cha11ter
Organizational Strategy
and Information Systems
In order for information systems (IS} to support an organization in achieving its goals, the
organization must reflect the business strategy and be coordinated with the organizational
strategy. This chapter focuses on linking and coordinating the IS strategy with the three
components of organizational strategy:
• Organizational design (decision rights, formal reporting relationships and structure,
informal networks)
• Management control systems (planning, data collection, performance measurement,
evaluation, incentives, and rewards}
• Internal culture (values, locus of control}
After 20 years of fast growth, in 2014 Cognizant Technology Solutions was a company with $8.84
billion in revenues from providing IS outsourcing services. However, growing at such a breakneck
speed, it had to reinvent its organizational structure many times to make sure that it facilitated the
flow of information. Initially, its India-centric structure located managers of each group in India
along with software engineers. Employees at customer locations worldwide reported to the managers. As the company grew and its focus shifted from simple, cost-based solutions to complex,
relationship-based solutions, this structure had to be changed to be more customer oriented. Under
the redesigned reporting structure, managers were moved to customer locations but software engineers remained in India. This change improved customer relations but brought about new headaches
on the technical side. Under the new arrangement, managers had to spend their days with customers and unexpectedly ended up spending their nights with software engineers to clarify customer ,
requirements and fix bugs. This created a tremendous strain on managers, who threatened to quit.
It also hampered the company's business of systems development. Thus, neither of these organizational structures was working well. Neither structure was well aligned with the business strategy
and the IS strategy.
However, Cognizant found that despite these problems, some work teams were working and ,
performing well. Upon an extensive analysis of those groups, the company decided to adopt a matrix
structure of comanagement throughout the company. In this matrix structure, each project has two
managers equally responsible for the project in a location. One manager is in India and the other
is at the client site. They work out among themselves how and when to deal with issues. And both
managers are equally responsible for customer satisfaction, project deadlines, and group revenue.
The new structure (Figure 3.1) enables Cognizant to work more closely with its clients to focus on
improving operations. That is, the new matrix structure makes it possible to build IS that the customers wanted.
During the same time period in 2008, the largest outsourcing company and software exporter
in India, Tata Consultancy Services (TCS), also found that growth led to problems. "As we scale
up over 100,000 employees, TCS needs a structure that allows us to build a nimble organization to
1
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Organizational Strategy and Information Systems
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Vertical Functions
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Business Manager
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Business Manager
Customer 3 China
Example of possible cognizant matrix structure.
Source: Adapted from "The Issue: For Cognizant, Two's Company," Businessweek (January 17, 2008), http://www.bloomberg.
com/bw /stories/2008-01-17 /the-issue-for-cognizant-twos-companybusinessweek-business-news-stock-market-and-financial-advice
(accessed August 20, 2015).
capture new growth opportunities," said then TCS CEO and Managing Director S. Ramadorai. 1 Growth led to a
high volume of issues that needed the attention of the CEO and COO, and eventually it was difficult to keep up.
At the same time, there was a need to spend significantly more time investigating new potential markets and new
strategic initiatives than the CEO/COO could spare. In 2011, the new TCS CEO N. Chandrasekaran modified the
structure and added a new layer of leaders to oversee the businesses and free up their time to work on strategy (see
Figure 3.2). The new layer focuses on customers and aims to boost revenue growth. 2
While both Cognizant and TCS are large Indian outsourcing companies that found they needed to reorganize
to respond to problems resulting from growth, their problems were profoundly different. Cognizant's main problem was its lack of necessary information flows between the software engineers in India and the customer service
managers on the client location. Its complex problems resulted in a c01Tespondingly complex matrix structure. It
focused on the delivery of information systems that reflect refined technical solutions to their problems to its customers. Its new organization structure both improves customer responsiveness and necessary information flows.
It focuses on system development and delivery and seeks to address the information flow problem that Cognizant
previously experienced in building systems.
In contrast, TCS's organization chart reflects a focus not only on current customers but also on future markets.
That is why it added major units called "New Growth Markets" and "Strategic Initiative Unit." The Business Process Outsourcing and Small and Medium Enterprise solutions in this latter major unit indicate the strategic directions that TCS wants to take. The organizational structure is designed to emphasize these new growth areas and
facilitate information flows along these lines in the organization. Its focus is on building an ever bigger market for
its IS and the IS services that it provides.
1
"Reinvented Blog by Prashanth Rai" (March 19, 2008), http://cio-reinvented.typepad.com/cioreinvented/2008/03/tcs-new-organ.html (accessed
December 19, 2011).
2 N. Shivapriya, "TCS CEO N Chandrasekaran Creates New Layer to Oversee Verticals" (May 25, 20 l l ), http://articles.economictimes.indiatimes.
com/20 l l-05-25/news/2958 ! 999_1_tcs-ceo-n-chandrasekaran-tcs-spokesperson-structure (accessed December 19, 2011 ).
Organizational Strategy and Information Systems
Iii
Chief Executive
Officer
Chief Operating ,___ _ _ _ _ _ ___,
Officer
....._ _...
....,Multiple units
Director, New
Growth
Markets
Director,
Major
Markets
Director,
Strategic
Initiative Unit
Director,
Organization
Infrastructure
India
USA
Financial
Solutions
Process
Excellence
APAC
UK
SME
Solutions
Emerging
Markets
FIGURE 3.2
__
Director,
Industry
Solutions Unit
Europe
Business
Process
Outsourcing
Solutions
Technology
Excellence
Shared
Services
Resource
Management
Tata Consultancy Services.
Source: "TCS Plans New Organizational Structure" (February 12, 2008), http://www.livemint.com/Companies/20Dg7L1mCcRlFow
K1ktXSN/TCS-plans-new-organisational-structure.html (accessed August 20, 2015).
Cognizant and TCS are both in the same business but chose different organizational structures to carry out
their objectives. The point is that different organizational structures reflect different organizational strategies
that are used to implement business strategies and accomplish organizational goals. These organizational strategies need to be aligned with IS strategies. When used appropriately, IS leverage human resources, capital, and
materials to create an organization that optimizes performance. Companies that design organizational strategy
without considering IS strategies run into problems like those Cognizant experienced. A synergy results from
designing organizations with IS strategy in mind-a synergy that cannot be achieved when IS strategy is just
added on.
Chapter 1 introduced a simple framework for understanding the role of IS in organizations. The Information
Systems Strategy Triangle relates business strategy with IS strategy and organizational strategy. In an organization
that operates successfully, an overriding business strategy drives both organizational strategy and information strategy. The most effective businesses optimize the interrelationships between the organization and its IS, maximizing
efficiency and productivity.
Organizational strategy includes the organization's design, as well as the managerial choices that define, set
up, coordinate, and control its work processes. As discussed in Chapter 1, many models of organizational strategy
are available. One is the managerial levers framework that includes the complementary design variables shown
in Figure 3.3. Optimized organizational designs support optimal business processes, and they, in turn, reflect the
firm's values and culture. Organizational strategy may be considered as the coordinated set of actions that leverages the use of organizational design, management control systems, and organizational culture to make the organization effective by achieving its objectives. The organizational strategy works best when it meshes well with
the IS strategy.
