Chapter 1: Organizations, Business
Processes, and Information Systems
Teaching Objectives
The teaching objectives of this chapter are to:
1. Understand that work in organizations is completed in processes that consist of
many steps
2. Compare and contrast the functional and process views of organizations and
identify the negative consequences of the traditional functional organizational
structure
3. Discuss and describe the various flows in a process – physical, data, document, and
information
4. Explain how enterprise systems enable organizations to execute and manage
processes
Chapter Outline and Teaching Suggestions
1. The Modern Global Business Environment
a. Global Competition
b. The Information Revolution
c. Knowledge Worker
Explain these three key concepts and why it is important for your students to
understand them.
Explain the reasons for the growth in global competition and the use of
information in organizations. An interesting question is which came first – did
technology drive globalization or vice versa.
Explain what a knowledge worker does.
Explain the key skills expected of a knowledge worker.
2. Key Business Processes
a. Generic Process
b. Procurement Process
c. Fulfillment Process
Define and explain a business processes. Ask students to identify some other
processes that they are familiar with. Identify the three key processes covered in
this book and the steps in these processes – in very general terms.
3. The Functional Organizational Structure
, a. The Silo Effect
b. Delays in Executing the Process
c. Excess Inventory
d. Lack of Visibility across Processes
Discuss how companies are organized and that the functional structure is the
most common one. You can use the university or business school departmental
structure as an example.
Point out that processes are cross-functional. Ask the question: why is the
functional structure so common?
Briefly discuss the history of the evolution of the functional structure
Explain the silo effect and the negative consequences of the silo effect.
Explain each of the negative consequences in detail focusing on the example of
the fulfillment process provided in the book. Ask students to perform a similar
exercise for another process.
4. The importance of Information Systems
a. Data and Information
b. Functional Information Systems
c. Enterprise Systems
d. Why is This Information Important to You?
Define the term information system and explain why they are important to
modern organizations.
Explain the evolution of information systems from functional systems to
integrated enterprise systems.
Define functional systems and their value and how they reduce some of the
negative consequences of the silo effect previously discussed.
Define enterprise systems and their value and how they further reduce these
negative consequences.
Explain why information systems are important to your students, regardless of
their major.
5. Flows in Business Processes
Explain the framework that will be used in the book. The framework consists of
several flows – physical, data, document and information.
6. The Roles of Enterprise Systems in Organizations
a. Execute the Process
b. Capture and Store Process Data
c. Monitor Process Performance
, Explain the key role of enterprise systems in supporting business processes.
Three key roles are highlighted in this book. Point out that there are other roles
as well.
7. Financial Impact of Process Steps
a. Income Statement
b. Balance Sheet
c. Chart of Accounts
Understanding the financial impact of process steps is important. Introduce
students to the two key financial statements – balance sheet and income
statement - in very simple terms. Briefly explain the double entry system.
Explain the idea of offsetting increases and decreases in accounts.
Review questions
1. What are the reasons for increased global competition? What are the consequences
of global competition to organizations?
One reason for increased global competition is changes in national and international
politics and policies. These policies have encouraged organizations to source their
activities in the most advantageous locations. Since organizations are no longer
geographically limited, they must ensure that their operations are properly
integrated. This is more difficult when organizations are spread all around the
globe.
2. What is meant by the term “information revolution?” What caused this revolution?
What are the implications of the information revolution for you?
The information revolution refers to the increased use of information and
communication technology to create, deliver, and use information. ICT includes such
things as the Internet (e.g., e-mail, web) and computer-based business information
systems (e.g., SAP ERP) that support the work of organizations. This revolution was
caused because organizations were expanding rapidly and their processes were
becoming widely dispersed. A key implication is that this has given rise to the
knowledge worker whose skills are quite different from workers of the previous
generation.
3. What are knowledge workers? What skills do they possess? Why are they important
to organizations?
