Information strategy: alignment with organization structure

Journal of Strategic Information System 1995 4 (4) 357-382

Information strategy: alignment with organization structure

Ernest Jordan Graduate School of Management, Macquarie University, NSW 2109, Australia*

Bob Tricker University of Hong Kong Business School, Hong Kong

An investigation has been carried out to examine the relationship between an organization’s structure and the information systems that support its operations. Twenty-five business units in an international bank were categorized in terms of their organizational structure and information systems. Close, but not perfect, association was found between organization structure and hypothesized generic information systems characteristics.

Keywords: organization structure, information systems strategic planning, organizational fit, assessment of organizational impact

The need for strategic planning for the development of information systems (IS) and the information technology (IT)’ that supports them became apparent, particularly in large organizations, as costs rose, organizational impacts increased and the strategic, competitive potential of the application of IT emerged. The decentralization and distribution of computer power, enabling user managers to change dramatically the ways in which business activities were carried out, further reinforced the need for effective strategic planning for both IS and IT (Lederer and Mendelow, 1986; Brancheau and Wetherbe, 1987; Earl, 1989), that is, the need for an information strategy.

Initial approaches to the task of planning an information strategy were simple models and frameworks and helped understanding and showed opportunities but did not lead to an implementable plan (McLean and Soden, 1977; King, 1978; Nolan, 1979). Since then, many methodologies have been developed that will guide the user towards a development portfolio (Earl, 1989; Lederer and Sethi, 1988). Most methodologies have been pragmatically developed and investigate three areas: business needs, an enhancement path for existing systems, and

Received February 1993; revised paper accepted for publication by Dr M Broadbent, August 1995

* Email: [email protected]

r We use the term ‘information technology’ to refer to the hardware that is used in implementing information systems. The term ‘information strategy’ of the title encompasses both information technology strategy and information systems strategy.

0963-8687/95/$09.50 0 1995 Elsevier Science B.V. All rights reserved 357

Information strategy: E Jordan and B Tricker

technology-driven opportunities. A common weakness is the way various methodologies evaluate alternative proposals created in the investigations. One aspect of that evaluation, the degree to which the development plan fits the structure and style of the organization, has received little attention in the established methodologies (McFarlan, 1990). This evaluation is the main focus of this paper and the concept of organizational fit is central to its argument.

Many of the significant developments, over the years, in organization theory have demonstrated the contingency of organizational processes on the situation of the enterprise, for example on its technology, scale or complexity. As information systems developments moved beyond merely providing operational support for the existing activities of the enterprise, to significantly and strategically affecting its processes and performance, so organizational structures and styles had to move in concert; there had to be an appropriate alignment or fit between the organization and its information systems. Consequently the planning of information strategy needs to include this dimension.

Planning for the strategic application of information technology remains complex, expensive and uncertain. Organizations are not assured of success in developing applications that will achieve competitive advantage (Earl et al, 1988). Conversely, organizations may develop successful applications without engaging in any formal planning activity. Our aim is to provide planners with additional tools to enable them to carry out quicker strategic assessments and to enable them to evaluate more critically some of the proposals raised in the strategic planning process. In particular, we will argue that planners should be able to evaluate the alignment of a potential application with the organization’s competitive strategy, and its compatibility with the way in which the organization functions. In looking for a theoretical foundation for information strategy, research results point towards both an organizational and a competitive, strategic role for information. While the competitive strategic implications of information technology may have been widely researched (Weill, 1990; Bergeron et al, 1991; Sabherwal and King, 1991), here we examine the implications for organizational structure, which have been considered much less (Tavakolian, 1989; Iivari, 1992).

The organizational view of information

From the viewpoint of agency theory (Williamson, 1975), organizations exist because of information. The uncertainty of the marketplace, characterized by information about transactions, drives individuals into forming or joining organizations. The continuing uncertainty in the environment of the organization leads it to changes in its strategy and structure (Boisot and Child, 1988). This view reduces all business activity to transactions involving decisions by individuals, with information as the controlling resource. Such a simple and powerful mechanism is attractive, giving primacy to information and economic activity, and has been adopted in the transaction costs approach to IS (Ciborra and Olson, 1989). However, it excludes corporate culture, organizational style and structure from its perspective; moreover, it takes a relatively low view of the nature of human beings, by treating all decisions as being motivated by personal utility maximization.

Information is a recurring theme in the organizational literature. Although Bacon’s dictum, ‘Knowledge itself is power’ is frequently misquoted as ‘information is power’, it is a commonplace that information is a source of power within the organization (Piercy, 1985; Buckland, 1989). Galbraith’s (1977) approach to organization design includes information processes in the five key

358 Journal of Strategic Information System 1995 Volume 4 Number 4


design areas: task, structure, information and decision processes, people and reward systems. He views each as variable and available for independent design; however, relationships between the areas are recognized. Indeed, Galbraith looks for and describes ‘optimal’ configurations in two or more of the five dimensions.

Although organizational theorists and strategists have included IS in their domains (Child, 1984; Miller, 1986; Mintzberg, 1988), there have been few incursions of wider organizational views into the IS field. For most practitioners in IS, a systems proposal is evaluated for technical, economic and operational feasibility (Davis, 1974), where ‘operational feasibility’ means being adoptable or fitting with the organization. The same three dimensions may be used for success or effectiveness, after implementation, using technical, economic and operational (organizational) performance. Operational or organizational performance are closely associated with the concept of organizational validity of Markus and Robey (1983). They suggest that, for an information system to have organizational validity, it should:

l fit with the structure, l fit with the environment, l fit with the people as individuals, and l fit with the people as political groups.

Furthermore, organizational structure variables, particularly the organization of the MIS function itself, are important in predicting effectiveness of IS in organizations (Mansour and Watson, 1980; Krebs, 1988; Daniel], 1990). Thus, there is strong support for a close examination of the relationship between organizational structure and IS in an organization. While the approaches of Williamson, Galbraith and Child have some applicability, it is that of Mintzberg which specifies most clearly the relationship between information and the organization. We extend the analysis of Leifer (1988) by carrying out a more detailed examination of the organizational structure.

Mintzberg’s structural forms of organizations

In his seminal work on organizational structures, Mintzberg (1979) breaks down organizations into five basic parts: the strategic apex, middle line, operating core, technostructure and support staff; shown in Figure I. The operating core carries out the elementary functions of production of the organization; it is supervised directly by the middle line, and the strategic apex includes senior management and members of the board. The technostructure consists of analysts, technologists and other specialists who are concerned with designing the work processes of others (mostly the operating core), generally to bring about standardization. The support staff provide support to the organization outside the flow of productive work - from legal services to canteens, print room to cleaners.

Mintzberg describes five distinct ways that work may be coordinated, that are used depending upon the complexity and dynamic nature of the organization’s environment, and interdependencies of the work tasks being undertaken in the operating core; namely:

l direct supervision, l standardization of work processes, 0 standardization of outputs, l standardization of skills, and l mutual adjustment.

Journal of Strategic Information Systems 1995 Volume 4 Number 4 359


Techno- structure

support staff

Operating core

Figure 1 The structural components of the organization (Mintzberg, 1979, p 20)

Each particular coordinating mechanism allows one of the basic parts to become the dominant, controlling part of the organization. They are the strategic apex, technostructure, middle line, operating core and support staff, respectively. For each of them, in turn, there is a corresponding form of the organizational structure, shown in Table I. Mintzberg names the characteristic organizational structures as simple structure, machine bureaucracy, divisionalized form, professional bureaucracy and adhocracy, respectively. These organizational forms are ‘pure’ types, idealized forms that describe organizations that conform fully to the underlying requirements. Real organizations may have structures that are close to these pure types or that are hybrids, combinations or amalgams of two or three structures.

