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Contributed on February 20, 2013

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Effective Business Decision Management: How Mature is Your Company?

Blog: Lux Magi – Decision Management for Finance Blog

Are you effectively managing your business decisions (or indeed rules)? Are you fully in control of those operational decisions your company makes, maybe thousands of times a day or more (possibly using some degree of automation), that determine which customers you will accept, what credit terms you will offer them, what risks you’re prepared to take, what products they might like or need, what prices to charge for them, whether you are compliant with regulatory edicts – in short, the bedrock of your business?

So: how grown-up is your company when it comes to decision management? Why not take our quiz and find out?

What are Operational Decisions and Why Should You Care?

By ‘business decisions’ we are not talking about the strategic choices made by the CEO that determine a company’s financial course. Rather we are referring to the high volume decisions that are made as a business operates. If your company is in the business of buying and/or selling products, it is making operational decisions (or using operational rules) every day. For example:

• What products can I cross sell to this client?
• For which credit terms is a client eligible?
• What regulatory constraints apply to this trade and how should they best be observed?
• How should I price a product or service for a given requirement?
• Is my capital adequacy compliant with the regulations?
• Which liquidity basket does a given position fit within?
• With whom should I intermediate this deal to mitigate risk?

Some of these decisions govern the behaviour of client web interfaces, other control internal processes.

Even if you are exclusively a service company you will be making operational decisions concerning: level of risk, regulatory compliance, profitability, resource allocation and timing. The quality of these decisions, the insight of your business strategy and how well the two align define your corporate success.

Example of a Decision Table Business Decision

Unless your company is small enough to allow all these decisions to be performed manually, by a human expert, these decisions require some degree of automation. If your operational decisions are fully automated you may think this article is a waste of time – haven’t you already achieved the pinnacle of success? Think again. Automation is only the beginning of the story and marks your company as a mere infant in the maturity of business decisions. There are other factors that are more impactful than automation – how well do you fare there?

So, Why Should I Care?

Regardless of whether you’ve got automated support or not, immature management of business decisions frequently has one or more of the following symptoms:

• Business know how is lost when key people leave the company or move departments
• The precise business policy your key systems support is not explicitly stated anywhere or known by any one individual
• When a key system is decommissioned, chaos ensues because some vital functionality that it had has not been recognised or ported to a replacement
• Demonstrating that you are compliant with regulations is expensive and time consuming
• Implementing a change is policy is slow and error prone: if a business goal changes, which decisions require modification?
• Measuring the performance of a specific business policy is expensive and unreliable
• Without this measurement, improving the profitability of your policies by evolving your operational decisions is a ‘hit and miss’ affair

All of these issues can cost you money, time and wasted business opportunities. Some are intangible drains; others sap your ability to capitalise on a new idea. Clearly, not managing your business decisions is not an option.

How to Test Your Company’s Maturity

To find out how mature your company’s management is, simply assess each of the statements listed below and determine if it is a fair approximation to the truth within your environment. Award yourself one mark for each true statement and add up all the marks. The job has been made easier by splitting the statements into a hierarchy, if you answer no to a parent statement, you can simply ignore all of its sub-statements and move along to the next one at that level. Don’t get too complacent if it appears easy at the outset, the points get harder as you progress!

Once you have added together all your marks, read the results section below. You can use the test to assess the maturity of an individual project, department or an entire enterprise. Good luck!

Visibility

How easy is it for business SMEs to see and understand the business’s operational decisions?

Award your organisation one point for each of the following statements (or sub-statements) that is true or a fair approximation of the truth:

1. The operational decisions made by the business are manifest in a separate and explicit representation, in a form other than program code
   1. This representation is available in a single centralised location
   2. This representation is shared among project personnel
   3. This representation is shared across departments
   4. This representation is shared enterprise wide
2. Any authorised SME can directly gain access the definition of the business decisions in which they are involved (without having to go via a third party)
   1. SMEs regularly do this in practice
   2. The decisions they can see are directly representative of those currently in use by the business (and not some stale spreadsheet, Word document or other shelfware)
   3. SMEs access these decisions by logging into a system that depicts business decisions, from their desktop
      1. They can also log into that system from a mobile device
      2. Their access is restricted according to their role and business domain, they may only see decisions pertinent to their job function
3. SMEs have tools to search for specific operational decisions on demand
   1. It is relatively easy to find a specific decision as they are organised in a logical hierarchy which is meaningful to the business
   2. There is an ability to search the decisions for those with a specific property (e.g., particular name, last authors, last change date, etc.) or dependency on a specific condition
   3. They can navigate to a representation of the entire business process –  from there, they can then select decision processes and drill down to see the definition of  their operational decisions
4. The decisions are expressed in a format that an SME can understand with a maximum of two days’ training (assuming they are already fully cognizant of the business logic)
   1. SMEs can understand decisions with less than one day’s training
   2. Decisions require no specialist training to understand, providing you are familiar with the business area they address
   3. These definitions are made in plain business English, rather than a semi-technical language
   4. There is no implicit understanding of the context the decisions are made within – all business logic is explicitly stated
   5. A search and online help are available for business terms used in business decisions
   6. SMEs may invoke an interactive help system to explain the meaning of the decisions
   7. The display of decisions includes which conditions are used to make a decision and all the possible outcomes
   8. The system permits easy navigation between the conditions of one decision and the decision that populated these conditions (i.e., you can traverse the inferential dependencies)
   9. The system shows each decision within the full context of the business process in which it is made
5. It is possible to view past versions of the decisions and how they have evolved
   1. It is clear which versions contribute to the currently live instance(s) of the production systems that support them – in other words you can clearly see which decisions are ‘live’
6. SMEs can review decisions and leave comments
7. SMEs may propose amendments to business decisions
8. SMEs may see the number of times each decision has been made and the relative frequency of the different outcomes

There is a maximum of 30 marks in this section.

How easy is it for business SMEs to test business decisions?

Award your organisation one point for each of the following statements (or sub-statements) that is true or a fair approximation of the truth:

1. Any authorised SME can test a business decision’s behaviour outside of a production instance of the automation software
   1. They may test the end to end decision process by supplying some sample data (e.g., on a web form or via an upload excel spreadsheet) and seeing the outcome (i.e., the decisions reached as a result of that input data)
   2. They may download the results of these tests for later analysis (e.g., as a spreadsheet)
   3. They may submit batches of tests and retrieve the resulting collection of decision outputs
   4. The system supports the definition of common sets of tests that can be co-developed, shared and reused by a team of SMEs
   5. The decision support system can explain, on demand, it’s rationale in making the decisions it did in response to the test data (complete with all the sub-decisions if applicable)
   6. The system can apply the same bulk test data to two different versions of the decisions (i.e., champion and challenger) and show the differences between them (i.e., the differing test results)
   7. The execution of a test, with all its attendant detail, can be recorded for later reference
2. SMEs regularly test the behaviour of business decisions with which they are involved
3. There is a system that assists users in the provision of test data in some way
   1. It validates the input data they provide (e.g., numerical fields can only be filled with valid numbers, enumerated fields may only be supplied with permitted values)
   2. It will generate bulk test data according to a profile specified by the user
   3. It will generate bulk test data according to the boundary conditions of the decision logic being tested
   4. It will provide access to real production data (disguised as needed to abide by data protection laws)
4. The system can schedule and automate the execution of testing on a regular basis and report anomalies (i.e., continuous integration)

There is a maximum of 15 marks in this section.

Agility

How agile is your decision development?

Award your organisation one point for each of the following statements (or sub-statements) that is true or a fair approximation of the truth:

1. Business SMEs may author and amend decisions, directly, themselves
   1. The entry and amendment of decisions can occur without the intervention of IT (although deployment to a production environment is still controlled by IT) – even for novel decisions, the form of which was not encountered before
   2. The testing of new and amended decisions is partly the responsibility of the business SME and partly that of IT
   3. Your company implements an explicitly defined change management (i.e., governance) process for business decisions (e.g., process of hand-off for authorship, testing, review, approval and deployment)
      1. The decision management system directly supports your company’s change management process (e.g., it will warn users if they attempt to deploy unapproved decisions)
      2. The decision management system mandates it (e.g., it will not allow deployment of unreviewed or unapproved decisions)
2. The decision management environment supports interactive, multi-site collaboration in the development and testing of business decisions
   1. It supports a federated business vocabulary (e.g., of fact types) from which decisions are made
      1. This vocabulary allows different departments to have synonyms for the same concepts
3. A minor change to a decision could be made, tested, reviewed, approved and presented to IT (for deployment) in less than one business day on average.
   1. This could be done in less than 4 hours on average.
   2. Until deployment is required, IT are not involved

There is a maximum of 12 marks in this section

How safe is your decision development?