This chapter builds on the managerial levers model. Of primary concern is how IS impact the three types of
managerial levers: organizational, control, and cultural. This chapter looks at organizational designs that incorporate IS to define the flow of information throughout the organization, explores how IS can facilitate management
control at the organizational and individual levels, and concludes with some ideas about how culture impacts IS
and organizational performance. It focuses on organizational-level issues related to strategy. The next two chapters
complement these concepts with a discussion of new approaches to work and organizational processes.
m
Organizational Strategy and Information Systems
Variable
Organizational variables
Decision rights
The authority to initiate, approve, implement, and control various types
of decisions
to plan and run the business
I Business processes
1
The set of ordered tasks needed to complete key objectives of the
: business
~-----~--~
I
Formal reporting relationships
The structure set up to ensure coordination among all units within the
organization; reflects allocation of decision rights
:ocm~=two: -
Mechanisms, such as ad hoc groups, which work to coordinate and
transfer information outside the formal reporting relationships
l
Control variables
rData
······-·--···---
-
The facts 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 nonmonetary devices used to motivate behavior
within an organization
Cultural variables
J
Values
The set of implicit and explicit beliefs that underlies decisions made and
, actions taken; reflects aspirations about the way things should be done
j
Locus
j
FIGURE 3.3
The span of the culture, i.e., local, national, regional
~
Organizational design variables.
Source: Adapted from James I. Cash, Robert G. Eccles, Nitin Nohria, and Richard L. Nolan, Building the Information Age Organization (Homewood, IL: Richard D. Irwin, 1994).
Information Systems and Organizational Design
Organizations must be designed in a way that enables them to perform effectively. Different designs accomplish
different goals. This section examines organizational variables. It focuses on how IS are designed in conjunction
with an organization's structure. Ideally, an organizational structure is designed to facilitate the communication
and work processes necessary for it to accomplish the organization's goals, and the use of IS is often the way
coordination and workflow are done. The organizational structures of Cognizant and TCS, while very different,
reflect and support the goals of each company. Perhaps intuitively, organizational designers at those companies used
organizational variables described in Figure 3.3 to build their structures. Those variables include decision rights
that underlie formal structures, formal reporting relationships, and informal networks. Organizational processes are
another important design component discussed in more detail in Chapter 5.
Decision Rights
Decision rights indicate who in the organization has the responsibility to initiate, supply information for, approve,
implement, and control various types of decisions. Ideally, the individual who has the most information about a
decision and who is in the best position to understand all of the relevant issues should be the person who has its
decision rights. But this may not happen, especially in organizations in which senior leaders make most of the
important decisions. Much of the discussion of IT governance and accountability in Chapter 9 is based upon who
has the decision rights for critical IS decisions. When talking about accountability, one has to start with the person
who is responsible for the decision-that is, the person who has the decision rights. Organizational design is all
about making sure that decision rights are properly assigned-and reflected in the structure of formal reporting
.,,,,,;
Information Systems and Organizational Design
m
relationships. IS support decision rights by getting the right information to the decision maker at the right time and
then transmitting the decision to those who are affected. In some cases, IS enables a centralized decision maker
to pass information that has been gathered from operations and stored centrally down through the organization. If
information systems fail to deliver the right information, or worse, deliver the wrong information to the decision
maker, poor decisions are bound to be made.
Consider the case of Zara from the last chapter. Each of its 1,000 stores orders clothes in the same way, using the
same type of handheld devices, and follows a rigid weekly timetable for ordering, which provides the headquarters
commercial team with the information needed to manage fulfillment. Many other large retailers make the decision
centrally about what to send to their stores, using forecasting and inventory control models. However, at Zara, store
managers have decision rights for ordering, enabling each store to reflect the tastes and preferences of customers
in its localized area. But, the store managers do not have decision rights for order fulfillment because they have no
way of knowing the consolidated demand of stores in their area. The decision rights for order fulfillment lie with the
commercial team in headquarters because it is the team that knows about overall demand, overall supply, and store
performance in their assigned areas. The information from the commercial team then flows directly to designers
and production, allowing them to respond quickly to customer preferences. 3
Formal Reporting Relationships and Organizational Structures
Organizational structure is the design element that ensures that decision rights are correctly allocated. The structure
of reporting relationships typically reflects the flow of communication and decision making throughout the organization. Traditional organizational structures are hierarchical, flat, or matrix. The networked structure is a newer
organizational form. A comparison of these four types of organizational structures may be found in Figure 3.4.
Hierarchical Organizational Structure
As business organizations entered the 20th century, their growth prompted a need for systems for processing and
storing information. A new class of worker-the clerical worker-flourished. From 1870 to 1920 alone, the number
of U.S. clerical workers mushroomed from 74,200 to more than a quarter of a million. 4
Hierarchical
Matrix
Networked
Workers assigned to
multiple supervisors
in an effort to
promote integration
Formal and informal
communication networks
that connect all parts of
the
Dual reporting
relationships based
on function and
purpose
Known for flexibility and
adaptability
·-··-·-····-
Bureaucratic form
with defined levels
of management
Decision making
pushed down to the
lowest level in the
organization
Informal roles,
Division of labor,
: specialization, unity : planning, and control;
of command,
f often small and young
, formalization
organizations
i
i-Type of Environment
i Best Supported
Stable, certain
Dynamic uncertain
Dynamic uncertain
i Basis of Structuring
Primarily function
Very loose
Function and
purpose (i.e.,
location, product,
customer)
L-------·---- --,---···· -·--·-------···. ------········-·-
! Power Structure
FIGURE 3.4
\ Centralized
recentralized
Distributed (matrix
managers)
- -
-·-·--·--···· .. ········-·-·- ---·-·-----·-
Distributed (network)
Comparison of organizational structures.
' Andrew McAfee and Erik Brynjolfsson, "Investing in the IT That Makes a Competitive Difference, https://cb.hbsp.harvard.edu/cbmp/product/R0807JPDF-ENG (accessed August 20, 2015); James Surowiecki, The Wisdom of Crowds (New York: Anchor Books, 2005).
4
Frances Cairncross, The Company ,,r the Future (London: Profile Books, 2002).
m
Organizational Strategy and Information Systems
Factories and offices structured themselves using the model that Max Weber observed when studying the
Catholic Church and the German army. This model, called a bureaucracy, was based on a hierarchical organizational structure.
Hierarchical organizational structure is an organizational form based on the concepts of division of labor,
specialization, span of control, and unity of command. Decision rights are highly specified and centralized. When
work needs to be done, orders typically come from the top and work is subjected to the division of labor. That
means it is segmented into smaller and smaller pieces until it reaches the level of the business in which it will be
done. 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 enterprise are specialized and
often organized around particular functions, such as marketing, accounting, manufacturing, and so on. Span of
control indicates the number of direct reports. The new TCS CEO, N. Chandrasekaran, revised the organizational
structure to lower his span of control by inserting a new layer with only a few leaders reporting directly to him.
Unity of command means that each person has a single supervisor. Rules and policies are established to handle the
routine work performed by employees of the organization. When in doubt about how to complete a task, employees
tum to the rules. If a rule doesn't exist to handle the situation, employees tum to a supervisor in the hierarchy for the
decision. Key decisions are made at the top and filter down through the organization in a centralized fashion. Hierarchical structures, which are sometimes called vertical structures, are most suited to relatively stable, certain environments in which the top-level executives are in command of the information needed to make critical decisions.
This allows them to make decisions quickly.
IS are typically used to store and communicate information and to support the information needs of managers
throughout the hierarchy. IS convey the decisions of top managers downward and data from operations are sent
upward through the hierarchy using IS. Hierarchical structures are also very compatible with efforts to organize
and manage data centrally. The data from operations that have been captured at lower levels and conveyed through
IS increasingly need to be consolidated, managed, and made secure at a high level. The data are integrated into
databases that are designed so that employees at all levels of the organization can see the information that they need
when they need it. Often there is an information dashboard for executives, a system that provides a summary of key
performance indicators (KPls). Each level of KPI has additional detail behind it and executives can drill down into
the details as necessary. For example, a KPI revealing lower profitability might have been caused by higher costs
or lower sales, and managers would need to drill down through additional levels of information to understand why
the KPI changed. Managers throughout the hierarchy often have similar dashboards with the KPis for their organization so that up and down the hierarchy, managers are looking at the same information consolidated for their level
of decision making.