Mintzberg’s examination (1973) of the informational roles of managers and his view of the organization as a system of information flows (1979) give a picture of information in the organization. Each of the five basic configurations shown in Table I is considered in turn.

The simple structure has direct, two-way information flows between the operational employees and the strategic apex, with most of them being informal. There is little need for a formal management information system because most of it is in the mind of the senior management. With direct supervision being applicable to all the operational employees, there is no need for formal communications. Information gathering is elementary, with external regulators such as government taxation and labour departments being driving forces. Any systems will be centralized and functional.

The machine bureaucracy is appropriate for stable environments; when non-routine decisions need to be made or exceptions arise, they need to be communicated up the hierarchy to someone with the level of authority to act. The management information system (MIS) is designed with that principle in mind. Summary information also flows up to higher levels so that control can be exerted

Table 1 The five structural forms*

Control mechanism Dominant part Structural form

Direct supervision Standardization of work processes Standardization of outputs Standardization of skills Mutual adjustment

Strategic apex Technostructure Middle line Operating core Support staff

Simple structure Machine bureaucracy Divisionalized form Professional bureaucracy Adhocracy

* Adapted from Mintzberg (1979)

360 Journal of Strategic Information Systems 1995 Volume 4 Number 4


and decisions can be made; which decisions in turn flow down the organization (Mintzberg, 1979). If designed correctly, at each point in the hierarchy, there is sufficient authority to deal with the normal amount of variation so that only exceptions need to be passed on. However, in many cases, ‘normal’ information is passed up to senior levels, a common pattern of excessive reporting. The vertical, both up and down, information flow is dominant but not the only one. There are horizontal flows of design and control information between the technostructure and the rest of the organization (mainly the middle line) because it is the function of the technostructure to design and control work. The third group of flows are the information flows that follow the material flow and flow of work (Mintzberg, 1979), which exist also in the simple structure and divisionahzed form. If the organization only processes information, then the material flows are themselves information flows.

Mintzberg characterizes the divisionalized form as a collection of organizational units, usually machine bureaucracies (Mintzberg, 1979) under the supreme control of the headquarters strategic apex. Thus the apex of each of the component divisions becomes the middle line in the overall organization, passing up performance information for the purpose of control. Within each division, the information flows are those of a machine bureaucracy, except that the information requirement of the apex has been designed and specified by the technostructure at headquarters:

The managers there, with the aid of their own technostructure, set up the system: they decide on the performance measures and reporting periods, establish formats for plans and budgets, and design an MIS to feed performance results back to headquarters. They then operate the system, setting targets for each reporting period, perhaps jointly with the divisional managers, and reviewing the MIS results. (Mintzberg, 1979,

P 390)

As an aside, this view gives clarity to the continuing debate (from Streeter, 1973 through Lucas, 1982 to Oppenheimer, 1991) in the IS field about centralization or decentralization of the MIS department. Should the organization put its greatest investment in central computer resources or should the functional or user departments have responsibility for their own computing? In Mintzberg’s terms, there must be a technostructure at headquarters involved in the design (and building) of the performance control system used for assessing divisions, while each division clearly needs authority to develop its own internal systems.

The professional bureaucracy is an organization in which the standards used by the operating core are determined by outside professional bodies. Thus the technostructure does not develop a performance control system; the standards and techniques of the operating core have been established in the professional code and practice of their discipline. Each discipline has specializations into which the task must be pigeon-holed; standard sets of conditions enable a diagnosis followed by a standard treatment pattern, learned during training. All the factors are in the hands of the profession, not the technostructure. Mintzberg (1979) suggests that a large professional bureaucracy organization will have a fully developed support staff, which may well be itself organized as a machine bureaucracy; thus the technostructure can create MIS for the support staff rather than the operating staff. There will remain information flows that follow the flow of work but they will simply be enough to effect communication with the next professional in the chain, such as in the medical referral; the next professional is expected to know what to do.



The adhocracy has professionally trained staff, like the professional bureaucracy, but they are organized in organic teams to try to solve new problems, such as reported by Burns and Stalker (1966) in the British electronics industry. Within the teams, which are usually project-based, will be managers and support staff. Liaison groups will be widely used to effect coordination between groups, with mutual adjustment used within the group. Formal IS that regulate and control are not important:

The regulated system does not matter much either. In this structure, information and decision processes flow flexibly and informally, wherever they must to promote innovation. And that means overriding the chain of command if needs be. (Mintzberg, 1979, p 433)

There are two forms of adhocracy, the administrative and operating adhocracies. Both are decentralized such that control is within the project teams, the manager being part of the team. There is no organization wide control system; each team has goals of its own.

The preceding sections demonstrate that the nature and role of information is central to the study of organizations and, just as emphatically, that the organizational structure and managerial roles are critical ingredients in the selection, analysis and design of IS. As a consequence, IS are implicitly associated with organizational change, as Keen (1981) pointed out. Changes in the organization can be dealt with in an information model by examining the organizational structure.

The organizational structure model of Mintzberg facilitates the understanding of information in the organization, particularly through its examination of the flows of information, decisions and control. It is also amenable to empirical investigation. The key features that enable us to classify organizational structures are the design parameters and the functioning of the operating core (Table 2). While Mintzberg describes these standard organizational forms, he does acknowledge intermediate forms, such as the simple bureaucracy and divisionalized adhocracy.

The research hypotheses

To describe the effect of organizational structure on information systems as an impact is limiting. Information systems and organization structures have mutual effects; they interact (Barlow, 1990). A change in one has inevitable effects on the other. For example, if the information system in an organization is fixed, the range of alternative organizational forms will be restricted; similarly, a specific organizational form will have quite specific and bounded requirements in its information system. This follows closely Miller’s (1986) notion of configurations or gestalts. Either factor may be considered as a dependent or an independent variable.

Because we are attempting to analyse and explain information system design characteristics, we have a propensity to treat the organizational structure as the independent variable, with the information systems as the dependent variable. This reflects the focus of the research and the interests of managers, who are concerned to improve information systems strategic planning. Further, since information systems are typically organizational artifacts, designed, built and operated by those inside the organization, the tendency is for the extant organizational circumstances to influence the IS planning and design.

Thus the research model uses organizational structure as the independent


Tab

le

2 K

eys

to i

dent

ifyi

ng

stru

ctur

al

form

s

Sim

ple

Mac

hine

P

rofe

ssio

nal

Div

isio

naliz

ed

Adh

ocra

cy

stru

ctur

e bu

reau

crac

y bu

reau

crac

y fo

rm

Coo

rdin

atin

g m

echa

nism

Key

par

t of

or

gani

zati

on

Spec

ializ

atio

n of

jo

bs

Tra

inin

g an

d in

doct

rina

tion

For

mal

izat

ion

of

beha

viou

r;

bure

aucr

atic

/org

anic

Gro

upin

g

Uni

t si

ze

Pla

nnin

g an

d co

ntro

l sy

stem

s

Lia

ison

de

vice

s

Dec

entr

aliz

atio

n

Func

tioni

ng

of

oper

atin

g co

re

Dir

ect

supe

rvis

ion

Stra

tegi

c ap

ex

Litt

le

Litt

le

Litt

le

form

aliz

atio

n;

orga

nic

Usu

ally

fu

nctio

nal

Wid

e

Litt

le

Few

Cen

tral

izat

ion

Info

rmal

w

ork

with

lit

tle

disc

retio

n

Stan

dard

izat

ion

of w

ork

Tec

hnos

truc

ture

Muc

h (h

oriz

onta

l an

d ve

rtic

al)

