Organization of the Information Function: A Review “Structuring Options”

Organization of the Information Function: A Review

by

ROGIER METSELAAR

University of Groningen Faculty of Economics and Business

Business Administration August, 2009 Address: Veldweg 16 9311 VE Nieuw Roden Email: r.m.metselaar@student.rug.nl Student number: s1671146 Supervisors: Prof. Dr. E.W. Berghout

3 ABSTRACT

Background: To effectively manage activities organizations need accurate and timely information. Consideration of the information function is of high importance for every organization. Current development, like economical, technological or organizational, not made this issue less challenging or less important. Considering the organization of the information function requires understanding how it functions and should function in relation to the organization and how its effectiveness is maintained or increased.

Purpose: This research provides a review on the subject organization of the information function to provide insight in the structuring options for the organization of the information function. This review discusses (1) the various structuring options, (2) relates the structuring options to its context (e.g. the overall organization), (3) and the objectives of the structuring options. These elements are brought together (synthesized) to enhance understanding on how to structure the organization of the information function.

Method: This research reviewed published literature from 1999 until 2009 identified from the databases; (1) EBSCO Host Research Database, including Academic Search Premier and Business Source Premier, (2) Elsevier Science-Direct and (3) Emerald, synthesized based on organizational theory principles.

Findings: First, management should understand the role and importance of the information function. In allocating activities and resources to the information function, the information function and the overall organization should be aligned. Second, the information function should be positioned accordingly in the organization. The locus of responsibility and decision-making authority regarding the allocated activities and resources can be positioned in a continuum from central to decentral, or combinations of central and decentral. The location of the allocated activities and resources can be positioned in a continuum from concentrated to deconcentrated, not necessarily within the overall organization. The positioned information function should be integrated with the overall organization accordingly. Third, the organization of the information function should be organized accordingly, in which specialization, differentiation, coordination, integration and control issues are relevant. Finally, a general framework synthesizes the structuring options for the organization of the information function to guide organizing the information function aimed at achieving effectiveness.

5 TABLE OF CONTENTS 1 INTRODUCTION ... 7 1.1 Initial Motive ... 7 1.2 Problem Statement ... 7 1.3 Research Questions ... 8 1.4 Scientific/Practical Relevance ... 9 1.5 Outline ... 9 2 RESEARCH METHODOLOGY ... 11 2.1 Data Collection ... 11 2.2 Search Strategy ... 11 2.3 Forward/Backward Search ... 12 2.4 Research Method ... 12

2.5 Research Scope and Limitations ... 12

3 ORGANIZATION THEORY ... 15 3.1 Introduction on Organizations ... 15 3.2 Organizational Strategy ... 16 3.3 Organizational Design ... 17 3.4 Organizational Environment ... 17 3.5 Organizational Culture ... 19 3.6 Organizational Structure ... 19 3.6.1 Coordination ... 20 3.6.2 Specialization ... 20 3.6.3 Integration ... 21

3.6.4 Hierarchy Authority and Control ... 21

3.7 Organizational effectiveness ... 22

3.8 Conclusions ... 23

4 ORGANIZATION OF THE INFORMATION FUNCTION ... 25

4.1 Introduction on Information Function ... 25

4.1.1 Goal/Objective Information function... 26

4.1.2 Activities of the Information Function ... 27

4.1.3 Defining the Information Function ... 29

4.1.4 IS Literature Terminology ... 30

4.2 Issues Organizing the Information Function ... 31

4.2.1 Importance of the Information Function ... 32

4.2.2 Aligning the Information Function ... 32

4.2.3 Positioning the Information Function ... 33

4.2.4 Coordinating/Integrating the Information Function ... 36

4.3 Organizing the Information Function ... 39

4.3.1 Outsourcing Activities/Resources ... 39

6

4.4 Conclusions ... 43

5 SYNTHESIS... 45

5.1 Structuring Options for the Organization of the Information Function ... 45

5.2 Contextual Factors on the Main Structuring Options ... 47

5.3 Objectives of the Main Structuring Options ... 49

5.4 Synthesis Structuring the Organization of the Information Function ... 50

6 CONCLUSIONS ... 53

7

1 INTRODUCTION

1.1 Initial Motive

Information is the cornerstone of an organization (Goepp et al., 2006). The importance of information is emphasized (Sampler, 1998) as Boddy et al. (2005) formulated: “People managing activities of all

kinds depend on information” (Boddy et al., 2005, p5). Thus (people in) organizations need information to manage their activities, which can only be done effectively if accurate and timely information is received (Boddy et al., 2005). “People depend on information to manage the inputs of

resources to the organization, the transformation processes and the output of the activities” (Boddy et al, 2005, p8), recapitulates this notion. The dependence on information underlines the importance for organizations to consider how to organize the information function.

