chapter 3 organizational strategy and learning...

1

Chapter 3

Organizational Strategy and

Information Systems

Jason C. H. Chen, Ph.D.

Professor of MIS

School of Business Administration

Gonzaga University

Spokane, WA 99258

[email protected] John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices

2 Copyright 2010 John Wiley & Sons, Inc. 2

Learning Objectives

• Understand how the use of information technology impacts an organization.

• Identify the type of organizational structure that tends to be most willing to embrace technological change and sophistication.

• List the advantages and disadvantages of the networked organizational structure.

• Discuss how IT has changed the way managers monitor and evaluate

• Define and explain the concept and importance of virtual organizations.

• Identify the challenges that are faced by virtual teams.

John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices 3 Copyright 2010 John Wiley & Sons, Inc. 3

Real World Examples • Cognizant Technology Solutions grew fast to become

a $1.4 billion revenue company providing IT outsourcing services.

• This quick growth required that they reinvent their organization – move from a cost based to a relationship based structure.

• Managers had to interact with customers and with developers in different locations.

• A tremendous strain was put on managers because they had to work day and night.

• However, some of the units adopted a matrix structure that shared managerial responsibilities.

John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices

Who/What Delivers IT Value?

IT Value is a function

of ______, ______

and _________. P

e

o

p

l

e

Process

Technology

organizational

IT Value is also a

function of

___________ value.

people process,

technology

John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices 5

MIS and Management Roles

Data Information

Interpersonal roles

Information- Based roles

Decision- related roles

Seeks and receives

Specific information

Transmits information

To employees, managers,etc.

Transmits information

To vendors, customer, etc.

Initiates improvements

Supervises projects

Allocates and approves

Resources

Represents the firm in

Settling disputes

Figurehead

Leader

Liaison

Very easy role

No major decision making

Or information processing

Most significant; judging,

Promoting, monitoring,

training “Give-and-take”

relationships

Monitor

Facilitator

Spokesperson

Entrepreneur Problem Solver Resource Allocator negotiator

Transformation Decisions

MIS/IS

Management Roles Description

Actionable

Results


6

Organizational Ware

Organizational

Ware

HW

SW

Strategy

Structure

Culture (SOS)

N

Infra-structure

• SOM (Social Operating Mechanism)

• Reward/ assessment

SOM is a key process to help groups come together

to plan and take effective action for change.

2


Learning Objectives

• Understand how the use of information technology

impacts an organization.

• Identify the type of organizational structure that tends to

be most willing to embrace technological change and

sophistication.

• List the advantages and disadvantages of the networked

organizational structure.

• Discuss how IT has changed the way managers monitor

and evaluate

• Define and explain the concept and importance of

virtual organizations.

• Identify the challenges that are faced by virtual teams. John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices

Real World Example

• Cognizant Technology Solutions grew fast to become a

$1.4 billion revenue company providing IT outsourcing

services.

• A quick growth required that they reinvent their

organization - move from a cost based to a relationship

based structure.

• Managers had to interact with customers and developers

in different locations.

• A tremendous strain was put on managers because they

had to work day and night.

• Some of the units adopted a matrix structure sharing

managerial responsibilities.


Real World Example - (Cont.)

• Tata Consultancy Services (TCS), the largest

outsourcing company and software exporter in India,

chose a different organization structure designed to

focus on customers and boost revenue growth.

• Added a new layer of leaders to oversee the

businesses and free up the CEO’s time to work on

strategy.

• Different organizational _________ reflect different

organizational ___________ that are used by

organizations to implement their ________ strategies

and accomplish organizational goals.

structures

strategies

business


Organizational Strategy

• the organization’s design, as well as the managerial

choices it makes to define, set up, coordinate, and

control its work processes

• Optimized organizational design and management

control systems support optimal business processes

which reflect the firm’s values and culture.

• Models used: _____________________

__________________ (see chapter 1)

• This chapter builds on the managerial levers model

discussed in chapter 1.

– Three types of managerial levers: organizational, control,

cultural.

business diamond and

managerial levers


Key Characteristics

• Includes the organization’s design, as well as the managerial choices that define, set up, coordinate, and control its work processes

• Optimized organizational design and management control systems support optimal business processes which reflect the firm’s values and culture

• This chapter builds on the managerial levers model discussed in chapter 1.

