Having clearly defined and well-understood business rules is one of the key ingredients of organisational success. Without a proper set of business rules, employees and the organisation itself would lack the guidance necessary to determine which actions are allowed and which are not.
The lack of company-wide guidelines would force them to make important decisions on the fly which often leads not only to poor performance and unsatisfactory results but to complete chaos and disarray within the organisation.
So, it’s hardly surprising that business rules analysis is one of the most essential techniques a business analyst can use when working on process optimization and improved decision-making.
As business rules affect almost all aspects of a company, including processes, data, systems, and stakeholders, an analyst can use this technique to deliver consistent, efficient, and clear guidelines throughout an organisation.
With a set of well-defined business rules in place, a company can accomplish its goals faster and be better equipped to react to market changes and emerging industry needs.
Table of Contents
What are Business Rules?
Business rules are the underlying principles, guidelines, and policies that dictate how an organisation operates on a day-to-day level and define acceptable behaviours and outcomes within the company.
Functioning as a regulation, a business rule can define or restrict an action that occurs during the company’s operation and, by doing so, it helps determine when, why, where, and how a certain task should be carried out.
These rules are necessary for an organisation to operate at an optimal level as they are key to maintaining consistency, reducing ambiguity, and ensuring that the company adheres to regulatory and legal requirements.
Business rules encompass a very wide range of areas, from employee conduct and financial transactions to customer interactions and product specifications.
Based on what aspect of the organisation they regulate, business rules can be classified into two main categories:
Definitional Rules
Definitional rules serve as a blueprint for how concepts and entities are defined within an organisation. They capture the essence of what each entity signifies and how it interacts with others and establish the fundamental attributes, relationships, and properties behind the company’s operation.
So, unlike behavioural rules which determine people’s behaviour, definitional rules are a product of the operational knowledge of the organisation and are derived and based on the information available to the business.
For example, these rules can be used to define and classify different categories of customers based on contractual agreements or order quantities. Such a rule becomes a foundational guideline for the classification of customers, meaning that it influences many aspects of sales strategy, such as pricing, order fulfilment, or tailored services.
Behavioural Rules
Behavioural rules, on the other hand, deal with people’s behaviour, thus shaping the day-to-day operations of the organisation. They shape and orchestrate interactions within the organisation by defining permissible behaviours and actions.
Behavioural rules influence the actions of people within the organisation but also impact the behaviour of those who interact with it, such as customers.
As they apply to people, behavioural business rules can be directly violated due to the people’s nature, unlike definitional rules which can be misapplied but not violated. The violation can happen no matter the precaution the organisation has taken to prevent it. Therefore, when defining the behavioural rules, it’s also important to determine the level of strictness in applying the rule and potential sanctions for its violation.
Business Rules Analysis
When an organisation and the people within it properly understand, capture and document business rules, understanding and dealing with change is much easier. The change impact analysis is clear and unambiguous and the implementation plan can be managed successfully with shared understanding among all relevant stakeholders.
Therefore, business rules analysis, as a systematic approach to identifying, documenting, and managing business rules within an organisation is among the most powerful tools at a business analyst’s disposal.
The process of business rules analysis involves a detailed examination of the company’s existing processes, workflow, and decision-making framework. By properly analysing all these aspects of the organisation, a business analyst can discover implicit or hidden rules governing and influencing business operations and define easily accessible and explicit rules, helping stakeholders to understand and follow them properly and consistently.
Of course, this requires meticulous work on extracting business rules from the organisation’s procedure documents, policy statements, filings, product descriptions, and other relevant documentation. These types of sources are commonly referred to as explicit. Some rules will need to be extracted from tacit sources or “tribal knowledge, such as corporate culture norms, undocumented stakeholder know-how, or general business practices.
In some cases, especially in organisations with more complex structures and multiple different departments, certain rules may conflict depending on the area of the company they’re applied in. When identifying, eliciting, and documenting business rules, business analysts will likely have to rely on several different techniques for their toolbox, such as interviews, surveys, workshops
, use cases, and decision tables.
It’s up to the business rules analysis process to help navigate through these complex processes and provide clear guidance for the discovery of business rules, as well as identify processes, events, roles, and data these business rules impact.
Defining Business Rules
After identifying the sources and scoping business rules, the next step in the analysis is to formulate them. Depending on the type and structure of the organisation and the requirements of a particular project, business rules can be formulated in different ways, including natural language expression, logical statement, or formal expression.
Once business rules are properly defined, they should be categorised using the method that best fits the structure of the organisation. Rules can be classified by source, type, scope, and priority.
No matter how a business rule is formulated, it should feature several key attributes. Business rules should be:
- Atomic – Business rules should be self-contained, discrete, and expressed in a format that is as granular as possible. This also means that they shouldn’t be broad or vaguely stated, but very specific With each rule addressing a single aspect of business operations, they’re much easier to manage and update.
- Declarative – Business rules should describe and prescribe what should happen, not how it should happen. In addition, they should be clearly stated, using high-level, non-technical language for maximum clarity and accessibility.