.,J
Flat Organizational Structure
In contrast to the hierarchical structure, the flat, or horizontal, organizational structure has a less well-defined
chain of command. You often don't see an actual organization chart for a flat organization because the relationships
are fluid and the jobs are loosely defined. That is, drawing an organization chart for a flat organization is like trying
to tie a ribbon around a puddle. In flat organizations, everyone does whatever needs to be done to conduct business.
There are very few "middle managers." For this reason, flat organizations can respond quickly to dynamic, uncertain environments. Entrepreneurial organizations, as well as smaller 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. Teamwork is important in flat organizations. To increase flexibility and innovation,
decision rights may not be clearly defined. Hence, the decision making is often decentralized because it is spread
across the organization to where the decisions are made. It is also time consuming. As the work grows, new individuals are added to the organization, and eventually a hierarchy is formed where divisions are responsible for
segments of the work processes. Many companies strive to keep the "entrepreneurial spirit," but in reality, work is
done in much the same way as with the hierarchy described previously. Flat organizations often use IS to off-load
certain routine work in order to avoid hiring additional employees. As a hierarchy develops, the IS become the glue
tying together parts of the organization that otherwise would not communicate. IS also enable flat organizations to
respond quickly to their environment.
'f//////111
Information Systems and Organizational Design
El
Matrix Organizational Structure
The third popular form, which Cognizant ultimately adopted, is the matrix organizational structure. It typically
assigns employees to 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. The team member would report to both, and both would be responsible in some measure for that member's performance and development. That is, the marketing manager would oversee the employee's development of
marketing skills and the product manager would make sure that the employee develops skills related to the product.
Thus, decision rights are shared between the managers. The matrix structure allows organizations to concentrate
on both functions and purpose. The matrix structure allows the flexible sharing of human resources and achieves
the coordination necessary to meet dual sets of organizational demands. It is suited for complex decision making
and dynamic and uncertain environments. IS reduce the operating complexity of matrix organizations by allowing
information sharing among the different managerial functions. For example, a saleswoman's sales would be entered
into the information system and appear in the results of all managers to whom she reports.
Cognizant might have moved to the matrix structure (see Figure 3. l) from a hierarchical structure because the
complexity of its projects had increased. "As part of the structure of a Cognizant engagement, we always pair our
technologists with people who have business context experience," says Raj Mamodia, who was then the Assistant
Vice President of Cognizant's Consumer Goods business unit. The purpose of these formally structured relationships is to meet the customer's needs, and not just focus on "how beautiful the technology is in and of itself." 5
The matrix organizational structure carries its own set of weaknesses. Although theoretically each boss has a
well-defined area of authority, the employees often find the matrix organizational structure frustrating and confusing because they are frequently subjected to two authorities with conflicting opinions. Consequently, working in
a matrix organizational structure can be time consuming because confusion must be dealt with through frequent
meetings and conflict resolution sessions. Matrix organizations often make it difficult for managers to achieve their
business strategies because they flood managers with more information than they can process.
Networked Organizational Structure
Made possible by advances in IT, a fourth type of organizational structure emerged: the networked organizational structure. Networked organizations characteristically feel flat and hierarchical at the same time. An article
published in the Harvard Business Review describes this type of organization: "Rigid hierarchies are replaced by
formal and informal communication networks that connect all parts of the company.... [This type of organizational structure] is well known for its flexibility and adaptiveness." 6 It is particularly suited to dynamic, unstable
environments.
Networked organizational 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.
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. 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 communication technologies and networks also renders it easier to coordinate across functional
boundaries. In short, the networked organization is one in which IT ties together people, processes, and units.
The organization feels flat when IT is used primarily as a communication vehicle. Traditional hierarchical lines
of authority are used for tasks other than communication when everyone can communicate with everyone else, at
5
Cognizant Computer Goods Technology. "Creating a Culture of Innovation: lO Steps to Transform the Consumer Goods Enterprise" (October 2009),
6, http://www.cognizant.com/Insights Whitepapers/Cognizant_Innovation.pdf (accessed August 20, 2015).
6
L. M. Applegate, J. I. Cash, and D. Q. Mills. ''Information Technology and Tomorrow's Manager," Han•ard Business Review (November-December
1988), 128-36.
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Organizational Strategy and Information Systems
least in theory. The term used is technological leveling because the technology enables individuals from all parts of
the organization to reach all of its other parts.
Portions of Zara's organizational structure appear networked. Being networked enables the store managers to
use technology to communicate directly with designers. Zara uses the technology-supported structure to coordinate
the actions and decisions of tens of thousands of its employees so that they can focus their attention on the same
goal of making and selling clothes that people want to buy.
Other Organizational Structures
An organization is seldom a pure form of one of the four structures described here. It is much more common to see
a hybrid structure in which different parts of the organization use different structures depending on the information
needs and desired work processes. For example, the IS department may use a hierarchical structure that allows
more control over data warehouses and hardware, whereas the research and development (R&D) department may
employ a networked structure to capitalize on knowledge sharing. In the hierarchical IS department, information
flows from top to bottom, whereas in the networked R&D department, all researchers may be connected to one
another.
Further, IS are enabling even more advanced organization forms such as the adaptive organization, the zero
time organization,7 and the elastic enterprise. 8 Common to these advanced forms is the idea of agile, responsive
organizations that can configure resources and people quickly. These organizations are flexible enough to sense
and respond to changing demands. Elastic enterprises, for example, have a core competency of adding partners
as necessary to quickly respond to customer needs. They do this by creating a platform and common interfaces
to reduce the effort and friction of partnering. Building in the capability to respond instantly means designing the
organization so that each of the key structural elements is able to respond instantly.
Informal Networks
The organization chart reflects the authority derived from formal reporting relationships in the organization's formal structure. However, informal relationships also exist and can play an important role in an organization's functioning. Informal networks, in addition to formal structures, are important for alignment with the organization's
business strategy.
Sometimes, management designs some of the informal relationships or networks. 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. This is considered an informal reporting relationship. Or a company may have a job rotation program that
provides employees with broad-based training by allowing them to work a short time in a variety of areas. Long
after they have moved on to another job, employees on job rotations may keep in touch informally with former
colleagues, or call upon their past co-workers when a situation arises that their input may be helpful. Hewlett Packard's Decision Support and Analytics Services unit encouraged the development of work-related informal networks
when it established focused interest group/forums known as Domain Excellence Platforms (DEPs). An IT-enabled
DEP allows at least five people who hold a common interest related to the business to form a team to share their
knowledge on a topic (e.g., cloud computing, Web analytics). For nonbusiness related topics, the employees can
join conferences to talk about the topic and get to know one another better. The hope is that they will start thinking
beyond their work silos. 9
However, not all informal relationships are a consequence of a plan by management. Some networks unintended
by management develop for a variety of other factors including work proximity, friendship, shared interests, family
ties, and so on. The employees can make friends with employees in another department when they play together on
7
For more infonnation on zero time organizations, see R. Yeh, K. Pearlson, and G. Kozmetsky, Zero Time: Providing Instant Customer Value Every Time,
All the Time (Hoboken, NJ: John Wiley, 2000).
8
For more information on elastic enterprises, see N. Vitalari and H. Shaughnessy, The Elastic Enterprise (Longboat Key, FL: Telemachus Press, 2012).
9
T. S. H. Teo, R. Nishant, M. Goh, and S. Agarwal, "Leveraging Collaborative Technologies to Build a Knowledge Sharing Culture at HP Analytics,"
MIS Quarterly Executive I 0, no. I (March 2011 ). 1-18.
