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The Virtual Organization and Processes (Part 4/5)

Author: Eric Torkia, MASc/Wednesday, February 2, 2011/Categories: Monte-Carlo Modeling, Analytics Articles

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How should you look at processes when designing a virtual organization?

In order to effectively manage activities across organizations' it becomes critical to have certain processes in place to manage as well as measure performance and quality (Hammer, 2001; Champy, 2002; P-CMM v2.00, July 2001). According to Venkatraman (1994), organizations seeking to effectively integrate with business partners must first get their house in order through the use of BPR – Business Process Redesign/Re-engineering. Hammer (2001) says that for those who have re-engineered their internal business processes and extracted most of the value available internally, must now look at integrating and re-engineering externally to yield the next gains in value and profitability.

 

 In order to achieve this, Hammer proposed a 4 step conceptual framework to assist organizations in implementing processes across organizational boundaries (see Figure 12 in Appendix A: Models and Frameworks).

James Champy also published a book21 on integrating across organizational boundaries, which suggests that by looking at cross-organizational processes or X-processes and leveraging the Internet, an organization can yield superior results. While developing his case study for EMC, he cites the following characteristics of collaborative inter-organizational processes:

  • Represent the active collaboration of all the parties they engage and affect
  • Foster lower costs and greater customer value
  • Improve the business performance of all members of a supply-chain
  • Rely substantially on information technology
  • Often call upon customers and/or employees to adopt a self-service mode
  • Provide feedback about performance and quality

Understanding and categorizing processes

Champy (2002) categorizes his "X-processes" into 3 groups (listed below) which comprise any number of business, material or information processes (see Table 1 below)

Class 

Description 

Comment by author 

Class 1 

The processes you perform yourself 

They may still be unique to your company, providing a competitive advantage. They are so important that you want to control them yourself and not trust others to do them.

Class 2 

The processes you perform with others. 

They involve the transfer of information, goods, or money between your company and your suppliers, partners, and customers. These processes may be important to your company, but you may no longer want to consider them proprietary.

Class 3 

The processes others perform for you. 

These processes mayor may not be central to your operations, but they are not your core competency. Another company performs these processes better and possibly less expensively-than you do. That's because these processes are its principal business. So you may choose to outsource these processes to that organization.

Table 1: Process Classes, Champy (2002)

On the other hand, Georgakopoulos & Tsalgatidou, (1998) classify process into types that are based on the nature of the activities to be performed. 

Process Type 

Description 

Business Processes 

"are market-centered descriptions of an organization's activities. That is, business processes are collections of activities that support critical organizational functions in realizing an objective or policy goal, such as fulfilling a business contract, and/or satisfying a specific customer need. Business processes are typically implemented by designing corresponding information and/or material processes"

Information processes 

"relate to automated activities (i.e., activities performed by programs) and partially automated activities (i.e., activities performed by humans interacting with computers) that create, process, manage, and provide information. Typically an information process involves distributing and coordinating work activities among human and information system resources. In addition, effective coordination must deal with throughput delays, achieve efficient human and system resource allocation, provide reliability and consistency, and improve the quality of the resulting products (whether information service or matter)."

Material processes 

"are related to the assembly of physical components and the delivery of physical products. That is, material processes relate human or machine activities that are rooted in the physical world. Such activities include, moving, storing, transforming, measuring, and assembling physical objects. Capturing business processes allows reasoning about the efficiency of an organization's activities. Implementing and automating business processes (by designing and implementing corresponding information and material processes) it provides for the actual coordination of the organization's activities." (

Table 2: Process Types, Georgakopoulos & Tsalgatidou, (1998)

By combining Champy's process classes and Georgakopoulos & Tsalgatidou, (1998) process types, we are able to define the following matrix.

 

Processes you perform yourself

Class 1 

Processes you perform with others

Class 1 

Processes others perform for you

Class 3 

Business Processes 

Information processes 

Material processes 

Table 3: Classifying processes by type and class

 

Assessing Process Maturity & Organizational Readiness for ERM

One of the tools available to align processes and organizational capability to the organization's business objectives is Carnegie Mellon's Software Engineering Institutes Capability Maturity Model. According to the SEI, one of the first steps in developing or enhancing processes within an organization is to assess what is already present in terms of culture and mechanisms. They further define a capability maturity model (CMM) as an evolutionary roadmap for implementing the vital practices from one or more domains of organizational process. It contains the essential elements of effective processes for one or more disciplines. It describes an evolutionary improvement path from an ad hoc, immature process to a disciplined, mature process with improved quality and effectiveness. [P-CMM v2.00, July 2001]

Given that ERM requires an organization to be able to effectively manage and measure processes effectiveness, we feel it is critical to assess an organization's ability to do so. Organizational capability can be defined as the level of knowledge, skills, and process abilities available for performing an organization's business activities. [P-CMM v2.00, July 2001]

Organizational capability indicates an organization's

  • Readiness for performing its critical business activities,
  • Likely results from performing these business activities, and
  • Potential for benefiting from investments in process improvement or advanced technology.

Our objective in using the P-CMM is to assess an organization's capability to manage process performance in a ERM context and suggest courses of action to bridge that gap (if any exists). Additionally it further enables us to qualify the processes that are ERM capable and which are not.

The action workflow approach to workflow management technology, R. Medina-Mora, T. Winograd, R. Flores and F. Flores, , Proceedings of the ACM Conference on Computer Supported Cooperative Work, ACM Press, Toronto, Ontario, 1992.

" Technology and Tools for Comprehensive Business Process Lifecycle Management ", D. Georgakopoulos and A. Tsalgatidou, 'Workflow Management Systems and Interoperability', NATO ASI Series F, Springer Verlag, 1998.

People Capability Maturity Model [P-CMM], Bill Curtis , William E. Hefley, Sally A. Miller , Software Engineering Institute, July 2001

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