1. Chapter 3 Organizational Strategy: Managerial Levers
Managing and Using Information Systems: A Strategic Approach
by Keri Pearlson & Carol Saunders

2. Learning Objectives
Understand how the use of information technology impacts an organization.
Identify the type of organizational structure that tends to be most willing to embrace technological change and sophistication.
List the advantages and disadvantages of the networked organizational structure.
Discuss how IT has changed the way managers monitor and evaluate
Define and explain the concept and importance of virtual organizations.
Identify the challenges that are faced by virtual teams.

3. ORGANIZATIONAL STRATEGY

4. Key Characteristics
Organizational strategy: includes the organization’s design, as well as the managerial choices that define, set up, coordinate, and control its work processes.
Optimized organizational design and management control systems support optimal business processes which reflect the firm’s values and culture.
This chapter builds on the managerial levers model discussed in chapter 1.
Figure 3.1 summarizes complementary design variables from the managerial levers framework.

5. Figure 1.8 Managerial Levers

6. Figure 3.1 Organizational design variables.
Description
Organizational variables
Decision rights
Authority to initiate, approve, implement, and control various types of decisions necessary to plan and run the business.
Business processes
The set of ordered tasks needed to complete key objectives of the business.
Formal reporting
relationships
The structure set up to ensure coordination among all units within the organization.
Informal networks
Mechanism, such as ad hoc groups, which work to coordinate and transfer information outside the formal reporting relationships.
Control variables
Data
The information collected, stored, and used by the organization.
Planning
The processes by which future direction is established, communicated, and implemented.
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.
Incentives
The monetary and non-monetary devices used to motivate behavior within an organization.
Cultural variables
Values
The set of implicit and explicit beliefs that underlie decisions made and actions taken.
Figure 3.1 Organizational design variables.

7. INFORMATION TECHNOLOGY AND ORGANIZATIONAL DESIGN

8. Decision Rights
Who in the organization has the responsibility to initiate, supply information for, approve, implement, and control various types of decisions.
Ideally the person with the most information and in the best position should have these rights.
Organizational design is all about making sure that decision rights are properly allocated.

9. Formal Reporting Relationships and Organization Structures
Organization structure is the way of designing an organization so that decision rights are correctly allocated.
The structure of reporting relationships typically reflects the flow of communication and decision making throughout the organization.
Traditional organizations are hierarchical, flat or matrix in design (Fig. 3.2).

10. In hierarchical organizations, middle managers tell subordinates what to do and tell superiors the outcomes. IS supports this hierarchy.
In flat structured organizations, work is more flexible and employees 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 complexities and expenses by allowing information to be easily shared among different managerial functions.

11. Figure 3.2 Hierarchical, flat, and matrix organization structures.

12. Hierarchical Organizational Structure
Based on the concepts of division of labor, specialization, and unity of command.
Decision rights are highly specified and centralized.
When work needs to be done, it typically comes from the top and is segmented into smaller and smaller pieces until it reaches the level of the business in which it will be done.

13. Hierarchical Organizational Structure
Middle managers do the primary information processing and communicating, telling their subordinates what to do and telling senior managers the outcome of what was done.
Jobs within the organization are specialized and often organized around particular functions, such as marketing, accounting, manufacturing, and so on.

14. Hierarchical Organizational Structure
Unity of command means that each person has a single supervisor, who in turn has a supervisor, and so on.
Key decisions are made at the top and filter down through the organization in a centralized fashion.
Two common organizational forms are based on the hierarchical organization structure: functional and divisional.

15. Hierarchical Organizational Structure
The functional form is: a structure that groups common activities together. The division of labor is based on key functions, such as accounting, marketing, finance, engineering, and production. Because the training, work, and values are typically similar for people in the same function, their collaboration and efficiency is promoted within the function.
+ve creates economies of scale and enables in-
depth knowledge and skill development.
-ve coordination and cooperation with other
departments is more difficult.