• Figure 3.1 summarizes complementary design variables from the managerial levers framework.


Figure 1.5 The Leavitt Business Diamond

Structure

Tasks Information

and Control

People

(Source: Hammer et al, 1994)

N

3


Figure 1.6 Managerial Levers and

Figure 3.3 Organizational Design Variables

Source: Cash, et al., 1994

People,

Information, and

Technology

Values

Performance

measurement and

evaluation Incentives

and rewards

Data

Planning

Culture

Control Organization (Design)

Execution

Informal

networks

Formal

reporting relationships

Business

processes

Decision

rights

Organizational

effectiveness Strategy

N

What are the

“THREE”

variables in the

“Managerial

Levers” model

that are used by

decision makers?

What is the

objective of the

model?

Give the manager

a set of

frameworks to use

in evaluating

various aspects of

organizational

design.


IS and Organizational Design

• IS in the organizational designs:

– Defines the flow of information throughout the organization.

– Facilitate management control at the organizational and

individual levels.

• Culture impacts IS and organizational performance.

• IS in the organization’s physical structure is designed

to facilitate the communication and work processes

necessary to accomplish the organization’s goals.

• The organization structures of Cognizant and TCS,

while very different, reflect and support the goals of

each company.


Decision Rights

• _____ in the organization has the responsibility to

initiate, supply information, approve, implement,

and control various types of decisions.

• Ideally the person with the most information and in

the best position should have these rights. (i.e.

senior leaders).

• Organizational design focus on making sure that

decision rights are properly allocated.

• Zara - decision rights moved to the store managers,

providing for quicker responses to their local

customer base.

Who


INFORMATION SYSTEMS AND

ORGANIZATIONAL DESIGN


Formal Reporting Relationships and

Organization Structures

• Organization structure is the way of designing an organization so that decision rights are correctly allocated.

• The structure of reporting relationships typically reflects the flow of communication and decision making throughout the organization.

• Traditional organizations are hierarchical, flat or matrix in design (Fig. 3.2).


• In hierarchical organizations, middle managers tell subordinates what to do and tell superiors the outcomes. IS supports this hierarchy.

• In flat structured organizations, work is more flexible and employees do whatever is needed. IS allows offloading extra work and supports intra-firm communications.

• In matrix organizations, work is organized into small work groups and integrated regionally and nationally/globally.

– IS reduces operating complexities and expenses by allowing information to be easily shared among different managerial functions.

Formal Reporting Relationships and Organization

Structures (cont.)

4


Figure 3.2 Hierarchical, Flat and Matrix Organization Structures


Networked Organizational

Structure

• Made possible by new information systems.

• They feel flat and hierarchical at the same time.

• Decision rights are decentralized in this structure.

• Defined by their ability to promote creativity and flexibility while maintaining operational process control, which is achieved by substituting hierarchical controls with controls based on IS

• Extensive use of communication technologies and networks also makes it easier to coordinate across functional boundaries


Figure 3.4 The Networked Organization


Hierarchical Flat Matrix Networked

Description

Characteristics

Type of

Environment Best

Supported

Basis of Structuring

Power Structure

Key Tech.

Supporting this

Bureaucratic w/

defined levels of

management

Division of labor

specialization, unity

of command

Stable

Certain

Primary function

Centralized

Mainframe,

centralized data and

processing

Decision-making

pushed down to

lowest level

Informal roles,

planning and

control; often

sm.,young orgs.

Unstable

Uncertain

Primary function

Centralized

Personal computers

Workers assigned to

2 or more supervisors

Dual reporting based

on function/purpose

Unstable

Uncertain

Functions and

purpose

Distributed

Networks

Formal/informal

communication

networks that connect

all

Known for flexibility

and adaptability

Unstable

Uncertain

Networks

Distributed

Intranets and Internet

Figure 3.4 Comparison of Organizational Structures

Traditional


Other Organizational Structures

• An organization is seldom a pure form of one of the

four structures described above (i.e., hierarchical,

flat, matrix and networked).

• It is more common to see a hybrid structure in which

different parts of organization use different

structures depending on their information needs and

desired work processes.

• Adaptive or zero time organization

– a newer organizational design is designed to be highly

flexible, agile and responsive so that __________ can be

configured quickly to respond to changing _________ .

