Chapter 5Chapter 5Information, Organization, Information, Organization,

and Controland Control“The important point is that technology neither

encourages nor discourages centralized or decentralized structures and controls, but …

offers new possibilities.”

The Organization Design The Organization Design Challenge of the 1990sChallenge of the 1990s

Hierarchy: centralized intelligence control

– complex organization in stable environment– mainframe

Entrepreneurial: autonomy decentralized intelligence

– simple organization in dynamic environment– microcomputer

Information Age: distributed intelligence collaboration

– complex organization in dynamic environment– networked IT architecture – flat, fast, flexible and focused on areas of core competency

*

Dr. Chen, Informatiion, Organization, and Control TM -2

The Organization Design The Organization Design Challenge of the 1990sChallenge of the 1990s

From Control to Learning– Promote flexibility, creativity, and learning while

continuing to enable tight control of operating process

From Autonomy to Collaboration– Line mangers are empowered to make decisions

– Timely, quality distributed information and new communication technologies (e.g., video conferencing) are important factors that are enabling dramatic changes in organization redesign.

Dr. Chen, Informatiion, Organization, and Control TM -3

Framework for Analyzing Framework for Analyzing Organizational DesignOrganizational Design

Framework for Analyzing Framework for Analyzing Organizational DesignOrganizational Design

DefiningDirection

Environmental Context and

Resources

Information Policy

Purpose Core Values, & Core Competencies

Strategy

Exhibit TN-3

Executing and Adapting

Units, groupings

Formal and informal power

Incentives Coordinating mechanismsAuthority

Boundary systems

operation, processes

Management processes

Control

People

Technology

Work

Values and

Behavior

Sustaining Value

Process PerformanceTimeQualityCostFlexibilityInnovation PotentialStakeholder SatisfactionEmployee/PartnersCustomersShareholdersSocietyBenchmarksBest of classBest of breadReputationOtherSustainabilityResiliencyFlexibility

Dr. Chen, Informatiion, Organization, and Control TM -4

Manufacturing Industry Value Manufacturing Industry Value Chain Product and Service FlowChain Product and Service Flow

Research and Development

EngineeringProduction

and Manufacturing

Marketing Sales and

DistributiionService

Administrative and Other Indirect Value Added

Administrative and Other Indirect Value Added

Primary Activities

Support Activities

Dr. Chen, The Trends of the Information Systems Technology TM -5

Figure 3-4: The Value ChainFigure 3-4: The Value Chain

Corporate infrastructure

N

Dr. Chen, The Trends of the Information Systems Technology TM -6

Com

petitive

Adv

anta

ge

The Objectives of the Value The Objectives of the Value Chain ModelChain Model

The value chain model can supplement the competitive forces model by identifying specific, critical leverage points where a firm can use IT most effectively to enhance its competitive position.

Dr. Chen, The Trends of the Information Systems Technology TM -7

From Control to LearningFrom Control to Learning“Networked, distributed information and

communication systems allow rigid, costly hierarchical controls to be replaced by a new form of information age controls that promote flexibility, creativity, and learning while continuing to enable tight control of operating processes”

“Processes are still defined in detail.”“IT can be used as a tool to streamline, integrate, and

time-synchronize the process.”“Leading companies are also learning to manage rather

than minimize complexity.”

Dr. Chen, Informatiion, Organization, and Control TM -8

From Autonomy to From Autonomy to CollaborationCollaboration

“Decision makers at all levels must be able to directly access timely information that integrates a corporate-wide perspective with knowledge of local business dynamics.”

“By solving the problem of poor information access and communication, selecting where to locate accountability for key business decisions can be based on the nature of the business and the capabilities of the people, rather than on who has access to the appropriate information.”

“Boundary and value systems that prescribe the limits of authority and the ethical principles upon which decisions should be based become much more critical in an empowered organization in which major corporate decisions are made in real time.”

Dr. Chen, Informatiion, Organization, and Control TM -9

Management vs. LeaderManagement vs. LeaderManagement

– Planning

– Budgeting

– Organizing

– Staffing

– Controlling

– Problem-solving

Leadership– Establishing direction

– Aligning people

– Motivating

– Inspiring

– Empowering

– Problem-preventing

•Working with conflict•Relationship building•Understanding how to work effectively in teams•Knowing when to say NO!