16. Hierarchical Organizational Structure
2) The divisional form cuts across functional lines and, instead, organizes according to outputs.
Each division is responsible for a different set of customers, products, geographical markets, and so forth.
Within the divisional unit, diverse functions such as
manufacturing and marketing are represented, but employees tend to relate more to their division than to the functional area.

17. Hierarchical Organizational Structure
2) The divisional form ……...
The divisional form is good for coordinating organizational activities across functions, especially in unstable or dynamic environments. Typically it is more customer focused.

18. Flat Organizational Structure
Decision-making is centralized.
In flat organizations, everyone does whatever needs to be done to complete business. For this reason, flat organizations can respond quickly to dynamic, uncertain environments.
Entrepreneurial organizations often use this structure because they typically have fewer employees, and even when they grow, they initially build on the premise that everyone must do whatever is needed.

19. Flat Organizational Structure
Many companies strive to keep the ‘‘entrepreneurial spirit,’’ but in reality work gets done in much the same way as with the hierarchy described previously.
Flat organizations often use IS to off-load certain routine work to avoid hiring additional workers. As a hierarchy develops, the IS become the glue tying together parts of the organization that otherwise would not communicate.

20. Matrix Organizational Structure
This typically assigns workers with two or more supervisors in an effort to make sure multiple dimensions of the business are integrated.
Each supervisor directs a different aspect of the employee’s work. For example, a member of a matrix team from marketing would have a supervisor for marketing decisions and a different supervisor for a specific product line.

21. Matrix Organizational Structure
That is, the marketing manager would oversee the employee’s development of marketing skills, and the product manager would make sure that the employee developed skills related to the product. Thus, decision rights are shared between the managers.

22. Matrix Organizational Structure
In some cases the matrix might even reflect still a third dimension, such as the customer relations segment.
IS reduce the operating complexity of matrix organizations by allowing information sharing among the different managerial functions. For example, a salesperson’s sales would be entered into the information system and appear in the results of all managers to whom he or she reports.

23. Matrix Organizational Structure
The matrix structure allows organizations to concentrate on both functions and purpose
The matrix organization structure carries its own set of weaknesses
1) Matrix organizations often fail to enable managers to achieve their business strategies.
2) Employees may be frustrated and confused since they are often subjected to dual authority.

24. Matrix Organizational Structure
3) working in a matrix organization structure can be time consuming because confusion must be dealt with through frequent meetings and conflict resolution sessions.
4) Make it difficult for managers to achieve their business strategies because they
flood managers with more information than they can process.

25. Networked Organizational Structure
Made possible by new information systems.
Networked organizations characteristically feel both flat and hierarchical at the same time.
Networked organization structures are those that rely on highly decentralized decision rights and utilize distributed information and communication systems to replace inflexible hierarchical controls with controls based in IS.

26. Networked Organizational Structure
Networked organizations are defined by their ability to promote creativity and flexibility while maintaining operational process control.
Because networked structures are distributed, many employees throughout the organization can share their knowledge and experience and participate in making key organizational decisions.
IS are fundamental to process design; they improve process efficiency, effectiveness, and flexibility.

27. Networked Organizational Structure
As part of the execution of these processes, data are gathered and stored in centralized data warehouses for use in analysis and decision making.
In theory, at least, decision making is more timely and accurate because data are collected and stored instantly.
The extensive use of communications technologies and networks also renders it easier to coordinate across functional boundaries.

28. Networked Organizational Structure
In short, the networked organization is one in which IT ties together people, processes, and units.
The term used is technological leveling because the technology enables individuals from all parts of the organization to reach all other parts of the
organization.

29. T-Form Form of the networked organizational structure.
“T” stands for “technology-based” or “technology-oriented.”
IT is combined with traditional organizational components to form new types of components such as:
electronic linking
production automation
electronic workflows
electronic customer/supplier relationships
self-service Internet portals.

30. T-Form
Although the original T-form organization was created long before the Internet was popular, this structure has been adopted by many Internet-based companies today.
Work is often coordinated automatically in the T-form organization. Systems enable information to more easily move around an organization and among individuals, making decisions possible wherever they are needed, rather than only at senior levels of the organization.