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Information Systems and Management Control Systems
m
=Social Business Lens: Social Networks
Social networks are a form of informal networks. They even have begun to supplement and possibly replace
organization charts in enterprises. A social network is an IT-enabled network that links individuals together in
ways that enable them to find experts, get to know colleagues, and see who has relevant experience for projects across traditional organization lines. Much like the networked organization, a social network provides an IT
backbone linking all individuals in the enterprise, regardless of their formal title or position. Some might regard a
social network as a "super-directory" that provides not only the names of the individuals but also their role in the
company, their title, their contact information, and their location. It might even list details such as their supervisor
(and their direct reports and peers), the project(s) they are currently working on, and personal information specific
to the enterprise.
What differentiates a social network from previous IT solutions to connect individuals is that it is integrated with
the work processes themselves. Conversations can take place, work activities can be recorded, and information
repositories can be linked or merely represented within the structure of the social network.
IBM has a good example of how a social network permeates an organization, changing its culture, structure,
and collaboration processes. With over 400,000 employees, the company has a flurry of social activity embodied in more than 17,000 individual biogs, 1 million daily page views of internal wikis and Web sites, and 400,000
employee profiles on IBM Connections. Its social network allows employees to share status updates, collaborate
on internal systems, and share files. There have been 15 million downloads of employee-generated videos and
podcasts so far.
Source: http:/ /www.forlws.com/ si tes/haydnshaugh1iessy/2011 / 12/09/is-social-husincss-t he- samc-as-social-111e, lia/ (w·,·essi·, I -\ I,ril
:;_ 2012).
the company softball team, share the same lunch period in the company cafeteria, or see one another at social gatherings. Informal networks can also arise for political reasons. Employees can cross over departmental, functional,
or divisional lines in an effort to create political coalitions to further their goals. Some informal networks even cross
organizational boundaries. As computer and information technologies facilitate collaboration across distances,
social networks and virtual communities are formed. Many of these prove useful in getting a job done, even if not
all of the members of the network belong to the same organization. Linkedln is an example of a tool that enables
large, global informal networks.
Information Systems and Management Control Systems
Controls are the second type of managerial lever. Not only does IS change the way organizations are structured, but
also it profoundly affects the way managers control their organizations. Management control is concerned with how
planning is performed in organizations and how people and processes are monitored, evaluated, and compensated or
rewarded. Ultimately, it means that senior leaders make sure the things that are supposed to happen actually happen.
Management control systems are similar to room thermostats. Thermostats register the desired temperature.
A sensing device within the thermostat determines whether the temperature in the room is within a specified range
of the one desired. If the temperature is beyond the desired range, a mechanism is activated to adjust the temperature. For instance, if the thermostat is set at 70 degrees and the temperature in the room is 69, then the heater
can be activated (if it is winter) or the air conditioning can be turned off (if it is summer). Similarly, management
control systems must respond to the goals established through planning. Measurements are taken periodically and
if the variance is too great, adjustments are made to organizational processes or practices. For example, operating
processes might need to be changed to achieve the desired goals.
IS offer new opportunities for collecting and organizing data for three management control processes:
1. Data collection: IS enable the collection of information that helps managers determine whether they are
satisfactorily progressing toward realizing the organization's mission as reflected in its stated goals.
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Organizational Strategy and Information Systems
2. Evaluation: IS facilitate the comparison of actual performance with the desired performance that is
established as a result of planning.
3. Communication: IS 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 for problematic
situations.
When managers need to control work, 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. IS collect and analyze information from automated processes, and they can 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 with time to make more strategic decisions.
Planning and Information Systems
In the first chapter, the importance of aligning organizational strategy with the business strategy was discussed.
An output of the strategizing process is a plan to guide in achieving the strategic objectives. IS can play a role in
planning in four ways:
• IS can provide the necessary data to develop the strategic plan. They can be especially useful in collecting
data from organizational units and integrating the data to transform those data into information for the strategic decision makers.
• IS can provide scenario and sensitivity analysis through simulation and data analysis.
• IS can be a major component of the planning process.
• In some instances, an information system is a major component of a strategic plan. That is, as discussed in
Chapters 1 and 2, information systems can be used to gain strategic advantage.
Data and Information Systems
In addition to focusing on organizational-level planning and control, managers use information systems to build
controls for individuals. An important part of management control lies in making sure that individuals perform
appropriately. At the individual level, IS can streamline the process of data collection (usually through monitoring
and analytical processes that use the collected data, as Chapter 4 discusses) 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. IS make it
possible to collect such data as the number of keystrokes, the precise time spent on a task, exactly who was contacted, and the specific data that passed through the process. The data collected from operations creates large data
stores that can be analyzed for trends. 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. Managers at call centers can easily and nonintrusively collect data on virtually any part of the process. The
organizational design challenge in data collection is twofold: (1) to embed monitoring tasks within everyday work
and (2) to reduce the negative impacts to employees being monitored. Workers perceive their regular tasks as value
adding but have difficulty in seeing how value is added by tasks designed to provide information for management
control. Research has found that monitoring does not always increase stress of the employee, especially when it fits
the task and is automatic and nonintrusive. 10 But employees often avoid activities aimed at monitoring their work
10
D. Galletta and R. Grant, "Silicon Supervisors and Stress: Merging New Evidence from the Field," Accounting, Management and Information Technology 5, no. 3 (1995), 163-83.
.,,,
Information Systems and Management Control Systems
m
or worse, find ways to ensure that data recorded are inaccurate, falsified, or untimely. Collecting monitoring data
directly from work tasks---or embedding the creation and storage of performance information into software used to
perform work-renders the data more reliable.
A large number of software products are available for companies to monitor employees. Software monitoring
products are installed by companies to get specific data about what employees are doing. This information can help
ensure that work is being performed correctly. It can also be used to avoid barriers to employee productivity from
"cyberslacking" and "cyberslouching." 11 The intention may seem both ethical and in the best interest of business,
but 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. Managers need to take into account employee privacy rights and try to
balance their right to privacy against the needs of the business to have surveillance mechanisms in place.
Performance Measurement. Evaluation. and Information Systems
IS make it possible to evaluate actual performance data against reams of standard and historical data, often by using
models and simulations. Analytics and big data tools have changed the way many companies use data to make
decisions. Managers can more easily and completely understand work progress and performance. In fact, the ready
availability of so much information catches some managers in "analysis paralysis": analyzing too much or too long.
In our example of the call center, a manager can compare an employee's output to that of colleagues, to earlier
output, and to historical outputs reflecting similar work conditions at other times. Even though evaluation constitutes an important use of IS, how the information is used has significant organizational consequences. Information
collected for evaluation may be used to provide feedback so that the employee can improve personal performance;
it also can be used to determine rewards and compensation. The former use-for improvement in performance-is
nonthreatening and generally welcomed.
Using the same information for determining compensation or rewards, however, can be threatening. Suppose a
call center manager is evaluating the number and duration of calls that service representatives answer on a given
day. The manager's goal is to make sure all calls are answered quickly, and he communicates that goal to his staff.
Now think about how the evaluation information is used.
If the manager simply provides the employees with information, then the evaluation is not threatening. If handled this way, employees might respond by improving their call numbers and duration. A discussion may even
occur in which the service representative highlights other important considerations, such as customer satisfaction
and quality. Perhaps the representative takes longer than average on each call because she believes that the attention
devoted to the customer would result in higher customer satisfaction.
On the other hand, some managers use the same information to rank employees so that top-ranked employees
are rewarded and those lower ranked are, in some way, punished or reprimanded. This may cause employees to
feel threatened and respond accordingly. The representative who is not on the top of the list might shorten calls or
deliver less quality, consequently decreasing customer satisfaction, while increasing the values of the metrics that
are measured. The lesson for managers is to pay attention to what is monitored and how the information is used.
Metrics for performance must be meaningful in terms of the organization's broader goals, and measured, managed,
and communicated appropriately.
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. For more complex feedback, IS may not be the appropriate vehicle. For example, no one would want to be told she or he was doing a poor job via e-mail or voice mail. Negative
feedback of significant consequence often is best delivered in person.
