Introduction

• How does the use of information technology

impact the organization?
• What type of organizational structure tends to be
Chapter 3 most willing to embrace technological change
and sophistication? Why?
Organizational Impacts of • What are the advantages and disadvantages of
Information System Use the networked organizational structure?
• How has IT changed the way managers monitor
Managing and Using Information Systems: A and evaluate?
Strategic Approach • Are virtual organizations just a passing fad?
by Keri Pearlson & Carol Saunders • What challenges are faced by virtual team?

Copyright 2006 John Wiley & Sons, Inc. 2

Real World Examples

• Diamond Technology Partners (DTP).
– Every consultant has a laptop to permit automatic connectivity
with the corporate intranet.
– Intense use of computers, shared data, extensive electronic
communications foster high levels of interaction & fluid, highly
adaptable work arrangements. INFORMATION AGE
• Mrs. Fields IS focused on sales skills not simply
production.
ORGANIZATIONS
– Implemented a computer system that automated much of the
baking and planning tasks.
– Employees able to focus on sales not on baking issues.
• IS is fundamental to the way these companies are
organized to do business.
• IS can leverage human resources, capital and materials.
Copyright 2006 John Wiley & Sons, Inc. 3
 Variable Description

Key Characteristics Organizational variables

Decision rights Authority to initiate, approve, implement, and control various types of decisions
necessary to plan and run the business.

• 1988 three professors at Harvard Business Business processes The set of ordered tasks needed to complete key objectives of the business.

School predicted what would be key Formal reporting

relationships
The structure set up to ensure coordination among all units within the
organization.
characteristics of information age organizations. Informal networks Mechanism, such as ad hoc groups, which work to coordinate and transfer
information outside the formal reporting relationships.
• Their predictions were close to what happened. Control variables

• These predictions can be related to three Data The information collected, stored, and used by the organization.
Planning The processes by which future direction is established, communicated, and
categories (Figure 3.2): implemented.

– Organizational structure. Performance measurement

and evaluation
The set of measures that are used to assess success in the execution of plans
and the processes by which such measures are used to improve the quality of
work.
– Human resources.
Incentives The monetary and non-monetary devices used to motivate behavior within an
– Management processes. organization.
Cultural variables
• Information age organizations use a different Values The set of implicit and explicit beliefs that underlie decisions made and actions
organization structures. taken.

Figure 3.1 Organizational design variables.

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Dimension Characteristics
Organizational Structure Companies have benefits of small and large scale
simultaneously.
Lg. organizations adopt flexible/dynamic structure
Centralized/decentralized control blur
Focus on projects/process vs. tasks/procedures
Human Resources Workers better trained, autonomous, transient INFORMATION TECHNOLOGY
Work environment exciting, engaging
Management shared, rotated, even part-time
Job descriptions tied to defined tasks non-existent
AND ORGANIZATIONAL
Management Processes
Compensation tied directly to contribution
Decision-making is well understood
DESIGN
Control separated from reporting relationships
Computers support creativity at all levels
IS retain corp. history, experience, expertise

Figure 3.2 Key characteristics for the Information Age organization

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 IT & Organizational Structures
• Traditional organizations are hierarchical, flat or matrix in
design (Fig. 3.3).
• In hierarchical orgs. middle managers tell subordinates
what to do and tell superiors the outcomes. IS supports
this hierarchy.
• In flat structured orgs. work is more flexible and
employee do whatever is needed. IS allows offloading
extra work and supports intra-firm communications.
• In matrix organizations, work is organized into small work
groups and integrated regionally and nationally/globally.
– IS reduces operating complexes and expenses by allowing
information to be easily shared among different managerial
functions.
Figure 3.3 Hierarchical, flat, and matrix organization structures.

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Hierarchical Organizational Structure Flat Organizational Structure

• Based on the concepts of division of labor, • Decision-making is centralized

specialization, and unity of command • As everyone does whatever needs to be
done, they can respond quickly to dynamic,
• Key decisions are made at the top and filter
uncertain environments
down through the organization
• However, this organizational structure often
• Middle managers do the primary information becomes less flexible as the org. grows
processing and communication function • Routine IS work is often off-loaded but, as a
• IS is typically used to store and communicate hierarchy develops, becomes the ‘glue’ tying
information along the lines of the hierarchy parts of the organization that would not
and to support the info management function otherwise communicate
of the managers
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 Matrix Organizational Structure Networked Organizational Structure
• This typically assigns workers with two or • “Rigid hierarchies are replaced by formal and
more supervisors in an effort to make sure informal communication networks that connect
multiple dimensions of the business are all parts of the company.”
integrated, with each supervisor directing a • Defined by their ability to promote creativity and
different aspect of the employee’s work. flexibility while maintaining operational process
• Matrix organizations often fail to enable control, which is achieved by substituting
managers to achieve their business hierarchical controls with controls based on IS
strategies because of the inability to cope
with increased information processing • Extensive use of communication technologies
demands and networks also makes it easier to coordinate
across functional boundaries

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Hierarchical Flat Matrix Networked

Description Bureaucratic w/ Decision-making Workers assigned Formal/informal
defined levels of pushed down to to 2 or more communication
management lowest level supervisors networks that
connect all
Division of labor Informal roles, Dual reporting Known for flexibility
Characteristics and adaptability
specialization, planning and based on
unity of command control; often function/purpose
sm.,young orgs.

