3

ORGANIZATIONAL STRATEGY AND INFORMATION SYSTEMS

Started in 1994, Cognizant Technology Solutions grew fast to become a $1.45 billion revenue company providing IS outsourcing services. However, growing at such a break-neck speed, it had to reinventits organization structure many times to make sure that it facilitated the flow of information which was supported by the development of IS and the delivery of IS services. Initially, its India-centric structure located the 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 model had to be changed to be more customer-oriented. Under the redesigned reporting structure, the managers were moved to customer locations, while software engineers remained in India. This change improved customer relations but brought in 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 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 groups were working and performing well. Upon an extensive analysis of those groups, the company decided to adopt a matrix structure of co-management throughout the company. In this matrix structure, each project has two managers equally responsible for the project. 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, demonstrated in Figure 3.1, enables Cognizant to “establish extremely close partnerships that foster continuous operational improvements and better bottom-line results for clients.” That is, the new matrix structure makes it possible to build IS that the customers wanted.

FIGURE 3.1 Example of possible cognizant matrix structure.

Source: Adapted from “For Cognizant, Two's Company,” BusinessWeek (January 17, 2008), http://www.cognizant.com/RecentHighlights/Corporate_Overview.pdf (accessed on December 17, 2011).

During the same time period in 2008, the largest outsourcing company and software exporter in India, Tata Consultancy Services (TCS), chose a different organization structure designed to focus on customers and boost revenue growth (see Figure 3.2), “As we scale up over 100,000 employees, TCS needs a structure that allows us to build a nimble organization to capture new growth opportunities,” said then TCS CEO and Managing Director S. Ramadorai.¹ That structure, which was modified in 2011 by the new TCS CEO N. Chandrasekaran, adds a new layer of leaders to oversee the businesses and free up his time to work on strategy.²

FIGURE 3.2 Tata Consultancy Services.

Source: “TCS plans new organizational structure,” The Financial Express (February 12, 2008), http://www.financialexpress.com/printer/news/272100/ (accessed on December 19, 2011).

Both Cognizant and TCS are large Indian outsourcing companies that found they needed to reorganize to respond to problems resulting from growth. 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 correspondingly complex matrix structure. Its focus is on the delivery to its customers of information systems that reflect refined technical solutions to their problems. Its organization structure both improves customer responsiveness and necessary information flows. It focuses on system development and delivery and seeks to address a problem that Cognizant experienced in buliding 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 later major unit indicate the strategic directions TCS wants to take. The organization 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 the IS that it builds and the IS services that it provides.

The point is that different organizational structures reflect different organizational strategies that are used by organizations to implement their business strategies and accomplish organizational goals. These organizational strategies should be in agreement 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 IS, maximizing efficiency and productivity.

FIGURE 3.3 Organizational design variables.

Source: James I. Cash, Robert G. Eccles, Nitin Nohria, and Richard L. Nolan, Building the Information Age Organization (Homewood, IL: Richard D. Irwin, 1994).

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, such as the business diamond that identifies four primary components of an organization: tasks, structures (or organizational design), people (and their culture), and information/control. Figure 3.3 summarizes complementary design variables from the managerial levers framework. 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 organizational design, management control systems and organizational culture to make the organization effective by achieving the organization's 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 the ways in which IS impacts 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 it with a discussion of new approaches to work and organizational processes.

INFORMATION SYSTEMS AND ORGANIZATIONAL DESIGN

This section examines the first type of managerial lever–organizational. It focuses on how IS may be reflected in the design of an organization's physical structure. Ideally an organization structure is designed to facilitate the communication and work processes necessary for it to accomplish the organization's goals. The organization structures of Cognizant and TCS, while very different, reflect and support the goals of each company. This section expands the discussion of organization structures by describing decision rights that underlie formal structures, formal reporting relationships, and informal networks. Oranizational processes are another important organizational variable that are studied 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 the decision right for the decision. But this may not happen, especially in organization designs where senior leaders make most decisions. Much of the discussion of IT governance and accountability in Chapter 8 is based upon who has the decision right 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 right for the decision. Organizational design is all about making sure that decision rights are properly allocated—and reflected in the structure of formal reporting relationships. IS support decision rights by making it easier to receive information needed to make the decision by the person holding the decision right and to transmit information from the decision maker to the people who will implement the decision. 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 deliver the wrong information to the person who holds the decision rights, or if the right information isn't delivered to the the person with the decision rights, poor decision making is bound to occur.