23

resources

demands


Informal Networks

• Informal relationships exist and can play an important role in the functioning of an organization.

• Some informal relationships are designed by management: – Working on a project.

– Job rotation program, etc.

• Unintended networks are formed throughout an organization by: – Proximity

– Shared interest

– Family ties, etc.

• Some even cross organizational boundaries.

5


INFORMATION SYSTEMS

AND

ORGANIZATION

DESIGN/TRANSFORMAITON


What is Organization

Transformation?

• Organization transformation is a comprehensive organization-wide change initiative that results in change in the “deep structure” of the firm, radically altering strategy, structure, systems, processes, human resource requirements, and core values and beliefs.

• With the overall change initiative resulted in radical change, the implementation process proceeded through overlapping episodes of incremental and radical change consistent with the change process.


Dilemma in Organization Design

Complex

Simple

Organization

Stable

Certain

Environment Dynamic

Uncertain

???

Hierarchy

(Control)

Entrepreneurial

(Autonomy)

N


The IT Design Challenge Parallels the

Organization Design Challenge

Complex

Simple

Organization

Environment Stable

Certain

Dynamic

Uncertain

“Centralized Intelligence”

Mainframe

(Control) 1960s, 1970s

“Decentralized Intelligence”

Microcomputer

(Autonomy) 1980s

Main Frame

“Networked Intelligence”

(Collaboration/ Distributed) 1990s and beyond


The Emerging Information Age Organization

Complex

Simple

Organization

Environment Stable

Certain

Dynamic

Uncertain

Hierarchy

Autonomy

Entrepreneurial

Collaboration (commitment)

Learning Flexibility

Standardization

Information/Knowledge Age

Supervision (compliance)

Work Technology

Shared understanding

Shared

purpose

Information

People


Transitions in Organization

Design

• From Control to __________ – Promote flexibility, creativity, and learning while

continuing to enable tight control of operating process

• From Autonomy to ___________

– Line mangers are empowered to make decisions

– Timely, quality distributed information and new communication technologies (e.g., video conferencing) are important factors that are enabling dramatic changes in organization redesign.

TM -30 Dr. Chen, Information, Organization, and Control TM -30

Learning

Collaboration / Co-opetition

http://images.google.com/imgres?imgurl=www.sec.state.la.us/img/elecdiv/elecdiv-pc.jpg&imgrefurl=http://www.sec.state.la.us/&h=148&w=170&prev=/images?q=PC&start=20&svnum=10&hl=en&lr=&ie=UTF-8&oe=UTF-8&sa=N





6


The Organization Design Challenge

• _______________: centralized intelligence control

– complex organization in stable environment

– mainframe

• _____________: autonomy decentralized intelligence

– simple organization in dynamic environment

– microcomputer

• _______________: distributed intelligence collaboration

– complex organization in dynamic environment

– networked IT architecture

– flat, fast, flexible and focused on areas of core competency

Dr. Chen, Information, Organization, and Control TM -31

Hierarchy

Entrepreneurial

Information/K. Age


Lessons of the Information Age

Organization Design

• _________ counts, but not at the expense of control.

• ______________ is not anarchy.

• Transforming an organization requires more than just changing the structure.

– Maximizing flexibility, innovation, and control.

– Maximizing independence and interdependence: collaboration, the missing organization design criterion.

– Organization transformation needs a comprehensive organization-wide change initiative that results in change in the “deep structure” of the firm, radically altering strategy, structure, systems, processes, human resource requirements, and core values and beliefs.

N

Speeds

Empowerment


Formal Reporting Relationships and

Organization Structures

• Organization structure is the way of designing an

organization so that decision rights are correctly

allocated.

• The structure of reporting relationships typically

reflects the flow of communication and decision

making throughout the organization.

• Traditional organizations are hierarchical, flat or matrix.

(Fig. 3.4).

• The networked structure is a newer organizational form.

• Social networks and virtual communities.


Figure 3.4 Comparison of organizational structures

Hierarchical Flat Matrix Networked

Description

Characteristics

Type of

Environment

Best Supported

Basis of

Structuring

Power

Structure

Key Tech.