Litt

le

Muc

h fo

rmal

izat

ion;

bu

reau

crat

ic

Usu

ally

fu

nctio

nal

Wid

e at

bot

tom

Act

ion

plan

ning

Few

Lim

ited

hori

zont

al

dece

ntra

lizat

ion

Rou

tine

form

aliz

ed

wor

k w

ith

little

di

scre

tion

Stan

dard

izat

ion

of s

kills

Ope

ratin

g co

re

Muc

h (h

oriz

onta

l)

Muc

h

Litt

le

form

aliz

atio

n;

bure

aucr

atic

Func

tiona

l an

d m

arke

t

Wid

e at

bot

tom

Litt

le

plan

ning

an

d co

ntro

l

Few

Hor

izon

tal

and

vert

ical

de

cent

raliz

atio

n

Skill

ed,

stan

dard

ized

w

ork

with

m

uch

indi

vidu

al

auto

nom

y

Stan

dard

izat

ion

of o

utpu

ts

Mid

dle

line

Som

e

Som

e

Muc

h fo

rmal

izat

ion;

bu

reau

crat

ic

Mar

ket

Wid

e at

top

Muc

h pe

rfor

man

ce

cont

rol

Few

Lim

ited

vert

ical

de

cent

raliz

atio

n

Ten

denc

y to

fo

rmal

ize

Mut

ual

adju

stm

ent

Supp

ort

staf

f (w

ith

oper

atin

g co

re)

Muc

h (h

oriz

onta

l)

Muc

h tr

aini

ng

Litt

le

form

aliz

atio

n;

orga

nic

Func

tiona

l an

d m

arke

t

Nar

row

Lim

ited

actio

n pl

anni

ng

Man

y

Sele

ctiv

e de

cent

raliz

atio

n

Tru

ncat

ed

(in

Adm

inis

trat

ive

adho

crac

y)

or m

erge

d w

ith

Adm

inis

trat

ion

to d

o fo

rmal

pr

ojec

t w

ork

(in

Ope

ratin

g ad

hocr

acy)

Sour

ce:

Min

tzbe

rg

(197

9,

pp

466-

467)


variable with information systems as the dependent variable, and employs Mintzberg’s theory to describe the independent organizational variable. Furthermore, it is a configuration model that uses categories for the independent variable. Hypotheses are developed to reflect the impact of organization structure on IS. These are labelled Mss, MMMB, MDF, MPB and MAD. The fundamental types of organizational structure are examined to attempt to define the generic information system that would be appropriate for them.

A set of contingency factors determines the method of coordination (Mintzberg, 1979) and in turn determines the organizational structure and the functioning of the organization. The contingency factors are:

l the age and size of the firm, l the technical system, l the environment, and l the centre of power.

In terms of information strategy, the contingency factors that are most significant are the technical system and the environment. The technical system refers to the means of production, whether it is simple or sophisticated and whether or not the technology of production controls the work of the operating core. Fully automated production dispenses with the need for an operating core, while very simple production technology (cooking hamburgers) is standardized. The organization’s operating environment has four key attributes - stability, simplicity, market diversity and hostility:

l stability leads to predictability that in turn leads to standardization; l simplicity leads to rationalization and the analysis of operational work into easily

comprehensible segments by the technostructure; l increasing diversity of markets increases the range of work to be done; and l hostility leads to unpredictability and the need for fast strategic actions.

Furthermore, the interaction between the environment and the technical system is concerned with the rate of change of the technical system (Mintzberg, 1979). The relationship between the environment, the technical systems and information strategy is through the information content of the technical system and of the product, and the rate of change of the applicable IT. That is, the four attributes of environment and the two attributes of system are strongly related to information strategy.

The hypotheses will be expressed in terms of ‘generic’ information systems - that is, the information systems that are expected to exist to support the particular organizational form. To the extent that the organizational structure may be a hybrid rather than one of Mintzberg’s pure types, the generic information systems may also be combined into more complex forms.

Hypothesis Mss

In the simple structure the generic information system is a small business system or turnkey system, typically minicomputer or microcomputer based. It will be running administrative bookkeeping applications, maintaining the central records of customers, products and activity. The applications are justified individually by paper-based systems having grown to such an extent that they are inadequate. In other words, given a sufficient number of customers, products, employees, etc, the ‘lists’ are computerized. Once there is an initial system installed, additional applications are more easily justified. There is little pressure to integrate the



applications unless explicit cross-referencing is a critical area. The computer system should be able to be operated by many staff, with the primary design and selection decisions coming from the chief executive officer (CEO), the individual who runs the whole organization. The organizational information system will be centred on the boss, with many parts of it only in his/her mind.

Hypothesis MMB

The generic information system for the machine bureaucracy will be a wide-reaching transaction processing system (TPS), because computer input and output are excellent forces for standardization - the driving force of the machine bureaucracy. The TPS forms the foundation for a classical MIS. Each computer user will only access a limited number (perhaps only one) function within the system and be ignorant of others, through specialization. Individual sub-systems need not necessarily be integrated because the important task is to standardize the individual function and only permit limited horizontal decentralization. Areas not computerized within the information system will be processed by forms as part of the standardization. Routines for processing such forms will be precisely specified, with rigid chains of command and authorization. The technostructure is in the ascendancy so the data processing or MIS department, as part of it, may be powerful. With control being the organization’s theme, the need to get management control information, rather than performance information, will be paramount in the design of computer systems. So the MIS emphasizes control and has little integration.

Hypothesis MDF

The generic information system for the divisionalized form will be a series of distinct computer systems in each division and often in departments within the individual organization, forming parts of a large MIS. The principal feature the systems have in common will be the output required by headquarters, which needs to monitor and control the performance of the division. Headquarters will need dollar and volume performance data to be compared with previous periods, budgets and other divisions - which may be competitors. This form of reporting suggests that some integration of results from subsystems within the division will be necessary. Some divisions may be ‘carbon-copy’ divisions, in which case headquarters will require indentical systems. Pressure will exist for all computer systems to be MIS, because management-level information is the only information required to ‘coordinate and control’ - because it takes place at the highest level. The force from the middle line managers to establish their own sovereignty will lead to distinct and separate systems whenever middle management can get away with it. Note that, in this case the middle line of the divisionalized form is represented by the heads of the individual divisions. The types of organizations making up the components (divisions) may be diverse, both in terms of their own coordination processes and market positioning. Then the distinct divisions may be able to have quite different systems. Headquarters may use some divisions for experimental systems, pilot studies or similar. In addition, return on investment (ROI), a common headquarters performance indicator, will be a frequently used criterion in computer system purchase.

Hypothesis MPB

The generic information system for the professional bureaucracy will be one that does not reach the operating core. The training, indoctrination and specialization

Journal of Strategic Information Systems I995 Volume 4 Number 4 365


of the staff will create an atmosphere where it becomes unthinkable to computerize at the core - its staff’s main assets are their professional skills that computerization would make redundant; besides, the work is complex. Administration and support systems will exist to minimize costs in their ‘overhead’ areas but little data will be gathered that will reflect on the performance of the operating core - its staff’s professionalism would resist that type of monitoring or control. A professional body of workers, operating on a human clientele, may encourage client support systems - not ones that displace the service of the professional but that enable a specific professional to be selected. For example, a hospital record system that tracks the movement of patients between specialist units will be readily accepted. One that records all diagnoses, however, and appears to monitor the individual doctors, will be treated with suspicion, and may never be installed. The same suspicions may be found in a machine bureaucracy, but its workers do not have the complex skills of the professionals. Because professionals establish their status with their own professional organizations outside their employment domain, they will be attracted to setting up links with similar professionals in outside organizations or with professional bodies. They are not links for carrying out operational activity but for enhancing professionalism.

