Chapter 8

1. Chapter 8 Organizing IT

2. 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

3. 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

4. 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

5. Early history continued • Capt. Henry Metcalf (1885) stated that there is a “science of administration” that can be seen through careful observation

6. 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 worker’s job with scientific determination • Scientific selection & training of workers

7. 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

8. 20th C. continued • Henri Fayol – general principles of management (ignored until translated into English in 1949); differed from Taylor’s 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

9. 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)

10. 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

11. 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

12. 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

13. 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

14. 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

15. 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

16. 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

17. 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

18. 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

19. 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

20. 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

21. 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

22. 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

23. 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)

24. 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

25. 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

26. 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

27. 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

28. 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

29. 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

30. 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 • Don’t have to carry all skills for company

31. 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

32. 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

33. 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

34. 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

35. 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

36. 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

37. 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

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

39. 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

40. 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