IFSM 300 Stage 2-Assignment

Business Processes

Introduction

The fourth component of information systems is process. But what is a

process and how does it tie into information systems? And in what ways

do processes have a role in business? This reading will look to answer

those questions and also describe how business processes can be used

for strategic advantage.

What Is a Business Process?

We have all heard the term process before, but what exactly does it

mean? A process is a series of tasks that are completed in order to

accomplish a goal. A business process, therefore, is a process that is

focused on achieving a goal for a business. If you have worked in a

business setting, you have participated in a business process. Anything

from a simple process for making a sandwich at Subway to building a

space shuttle utilizes one or more business processes.

Processes are something that businesses go through every day in order to

accomplish their mission. The better their processes, the more effective

the business. Some businesses see their processes as a strategy for

achieving competitive advantage. A process that achieves its goal in a

unique way can set a company apart. A process that eliminates costs can

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allow a company to lower its prices (or retain more profit).

Documenting a Process

Every day, each of us will conduct many processes without even thinking

about them: getting ready for work, using an ATM, reading our email, etc.

But as processes grow more complex, they need to be documented. For

businesses, it is essential to do this because it allows them to ensure

control over how activities are undertaken in their organization. It also

allows for standardization: McDonald’s has the same process for building

a Big Mac in all of its restaurants.

The simplest way to document a process is to simply create a list. The list

shows each step in the process; each step can be checked off upon

completion. For example, a simple process, such as how to create an

account on eBay, might look like this:

1. Go to ebay.com.

2. Click on “register.”

3. Enter your contact information in the “Tell us about you” box.

4. Choose your user ID and password.

5. Agree to User Agreement and Privacy Policy by clicking on “Submit.”

For processes that are not so straightforward, documenting the process

as a checklist may not be sufficient. For example, here is the process for

determining if an article for a term needs to be added to Wikipedia:

1. Search Wikipedia to determine if the term already exists.

2. If the term is found, then an article is already written, so you must

think of another term. Go to 1.

3. If the term is not found, then look to see if there is a related term.

4. If there is a related term, then create a redirect.

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5. If there is not a related term, then create a new article.

This procedure is relatively simple—in fact, it has the same number of

steps as the previous example—but because it has some decision points, it

is more difficult to track with a simple list. In these cases, it may make

more sense to use a diagram to document the process:

Wikipedia Term Search Process

Process for determining if a new term should be

added to Wikipedia.

Public Domain

Managing Business Process Documentation

As organizations begin to document their processes, it becomes an

administrative task to keep track of them. As processes change and

improve, it is important to know which processes are the most recent. It is

also important to manage the process so that it can be easily updated!

The requirement to manage process documentation has been one of the

driving forces behind the creation of the document management system.

A document management system stores and tracks documents and

supports the following functions:

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• Versions and timestamps. The document management system will

keep multiple versions of documents. The most recent version of a

document is easy to identify and will be served up by default.

• Approvals and workflows. When a process needs to be changed, the

system will manage both access to the documents for editing and the

routing of the document for approvals.

• Communication. When a process changes, those who implement the

process need to be made aware of the changes. A document

management system will notify the appropriate people when a

change to a document is approved.

Of course, document management systems are used not only for

managing business process documentation. Many other types of

documents are managed in these systems, such as legal documents or

design documents.

ERP Systems

An enterprise resource planning (ERP) system is a software application

with a centralized database that can be used to run an entire company.

Let’s take a closer look at the definition of each of these components:

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An Enterprise Resource Planning

(ERP) System

A software application with a centralized

database that can be used to run an

entire company

• A software application: The system is a software application, which

means that it has been developed with specific logic and rules

behind it. It has to be installed and configured to work specifically for

an individual organization.

• With a centralized database: All data in an ERP system is stored in a

single, central database. This centralization is key to the success of

an ERP—data entered in one part of the company can be immediately

available to other parts of the company.

