International Process and Performance Institute

I recently had some interesting conversation on business rules - how the way we think of business rules has actually created many of the challenges we face in business process management. The essence of the conversation is that there are two categories of business rules that exist in most organizations; those that act to control work and those that act to direct intent.

While I believe the distinction between these two categories of business rules is not something we formally recognize, there is little doubt that they both exist in every organization.

Control

Business rules used for control, as I would define them, are those business rules we expect our organization to follow rigorously. Exceptions for control rules require formal acknowledgement, via a programmatic exception handling sub-process or approval. For the most part, control rules are inviolate. They are the rules we expect the people in our organization to follow based on what each rule tells us we must do.

BPMS, BRMS and enterprise applications products are often used effectively for these rules, creating executable software with these rules embedded within them. For example, the quoting of customized goods or services could follow a specific rule set to determine product price. Exceptions for pricing other than what the rule set dictates, if this option exists at all, would likely be handled through a formalized exception sub-process.

Intent

In contrast, a set of documents that provide a pricing matrix could exist instead of a formalized pricing rule set in software. A given company could operate under an adapted rule that is driven by sales goals, with exceptions (pricing adjustments) commonly ‘ignored’ as long as sales goals are met. I have seen this before, many times, where the organization has a set of unwritten rules that people know and apply on a regular basis.

The intent of the pricing rules in this case could be interpreted as ‘we need to make sales goals and our pricing should be as close to this as possible.’ Exceptions to the pricing rules are driven by what is accepted by management. These exceptions suggest that the definition of the real rule in place is more complex. The rule is really “we need to make sales goals, ideally at a certain level of profit but at the same time to keep a certain volume moving and with the caveat that volume can offset profit percent, and this pricing is what we really want to be as close to as possible.”

What I want you to observe is that this rule can be almost infinitely complex. When sales are down, the rule may be relaxed more. If sales are up, nearing production capacity, the pricing matrix may be more strictly enforced. Closing business with an important new client might skew the pricing model even to a loss. It is, in affect, a subjective rule that acts as a guide line to achieve an outcome of sales levels and related profit.

Another example of intent-based rules relates to operating procedures. It amazes me that all organizations have rules in place that tell us how to do things, yet they are largely ignored and rarely enforced. The intent may be to comply with external regulations or it could be how the organization has decided certain things should get done. These rules are always documented but often times they are not enforced, or if they are enforced that enforcement is the creation of “documentation” to support rule compliance. Let’s face it, when anyone reviews adherence to procedures, how do they do that? They don’t take the time to observe people at work, the audit the “paperwork.”

A rule of thumb

The takeaway I have from this is that codifying control rules makes complete sense while codifying rules of intent has the potential to produce serious negative consequences. While it may seem logical that codifying rules of intent is beneficial, the realty is that doing so will immediately create a need for organizational change and the consequences can negatively impact performance and morale.

Where rules of intent need codification, i.e. “we need to follow that rule,” then there is a need to factor in education and training to the people affected so that we can successfully go through the change process with at worst a temporary negative impact on performance and morale.

Perhaps if we take the time to think about the rules in our organizations we will find that many rules of intent can remain as they are. I suspect that this is necessary, as people are not machines and they will develop unique work patterns as part of human nature. Control rules are relatively easy to deal with. Rules of intent are far more challenging, requiring us to think hard about the purpose of the rule and the best action we can take (which may be no action) to achieve the outcome the rule exists to serve.