Joint design of organization processes and information system: a methodology based on action theory

Joint design of organization processes and information system: a methodology based on action theory Massimo LOZZI Consultant Atlantic Technologies Corp., Milano, Italie E-mail mlozzi@atlantic.it Abstract This paper proposes a preliminary methodology for the design of organizational processes and information systems. The methodology is derived both from the innovative trends for the process oriented organizational design and the strictly related information system design. The deep origin of the proposed methodology is the Thompson s action theory together with the new developments in this field. The proposal try to improve the existing well known BPR approaches through a more grounded theoretical foundation for the joint analysis and design of organizational processes and information systems. Key-words: Organizational change, information systems design, action theory Résumé Piercarlo MAGGIOLINI Professore associato Politecnico di Milano Dipartimento di Economia e Produzione Piazza Leonardo da Vinci 32 20133 Milan, Italie Tel. +39-02-23992777 E-mail piercarlo.maggiolini@polimi.it Piero MIGLIARESE Professore ordinario Università della Calabria e Politecnico di Milano Dipartimento di Economia e Produzione Piazza Leonardo da Vinci 32 20133 Milan, Italie tel ++39-02-23992775 E-mail piero.migliarese@polimi.it Le papier propose une version préliminaire d une méthodologie pour la conception conjointe des processus organisationels et des systèmes d information. La méthodologie prend son origine des tendences innovatives soit dans la conception de l organisation orientée aux processus que dans la conception des systèmes d information reliée à cette orientation. La mèthodologie proposée est fondée sur la théorie de l action de Thompson, et sur les nouveaux développements dans ce domaine. La méthodologie proposée cherche d améliorer les approches BPR bien connues à travers une fondation théorique mieux basée pour l analyse et la conception conjointe des processus organisationnels et des systèmes d information. Mots Clefs: Change organisationnel, conception des systèmes d information, théorie de l action

Overview The development of IT has made possible increasingly complex organizational processes. It is necessary, therefore, to have theoretical and analytical tools that can adequately capture the complexity of processes within the firm. Furthermore, the concept of Business Process, although crucial and innovative, suffers from theoretical and explanatory weaknesses that inevitably give raise to methodological inadequacies. When the Business Process paradigm is positioned amidst the various sourronding major reference points and underllying themes it is apparent that the paradigm has elements of a supermarket approach to management grabbing items of theory and practice from journals, conferences and the trade press because they each appear individually inviting and relevant, but without attempting to examine whether the items in the trolley add up to a coherent, consistent and sustainable diet. There is an evident need to examine the theoretical and practical underpinnings of the Business Process paradigm starting from what is already known about management, organizations and technology, rather then from the stand alone concept of Business Process. 1 We have to turn to organization theory, particularly to those approaches that see organizational processes in terms of decisions and information processing. In this respect the following are particularly useful: Simon's conception of bounded rationality 2 as the basis of the processes of organizational decision, which allows for information technologies to play a role in lifting the constraints on rationality. The work of Thompson 3, which assumes as the fundamental criterion for design the structure of processes the minimization of costs of coordination and control, which are essentially informational. Williamson's position 4 with respect to interorganizational transactions and the need to manage these in ways congruent with their complexity so that costs, which again are informational in nature, can be minimized. New developments in innovative organizational forms for the interfirm relations 5 and relationals organizational model 6 These authors' work has become particularly important with the emergence of the Business Process paradigm, as they have all interpreted organization as a process rather than as a set of functions. In this sense, organization theory can make two important contributions to: 1) improve our understanding of the relationship that exists between information systems and organizational processes. 2) strengthen theoretically and methodologically approaches with a BPR orientation. This paper takes the work of Simon, Thompson and Williamson as its starting point and develops a methodology of integrated design bringing together organizational processes and information systems. This methodology is based on a concept of organization as a process of actions and decisions shaped by intentional, bounded rationality where one can analytically distinguish:! an institutional action and decision plan related to the choices of objectives that determine the process;! a technical action and decision plan related to the technical choices linked to particular objectives;! a structural action and decision plan related to: the operational structure relative to the tasks that must be carried out given certain objectives, techniques and their interactions; the social and informational structure relative to the organizational units that carry out the tasks and the interactions among these units. The objectives, the techniques, the operational and informational structures constitute the states of the process and identify it in time and space. Within this conception, information systems are considered as particular organizational processes that transform information and increase congruence between the complexity of the three organizational action and decision plans (institutional, technical and structural). 1 Coombs R., Hull R., 1997, The wider research context of Business Process Analisys, CROMTEC, Manchester. 2 Simon H.A., 1947, Administrative Behavior, McMillan, New York. 3 Thompson J.D., 1967, Organizations in Action, McGraw- Hill. 4 Williamson O.E., 1986, The Economic Institution of Capitalism. Firms, Market, Relational Contracting, Free Press, New York. 5 Nohria N., Eccles R.G., Networks and Organizations, Harvard Business School Press. 6 Ferioli C., Migliarese P., Supporting organizatonal relations through information technology in innovative organizational forms, European Journal of Information Systems (1996) 5, 196-207.