• That can be used to run an entire company: An ERP can be used to

manage an entire organization’s operations. If they so wish,

companies can purchase modules for an ERP that represent different

functions within the organization, such as finance, manufacturing,

and sales. Some companies choose to purchase many modules;

others choose a subset of the modules.

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An ERP system not only centralizes an organization’s data, but the

processes it enforces are the processes the organization adopts. When an

ERP vendor designs a module, it has to implement the rules for the

associated business processes. A selling point of an ERP system is that it

has best practices built right into it. In other words, when an organization

implements an ERP, it also gets improved best practices as part of the

deal!

For many organizations, the implementation of an ERP system is an

excellent opportunity to improve their business practices and upgrade

their software at the same time. But for others, an ERP brings them a

challenge: Is the process embedded in the ERP really better than the

process they are currently utilizing?

And if they implement this ERP, and it happens to be the same one that

all of their competitors have, will they simply become more like them,

making it much more difficult to differentiate themselves?

This has been one of the criticisms of ERP systems: that they

commoditize business processes, driving all businesses to use the same

processes and thereby lose their uniqueness. The good news is that ERP

systems also have the capability to be configured with custom processes.

For organizations that want to continue using their own processes or

even design new ones, ERP systems offer ways to support this through

customization.

But there is a drawback to customizing an ERP system: organizations

have to maintain the changes themselves. Whenever an update to the

ERP system comes out, any organization that has created a custom

process will be required to add that change to their ERP. This will require

someone to maintain a listing of these changes and will also require

retesting the system every time an upgrade is made. Organizations will

have to wrestle with this decision: When should they go ahead and

accept the best‐practice processes built into the ERP system and when

should they spend the resources to develop their own processes? It

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makes the most sense to only customize those processes that are critical

to the competitive advantage of the company.

Some of the best‐known ERP vendors are SAP, Microsoft, and Oracle.

Business Process Management

Organizations that are serious about improving their business processes

will also create structures to manage those processes. Business process

management (BPM) can be thought of as an intentional effort to plan,

document, implement, and distribute an organization’s business processes

with the support of information technology.

BPM is more than just automating some simple steps. While automation

can make a business more efficient, it cannot be used to provide a

competitive advantage. BPM, on the other hand, can be an integral part

of creating that advantage.

Not all of an organization’s processes should be managed this way. An

organization should look for processes that are essential to the

functioning of the business and those that may be used to bring a

competitive advantage. The best processes to look at are those that

include employees from multiple departments, those that require

decision‐making that cannot be easily automated, and processes that

change based on circumstances.

To make this clear, let’s take a look at an example.

Suppose a large clothing retailer is looking to gain a competitive

advantage through superior customer service. As part of this, they create

a task force to develop a state‐of‐the‐art returns policy that allows

customers to return any article of clothing, no questions asked. The

organization also decides that, in order to protect the competitive

advantage that this returns policy will bring, they will develop their own

customization to their ERP system to implement this returns policy. As

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they prepare to roll out the system, they invest in training for all of their

customer‐service employees, showing them how to use the new system

and specifically, how to process returns. Once the updated returns

process is implemented, the organization will be able to measure several

key indicators about returns that will allow them to adjust the policy as

needed. For example, if they find that many women are returning their

high‐end dresses after wearing them once, they could implement a

change to the process that limits the time (e.g., 14 days) after the original

purchase that an item can be returned. As changes to the returns policy

are made, the changes are rolled out via internal communications, and

updates to the returns processing on the system are made. In our

example, the system would no longer allow a dress to be returned after

14 days without an approved reason.

If done properly, business process management will provide several key

benefits to an organization, which can be used to contribute to

competitive advantage. These benefits include:

• Empowering employees. When a business process is designed

correctly and supported with information technology, employees will

be able to implement it on their own authority. In our returns‐policy

example, an employee would be able to accept returns made before

14 days or use the system to make determinations on what returns

would be allowed after 14 days.

• Built‐in reporting. By building measurement into the programming,

the organization can keep up to date on key metrics regarding their

processes. In our example, these can be used to improve the returns

process and also, ideally, to reduce returns.