31. T-Form
Business processes are typically designed differently, relying on the technology for more mundane, repetitive tasks and enabling employees to take on more people-oriented and unstructured responsibilities.
Technology is integrated with all components of the business, not just communications networks, as in a traditional networked organization.

32. Figure 3.3 Comparison of Organizational Structures
Hierarchical
Flat
Matrix
Networked
Description
Characteristics
Type of Environment Best Supported
Basis of Structuring
Power Structure
Key Tech. Supporting this
Bureaucratic w/ defined levels of management
Division of labor specialization, unity of command
Stable
Certain
Primary function
Centralized
Mainframe, centralized data and processing
Decision-making pushed down to lowest level
Informal roles, planning and control; often sm.,young orgs.
Unstable
Uncertain
Personal computers
Workers assigned to 2 or more supervisors
Dual reporting based on function/purpose
Functions and purpose
Distributed
Networks
Formal/informal communication networks that connect all
Known for flexibility and adaptability
Intranets and Internet
Figure 3.3 Comparison of Organizational Structures

33. Figure 3.4 The networked organization.

34. Informal Networks
Informal relationships exist and can play an important role in the functioning of an organization.
Some informal relationships are designed by management:
For example:
- When working on a special project, an employee might
be asked to let the manager in another department
know what is going on.

35. Informal Networks Company may have a job rotation program. Part of the
rationale for such programs is that it allows employees
to get a broad-based training in a variety of areas. That
way the employees can learn about and appreciate the work
that is done in the multiple departments where they have
worked.
It also allows them to make contacts, and even
friends, in these departments where they work. Long after
they have moved on to another job, they may keep in touch
informally or call on their past coworkers when a situation
arises in which their input may be helpful.

36. INFORMATION TECHNOLOGY AND MANAGEMENT CONTROL SYSTEMS

37. Management Control
IT affects the way managers control their organizations.
People and processes are monitored in ways that were not possible only a decade ago.
Managers need to control work done at the process level.
The organizational structure will determine the level of control that a manager must exercise.

38. Management Control
IS plays three important roles in management control processes:
1. Data Collection: They enable the collection of information that may not be collectible other ways. This information helps managers determine if they are satisfactorily progressing toward realizing the organization’s mission as reflected in its stated goals.

39. Management Control
2. Evaluation: They facilitate the analysis of information in ways that may not be possible otherwise. The evaluation compares actual performance with the desired performance that is established as a result of planning.
3. Communication They speed the flow of information from where it is generated to where it is needed. This allows an analysis of the situation and a determination about what can be done to correct the situation.

40. Management Control
Managers need to control work done at the process level. IS can play a crucial role. IS provide decision models for scenario planning and evaluation.
For example, the airlines routinely use decision models to study the effects of changing routes or schedules.

41. Management Control
IS collect and analyze information from automated processes, which can then be used to make automatic adjustments to the processes.
For example, a paper mill uses IS to monitor the mixing of ingredients in a batch of paper and to add more ingredients or change the temperature of the boiler as necessary. IS collect, evaluate, and communicate information, leaving managers free to make decisions.

42. Planning and Information Technology
Information technology can play a role in planning in three ways:
1) IS can provide the necessary data to develop the strategic plan they can be especially useful in collecting data from organizational units and transforming the data into information for the strategic decision makers.
2) Some IS actually automate the planning process.
3) IS can lie at the heart of a strategic initiative and can be used to gain strategic advantage.

43. Data Collection and IT
An important part of management control lies in making sure individuals perform appropriately. At the individual level, IS can streamline the process of data collection (i.e., monitoring) and support performance measurement and evaluation, as well as compensation through salaries, incentives, and rewards.
Monitoring work can take on a completely new meaning with the use of information technologies.

44. Data Collection and IT IS make it possible to collect such data as:
precise time spent on a task
exactly who was contacted
specific data that passed through the process
For example, a call center that handles customer service telephone calls is typically monitored by an information system that collects data on the number of calls each representative received and the length of time each representative took to answer each call and then to respond to the question or request for service.

