Sultan Qaboos University

College of Economics and Political Science

Department of Information systems
INFS 4461
Strategic IS
Dr. Rafi Ashrafi FBCS PMP CEng

Chapter 3
Organizational Strategy and IT

Keri Pearlson, Carol Saunders, and Dennis Galletta

© Copyright 2020
Managing and Using Information Systems:
John Wiley & Sons, Inc.
A Strategic Approach – Seventh Edition
 Introduction
This chapter focuses on linking IS Strategy with the
three components of organizational strategy:

• Organizational design (Decision rights, formal

reporting relationships and structure, informal
structures)

• Management control systems (planning, data

collection, performance measurement, evaluation,
incentives, and rewards)

• Internal Culture
© 2020 John Wiley & Sons, Inc. 2
 Cognizant
• Two major IT software and consulting firms of India
• Cognizant: 15 billion revenues provide IS outsourcing services
• Initially, India centered structure located mangers of each group in India along with
software engineers
• Employees at customer locations worldwide reported to the managers
• As the company grew and its focus shifted from simple cost-based solutions to complex,
relationship-based solutions, this structure has to be changed to be more customer
oriented.
• Under the redesigned reporting structure, managers were moved to customer locations,
but software engineers remained in India.
• This changed improved customer relations but brought new headache at the technical
side.
• Under the new arrangement, managers had to spend their days with customers and
ended up spending their night with software engineers
• This created tremendous strain on managers
• Neither structure worked, and neither structure was aligned with the business strategy
and the IS Strategy.
• To overcome this problem, Cognizant decided to adopt Matrix structure.
© 2020 John Wiley & Sons, Inc. 3
 Tata
• Tata Consulting Services (TCS) has $19 billion revenues in 2018.
• Also found the growth led to problems
• TCS needs structure that allows TCS to build an organization to
capture new growth opportunities
• They modified the structure and added anew layer of leaders to
oversee the businesses and free up their time to work on strategy.
(See Fig.)
• The new layer focuses on customers and aims to increase revenue
growth.

© 2020 John Wiley & Sons, Inc. 4

 Comparing Cognizant and Tata
• What is similar about the two firms?
• Why are they organized differently?

Cognizant Tata
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 Figure 3.3 Organizational design variables.
Variable Description
Organizational variables
Decision rights Authority to initiate, approve, implement, and control decisions
necessary to plan and run the business
Business processes Ordered tasks to complete key business objectives
Formal reporting Structure set up to coordinate organizational units
relationships
Informal networks Mechanism, such as ad hoc groups, to coordinate and
transfer information outside formal reporting relationships.
Control variables
Data Facts collected, stored, and used by the organization
Planning Processes by which future direction is established,
communicated, and implemented
Performance measurement Measures to assess successful execution of plans then using
and evaluation the measures to improve the quality of work
Incentives Monetary and non-monetary devices to motivate behavior

Cultural variables
Values Implicit and explicit beliefs that underlie decisions and actions

Locus The span of culture: local, national, regional, etc.

© 2020 John Wiley & Sons, Inc. 6

© 2020 John Wiley Sons, Inc.

 Organizational Design
• Different designs accomplish different goals
• Decision rights will differ according to the design
• Different reporting relationships and organizational
structure will allocate decision rights in different
ways
• Four major organizational designs are:
• Hierarchical
• Flat
• Matrix
• Networked

© 2020 John Wiley & Sons, Inc. 7

Hierarchical Organizational Structure
• Orders go down and information goes up
• IT provides communication/memory in both
directions
• Also known as a bureaucracy
• First observed by Max Weber in the Catholic Church
and German army and applied to early factories and
offices
• Features include
• Unity of command (one boss for each person)
• Span of control (measures the number of subordinates for
each boss)
• Clear lines of authority and reporting duties
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 Flat Organizational Structure
• Also known as horizontal organizational structure
• Features:
• Decentralized decision making
• Less well-defined chain of command
• Less clear decision rights
• Few middle managers
• IT glues together the organization
• IT allows rapid response; supports internal communications