• Enforcing best practices. As an organization implements processes

supported by information systems, it can work to implement the best

practices for that class of business process. In our example, the

organization may want to require that all customers returning a

product without a receipt show a legal ID. This requirement can be

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built into the system so that the return will not be processed unless a

valid ID number is entered.

• Enforcing consistency. By creating a process and enforcing it with

information technology, it is possible to create consistency across

the entire organization. In our example, all stores in the retail chain

can enforce the same returns policy. And if the returns policy

changes, the change can be instantly enforced across the entire

chain.

Business Process Reengineering

As organizations look to manage their processes to gain a competitive

advantage, they also need to understand that their existing ways of doing

things may not be the most effective or efficient. A process developed in

the 1950s is not going to be better just because it is now supported by

technology.

In 1990, Michael Hammer published an article in the Harvard Business

Review entitled “Reengineering Work: Don’t Automate, Obliterate.” This

article put forward the thought that simply automating a bad process

does not make it better. Instead, companies should “blow up” their

existing processes and develop new processes that take advantage of the

new technologies and concepts. He states in the introduction to the

article:

Many of our job designs, work flows, control mechanisms, and

organizational structures came of age in a different competitive

environment and before the advent of the computer. They are

geared towards greater efficiency and control. Yet the

watchwords of the new decade are innovation and speed,

service, and quality.

It is time to stop paving the cow paths. Instead of embedding

outdated processes in silicon and software, we should obliterate

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them and start over. We should “reengineer” our businesses: use

the power of modern information technology to radically

redesign our business processes in order to achieve dramatic

improvements in their performance. (Hammer, 1990)

Business process reengineering (BPR) is not just taking an existing

process and automating it. BPR is fully understanding the goals of a

process and then dramatically redesigning it from the ground up to

achieve dramatic improvements in productivity and quality. But this is

easier said than done. Most of us think in terms of how to do small, local

improvements to a process; complete redesign requires thinking on a

larger scale. Hammer (1990) provided some guidelines for how to go

about doing business process reengineering:

• Organize around outcomes, not tasks. This simply means to design

the process so that, if possible, one person performs all the steps.

Instead of repeating one step in the process over and over, the

person stays involved in the process from start to finish.

• Have those who use the outcomes of the process perform the

process. Using information technology, many simple tasks are now

automated, so we can empower the person who needs the outcome

of the process to perform it. The example Hammer gives here is

purchasing: instead of having every department in the company use

a purchasing department to order supplies, have those who need the

supplies order them directly by using an information system.

• Subsume information‐processing work into the real work that

produces the information. When one part of the company creates

information (like sales or payment information), it should be

processed by that same department. There is no need for one part of

the company to process information created in another part of the

company.

• Treat geographically dispersed resources as though they were

centralized. With the communications technologies in place today, it

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becomes easier than ever to not worry about physical location. A

multinational organization does not need separate support

departments (such as IT, purchasing, etc.) for each location anymore.

• Link parallel activities instead of integrating their results.

Departments that work in parallel should be sharing data and

communicating with each other during their activities instead of

waiting until each group is done and then comparing notes.

• Put the decision points where the work is performed, and build

controls into the process. The people who do the work should have

decision‐making authority, and the process itself should have built‐in

controls using information technology.

• Capture information once, at the source. Requiring information to be

entered more than once causes delays and errors. With information

technology, an organization can capture it once and then make it

available whenever needed.

These principles may seem like common sense today, but in 1990 they

took the business world by storm. Hammer (1990) gave example after

example of how organizations improved their business processes by many

orders of magnitude without adding any new employees, simply by

changing how they did things (see “Reengineering the College Bookstore”

below).

Unfortunately, business process reengineering got a bad name in many

organizations. This was because it was used as an excuse for cost cutting

that really had nothing to do with BPR. For example, many companies

simply used it as an excuse for laying‐off part of their workforce. Today,

however, many of the principles of BPR have been integrated into

businesses and are considered part of good business‐process

management.