Supporting this

Bureaucratic w/

defined levels of

management

Division of labor

specialization, unity

of command

Stable

Certain

Primary function

Centralized

Mainframe,

centralized data and

processing

Decision-making

pushed down to

lowest level

Informal roles,

planning and

control; often

sm.,young orgs.

Unstable

Uncertain

Primary function

Centralized

Personal

computers

Workers assigned to

2 or more

supervisors

Dual reporting

based on

function/purpose

Unstable

Uncertain

Functions and

purpose

Distributed

Networks

Formal/informal

communication

networks that

connect all

Known for

flexibility and

adaptability

Unstable

Uncertain

Networks

Distributed

Intranets and

Internet


Social Network

• Computer and information technologies facilitate

____________ across distances, social networks

and virtual communities are formed.

• Useful in getting a job done, even if not all of the

members of the network belong to the same

organization. (i.e. LinkedIn)

• Social network is

– an ____-enabled network that links individuals together

in ways that enables them to find experts, get to know

colleagues, and see who has relevant experience for

projects across traditional organization lines.

– a form of _______ network

collaboration

IT

informal



MANAGEMENT CONTROL

SYSTEMS

7



MANAGEMENT CONTROL SYSTEMS

• IT changes the way Managers _______.

• IT changes the way Managers Evaluate.

• IT changes the way Managers Provide

Feedback.

• IT changes the way Managers _________

and _______.

• IT changes the way Managers Control

Processes. 37

Monitor

Compensate

Reward

Fig 3.1 Organizational design variables

(Managerial Levers)

Organizational variables

Decision rights

Business Processes

Formal reporting relationships

Informal networks

Authority to initiate, approve, implement, and control various types of

decisions necessary to plan and run the business.

The set of ordered tasks needed to complete key objectives of the business.

The structure set up to ensure coordination among all units within the organization.

Mechanism, such as ad hoc groups, which work to coordinate and transfer information outside the formal reporting relationship.

Control variables Data

Planning

Performance measurement and evaluation

Incentives

The information collected, stored, and used by the organization.

The processes by which future direction is established, communicated, and implemented.

The set of measures that are used to assess success in the execution of plans and the processes by which such measures are used to improve the

quality of work.

The monetary and nonmonetary devices used to motivate behavior within an organization.

Cultural variables

Values

The set of implicit and explicit beliefs that underlie decisions made and actions taken.


Organizational Characteristics of Information

Age Organizations

Dimension Characteristics

Organizational

Structure

Companies have benefits of small and large scale

simultaneously.

Lg. organizations adopt flexible/dynamic structure

Centralized/decentralized control blur

Focus on projects/process vs. tasks/procedures

Human Resources Workers better trained, autonomous, transient

Work environment exciting, engaging

Management shared, rotated, even part-time

Job descriptions tied to defined tasks non-existent

Compensation tied directly to contribution

Management Processes Decision-making is well understood

Control separated from reporting relationships

Computers support creativity at all levels

IS retain corp. history, experience, expertise John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices

40


MANAGEMENT CONTROL

SYSTEMS


Management Control

• IT profoundly affects the way managers control their organizations.

• People and processes are monitored in ways that were not possible only a decade ago.

• Managers need to control work done at the process level.

• The organizational structure will determine the level of control that a manager must exercise.

• IS plays three important roles in management control processes:

– Data collection, Evaluation, and Communication.


IT Changes the Way Managers….

• Monitor: IS makes possible new ways to track

performance and behavior

• Evaluate: models are easily built, making it easier

to understand progress and performance

• Provide Feedback: IS makes rapid feedback

possible (e.g., through electronic forms)

• Compensate & Reward: team-based efforts can

be evaluated and complex formulas used

• Control Processes:IS also used extensively in

industrial processes, and makes it easier to collect,

analyze and move information

8


Planning and Information Technology

• Information technology can play a role in planning

in three ways:

– IS can provide the necessary data to develop the

strategic plan

– Some IS actually automate the planning process

– IS can lie at the heart of a strategic initiative and can be

used to gain strategic advantage


Data Collection and IT

• Monitoring work can take on a completely new meaning with the use of information technologies.

• IS make it possible to collect such data as: – number of keystrokes

– precise time spent on a task

– exactly who was contacted

– specific data that passed through the process

• Organizational design challenge in data collection is to: – embed monitoring tasks within everyday work

– reduce the negative impacts to workers being monitored.