Numerous organizations are or will be engaged in (re-)organizing the information function. In May 2009 Finnair (www.logica.nl, 2009) announced an agreement with Logica (as information technology outsourcing partner) to manage Finnair’s information technology (IT)-architecture. In July 2008 a news report (www.nu.nl, 2008) announced that The Royal Bank of Scotland Group will insource the IT of ABN Amro, concluding that IT is too important for the organization to be outsourced. The IT-applications used by the ‘Belastingdienst (Belastingdienst, 2008) developed with increasing complexity. To reduce complexity and increase flexibility the ‘Belastingdienst’ plans to (re-)organize its IT-applications. In 2008 KPN implemented Oracle Application Integration Architecture to simplify and transform its IT-systems, and improve customer-centricity (www.oracle.com, 2009). In April 2009 news reported that Royal Dutch Shell (www.nrc.nl, 2009) signed IT outsourcing contracts with EDS, AT&T and T-Systems outsourcing a substantial part of its IT-activities and –resources. The discussed significance of information and relevance in practice, given a few examples, underlies the interest of how to organize the information function.

Technological developments increased the power and potential value of information systems (IS) (Boddy et al., 2005), as organizations increasingly depend on IS to provide the organization with information (Boddy et al., 2005; Peppard and Ward, 2004). Referring to the ‘information age’ (Sampler, 1998), ‘information economy’ (Sharipo and Varian, 1999), ‘new economy’ or ‘network industry’ (McGee et al., 2005), in which IT is discussed to play a significant and strategic role (Betis and Hill, 1995; Hitt et al., 1998; Porter and Millar, 1985; Sampler, 1998), has increased the fundamental interest regarding the subject organization of the information function even further.

1.2 Problem Statement

8 In addition, technological developments have an (disruptive) impact on organizations and environment (Porter and Millar, 1985; Sampler, 1998). Due to this, organizations respond to an continuous changing environment, in which IS/IT should be (re-)aligned accordingly (Sabherwal et al., 2001). As organizations (re-)consider their organization of the information function, research has gained attention referring to information function, IS function or IT function. The subject information function has various relevant associated subjects, such as; IS/IT architecture, IT infrastructure, IS/IT management, IS/IT governance, IS/IT outsourcing, which are discussed by an interdisciplinary field of research. The diversity of relevant literature does not necessary make (re-)consideration of the organization of the information function an easier issue. With various reasons/objectives to (re-) consider the organization of the information function, finding suitable solutions might be hard to identify. Mantelaers (1995) distinguished the general reasons, increasing efficiency or effectiveness of the organization of the information function, resolving organizational power issues, following emerging trends, or using as leverage for solving/forcing other (organizational) issue, to (re-)organize the information function. This paper seeks to contribute on the organization of the information function by bringing together relevant literature, examining the structuring options for the organization of the information function. In this manner more insight is gained in how to organize the information function, aiding organizations on this issue.

Only gaining insight in the structuring options for the organization of the information function, provides an organization little support on how to (re-)organize the information function. Not every structuring option is suitable for an organization, as Mantelaers (1995) discussed that the ‘most’ suitable structuring option(s) depend on specific (contextual) circumstances. As Boddy et al. (2005) also address the relevance of contextual factors on IS, to be able to identify the ‘most’ suitable structuring options, organizations need more insight on the influence of contextual factors on the structuring options for the organization of the information function. Therefore this paper aims to yield more insight in the influence of contextual factors to aid organizations in identifying their ‘most’ suitable structuring options.

The reasons to (re-)consider the organization of the information function (Mantelaers, 1995), also has consequences on the structuring options ‘most’ suitable. The objective to increase efficiency might strive for structuring options enabling economies of scope or economies of scale, where the objective to increase effectiveness might strive for organizational integration (Mantelaers, 1995). Therefore this paper not only considers contextual factors to identify the ‘most’ suitable structuring options, but also considers the pursued objectives (reasons) of the (re-)consideration how to organize the information function.

1.3 Research Questions

This results in the following research question:

- What are the main structuring options for the organization of the information function and relating contextual factors and objectives?

This research question leads to the following sub-questions:

- What are the main structuring options for the organization of the information function? - How does the context influence the structuring options for the organization of the

9 - What is described regarding the objective of the different structuring options for the

organization of the information function?

The main structuring options for the organization of the information function are identified, reviewing relevant literature. Further, the contextual influential factors related to the identified main structuring options for the organization of the information function are identified. In the same way, the (pursued) objectives related to the identified main structuring options for the organization of the information function are identified. Bringing together previous research streams, the ‘most’ suitable (main) structuring options for the organization of the information function related to contextual factors and objectives of the (re-)organization are brought together in the synthesis.

1.4 Scientific/Practical Relevance

This review brings together previous research streams from an interdisciplinary field of research on the organization of the information function, to create a foundation for advancing knowledge (Webster and Watson, 2002). The synthesis of identified main structuring options for the organization of the information, and relating contextual factors and objectives, guides further theoretical developments. Identifying the main structuring options for the organization of the information function and relating contextual factors and objectives, provides organizational members concerned with how to (re-) organize the information function (e.g. the chief executive officer and the chief information officer) insight and support on the possible structuring options to consider. In addition, insight and support is provided on important issues to address (e.g. the influence of contextual factors) in (re-)considering the possible structuring options for the organization of the information function, to identify the ‘most’ suitable structuring options.

