2. 1 Information Systems: the Foundation of E-Business (CIS 108) Organisational Structure & Technology Lecture SIX (21 st February 2005) Amare Michael Desta

3. 2 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

4. 3 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

5. 4 Classification of Organisations Economic – businesses Protective – police, armies, trades unions Public service – hospitals, local authorities, schools Leisure – clubs, societies Voluntary – charities, TA Religious - churches

6. 5 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)

7. 6 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

8. 7 Organisation Charts Organisation charts graphically depict the organisations formal structure, the locations of individuals, jobs, departments, divisions etc within the hierarchy.

9. 8 Ways of Organising Tasks By function By product or service By market By process

10. 9 Types of Structure Chief Executive ITMANUFACTURINGFINANCESALESPERSONNEL Product AArea YProduct BProduct CArea zArea X Chief Executive Product AProduct BProduct C IT P M F S PMF S P M F S AREA XAREA YAREA Z IT P M F S PMF S P M F S Chief Executive Function-based Geographical-based Product-based

11. 10 Matrix Organisation Chief ExecutiveProductionMarketingFinanceResearch Project A Manager Project B Manager Project C Manager Vertical Flows of Functional Authority Horizontal Flows of Project Authority

12. 11 Process Based Approach P roduction MarketingSales Customer

13. 12 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

14. 13 Engineering Firms Designing Producing Selling Delivering After-sales service

15. 14 Processes in a Restaurant Chain Purchase supplies Store food Take orders Cook food Serve food Bill customer Receive payment

16. 15 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

17. 16 Flat Organisations Characteristics Few levels of authority and management Short chain of command Broad span of control

18. 17 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

19. 18 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

20. 19 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

21. 20 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 organisations 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

22. 21 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

23. 22 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

24. 23 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

25. 24 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.

26. 25 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.

27. 26 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.

28. 27 Reading For further understanding, read: Mintzberg, H. (1975) The Managers Job: Folklore and Fact, Harvard Business Review, 53, 4, pp.49-61 as it is available in the library.