New Jersey Institute of Technology (NJIT)
Computer and Information Science Department (CIS)
CIS677: Information System Principles
Professor: Michael Bieber

CIS677 - Notes for Lecture 11 - Professor Bieber

Virtual Organizations; IS & Organizational Structure  

Guest:

Walter D'Costa, Senior Consultant, Spectrum Technology Group (dcostaiyer@snip.net)

 

Organizational Structure & IS

Definition: Organizational Structure

 

 

One theory of organizations states that people inside organizations:

(1) scan the environment for opportunities,

(2) allocate resources so the organization can take advantage of the opportunity, and

(3) structure the organization so it can use its resources more effectively to meet the opportunity (this time or in planning for the next time).

 

In other words, the environment drives the organization's strategy, and the strategy drives the organization's structure.

 

 

Basic Model of Organizational Structure {from Davis & Olsen}

 

4 common dimensions of organizational structure are:

  1. hierarchy of authority for decisions and task relationships
  2. specialization of function and task
  3. formalization of procedures
  4. centralization of authority for decisions

 

1. Hierarchy of Authority for decisions and task relationships

The traditional organizational structure can be viewed as a hierarchy or pyramid of job positions. There is a CEO at the top, then vice presidents of marketing and manufacturing, etc., and then managers who report to them. Each of these jobs has a span of control, i.e., the group of people who report to them.

A "tall hierarchy" has narrow spans of control, i.e., each manager has just a few people reporting to her/him directly.

A "flat hierarchy" has wide spans of control, with few levels and each manager having many people reporting to her/him directly.

 

Role for IS…

 

 

2. Specialization of Function and Task

The traditional organization is organized along functional lines. There will be a separate, specialized manufacturing department; separate, specialized marketing function, separate, specialized research function, etc. The organization then must divide and assign tasks to the different functions.

One approach is to train specialists very broadly so they can perform many activities. The second approach is to train specialists very narrowly in very specific subtasks.

 

Role for IS…

 

 

3. Formalization of Procedures

Formalization is the extent to which rules and procedures exist to guide organizational activities. For example, how bank loan managers should evaluate loan applications. Or for example, which processes analysts should follow in the IS software engineering process.

The more formalized an organization is, the less discretion or choice individuals have in making decisions. The less formalized an organization is, the more discretion individuals have.

 

Role for IS…

 

 

 

4. Centralization of authority for decisions

Centralization refers to the level in the organization where the decision-making occurs. In highly centralized organizations, most decision making occurs at the top of the hierarchy; in decentralized organizations, decision-making authority is delegated much lower in the organizations.

Organizations with a "tall hierarchical" structure tend to be centralized, while organizations with a "flat hierarchy" tend to be decentralized. In a flat hierarchy, managers have too many subordinates to do all the decision making for them.

In formalized organizations, lower-level employees make decisions based on rules and regulations. If an exception occurs, e.g., when a bank loan applicant doesn't fit the rules, then a higher-level manager often decides how to handle the exception.

 

Role for IS…

 

 

Organizational Structure and Informal (Human) Relations

 

 

 

Variations on the Basic Model of Organizational Structure

 

{Slide: Functional vs. Product Organizational Structure}
{Slide: Project Structure}

 

 

 

 

Matrix Organizations

{Slide: Matrix Organization and Lateral Relations}

Matrix organizations work by formalizing lateral relations.

 

Lateral relations are used to resolve conflicts, especially regarding the organization's resources. Lateral relations could be as simple as two managers who know to contact each other if there is a conflict. (e.g., to determine which project a particular employee with certain skills should work on). Lateral relations could also include task forces or teams which form to tackle larger or reoccurring conflicts.

 

 

 

Role for Group DSS & organizational memory…

 

Information Processing and Organizational Structure

 

(Herb Simon's "Information Processing" viewpoint of organizations.)

 

 

Automating the information processing within an organization…

 

 

 

Can the IT cause an organization to change its structure?

 

 

Virtual Organizations

 

 

Virtual Organizations: A principle of management…

 

Virtual Organizing is more a management principal rather than a way of structuring organizations. It however leads to different structural forms, which are mistakenly referred to as virtual organizations. For example, Strategic Alliances are very commonly referred to as Virtual Organizations, but they are really the outcome of using these VO principles. Most corporations don't realize that they are unconsciously using VO principles in arriving at structural forms that give them a market advantage, and rather focus on the organizational arrangement which is the outcome of the management principle called 'switching' which leads to the form.

 

Means:

 

Ends:

 

Regarding Federal Express' efforts in outsourcing its pickup and delivery services, and to concentrate on becoming an information systems company , Bob S2. asks: (41:57)
If a company like Federal Express actually does do this, and their specialty is having good fast courteous pick-up, and they outsource that --- and almost every time you outsource you lose a certain level of control --- how will they ensure that they're going to keep their core business or their customer happy?

 

 

 

Switching, Switching Costs and the Allocation Function

 

 

Scott M. (a Federal Express employee) says regarding Federal Express contracting out its pickup and delivery functions: (43:17)
Federal Express will never contract out the delivery and pick up of their Express service, and that is what you were referring to. What we have done is now we've formed the FDX Corporation, which is the information company you are talking about…

Federal Express will be the contractor to FDX.

We now have a mother company called FDX, and Federal Express is just part of FDX.

It's conceivable, but like you said, I mean it's a great example that you bring up, but it doesn't really apply to Federal Express…

 

Scott M. continues (45:24)
I wanted to add that that is one thing that FE built themselves on. Years ago Fred Smith realized that it's an information company, and that's what he's built the company on. We're not just a package delivery company, we're an information delivery company.

 

Moshowitz: Virtual Organizations result from standardization

 

 

Example: Paper Industry

 

 

 

 

 

 

 

 

Regarding the choices of what to produce in paper mills, Michael R. asks (55:10):
This is just a management science problem though… How does the virtual organization play into this?

 

 

MB asks regarding virtual organizations: (56:30)
How easy is it to get an organization to do this, to become a virtual organization?

 

 

MB asks in summary: (57:27)
A lot of this just sounds natural and logical, although I'm sure you will find people who are resistant. Do you think that it will catch on more and more? If we look maybe 20 years from now, that most organizations and enterprises will be virtual organizations?

 

 

MB continues (58:36)
And this will happen not only in industry, but in governmental and non-profit organizations too?

 


last updated: 3/30/2000

This page: http://www.cis.njit.edu/~bieber/CIS677/lecture-notes/lecture11.html