- Independent – Business rules should be able to stand alone, regardless of the system or technology used for their implementation. This ensures that a business rule will be flexible and adaptive across various platforms. In addition, independence means that the rule can be changed without the modification of associated processes. The rules should also be documented independently of how, when, where, and by whom they’re enforced
- Manageable – When business rules can be actively managed, they’re ready for reuse whenever they’re needed. Therefore, it’s necessary to clearly document them, so it’s easy to track changes and updates, ensuring efficient adaptation to evolving business needs.
- Reusable – Business rules, once defined, should be ready for reuse in different systems and processes, with consistency and without redundancy.
- Accessible – Business rules won’t be of much use if they’re not published in a way that all relevant people can view and manage them.
Validation and Verification of Business Rules
Whatever the form, the analyst needs to make sure that business rules are expressed in a way that allows for validation and verification for correctness and consistency. Therefore, before formulating rules, it’s important to have a full understanding of the business audience and specific organisational standards.
The validation of business rules involves checking them for correctness, completeness, relevance, and feasibility. The process of validation can be done using different methods, including walkthroughs, reviews, simulations, and inspections.
To properly validate business rules, the process should also involve relevant stakeholders, such as business owners, SMEs (subject matter experts), developers, and end users. It’s also necessary to, before moving on to the next stage in the business rules analysis process, document any problems, risks, assumptions, and dependencies regarding business rules, so the issues can be resolved.
Verifying business rules, or ensuring that they’re implemented and executed as planned, involves using various BA techniques, such as scenarios, scripts, use cases, or automation tools, to perform testing. At this stage, it’s also important to determine the desired outcomes and define criteria and metrics by which the business rules will be measured for effectiveness and performance.
Business rules should also be tested to make sure they work in different systems and environments.
Monitoring Business Rules
With the start of their implementation, business rules should be tracked and monitored to establish their impact on business operations and processes within the organisation. Business rules can be monitored using several different business analysis tools, such as reports, dashboards, alerts, and feedback mechanisms.
At this point, there should also be a system in place, allowing updating, reviewing, and communicating business rules., The established process should also allow for efficient management of changes, issues, or conflicts that may occur.
While monitoring, business rules should be checked to determine if they are aligned with the overall organisational objectives and that they can provide support for continuous growth and improvement.
Benefits and Strengths of Business Rules Analysis
Business Rules Analysis as a strategic business analysis technique and business rules themselves bring multiple benefits to organisations.
- Enhanced Decision -Making – Business rules, when clearly defined, help ensure that the decisions made within the organisation are consistent and in alignment with the overall objectives of the company. They make sure that the employees perform specific business activities in the right way and enable them to make better decisions. In addition, business rules provide a systematic approach to collecting and analysing data, allowing businesses to easier identify emerging trends and patterns which is very valuable for informed decision-making.
- Improved Compliance – With a set of business rules in place, organisations have fewer issues in adhering to regulatory, legal, and industry-specific requirements, thus reducing the risk of non-compliance.
- Efficiency and Consistency – Business rules help standardise processes and actions, and, in that way, contribute to streamlining operations and reducing errors. Thanks to the structured analysis of data, business rules analysis can help organisations identify areas for improvement and quickly and easily adapt and make changes. Plus, as they predetermine several aspects of business operations, business rules can significantly increase productivity and save the time needed for creating actions.
- Facilitated Communication – When stated explicitly and clearly, business rules foster clear communication among stakeholders and reduce potential misunderstandings and conflicts. They can also significantly improve communication between different departments within the organisation and allow them to share information quickly and efficiently.
- Agility and Adaptability – With properly documented business rules, the organisation is capable of swiftly and efficiently reacting to any changes in its environment without sacrificing the integrity of its business operations.
- Capturing Undocumented Knowledge – In many cases, the knowledge required to complete a certain task is unwritten and only known by certain employees within the company. The business rules analysis process ensures that knowledge is captured and shared across the organisation, reducing the risk of inefficiency and errors.
Limitations of Business Rules Analysis
While it is a very powerful business analysis tool, business rules analysis still has certain limitations.
- Complexity Handling – In more complex organisations and business environments, documenting and managing all business rules can become overwhelming and too time-consuming. This can also lead to a larger number of business rules which makes it difficult to apply them across different systems and departments. In some cases, business rules will require a management system which can often prove to be very costly. Plus, the business rules analysis process itself is often time-consuming and expensive.
- Human Interpretation – No matter how clearly defined, business rules may still require human interpretation. This may lead to subjective understanding and potential misapplication.
- Rapid Changes – In rapidly evolving industries, business rules may become outdated quickly, necessitating frequent updates. That’s why the ability to adapt to changing circumstances and emerging technologies is one of the key qualities of a business rule.
- Lack of Context – Isolated business rules might lack the contextual understanding necessary for making informed decisions. They sometimes provide only a limited view of business, failing to provide an in-depth understanding of organisational processes, data, and system dynamics.