IS can allow for feedback from a variety of participants who otherwise could not be involved. Many companies
provide "360-degree" feedback in which the individual's supervisors, subordinates, and co-workers all provide
11
Bernd Carsten Stahl. "'The Impact of the UK Human Rights Act 1998 on Privacy Protection in the Workplace," Computer Security, Privacy and
Politics: Current Issues, Challenges and Solutions (Hershey, PA: Idea Group Publishing, 2008), 55-68.
m
Organizational Strategy and Information Systems
formal input. Social tools are making inroads in evaluation, too. For example, a "thumbs up" or "1-5 stars" evaluation system makes it easy and fast to provide informal feedback and evaluate activities. Because that feedback is
received more quickly, improvements can be made faster.
Incentives and Rewards and Information Systems
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, giving them electronic badges that are displayed on the social network
to identify them as award recipients. Others reward them with new technology. At one organization, top performers
get new computers every year, while lower performers get the "hand-me-downs."
IS make it easier to design complex incentive systems, such as shared or team-based incentives. IS make it easier to keep track of contributions of team members and, in conjunction with qualitative inputs, allocate rewards
according to complex formulas. For example, in a call center, agents can be motivated to perform better by providing
rewards based on tracking metrics, such as average time per call, number of calls answered, and customer satisfaction. Information systems can provide measures of all of these on a real-time basis-even customer satisfaction
through automated audio or Web site questionnaires after a customer interaction.
When specifying reward metrics, managers must be careful because they tend to drive the behavior they specify.
For example, call center agents who know they will be evaluated only by the volume of calls they process may rush
callers and provide poorer service in order to maximize their performance according to the narrow metric. Those
measured only by customer satisfaction might spend more time than necessary on each call and perhaps try endlessly to solve problems that should be routed to more technical personnel.
Information Systems and Culture
The third managerial lever of organizational strategy is culture. Culture plays an increasingly important role in
information system management and use. Because information systems management and use are complicated
by human factors, it is important to consider culture's impact. Culture is defined as the set of "shared values and
beliefs" that a group holds and that determines how the group perceives, thinks about, and appropriately reacts to
its various environments. 12
A "collective programming of the mind" distinguishes not only societies (or nations) but also industries, professions, and organizations. 13 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. Culture is something of a
moving target because it evolves over time as the group solves problems adapting to the environment and internal
operations.
Culture has been compared to an iceberg because, like an iceberg, only part of the culture is visible from the
surface. In fact, it is necessary to look below the surface to understand the deep-rooted aspects of culture that are
not visible. That is, culture may be thought of in terms of layers: observable artifacts, values, and assumptions.
Observable artifacts are the most visible level. They include such physical manifestations as type of dress, symbols in art, acronyms, awards, myths and stories told about the group, rituals, and ceremonies. Espoused values
are the explicitly stated preferred organizational values. Ideally, they should be consistent with the enacted values,
which are the values and norms that are actually exhibited or displayed in employee behavior. For example, if
an organization says that it believes in a good work-life balance for its employees but actually requires them to
work 12-hour days and on weekends, the enacted values don't match with the espoused ones. The deepest layer of
culture is the underlying assumption layer, or the fundamental part of every culture that helps discern what is real
12
A. Kinicki, Organiwtional Behavior: Core Concepts (Boston, MA: McGraw-Hill Irwin, 2008), 183.
" G. J. Hofstede, Culture's Consequences: Comparing Values, Behaviors, Institutions, and Organizations Across Nations, 2nd ed. (Thousand Oaks, CA:
Sage Publications, 200 I).
.,,,.J
Information Systems and Culture
llfl
and important to the group. Assumptions are unobservable because they reflect organizational values that have
become taken for granted to such an extent that they guide organizational behavior without any group members
thinking about them. 14
Levels of Culture and IT
Culture can vary depending upon which group you are studying. Countries, organizations, and subgroups in organizations all have a culture. IS management and use can be impacted by culture at all these levels. IS can even play
a role in promoting it. For instance, Cognizant used IT to implement "10/10/10," a program designed to keep its
associates focused on innovation. On the tenth workday of each month at 10 A.M., everyone's computer screen is
frozen, allowing the entire Cognizant workforce to spend 10 minutes thinking about and sharing innovative ideas. 15
With the growth of analytics and the availability of large stores of data, many organizations are adopting a datadriven culture in which virtually all decisions are made with the support of analytics. In a data-driven culture, managers are typically expected to provide data to support their recommendations and to back up decisions. Information
is often freely shared in this culture, and IS take on the important role of collecting, storing, analyzing, and delivering data and information to all levels of the organization. Dell, Procter and Gamble, GE, Google, and Facebook are
examples of companies that are known to have a data-driven culture. Sometimes the employees in these companies
are said to "speak the language of data" as part of their culture.
When IS developers have values that differ from the clients in the same organization for whom they are developing systems, cultures can clash. For example, clients may favor computer-based development practices that
encourage reusability of components to enable flexibility and fast turnaround. Developers, on the other hand, may
prefer a development approach that favors stability and control but tends to be slower. Both national and organizational cultures can affect IT management and usage and vice versa. National culture may affect IT in a variety of
ways, impacting information systems development, technology adoption and diffusion, system use and outcomes,
and management and strategy. These relationships are shown in Figure 3.5 and described next. The model and the
discussion of the impact of culture on IT issues draws heavily from the work of Leidner and Kayworth. 16
National Values
Organizational Values
Information
Systems
Development
IT Adoption
and Diffusion
(Entire Organization and within Organization)
FIGURE 3.5
Levels of culture.
Source: Adapted from D. Leidner and T. Kayworth, "A Review of Culture in Information Systems Research: Toward a Theory of
Information Technology Culture Conflict," MIS Quarterly 30, no. 2 (2006), 372, Figure 1.
14
E. Schein, Organizational Change and Leadership, 4th ed. (San Francisco, CA: Jossey-Bass, 2010).
Cognizant Computer Goods Technology, "Creating a Culture of Innovation," 1-6.
16
D. Leidner and T. Kayworth, "A Review of Culture in Information Systems Research: Toward a Theory of Information Technology Culture Conflict,"
MIS Quarterly 30, no. 2 (2006), 357-99.
15
m
Organizational Strategy and Information Systems
Culture and Information Systems Development
Variation across national cultures may lead to differing perceptions and approaches to IS development. In particular,
systems designers may have different perceptions of the end users and how the systems would be used. For example,
Danish designers who had more socialist values were more concerned about people-related issues when compared
to Canadian designers with more capitalist values. The Canadian designers were more interested in technical issues.
National culture may also affect the perceptions of project risk and risk management behaviors. At the organizational level, cultural values can affect the features of new software and the way it is implemented.
Culture and Information Technology Adoption and Diffusion
National cultures that are more willing to accept risk appear to be more likely to adopt new technologies. Those
cultures that are less concerned about power differences among people (i.e., have low power distance) are more
likely to adopt technologies that help promote equality. People are more likely to adopt a new technology if they
think that the technology's embedded values match those of their national culture. Further, if a technology is to be
successfully implemented into an organization, either the technology must fit with the organization's culture or the
culture must be shaped to fit the behavioral requirements of the technology. For example, a dashboard that shares
analytics and key performance indicators to all employees would reduce the "power" of leaders in a hierarchical
organization in which only the senior managers have access to the data. In such organizations, implementation of
such an information system would likely be very slow or rejected altogether because the culture would not support
broad information sharing.
Culture and Information Technology Use and Outcomes
Research has shown that differences in culture result in differences in the use and outcomes of IT. At the organizational level, cultural values are often related to satisfied users, successful IS implementations or knowledge
management successes. At the national level, e-mail adoption was much slower in Japan than in the United States.
