PUAD 626: Information Resources Management

1. PUAD 626: Information Resources Management ORGANIZATION THEORY,PROCESS DESIGN,the QUALITY MOVEMENT,andORGANIZATIONALREENGINEERING

2. Organizational Theory and ReengineeringA “Quik” Outline • Basic Concepts from Organization Theory • Two perspectives of organizations • Traditional view • Process view • Organizations as a Production Process • Input  Process  Output  Outcome • Types of processes • Measurement and the Production Process • Importance • Types of measures • Process Improvement • Total Quality Management (TQM) • Continuous Quality Improvement (CQI) • Relationship between TQM & CQI • CQI Improvement Model

3. Two Perspectives on OrganizationsTraditional View versus Process View • Focus of the traditional view • Hierarchical control • Vertical workflow • Nature of the organization • Emphasis on top manager • Direct personnel supervision • Emphasis on vertical relationships This is the model thatmade American industry great —between 1850 and 1950. First proposed by Adam Smith, and adoptedby Henry Ford, strict division of labor andassembly lines made a lot of sense at the time.

4. Traditional View of OrganizationsVertical Workflow Work Flow

5. Traditional View of OrganizationsTimes Have Changed • Changes in the character of work and the workforce have undercut the efficacy of the traditional view • Increases in workforce professionalism, education,and skills. • Changes in the nature of work, increasing the emphasis on services, information, and knowledgein the production process. • Organizations of today need to be much more flexible to adapt to the rapidly changing external environment.

6. Traditional View of OrganizationsFocuses Attention on the WRONG Things • Because of the fundamental changes thatare occurring in how work is performed,the traditional organization chart view failsto offer an accurate description of howtoday’s organizations need to work! • The traditional view focuses on the boss, whereas today’s leading organization’s focus on the customer. • The traditional organization chart does not acknowledge customers, suppliers, or how work flows horizontally across the organization. It fails to show the relationships among individuals in the same function, between different functions, or with customers. • The traditional view perpetuates an emphasis on directing and supervising individuals as they perform their job.

7. Two Perspectives on OrganizationsTraditional View versus Process View • Focus of the process view • Adaptation to change • Process workflow • Nature of the organization • Emphasis on customer • Decentralized decision-making • Emphasis on horizontal relationships “Taking a process approach implies taking the customer point of view, since processes are the means by which an organization does what is necessary to produce value for its customers.”(Davenport, 1993, 7) This is the organizational model on whichcontinuous quality improvement is based.

8. Process View of OrganizationsHorizontal Workflow Inputs Outputs Outcomes Suppliers Customers HorizontalWorkflow

9. Process View of OrganizationsWhat Is a Process? • Plenty of definitions, all of them essentially right • A logically related set of tasks performed to achieve a defined business outcome. • A structured, measured set of activities designed to produce a specified output for a particular customer or market. • A specified ordering of work activities across time and place, with a beginning and an end, and clearly identified inputs and outputs. • Processes normally occur across or between organizational subunits. Sometimes they even cross inter-organizational boundaries. • Processes have customers (either internal or external) – that is, they have defined business outputs and there are recipients of those outputs.

10. Process View of OrganizationsFocuses Attention on the RIGHT Things • Understanding the flow of work is essential, because the problems today’s organization encounters are usually between functions,not within them. • By focusing on customers rather than bosses, a process view makes us pay attention to the supplier-customer chain along which products and services are produced and delivered. • Cross-functional problems are commonly found when any department depicted by the traditional organization chart interacts with other units. • Of course, cross-functional “handoffs” are not the only source of problems. Handoffs between people within departments or units also can create delay and duplication of effort.

11. Two Perspectives on OrganizationsA Final Comparison

12. Notes

13. Organizations as a Production ProcessTransforming Inputs Into Outputs As a production process, an organizationis viewed as a network of activity chainsthat transform inputs into outputsusing a specific technology. These outputs are provided to another individualwho wants them for the outcomes that result. • Terms • Inputs • Technology • Activity chain • Network of activity chains • Output • Another individual • Outcome

14. Organizations as a Production ProcessTransforming Inputs Into Outputs Input ProductionProcess Output Quality Efficiency OUTCOME

15. Organizations as a Production ProcessDefinitions of Key Terms • Customers • The individuals to whom the products, services, or outputs are delivered. (Customers are best identified as people, not organizations. Organizations cannot be interviewed and questioned as to their requirements or expectations. If it is not possible to identify a customer for an output, you may be producing scrap.) • Outputs • The goods or services produced by a process that are provided to the customer. When customers use these outputs, they create outcomes for the customer. • Transform • The tasks, activities, and procedures inside of the process add value to the inputs by transforming them into value-added outputs for customers.

16. Organizations as a Production ProcessDefinitions of Key Terms, continued • Inputs • The goods and services provided by suppliers and transformed by the process into outputs. • Requirements • Requirements describe the outputs expected by customers. (It also refers to inputs expected from suppliers.) • Boundaries • Process boundaries delineate the tasks, activities, and procedures that comprise the process. • Process Owner • The person who has responsibility and authority for the operation and improvement of the entire process (an individual, not an organization or group).

