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SOCI110 Module 7 - INFORMATION & CONTROL
Note on Readings
Readings for this module consist of Daft 7e Chapter
7 and pp. 293-301 in Chapter 8.
0. OBJECTIVES
In this module you will learn:
-
the evolution in the use of Information Technology
(IT) at different levels of management
-
new strategic uses of IT, including improvements
in the low-cost leadership strategy and differentiaiton strategy, and e-commerce
-
implications of IT in ushering new organization
designs (such as the dynamic network structure), and affecting interorganizational
relationships and the design of existing organizations in specific directions
(smaller size, greater decentralization, greater employee participation,
etc.)
-
the basic model of cybernetic (feedback) control
-
the 3 major control approaches (market, bureaucratic,
and clan) and the contingency model for their use
-
the 3 major supervisory control approaches (output,
behavior, input) and the contingency model for their use
1. INFORMATION & INFORMATION TECHNOLOGY
1. Information Technology Evolution &
Organizational Hierarchy
Computer-based information technology (IT) has
evolved from low-level management uses (well-defined, programmed problems
about operations) to top-level management uses (more uncertain, ambiguous
issues related to nonprogrammed events, such as planning and strategic
decisions).
Lower levels in the hierarchy typically deal
with more analyzable problems, higher levels of management deal with more
unanalyzable problems and require richer information.
Operations & Business Resources Applications
(Levels 1 & 2)
-
TSP (Transaction Processing System) keeps
track of day-to-day transactions
-
Data Warehousing combines info from TSP
in huge databases
-
Data Mining uses statistical software to
look for patterns in the databases (SAS Institute is prominent developer
of this software)
-
MIS (Management Information System) supports
decision-making by managers
-
of which IRS (Information Reporting System)
provides data for mid-level management decisions (e.g., scheduling)
-
of which EIS (Executive Information System)
helps higher-level management analyze data to make decisions
-
DSS (Decision Support System) used at all
levels of management. EX: Wal-Mart uses DSS to find items often purchased
together so they can be promoted together
Higher Level Uses of Informnation Technology (Level 3)
-
Internal Uses: Networking, Intranet, ERP (Enterprise
Resource Planning)
-
External Uses: Extranets, e-commerce, dynamic network
structure (see below)
Minicase: Turner Industries Ltd.
(Daft p. 245). This construction company specializing in huge industrial
projects is highly successful thanks to its sophisticated IT system.
Their use of specialized software for cost estimates, scheduling, etc.,
has lead them to achieve high levels of efficiency, accuracy, and customer
satisfaction.
2. Strategic Uses of Information Technology
Information technology can be used to enhance both the low-cost leadership
strategy and the differentiation strategy.
Strategic benefits from information technology (cf. Daft
E7.2 p. 246)
|
Low-cost Leadership Strategy
|
Differentiation Strategy
|
| Operational efficiency |
Lock in customers
EX: American Hospital Supply Corp. |
| Interdepartmental coordination |
Improved customer service |
Rapid resupply
EX: EDI (Electronic Data Interchange) with supliers. |
Product development, market niches
EX: Nike |
Minicase: Nike Inc. (Daft p. 249) Nike uses its GPIN
(Global Product Information Network) to speed up product development by
making information accessible on new products being developed in all Nike
offices on several continents.
An important strategic use of information technology is e-commerce.
3. Implications of IT for Organization Design
Dynamic Network Structure
IT has made possible the dynamic network structure,
in which the organization is reduced to a small headquarters organization
that subcontracts most major functions to separate companies.
Minicase: Monorail (Daft p.
252): The comany sells PCs using a network structure. The core
company concentrates on design and marketing. They subcontract for
assembly, shipping, invoicing, billing, providing technical help to consumers,
etc.
New Interorganizational Relationships
IT has induced a profound changes in interorganizational
relationships involving both customers and suppliers.
General Features of IT Impact on Organization
Design
IT has induced the following trends in organization
design:
-
smaller organizations - because of easier outsourcing,
reduced need for physical local presence
-
decentralized organization structure - layers
of management can be removed
-
improved internal & external coordination
-
more professional staff & departments - needed
to maintain IT systems
-
greater employee participation & autonomy
4. Knowledge Management
[Section under construction.]
2. CONTROL
Note: see Daft pp. 293-301 in Chapter 8
1. Basic Cybernetic Control Model
Most types of operational (short-term) control
in an organization are elaborations of the basic cybernetic control
model (aka feedback control model).
2. Major Control Approaches (from the work
of William Ouchi)
The 3 major control approaches are market control,
bureaucratic control, and clan control.
(1) MARKET CONTROL
Market control is based on the use of price competition
to evaluate output of whole organization or subunits of the organization.
