1. 8th Module: Information Systems and Organisational Change: Structure: 1.Information Systems in Organisations – past and present roles 2.The Co-evolution of Organisations and IT 3.The Organisational Impact of IT 4.Organisational Learning

2. Information Systems in Organisations – past and present roles It is almost common sense that information systems change organisations. They do this by automating tasks (which allows to perform work more efficiently), carrying out workload in new ways, etc. Examples are Expert systems, transaction processing systems, decision support systems, ATMs, electronic sales, etc.

3. It took a long time, however, until the true potential for Information Systems to change organisations had been understood. In the past, responsibilities for making changes through information systems was handed over to systems analysts and developers. The changes analysts were permitted to make, however, were quite restricted. Senior management was reluctant to let IT experts and technology lead their business. The work of IT professionals therefore concentrated on automating tasks and increasing efficiency in organisations.

4. The key question used to be: How can IT support the business? However, this traditional point of view does not take into account the full potential of Information Systems to help running a business successfully. As we have seen in Module 2, Information Systems can give organisations a sustainable and competitive advantage by enhancing/improving what the organisation is already good at.

5. Thus, Information Systems can transform the organisation in fundamental ways. It has been recognised that IT and the organisation must evolve together in order to get the maximum benefit from IT. Nevertheless, the traditional function of IT (which was to support organisational goals and strategies) still plays a role in organisations nowadays. The main difference is that the role of Information Systems has become wider and more important.

6. This does NOT mean that the traditional role of Information Systems (=support) has to be given up. Nowadays, it is essential that organisations and their information systems co-evolve. The next sub-chapter is dedicated to this co- evolution.

7. The Co-evolution of Organisations and IT To make sure that the co-evolution works successfully, the process of designing change in organisations needs to reflect both organisational practices and the technologies employed.

8. There are 2 main approaches to organisational change: 1.Business Process Re-engineering (an approach that advocates radical change within organisations) 2. Socio-technical Design (an approach which advocates a more evolutionary and less radical change within organisations).

9. Business Process Re-engineering: This approach demands a complete re-thinking of the ways that tasks are performed in an organisation, e.g. Hammer (1990). The justification given for this approach is that organisations have failed to realise benefits of Information Systems in the past (e.g. they have just used IT to speed up organisational processes rather than to change the processes themselves).

10. These out-of-date organisational processes just focused on promoting efficiency within the organisation rather than product and service quality or speed of delivery/response (which is vital for many companies/hospitals etc.). Proponents of the Business Process Re- engineering approach base their arguments in favour of this approach on their estimate that the design of business processes from scratch would increase productivity by at least 50 percent (Duncan, 1997).

11. The principle behind the change towards Business Process Re-engineering is to ignore existing functional boundaries within the organisation and to focus on those processes that guarantee successful business outputs. The re-design of the processes works by creating a plan how the work should be performed and by identifying the objectives/technological changes to be achieved in order to gain maximum benefits for the organisation.

12. The study of existing processes is only aimed at identifying problems, which the proponents of this approach hope to change by introducing new processes. The role of IT is to support change and to offer a technology that allows a transformation of these processes (Duncan, 1997). The aim to achieve significant improvements in performance is based on the expectation that IT helps to transform the organisational process. Business process re-engineering will certainly bring changes to the organisational structure, job design, work flows, control mechanisms, etc.

13. It is also considered vital that Business process re-engineering projects are driven by senior management and not by the Information Systems division within an organisation. Although Business process re-engineering might bring significant changes to an organisation, there are a number of things to consider before implementing it. Actually, it was criticised very harshly.

14. The following were the main concerns of criticism: 1.It neglects human issues in business change. 2.It assumes that change is a continuous process, but does NOT give any advice on what to do after the change has been made. 3.It is offered as a solution for every business problem, but it is certainly not appropriate for any business/organisational environment. 4.The costs of implementing this type of radical change can be very high and it is NOT clear whether the costs exceed the benefits.

15. Davenport (1993) suggests that there must be a clear need for Business process re- engineering and a clear estimate of the benefits that it might yield. Though Business process re-engineering might bring radical change and might not be a good strategy for many organisations, it is one example where business and technology co-evolve together.

16. The Socio-technical design approach: The Socio-technical approach focuses on all parties that are involved in the organisation that is expected to undergo the change (e.g. in a hospital, these would be doctors, nurses, psychologists, management, administrative and other support staff, staff in the personnel department, accounting, IT staff, catering, mechanics, etc.)

17. The tasks in the socio-technical approach are designed in a way that allows to reduce factors which can negatively influence the quality, throughput, job satisfaction, work environment and costs. It focuses on the inputs and outputs of the work process. Although many of the design changes, e.g. towards multi-skilling jobs, are similar to Business process re-engineering, Socio- technical change is rather aimed at continuous organisational renewal and evolutionary change.