Hypothesis MAD

The generic information system for the adhocracy is the network; local area networks to support the small-size unit focused on a particular function or market, and larger networks to facilitate liaison and coordination among larger groupings. The networks mimic, supplement and support the human networks that are an essential part of the adhocracy. The software on the network varies significantly, although there is a need for some transferability and transportability. The criterion for selection of software will be the extent to which it supports and enhances the performance of the team; in other words the software may have to be regarded as another team member. Mintzberg identifies ‘non-regulating and unsophisticated technical systems’ as the hallmark of the operating adhocracy. An administrative adhocracy will have an information system incorporated in the background (automated) production process; it may be as explicit information or as control and monitoring information built into hardware devices.

The organization structures and their hypothesized IS are summarized briefly in Table 3. Although the table may be more convenient, it is the more detailed descriptions above that are the hypotheses. These hypotheses do not define mutually exclusive categories of IS because there is some progression in development of the structural forms. Bookkeeping applications indicate simple structures but are also needed in machine bureaucracies and divisionalized forms. Divisionalized forms include most of the characteristics of machine bureaucracies but have some unique properties. The unique properties enable us to test the hypotheses and make them falsifiable. For a detailed development of these hypotheses, see Jordan (1994).

Methodology

An in-depth investigation was carried out on 2.5 strategic business units in the Asia Pacific region of a multinational financial institution, referred to here as ‘Globalbank’. It has pursued a policy of applying IT aggressively as a strategic weapon, with the aim of becoming more successful in an increasingly competitive marketplace. Its practice of decentralization of business units has enabled those


Information sirategy: E Jordan and 3 Tricker

Table 3 Hypothesized system characteristics using Mintzberg’s structural form

Structural form Hypothesis Hypothesized generic IS characteristics

Simple structure

Machine bureaucracy

Divisionalized form

Professional bureaucracy

Adhocracy

MSS Small business system; Bookkeeping applications

Little integration

MMB Wide-reaching functional-area transaction processing systems

Users’ restricted range

Little integration, vertical information flows (upwards)

Planning and control systems; DP department strong

MIS aggregates information upwards, along formal lines of command

MDF Performance control systems; Head office standard input

Strong MIS, with some integration

Return on Investment (ROI) justification

Some systems identical; Some pilots, experiments

M PB Applications not in operating core

Administration and support systems

Links to outside professionals

M AD Network; latera information flows

Local and wide area networks; Variety of software

Software enhances team performance

Information collection in automated processes (administrative adhocracy)

units to pursue strategies that are almost independent, to such an extent that the business units can be regarded as distinct entitites within a set of overall organizational constraints. Thus the internal business units of Globalbank will provide examples of separate implementations of information strategy. In addition, Globalbank has been successful in its innovative and aggressive search for opportunities to apply IT, and can serve as a model for other organizations.

Public inforrnution strategy - the historic drive to apply IT

Globalbank is seen by authoritative commentators as a leader in the application of IT to banking, a position that it has held for many years. It recognized at an early stage that leadership in information technology would lead to strategic advantages and competitive success. As an example of its leadership, it introduced a communications network into its IT architecture long before most of its competitors; it was a strategic move that indicated its aim to expand the marketplace in which it operated. The establishment cost of the network was very large, comparable with the costs experienced by dedicated communications companies. The perception of strength is not only held externally but also internally; for example, its annual reports repeatedly refer to the application of IT as one of the strengths of the organization.

Globalbank has an acknowledged position of leadership in its industry, particularly in the application of IT for competitive advantage. Having emphasized the importance of information technology for a long time, information strategies have been implemented and the impact on Globalbank, both within the organization and on its longer term performance, have already been felt.



Globalbank has many distinct business units, each of which has had considerable freedom in determining its own information strategies. Each can be regarded as a case study. Globalbank managers are expected to be aggressive in using information systems wherever they are beneficial in their domain. In such a setting there is the opportunity to assess successful users of IT, and to determine whether the organizational theories of Mintzberg can suitably reflect the information strategies. The next requirement is to review the general hypotheses to see whether they need to be amended to be applied to business units rather than entire organizations.

Unit of analysis

The testing of the hypotheses relies upon the categorization of the 25 organizational units to the Mintzberg structures. Mintzberg’s structural forms may be applied to business units and to complete organizations. The structural form of a business unit will usually be a little clearer, however. Each of Mintzberg’s contingency factors will take only a single value, rather than different environmental characteristics for each part of the full organization. The entire Globalbank organization would be classified as a divisionalized form, which does little justice to the complexity of the organization; nor does it offer much guidance into the way in which an information strategy can be determined at the lowest level. At head office the organization can be seen to consist of a few divisions but, from the business unit manager’s perspective, there is a great deal of independence at the level of the business unit.

However, the smaller size of the business units makes it harder to see the natural style of coordination. A business unit may look, at first sight, as if it is a simple structure, just a small business. On closer inspection, the degree of professionalism, specialization, level of routine work and coordination with other groups indicates another form of structure. The entire organization in Hong Kong can be regarded as a divisionalized form, with each unit simply part of that. In the case of Globalbank, the separate business units vary greatly in size but only in the case of the major groupings, such as Corporate, Consumer, and Private Banking, do the divisions resemble the massive units analysed by Chandler (1962), Rumelt (1974) and others. The many business units within Globalbank’s Corporate Banking Hong Kong grouping (CBHK) have considerable diversity, a rich variety of structures and business strategies, and provide unique opportunities for studying them separately. The potential loss in this approach is that of the divisionalized form, since there is only a single unit in this category.

Data collection and validation

A plan was established for interviewing managers of business units, using a semi-structured schedule. Supplementary information sources included computer system documentation, internal communications and external material, such as newspaper and journal articles. The sources are described in the following sections. Many items explicitly identify the organization and thus have been excluded from the references.

Interviews. The principal data collection method was determined to be semi-structured interviews. The schedule is displayed in Appendix 1. The schedule was a compilation of items from many sources, including Mintzberg (1973, 1979, 1983), Porter (1980,1985), Davis and Olson (1985), Dickson and Wetherbe (1985), Porter and Millar (1985), Lucas (1986) and Feeny et al (1989). The schedule was



designed to be directly administered by the interviewer. Questions raised in one interview could be presented to another manager in a later interview.

The interview subjects were the heads of the various business units and, when the business units were organized into groups, the heads of those business groups. In a few cases where operating processes were unclear or unusual, subordinate staff (for example, functional managers) were consulted for explanation. Those staff were not targets for the interview schedule, which was aimed at business unit heads who make recommendations for IS facilities to support their business strategy. The sequence of business units investigated was customer-orientated units followed by product-oriented units. The two groups had only recently been merged into Corporate Banking Hong Kong, and had some historical differences. At that time most of the customer-oriented units were in a different building to the product-oriented units, which made it also physically convenient to deal with them sequentially. After all the business units had been examined, the service units were taken in turn, and finally the regional and divisional heads were interviewed.

Internal documentation. A wide variety of documents originating from inside Globalbank in Hong Kong was collected. It included IS documentation, IS planning documents, minutes of working meetings, inter-office memos, and formal reports dealing with IS. In addition, wider organizational material included organization charts, standard business forms, internal publicity, recruitment and induction handouts, newsletters and company magazines.

External documentation. As Globalbank is a major international organization, references to it are frequently to be found in public media. A collection was made of newspaper reports and journal articles referring to Globalbank, especially the principal Hong Kong English language newspaper, which often had articles referring to the same major issues that had been revealed earlier in interviews. The newspaper was also a source for advertisements for Globalbank’s services and for recruitment of staff. Major references were found in books, although they seldom referred to activity in Hong Kong. Similarly there were frequent references in such sources as The Economist and Business Week. In addition to the more journalistic articles, there were highly formalized public documents such as annual reports to shareholders, returns to statutory authorities, and invitations to participate in financial instruments and share issues.

