Organizing IT

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Chapter 8

• Organizing IT

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Early Organization Theory

• Egyptians for construction of the pyramids
• First written evidence the Bible (1491 B.C.) to
  Moses to delegate authority
• China (500-400 B.C.) Sun Tzu need for
  hierarchical organization, interorganizational
  communications and staff planning
• Greece (500-400 B.C.) Socrates-universality of
  management is an art unto itself

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Early theory continued

• Roman Catholic church (for over 2,000 years) has
  enduring model of hierarchical management pope,
  cardinal, archbishop, bishop and priest
• Muslim scholars (1377 A.D.) principles of
  administration, formal informal organizations
  and looked at improvement can be developed by
  studying science of culture

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Early history continued

• Machiavelli (1513-1521 A.D.) offered the
  principles of unity of command
• Adam Smith (1776) division of labor shown in a
  pin factory
• Charles Babbage (1854) gave basic principles of
  management
• Daniel McCallum (1855) had six basic principles
  of administration New York RR

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Early history continued

• Capt. Henry Metcalf (1885) stated that there is a
  science of administration that can be seen
  through careful observation

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Organization Theory 20th C.

• Frederick Winslow Taylor founding father of
  school of classical organization theory (2
  writings 1903 and 1911) had 4 principles for
  productivity improvement
• The application of rule-of-thumb methods for
  determining each element of a workers job with
  scientific determination
• Scientific selection training of workers

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20th C. continued

• The cooperation of management and labor to
  accomplish work objectives, in accordance with
  the scientific method
• More equal division of responsibility between
  managers and workers, with the former doing the
  planning and supervising, and the latter doing
  the execution

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20th C. continued

• Henri Fayol general principles of management
  (ignored until translated into English in 1949)
  differed from Taylors in that it was aimed at
  the general managers and executives rather than
  at the unit level manager 14 principles
• Division of work
• Authority and responsibility for managers

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20th C. continued

• Discipline of employees
• Unity of command
• Unity of direction
• Subordination of individual interest to the
  general interest
• Remuneration of personnel
• Centralization in decision-making
• Scalar chain (line of authority)

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20th C. continued

• Order in resources
• Equity in treatment of individuals
• Stability of tenure of personnel
• Initiative
• Esprit de corps
• Scientific management coined in 1910

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Organization Theories

• Human relations OT (neo-classic theory) focuses
  on the motivation and involvement of the
  employee Herbert Simon added ideas of span of
  control and unity of command
• Chester Barnard idea of incentives
• Douglas McGregor Theory X/Theory Y how
  managers motivate employees
• Philip Selznick misalignment of employees goals
  with that of company

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Theories continued

• Modern structural OT Max Weber (1922)
  established the ideal structure calling is a
  bureaucracy focused on efficiency and
  rationality use of org chart
• Power and politics OT disavows other theories
  and bases theory on conflicts of interest,
  personal agendas and selfish attitudes

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Theories continued

• Systems theory organizational economics an
  open system where everything is related to
  everything else need flexibility,
  responsiveness, individual and group empowerment
  and customer service (looks at works of Dr.
  Deming in 1950s) business process reengineering
  concept

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Theories continued

• Institutional OT organizational culture man
  intangible things such as values, beliefs,
  assumptions, perceptions, behavior norms,
  artifacts and patterns of behavior. Many
  decisions are predetermined based on patterns of
  basic assmptions

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Forces that Impact Organizational Design

• Impact of technology on OT information,
  equipment, techniques and processes required to
  transform inputs to outputs
• John Woodward (1965) found related fit between
  technology and structures
• Charles Perrow looked at knowledge technology
  rather than production technology
• James Thompson (1967) technology determines
  selection of strategy for reducing uncertainty

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Forces continued

• Communication coordination Jay Galbraith said
  key purpose for existence of firms is need for
  communication coordination firms organized
  around product lines, geographical areas or
  customer groups

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21st Century Environment

• Internet, Webcams, wireless computing,
  Web-enabled cell phones, etc. have helped to
  bring about new questions for IT support for the
  organization
• How does an organization handle this much change
• How does an organization effectively manage the
  technology

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21st continued

• How does the organization manage the employees
  using the new technology
• How will the organization be affected by the new
  technology
• How does the technology drive organization change
  and design
• Telecommunications technology has helped
  organizations adopt whatever design it wants

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Types of organizations

• Hierarchical organization manager makes
  decisions and announces or sells it
• Flattened organization manager presents
  problem, gets suggestions and makes decisions
• Network organization manager allows situational
  leadership to occur based on which node of
  network is equipped to solve

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What can be learned?