© 2020 John Wiley & Sons, Inc. 9

 Matrix Organization
• Assigns employees to two or more supervisors to
integrate multiple dimensions of a firm
• Features:
• Work is organized into small work teams
• Allows organizations to concentrate on functions and purpose
• IT reduces operating complexity and expense by allowing
information to be easily shared among different managerial
functions
• Shortcomings:
• Sometimes frustrating and confusing
• Require frequent meetings
• Information overload

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 Networked Organizational Structure
• Feel flat yet hierarchical
• Work well in dynamic, unstable environments
• Features:
• Highly decentralized decision rights
• Information systems replace hierarchical controls
• Formal and informal communication networks connect
everyone
• Promote creativity and flexibility while maintaining
operational process control
• Extensive use of communication technologies and
networks:
• Allows coordination across functional boundaries
• Enables quick and more accurate decision making
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The networked
organization

© 2020 John Wiley & Sons, Inc. 12

 Comparison of Organizational Structures
Hierarchical Flat Matrix Networked
Description Bureaucratic w/ Decision-making Workers assigned Formal/informal
defined levels of pushed down to to 2 or more communication
management lowest level supervisors networks that
connect all
Division of labor Informal roles; Dual reporting Known for flexibility
Characteristics
specialization, often small, based on and adaptability
unity of command young function/purpose
organizations

Type of
Stable Dynamic Dynamic
Environment
Certain Dynamic Uncertain Uncertain
Best Supported
Uncertain
Basis of Primary functional Functions and Networks
Structuring Very loose purpose

Power Structure Centralized Distributed Distributed

Decentralized
Key Tech. Mainframe, Networks Intranets and
Supporting this centralized data PCs Internet
and processing

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Emerging Organizational Forms
• Hybrid structure (differs throughout the
organization)
• New forms are beginning to emerge:
• Adaptive Organization
• Zero-Time Organization
• Elastic Enterprise
• Heterarchies
• What is common among those?
• Flexible, agile, responsive configurations over time
• React to changing needs
• Use of IT and networks to enable these
configurations
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 Adaptive Organizations
• Adaptive organization: is an organization or a company that
is able to successfully adapt to the rapid and unexpected
changes that occur in its environment.
• Such businesses are flexible, able to develop fast, and tend
to entrust more powers (in terms of making decisions) to the
employees. In order for a business to become an adaptive
organization, its employees and internal departments are
supposed to collaborate efficiently and effectively.
• Moreover, the employees are expected to be able to
network with the outside parties in order to gain relevant
and useful information and to receive some helpful insights
and perspectives while doing so.

© 2020 John Wiley & Sons, Inc. 15

 Zero time and Elastic
organizations
• The zero time organization is “an organization designed around responding
instantly to customers, employees, suppliers, and other stakeholders demands”
or “instate customerization”.
• An example of a control system in managing the zero time organization would be
customer service online chat.

• Elastic enterprises are a new class of enterprise that exhibit a level of strategic,

economic, and structural flexibility not previously seen in large scale enterprises.
As a result, elastic enterprises display remarkable competitive agility and growth.
• Elastic enterprises more flexible, could easily adopt new business models, and
could grow faster and with less operational friction than the traditional industrial
organizations that were the model of business organization for over 100 years. At
the time, elastic enterprises were still a novelty. But they have enabled
companies like Amazon, Apple, Deere, GE, Google, Tesla and entrepreneurial
startups to transform industries and the competitive landscape.

© 2020 John Wiley & Sons, Inc. 16

 Heterarchy
• Heterarchy, form of management or rule in which
any unit can govern or be governed by others,
depending on circumstances, and, hence, no one
unit dominates the rest.
• Authority within a heterarchy is distributed.
• A heterarchy possesses a flexible structure made up
of interdependent units, and the relationships
between those units are characterized by multiple
intricate linkages that create circular paths rather
than hierarchical ones. 

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 New Options
• Social networks – used for:
• Finding experts
• Getting to know colleagues
• Seeing who has relevant experience for projects
across functions and geography
• ESNS:
• Enterprise social networking site
• A social network in an organization, for business use
• Not for loafing at work!