Summary - data collection and validation. Very large quantities of data were collected from a variety of sources. Interviews with heads of business units were the focal point, where questions covered the business unit structure, its competitive strategy and the role for the application of information technology. Responses were corroborated by reference to other informants and other documentary information sources. Regular literature searches, scans of contemporary journalism, and internal Globalbank documentation were the main supporting sources.

Before proceeding to the research results, we look in greater detail at the Asia Pacific region of Globalbank in terms of organization, information systems and performance. Specific hypotheses are then developed, separated into the groups of business units, service units and organization-wide. The term ‘service unit’ is used to describe staff functions such as personnel and financial control, in addition to organizational units that support or facilitate, rather than initiate, sales activities. Business units deal with customers in some way and have sales targets in one form or another, that are not aggregates of lower-level units.



The structure and organization of Globalhank

Globalbank’s main activities in Hong Kong are corporate, consumer and private banking. Corporate banking customers include businesses, government departments and other banks. Each of the Globalbank business units reports to its own superiors at head office directly. Within each country, including Hong Kong, a committee coordinates certain activities and ensures that local legal requirements are met. However, the organizational structure is not hierarchical, it is a matrix based upon customers, products and geography. Thus, in the ‘geography’ dimension, each business also reports to a regional group, which in turn reports to head office. The product dimension of the structure becomes most apparent when looking within a business area. Although corporate banking customers are subdivided into smaller customer groups, there are product teams dedicated to providing and managing certain products, whichever customer is using them. The product team may well cut across the boundaries between corporate, consumer and private banking. Product teams also have a reporting path to head office.

The effect of this structural arrangement is to break down Globalbank into many smaller businesses, each responsible for a small group of customers, products or geographical territories. It is described by Gonzalez and Mintzberg (1991) as the ‘related diversifier’ or ‘shotgun’ strategy, where a financial institution enters many business segments with only loose links between them. A senior Globalbank headquarters executive describes it as a key strength, because the small business units are all available for expansion. The manager of each of the businesses will have the job of achieving the best performance for the unit, in cooperation with others. There are many committees and other opportunities for coordination and liaison between units. Further complication is added because the manager of one unit may well have responsibilities in another area and because the individual’s set of responsibilities frequently change. Each of the individual business units (or service units) has been able to develop in its own way, within the general constraints posed by the organization.

The actual area of study is the Hong Kong corporate banking business, Corporate Banking Hong Kong (CBHK).* Through decentralization each unit in this business has had considerable freedom and opportunity to develop the IS that it needs. By studying the nature of each unit’s activities and its use of IS, we can examine various implementations of a single corporate policy. The regional management of corporate banking also takes place in Hong Kong. However, there are few staff whose responsibilities are solely at the regional level; most also have a primary task in Hong Kong. Business units are broadly grouped into nine that are customer-oriented, shown in Table 4, and 10 that are product-oriented, shown in Table 5. The six service units are listed in Table 6.

IS and IT services in the Asia-Pacific region

The organization of IS and IT services mirrors the business units. The corporate, consumer and private banking organizations have their own service groups, and there is a regional group (Asia Pacific IT, APIT) which can support any unit, country or product. CBHK’s IT group (ITG) carries out some systems development for APIT, and vice versa. Any unit in CBHK must seek the assistance of ITG for any of its requirements. If they are not provided directly by either APIT or ITG, one of these units will manage the project and ensure that it meets

* Note: industry-standard names are used to disguise the names of business units and groups.



Table 4 A summary of the customer-oriented business units

Unit Main customers Typical products

World Corporate Group Trade Factory Cash Management Divisic Banks and Insurance Funds and Securities Corporate Banking Unit Real Estate Unit Commercial Finance China

WCG TF CMD B&I F&S CBU REU FIN China

Multinational Traders Many Banks and insurance Investment houses Major local companies Real estate developers Small to medium size Joint ventures

Many Letters of credit Cash management Funds transfer Custody and settlement Many Loans Fixed asset leasing Many

Table 5 A summary of the product-oriented business units

Unit

Treasury Marketing Foreign Exchange Unit Treasury Back Office Asset Sales Unit Corporate Finance Unit Project Finance Unit Investment Management Unit Institutional Investment Globalbank Stockbroking Tax Management Unit

TM FXU TBO ASU CFU PFU IMU IIM GSB TMU

Main customers

Many Many Many Banks Middle size manufacturers Large organizations Public Large organizations High net worth investors Multinationals

Money market, FX Foreign exchange Money market, FX Debt fundraising Corporate equity Capital project finance Mutual funds Pension funds Stock market Tax management

Table 6 A summary of the internal service units

Unit Service target

Information Technology Group ITG All units Human Resource Management HRM All units Price Risk Management PRM All business units Customer Credit Management CCM All business units Industry Risk Management IRM Sales teams Financial Control FC All units, Head Office

Service

IS development and support Personnel Product pricing Customer risk assessment Industry assessment Financial standards and reporting

corporate standards and fits into the existing systems. However, to a great extent it is the responsibility of the business unit to determine its own IS requirements and to decide on the amount of funds that may be allocated to new systems. It reinforces the notion of the decentralized business units being independent decision makers.

Analysis and discussion

This section examines in some detail each Mintzberg hypothesis. Extended case descriptions for the units, including their information strategies, are available from the first named author by mail or electronic mail. Differences from the hypothesized forms need to be understood, either as ‘random’ variation, reasonably insignificant differences, or as differences caused by some other factor that was not part of the experiment, or as faults in the hypotheses.

The analysis proceeds by first considering the classification of the business units into Mintzberg’s structural forms and then by examining the information technology in each of the structures. Three independent judges examined the case



descriptions separately, with a follow-up meeting to agree on the few that were disputed. In all cases consensus was reached. This first step in the analysis proceeds as follows:

l compare the key characteristics of the unit (coordinating mechanism, specialization of jobs, training and indoctrination, planning and control, formalization, bureaucratic nature, etc) with those for the standard structures, shown in Table 2, to identify a configuration that matches;

l check whether other characteristics correspond to that configuration.

Simple examples are:

l Trade Factory (TF), where 43 of the 60 staff operate computer terminals to carry out routine work - ‘following the book’; they have no qualifications in banking and are supervised by a few staff. Each day’s work is like any other’s and there is little freedom to vary the work routine. With a wide span of control, standardized work processes, low levels of (professional) training, formal job descriptions, and generally bureaucratic functioning, this was classified without difficulty to be a machine bureaucracy.

l Tax Management Unit (TMU), where the small group in Hong Kong worked closely with similar staff around the world. All were professionally trained, mostly as lawyers, accountants, bankers or financial analysts. Each project was unique and an appropriately skilled team would be constructed for the task. Marketing, computing or other specialist staff would be drafted in when necessary. With highly trained individuals, liaison mechanisms, formal project work, and generally organic functioning, this unit was classified as an adhocracy (to be precise, an operating adhocracy).

Difficulties arise when units have characteristics that are inconsistent with the configurations. The main difficulty that was found concerned business units that performed both routine professional work and, for part of their time, project-based work in adhocratic teams. In all such cases the dominant mode of work was used to determine the allocation of professsional bureaucracy or adhocracy. An example of this difficulty is:

l Investment Management Unit (IMU), which consists of 26 staff, 12 of whom are professionally qualified and the remaining 14 are support staff, many with para-professional qualifications. The unit’s activity is managing investment funds for institutional clients and the bank’s own mutual funds. Most of the time the staff were making buy/sell decisions for particular securities - routine professional work. Occasionally (a few times each year) they would be involved in developing a new mutual fund or some similar project, where a team would be set up to look at the structure, marketing, contracts, etc for the new fund. This work is in an adhocratic team. However, as the majority of the work was in routine professional activity, IMU was classified as a professional bureaucracy.