Monitoring and Performance Software

• Software collecting monitoring _____ directly from

work tasks, or embedding the creation and storage of

performance information into software used to perform

work is more reliable.

• Monitor “cyberslacking” and “cyberslouching.”

• Monitoring is ethical and in the best interest of business.

• Employees must be informed about monitoring software.

• __________ increase in productivity derived from

monitoring information.

• Balance employees’ right to privacy against the needs of

the business to have surveillance mechanisms in place.

Reward

data


Performance Measurement, Evaluation and IT

• IS make it possible to evaluate data against reams of standard or historical data.

• Managers can more easily understand work progress and performance.

• However, analysis paralysis (too much data/information) can cause managers to become overwhelmed.

• How the information is used is important to performance measurement.

• How feedback is communicated in the organization plays a role in affecting behavior.

• Key is making sure that the information is handled discreetly and appropriately.

___________ activities in the Value Chain. Supporting


(Value)

N

Figure I.6 Business Level: The Value Chain


Incentives and Rewards and IT

• Enables organizations to encourage good performance.

• Done properly, can make employees feel good without

paying them more money.

• Organizations use their Web sites to recognize high

performers.

– Using electronic badges that are displayed on the social

network to identify the award recipients.

– Reward with allocation of new technology.

• IS makes it easy to design complex reward systems (shared

or team based).

• Managers must consider both the ________ and qualitative

data in assigning compensation and rewards.

metrics

9


INFORMATION SYSTEMS

AND

CULTURE


CULTURE

• Culture is the third managerial lever.

• Plays an increasingly important role in IS

development and use.

• It is defined as a shared “set of _______ and

_______about what is desirable and undesirable in a

community of people” (also see TAM model in

chapter 4).

• Culture is not static but always changing.

• Different levels of culture.

• Culture should be considered as the most important

organizational ________ resources for improving its

competitive advantage as it is non- ___________

values

beliefs

strategic

imitatable.


Levels of Culture and IT

• Culture can be found in countries, organizations, or even

within organizations.

• IS development and use can be impacted by culture at all

levels within the organization.

• Both national and organizational cultures can affect the

IT issues and vice versa.

• Differences in national culture may affect IT in a variety of

ways: impacting IS development, technology adoption and

diffusion, system use and outcomes, and management and

strategy.

• Figure 3.5 and describe the model for the impact culture of

on IT issues. John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices

Figure 3.5 Levels of culture.


CULTURE

• Cultural differences have not totally disappeared.

• Convergence is a challenge for an organization that

employs people from a variety of countries and

cultures.

• Having an understanding and appreciation for cultural

values, practices and subtleties can help in smoothing

the challenges.

• Effective communication means listening, framing the

message in a way that is understandable to the receiver

and responding to feedback.

• National culture differences may affect system

development and use.


CULTURE

• Hofstede is one of the best known researchers in the

values across national cultures.

• Awareness of the Hofstede or GLOBE dimensions

may help improve communications and reduce

conflict.

• The GLOBE (Global Leadership and organizational

Behavior Effectiveness) research program was a team

of 150 researchers who have collected data on cultural

vales and practices and leaderships attributes from

over 18,000 manages in 62 countries.

• The GLOBE dimensions and their relationship to

Hofstede’s dimensions are found in Figure 3.5.

10


Organizational Culture and

Information Technology Management

• Differences in culture result in differences in the use

and outcomes of IT.

• At the organizational level, cultural values are often

related to satisfied users, successful IS

implementations, or knowledge management success.

• Culture affects planning, governance, and perceptions

of service quality at the national and organizational

levels

– Having planning cultures at the top levels, signal that

strategic systems investment is important.


Figure 3.6 – National cultural dimensions

GLOBE DIMENSIONS

DESCRIPTION RELATIONSHIP TO HOFSTEDE DIMENSION

UNCERTAINTY

AVOIDANCE

EXTENT TO WHICH MEMBERS OF AN ORGANIZATION OR

SOCIETY STRIVE TO AVOID UNCERTAINTY BY RELIANCE ON

SOCIALNORMS, RITUALS, AND BUREAUCRATIC PRACTICES

TO ALLEVIATE THE UNPREDICTABILITY OF FUTURE

EVENTS.