• Organization is important to the firm without
  it chaos and inability to achieve goals
• Not one correct organization structure that will
  apply to a situation
• Organization and its structure will be influenced
  by technology, power, politics, culture, size,
  history, industry and competition

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Learned continued

• Workers in an organization have an impact on how
  organization will be managed
• Organizations need to be quick to adapt to market
  and competitive changes and responsive to key
  customers

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Organizational Infrastructures

• Simple structure hierarchical in nature
• Machine bureaucracy larger than simple
  structures more formal organization and
  technology has affected firm greatly
• Professional bureaucracy doctors, lawyers, or
  accountants firms employ these professionals in
  a partnership model

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Infrastructures continued

• Divisional form major corporate organization
  use a hierarchy, but have many divisions (Global
  2000 companies)
• Adhocracy organization that has banded together
  for a special purpose, can disband or reserved
  until another special project is identified
  (contract programmers, creating movie,
  constructing a building)

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Organizational Types

• Vertical functional stovepipe found in
  centralized organization each vertical
  stovepipe represents a function or business unit
• Benefits
• Expertise is shared
• Clear career paths and training programs
• Back up with redundancy of skills

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Types continued

• Managers familiar with jobs do staff evaluations
• Centralized can easily establish standards
• Drawbacks
• Each stovepipe is self-contained bureaucracy
• Separatist mentality problems in other parts of
  company do not affect them
• Often failures in communication
• Business priorities and measurements may be
  different

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Types continued

• Business unit may believe that the projects are
  not what they wanted no ownership
• Horizontal process tunnels decentralized
  organizations units formed to focus on one
  business area independently
• Benefits
• Priorities based on needs of products and
  processes
• Communication among functions increases
  dramatically because groups work as a team

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Types continued

• Great opportunity for staff to be knowledgeable
  about multiple aspects of the product
• Drawbacks
• Limited upward career paths
• Evaluation of job performance may be done by
  those not experienced in work
• Often lack of back-up personnel available

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Types continued

• Matrix organization cross functional teams with
  two bosses product manager and functional
  manager
• Benefits
• Product manager responsible for managing
  priorities and assessing daily tasks
• Functional manager responsible for work
  evaluations, providing training, insuring
  standardization
• Rotating workers

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Types continued

• Drawbacks
• Workers experience difficulty reporting to two or
  more bosses
• Performance reviews determined by multiple
  managers
• Differences in direction or priority between
  managers
• Federated organization U.S. Federal government
  some things best handled by strong centralized
  unit

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Types continued

• Benefits
• Same as centralized and decentralized structures
• Individual workers report to one manager
• Senior managers of the unit accountable for
  performance and compliance
• Adhocracy organization composed of temporary,
  project-oriented work groups
• Benefits
• Dont have to carry all skills for company

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Types continued

• Drawbacks
• Lose expertise from firm
• Temporary employees not loyal to firm
• Turnover may be more prevalent
• bait switch outside companies changes staff
• Maintenance can be very difficult
• Two new organizations virtual and digital
  organizations

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How can IT be Organized?

• Traditional IT structure has 3 lines
• Consulting planning and managing of projects
  and services
• Development includes the design, programming,
  and delivery of systems
• Service units includes the operational elements
  such as data centers, telecommunications,
  customer service and help desks

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IT structures

• Centralized IT CIO with formal hierarchical
  structure under him/her
• Benefits
• Single IT group provides sharing expertise
• Clear career paths and training programs
• Managed skill redundancy
• Managers are experts in IT and familiar with
  projects carry out evaluations
• Standard readily defined

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IT continued

• Criticisms
• Centralized organization is unresponsive to
  individual business unit needs headquarters gets
  most attention
• No one who really understands the business area
  no functional experts (technical specialist
  business generalist)
• Can become insular and unaware of outside world
  language culture of its own
• Tendency for ivory tower focused on itself
  and perfection rather than business problems

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IT continued

• Decentralized IT IT professionals do not reside
  in IT organization, but report to each business
  unit
• Benefits
• IT professionals experts in the business area
• Priorities set by business unit
• Funding provided by business unit
• Potential career path within business and out of
  IT

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IT continued

• Criticisms
• Create huge redundancies without associated value
  of backing up each other
• Career path within IT is quite limited
• IT department will optimize for local business
  area, could be suboptimal for firm as a whole
• Integration and adhered to standards more
  difficult
• Loyalties develop to business area and not to
  firm

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IT continued

• Federal or Hybrid IT incorporate the strength
  of centralized systems standards, procedures,
  common systems but decentralizes ownership and
  control of specific application development
  efforts
• Benefits
• IT vision and leadership
• Scale of economies
• Leverage standards and tools

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IT continued

• Control architecture
• Critical mass of skills
• Users control IT priorities
• Business unit ownership
• Responsive to business units needs
• Strategic control synergy
• Adhocracy can add this to any of the three
  models create SWAT teams as needed and use
  outsourcing where needed

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Strategic Alignment Org Structure

• Choose the organization structure that delivers
  the most effective strategic alignment
• How market forces are affecting its relationships
  with its customers
• How IT can best relate to the line business
  functions to enable strategic application of
  technology

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Alignment continued

• Focus on cost reduction will tend to drive a firm
  toward a centralized IT organization closely
  control costs and technical skills focused on
  critical projects
• Responsiveness, flexibility and ownership will go
  more toward decentralized IT
• Mixed go more toward federal model
• Seems to be direction for best strategic alignment