Consider the case of Zara from the last chapter. Each of its 1,000 stores orders clothes in the same way, using the same digital form, using the same type of handheld devices, following a rigid weekly timetable for ordering. Most other large retailers use forecasting and inventory control models to determine what clothes should be sent to the stores. That is, the ordering decisions are made at headquarters. However, with Zara, the decision rights for ordering have been moved to the Zara store managers. By giving them the decision rights for ordering, Zara store managers can place orders that reflect the tastes and preferences of customers in their localized areas. Using handheld devices that are linked directly to the company's design rooms in Spain, store managers can make daily reports with information what the customers want. However, the store managers do not have decision rights for order fulfullment because they have no way of knowing the consolidated demand of stores in their area. The decision rights for order fulfillment lay with the commercial team in headquarters, since it is the team that knows about overall demand, overall supply, and store performance in their assigned area. The information from the commercial team then flows directly to the designers and production people to respond quickly to customer preferences, and in so doing offers Zara a distinct strategic advantage over its competitors because of its designation of decision rights and its use of IS to make sure those who make the decisions have the information necessary to make the best decision.³

Formal Reporting Relationships and Organization Structures

Organization structure is the way of designing an organization so that decision rights are correctly allocated. The structure of reporting relationships typically reflects the flow of communication and decision making throughout the organization. Traditional organization structures are hierarchical, flat, or matrix. The networked structure is a newer organizational form. A comparison of these four types of organization structures may be found in Figure 3.4.

Hierarchical Organization Structure

As business organizations entered the twentieth century, they found themselves growing and needing to devise systems for processing and storing information. A new class of worker—the clerical worker—flourished. From 1870 to 1920 alone, the number of clerical workers mushroomed from 74,200 to more than a quarter of a million.⁴

FIGURE 3.4 Comparison of organizational structures.

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 organization structure.

Hierarchical organization structure is an organizational form based on the concepts of division of labor, specialization, spans 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. Spans of control indicates the number of direct reports. The new TCS CEO, N. Chandrasekaran, revised the organization 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, who in turn has a supervisor, and so on. A number of rules are established to handle the routine work performed by employees of the organization. When in doubt about how to complete a task, workers turn to rules. If a rule doesn't exist to handle the situation, workers turn to 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 where 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 along the lines of the hierarchy and to support the information needs of managers throughout the organization. IS convey the decisions of top managers downward and provide a hierarchy of reports to support organizational operations. Data from the operations is 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 higher level. The data is 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.

Flat Organization Structure

In contrast to the hierarchical structure, the flat, or horizontal, organization structure has less well-defined chain of command. You often don't see an actual organization chart for a flat organization because the relationships are so fluid and the jobs are so ill-defined. That is, drawing an organization chart for a flat organization is like trying to tie a ribbon around a puddle. If you do see an organization chart, you probably won't see many middle managers in it. In flat organizations, everyone does whatever needs to be done in order to complete business. 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 since 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 gets 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 workers. 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.

Matrix Organization Structure

The third popular form, which Cognizant ultimately adopted, is the matrix organization structure. It typically assigns workers 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 of the managers to whom she reports.

Cognizant probably moved to the matrix structure (see Figure 3.1) from a hierarchical structure based on purpose 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 organization structure carries its own set of weaknesses. Though theoretically each boss has a well-defined area of authority, the employees often find the matrix organization structure frustrating and confusing since they are frequently subjected to dual authority. Consequently working in a matrix organization stucture can be time-consuming since 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 Organization Structure

Made possible by advances in IT, a fourth type of organization structure emerged: the networked organization 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 organization 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 least in theory. The term used is technological leveling, because the technology enables individuals from all parts of the organization to reach all other parts of the organization.