1.5 Outline

11

2 RESEARCH METHODOLOGY

2.1 Data Collection

This research conducts a literature review on the organization of the information function to identify structuring options and relating contextual factors and objectives. To identify and locate relevant literature, a preliminary search is done in one of the leading journals in the field of IS research, MIS Quarterly, to assist in determining keyword to establish a structured search approach. The Journal Citation Report (JCR) Edition 2008, made available by Thomson Reuters to define world’s leading journals their performance, evaluates MIS Quarterly’s influence (impact) to be one of the leading journal in the field of IS. In this first phase the search string (without quotation marks) ‘information function’ was entered in the EBSCO Host Research Database, limited to the journal MIS Quarterly. Based on the search results (sample size of 84), from which some hold little relevance based on abstract review, the keywords coming forward are (or combinations of): information technology, information resources, information services (function), information systems, IS function, IT architecture, management, organization(al), design, structure, business and enterprise.

2.2 Search Strategy

Based on these preliminary findings, the search strategy is established to conduct a systematic review of relevant literature. Since the issue for organizations is how to organize the information function, the search string for organization (1); organi?ation OR business OR enterprise, is entered included in (SU) subject terms (keywords). The search string for information function (2); information function

OR information management OR information resources OR information processes OR information architecture, is entered included in (AB) abstract. Information processes is added to the search string based on identified literature which initiated this research. The search string for structure (4); structure

OR organi?e, is entered included in AB. The keyword ‘design’ is excluded from the search string as it yielded a large number of irrelevant search results. Further narrowing down search results, the search string (4); information services OR information systems OR information technology OR “IT” OR

“IS”, is entered included in AB. The search strings are entered in EBSCO Host Research Database, including Academic Search Premier – an online database with references and abstracts of articles on various research areas –, and Business Source Premier – an online database with references and abstracts of articles on all disciplines of business –. In addition, the search strings are entered in Elsevier Science-Direct – an online database with references, abstracts and journals on various areas like technology, and information –, and Emerald – an online database with journals on various areas like information science and management –. The search results are limited to publication data starting from 1999 until 2009, scholarly (peer reviewed) journals and academic journals.

12 identified contextual factors or objectives. Articles not meeting the criteria are excluded from this research. After fully reviewing the remaining articles, 13 articles were identified to be relevant. Re-adjusting or re-establishing the search method did not improve the results. The disappointing results of this search, further hampered by an unequivocal or clear-cut use of terminology in the field of IS, the common use of abbreviations like IS limiting search possibilities in the used databases, and a subject which has an wide area of relevant and related subjects, caused to readjust the focus of the research from providing an overview of structuring options to the research as described in chapter one.

2.3 Forward/Backward Search

The identified articles as result from the search strategy, are used for backward and forward search. The backward search refers to reviewing the citations of the identified articles to determine prior relevant articles. The forward search refers to using Web of Science (www.webofscience.com) to determine relevant articles citing the articles identified in the search. The resulting articles are located using the databases priory mentioned and Google Scholar – an online search engine providing scholarly literature in various areas –. The additional articles identified based on forward and backward search have been evaluated on relevance in a similar manner described in the previous paragraph. This phase yielded the most result, identifying 19 additional fully available articles. Combined with relevant literature that motivated and initially started this research, a relative complete number of available relevant IS articles is accumulated. The search process and results are depicted in figure <1>.

2.4 Research Method

To provide a more holistic approach on the organization of the information function, to enhance knowledge about the structuring options, identified relevant literature is synthesized with relevant organizational theory and design literature. General organization theory (and design) literature is reviewed in which books of Daft (2004) and Jones (2006) are guiding, to provide theoretical grounding for this research. The identified literature is reviewed to synthesis previous research streams to provide a holistic view on the structuring options of the organization of the information function. Finally, the research draws back on the research question to formulate conclusions and possible implications.

2.5 Research Scope and Limitations

The notion of this research is that the ‘best’ structuring options for the organization of the information function are those that ‘best’ meet the information requirements of the overall organization. The focus is thus on the effectiveness of the (re-)structuring options to meet the information requirements, and then as efficient as possible. In practice, costs and time to realization of the (re-)structuring options might play a more important role in structuring the organization of the information function, which might result in different ‘best’ structuring options.

13 synergy between the overall organization and the information function, the information function here is discussed in a static manner. Realizing that the (re-)structuring of the organization of the information function is a dynamic process, relevant factors are in this research generally discussed as known fact.

In practice (re-)structuring the organization of the information function is not always approached as a dynamic process, as Mantelaers (1995) already questioned whether the (re-)structuring issue should only be addressed in response to manifesting problems or should be a subject of strategic management and be planned to address regularly (Mantelaers, 1995, p4), indicating that the latter in practice often not occurs. The (re-)structuring process itself or a methodology to (re-)structure the organization of the information function are not discussed. Associated processes to (re-)structure the organization of the information function, like possible (re-)structuring of the organization, and resulting effects are also not discussed.

The organization of the information function is discussed in organizations in which information function activities have been specialized, which in an one-man business is not the case. The organization of the information function is often discussed (e.g. case studies) in an (autonomous) ‘grown’ (size and/or lifecycle) organizations which evidently came to vertical and/or horizontal differentiation. Vertical differentiation refers to the way an organization designs its hierarchy of authority and creates reporting relationships to link organizational roles and subunits to maintain control over the organization, over its activities and increase its ability to create value (Jones, 2006, p94/95). Horizontal differentiation refers to the way an organization groups organizational tasks into roles and roles into subunits (function and divisions), establishing the division of labor that enables people in an organization to become more specialized and productive and increases its ability to create value (Jones, 2006, p95). Nevertheless, these studies are also valuable for ‘smaller’ organizations, despite perhaps being less applicable, while (re-)thinking the organization of the information function is an issue for every organization (Mantelaers, 1995, p1).