A knowledge worker is one who uses ICT to create, acquire, process, synthesize,
disseminate, analyze and use information to be more productive. They develop the
skills to find and use the information they need rather than rely on others to find it
for them. They are important to organizations because they can look at something
, and see how it fits into the whole organization. Knowledge workers are scarce and
most organizations do not have enough of them.
4. Explain the difference between the functional view and the process view of
organizations. Why is the process view important today?
The functional view of an organization view the work performed in organizations in
terms of loosely coupled functions. Whereas, the process view focuses on the
interrelationships between functions that are needed to effectively complete the
work of organizations. The process view is extremely important today because
pressures of global competition are forcing organizations to find way to reduce
costs, lead times, and delays.
5. What are some of the key business processes in an organization? Do all companies
have the same key processes? Why or why not?
Some key business processes in an organization are procurement, fulfillment, and
production. While most companies in the same industry do have similar key
processes they may execute them differently. Some companies may not execute
certain processes at all. For example a retail store like Home Depot wouldn’t have
the manufacturing process.
6. What is a common organizational structure? Why did this structure evolve? What
are the benefits of such a structure?
The most common organizational structure is a functional structure. This structure
evolved to solve the problems of managing organizations that evolved from being
relatively small corporations that were centralized to large corporations that were
located across the world. The functional structure emphasizes division of labor and
specialization and makes the task of managing large organizations simpler.
7. What are the typical functions or departments in an organization? What type of
work is done in each of these functions?
Typical functions or departments in an organization are purchasing, operations,
warehouse (inventory management), sales and marketing, research and development,
finance and accounting, human resources, and information technology. Each function
performs a narrowly defined (or specialized) set of activities. Specific activities are
provided in Table 1.1.
8. What are the drawbacks of a functional organizational structure? What negative
consequences do they lead to?
The major drawback of a functional organizational structure is the silo effect where
persons in a function are very focused on the work performed in their functions and
lose sight of the bigger process that they support.
9. What are functional information systems? What is their value to organizations?
What are their main drawbacks?
Processes, and Information Systems
Teaching Objectives
The teaching objectives of this chapter are to:
1. Understand that work in organizations is completed in processes that consist of
many steps
2. Compare and contrast the functional and process views of organizations and
identify the negative consequences of the traditional functional organizational
structure
3. Discuss and describe the various flows in a process – physical, data, document, and
information
4. Explain how enterprise systems enable organizations to execute and manage
processes
Chapter Outline and Teaching Suggestions
1. The Modern Global Business Environment
a. Global Competition
b. The Information Revolution
c. Knowledge Worker
Explain these three key concepts and why it is important for your students to
understand them.
Explain the reasons for the growth in global competition and the use of
information in organizations. An interesting question is which came first – did
technology drive globalization or vice versa.
Explain what a knowledge worker does.
Explain the key skills expected of a knowledge worker.
2. Key Business Processes
a. Generic Process
b. Procurement Process
c. Fulfillment Process
Define and explain a business processes. Ask students to identify some other
processes that they are familiar with. Identify the three key processes covered in
this book and the steps in these processes – in very general terms.
3. The Functional Organizational Structure
, a. The Silo Effect
b. Delays in Executing the Process
c. Excess Inventory
d. Lack of Visibility across Processes
Discuss how companies are organized and that the functional structure is the
most common one. You can use the university or business school departmental
structure as an example.
Point out that processes are cross-functional. Ask the question: why is the
functional structure so common?
Briefly discuss the history of the evolution of the functional structure
Explain the silo effect and the negative consequences of the silo effect.
Explain each of the negative consequences in detail focusing on the example of
the fulfillment process provided in the book. Ask students to perform a similar
exercise for another process.
4. The importance of Information Systems
a. Data and Information
b. Functional Information Systems
c. Enterprise Systems
d. Why is This Information Important to You?
Define the term information system and explain why they are important to
modern organizations.
Explain the evolution of information systems from functional systems to
integrated enterprise systems.
