1 Information Systems: the Foundation of E-Business (CIS 108) Organisational Structure & Technology Lecture SIX (21 st February 2005) Amare Michael Desta.

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Information Systems: the Foundation of E-Business (CIS 108)

Organisational Structure & Technology

Lecture SIX (21st February 2005)

Amare Michael Desta

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Aims To explain the concept of organisation

and organisational structure To explain the different types of structure

that exist within organisations To highlight the relationship between

organisational structure and technology To describe the various ways in which the

IT function can be organised

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Organisations A social unit created specifically to

achieve certain goals. These goals are realised through the division of labour and the implementation of rules that make it possible to control performance

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Classification of Organisations Economic – businesses Protective – police, armies, trades

unions Public service – hospitals, local

authorities, schools Leisure – clubs, societies Voluntary – charities, TA Religious - churches

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Organisational Structure “…the pattern of relationships among

positions in the organisation and amongst members of the organisation. Structure makes possible the application of the process of management and creates a framework of order and command through which the activities of the organisation can be planned, organised, directed and controlled.”

(Mullins, 1999, p.520)

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Purpose of Structure Divide up organisational activities and allocate

them to sub units Co-ordinate and control organisational activities

so that the goals of the organisation can be met Facilitate the flow of information within the

organisation, thus reducing uncertainty in decision-making

Co-ordinate the diverse activities within the organisation, thereby integrating the activities of the different individuals, groups and units

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Organisation Charts Organisation charts graphically

depict the organisation’s formal structure, the locations of individuals, jobs, departments, divisions etc within the hierarchy.

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Ways of Organising Tasks By function By product or service By market By process

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Types of Structure

Chief Executive

IT MANUFACTURING FINANCE SALESPERSONNEL

Product A Area YProduct B Product C Area zArea X

Chief Executive

Product A Product B Product C

IT P M F S IT P M F S IT P M F S

AREA X AREA Y AREA Z

IT P M F S IT P M F S IT P M F S

Chief Executive

Function-based

Geographical-based

Product-based

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Matrix Organisation

Chief Executive

Production Marketing Finance Research

Project AManager

Project BManager

Project CManager

Vertical Flows of Functional Authority Hor

izon

tal F

low

s of

Pro

ject

Aut

hori

ty

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Process Based Approach

Production Marketing Sales

Customer

Customer

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By Process A process is a succession of actions that lead to the

attainment of some result A process has an input and an output and consists of a

series of individual tasks through which the input passes to become an output. During the process, value is added to the input to transform it into an output

The process approach to structure looks at the way a new product or service is created, customer order is filled etc. without regard for functional boundaries

The majority of activities a business undertakes are part of non-strategic processes

Some processes are core to the business because of they capabilities they it for competitiveness, e.g. production of goods, alliance management, marketing and branding

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Engineering Firms Designing Producing Selling Delivering After-sales service

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Processes in a Restaurant Chain

Purchase supplies Store food Take orders Cook food Serve food Bill customer Receive payment

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Centralisation v Decentralisation Centralisation

Centralisation describes a state in which all major decisions are taken by one central body. These decisions are implemented by those lower in the organisation and are binding on them.

It is the tightest means of co-ordinating decision-making within the organisation and of ensuring control

Decentralisation Decision-making power is

dispersed throughout the organisation

As organisations expand, particularly geographically, some decentralisation is inevitable to enable the organisation to respond to local problems

May occur naturally through the setting up of subsidiaries, divisions, strategic business units etc

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Flat Organisations

Characteristics• Few levels of authority and

management• Short chain of command• Broad span of control

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Tall Organisations

• Found in larger organisations• Numerous levels of authority

and management• Narrow span of control• Long chain of command• High levels of formality,

specialism and standardisation

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Classical Approach: Fayol

Worker should have only one boss Work should be divided into discrete,

specialised tasks Management should create stable work

groups and offer job security Management should devise plans

centrally and set objectives throughout the organisation so it has unity of direction

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Classical Approach: Max Weber (1864-1920)

Organisation should be governed by rules and regulations defined by officials

Clear division of labour

Appointments based on technical competence

Roles should be clearly defined

High level of specialisation

Authority based on hierarchical division

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Contingency Approach Organisations may share some similar

characteristics but they differ in important ways There is no one right way to manage them The structure of an organisations should reflect

its unique characteristics Structure is influenced by the organisation’s

mission, its external environment, size, technology, demography, labour force characteristics

Decisions about structure rest with senior management but structure is also created by the daily interactions of staff

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Bureaucracy Advantages

Rational form of organisation

Clear rules governing behaviour facilitates consistency in behaviour and high level of predictability

Enables managers to cope with the demands of large-scale enterprise and need for specialisation & division of labour

Disadvantages Inflexible and

resistant to change Encourages

conformity and passivity

Problems with communication

Often slow to react to threats

Stifles innovation and creativity

Can result in red-tape

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Implications for IS Design The way an IS is designed will to some extent be

determined by the structure of the organisation, e.g. in a function based organisation, IS will be designed to meet the specific requirements of the function. Historically, IS have evolved as federations of functional information systems.

There are problems with designing systems around existing structures – the structure may be inappropriate, structures frequently change etc.

When designing systems it is important to try to base IS design on business strategy and objectives since this influences the structure of the organisation and defines the goals of the system

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Implications for IS Design IT can facilitate structural change in organisations by

enabling those in functional areas and in the various operating divisions to communicate and have access to shared information. IT has a crucial role to play in facilitating the shift from tall to flat organisations and function to process-based structures.

Once systems are in place, they can become an obstacle to organisational restructuring and change

Flexibility needs to be built into systems to allow for change

The position of the IS function within the organisation may be influenced by the dominant structural arrangements

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The IS/IT Function In many large organisations, IS is so central to

operational and strategic effectiveness, there is a separate IS/IT department or division

Changes in the use of IT within organisations as well as dissatisfaction with the way central IT/IS departments operate have led many companies to break up their IT/IS departments/divisions and to devolve responsibility for IT/IS to the business areas or to deploy teams of IS/IT professionals to work with business managers in particular areas

In a federated IT/IS structure, a small central IT/IS unit develops strategy for the organisations, sets standards for the organisation, etc but day to day responsibility for IT/IS rests with managers in the business units.

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IS/IT Function: Some of the Options All IS/IT staff work in the same department that serves

the needs of the entire organisation All IS/IT staff work in a central department but are

organised into teams that look after systems in particular areas of the business

The main operating divisions/units have their own IT staff who are controlled by the relevant business manager

IT/IS staff work in the operating divisions/units but there is a central IT/Is unit or ‘think tank’ responsible for devising strategy, overseeing projects, purchasing equipment, maintaining standards etc.

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Summary IS/IT professionals need to understand the structural

characteristics of organisations if they are to design effective systems

There are a variety of ways organisations can group functions, allocate roles and assign decision-making responsibilities. The particular structure that is adopted will be determined by senior management and will be influenced by both external and internal factors.

IS/IT systems can both facilitate and impede change in organisational structure

IS/IT systems should reflect the goals of the organisation and must be amenable to change since both the goals and structure of an organisation are likely to change over time.

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Reading For further understanding, read:

Mintzberg, H. (1975) The Manager’s Job: Folklore and Fact, Harvard Business Review, 53, 4, pp.49-61 as it is available in the library.