In discussing the organization of the information function a top-down approach is attained. The assumption is that (the reconsideration of the) information function draws its purpose and reason for existence from the (functioning of the) overall organization. The top-down approach (outside-in) is used for clarification purposes to maintain a clear structure in discussing the organization of the information function. This does not mean that the nature of the overall organizational strategy cannot come from the organization of the information function.

In practice a middle-out (or perhaps bottom-up) approach could also be used. When structuring the organization of the information function initiates change, or an IT manager, in which the structuring of the overall organization follows, the setting for change is different, as might be stakeholders and the relevance of other factors.

14 Academic Search Premier Business Source Premier EBSCO Host Research Databases Elsevier Science-Direct Keywords organi?ation OR business OR enterprise information management OR information resources OR information processes OR information architecture OR information function organi?e OR structure In: AB - Abstract Limiters Set Starting Year 1999

Academic Search Premier: Scholarly (Peer Reviewed) Journals – Publication Type: Academic Journals Business Source Premier: Scholarly (Peer Reviewed) Journals – Publication Type: Academic Journals

Elsevier Science-Direct: Publication Type: Journals Emerald: Publication Type: Journals

Sort Relevance Academic Search Premier: 104

Business Search Premier: 279 Elsevier Science-Direct: 16 Emerald: 9 AND AND Evaluate Relevance Articles Reviewed in Detail

Result: 32 Prior Identified: 14 Forward/Backward Search Articles included: 46 Emerald information systems OR information services OR information technology OR "IT" OR "IS" AND Duplication: 57 Apply criteria Abstract Reviewed Full Text Availability Result: 351 Result: 117 Result: 104 Result: 13 In: SU - Subject Terms Articles Reviewed in Detail

15

3 ORGANIZATION THEORY

Organization theory studies how organizations relate to the environment and how organizations function or should function (internally). Organization theory helps understand how to maintain and increase the effectiveness of organizations. Since organizing is the issue of this research, aimed at the organization of the information function, organization theory in general is reviewed to guide the review of structuring options for the organization of the information function.

3.1 Introduction on Organizations

As organizations affect us daily, the intangible, vague and abstract concept organization is defined in various ways. Daft (2004) defined organizations as social entities that are goal-directed, are designed as deliberately structured and coordinated activity systems, and are linked to the external environment (Daft 2004, p11). Jones defined organizations as tools used by people to coordinate their actions to obtain something they desire or value – that is, to achieve their goals (Jones, 2006, p2). The consensus is that people are the key element in organizations and their coordination with one another to achieve a goal. These definition leave room for diverse organizations, institutional, instrumental, or functional (Mantelaers 1995), large multinational corporations or small family-owned shops, manufacturers or service providers, profit or non-profit (Daft, 2004). Understanding the whole organization, organization studies approach an organization as a system. According to Daft (2004) a system is a set of interacting elements that acquires inputs from the environment, transforms them, and discharges outputs to the external environment, in which the need for inputs and outputs reflects dependency on the environment (Daft 2004, p14). A distinction is made between open and closed systems, were closed systems take the environment for granted and focus on internal design. A ‘competitive landscape’, driven by information technology and globalization (McGee et al., 2005), forced a reorientation towards an open systems mindset while a true closed system cannot exist (Daft 2004). The three stages, input, transformation, output are affected by the environment in which the organization operates (Jones, 2006, p2).

Figure <2>: Open systems perspective (Source: Daft, 2004; Jones, 2006)

16 (decision) guidelines, and standards of performance. To achieve organizational mission, purpose, goals within its ‘competitive landscape’, appropriate organizational strategy and design have to be selected.

3.2 Organizational Strategy

According to McGee et al. (2005) strategy is one of the most contested and ill-defined concepts. Daft (2004) defined strategy as a plan for interacting with the competitive environment to achieve organizational goals (Daft, 2004, p59). Jones (2006) defined strategy as the specific pattern of decisions and actions that managers take to sue core competences to achieve a competitive advantage and outperform competitors, in which core competences are defined as the skills and abilities in value creation activities that allow a company to achieve superior efficiency, quality, innovation, or customer responsiveness. (Jones, 2006, p205). McGee et al. (2005) defined core competences as the set of firm-specific skills and cognitive processes directed towards the attainment of competitive advantage, seeing core competences as the link between managerial cognition and the economics of the firm (McGee, 2005, p260). Porter (1996) discussed strategy as being different and achieving strategic fit. Rumelt (1979) described strategy as problem solving of the most unstructured sort (Rumelt 1979, p196), arguing that strategy, is strongly contextual in that the focus of strategy is on the relationship between a whole organization and its external environment (Lengnich-Hall and Wolff, 1999, p1115). McGee et al. (2005) discussed the basic dynamics and key factors to be considered in discussing strategy, elaborating that actions and decisions need to be analyzed and taken in order for the organization to survive and thrive as conditions develop and change around it (McGee et al., 2005, p8). According to McGee et al. (2005) the main basic dynamics and key factors are external environment, resources and goals, leading plans, decisions and actions, intended and/or emergent as discussed by Mintzberg and Waters (1985). Strategy formulation is directed by organizational mission, purpose and goals, and analysis of the external and internal environment.