Japanese prefer richer forms of communication such as meeting face-to-face. The lean e-mail can't accommodate
the symbols in their language as easily as a fax. Further, in countries that are more likely to avoid uncertainty like
Japan and Brazil, IT is used often for planning and forecasting, whereas in countries that are less concerned about
risk and uncertainty, IT is more often used for maintaining flexibility. Furthermore, some things are acceptable in
one country but not another. For example, Ditch Witch could not use its logo globally because a witch is offensive
in some countries.
Culture and Information Technology Management and Strategy
National and organizational culture affects planning, governance, and perceptions of service quality. For example,
having planning cultures at the top levels of an organization typically signal that strategic systems investment is
important. At Adidas, a multinational sports apparel company headquartered in Germany, national culture played
a role in its multisourcing strategy. Adidas' managers selected an Eastern European vendor because they were
looking for a provider whose culture was similar to their own. They thought that vendor's employees were more
likely to question system requirements and to make creative, innovative contributions than the Indian vendors they
had hired. 17
National Cultural Dimensions and Their Application
One of the best-known (and prolific) researchers in the area of differences in the values across national cultures
is Geert Hofstede. Most studies about the impact of national cultures on IS have used Hofstede's dimensions
of national culture. Hofstede 18 originally identified four major dimensions of national culture: power distance,
17
Martin Wiener and Carol Saunders, "Forced Coopetition in IT Multi-Sourcing," Journal of Strategic /11formatio11 Systems 23, no. 3 (2014), 210-25.
"' G. Hofstede, Culture's Consequences: /ntemational Differences in Work-Related Values (London: Sage, 1980).
..,,,;
Information Systems and Culture
m
uncertainty avoidance, individualism-collectivism, and masculinity-femininity. 19 To correct for a possible bias
toward Western values, a new dimension, Confucian work dynamism, also referred to "short-term vs. long-term
orientation," was added. 20 Many others have used, built upon, or tried to correct problems related to Hofstede's four dimensions. One notable project is the Global Leadership and Organizational Behavior Effectiveness
(GLOBE) research program, which is a team of 150 researchers who have collected data on cultural values and
practices and leadership attributes from over 18,000 managers in 62 countries. The GLOBE project has uncovered nine cultural dimensions, six of which have their origins in Hofstede's pioneering work. The Hofstede
dimensions and their relationship to the GLOBE dimensions are summarized in Figure 3.6.
Hofstede Dimensions (Related
GLOBE Dimensions)
i Description•
Uncertainty Avoidance (Uncertainty
Avoidance)
Extent to which a society tolerates
uncertainty and ambiguity; extent to
which members of an organization or
society strive to avoid uncertainty by
, reliance on social norms, rituals, and
i bureaucratic practices to alleviate the
l unpredictability of future events.
Countries with high uncertainty
avoidance are less likely to adopt
new IT and have higher perceptions
of project risk than countries with low
uncertainty avoidance.
Power Distance (Power Distance)
· Degree to which members of an
organization or society expect and
agree that power should be equally
shared.
Individuals from high power distance
countries are found to be less
innovative and less trusting of
technology than individuals from
tow power distance countries.
-·
---
' Examples of Effect on l'fb
-----···
--·--
-- - - - - - - - ·
lndivid ualism/Collectivism (Societal
and In-Group CoUectivism)
Degree to which individuals are
integrated into groups; extent to
which organizational and societal
institutional practices encourage
and reward collective distribution of
resources and collective action.
' Individualistic cultures are more
predisposed than collectivistic
cultures to report bad news about
troubled IT projects; companies in
collectivist societies are more likely
than individualistic societies to fill an
IS position from within the company.
Masculinity /Femininity ( General
Egalitarianism and Assertiveness)
Degree to which emotional roles are
distributed between the genders;
extent to which an organization or
society minimizes gender role
differences and gender
discrimination; often focuses on
caring and assertive behaviors.
Australian groups (high masculinity)
generated more conflict and relied
less on conflict resolution strategies
than Singaporean groups (low
masculinity).
Confucian Work Dynamism (Future
Orientation)
Extent to which society rewards
behaviors related to long- or
short-term orientations; degree to
which individuals in organizations or
societies engage in future-oriented
behaviors such as planning, investing
in the future, and delaying
gratification.
When considering future orientation,
studies found differences in the use
of Executive Information Systems
and the evaluation of service quality
across countries.
'Adapted from R. House, M. Javidan, P. Hanges, and P. Dorfman, "Understanding Cultures and Implicit Leadership Theories across the Globe: An Introduction to
Project GLOBE," Journal of World Business 37, no. 1 (2002), 3-10; and G. Hofstede and G. J. Hofstede, Dimensions of National Culture, hnp://www.geerthofstede.
nVdimensions-of-nationakultures.aspx (accessed August 20, 2015).
'Examples were provided in D. Leidner and T. Kayworth, "A Review of Culture in Information Systems Research: Toward a Theory of Information Technology
Culture ConfLict," MIS Quarterly 30, no. 2 (2006), 357-99.
FIGURE 3.6
19
20
National cultural dimensions.
Ibid.
G. Hofstede and M. H. Bond, "The Confucius Connection: From Cultural Roots to Economic Growth," Organizational Dynamics 16 (1988), 4021.
lliil
Organizational Strategy and Information Systems
=Geographic Lens: Does National Culture Affect Firm Investment in IS Training?
In a massive study of 6,000 firms in 21 countries, Hilla Peretz and Zehava Rosenblatt found that differences along
Hofstede's cultural dimensions do affect employee training. In particular, firms in countries that embrace low
power distance (i.e., Germanic countries, Anglo-American countries, the Netherlands, and Israel} tend to invest
more in training than firms in countries with high power distance (i.e., some Asian, Latin America, and Middle
Eastern countries).
Why might this be the case? Perhaps firms in high power distance societies view investment in training as less
favorable because it might narrow the power gaps by making a higher level of skills available across all levels of
the organization. Those in power might not want to see a leveling of power throughout the organization.
Peretz and Rosenblatt also discovered that firms in countries that had a strong orientation toward the future
(i.e., some Asian countries) were more likely to invest in training than firms in countries with a shorter-term orientation (i.e., some Anglo-American countries). The researchers think this might be so because training is all about
helping employees develop so that they can perform better in the future. Better-trained employees help the
firm's competitive prospects down the line.
Finally, the researchers found that firms in countries with high uncertainty avoidance (i.e., some Hispanic cultures, Japan, South Korea, Israel, and Russia) spend more on training than countries with low uncertainty avoidance (i.e., the United Kingdom, Ireland, Hong Kong, and Singapore)-maybe because employee training may be
seen as a way to reduce uncertainty.
Although the study was about training in general, the findings are even more likely to hold for IS training.
Because IS change so quickly, IS professionals need considerable training to stay current and do their jobs well.
Source: 11. Peretz and Z. Rosenblatt. "The Role of Societal Cultural Practices in Organizational Investment in Training: A Comparatin·
Study in 21 Countries:· ./mmwl of Cross-C11lt11rnl Psycho/010· 42. no.;; (2011), 817-:11.
Even though the world may be becoming "flatter," cultural differences have not totally disappeared. But some
leadership traits, such as being trustworthy, just, and honest; having foresight and planning ahead; being positive,
dynamic, encouraging, and motivational; and being communicative and informed are seen as universally acceptable
across cultures. 21
The generally accepted view is that the national culture predisposes citizens of a nation to act in a certain way
along a Hofstede or GLOBE dimension, such as in an individualistic way in England or in a collectivist way in
China. Yet, the extent of the influence of a national culture may vary among individuals, and culturally based idiosyncrasies may surface based upon the experiences that shape each person's ultimate orientation on a dimension.
Having an understanding and appreciation for cultural values, practices, and subtleties can help in smoothing the
challenges that occur in dealing with these idiosyncrasies. An awareness of the Hofstede or GLOBE dimensions
may help to improve communications and reduce conflict.