There are, therefore, two logically ordered phases to this methodology: 1) the design of the operational structure, which crucially involves:! the identification of processes by the separation of organizational processes into: institutional processes: those that define the objectives of the organization; operational processes: those that execute input-output transactions; management processes: those that coordinate and control the interdependences among the operational processes, and between those processes and the external environment.! the evaluation of their interdependencies; in order to this point we can distinguish between: transactional interdependencies, which are due to the variety of interactions with the external environment; technical interdependencies, which are linked to the techniques employed in the execution of the transactions.! the design of management processes, on the basis of Thompson's model of interdependencies-coordination, to deal with: the integration of input, output and technical processes related to transactional interdependencies; the coordination and control of the operational processes related to technical interdependencies. 2) the design of the informational structure, which is based on:! the distinction between: institutional information systems that produce and transmit information related to the organizational objectives; operational information systems that produce and transmit information and procedures required to apply the techniques in the various tasks; management information systems that produce and transmit information necessary for coordination and control.! the design of management information systems in relation to the informational interdependencies among organizational units.! the distinction between the information system and the data system, the latter defined operationally as a relation between states of the process that identify a transaction in time and space.! the identification of informational supports in relation to: the elaboration processes that support management activities; the data bases that allow a decrease in intensity of informational interdependencies. The methodology detailed in this paper has been piloted with good results in a small-to-medium sized firm. The paper will, therefore, give concrete examples of the types of logical and operational tools that characterize it. This methodology, unlike those typical of BPR approaches that are mainly focused on the firm, can also be applied to any type of organization, such as public institutions like hospitals and schools. Proposed methodology 1. The design of the operational structure This phase expands our understanding of the structure of the processes. According to work flow analysis, process structure is defined in terms of activities, steps, inputs, outputs, trigger and timing. Activities are the major subdivisions of a process. Each activity represents a unit of mental or physical work and produces a result (output). Each activity uses the physical and/or informational output of other activities (its inputs). If an input is from outside the process and it also initiates an activity, we call that input a trigger. Steps are further subdivisions of activities. 1.1 The identification of the strategic processes Strategic processes are those that are of essential importance to an organisation s objectives, goals, positioning and stated strategy. 1.1.1 Model relations with customers We call customers the ones who produce the triggers that initiate the process. It is linked to the customers by interdependencies that we call transactional. We