At least portions of Zara's organization structure appear networked. Because it is networked, the store managers can 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 above. It is much more common to see a hybrid structure in which different parts of the organization use different structures depending on their 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 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 and the zero time organization.⁷ Common to these advanced forms is the idea of agile, responsive organizations that can configure their resources and people quickly. These organizations are flexible enough to sense and respond to changing demands. The zero time organization, for example, describes the concept of instant “customerization,” or the ability to respond to customers immediately. It can respond quickly only if it masters five key principles: instant value alignment, instant learning, instant involvement, instant adaptaion, and instant execution. Building in the capability to respond instantly means designing the organization so that each of the key structural elements are 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. Some informal relationships are designed by management. 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 where their input may be helpful. Hewlett Packard's Decision Support and Analytics Servies unit encouraged the development of work-related informal networks when they 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 non-business 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.⁸

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, etc. The employess can make friends with employees in another department when they play together on the company softball team, share the same lunch period in the company cafeteria, or see one another repeatedly at family 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. LinkedIn 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, it also 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 actutally happen.

Management control systems are similar to room thermostats. Thermostats register the desired temperature. A sensing device within the thermostat determines if the temperature in the room is within a specified range of the desired temperature. If the temperature is beyond the desired range, a mechanism is activated to adjust the temperature. For instance, if the thermostat is set at 78 and the temperature in the room is 76, 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 must be taken periodically and if the variance is too great, adjustments must be 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 if they are satisfactorily progressing toward realizing the organization's mission as reflected in its stated goals.
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 anlaysis 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 be used to 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 more time to make 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 in a fashion that they are transformed into information for the strategic decision makers.
• IS can provide scenario and sensitivity analysis through simulation and data analysis.
• Some IS automate 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 Collection and Information Systems

In addition to focusing on organizational-level planning and control, the next three subsections in this section focus on the individual level. 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 (i.e., monitoring), 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. 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. In contrast, a manager of field representatives might also use IS to monitor work, but the use may be more obvious, and, thus, more intrusive. For example, having field sales personnel complete documents detailing their progress adds work for them.

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 workers 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. Often these tasks are avoided, or worse, 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 them 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 perfromed correctly. It can also be used to avoid barriers to employee productivity from “cyberslacking” and “cyberslouching.”⁹ While the intention may seem both ethical and in the best interest of business, 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. To protect their freedom and to gain their acceptance, employees should be informed when they are monitored, and their bonuses or other rewards should be linked to an increase in productivity derived from the monitoring. In summary, 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.

However, prior notice about monitoring may heighten employee stress levels and the control that employers exert over their employees. As employees become aware of monitoring activities, productivity and morale may fall. Also, tracking job performance in terms of discrete, measurable tasks may disconnect workers from the larger business process in which they are involved, giving them less opportunity to broaden their skills and advance in the organization. Breaking down jobs into simple tasks counters an organizational philosophy that seeks to empower individuals to make significant contributions to the company as a whole. While the side effects of monitoring may seem peripheral or trivial, its importance can only increase as technology further intrudes into the workplace and shapes working conditions. Today's managers must be concerned with creating a work atmosphere that is amenable to IS and responsive to employees' needs.

Performance Measurement, Evaluation, and Information Systems

IS make it possible to evaluate actual performance data against reams of standard or historical data, often using models and simulations. Thus, 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 a worker'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 worker 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 welcome.

Using the same information for determining compensation or rewards, however, can be threatening. Suppose the call center manager is evaluating the number and duration of calls service representatives answer on a given day. The manager's goal is to make sure all calls are answered quickly, and he or she communicates that goal to his or her staff. Now think about how the evaluation information is used. If the manager simply provides the workers with information about numbers and duration, then the evaluation is not threatening. Typically, each worker will make his or her own evaluation and respond by improving call numbers and duration. A discussion may even occur in which the service representative describes other important dimensions, such as customer satisfaction and quality. Perhaps the representative takes longer than average on each call because of the attention devoted to the customer. On the other hand, if the manager uses the information about number of calls and duration to rank workers so that top workers are rewarded, then workers may feel threatened by the evaluation and respond accordingly. The representative who is not on the top of the list may shorten calls or deliver less quality, consequently decreasing customer satisfaction. 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, but these metrics are harder to define when work is decentralized and monitored electronically.