45. Data Collection and IT
The organizational design challenge in data collection is:
(1) Embed monitoring tasks within everyday work.
(2) Reduce the negative impacts to workers being
monitored.
A large number of software products are available for companies to monitor employees. Software monitoring products are installed by companies to obtain specific data about what employees are doing.

46. Data Collection and IT
Although the intention may seem both ethical and in the best interest of business, in practice the reverse may actually be true.
In many cases employees are not informed that they are being monitored or that the information gleaned is being used to measure their productivity.
In these cases, monitoring violates both privacy and personal freedoms.
To protect their freedoms and to gain their acceptance, employees should be informed when they are monitored, and their bonuses or other rewards should be linked to increases in productivity derived from the monitoring.

47. Data Collection and IT
However, prior notice about monitoring may heighten employee stress levels and highlight an increase in the level of control that employers are doing over their employees.
As employees become aware of monitoring activities, productivity and morale may fall.
Also, tracking job performance in terms of discrete, measurable tasks can serve to disconnect workers from the larger business process in which they are involved, giving them less opportunity to broaden their skills and advance in the organization.

48. Performance Measurement, Evaluation and IT
In our example of the call center, a manager can compare a worker’s output to that of colleagues, to earlier output, and to historical outputs reflecting similar work conditions at other times.

49. Performance Measurement, Evaluation and IT
Information collected for evaluation may be used to provide feedback so the worker can improve personal performance; it also can be used to determine rewards and compensation.
Using the same information for determining compensation or rewards, however, can be threatening.
Suppose the call center manager is evaluating the number and duration of calls that service representatives answer on a given day.

50. Performance Measurement, Evaluation and IT
The manager’s goal is to make sure all calls are answered quickly, and he or she communicates that goal to his or her staff. Now think about how the evaluation information is used. If the manager simply provides the workers with information about numbers and duration, then the evaluation is not threatening.
Typically, each worker will make his or her own evaluation and respond by improving call numbers and duration.

51. Performance Measurement, Evaluation and IT
A discussion may even occur in which the service representative describes other important dimensions, such as customer satisfaction and quality.
Perhaps the representative takes longer than average on each call because of the attention devoted to the customer.

52. Performance Measurement, Evaluation and IT
On the other hand, if the manager uses the information about number of calls and duration to rank workers so that top workers are rewarded, then workers may feel threatened by the evaluation and respond accordingly.
The representative not on the top of the list may shorten calls or deliver less quality, consequently decreasing customer satisfaction.

53. Performance Measurement, Evaluation and IT
The lesson for managers is to take care concerning what is monitored and how the information the systems make available is used.
Metrics for performance must be meaningful in terms of the organization’s broader goals, but these metrics are harder to define when work is decentralized and monitored electronically.

54. Performance Measurement, Evaluation and IT
How feedback is communicated in the organization plays a role in affecting behavior. Some feedback can be communicated via IS themselves.
A simple example is the feedback built into an electronic form that will not allow it to be submitted until it is properly filled out.

55. Performance Measurement, Evaluation and IT
IS can allow for feedback from a variety of participants who otherwise could not be involved.
Many companies do a ‘‘360-degree’’ feedback, into which the individual’s supervisors, subordinates, and coworkers all provide input.
IS make it relatively easy to solicit feedback from anyone who has access to the system. Because that feedback is received more quickly, improvements can be made faster.

56. Incentives and Rewards and IT
Incentives and rewards are the ways organizations encourage good performance.
A clever reward system can make employees feel good without paying them more money.
IS can affect these processes, too. Some organizations use their Web sites to recognize high performers. Others reward them with new technology.

57. Incentives and Rewards and IT
At one organization, top performers get new computers every year.
IS make it easier to design complex incentive systems, such as shared or team-based incentives.
An information system facilitates keeping track of contributions of team members and, in conjunction with qualitative inputs, can be used to allocate rewards according to complex formulas.

58. Incentives and Rewards and IT
For example, in the call center example, tracking metrics, such as ‘‘average time per call’’ and ‘‘number of calls answered,’’ allows the manager to monitor agents’ performance.
This quantitative data makes for useful comparisons, but it cannot account for qualitative variables:
For example, agents who spend more time handling calls may be providing better customer service.