can distinguish three kind of transactional interdependencies: I. Reciprocal: when the object of the transaction require continuous interaction between process and customer. II. Sequential: when we can define sequence of steps requested to satisfy customer demands. The beginning of each step require interactions between process and customer to verify the results of previous steps and plan the next steps. III. Standard: when the object of the transactions require relations between process and customer only to start the process. In this case the activities and their timing can be standardized. The three kind of transactional interdependencies are cumulative not alternative. In other words, if we have a kind of transactional interdipendence we have also the ones that are less complex. 1.1.2 Define strategic processes Now we can identify the different processes required in order to the different kind of transaction and their major activities. 1.1.3 Define and measure strategic performance This task defines customer-oriented measure of performance and determines current performance levels-both averages and variances. It also examines existing standards of performance and identifies performance problems. Only when the customers needs and wants are understood can an organisation begin to define what performance means and how to measure it. When a measure has been in use for some time, the reference point may be a baseline or a standard. Increasingly, the standard is a benchmark. When a new measure is intoduced, it is often difficult to obtain a reference point at first. 1.2 The identification of technical processes The technical processes are those needed to transform inputs into outputs by applying the choosen techniques. So, a strategic process could have different structures related to different techniques. 1.2.1 The analysis of techniques In this step we identify the techniques to apply in order to perform the strategic analysis. The analysis is concerned with: -objects to be transformed by identifying inputs and outputs. The objects can be physical or informational and the same entity can be both an input and an output. When a process takes an input, modifies the input item, and then outputs the modifie item, we call that process output an updated output. When an activity produces a new output, we say that the entity is created. When an activity uses an input without updating it, we say that input is read. -means to transform the objects; -processes that link specific inputs with specific outputs. 1.2.2 Define technical processes Now we can define the different processes required to apply choosen techniques. We can distinguish primary processes directly involved with transforming objects by technical means in specific technical processes; and secondary or support processes needed to keep the techniques and their environment ready for use. In this task we also establish the timing of the processes. Timing a process means assigning times to each activity, or if more accuracy is required, to each step of the process. The degree of accuracy and level of effort required will depend upon the relevance of time in strategic measure of performance. 1.2.3 Define and measure technical performance This task defines technical oriented measure of performance and determines current performance levels-both averages and variances. It also examines existing standards of performance and identifies performance problems. We can distinguish between measure of effectiveness and measure of efficiency. The first evaluate the capability of a given technique to satisfy demands such as the ones remarked by strategic analysis. The second measure the level of resources employed to use the techniques. 1.3 The identification of management processes In this phase we understand how the processes are related. This task expands our understanding of the dynamic aspects of the modeled process by identifying primary decision points and subprocesses, identifying flow variations and the rules to coordinate and control activities. In this task we explicitly recognize that the process is not performed the same way every time. Rather, variants typically are put into practice under differing circumstances. We call a series of activities/steps performed together conditionally a subprocess. 1.3.1 The analysis of interdependencies among processes Interdependencies are related to the flows of physical or informational objects among processes that are needed to carry out them. We call management

processes the ones required to manage the interdependencies among processes. According to Thompson s theory (Thompson, 1967) we can distinguish three major kind of interdependencies: I. generic: among processes that aren t linked by physical or informational flows; II. sequential: when a process can be initiated only after the beginning of another process. The degree of interdipendence can be expressed in terms of percentage of overlapping. So ten percent of overlapping means that we must complete ten percent of one process before the beginning of another process; III. reciprocal: when processes are linked by feedback. We can express the degree of reciprocal interdipendence in terms of percentage of feedback. So ten percent of feedback means that the ten percent of the objects processed require a feedback to the first step. The three kind of interdependencies are cumulative not alternative. In other words, if we have a kind of interdipendence we have also the ones that are less complex. The cost of managing interdependencies, in terms of frequency of decisions and quantity of informations to be processed, is directly related to their complexity. Therefore, reciprocal interdependencies are more expensive then the sequential ones. Finally, the task is concerned with timing interdependencies too. To this point of view are relevant the duration and frequency of interdependencies. 1.3.2 Define the subprocesses After we have identified interdependencies we must define clusters of processes linked by them. Clusters have different priority in accessing to common resources. Major priority is assigned to the ones linked by the higher degree of interdependencies because of their cost of management. Consequently, first of all we identify clusters of processes linked by reciprocal interdependencies, then the ones linked by sequential, finally those that are pooled. There are three kind of subprocesses, each one congruent with a kind of interdipendence (ibidem). I. Associations These subprocesses are characterized by reciprocal interdependencies. Their boundaries are defined to minimize the number of processes included. Infact the cost of management reciprocal II. III. interdependencies is related with the number of processes linked. These subprocesses have the major priority to access common resource that must be ready to use. Connections These subprocesses include units linked by sequential interdependencies. Their boundaries are designed to minimize the lenght of sequences, according to the positive relation between it and the cost of management sequential interdependencies. Pools They include processes linked by pooled interdependencies. The processes are grouped according to their similarity. In fact the cost of management pooled interdependencies grows with the heterogeneity of the processes. 1.3.3 Define coordination and control rules and activities Now we can define the rules and the activity needed to coordinate and control processes and subprocesses. According to Thompson s theory we know that reciprocal interdependencies must be coordinated by mutual adjustment and rules to adjust the feedbacks; sequential interdependencies require plans to manage the sequences of activities; pooled interdependencies are coordinated by standardization. In respect to this congruence criteria we can define coordination and control tasks to manage the subprocesses. 1.3.4 Define and measure organisational performance Organisational performance are related with the capability of the processes to manage interdependencies among activities. According to Thompson s theory we can distinguish three different ways to measure the subprocesses: -Pools are evaluated by the numbers of standards and rules they fail in achieving. -Connections are measured by the respect of times and quantities defined in the plans -Associations are evaluated by the mutual trust among the different units 2. The design of the organizational responsibilities and of the informational structure The purpose of this stage is to specify:

-social dimension of the new process through design of staffing, jobs, organisational units and their linkages; -technical dimension about the management of informations requested to carry out the activities of the process. This specification will produce descriptions of information technology, standards, procedures, systems and controls employed; designs for the interaction of social and technical elements; preliminary plans for development, procurement, facilities, tests, conversions, and deployment. We think that social design must be performed in conjunction with information system design. The social and technical component of a process must be congruent if the process is to be effective. 2.1 The identification of organisational units In this task process activities will be grouped by two dimension: -technical affinity: it deal with technical knowledges and skills requested to carry out the jobs; -orientation affinity: it means the set of attitude, beliefs, preferences concerned with a job. For example, an individual prefers to manage other people or not, they prefer activity oriented work or project oriented, they prefer to work indoors or outdoors. Each category of job characteristics or requirementstechnical and orientation- itself consists of a number of specific skills, areas of knowledge, or aspects of orientation. First of all we must identify the set of skill, knowledge, and orientation relevant to the process. For the purpose of social design, we may represent the amount of most skills or areas of knowledge or orientation with a simple triage scheme: high, moderate or low. After this we can look at the clustering of job requirements in ordere to determine which current jobs titles should be retained or upgraded, which combined, and which eliminated. This task also defines the relationship between staffing levels and volumes and identifies staffing needed at current and project volumes. 2.2 Structuring of the relation among organisational units In this task we identify and detail interdependencies among jobs. A base for this analysis is provided by the design of operational structure. Then we cluster jobs in order to their interdependencies in the way we have discussed before. This task considers changing the organisational structure to reduce the numbers of organisational boundaries traversed by the process only to the ones requested by the management of interdependencies. At the end of this step we have identified group of jobs such as we have done about subrocesses. Now we must identify the ways to coordinate and control these groups. We can distinguish three decisional areas: 1. spatial proximity among units; 2. kind of communications such as formal or informal, written or verbal, symmetrical or not; 3. line of communications: vertical, horizontal, supported or not by staffs. This activity lead to identify management tasks which complexity and characteristics depend on the complexity of the jobs managed. Regarding to Thompson s theory we can distinguish two dimension of complexity: technical and political. The first is related to the degree of technical affinity among units, the second to the degree of orientation affinity among units. We can identify four classes of complexity by crossing the two kinds of affinity as shown in the table: Orientation affinity High Low Technical High Work management Negotiation Affinity Low Personnel development Leadership The table shows the four main components of management related to affinity among the units that are managed. In simple situations the work management component is the most important: it is only necessary to ensure that the right work is done by the right people in the right time frame in the right way. The job of the work manager is to organize the people, direct the work, and control the results. When technical complexity grows personnel development is necessary to perfect the skills and knowledge to ensure the supply of qulified employees. The job of personnel developer is to asses, coach, and advise the employees. When the complexity is concerned only with orientation it is necessary to manage conflicts of interests and find compromises among the different groups of preferences. Finally, when complexity afflicts both dimensions leadership is necessary to get people to work and pull together in the same directions. This kind of complexity characterizes the role of process owner that is the lowest level manager responsible for the entire process. The process owner is expected to negotiate with and coordinate with the managers whose domain the process crosses. 2.3 Structuring of the informational flows This step expands our comprehension of informational flows and define the ways through which information technology can support the

processes. So the step aim to identify only structured and permanent informations and flows. We can distinguish two different but related information flows. 1) Operational information flows: they concern the informations about physical entities that are processed by the activities of the process. They are analyzed referring to the traditional tools and methodologies of information engineering. 2) Management information flows: those that are requested to coordinate and control the processes. Management information systems get informations from operational by: - Selection of operational informations; - Integration of further informations not avalaible by the operational ones; - Assemble of operational information. and add steps to the process, as needed, to capture, assemble and disseminate the needed information. The design of technical solutions to support management informations flows leads to reexamine process structure to capitalize on information technology benefits. Tipically, we can: -reduce or simplify process interfaces both internal and external; -move activities among processes and/or reassign responsibility; -replace a single complex process with one more simpler process; -redefine relationships among activities in order to perform in parallel activities currently performed serially; -integrate controls into activities. So, we must identify the informations needed to measure and manage the performance of the process, define places where the informations can be stored,