Effective communication means listening, framing the message in a way that is understandable to the receiver,
and responding to feedback. Effective cross-cultural communication involves each of these plus searching for an
integrated solution that can be accepted and implemented by members of diverse cultures. This may not be as
simple as it sounds. For instance, typical American managers, noted for their high-performance orientation, prefer direct and explicit language full of facts and figures. However, managers in lower performance-oriented countries like Russia or Greece tend to prefer indirect and vague language that encourages the exploration of ideas. 22
Communication differences surfaced when one of this book's authors was designing a database in Malaysia. She
asked questions that required a "yes" or "no" response. In trying to reconcile the strange set of responses she
received, the author learned that Malaysians are hesitant to ever say "no." Communication in meetings is also
subject to cultural differences. In countries with high levels of uncertainty avoidance such as Switzerland and
21
22
Mansour Javidan and R. J. House, "Cultural Acumen for the Global Manager," Organizational Dynamics 29, no. 4 (2001 ), 289-305.
Ibid.
Discussion Questions
..
Austria, meetings should be planned in advance with a clear agenda. The managers in Greece or Russia who come
from a low uncertainty avoidance culture often shy away from agendas or planned meetings.
Knowing that a society tends to score high or low on certain dimensions helps a manager anticipate how a person from that society might react. However, this provides only a starting point because each person is different.
Importantly, without being aware of cultural differences, a company is unlikely to develop IS or to use it effectively.
SUMMARY
• Organizational strategy reflects the use of the managerial levers of an organization's design, organizational culture, and
management control systems that coordinate and control work processes.
• Organizational designers today must have a working knowledge of what information systems can do and how the choice
of information system will affect the organization itself.
• Organizational structures can facilitate or inhibit information flows.
• Organizational design should take into account decision rights, organizational structure, and informal networks.
• Structures such as flat, hierarchical, matrix and, networked organizations are being enhanced by information technology.
Increasingly information technology enables and supports networked organizations that can better respond to dynamic,
uncertain organizational environments.
• Information technology affects managerial control mechanisms: planning, data, performance measurement and evaluation, incentives and rewards.
• Management control at the individual level is concerned with monitoring (i.e., data collection), evaluating, providing
feedback, compensating, and rewarding. It is the job of the manager to ensure that the proper control mechanisms are
in place and the interactions between the organization and the information systems do not undermine the managerial
objectives.
• Organizational and national culture should be taken into account when designing, managing, and using IS.
KEY TERMS
assumptions (p. 67)
beliefs ( p. 66)
bureaucracy (p. 60)
culture (p. 66)
decision rights (p. 58)
enacted values (p. 66)
espoused values (p. 66)
flat organizational structure (p. 60)
hierarchical organizational
structure (p. 60)
matrix organizational
structure (p. 61)
networked organizational
structure (p. 61)
observable artifacts (p. 66)
organizational strategy (p. 57)
social network (p. 63)
span of control (p. 60)
unity of command (p. 60)
values (p. 66)
DISCUSSION QUESTIONS
1. How might IS change a manager's job?
2. Is monitoring an employee's work on a computer a desirable or undesirable activity from a manager's perspective? From the
employee's perspective? How does the organization's culture impact your position? Defend your position.
3. Consider the brief description of the elastic enterprise. What is an example of a control system that would be critical to manage for success in elastic enterprise? Why?
4. Mary Kay, Inc. sells facial skin care products and cosmetics around the globe. The business model is to provide one-on-one,
highly personalized service. More than 500,000 Independent Beauty Consultants (IBCs) sell in 43 markets worldwide. Each
IBC runs his or her own business by developing a client base and then providing services and products for sale to those
clients. The IBCs were offered support through an e-commerce system with two major components: mymk.com and Mary
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Organizational Strategy and Information Systems
Kay InTouch. Mymk.com allows IBCs to create instant online sites where customers can shop anytime directly with their
personal IBC. Mary Kay InTouch streamlines the ordering process by automatically calculating discounts, detecting promotion eligibility, allowing the IBCs to access up-to-date product catalogs, and providing a faster way to transact business
with the company. 23
a. How would the organizational strategy need to change to respond to Mary Kay's new business strategy and information
system?
b. What changes would you suggest Mary Kay, Inc. managers make in their management systems in order to realize the
intended benefits of the new systems? Specifically, what types of changes would you expect to make in the evaluation
systems, the reward systems, and feedback systems?
• CASE STUDY 3-1
The Merger of Airtran by Southwest Airlines: Will the Organizational Cultures Merge? 24
Southwest Airlines' merger with AirTran Airlines, valued at over US$3 billion, made Southwest the largest domestic carrier based on number of passengers flown. 25 The merger increases Southwest's presence in a number of major cities, most
notably New York (LaGuardia) and Washington D.C. (Ronald Reagan National Airport). Thanks to AirTran, Southwest now
flies into the coveted Atlanta's Hartsfield-Jackson Atlanta International, the world's busiest airport, along with a number
of international vacation destinations such as Aruba, Puerto Rico, and the Bahamas. In all, 21 new cities were added, 7 of
which were in the international market, positioning Southwest to expand in Central and South America. The result was a
significant increase in profitability for Southwest, growing from $178 million in 2011 to $1.1 billion in 2014. 26
Southwest has grown organically, acquiring only two other smaller carriers-Morris Air and Muse Air-in the 1980s.
This has made it easier to maintain its quirky identity. On the other hand, AirTran was created from several airlines, including the former ValuJet, about 15 years ago. It is known mostly as a low-cost, on-time carrier. The Company Culture page
on AirTran's Web site prior to the merger claimed that "loyal crew members keep AirTran airways customers soaring" and
who have a "timely and accommodating demeanor." AirTran's values included a total commitment to safety, technical excellence, continuous learning, fun, and profit.27
Southwest, headquartered at Love Field in Dallas, uses the ticker symbol LUY and uses all kinds of ways to show that
"Luv" to their customers. Southwest has cultivated a corporate culture that focuses on employees and customers having a
good time while flying. The company carefully selects its employees using interviews that involve creative activities and
even asking the recruits to wear tutus. Southwest's training program with karaoke and amusing challenges is designed
to socialize the new recruits into the airline's fun-loving culture. According to its Web site, its cultural values include
"A Warrior Spirit, A Servant's Heart, A Fun-Luving Attitude." 28
Wharton management professor Peter Cappelli commented just after the merger was announced in 2010 that "Southwest's whole business model is built on a particular approach to managing employees. It's a big bet they are making that
they can swallow AirTran .... This is a very different approach, taking thousands of AirTran employees, dumping them
into the system and hoping it works. It's a pretty risky move." Cappelli adds that airline mergers are always difficult because
integration has to take place while a carrier continues to carry out complex operations. Thousands of employees can't easily
be put through an orientation program in the merger's short time frame, and the information systems supporting the complex
operations of two airlines can't be easily changed. 29
03
Adapted from "Mary Kay, Inc.," Fortune (Microsoft supplement, November 8. 1999).
An earlier version of this case was written by Parul Acharya.
" "What Has AirTran Done for Southwest Airlines," Forbes (December 11, 2014), http://www.forbes.com/sites/greatspeculations/2014/12/l l/what-hasairtran-done-for-southwest-airlines/ (accessed April 27, 2015).
" Charisse Jones, "Southwest Scores Record Profit-Again" USA Today (January 22, 2015), http://www.usatoday.com/story/money/2015/0l/22/
southwest-sees-record-profits-in-2014/22166225/ (accessed August 20, 2015).
27
www.airtran.com (accessed April 2011).
28
Southwest Airlines, http://www.southwest.com/html/about-southwest/careers/culture.html (accessed January 27, 2012).