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 they were 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 input. IS make it relatively easy to solicit feedback from anyone who has access to the system and report it anonymously. 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 the call center example, tracking metrics, such as “average time per call” and “number of calls answered,” allows the manager to monitor agents' performance. This quantitative data makes comparisons easier, but it cannot account for qualitative variables: for example, agents who spend more time handling calls may be providing better customer service. Agents who know they will be evaluated 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. Agents providing the poorest service could in fact be compensated best if the firm's performance evaluation and compensation strategy is linked only to such metrics. The manager must consider both the metrics and qualitative data in assigning compensation and rewards.

INFORMATION SYSTEMS AND CULTURE

The third managerial lever of organizational strategy is culture. Culture is playing an increasingly important role in information system development and use. Since information systems development and use is complicated by human factors, it is important to consider culture's impact on information systems. 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.¹⁰

It is a “collective programming of the mind” that distinguishes not only societies (or nations) but also industries, professions, and organizations.¹¹ Beliefs are the perceptions that people hold about how things are done in their community, while values reflect the community's aspirations about the way things should be done. Culture is something of a moving target since 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 aren't 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 traditional dress, symbols in art, acronyms, awards, myths and stories told about the group, rituals, and cermonies and so on. 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 behavaior. For example, if an organization says that it believes in a a good work-life balance for its employees, but actually requires them to work ten-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 and important to the group. Assumptions are unobserveable since they reflect organizational values that have become so taken for granted that they guide organizational behavior without any of the group members thinking about them.¹²

Levels of Culture and IT

Culture can vary depending upon which group you are studying. Culture can be found in countries, organizations, or even within organizations. IS development 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 ten minutes thinking about and sharing innovative ideas.¹³

A within-organizational level example of culture is when IS developers have values that differ from the clients in the same organization for whom they are developing systems. Clients may favor computer-based development practices that encourage reusability of components that allow flexibility and fast turnaround. Developers, on the other hand, may prefer a development approach that favors stability and control, but tends to be slower. In another example, engineers and operators showed different ways of resisting to the adoption of certain new technologies.

FIGURE 3.5 Levels of culture.

Source: Adapted from Leidner and Kayworth (2006), p. 372, Figure 1.

Both national and organizational cultures can affect the IT issues and vice versa. Differences in 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. We have shown the relationships in Figure 3.5 and described these impacts below. The model and the discussion of the impact culture on IT issues draws heavily from the work of Leidner and Kayworth.¹⁴

Culture and Information Systems Development

Variation across national cultures may lead to differing perceptions and approches 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 then 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.

Culture and Information Technology Use and Outcomes

Research has shown that differences in culture result in differences in the use and outcomes of IT. For example, email adoption was much slower in Japan than in the United States. Japanese prefer richer forms of communication such as meeting face-toface. The lean email couldn'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. At the organizational level, cultural values are often related to satisfied users, successful IS implementations or knowledge management success.

Culture and Information Technology Management and Strategy

Culture affects planning, governance, and perceptions of service quality at the national and organizational levels. For example, having planning cultures at the top levels of an organization typically signal that strategic systems investment is important.

National Cultural Dimensions and Their Application

Certainly one of the best-known (and prolific) researchers in the area 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. Hofstede¹⁵ originally identified four major dimensions of national culture: power distance, uncertainty avoidance, individiualism-collectivism, and masculinity-feminity. To correct for a possible bias toward Western values, a new dimension, Confusian Work Dynamism, also refered to “short-term vs. long-term orientation,” was later added.¹⁶ Many others have used, built upon, or tried to correct problems related to Hofstede's four dimensions. One notable project is the GLOBE (Global Leadership and Organizational Behavior Effectiveness) research program, which is a team of 150 researchers who have collected data on cultural values and practices and leadship 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.

Even though the world may be becoming “flatter,” cultual differences have not totally disappeared. But some leadership traits are seen as universally acceptable across cultures such as being trustworthy, just and honest; having foresight and planning ahead; being positive, dynamic encrouaging, and motivational; and being communicative and informed.¹⁷

FIGURE 3.6 National cultural dimensions.