EX:
-
to control individual department stores that are
part of a chain each store is considered a "profit center"; store profits
are used as a measure of performance
-
outsourcing by choosing the lowest bid
Market control requires that:
-
output can be priced in monetary terms
-
competition exists
Therefore, market control is not appropriate for
functional departments or not-for-profit organizations.
Minicase: Bakerstown University
(Daft old edition). BU tried to use market control for all schools
and departements, including the Computation Center. This worked well
for most units. But the Computation Center started raising the price
of computing services it charged to other units in the university.
The prices of computing services were so much out of line that bureaucratic
control had to be restored for the Center. Why did market control
fail in the case of the Computation Center?
Minicase: Imperial Oil Limited
(Daft 7e p. 298). Recently the company's R&D department was switched
to market control. It receives a smaller budget from the larger company
and supports itself as an independent profit center through contracts for
applied research and laboratory services both with other units inside the
company and outside customers. Research teams in the company can
also contract for R&D outside the company's R&D department, if
they can get a better deal. This approach has been very successful
in terms of reduced R&D costs and increased productivity.
(2) BUREAUCRATIC CONTROL
Bureaucratic control is the use of written rules,
policies, hierarchy of authority, standardization, etc., to standardize
and control employee behavior
EX: used in not-for-profit organizations (where
market control is often not possible)
Management Control Systems (MCS) are
formalized information procedures used to maintain or alter patterns of
organizational activity as part of bureaucratic control. The 4 MCS
focus on different aspects of the production process.
The 4 MCS can be related to subsystems in the
open system model of organizations:
Minicase: Cypress Semiconductor Corp.
(Daft 6e p. 351). Cypress may be the ultimate bureaucratic nightmare,
but it seems to work! It has a comprehensive computerized management
control system that tracks corporate, departmental, and individual performance.
It is designed to encourage collective thinking and problem solving.
Employees set goals weekly. The performance appraisal system ranks
all employees according to their performance and allocates salary increases
accordingly. Would you like to work there?
Q - List at least 2 of the 4 subsystems of
a management control system (MCS).
Q - Which subsystem of a MCS features rules
and regulations?
(3) CLAN CONTROL
Clan control is based on the use of social-psychological
mechanisms such as organizational culture, shared values, commitment, traditions,
professional standards, etc., to control behavior
EX:
-
organizations or departments faced with high uncertainty
and ambiguity
-
professional norms of CPAs
-
Supreme Court judges
-
the code of honor in the mafia
Clan control is often "invisible" and its importance
may therefore be underestimated.
Minicase: Metallic, Inc.
(Daft 6e pp. 352-353). A new vice president tried to bring the strategic
planning department under control by establishing a strict budget system
for each project. But with the stronger bureaucratic controls both
productivity and satisfaction of the department decreased, and a lot of
conflict broke out between the vice president and the director of the unit.
An outside consultant concluded that bureaucratic control was inappropriate
for this department because of its long time horizon, frequent change,
and high uncertainty. The consultant recommended instead a clan control
system in which behavior is regulated by the shared values and commitment
of the professional employees.
3. Contingency Control Model
The optimal type of control used in an organization
depends on technology, environment, size, and organizational
structure
Q - " ____ control occurs when price competition
is used to evaluate the output and productivity of an organization."
Q - "Clan control relies on hierarchy and authority
for control." (TRUE/FALSE?)
Q - Josefina Nelson is vice president of the
commercial estate division of a large real estate company. Which
type of control is likely to be used predominantly for her division?
Q - The model describing the contingencies
associated with each type of control is called the ____ control model.
4. Balanced Scorecard Approach
See Daft 7e pp. 300-301.
5. Supervisory Control Strategies
Supervisory control focuses on the performance
of individual employees.
There are 3 main types of supervisory control:
-
output control (based on measuring employee
output and productivity; used when output is easily measured) EX:
salesperson, faculty research
-
behavior control (based on personal observation
of employee behavior; used when output is not easily measured) EX:
faculty teaching
-
input control: (based on selection and
training to control skills, abilities, and values of employees; used when
both output and behavior are hard to measure) EX: helping professions
such as psychotherapists
(Note the correspondence with the 3 traditional
approaches to organizational effectiveness.)
Appropriate supervisory control mechanism depends
on measurability of output & programmability of tasks:
Q - What type of supervisory control is based
on personal observation of the employee to see whether s/he follows correct
procedures?
Q - William Roundleather is a supervisor of
15 data processing clerks at Turisk Insurance Co. The computer system
is set up so that he can get figures on the number of keystrokes of each
clerk under his supervision. He can compare keystrokes among the
clerks, and over time. This is an example of what kind of supervisory
control?
Last modified 2 Oct 2001