•Effective communication•Deep listening•Facilitating•Negotiating

“Soft” Interpersonal Skills

Dr. Chen, Informatiion, Organization, and Control TM -10

Organization StructureOrganization StructureFlat hierarchy with broader spans of controlDownsized corporate headquarters; staff

reassigned to the fieldStrategic partnerships and alliances enable

focus on core competenciesNetworked coordinating mechanisms layered

over hierarchical reporting mechanismsFunctional units remain as center of expertise

and career development

Dr. Chen, Informatiion, Organization, and Control TM -11

Authority and Decision MakingAuthority and Decision Making Shared authority and decision making replace clearly

defined hierarchical authority Senior management more involved in monitoring/

understanding operations; responsible for defining, communicating, and consistently enforcing boundary and value systems

Interfunctional middle management operating units responsible for operating strategy development, strategy execution, network coordination, and innovation

Self-managing work teams responsible for defining and managing local operations and product quality

Dr. Chen, Informatiion, Organization, and Control TM -12

Operating ProcessesOperating Processes Integrated, streamlined, and time-synchronized

product/service delivery and new product development processes

Cycle time of operating processes equals cycle time in environment

Increased complexity of operating processes matches the inherent complexity in the environment

Efficient, yet flexible, management Interfunctional and interorganizational Focus on continuous improvement and innovation

Dr. Chen, Informatiion, Organization, and Control TM -13

Management ProcessesManagement Processes Integrated, streamlined, and time-synchronized

management processes that manage operating processes Cycle time of management processes matches cycle time

of operating processes Increased complexity of management processes matches

the increased complexity of operations Efficient, yet flexible, management Interfunctional and interorganizational Increased vertical and lateral interaction “Tight control” achieved through information vs.

structure and supervision

Dr. Chen, Informatiion, Organization, and Control TM -14

Incentives and RewardsIncentives and RewardsShared incentive systems augment and enforce

shared authority structuresPersonal accountability and commitment

maintained“Stretch” targets motivate commitment to

collaborate, maintain focus on organizational priorities, and intensify efforts to achieve organizational goals

Dr. Chen, Informatiion, Organization, and Control TM -15

Roles/Skills and ExpertiseRoles/Skills and ExpertiseRoles evolve as individuals and teams struggle to

redefine work within the new structure and incentive systems

Increased analytical/intellectual content of the work

People expected to have a broader skill base Information competency at all levels Increased emphasis on the development of

leadership and change management skills

Dr. Chen, Informatiion, Organization, and Control TM -16

Career DevelopmentCareer DevelopmentFewer opportunities for advancement available

within the hierarchical reporting structureExpanded jobs and increased lateral movement

instead of hierarchical movement

Dr. Chen, Informatiion, Organization, and Control TM -17

Communicating Communicating Organizational PrioritiesOrganizational Priorities

What are the common causes of failure of traditional control systems?– people do not understand corporate goals– people understand corporate goals but lack the

resources to meet them– people are not motivated to meet corporate

goals

Dr. Chen, Informatiion, Organization, and Control TM -18

IT Planning: Stages, Methods, and OutputsIT Planning: Stages, Methods, and Outputs

TM -19Dr. Chen, Informatiion, Organization, and Control

Meaningful BudgetsMeaningful Budgets

What technology makes this possible?– Spreadsheets, DSS

What are the aspects of this change?– budget process: ability to investigate several

scenarios– budget update: continual entry of actual vs.

budget

Dr. Chen, Informatiion, Organization, and Control TM -20

Effective Incentive SystemsEffective Incentive Systems

What technology makes this possible?– database, communications, DSS

What are the aspects of this change?– continuous tally of sales commissions– identify and track the contribution of a working

unit– base customer’s discounts on total volume

Dr. Chen, Informatiion, Organization, and Control TM -21

Solutions for ProductionSolutions for Production

What technology makes this possible?– process monitoring systems

What are the aspects of this change?– early detection of problems in output or

equipment function– correction of settings or maintenance of

equipment

Dr. Chen, Informatiion, Organization, and Control TM -22

Facts to Make the SaleFacts to Make the Sale

What technology makes this possible?– database, datawarehouse, and “automated

‘tickler’ system”