Define functional systems and their value and how they reduce some of the
negative consequences of the silo effect previously discussed.
Define enterprise systems and their value and how they further reduce these
negative consequences.
Explain why information systems are important to your students, regardless of
their major.
5. Flows in Business Processes
Explain the framework that will be used in the book. The framework consists of
several flows – physical, data, document and information.
6. The Roles of Enterprise Systems in Organizations
a. Execute the Process
b. Capture and Store Process Data
c. Monitor Process Performance
, Explain the key role of enterprise systems in supporting business processes.
Three key roles are highlighted in this book. Point out that there are other roles
as well.
7. Financial Impact of Process Steps
a. Income Statement
b. Balance Sheet
c. Chart of Accounts
Understanding the financial impact of process steps is important. Introduce
students to the two key financial statements – balance sheet and income
statement - in very simple terms. Briefly explain the double entry system.
Explain the idea of offsetting increases and decreases in accounts.
Review questions
1. What are the reasons for increased global competition? What are the consequences
of global competition to organizations?
One reason for increased global competition is changes in national and international
politics and policies. These policies have encouraged organizations to source their
activities in the most advantageous locations. Since organizations are no longer
geographically limited, they must ensure that their operations are properly
integrated. This is more difficult when organizations are spread all around the
globe.
2. What is meant by the term “information revolution?” What caused this revolution?
What are the implications of the information revolution for you?
The information revolution refers to the increased use of information and
communication technology to create, deliver, and use information. ICT includes such
things as the Internet (e.g., e-mail, web) and computer-based business information
systems (e.g., SAP ERP) that support the work of organizations. This revolution was
caused because organizations were expanding rapidly and their processes were
becoming widely dispersed. A key implication is that this has given rise to the
knowledge worker whose skills are quite different from workers of the previous
generation.
3. What are knowledge workers? What skills do they possess? Why are they important
to organizations?
A knowledge worker is one who uses ICT to create, acquire, process, synthesize,
disseminate, analyze and use information to be more productive. They develop the
skills to find and use the information they need rather than rely on others to find it
for them. They are important to organizations because they can look at something
, and see how it fits into the whole organization. Knowledge workers are scarce and
most organizations do not have enough of them.
4. Explain the difference between the functional view and the process view of
organizations. Why is the process view important today?
The functional view of an organization view the work performed in organizations in
terms of loosely coupled functions. Whereas, the process view focuses on the
interrelationships between functions that are needed to effectively complete the
work of organizations. The process view is extremely important today because
pressures of global competition are forcing organizations to find way to reduce
costs, lead times, and delays.
5. What are some of the key business processes in an organization? Do all companies
have the same key processes? Why or why not?
Some key business processes in an organization are procurement, fulfillment, and
production. While most companies in the same industry do have similar key
processes they may execute them differently. Some companies may not execute
certain processes at all. For example a retail store like Home Depot wouldn’t have
the manufacturing process.
6. What is a common organizational structure? Why did this structure evolve? What
are the benefits of such a structure?
The most common organizational structure is a functional structure. This structure
evolved to solve the problems of managing organizations that evolved from being
relatively small corporations that were centralized to large corporations that were
located across the world. The functional structure emphasizes division of labor and
specialization and makes the task of managing large organizations simpler.
7. What are the typical functions or departments in an organization? What type of
work is done in each of these functions?
Typical functions or departments in an organization are purchasing, operations,
warehouse (inventory management), sales and marketing, research and development,
finance and accounting, human resources, and information technology. Each function
performs a narrowly defined (or specialized) set of activities. Specific activities are
provided in Table 1.1.
8. What are the drawbacks of a functional organizational structure? What negative
consequences do they lead to?
The major drawback of a functional organizational structure is the silo effect where
persons in a function are very focused on the work performed in their functions and
lose sight of the bigger process that they support.
9. What are functional information systems? What is their value to organizations?
What are their main drawbacks?