Porter (1985) popularized a framework for competitive action, modeling generic strategies, elaborating that the competitive position can be improved by creating cost advantages or product differentiation. Organizations seek to gain competitive advantage from positioning its products/services in a way difficult for competitors to imitate, in terms of cost advantages (cost leadership) or quality (differentiation). The other dimension of Porter’s generic strategies revolves around scope, divided in narrow scope, competing in a selected market, or broad scope, competing in many markets.

17 Miles and Snow (1978) followed the notion that organizations strive for a fit among internal organization characteristics, strategy and the external environment. In seeking congruence with the external environment Miles and Snow developed four typologies (prospector, defender, analyzer, reactor) in formulating strategy. A prospector strategy suites a growing, dynamic environment, striving for innovation, seeking out new opportunities and growth. In organizational learning this is congruent with an exploration strategy (March, 1991), searching for new opportunities. Contrary a defender seeks stability or retrenchment, focusing on internal efficiency and control, suiting a stable environment, where the organizational learning strategy is exploitation (March, 1991), seeking refinement or improvement. An analyzer strategy combines the prospector and defender strategy. By seeking stability while striving for innovation, balancing between internal efficiency and creativity (seeking new opportunities). An analyzer strategy combines exploitation and exploration. The fourth typology is not really regarded a strategy, but is referred to as reactor strategy. The reactor strategy responds to the environment when necessary in an ad hoc manner, without exploration and exploitation.

3.3 Organizational Design

Organizational design is the process by which managers select and manage aspects of structure and culture so that an organization can control activities necessary to achieve its goals (Jones, 2006, p9). Organizational design describes the internal characteristics of an organization and characterizes the organization as a whole (Daft, 2004, p17). Design alternatives indicate the required work activities, reporting relationships, grouping of activities (functional, divisional, multifocused (matrix), horizontal (process), modular or a hybrid of the mentioned grouping of activities) (Daft, 2004, p97/98), and focus (internal/external and flexibility/stability) (Daft, 2004, p367).

As strategy formulation is directed by external and internal environment, the formulated strategy affects the organizational design, as organizational design characteristics need to support the firm’s competitive approach (Daft 2004, p63). Based on Porter’s generic strategies or Miles and Snow typologies, Daft (2004) illustrated how strategy affects organizational design, arguing for instance that a prospector strategy asks for a flexible, fluid, decentralized structure, where a defender strategy asks for a more centralized structure. Strategy is thus an important contingency of organizational design (organizational structure and culture), however Daft (2004), Jones (2006) and McGee et al. (2005) discussed additional contingencies of organizational design. The discussed contingencies can by simplified into internal and external environment as McGee et al. (2005) for instance placed culture and history (life cycle) in the internal environment, as Mantelaers (1995), and Jones (2006) for instance placed technology in the external environment. Therefore, to gain more insight discussing organizational structure, the internal and external environment, more generally referred to as the organizational environment, followed by organizational culture (also discussed in organizational design) are discussed prior to organizational structure.

3.4 Organizational Environment

18 external environment is often divided in a specific (direct) and a general (indirect) environment. Jones (2006) defined the specific environment as the forces from outside stakeholder groups that directly affect an organization’s ability to secure resources (Jones, 2006, p58), discussing government, customers, distributors, unions, competitors and suppliers. Jones (2006) defined the general environment as the forces that shape the specific environment and affect the ability of all organizations in a particular environment to obtain resources (Jones, 2006, p60), discussing demographic and cultural forces, international forces, political forces, technological forces, economic, and environmental forces. Based on Daft (2006) definition of an external environment, the internal environment can be referred to as all elements that exist inside the boundary of the organization and have the potential to affect all or part of the organization. McGee et al. (2005) refers with the internal environment to the basic strengths and weaknesses, core competences and capabilities of an organization.

The environment causes turbulence and uncertainty, as it is a complex network of changing forces affecting organizations. The environment is understood to be a major contingency to which organizations should plan and adapt. Daft (2006) summarizes several dimensions of events patterns occurring in the environment; an environment is stable or unstable, homogeneous or heterogeneous, concentrated or dispersed, simple or complex (Daft 2004 p140). Jones (2006) discusses three sources of uncertainty in the organizational environment, (1) environmental complexity, (2) environmental dynamism, and (3) environmental richness. Environmental complexity is defined as the strength, number, and interconnectedness of the specific and general forces that an organization has to manage (Jones, 2006, p62). Environmental dynamism is defined as the degree to which forces in the specific and general environments change quickly over time, and thus contribute to the uncertainty an organization faces (Jones, 2006, p63). Environmental richness is defined as the amount of resources available to support an organization’s domain (Jones, 2006, p63). Daft (2004) establish similar dimensions, but combined complexity and change (dynamism), arguing that these dimensions create a greater need to gather information and to respond based on that information, coming down to two dimensions; (1) the need for information about the environment and (2) the need for resources from the environment (Daft, 2004, p140). In managing and coping with uncertainty, as Daft (2004) referred to as having insufficient information about environmental factors to make decisions, the complexity and dynamism dimensions are combined in a framework. The complexity dimension is distinguished in simple and complex and the dynamism dimension is distinguished in stable and unstable as Duncan (1972) referred to static and dynamic.