In this way the organizational structure was determined for each of the 25 units. They are shown in the accompanying tables: Table 7 for customer-oriented business units, Table 8 for product-oriented business units, and Table 9 for service units. The main reasons supporting the classification are shown in the final column of each table.

Information strategies in units categorized as simple structure

The Foreign Exchange Unit (FXU) and the Asset Sales Unit (ASU) are both



Table 7 Allocation of the customer-oriented business units

Unit Category Main reasons

World Corporate Group Trade Factory Cash Management Division Banks and Insurance Funds and Securities Corporate Banking Unit Real Estate Unit Commercial Finance China

WCG Adhocracy TF MB CMD MB B&I MB F&S MB CBU Adhocracy REU PB FIN MB China Adhocracy

Professional staff in multi-skilled teams Routine clerical work in large quantities Routine clerical work in large quantities Routine clerical work in large quantities Routine clerical work in large quantities Professional staff in multi-skilled teams Professional staff in routine professional work Routine clerical work in large quantities Professional staff in multi-skilled teams

Table 8 Allocation of the product-oriented business units

Unit

Treasury Marketing Foreign Exchange Unit

TM FXU

Adhocracy ss

Treasury Back Office Asset Sales Unit

TBO ASU

MB ss

Corporate Finance Unit CFU Adhocracy Project Finance Unit PFU Adhocracy Investment Management Unit IMU PB Institutional Investment IIM Adhocracy Globalbank Stockbroking GSB MB Tax Management Unit TMU Adhocracy

Category Main reasons

Professional staff in multi-skilled teams Dynamic, hostile environment, led from the front by manager Routine clerical work in large quantities Small group with manager directing, more sales than professional. Low volume Professional staff in multi-skilled teams Professional staff in multi-skilled teams Professional staff in routine professional work Professional staff in multi-skilled teams Routine clerical work in large quantities Professional staff in multi-skilled teams

Table 9 Allocation of the internal service units

Unit Category Main reasons

Information Technology Group ITG PB Professional staff in routine professional work Human Resource Management HRM PB Professional staff in routine professional work Price Risk Management PRM Adhocracy Professional staff in multi-skilled teams Customer Credit Management CCM MB Industry Risk Management

Routine clerical work in large quantities IRM Adhocracy Professional staff in multi-skilled teams

Financial Control FC PB Professional staff in routine professional work

classified as simple structures. Neither of these units has an information strategy (Table 3: Mss) that was hypothesized for the simple structure. ASU staff establish business networks of contacts in other financial institutions and sell debt to them, with no formal supporting information systems. FXU carries out high-denomination foreign currency transactions for both Globalbank and its major customers. The first impression is that there are very large differences between the uses of technology in these units. ASU has almost no computerized IS and operates from informal information sources in the marketplace, rejecting Mss. FXU uses much technology, both before and after carrying out the transaction. However, the main use of information technology by FXU front line staff is in collecting information from the marketplace, and much of that is ‘informal’ too. The information that each person uses to carry out the basic activity is a very short list of current prices, but much background, informal data. There are



bookkeeping applications, but they have been delegated to a separate unit, Treasury Back Office. FXU is finished with the transaction as soon as it has been entered, except insofar as the trader’s overall position has changed.

The hypothesis M ss, for simple structures, was examined by consideration of FXU, the Foreign Exchange Unit, and ASU, the Asset Sales Unit. However, neither of those units is strictly the small business for which Mss is intended. When Mintzberg refers to the Simple Structure, most of the reference is to a small business. We were faced by small business units that were coordinated as simple structures but lacked their other characteristics. The Foreign Exchange Unit is closer to a machine bureaucracy organization that faces enormous volatility and is extremely critical to Globalbank, so it is led directly by its management - much like an army in time of war. It is then a simple structure in terms of coordination, but in other respects it is a machine bureaucracy. The Foreign Exchange Unit is thus an unsatisfactory representative for its category. The problem is that FXU is coordinated as a simple structure to deal with the hostility of the marketplace and its critical status in Globalbank. It operates in most respects as a machine bureaucracy. Most of the hypothesis building had been under the assumption of a simple structure as a small business. The underlying information requirement is thus for environmental monitoring at the front line with backroom control systems. The Asset Sales Unit is barely more than a small group of people working in the same area, with no systems to criticize or evaluate. For it, informal market information is critical. It fits Miller’s (1986) suggestion that simple structures need only crude, informal IS. Hypothesis Mss was thus not supported.

Information strategies in units categorized as machine bureaucracy

Eight units were classified as machine bureaucracies:

l Funds and Securities (F&S) l Trade Finance (TF) l Treasury Back Office (TBO) l Globalbank Stockbroking (GSB) l Customer Credit Management (CCM) l Banking and Insurance (B&I) l Globalbank Commercial Finance (FIN) l Cash Management Division (CMD).

They all process large volumes of transactions that are of a restricted variety and are supported by information strategies hypothesized for machine bureaucracies (Table 3: M&. CMD, CCM, TF and TBO function primarily as processing centres, having little or no sales effort. The others have a sales function which collects transactions for their own office to process. The sales function does not normally create innovative products. The IS in all units is large and stable, evolving slowly in most cases. The Mintzberg hypothesis, MMB, is a good description of the fundamentals of all units. B&I occupies a unique position because it is evolving away from machine bureaucracy towards an operating adhocracy, because an increasing proportion of its transactions are being entered directly by its customers. When the proportion becomes close to 100 per cent, the main function of B&I will become marketing and an adhocratic organization will be in place.

MMB, for machine bureaucracies, was found to be well supported. As organizational forms, machine bureaucracies were well defined and clearly observed. The very specific claims of Mintzberg were reflected in the results.



Information strategy in the unit categorized as divisionalized form

The whole of Corporate Banking Hong Kong (CBHK) is regarded as a divisionalized form. The Country Coordinating Officer and the committees that he chairs represent the head office of the organization, and the business units are the operating divisions. Financial Control collects the information needed from each unit. This information is standardized to volumes and dollars, with comparisons to budgets and targets. FC collects information by monitoring the separate systems and then summarizing and merging results. There are no ‘carbon copy’ systems because all of the units are different; however, such systems are to be found elsewhere in the region. Few, if any, of the units produce management information in their systems but this is changing with a new integrated database system being developed.

MDF covers the divisionalized form and is only represented by the single case of the whole organization, Corporate Banking Hong Kong. The MIS are the main deficiency for CBHK, otherwise the decentralized systems strongly support MDF, as shown in Table 3.

Information strategies in units categorized as professional bureaucracy

Five units were classified as professional bureaucracies:

l Real Estate Unit (REU) l Financial Control (FC) l Investment Management Unit (IMU) l IT Group (ITG) l Human Resource Management (HRM).

In all of these units there are highly qualified staff carrying out the basic activities. In most cases the work that they do is very similar, if not identical, to work carried out by similar professionals at other organizations. Suitable professional staff recruited into ITG and FC would take more time to settle in because of the complexity of some of the existing systems and procedures. ITG and FC staff themselves would also find the same transition problem in moving to another organization; they are to some extent ‘locked in’ to Globalbank. Similarly, HRM staff may not be able to carry out their more advanced professional activities soon after arriving as they need time to acquire an understanding of the organizational culture - a key knowledge area for the HRM professional. ITG, FC and HRM staff should take longer in familiarization because they are in service units with no direct contact with the bank’s customers. Staff in the other units could easily offer identical products to the same or similar customers if they were employed in other banks.

In terms of IS, none of the professional staff has their basic work being undertaken by a system, although there are systems to support them in most cases. ITG staff are the ones whose work is most closely supported by technology when they are using CASE tools. They are able to be more efficient. In all cases, IS enables staff to be more effective, particularly through end-user computing. Mintzberg’s hypothesis (Table 3: Mpg) is generally supported, with the exception that there are no links to outside professionals in their systems. There are links to similar professionals within Globalbank using electronic mail, but they do not extend outside. Professional contacts are maintained in other ways in general in Hong Kong.