29
"By Acquiring AirTran, Will Southwest Continue to Spread the LUY?" Knowledge@Wharton (October 13, 2010), http://knowledge.wharton.upenn.
edu/article.cfm?articleid=2614 (accessed August 20, 2015); and B. Snyder, "How the Southwest-AirTran Merger Creates a Labor Problem," CBS
Money (October 5, 20 I 0), http://www.cbsnews.com/830 l -505123 _ 162-43642550/how-the-southwest-airtran-merger-creates-a-labor-problem/ (accessed
April 12, 2012).
24
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CaseStudy
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In November 2011, Southwest Airlines' more than 6,000 pilots and AirTran Airways' 1,700 pilots overwhelmingly
approved a plan to combine the seniority lists of the two carriers with five of six pilots voting in favor. 30 The personnel systems had to be modified to reflect the new seniority and pay systems.
The disparate cultures of Southwest and AirTran also posed problems for the merger of their online reservation systems
and their frequent-flyer programs. Southwest switched from Sabre to Amadeus system to better accommodate merchandising and international flights. AirTran's reservations system vendor was Navitaire. 31 AirTran and Southwest had diametrically
opposed views on distribution through online travel agencies. Southwest usually sold its tickets via telephone or through its
Web site whereas AirTran preferred online reservation systems such as Orbitz and Expedia. 32 It took several years after to
figure out how to blend the two different reservations systems. The Southwest frequent-flyer program was the last system
to be updated to include the top customers of AirTran. In December 2014, the new merged airline was just finishing up the
integration. Will the cultures of Southwest and AirTran come together? People are optimistic, but the real answer lies in the
future.
Discussion Questions
1. Discuss the layers of culture that are evident in this case. Why do you think Southwest has preferred to grow organically
over its history?
2. What are the similarities and dissimilarities between the cultures, values, and beliefs of Southwest and AirTran airlines?
Where would you expect the differences to be most difficult to manage? Why?
3. What problems could arise due to the different perspectives of both airlines toward online reservation systems? What do
you recommend the managers do to solve these problems?
4. What would you recommend managers to do ensure a smooth integration of the information systems given the culture
differences?
4.., • CASE STUDY 3-2
The FBI
The Federal Bureau of Investigation of the U.S. government, the FBI, was forced to scrap its $170 million virtual case file
(VCF) management system. Official reports blamed numerous delays, cost overruns, and incompatible software. But a deeper examination of the cause of this failure uncovered issues of control, culture, and incompatible organizational systems.
Among its many duties, the FBI is charged with the responsibility to fight crime and terrorism. To do so requires a
large number of agents located within the United States and around the world. That means agents must be able to share
information among themselves within the bureau and with other federal, state, and local law enforcement agencies. But
sharing information has never been standard operating procedure for this agency. According to one source, "agents are accustomed to holding information close to their bulletproof vests and scorn the idea of sharing information." This turned out to
be a real problem in an investigation of DarkMarket, an Internet forum that connected buyers and sellers so that they could
exchange stolen information such as bank details and credit card numbers. When both the FBI and Secret Service agents were
investigating each other as criminals, it took their British colleagues, who knew the secrets of both agencies, to avert a crisis.
Enter the FBI's efforts to modernize its infrastructure, codenamed "Trilogy." The efforts included providing agents with
30,000 desktop PCs, high-bandwidth networks to connect FBI locations around the world, and the VCF project to facilitate
sharing of case information worldwide. The FBI Director explained to Congress that VCF would provide "an electronic
means for agents to globally send field notes, documents, pieces of intelligence and other evidence so they could hopefully
act faster on leads." It was designed to replace a paper-intensive process with an electronic, Web-based process. With such
a reasonable goal, why didn't it work?
30
T. Maxon, "Southwest Airlines, AirTran Pilots Overwhelming Approve Plan to Combine Seniority Lists," Aviationblog, Dallas News (November 7,
2011), http://aviationblog.dallasnews.com/archives/mergers-consolidation/ (accessed November 7, 2011); Snyder, "How the Southwest-AirTran Merger
Creates a Labor Problem."
31
D. Schall, "Distribution Questions Loom Following US Approval of Southwest-AirTran Merger," tnooz.com (April, 27, 2011), http://www.tnooz.
com/2011/04/27 /news/distribution-questions-loom-following-us-approval-of-southwest-airtran-merger/ (accessed April 12, 2012).
32
J. Brancatelli, "The Fight Stuff: Why the Airlines Are Fighting Travel Sites," Portfolio.com (January 5, 2011), http://www.portfolio.com/businesstravel/20 l 1/0 l/05/why-legacy-airlines-are-warring-with-expedia-and-orbitz/ (accessed November 7, 20 l l ).
Ill
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Organizational Strategy and Information Systems
The CIO of the FBI offered one explanation. He claimed that the FBI needed to change its culture. "If the Bureau is ever
going to get the high-tech analysis and surveillance tools it needs to ... fight terrorism, we must move from a decentralized
amalgam of 56 field offices ... to a seamlessly integrated global intelligence operation capable of sharing information and
preventing crimes in real-time." He added that the Bureau personnel were also very distrustful of the technology, as well as
others not only in other organizations but also within the FBI.
A former project manager at the FBI further explained, "They work under the idea that everything needs to be kept secret.
But everything doesn't have to be kept secret. To do this right, you have to share information."
The VCF system has been shut down, but the CIO is working on a new approach. He is busy trying to win buy-in from
agents in the field so that the next case management system will work. In addition, he is working to establish a portfolio
management plan that will cover all of the FBI's IT projects, even those begun in decentralized offices. His team has been
designing an enterprise architecture that will lay out standards for a bureauwide information system. The Director of the
FBI has helped too. He reorganized the governance of IT, taking its budget control away from the districts and giving total
IT budget authority to the CIO.
The FBI is building a new case management system called Sentinel in four phases. The first two phases have been deployed and, according to the Federal IT dashboard, the project is on schedule and on budget. The new system, according to
the CIO, will include workflow, document management, record management, audit trails, access control, and single sign-on.
It will provide enhanced information sharing, search, and analysis capabilities to FBI agents and facilitate information
sharing with members of the law enforcement and intelligence communities. To manage the expectations of the agents, the
CIO plans to communicate often and significantly increase the training program for the new system. The CIO commented,
"We want to automate those things that are the most manually cumbersome for the agents so they can see that technology
can actually enhance their productivity. That is how to change their attitudes."
The FBI also has a billion-dollar Next Generation Identification (NGI) system with 52 million searchable facial images
and 100 million individual fingerprint records as well as millions of palm prints, DNA samples, and iris scans. NGI can scan
mug shots for a match and pick out suspects from a crowd scanned by a security camera or in a photograph on the Internet.
The information can be exchanged with 18,000 law enforcement agencies 24 hours a day, 365 days a year. 33 When combined
with Sentinel, NGI will further enhance the effectiveness of the FBI's antiterror efforts.
Discussion Que~tions
1. What do you think were the real reasons why the VCF system failed?
2. What were the points of alignment and misalignment between the information systems strategy and the FBI
organization?
3. What do you think of the CIO's final comment about how to change attitudes? Do you think it will work? Why or
why not?
4. If you were the CIO, what would you do to help the FBI modernize and make better use of information technology?
Sources: Adapted from Allan Holmes, "Why the G-Men Aren't IT Men" C/0 (June 15, 2005), 42-45; IT Dashboard, "FBI Sentinel," http://
www.itdashboard.gov/investment?buscid=441; Marc Goodman, Future Crimes (Toronto, Canada: Random House, 2015).
" Federal Bureau of Investigation, "FBI Announces Full Operational Capability of the Next Generation Identification System" (September 15, 2014 ),
h tips:// www .fbi .gov/ news/ press rel/ press-releases/fb i-an nounces-f ull -operational -ca pab iii ty-of-the-next -generation-iden ti fication-s ystem (accessed
August 20, 2015).
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