Figure <4>: Framework for Assessing Environmental Uncertainty (Source: Daft 2004, p143)

19 uncertainty is low because resources are easily to acquire and control. Poor environments have high uncertainty, because resources are scarce and hard to acquire and control.

3.5 Organizational Culture

Focusing on the structure of the organization of the information function, organizational culture evolves at the same time. While Jones (2006) discussed that the most important function of structure is to control organizational members, culture controls the way members make decision, the way members interpret and manage the organization’s environment, what members do with information, and how members behave (Jones, 2006, p177/178). Daft (2004) discussed that the organizational culture should reinforce the strategy and structure that the organization needs to be effective within its environment (Daft, 2004, p366). Jones (2006) defined organizational culture as the set of shared values and norms that controls organizational members’ interactions with each other and with people outside the organization (Jones, 2006, p177). Daft defined organizational culture as the set of values, norms guiding beliefs and understandings that is shared by members of an organization and taught to new members as correct (Daft, 2004, p361). Daft (2004) identified two critical functions of culture in organizations: (1) to integrate members so that they know how to relate to one another, and (2) to help the organization adapt to the external environment (Daft, 2004, p361), referring to how the organization meet goals and deals with outsiders (Daft, 2004, p362). These identified critical functions can also be noticed in Jones’ (2006) definition of culture. According to Jones (2006) organizational culture develops from the interaction of four factors: (1) the personal and professional characteristics of people within the organization, (2) organizational ethics, (3) the property rights that the organization given to employees, and (4) the structure of the organization, producing different cultures in different organizations and causes changes in culture over time (Jones, 2006, p187). Discussing how culture can be shaped (Daft, 2004; Jones, 2006), identifying possible (multiple) subcultures within an organization (Daft, 2004; Boddy et al., 2005), culture is identified to influence the effectiveness of organizational structure. Boddy et al. (2005) pointed out that people in subcultures differ in the information they require and how they obtain and process it (Boddy et al., 2005, p149). Therefore in discussing organizational structure, organizational culture should be considered.

3.6 Organizational Structure

20 Mintzberg (1980). In structuring the organization (of the information function) these in organization theory discussed design elements (dimensions) provide insight in structuring options.

3.6.1 Coordination

How to coordinate tasks and roles in an organization is a dimension of organizational structuring. Mintzberg (1980) discussed the mechanisms - mutual adjustment, direct supervision, and the standardization of work processes, outputs, and skills - for coordination. Mutual adjustment refers to the compromise that emerges when decision making and coordination are evolutionary processes and people use their judgment rather than standardized rules to address a problem (Jones, 2006, p103). This indicates that standardization is the opposing mechanisms of mutual adjustment, defined as the conformity to specific models or examples – defined by sets of rules and norms – that are considered proper in a given situation (Jones, 2006, p103). The extent to which these rules (and procedures) are written down to standardize processes refers to the degree of formalization. The extent to which these norms (rules of conduct) are learned and internalized refers to the degree of socialization. The written rules and standard procedures and unwritten values and norms are important forms of behavior control in organizations, as how employees are to perform their organizational roles, setting forth the tasks and responsibilities associated with each role are specified (Jones, 2006, p102). As standardization makes actions more controllable and predictable in achieving organizational task and goals, as the defined sets of rules and norms specify how roles and tasks are performed and what the associated responsibilities are, standardization reduces creativity and ability to response imaginative to unusual events, making decision-making inflexible according to Jones (2006). The challenge is to find a way of using role and norms to standardize behavior (actions) while at the same time allowing for mutual adjustments to provide employees with the opportunity to discover new and better ways of achieving organization goals, as mutual adjustment gives the freedom to behave flexibly, being able to respond to new and changing situation creatively, but reduces controllability and predictability.

3.6.2 Specialization

21 3.6.3 Integration

While horizontal differentiation is supposed to enable people to specialize, specialization tend to limit communication between tasks, jobs and roles, preventing them from learning from one another (Jones, 2006). Differentiation results in diverse attitudes, goals and orientations between the various tasks, requiring integrators to improve the quality of collaboration (Lawrence and Lorsch 1967; Daft, 2004; Jones, 2006). Differentiation tend to make integration more difficult and complex. Organization use techniques or integrating mechanisms to coordinate the various task, roles and functions and promote communication so they can work together, not at cross-purposes (Jones, 2006). Daft (2004) emphasized the need for organizational design to facilitate communication among employees, stating that information should be facilitated in the necessary vertical and horizontal flows to accomplish organizational goals. Horizontal communications overcomes barriers between departments and provides opportunities for coordination among employees to achieve unity of effort and organizational objectives (Daft, 2004, p91). Daft (2004) discussed (horizontal) integration mechanism like information systems, direct contact (face-to-face meeting to coordinate activities), task forces (to meet in temporary committees to coordinate cross-functional activities), full-time integrators, and (project) teams in a continuum from low to high costs and low to high horizontal information capacity. As the following paragraph will discuss, vertical differentiation is designed primarily for control, as are vertical information flows (Daft, 2004), forming a tension with horizontal information flows, which usually reduces control. Differentiation between horizontal and vertical integration mechanisms, Daft (2004) discussed vertical information systems (management IS), rules and plans, and hierarchical referral as mechanisms to integrate the organization vertically. The additional challenge is thus to establish a level of integration that facilitates the needed communication, collaboration and control (limited by the level of differentiation) for an organization to operate effectively.