SAME AS UNCERTAINTY

POWER DISTANCE DEGREE TO WHICH MEMBERS OF AN ORGANIZATION OR

SOCIETY EXPECT AND AGREE THAT POWER SHOULD BE

EQUALLY SHARED.

SAME AS POWER DISTANCE

COLLECTIVISM I:

SOCIETAL

COLLECTIVSIM

DEGREE TO WHICH ORGANIZATIONAL AND SOCIETAL

INSTITUTIONAL PRACTICES ENCOURAGE AND REWARD

COLLECTIVE DISTRIBUTION OF RESOURCES AND

COLLECTIVE ACTION.

SAMES AS INDIVIDUALISM/

COLLECTIVISM

COLLECTIVISM II:

IN-GROUP

COLLECTIVISM

DEGREE TO WHICH INDIVIDUALS EXPRESS PRIDE,

LOYALTY AND COHESIVENESS IN THEIR ORGANIZATIONS

OR FAMILIES

TYPE OF COLLECTIVISM FOCUSED ON

SMALL IN-GROUPS

GENERAL

EGALITARIANSIM

EXTENT TO WHICH AN ORGANIZATION OR SOCIETY

MINIMIZES GENDER ROLE DIFFERENCES AND GENDER

DISCRIMINATION

MODIFIED VERSION OF

MASCULINITY/FEMINITY

ASSERTIVENESS DEGREE TO WHICH INDIVIDUALS IN ORGANIZATIONS OR

SOCIETIES ARE ASSERTIVE, CONFRONTATIONAL AND

AGGRESSIVE IN SOCIAL RELATIONSHIPS

MODIFIED VERSION OF

MASCULINITY/FEMINITY

FUTURE

ORIENTATION

DEGREE TO WHICH INDIVIDUALS IN ORGANIZATIONS OR

SOCIEITES ENGAGE IN FUTURE-ORIENTED BEHAVIORS

SUCH AS PLANNING, INVESTING IN THE FUTURE, AND

DELAYING GRATIFICATION

SIMILAR TO CONFUCIAN WORK

DYNAMISM BY HOFSTEDE AND BOND

(1988)

PERFORMANCE

ORIENTATION

EXTENT TO WHICH AN ORGANIZATION OR SOCIETY

ENCOURAGES AND REWARDS GROUP MEMBERS FOR

PERFORMANCE IMPROVEMENT AND EXCELLENCE

HUMANE

ORIENTATION

DEGREE TO WHICH INDIVIDUALS IN ORGANIZATIONS OR

SOCIETIES ENCOURAGE AND REWARD INDIVIDUALS FOR

BEING FAIR, ALTRUISTC, FRIENDLY, GENEROUS, CARING

AND KIND TO OTHERS.

SIMILAR TO KIND HEAREDNESS BY

HOFSTEDE AND BOND (1988)


Awareness of Cultural Differences

• Effective communication means listening, framing the

message in a way that is understandable to the receiver, and

responding to feedback.

• Effective _____-cultural communication involves all of

these plus searching for an integrated solution that can be

accepted and implemented by members of diverse cultures.

• Communication in meetings is also subject to cultural

differences.

• Knowing that a society tends to score high or low on certain

dimensions helps a manager anticipate how a person from that

society might react.

• Without awareness of cultural differences, it is unlikely that

IS will be developed or used effectively.

cross


IT

Vision/

IT

Strategy

Strategic

Vectors

Business

Strategy Business

Vision

Technology

Concepts

• Standards

• Protocols

• Performance

• Compatibility

• Guidelines

Key Issues

• Operating System

• Data Bases

• Applications

• Communications

• Processors

_________

Management

_________

Management

IT

____________

Technology

Selection

• Hardware

• Software

Fig. 3-(Extra): IT Architecture and Strategic Business Vision

General

IT Technologists


Break

• Read end of chapter case on p.96 (#4 –

Mary Kay, Inc.)

• Or

• Read Case Study 3-1: The Merger of

Airtran by Southwest Airlines: Will the

Organizational Culture Merge?

59 John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices

DQ #4 Mary Kay, Inc. • a. How would organizational strategy need to change to

respond to Mary Kay’s new business strategy?