^a 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 (2002), 37(1), 3–10; and G. Hofstede and G. J. Hofstede, Dimensions of National Culture, http://www.geerthofstede.nl/culture/dimensions-of-national-cultures.aspx.

^b D. Leidner and T. Kayworth, “A Review of Culture in Information Systems Research: Toward a Theory of Information Technology Culture Conflict,” MIS Quarterly (2006), 30(2), 357–399.

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 this idiosyncrasies. An awareness of the Hofstede or GLOBE dimensions may help 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-cultual communication involves all 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.¹⁸ 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 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, it only provides a starting point, because each person is different. Importantly, without being aware of cultural differences, it is unlikely that IS will be developed or used effectively.

SUMMARY

• Organizational strategy reflects the use of the managerial levers of 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.
• Organization structures can facilitate or inhibit information flows.
• Organizational design should take into account decision rights, organization 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 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 and using IS.

KEY TERMS

assumptions (p. 90)

beliefs (p. 90)

culture (p. 89)

decision rights (p. 78)

enacted values (p. 90)

espoused values (p. 90)

flat organization structure (p. 81)

hierarchical organization structure (p. 80)

matrix organization structure (p. 82)

networked organization structure (p. 82)

observable artifacts (p. 90)

organizational strategy (p. 78)

social network (p. 85)

values (p. 90)

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? Defend your position.
3. Consider the brief description of the zero time organization. What is an example of a control system that would be critical to manage for success in the zero time organization? 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. Recently the IBCs were offered support through an e-commerce system with two major components: mymk.com and Mary 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.¹⁹
   1. How would the organizational strategy need to change to respond to Mary Kay's new business strategy?
   2. What changes would you suggest Mary Kay, Inc. managers make in their management systems 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 3-1²⁰
THE MERGER OF AIRTRAN BY SOUTHWEST AIRLINES: WILL THE ORGANIZATIONAL CULTURES MERGE?

Southwest's merger with AirTran, valued at over US$3 billion, makes Southwest the fourth largest American carrier. 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, it 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.

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, a little over 10 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” who have a “timely and accommodating demeanor.” AirTran's values included a total commitment to safety, technical excellence, continuous learning, fun and profit.²¹

Southwest, headquartered at Love Field in Dallas, uses the ticker symbol LUV and they use all kinds of ways to show that the “Luv” their customers. Southwest has cultivated a corporate culture that focuses on employees and customers having a good time while flying. They carefully select their employees using interviews that involve creative activities and or even asking the recruits to wear tutus. Their training program with karaoke and amusing challenges is designed to socialize the new recruits into Southwest's fun-loving culture. According to its Web site, its cultural values are “A Warrior Spirit, A Servant's Heart, A Fun-Luving Attitude.”²²

“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,” says Peter Capelli, a Wharton management professor in 2010. 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.²³

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 out of six pilots voting in favor.²⁴ The personnel systems have to be modified to reflect the new seniority and pay systems.

The disparate cultures of Southwest and AirTran are also posing problems for the merger of their online reservation systems. Southwest currently is planning to switch from Sabre or Amadeus to better accommodate merchandising and international flights. AirTran's reservations system vendor is Navitaire.²⁵ AirTran and Southwest have diametrically opposed views on distribution through online travel agencies. Southwest usually sells its tickets via telephone or through its Web site whereas AirTran prefers online reservation systems such as Orbitz and Expedia.²⁶ It will likely take several years after to figure out how to blend the two different reservations systems. 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.
2. What are the similarities and dissimilarities between the cultures, values and beliefs of Southwest and AirTran airlines?
3. What problems could arise due to the different perspectives of both airlines towards online reservation systems? What do you recommend the managers do to solve these problems?
4. What would you recommend managers to do insure a smooth integration of the information systems, given the culture differences?

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 Unites 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?

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 they 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 IT 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 also 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 cumbersome for the agents so they can see that technology can actually enhance their productivity. That is how to change their attitudes.”

Discussion Questions

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,” CIO Magazine (June 15, 2005), 42–45; and Federal IT dashboard: FBI Sentinnel, http://www.itdashboard.gov/investment?buscid=441.