17. Organizations as a Production ProcessCategories of Common Processes • Production • The processes that transform inputs acquired from suppliers into finished outputs (goods or services) for customers. • Purchasing • Includes the acquisition of services as well as activities. • Distribution • Processes involved in transporting/delivering outputs (goods or services) to customers. • Service • Includes “after sales” activities performed to maintain, repair, refurbish, and support customers using outputs previously provided by the organization.

18. Organizations as a Production ProcessCategories of Common Processes, continued • Design and Development • Includes processes that collect customer needs, requirements, and expectations and that develop products and services to meet those identified needs. • Control • Includes processes such as strategic planning, business planning, and financial oversight. • Support • Includes processes that provide human resource assistance, legal guidance, environmental, health and safety direction, as well as facility management, training, and other similar internal services. (Adapted from Watson, Benchmarking Workbook, 1992, 18-19.)

19. Organizations as a Production ProcessTypes of Processes • Departmental • Processes may be identified by organizational department. For example, Finance, Human Resources, and Legal are departmental processes. • Work Activities • Processes may be identified by various types of organizational work tasks. For example, purchasing, production, and support are work activity processes. • CORE PROCESSES • The activity work chains that create outputs for the customer – critically affect customer satisfaction. • Subprocesses • Work activities that represent one component of the whole work activity chain process.

20. Organizations as a Production ProcessCore Processes • All processes do not have equal value • Certain processes represent the means by which an organization will achieve its goals and objectives, fulfill its mission, and attain its vision. • Jurisdiction of core processes • Core processes will tend to be cross-functional in traditional (hierarchical) organizations that have been structured around areas of specialization. These processes usually include one or more functional processes. • Importance of core processes • Core processes are usually (but not always) major, large, and complex. However, size is not the determining factor, a process is core (or key) because it is critically important to the organization.

21. Organizations as a Production ProcessNot A Way, The Only Way Developing an understanding of yourorganization’s processes is a fundamental but underappreciated management responsibility. Yet without this approach, permanent improvement cannot be achieved. A senior officer at a Deming Prize winning Japanese firm was overheard to say — “Of course, process management is the only way to secure permanent improvement. But you will have a hard time convincing [managers] in the U.S. because they probably perceive this type of work as too detailed, boring, and not the basis on which people get promoted.”

22. Notes

23. Organizations as a Production ProcessEnumerating Processes • During enumeration, provide a context specification and a written description (definition) for each process • First, loosely identify the process context, inputs, and outputs Customers Orders, Requests, Requirements, Payments Products OTR

24. Organizations as a Production ProcessIdentifying Process Boundaries • Next, provide a clear written description (definition). Make sure you identify the process boundary and relevant subprocesses. • The Order-to-Remittance Process encompasses all organizational activities which take place from the time a customer order is received through the receipt of payment. This includes the management of the order and inventory, manufacturing, distribution planning, shipping, traffic management, delivery, invoicing, and payment processing.

25. Organizations as a Production ProcessIdentifying Process Boundaries • Questions to keep in mind. • When should the process owner’s concern with the process begin and end? • When should the process customers’ involvement begin and end? • Where do subprocesses begin and end? • Is the process fully embedded in another process? • Are performance benefits likely to result from combining the process with other processes or subprocesses?

26. Notes

27. Organizations as a Production ProcessWhere to Start • After identifying all of your organization’s processes, evaluate each in terms of importance to the organization and health. Criticality to Organization Mission and Strategy High Medium Low High Current Implementation Meets the Challenge Degree to Which (“Health”) Medium Low

28. Organizations as a Production ProcessProcess Health • Health indicators — • Ratio of value-added time to cycle time. • Does current process cross many functions (or organizations)? • Does current process involve many narrowly defined jobs? • Does current process have clearly defined owner and customers? (Does anyone get upset when the process product is late or over budget? Do we know who is responsible? Who ya gonna’ call?)

29. Measurement and the Production ProcessThe Importance of Measurement Measures use numbers “to see”how well we are satisfying our customers. • Input measure • Measures the resources used to produce the output. • Efficiency (or process) measure • Measures how well resources are used in the production process. • Output measure • Measures the number of services produced. • Compares characteristics of outputs to desired. • OUTCOME measure • Measures the result on the customer of having received the output.

30. Notes

31. Continuous Quality ImprovementThe Model Key Customer Performance Area Baseline Measure of Key Performance Area Customer Expectation of Key Performance Area Measure Evaluate for Performance Gap Analyze Reasons for Performance Gap Form Strategies to Improve Performance Measure Implement Strategy Monitor Results Continue the Process to Improve Quality

32. Evaluating Process ImprovementsA Criteria Checklist • Acceptance by customers • Legal/statutory authority • Fit with mission, vision, and values • Relevance to goals (causal connection?) • Public acceptance; Impact on users/clients • Political considerations • Long term impact • Technical feasibility • Integration with other processes • Cost and financing • Cost-effectiveness • Facility, staff, and training requirements

33. Implementing Process ImprovementsCriteria for Action Plans • Specific results and milestones • Roles and responsibilities of the implementers • Specific action steps • Schedules • Resource requirements and sources • A communication process • A review and monitoring process • Accountability processes and procedures

34. Continuous Quality ImprovementMonitoring Performance Measure Actual Performance Set Objectives Compare Objectives and Performance Take Corrective Action Determine Reasons for Deviations