3.6.4 Hierarchy Authority and Control

22 is setup centralized when the authority for decision making is kept at the top level of the hierarchy (Daft, 2004; Jones, 2006). When decision making is delegated (pushed down) to lower hierarchical levels, an organization becomes more decentralized (Daft, 2004; Jones, 2006). The advantage of centralization is that authority and control at the top levels of the hierarchy keeps organization easily focused on organizational goals. However, as organizations develop, the top of the hierarchy can become overloaded and immersed in operational decision making, limiting strategic focus, planning and decision making (Jones, 2006). On the other hand decentralization increases flexibility and responsiveness as lower levels can make on-the-spot decisions (Jones, 2006). However, excessive decentralization could cause losing control of the decision making process, as managers make their own decision, making planning and coordination very difficult (Jones, 2006).

3.7 Organizational effectiveness

23

Figure <5> Competing Values Approaches to Organizational Effectiveness evaluation (Source: Quinn And Rohrbaugh, 1983, p369)

The dimension organizational focus is from an internal, micro emphasis on the well-being and development of people in the organization to an external, macro emphasis on the well-being and development of the organization itself (Quinn and Rohrbaugh. 1983, p369). The dimension organizational structure is from an emphasis on stability to an emphasis on flexibility (Quinn and Rhorbaugh, 1983, p369). The four resulting approaches to organizational effectiveness, reflect different management emphasis (shared values, beliefs and/or culture) on structure and focus.

3.8 Conclusions

25

4 ORGANIZATION OF THE INFORMATION FUNCTION

The principles of organization theory shape the review on the organization of the information function. Therefore, before discussing structuring options for the organization of the information function, the goal and activities (and allocated resources needed to perform these activities) in general allocated to the information function are discussed in this chapter. Following this theoretical background, used as the starting point, the organizational design of the information function is discussed in this chapter. The emphasizes on structure (options) of the organization of the information function, leads to discuss structuring issues based on organization theory.

4.1 Introduction on Information Function

Pointed out the importance of information for every organization, as it is essential for organization performance, referring to Boddy et al. (2005) formulation that people in organizations can only do their work effectively if they receive accurate and timely information (Boddy et al., 2005, p5), the awareness that organizations depend on information is also acknowledged by Galbraith (1973, 1977), as others like Tushman and Nadler (1978) and Daft (2004). Viewing organizations as information processing systems, Galbraith (1973, 1977) argued that organizations should be structured in a manner that the organization’s information processing capabilities matches the organization’s information requirements. Based on this view, the linkage between information (as a key organizational resource) and the management (use) of information is considered to be the most critical performance factor (Fairbank et al., 2006). Galbraith (1973, 1977) discussed two main strategies for structuring the organization to match the information processing capabilities with the organization’s information requirements; (1) reduce the information requirements, or (2) increase the information processing capacity. The notion behind Galbraith’s (1973, 1977) information processing theory is that every organization deals with uncertainty in performing their activities. The greater the uncertainty regarding the activity to perform, the more information required to perform the activity. Drawn on this notion, uncertainty can be defined as the difference between information needed by an organization to perform an activity and the information which an organization has available at the time the activity is going to be performed (Bussaard, 1995).

26 for instance Miller (1980) and Cross et al. (1997), the function providing information processing capability is often viewed as a function of an organization (organization function), discussed previously, establishing its own goals and objectives to help meet the mission or purpose of an organization (Daft, 2004). To not unnecessarily confine to types of organizations, this view of an organization function is adopted, referring to the information function, of which the role and scope is understood to differ per organization.

4.1.1 Goal/Objective Information function

Based on Galbraith’s notion the purpose of the information function is to provide the organization the information processing capability to provide itself and environment with the required information. That is, the information function concerns the organization of activities (and allocated resources needed to perform these activities) that process/provide information. How to provide the required information depends on the goals and objectives established. The goals and objectives of the information function, how to manage their resources and activities, how to perform their activities, are set to help meet the mission or purpose of an overall organization, and thus not established solely by the information function itself. The organization ‘usually’ sets the plan of actions for the information function, defining the allocation of resources to provide the organization with the required information to achieve organizational goals with a set time-frame (Bussaard, 1995, p71).

When considering the role of the information function an organization of the information function often already is in place. This organization often has its own view on its role, intentionally and unintentionally developed. In an healthcare setting Engelman (2007) characterized four categories of IT departments; (1) a commodity IT department primarily focused on providing services at the lowest cost possible, (2) an utility IT department focused on providing services at a higher level with a slight increase of cost, but still focused on costs, (3) a partner IT department focused on assisting the organization to achieve its vision/strategy, and (4) an enabler IT department focused on providing the organization new capabilities and helps plotting vision/strategy. Arguing that the type of IT department should meet the organization’s IT needs, Engelman (2007) stated: “Your IT department

needs to reflect where your organization is today and where it will be tomorrow” (Engelman, 2007, p150). As an overall organization sets the plan of actions for the information function and defines the allocation of resources, it should understand the information function currently in place.