What are the aspects of this change?– correlation/crosstabulation– distributed branches with all the data available at

HQ

Dr. Chen, Informatiion, Organization, and Control TM -23

Adaptation to ChangeAdaptation to Change

What technology makes this possible?– more powerful and flexible data architectures

What are the aspects of this change?– identify those affected by change– communicate to those affected by change– solve those affected by change

Dr. Chen, Informatiion, Organization, and Control TM -24

The power of Is department now and the future will come from leadership, influence and capability - and less from control.

The measure of success of the IS will no longer be numbers of people but contributions to the business - quality, speed, products/services, and innovation.

The roadblock to competitive advantage generally is not technology, but implementation - with people.

Successful implementation requires working closely with line people. Thus IS departments need to establish better relationships with outside organizations, senior management, and users.

ConclusionsConclusions

Dr. Chen, Informatiion, Organization, and Control TM -25

Opportunities

Dr. Chen, Informatiion, Organization, and Control TM -26

POLICIES

INFORMATION

TECHNOLOGY

STRATEGIES

Theme 2: Integrating Changing Technology PlatformsTheme 2: Integrating Changing Technology Platforms

How to Capitalize on the real How to Capitalize on the real Business Opportunities?Business Opportunities?

Integrating ...Integrating ...

ORGANIZATION

Dr. Chen, Informatiion, Organization, and Control TM -27

Who should be Involved in the Who should be Involved in the Project Development?Project Development?

Consists of ...Consists of ...

PROJECT PROJECT MEMBERSMEMBERS

TECHNICAL TECHNICAL PROFESSIONALSPROFESSIONALS

USERSUSERS

MANAGEMENTMANAGEMENT

Dr. Chen, Informatiion, Organization, and Control TM -28

POLICIES

INFORMATION

TECHNOLOGY

STRATEGIES

Theme 2: Integrating Changing Technology PlatformsTheme 2: Integrating Changing Technology Platforms

How to Capitalize on the real Business Opportunities?

Integrating ...Integrating ...

ORGANIZATION

Dr. Chen, Informatiion, Organization, and Control TM -29

Who should be Involved in the Project Development?

Consists of ...Consists of ...

PROJECT PROJECT MEMBERSMEMBERS

TECHNICAL TECHNICAL PROFESSIONALSPROFESSIONALS

USERSUSERS

MANAGEMENTMANAGEMENT

Dr. Chen, Informatiion, Organization, and Control TM -30

Problem Business Concern SolutionAuthorization Does a user have permission to

access a specific computer orcollection of information?

User name and password

Authentication Is the user truly who he or shepurports to be?

Random-number generationand response

Integrity Did the person sending themessage actually send it?Can the receiver be sure themessage has not been changed?

Digital signature

Privacy Is the conversation private? Key encryption algorithmsFraud/Theft Is anyone stealing from me? Log, audit, systems

management policies andprocedures

Sabotage Can someone enter my systemand destroy or alterinformation?

Firewalls, firebreaks

Dr. Chen, Informatiion, Organization, and Control TM -31

Table 3-1: Impact of Competitive ForcesTable 3-1: Impact of Competitive Forces

Force ImplicationPotential Uses of IT

to Combat Force

Threat of new entrants New capacitySubstantial resourcesReduced prices or inflation

of incumbent’s costs

Provide entry barriers:economies of scaleswitching costsproduct differentiationaccess to distribution channels

Buyers’ bargaining power Prices forced downHigh qualityMore servicesCompetition encouraged

Buyer selectionSwitching costsDifferentiationEntry barriers

Suppliers’ bargainingpower

Prices raisedReduced quality and services

(labor)

SelectionThreat of backward integration

Threat of substituteproducts or services

Potential returns limitedCeiling on prices

Improve price/performanceRedefine products and services

Traditional intraindustryrivals

Competition:priceproductdistribution and service

Cost-effectivenessMarket accessDifferentiation:

productservicesfirm

Dr. Chen, Informatiion, Organization, and Control TM -32