Type of Stable Unstable Unstable Unstable

Environment Best Uncertain
Supported Certain Uncertain Uncertain

Basis of Primary function Functions and Networks

Structuring Primary function purpose

Power Structure Centralized Centralized Distributed Distributed

Key Tech. Mainframe, Personal Networks Intranets and

Supporting this centralized data computers Internet
and processing
Figure 3.5 The networked organization.
Figure 3.4 Comparison of Organizational Structures
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 T-Form Organization
• T-form (“technology-based”) organizations
take the networked structure one step further
by combining IT with traditional components
to form new types of components INFORMATION TECHNOLOGY
• These include electronic linking, production
automation, electronic workflows, electronic
AND MANAGEMENT
customer/supplier relationships and self-
service Internet portals
CONTROL SYSTEMS
• Work is often coordinated electronically, while
systems enable information to more easily
move around the organization, and
decentralizing decision-making

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Management Control Control Activities Brief Definition

Monitoring Observing and keeping track of the progress, quality,

cost, time and other relevant parameters
• IT profoundly affects the way managers control
their organizations. Evaluating Comparing the data collected through monitoring to
standards or historical data.
• People and processes are monitored in ways
that were not possible only a decade ago. Providing Feedback Communicating the results of evaluation to the
individuals responsible for the activities and tasks.
• The activities of management control are
summarized in figure 3.6
Compensating Deciding on salary or other forms of payment to those
• Depending upon the organizational structure will individuals who preformed the tasks.
determine the level of control that a manager
must exercise over their employees. Rewarding Deciding and delivering bonuses, recognition, or other
types of prize for exemplary work.
• IS play three important roles in management
control processes
– Collection, Communication, and Evaluation. Figure 3.6 Model of management control activities.

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 IT Changes Management
Functions
• IT changes the way managers:
– Monitor: IS makes possible new ways to track
performance and behavior
– Evaluate: models are easily built, making it easier to
understand progress and performance
VIRTUAL ORGANIZATIONS
– Provide Feedback: IS makes rapid feedback
possible (e.g., through electronic forms)
– Compensate & Reward: team-based efforts can be
evaluated and complex formulas used
– Control Processes: IS also used extensively in
industrial processes, and makes it easier to collect,
analyze and move information
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Virtual Organizations Virtual Teams

• Virtual Teams are geographically and/or
• IT has made it possible for an individual to organizationally dispersed coworkers assembled using
telecommunications and IT to accomplish an
work for an organization and live anywhere organizational task.
• Virtual organization structure is “networked”. • Several reasons explain their growing popularity:
– As information needs mushroom, firms rely on the skills and
– Extensive collaboration takes place electronically knowledge of individuals dispersed across countries/time
(e-mail). zones, etc
– Enhanced bandwidths promote the use of networks linking
• Managers in a virtual environment monitor individuals, internal and external to the organization
results, not progress – Technology (group support systems, groupware, etc) is
available to assist collaboration
• Forms are electronic, tech. support through a – Difficulties in getting relevant stakeholders together physically
are relaxed
web interface – Growing pressures for off-shoring has resulted in systems
development by global virtual teams whose members are
• Business processes are designed differently. located around the world.

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Challenges Virtual Teams Traditional Teams
Communications Multiple Zones can lead to greater Teams are collocated in same
efficiency but can lead to time zone. Scheduling is less
communication difficulties. difficult.
Communication dynamics such as Teams may use richer
non-verbal are altered. communication media.
Technology Team members must have
proficiency across a wide range of
technologies.
Technology is not critical and
tools not essential for
communications.
FOOD FOR THOUGHT:
Technology offers electronic
repository.
Electronic repositories are not
typically used.
IMMEDIATELY RESPONSIVE
Work group effectiveness may be
more dependent on alignment of
Task technology fit may not be as
critical. ORGANIZATIONS
group & technologies used.
Team Diversity Members typically come from Because members are more
different organizations and/or homogeneous, group identity is
cultures which makes it: easier to form.
-Harder to establish a group identity. Because of commonalities,
-Necessary to have better com. skills communications are easier to
-More difficult to build trust, norms … complete successfully.

Figure 3.7 Comparison of challenges facing virtual and traditional teams.

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Immediate Responsive
Organizations
To accomplish the goal of instant “customization”,
an organization must master five disciplines:
1. Instant value alignment – ready to provide exactly what the
customer wants SUMMARY
2. Instant learning –building learning directly into the company’s
tasks and processes
3. Instant involvement – using IT to ensure that everyone is ready
to deliver products, services, etc
4. Instant adaptation – creating the culture to support this
5. Instant execution – During It to cut cycle times to appear
instant to the customer

Copyright 2006 John Wiley & Sons, Inc. 27 Copyright 2006 John Wiley & Sons, Inc. 28
 Summary
• Copyright 2006 John Wiley & Sons, Inc.
• IS must be a key component of organizational design.
• Organizational designers must have an understanding of • All rights reserved. Reproduction or translation of this work beyond that
what IS can do. named in Section 117 of the 1976 United States Copyright Act without the
• The flow of information can inhibit or facilitate organization express written consent of the copyright owner is unlawful. Request for
structures. further information should be addressed to the Permissions Department,
John Wiley & Sons, Inc. The purchaser may make back-up copies for
• Virtual and networked organizations are rising in use and his/her own use only and not for distribution or resale. The Publisher
are replacing older legacy structures. assumes no responsibility for errors, omissions, or damages, caused by the
• IT affects managerial control mechanisms and managers use of these programs or from the use of the information contained herein
must ensure that these controls are in place.
• Virtual organizations make it possible for employees to live
anywhere.
• Virtual Teams are increasing in frequency and the
challenges that they pose must be addressed.

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