Enabling Operational Excellence
Enabling Operational Excellence
Enabling Operational Excellence
Enabling Operational Excellence

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What is a Business Rule?

It’s become more and more apparent that software vendors are misleading people (badly) about the true meaning of ‘business rule’. Time to set the record straight. Here is an authoritative 3-part explanation. Take a moment and reacquaint yourself. As a business-oriented professional you’ll be glad you did!

   Reference Sources

[MWUD] Merriam-Webster Unabridged Dictionary (Version 2.5).  [2000].  Merriam-Webster Inc.
[SBVR] Semantics of Business Vocabulary and Business Rules (SBVR) (Version 1.0).  [January 2008].  Object Management Group.
  1. Rule When we say rule we always mean real-world rule. Here’s the dictionary meaning of “rule”. That’s what we mean.

[MWUD ‘rule’ 1a]:  guide for conduct or action; [MWUD ‘rule’ 1f]:  one of a set of usually official regulations by which an activity (as a sport) is governed [e.g.,] *the infield fly rule* *the rules of professional basketball* ; [MWUD ‘criteria’  2]:  a standard on which a decision or judgment may be based

A real-world rule always tends to remove some degree of freedom.  If it does not, it’s not a rule.  2. Under Business Jurisdiction    When we say business rule we mean only rules that the business can opt to change or to discard. A business rule is always under business jurisdiction of your organization.  The point with respect to external regulation and law is that your organization has a choice about how to interpret the regulations and laws for deployment into its day-to-day business activity – and even whether to follow them at all. So external regulations are not business rules per se. Business rules include only the rules that a business creates in response to external regulation. SBVR explains: 

“The laws of physics may be relevant to a company … ; legislation and regulations may be imposed on it; external standards and best practices may be adopted. 

These things are not business rules from the company’s perspective, since it does not have the authority to change them. 

The company will decide how to react to laws and regulations, and will create business rules to ensure compliance with them.  Similarly, it will create business rules to ensure that standards or best practices are implemented as intended.”

3. Business Rule

[SBVR]:  a rule that is under business jurisdiction

A business rule is a criterion used to:
    • guide day-to-day business activity
    • shape operational business judgments, or
    • make operational business decisions. 
A number of years ago, a colleague of ours, Mark Myers, came up with a highly pragmatic test to determine whether some statement represents a business rule or a system rule.  It almost always works.  Imagine you threw out all the systems running your business and did it all by hand (somehow).  If you still need the statement, it’s a business rule.  If you don’t, it’s not.  A colleague on the SBVR standardization team, Don Baisley, puts it another way:  “Business people don’t set variables and they don’t call functions.” Some people think of business rules as loosely formed, very general requirements.  Wrong.  Business rules have definite form, and are very specific.  Each should give well-formed, practicable guidance Here are a few simple examples expressed in RuleSpeak:  

A customer that has ordered a product must have an assigned agent. 

The sales tax for a purchase must be 6.25% if the purchase is made in Texas. 

A customer may be considered preferred only if the customer has placed more than $10,000 worth of orders during the most recent calendar year.

Business rules represent a form of business communication and must make sense (communicate) to business people.  If some statement doesn’t communicate, it’s not a business rule. 

Consider this example:  If ACT-BL LT 0 then set OD-Flag to ‘yes’.  Not a business rule. 

Consider another example:  An account must be considered overdrawn if the account balance is less than $0.  This statement communicates and therefore is a business rule. 

More observations about business rules:
    • In SBVR a business rule can be either a behavioral rule or a definitional rule.
    • Business rules can be technical, but only in terms of the company’s know-how or specialized product/service, not in terms of IT designs or platforms.
    • Expression of business rules should always be declarative, rather than procedural.
    • A business rule statement should use terms and wordings about operational business things that should be based on a structured business vocabulary (concept model).
    • Your company’s business rules need to be managed and single-sourced, so we strongly recommend rulebook management.
Business rules are not about mimicking intelligent behavior, they are about running a business Mimicking intelligent behavior in a generalized way is far harder (an order of magnitude or more) than capturing the business rules of an organization.  Unfortunately, expert systems have generally focused on the former problem, causing considerable confusion among business practitioners.  ~~~~~~~~~~~~~~~~~~~~  Excerpted from Building Business Solutions: Business Analysis with Business Rules, by Ronald G. Ross with Gladys S.W. Lam, An IIBA® Sponsored Handbook, Business Rule Solutions, LLC, 2011, 304 pp,http://www.brsolutions.com/bbs

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Ronald G. Ross

Ronald G. Ross

Ron Ross, Principal and Co-Founder of Business Rules Solutions, LLC, is internationally acknowledged as the “father of business rules.” Recognizing early on the importance of independently managed business rules for business operations and architecture, he has pioneered innovative techniques and standards since the mid-1980s. He wrote the industry’s first book on business rules in 1994.