18. IT is not even essential, because this approach can be used for any work environment where technologies are applied. More detailed explanations about socio- technical design are provided by Mumford (1983a, 1983b). Like Business process re-engineering, Socio- technical design is also seen as a partnership, but not as a partnership between business processes and technology. Rather, Socio-technical design emphasises a partnership between people and technology.

19. Integrating Business process re-engineering and Socio-technical design: Business process re-engineering as well as Socio-technical design recognise the importance of changing/evolving technology and the organisation together, but the philosophies behind both approaches are quite different. The majority of system development in Information Systems is no longer seen as an intervention in the organisation (as it used to be the case), but as a change within the organisation.

20. The Organisational Impact of IT IT will continue to create opportunities for major changes in the way that organisations are structured and in the nature of work itself (Duncan, 1997). According to Drucker (1988), future organisations will be information-based, composed of knowledge specialists who co- ordinate their efforts by communication rather than direction, with flat rather than hierarchical management structures.

21. If you consider that Druckers influential article dates back to 1988 and if you compare his predictions with organisational structures nowadays, you realise that many of these predictions have become reality. Many organisations have flat management structures (lean management), classical hierarchies no longer exist in the traditional way, a lot of communication takes place via email, internal memos, intranet, and senior management becomes more and more knowledgeable in IT issues.

22. Furthermore, the internet has enabled many companies to offer products in a non- traditional way (Amazon, Easyjet, etc.). Due to advances in IT, it is now common that many employees are less dependent on location, and can for instance work from their homes. Even though many of these predictions have become reality nowadays, the range of possibilities for the application of IT appears without limit, and there will always remain some uncertainty about future developments.

23. Organisational Learning In an environment of rapid progress, the only constant is change itself, and it will be important for organisations to adapt to this change. The term that describes the way to tackle the challenge of continuous change is Organisational Learning. Organisational learning recognises that in order to change itself, it must first understand the way it works.

24. It must also be able to question the implicit and explicit norms that guide its organisational behaviour as well as its employees. This process of understanding and questioning is described as double-loop learning (Argyris, 1977). Argyris recognised that there were frequent contradictions in terms of organisational demands on managers. This was due to the fact that the organisations wanted to maintain stability, but promote change at the same time.

25. Managers were often told to be innovative but not to violate any organisational rules. They were also encouraged to plan for the future, but their reward scheme was pretty much based on their present short-term performance. The result was often that managers became defensive and minimised their co-operation with other employees. The only learning that resulted from this process was learning on how to conform, which Argyris calls single loop learning.

26. Argyris suggested that the solution of these conflicts lies in group/organisational learning. Therefore, he demands that openness be encouraged and not seen as a sign of weakness. Moreover, he suggests that managers should look for contributions from other employees and not be shy about testing their own assumptions in public. This switch of behaviour would lead to double loup learning, enabling both managers and the group to change.

27. Organisational learning is particularly important for the introduction of Information Systems, because they challenge many basic practices in organisations. Various experts believe that in an increasingly complex world of business, the successful organisations will be the ones that learn quickly and adapt fastest to changes in the environment. Business scientists McKenney and McFarlan (1982) have examined the process by which organisations adapt to new technologies.

28. The result of their studies was that irrespective of the new technology employed (be it databases, LANs or expert systems), the process of assimilation undergoes the same phases. Organisational and technological change is expected to increase even more in the future, so a key area of competence for every IT manager will be to manage the introduction of new technologies and the adaptation to new skills by an organisations employees.

29. References: Argyris, C. (1977). Double-loop Learning in Organisations. Harvard Business Review, 5, 115-125. Davenport, T.H. (1993). Process Innovation: Re- engineering Work through Information Technology. Boston, MA: Harvard Business School Press. Duncan, W.M. (1997). Information Systems Management. London: University of London Press.

30. Drucker, P. (1988). The Coming of the New Organisation. Harvard Business Review, 66 (1), 45-53. Hammer, M. (1990). Re-engineering Work: Dont Automate, Obliterate. Harvard Business Review, 68 (4), 104-112. McKenney, J.L. & McFarlan, F.W. (1982). The Information Archipelago – Maps and Bridges. Harvard Business Review, 60 (5), 109-119. Mumford, E. (1983a). Designing Human Systems. Manchester Business School ISBN 0-903- 808-285.

31. Mumford, E. (1983b). Designing Participatively. Manchester Business School ISBN 0-85227- 221-9. The references for students who are interested in further reading can be found on page 25 of the study guide.