Mpg, for professional bureaucracies, was well supported by the evidence. In spite

Journal of Strategic Information Systems I995 Volume 4 Number 4 375


of Miller’s (1986) suggestion that the professional bureaucracy is not a business firm, two business units and three service units were found to be professional bureaucracies. In all units, Mpg provides a good description of the IS parameters.

Information strategies in units categorized as adhocracy

Ten units were classified as adhocracies:

l World Corporate Group (WCG) l China customers l Tax Management Unit (TMU) l Project Finance Unit (PFU) l Treasury Marketing (TM) l Corporate Banking Unit (CBU) l Institutional Investment Management (IIM) l Price Risk Management (PRM) l Industry Risk Management (IRM) l Corporate Finance Unit (CFU).

PRM and IRM are administrative adhocracies, concerned with problems inside Globalbank, and the remainder are operating adhocracies that deal with customers’ problems. In all units professional staff use their skills more on unique cases or projects than on routine action, although there is some routine in all of their work. There is much dealing with other professional or expert staff in different domains of expertise. Creativity, originality and the ability to coordinate with other disciplines are key attributes for staff in these areas. In all areas standard professional skills are used but a variation is found in WCG, where Globalbank has created its own profession of the WCG specialist. They are only interchangeable with WCG specialists from other countries.

CBU and China are concerned with setting up business, while TM even has a transaction processing function in the unit. All units are concerned with the design and/or the marketing of products. CBU creates management information for its own use. There is little use of IS to directly support staff activities beyond the use of PCs to model alternative proposals. The Globalbank electronic mail network is used in all units to work with people in other locations, and, in the case of PRM, to collect information. It is critical to the success of WCG, TMU, PRM, PFU and the China unit. The existence of an international telecommunications network permits the processing that WCG and the China unit market. Specific software that enhances the functioning of the staff is used in TMU, PRM, IIM and TM, with the most sophisticated software used by any of the groups being in TMU and PRM. General purpose software, such as PC packages, is used for enhancement performance of PFU, CFU and WCG. Because CFU’s networks extend outside Globalbank, a portable telephone is used, one of the few used by any business unit.

The Mintzberg hypothesis (Table 3: MAD) gives little explanation of the differences between the IS developments in the units. Support for MAD is given in the China unit, WCG, PFU, CFU and TMU. It is perhaps indicative of the competitive, dynamic and evolving nature of banking in the present era, that eight business units were found to be operating as adhocracies, together with two service units. None of the units rejected MAD, but the degree of support was seldom strong. Part of the weak support may be attributable to the paucity of specific testable statements suggested by Mintzberg’s theories in MAD. Apart from the notion of networking and interaction with other experts, there are few concrete statements.



End-user computing (Arkush and Stanton, 1987) was observed to be an important ingredient to the adhocracy. M AD was insufficiently authoritative to carry out robust testing. It gave a flavour of the information processing in an adhocracy but was very light on details, except for the concept of networking. End-user computing was highly developed in the adhocracies, and in different ways in different units, but the hypothesis makes no proposals that could be tested.

Summary and conclusions

Information systems strategic planning tackles the general problem that organizations have of determining where and how to develop information systems and apply information technology. A body of knowledge and experience suggests that an effective information strategy depends on organizational and environmental factors. The alignment of IS strategy with the business needs has been an important issue to many organizations in their planning. The starting point of this investigation was that the organizational structure influences, and in turn is influenced by, the information strategy.

From an examination of the literature, we have developed general hypotheses that indicate how an information strategy may vary with the organization’s structure. We have investigated such variation in a large, successful organization to attempt to determine to what extent compatibility exists. That is, to what extent a specific organization structure leads to a specific form of information strategy. Our research has shown that an organizational unit has IS that complements its organizational structure. It does not mean that any other configuration is doomed to organizational failure or that compatibility guarantees success. Such deductions have not been tested in the research and further research could be conducted in this area.

Conclusions

The Mintzberg-based hypotheses are well supported for the machine bureaucracy, divisionalized form, and professional bureaucracy. Some support was received for the adhocracy hypothesis, although it was found to be insufficiently authoritative to be robustly tested. The simple structure hypothesis was not supported, particularly because of the unanticipated organizational forms in the category.

We have found that aligning the information strategy with the organizational structure is feasible. Using this approach, any candidate proposal for inclusion in the IS development portfolio could be assessed for its compatibility with the organizational structure. In addition, in a strategic review of an organization our results would enable the assessment of existing systems for compatibility. It shows whether the IS supports the organization structure at present. A similar assessment can be made for planned systems.

The existing literature in IS development is particularly concerned with the problems of big business and the design of IS to suit their needs. Most such organizations would be classified as machine bureaucracies or divisionalized forms. For these structures, we have found that the generic information strategies, suggested by Mintzberg, are strongly supported. Similarly, the professional bureaucracies follow the hypothesized descriptions well, although there is some variation among them.

However, we have found that existing theories are most inadequate when dealing with a form of organizational structure that is becoming more common, the adhocrucy. Our results show that this organically functioning, creative business unit



benefits from a wide variety of information technologies, most particularly networks and small systems and models developed by the users - end-user computing.

Our results also show that units organized as simple structures are not as simple as theory suggests. The many reasons that may be behind the adoption of the simple structure form lead to major differences in IS needs. For such units, conclusive results have not been found beyond the inadequacy of existing theories.

Implications for future research

Two difficulties were encountered in the research that warrant further investigation. The hypothesis produced for the simple structure was not supported, as the label ‘simple structure’ develops from a wide variety of environments and organizational contingencies. This needs to be explored in detail. Secondly, the hypothesis for the adhocratic form was extended in the analysis - the suggestions developed from Mintzberg were found to be lacking in sufficient detail to generate much criticism. The new, extended hypothesis should now be rigorously tested.

For a given structural form, one of the most significant sources of differences between the organizational units has been found to be the competitive market strategy adopted by the units (Jordan, 1993). Additional analysis of an enhanced model that incorporates both organizational structure and competitive strategy would more accurately reflect the complexity involved in planning an organization’s information strategy.

Acknowledgements

The authors are particularly grateful for the efforts of the anonymous referees who have contributed significantly to this paper, and greatly enhanced its readability.

References

Arkush, E and Stanton, S A (1987) ‘Third-era information systems: strategy development continued’ Journal of Information Systems Management (Spring), pp 66-69

Barlow, J F (1990) ‘Putting information systems planning methodologies into perspective’ Journal of Systems Management 41, 7, pp 6 -9, 15

Bergeron, F, Buteau, C and Raymond, L (1991) ‘Identification of strategic information systems opportunities: applying and comparing two methodologies MIS Quarterly 15, 1, pp 89-103

Boisot, M and Child, J (1988) ‘The iron law of fiefs: bureaucratic failure and the problems of governance in the Chinese economic reforms’ Administrative Science Quarterly 33, pp 507-527

Brancheau, J C and Wetherbe, J C (1987) ‘Key issues in information systems management’ MIS Quarterly 11, 1, 23-45

Buckland, M K (1989) ‘Information handling, organizational structure and power’ Journal of the ASIS 40, 5, pp 329-333

Burns, T and Stalker, G M (1966) The Management of Innovation 2nd edition, Tavistock Publications, London

Child, J (1984) Organization: A Guide to Problems and Practice 2nd edition, Harper & Row, London Chandler, A D Jr (1962) Strategy and Structure: Chapters in the History of the Industrial Enterprise MIT

Press, Cambridge, MA Ciborra, C U and Olson, M H (1989) ‘Encountering electronic work groups: a transaction costs

perspective’ Ofjice: Technology and People 4, 4, pp 285-298 Daniell, M (1990) ‘Webs we weave’ Management Today February, pp 81-88 Davis, G B (1974) Management Information Systems: Conceptual Foundations, Structure, and

Development McGraw-Hill, New York, NY Davis, G B and Olson, M (1985) Management Information Systems: Conceptual Foundations, Structure,

and Development 2nd edition, McGraw-Hill, New York, NY

378 Journal of Strategic Information Systems I995 Volume 4 Number 4


Dickson, G W and Wetherbe, J C (1985) The Management of Information Systems McGraw-Hill, New York, NY

Earl, M J (1989) Management Strategies for Information Technology Prentice Hall, Hemel Hempstead Earl, M J, Feeny. D, Lockett, M and Runge. D (1988) ‘Competitive advantage through information

technology: eight maxims for senior managers’ Multinational Business 2, Summer, pp 15-21 Feeny, D F, Earl, M J and Edwards, B R (1989) ‘IS arrangements to suit complex organisations 1.