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Reengineering the College Bookstore

The process of purchasing the correct textbooks in a timely manner

for college classes has always been problematic. And now, with

online bookstores such as Amazon competing directly with the

college bookstore for students’ purchases, the college bookstore is

under pressure to justify its existence

But college bookstores have one big advantage over their

competitors: They have access to students’ data. In other words,

once a student has registered for classes, the bookstore knows

exactly what books that student will need for the upcoming term. To

leverage this advantage and take advantage of new technologies, the

bookstore wants to implement a new process that will make

purchasing books through the bookstore advantageous to students.

Though it may not be able to compete on price, it can provide other

advantages, such as reducing the time it takes to find the books and

the ability to guarantee that the book is the correct one for the class.

In order to do this, the bookstore will need to undertake a process

redesign.

The goal of the process redesign is simple: to capture a higher

percentage of students as customers of the bookstore. After

diagramming the existing process and meeting with student focus

groups, the bookstore comes up with a new process. In the new

process, the bookstore utilizes information technology to reduce the

amount of work the students need to do in order to get their books.

In this new process, the bookstore sends the students an email with

a list of all the books required for their upcoming classes. By clicking

a link in this email, the students can log into the bookstore, confirm

their books, and purchase the books. The bookstore will then deliver

the books to the students.

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Business Process Reengineering

College bookstore process redesign

ISO Certification

International Standards

Organization (ISO) Certification

ISO defines quality standards

organizations must meet to show

effective business process management

Many organizations now claim that they are using best practices when it

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comes to business processes. In order to set themselves apart and prove

to their customers (and potential customers) that they are indeed doing

this, these organizations are seeking out an ISO 9000 certification. ISO is

an acronym for International Standards Organization. This body defines

quality standards that organizations can implement to show that they are,

indeed, managing business processes in an effective way. The ISO 9000

certification is focused on quality management.

In order to receive ISO certification, an organization must be audited and

found to meet specific criteria. In its most simple form, the auditors

perform the following review:

• Tell me what you do (describe the business process).

• Show me where it says that (reference the process documentation).

• Prove that this is what happened (exhibit evidence in documented

records).

Over the years, this certification has evolved, and many branches of the

certification now exist. ISO certification is one way to separate an

organization from others.

Summary

The advent of information technologies has had a huge impact on how

organizations design, implement, and support business processes. From

document management systems to ERP systems, information systems are

tied into organizational processes. Using business process management,

organizations can empower employees and leverage their processes for

competitive advantage. Using business process reengineering,

organizations can vastly improve their effectiveness and the quality of

their products and services. Integrating information technology with

business processes is one way that information systems can bring an

organization lasting competitive advantage.

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Study Questions

1. What does the term business process mean?

2. What are three examples of business process from a job you

have had or an organization you have observed?

3. What is the value in documenting a business process?

4. What is an ERP system? How does an ERP system enforce best

practices for an organization?

5. What is one of the criticisms of ERP systems?

6. What is business process reengineering? How is it different

from incrementally improving a process?

7. Why did BPR get a bad name?

8. List the guidelines for redesigning a business process.

9. What is business process management? What role does it play

in allowing a company to differentiate itself?

10. What does ISO certification signify?

References

Hammer, M. (1990). Reengineering work: don't automate, obliterate.

Harvard Business Review, 68.4: 104–112.

Licenses and Attributions

Chapter 8: Business Processes (https://www.saylor.org/site/textbooks

/Information%20Systems%20for%20Business%20and%20Beyond.pdf)

from Information Systems for Business and Beyond by David T. Bourgeois

is available under a Creative Commons Attribution 3.0 Unported

(https://creativecommons.org/licenses/by/3.0/) license. © 2014, David

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T. Bourgeois. UMGC has modified this work and it is available under the

original license.

© 2023 University of Maryland Global Campus

All links to external sites were verified at the time of publication. UMGC is not responsible for the

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