Award your organisation one point for each of the following statements (or sub-statements) that is true or a fair approximation of the truth:

1. Business SMEs (rather than IT) capture business decisions from their own analysis of the business goals and processes
   1. They use an industry standard means (i.e., method and notation) of capturing and documenting their business process and decisions (e.g., BPMN and The Decision Model)
   2. SMEs use a purpose driven tool to capture this information (rather than Visio, Excel and Word)
      1. This tool supports navigation between process and decisions and can (and is) be used to promulgate understanding of the business within your company
      2. This tool supports integrity and consistency checking of the model and assists SMEs in producing a coherent and consistent description of business logic
      3. This tool is open and able to support reporting and data extracts
2. Business SMEs review the operational decision definitions (as defined above) and the deployment of decisions is subject to satisfactory review
3. Business decisions are subject to version control
   1. The SME may create and amend decisions within their own sandbox with no impact on other authors until they have finished and tested their work and wish to submit it. At such time the next version of the decision becomes available to other, authorised workers
   2. It is possible for SMEs to ‘lock’ decisions to prevent multiple SMEs making changes concurrently.
4. Business SMEs must be able to determine, from the management system, what the impact of a proposed decision change is by, for example, it provides the difference in test results that arise from proposed decision changes

There is a maximum of 11 marks in this section.

Alignment with and Measurement of Business Goals

Are your decisions aligned to business goals?

Award your organisation one point for each of the following statements (or sub-statements) that is true or a fair approximation of the truth:

1. Your business has specific goals that are explicitly defined and modelled
   1. There exists a business strategy document that defines one or more measurable success criteria for each of your business goals
      1. This is maintained by accountable business stakeholders
      2. This is an open document within the company
   2. Each goal has one or more defined tactics to achieve it
      1. Each tactic defines one or more policies designed to support it
         1. Each policy shows zero or more risks that threaten its achievement.
         2. Risks can have counter-tactics and so on
      2. Every policy, tactic and goal is SMART (specific, measurable, achievable, realistic and timely) and has at least one quantified metric and a target for that metric.
      3. Goals, metrics and targets are defined separately as the latter can prove to be inappropriate, irrespective of the correctness of the former
2. Every business decision is associated with one or more tactics or policies that it assists in meeting

There is a maximum of 9 marks in this section.

Are the quality of your business decisions measured?

Award your organisation one point for each of the following statements (or sub-statements) that is true or a fair approximation of the truth:

1. Every business goal, tactic and policy is routinely measured by the metrics defined for it
   1. Measurements are monitored and their trends and comparison to targets is regularly reported
   2. These reports can be used to determine the effectiveness of a given decision or set of decisions
   3. Poor scoring decisions are automatically flagged for the attention of a responsible person
   4. These reports directly motivate refinement in the goals, tactics, policies and eventually to the creation and amendment of business decisions
   5. The metric trends are used to automatically adjust business decision parameters or business decisions themselves
2. All changes in business decisions are recorded with a rationale for which business goals, tactics and polices the amendment is intended to support
3. It is possible to see how a business decision performed against previous versions and/or rivals (i.e., decisions supporting alternative business policies)

There is a maximum of 8 marks in this section.

Experimentation and Optimization

Does your company support improvement through experimentation with business decisions?

Award your organisation one point for each of the following statements (or sub-statements) that is true or a fair approximation of the truth:

1. Once a business decisions is deemed (either manually or automatically) to be in need of improvement, the management system can assist with testing (better) alternatives
   1. SMEs can determine how decision amendments (that they propose) would have changed its performance against real production data
   2. SMEs can propose (single or families of) ‘rival’ or alternate decision definitions that can (once defined and  approved) be run (by the management system) competitively with incumbents with the goal of comparing their relative degree of success
   3. SMEs can, using the management system, propose hypotheses about which decisions are more effective at achieving a business goal and make plans to test these
2. The system can depict the statistical significance of any deemed failure in a business decision or set of decisions (e.g., the number of bad decisions made as a proportion of all decisions, the total cost of the bad decisions, etc)

There is a maximum of 5 marks in this section.

Results

How did you score? The test has a total of 90 marks. We’ve applied this test to several of our clients. To some the test was applied both before and after our services were provided. Here is our assessment of the scores (complete with the expected frequency our research would predict):

We would love to know how you fared and what you think of this test. Please feel free to leave comments that summarize your experiences.