An effective IS structure’ Oxford Institute of Information Management, Working Paper Galbraith, J R (1977) Organization Design Addison-Wesley, Reading, MA Gonzalez, M and Mintzberg, H (1991) ‘Visualizing strategies for financial services‘ McKinsey Quarterly

2, pp 125-134 Iivari, J (1992) ‘The organizational fit of information systems’ Journal of Znformation Systems 2,

pp 3-29 Jordan, E (1993) Information Strategy: A Model for Integrating Competitive Strategy, Organisational

Structure and Information Systems. PhD dissertation. University of Hong Kong, Hong Kong (UMI, Ann Arbor, MI: 9427461)

Jordan, E (1994) ‘Information strategy and organisation structure’ Information Systems Journal 4, 4, pp 253-270

Keen, P G W (1981) ‘Information systems and organizational change’ Communications of the ACM 24, 1, pp 24-33

King, W R (1978) ‘Strategic planning for MIS’ MIS Quarterly 2, 1 Krebs, V E (1988) ‘Planning for information effectiveness’ HR Magazine September, pp 34-42 Lederer. A L and Mendelow, A L (1986) ‘Issues in information systems planning’ Information and

Management 11, pp 245-254 Lederer, A L and Sethi, V (1988) ‘The implementation of strategic information systems planning

methodologies’ MIS Quarterly 12, 3, pp 445-461 Leifer, R P (1988) ‘Matching computer-based information systems with organizational structures’MlS

Quarterly 12, 1, pp 63-73 Lucas, H C Jr (1982) ‘Alternative structures for the management of information processing’ in

Goldberg, R and Lorin, H (eds) The Economics of Information Processing Wiley-Interscience, New York, NY, pp 55-61

Lucas, H C Jr (1986) Information Systems Concepts for Management 3rd edition, McGraw-Hill, New York, NY

Mansour, A H and Watson, H J (1980) ‘The determinants of computer based information systems performance’ Academy of Management Journal 23, 3, pp 521-533

Markus, M L and Robey, D (1983) ‘The organizational validity of management information systems’ Human Relations 36, 3, pp 203-226

McFarlan, F W (1990) ‘The 1990s: the information decade’ Business Quarter/y (Canada) 55,1, pp 73-79 McLean, E R and Soden, J V (1977) Strategic Planning for MIS Wiley-Interscience, New York, NY Miller, D (1986) Configurations of strategy and structure: towards a synthesis’ Strategic Management

Journal (UK) 7, pp 233-249 Mintzberg, H (1973) The Nature of Managerial Work Prentice-Hall, Englewood Cliffs, NJ Mintzberg, H (1979) The Structuring of Organizations: A Synthesis of the Research Prentice-Hall,

Englewood Cliffs, NJ Mintzberg, H (1983) Structure in Fives: Designing Effective Organizations Prentice-Hall, Englewood

Cliffs, NJ Mintzberg, H (1988) ‘The structuring of organizations’ in Quinn, J B, Mintzberg, H and James, R M

(eds) The Strategy Process: Concepts, Contexts and Cases Prentice-Hall, Englewood Cliffs, NJ, pp 276-303

Nolan, R L (1979) ‘Managing the crises in data processing’ Harvard Business Review 57,2, pp 115- 126 Oppenheimer, D (1991) ‘Debate swirls over IS organizational approaches’ National Underwriter 95, 7,

pp 56-57 Piercy, N (1985) ‘The corporate environment for marketing management: an information-structure-

power theory of marketing’ Marketing Intelligence and Planning 3, 1, pp 23-40 Porter, M E (1980) Competitive Strategy: Techniques for Analyzing Industries and Competitors Free

Press, New York, NY Porter, M E (1985) Competitive Advantage: Creating and Sustaining Superior Performance Free Press,

New York, NY Porter, M E and Millar, V E (1985) ‘How information gives you competitive advantage’ Harvard

Business Review 63, 4, pp 149-160 Rumelt, R P (1974) Strategy, Structure and Economic Performance (reprinted 1986) Harvard Business

School Press, Boston, MA Sabherwal, R and King, W R (1991) ‘Towards a theory of strategic use of information resources: an

inductive approach’ Information and Management 20, pp 191-212



Streeter, D N (1973) ‘Centralisation or dispersion of computing facilities’ IBM Systems Journal 12, 3, 283-301

Tavakolian, H (1989) ‘Linking the information technology structure with organizational competitive strategy: a survey’ MIS Quarterly 13, 3, pp 309-317

Weill, P (1990) ‘Strategic investment in information technology: an empirical study’ Information Age (UK) 12, 3, pp 141-147

Williamson, 0 E (1975) Markets and Hierarchies: Analysis and Antitrust Implications Free Press, New York, NY

Appendix Structured interview schedule

1 STRUCTURE

1.1 Questions to determine structure category:

Key coordination mechanisms? direct supervision, standardization (work, skills, outputs) or mutual adjustment

Specific questions about all of Mintzberg’s design parameters specialization of jobs training and indoctrination formalization of behaviour planning and control systems liaison devices decentralization

Contingency factors affecting design age size technical systems environment power

1.2 Check questions to verify that deduction is correct:

Actual functioning in five parts characteristics of fundamental flows and work constellations

Response to tentative deduction suggest deduced structure, ask for comment

1.3 Questions relating to other organizational structure theories:

Checking limit of applicability

2 MARKETING POSITION AND STRATEGY

2.1 Questions to determine competitive strategy:

What is industry in which they operate? Is it one market or many?



2.2 Specific questions about industry forces

Strength of force from: competitors entry barriers customers suppliers substitute products

2.3 Questions to verify that tentative deduction is correct:

Response to tentative deduction market position statistics market share data

2.4 Questions relating to alternative theories:

Limits of applicability

3 INFORMATION SYSTEMS

3.1 IS definition

IS department organization (staffing, groups, reporting. . . ) hardware installed and planned, value software installed and planned, dates user participation tools, techniques, methodologies performance measures used

3.2 IS strategy

Explicit strategy?

People and processes for determining the strategy review mechanism and timing scope of strategy statement hardware software priorities etc

Perceived importance of this strategy within IS function

Perceived importance of this strategy outside IS function

3.3 Alignment of IS strategy and business strategy

Examples of strategic advantage?

Examples relating directly to market forces These examples - what percentage of total IS resource is used?

Project justification process used

3.4 Perceived contribution of IS to organization’s success

Is the organization seen as successful? How is this determined? How does IS contribute?

By IS manager

By CEO



3.5 IS swot analysis

Strengths, weaknesses, opportunities, threats

What are IS department’s strengths?

What are IS departments weaknesses?

What opportunities exist with new technology now available?

Other opportunities?

What threats exist with new technology now available?

Other threats?


Documents

Information strategy: alignment with organization structure