59. Incentives and Rewards and IT
Agents who know they will be evaluated by the volume of calls they process may rush callers and provide poorer service to maximize their performance according to the narrow metric.
Agents providing the poorest service could, in fact, be compensated best if the firm’s performance evaluation and compensation strategy is linked only to such metrics. The manager must consider both the metrics and qualitative data in assigning compensation and rewards..

60. INFORMATION TECHNOLOGY AND CULTURE

61. CULTURE The third managerial lever is culture.
Culture is playing an increasingly important role in information system development.
Culture is defined as a shared ‘‘set of values and beliefs about what is desirable and undesirable in a community of people.’’
Beliefs are the perceptions that people hold about how things are done in their community, whereas values reflect the community’s aspirations about the way things should be done

62. CULTURE
Culture is something of a moving target because it is not static. It evolves over time.
There are different levels of culture. Culture can occur across countries, across organizations, or even within organizations.
For instance, Google works hard to create a culture of creativity throughout its organization. Employees get a ‘‘free’’ day a week to pursue their dream project and are encouraged to share their ideas with other employees.

63. CULTURE
They can do so with technology or during one of the free meals at the company cafeteria or in the company laundry room when they move their clothes from the washer to the dryer.
An example at the organizational level is when IS developers have different values from the clients in the same organization for whom they are developing systems. Clients may favor computer-based development practices that encourage reusability of components that allow flexibility and fast turnaround.

64. FOOD FOR THOUGHT: IMMEDIATELY RESPONSIVE ORGANIZATIONS

65. Immediate Responsive Organizations
Organizations are now able to create the ability to respond instantly to customer demands, supplier issues, and internal communication needs.
IS are enabling even more advanced organization forms such as the adaptive organization, the horizontal organization and a relatively new form, the zero time organization.
The zero time organization, for example, describes the concept of instant ‘‘customerization,’’ or the ability to respond to customers immediately.

66. Immediate Responsive Organizations
To accomplish the goal of instant “customization”, an organization must master five disciplines:
1. Instant value alignment: understanding the customer so well that the company anticipates and is therefore ready to provide exactly what the customer wants.
2. Instant learning: building learning directly into the company’s tasks and processes and making sure that requisite information is readily at hand when it is needed.

67. Immediate Responsive Organizations
3. Instant involvement: using IS to communicate all relevant information to suppliers, customers, and employees and making sure everyone is prepared to deliver their products, services, or information instantly.
4. Instant adaptation: creating a culture and structure that enable all workers to act instantly and to make decisions to respond to customers.
5. Instant execution: building business processes that involve as few people as possible (no touch), electronically cross organizational boundaries, and result in cycle times so short that they appear to execute instantly when the customer needs their outputs.

68. Immediate Responsive Organizations
For example, at Dell Computers, assembly line workers have access to a terminal directly above their workstations. As an assembly comes to their stations, its bar code tells the information system what type of assembly it is and which instructions to display.
When the assembly reaches the table, the instructions are already there. The worker does not have to ask for the instructions, nor go anyplace to find them. IS allow this type of instant learning to happen.

69. Immediate Responsive Organizations
Further, Web-based applications that are easily configured by the user, rather than by an IS specialist, enable organizations to quickly build systems that meet the businesses needs, then to reconfigure or completely redesign the systems as the business needs change.
Few companies qualify as zero time organizations with all of their processes designed in a way that allows them to respond instantly to every interaction.

70. SUMMARY

71. Summary
Incorporating IS as a fundamental organizational design component is critical to company survival.
Organization structures can facilitate or inhibit information flows.
Organizational design should take into account decision rights, organization structure and informal networks.
Flat, hierarchical, and matrix structured organizations are being enhanced by IT resulting in networked organizations.
IT affects managerial control mechanisms.
Management control at the individual level is concerned with monitoring, evaluating, providing feedback, compensating, and rewarding.
Organizational and national culture should be taken into account when designing and using IS.