Enterprise Organization and IS Flashcards
Impacts of digitizing work in firms
1) Interactivity and routines
2) Flat organizational hierarchies
3) Separation of work and workplace
4) Re-structuring of business processes
5) Increasing organizational flexibility
6) Consequences of IS on organizational structures
Interactivity and routines
1) The individual routines of separate business processes have to be coordinated
2) New technological possibilities, e.g. exponential growth of computing power and transmission, real-time information exchange, inter-firm optimization of business processes have an impact on…
a. Organizational structures
b. Workplaces (activities)
c. Reporting and control mechanisms
d. Work procedures and routines
e. Products and services
- New IS applications require that individual routines and business processes change to achieve high levels of organizational performance
Flat organizational hierarchies & Organizational resistance to change
Consequences of IS:
- More flexible spatial distribution horizontally & vertically
- Higher information availability on lower and higher levels, vertically
- Managers can lead more employees
- Firms release middle management
- Option to giving lower-level employees more decision-making authority
- Post-industrial organizations: flattening because in post-industrial societies, authority increasingly relies on knowledge and competence rather than formal positions
Organizational resistance to change
- IS become bound up in organizational politics because they influence access to a key resource: information
- IS potentially change an organization’s structure, culture, politics and work
- Most common reason for failure of large projects is due to organizational and political resistance to change
Separation of work and workplace & re-structuring of business processes
Computer-supported cooperative work (CSCW):
- application software for remote team work
Business process reengineering (BPR)
- Integration of web-based customer-facing application systems (AS), departments’ AS and specialist AS, introduction of (distributed) team work, re-structuring business processes, introduction of shared working procedures
- Effects: cost reduction, improved customer service, improved quality control
- Example: electronic processing of insurance application forms
What is a virtual team?
What characteristics do employees need in order to work remotely effectively?
What are the manager’s major tasks?
Which suggestions are made for managing virtual teams?
Increasing organizational flexibility
For Small Firms:
• By high performance computers, affordable CAD software and computer-controlled machines such as CNC or 3D printing, the precision, speed and quality of large firms can be achieved
• Direct information availability replaces information retrieval tasks and libraries. Senior mgmt. can retrieve all required information by themselves across distributed sites and office locations.
• Cloud Storage and software as a service (SaaS) allow for scalable usage models and growth
For large Enterprises:
• Through adaptive manufacturing management systems (e.g. mass customization) large factories can produce in small batch sizes at appropriate costs
• Business intelligence/Analytics engines allow to analyze databases to reach real-time business
• Through shared services, information can be distributed easily to teams and individual workplaces to enable problem solution or prevention.
Consequences of IS (technological changes and the internet) on organizational structures
Approaches from economics: - Transaction cost theory - Agency theory Behavioral approaches: - The emergence of virtual enterprises
Approaches from economics:
Transaction Cost Theory
Transaction cost theory: TCT assumes that any activity on a market is linked to transaction cost. Impact of IT on the firm according to transaction cost theory:
a. In past, firms needed to grow to reduce TC. Today, IT potentially reduces the TC for all firm sizes. Internal TC reduction – turnover increase without additional employees. External TC reduction – turnover increase at shrinking firm size
b. Consequences of IT: number of employees is reduced, because external value creation becomes more advantageous. # of employees is also reduced if turnover increases
Approaches from economics:
Agency theory
Agency theory: firms as relationships between principals and agents. Agents are individuals that need to be led and controlled to make sure they represent and act in the principal’s interest and not their own.
- Impact of IT on the firm according to AT:
a. The bigger and more diverse a firm gets, the more their agency costs rise. IT allows for growth with simultaneous shrinking of AC (Agency Costs).
b. Consequences of IT: turnover rises at constant employee numbers, because of better incentives and work performance. Result: Option to reduce number of employees. For small firms, large coordination efforts can be accomplished. Increases in performance and reach.
Classical forms of organizing economic activities:
a. Price coordinated market: purchase contract, countertrade
b. Hybrid forms (e.g. cooperation, enterprise networks): long-term delivery contracts or franchising
c. Hierarchy (firm): functional organization
Hypotheses on changing organization and coordination structures – Economic View, Transaction-Cost Theory
- Move-to-the market hypothesis
- Move-to-the-middle hypothesis
- Move-to-the-hierarchy hypothesis
- Mixed-mode hypothesis
- Conclusion: in all forms of coordination of economic activities, transaction costs are reduced, allowing for more specific products and services on equal TC level.
Move-to-the-market hypothesis:
- “IT makes both market and hierarchical coordination forms more efficient”
- TC (Market) by trend higher than TC (hierarchy). IT reduces TC, it promotes externalization of activities toward the market. The emergence of electronic markets.
Move-to-the-middle Hypothesis.
- “IT reduces TC, particularly coordination and control cost, outside the firm as well; and partner-specific investments; and Market demand uncertainty is reduced because of better market transparency.
- IT promotes externalization of activities -> trend away from hierarchical relationships, towards long-term cooperative relationships.
Move-to-the-hierarchy Hypothesis
• Increased span of control through IT. IT promotes flat hierarchies (however the hypothesis is so far not empirically validated)
Mixed-mode hypothesis:
“IT can organize any form of coordination efficiently and flexibly”
• Combination of both coordination forms possible (concept of dynamic integration)
Consequences of IT from an economic point of view:
- IT enables coordinating more specific products/services on equal Transaction-Cost level
- High specificity leads to hierarchical relationships. Highly specific products are coordinated in electronic hierarchies. IT results in shifting inter-firm and market coordination forms.