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 INFORMATION
TECHNOLOGY AND
MANAGEMENT CONTROL
SYSTEMS

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 Management Control
• IS profoundly affect control
• People & processes are monitored in ways that were not
possible only a decade ago.
• IS play important roles in management control processes
• Data collection
• Evaluation
• Communication
• TMC: Technology-mediated control
• Used by UPS and Uber
• IS play important roles in planning
• Can provide the necessary data
• Can evaluate scenarios
• Can provide analysis and simulation tools instrumental to a strategic plan

© 2020 John Wiley & Sons, Inc. 20

 IS and Culture
• Culture is a shared set of values and beliefs”
• It may be held by a group, organization, profession,
industry, and/or nation.
• AKA “collective programming of the mind”
• Culture has:
• Observable artifacts
• Espoused values
• Assumptions

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 Data and Information Systems
• IS can streamline data collection through monitoring
• IS can provide analysis tools for that data
• Types of data include
• Keystrokes
• How long each task takes
• Who is contacted during the task
• Specific data passing through the process
• Large data stores can be created
• Behavioral issues can result
• Stress from monitoring, especially if it seems not to fit the task
• Deliberate delaying, distorting or falsifying collected data
• Employees should know what is collected and how it is used
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Performance Measurement, Evaluation, and IS

• Analytics tools have proliferated, perhaps leading to information

overload
• Often it is less threatening/more welcomed to provide feedback
for performance improvement than for rewards/compensation
• Incentives and goals need to be carefully administered
• Reward for short call duration? You’ll get short calls and perhaps unhappy
customers
• Reward for customer satisfaction? You’ll get happier customers but
perhaps calls that are significantly longer than necessary
• Be careful with incentives; you will get what you reward
• IS can easily apply complex formulas and track performance
• Multi-dimensional goals (e.g., 50% on efficiency + 50% on satisfaction)
• If most work is done on teams, team performance needs to be added

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 Impacts of Culture on IT
• Culture is a “collective programming of the
mind” involving “shared values and beliefs”
• Culture can:
• Color the development of IS
• Affect technology adoption/diffusion
• Influence system use and outcomes
• Impact management practices

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 Layers of Culture
1. Observable artifacts – most visible layer
• For example, dress, acronyms, awards, stories, rituals
2. Espoused values: explicitly stated preferred values
• For example: “we have a good work-life balance”
3. Enacted values: reflected in actual behavior,
sometimes inconsistent with espoused values
• For example “we have a good work-life balance” but
require 12-hour work days plus weekends
4. Assumptions – deepest layer – unobservable;
taken for granted
• For example, “respect the customer”
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 Levels of Culture and IT
• In business, culture is often applied at the following
levels:
• Nations
• Organizations
• Work groups
• Sometimes IS developers and clients can have a
clash in culture
• Clients might want fast turnaround and convenience
• Developers might want slower, more deliberate approach,
for stability and control

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Levels of Culture

From Leidner and Kayworth, 2006

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 NATIONAL CULTURE:
Often-used Cultural Dimensions (Integrating
work by Hofstede and GLOBE)
• Uncertainty avoidance
• Power distance
• Individualism/collectivism
• Masculinity/Femininity (egalitarianism/assertiveness)
• Confucian Dynamism (Future orientation)
• Indulgence/restraint

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 How are IT and Culture Linked?
• IT supports cross-cultural communication
• People need to be aware of cultural differences
when communicating
• This awareness will lead to:
• Better listening and understanding (correctly framed
messages)
• Searching for a solution that will be accepted widely
• Reduced conflict

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 Supplement to the Text:
Application to IS Training
Investments
• Peretz & Rosenblatt found that cultural dimensions impact
training.
• Higher training investments were found by firms in countries with:
• Low power distance (Germanic countries, Anglo-American countries,
Netherlands, Israel)
• Future orientation (some Asian countries)
• High uncertainty avoidance (some Hispanic countries, Japan, South Korea,
Israel, Russia)
• Lower investments were found in firms from countries with
• High power distance (some Asian, Latin American, and Middle Eastern
countries)
• Why? Perhaps to maintain power differences
• Short-term orientation (some Anglo-American countries)
• Low uncertainty avoidance (the UK, Ireland, Hong Kong, and Singapore)

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