• Ans: Organizational changes would need to be consistent with a

revised organizational strategy. If no organizational changes were

made, we’d expect the systems to be rejected by many of the

workers. Managers would expect IBCs to use the systems, but

IBCs are independent agents, so they would most likely delay in

using the systems unless motivated to do otherwise.

• Thus the reward and compensation systems would need to be

adjusted to accommodate the new system. And unless business

processes were also changed to accommodate the new systems, we

would expect problems to occur that make it difficult for the new

systems to be used (information entered into the system might be

just printed out, if the processes are expecting paper-based forms

rather than screen shots).

60

11


• a. How would organizational strategy need to change to

respond to Mary Kay’s new business strategy? (cont.)

• You might also want to explore business process that would

have to change to accommodate the new systems. The paper-

based ordering system would have to be removed, if

managers wanted IBCs to only use the new system, since

running the older system discourages IBCs from using the

new system.

• Fulfillment and reconciliation processes would be different

with the use of mymk.com, since the order information was

entered earlier into the system. If customers of IBCs place

orders automatically, IBCs lose control over what is ordered,

and will have to build new ways to keep track of their sales.

If fulfillment processes are done using paper pick lists, then

the process either needs to be redesigned to use electronic

lists (shown on the screen or such) or to print out paper lists.


• b. What changes would you suggest Mary Kay, Inc. managers

make in their management systems in order to realize the intended

benefits of the new systems? Specifically, what types of changes

would you expect to make in the evaluation systems, the reward

systems, and the feedback systems?

• Ans: Evaluation systems would include a component of how well

the systems were used by the Independent Beauty Consultants

(IBCs). There would need to be an evaluation of the frequency

and effectiveness of the use of the systems. That may translate into

the reward systems, where IBCs are compensated for their use of

the systems (direct bonuses, etc) or where they find that using the

systems gives them advantages they didn’t get otherwise (faster

orders, better book keeping, etc). IBCs might need incentive

packages to encourage them to buy computers if they don’t have

one already (such as discounts from a preferred vendor ).

62


• b. (cont.)

• Support processes would be needed to help IBCs learn

how to use the systems effectively, and to help them

identify new ways to do their business better. The results

of the evaluation process would have to be used to provide

feedback to the employees. Possibly, in discussing an

employees performance, it may be helpful to share with

them average performance levels of other employees.


Case Study 3-1: The Merger of Airtran by

Southwest Airlines: Will the Organizational

Culture Merge?

• This case study allows the students to

explore real world cultural issues related to

the merger of two companies that basically

offer the same services, but have two very

different organizational structures and

cultures.

64


• 1. Discuss the layers of culture that are evident in

this case.

• Ans: The organizational values of both airlines are

discussed. This includes the employees’ foundational

values regarding their work processes.

• It also includes the expectations of customers. Each

firm has built a reputation based on its values, so the

assimilation of those divergent cultures can create

some friction and confusion.


• 2. What are the similarities and dissimilarities

between the cultures, values and beliefs of

Southwest and AirTran airlines?

• Ans: Both airlines include “fun” in their value

statements. They both want customers to have a

pleasant experience.

• Southwest Airlines takes it a step further,

emphasizing the “over the top” experience the

company is noted for providing. AirTran includes

safety and more serious notions as part of its value

and belief statement. They want to have fun, but

there are other things that are more important. 66

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• 3. What problems could arise due to the different perspectives

of both airlines towards online reservation systems? What do

you recommend the managers do to solve these problems?

• Ans: Depending on familiarity with the reservation systems,

preference might be given to one system over the others. This

could disadvantage some customers if they elected to use the

other online system.

• The outcome could be confusion and frustration for customers.

Managers need to ensure that all employees are trained properly.

They should also actively monitor the reservation process to

check for any disruptions. They might even try pairing

employees from the two airlines to work together, thereby

overcoming any confusion in processing the reservations.


4. What would you recommend managers do to

ensure a smooth integration of the information

systems, given the culture differences?

• Ans: The information systems should focus on

efficiency and effectiveness standards. Ease of use

would be important when designing the user

interface.

• Retain familiar features, as much as possible, and

require the least amount of business process change.

Open and constant communication is imperative for

a smooth transition. Assess the results at regular

intervals, and make changes as required. 68


SUMMARY

chapter 3 organizational strategy and learning...

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