27 distribution, has transformed the way activities are performed and the nature of the linkages (Porter and Millar, 1985). The increased role and reach of IT is noticeable throughout the organization, increasing the strategic role of the information function in the organization. Rockart et al. (1996) underlined the ‘growing’ importance of information and information technology, stating that it has become the fifth major resource available to executives for shaping an organization (Rockart et al., 1996, p53), in addition to the major resources, people, money, materials, and machines. The growing importance of information, increased role and reach of IT, and thus the information function, the dynamic and complex (uncertain) developments in the environment, emphasizes the need to consider the organization of the information function.

In establishing goals and objectives, various strategies can be chosen to provide the organization the needed information processing capability. Returning to Galbraith’s information processing theory, strategies might be reducing the information processing capability requirements or increase the information processing capability. This research aims particularly at influencing the information processing capability, or as Mantelaers (1995) referred to information capacity, defined as the ability/capacity of an organization, using available resources, to provide itself as well as its environment information at an given moment (Mantelaers, 1995, p10), by discussing the structuring options for the organization of the activities (and resources) which are allocated to the information function.

4.1.2 Activities of the Information Function

In comprehending the activities allocated to the information function, Mantelaers (1995) viewed the elementary information processing activities which can be defined in the information function. In addressing information processing capabilities of an organization, Mantelaers (1995) discussed several elementary information processing activities: (1) sensing information, (2) recording information, (3) collecting information (4), processing information, (5) disseminating information, and (6) using information (Mantelaers, 1995). These information processing activities (or combinations of these activities) needed and aimed to provide an organization with information are considered part of the information function. All elementary information processing activities (and needed resources to perform these activities) that may be desired to consider (Mantelaers, 1995, p9), are illustrated in figure <6>. In the figure the input refers to signals from the environment (the organization or otherwise). These signals are sensed by human actors and technology, and the combined action of technology and human actors, set by procedures, perform information processing activities to handle the sensed signals. The results of these activities might be disseminated, as output in the figure, into the environment (Mantelaers, 1995).

28 To clarify; (1) sensing information concerns sensing and becoming aware of information in the environment, (2) recording information concerns recording the information to a medium, (3) collecting information concerns bringing similar recorded information together, (4) processing information concerns transforming information to a different form and/or content better suitable for use or to come to ‘new’ information, (5) disseminate information concerns transferring/spreading information throughout the organization, and (6) using information concerns using the disseminated information to perform/manage certain activities (Mantelaers, 1995).

Mantelaers (1995) view on the information function, depicted in figure <6> is identifiable with the systems view on an organization, discussed in the previous chapter, depicted in figure <2>. Conform to organization theory, the information function can be viewed as a system with interacting elements that acquires inputs from the environment, transforms them, and discharges output to its external environment (Daft, 2004). The activities defining the information function can be simplified to acquiring, transforming and discharging information, which is also more in compliance with for instance Boddy et al. (2005) definition of an information system, defined as: “a set of people,

procedures, and resources that collect data which it transforms and disseminates”(Boddy et al. 2005, p10). The elementary information processing activities defined by Mantelaers (1995) provide assistance in identifying the activities to be emphasized in structuring the organization of the information function, as the emphasize on performance can vary from acquiring information to the recording/storing or disseminating information.

In discussing information function activities researchers, like Olsen and Chervany (1980), and Looff (1995), realized less abstract activities. As Bussaard (1995) defined the information function as: “all

activities which need to be performed for an organization(-unit) to provide everybody the information needed to fulfill assigned functions” (Bussaard, 1995, p8), realizing all activities Bussaard focused on information systems, as did the just mentioned researchers. Derived from this notion, an aggregate of information systems could be viewed realizing the elementary information processing activities. Definitions of Feeny and Willcocks (1998a), “the set of activities, personnel and IT assets set up to

define and ensure delivery of the information systems requirements of the business”(Feeny and Willcocks, 1998a, p356; Working Definition), and Looff (1995), “the aggregate of activities and the

29 4.1.3 Defining the Information Function

Considering the information function, the terminology used to place the information function in an organization, differs. Organizations refer to the information function as IT department, IT unit, IT group or IT organizations, placing the information function on an organization chart to ease understanding, e.g. Gasterra’s organization chart (www.gasterra.nl, 2009). While IT is increasingly applied into performing information processing activities (and associated resources e.g. IT-specialists), it is understandable to shape an IT unit, within which (un-)intentionally the responsibility for providing the organization with information processing capability is placed. IT is a more commonly used term, generally more custom, than the information (systems) function, due an emphasis on the significance of IT. Although not necessarily, using IT unit to refer to the information (systems) function, to some extent advocates a technocratic approach in performing information processing activities. The users of IT, however, play an important role in the information processing activities (Boddy et al., 2005; Davenport, 1995; Kahai et al. 2002; Peppard, 2007; Von Simson, 1990).

Feeny and Willcocks (1998a), Peppard and Ward (2004) and Mantelaers (1995) also acknowledged the role of human actors, viewing human actors and IT both as resources of the information function. As resources are required to perform information processing activities, in performing information processing activities, the resources available determines to certain extent, as the information capacity of the information function to process information depends on the availability of information and on the capability of the information processing activities (Mantelaers, 1995), the capacity to provide an organization (and environment) with information (Mantelaers, 1995). Information technology is aimed to maintain or increase the information capacity of an organization, by increasing the effectiveness of the information function, as it is increasingly applied and used in performing information processing activities. Human agents are also needed to perform information processing activities, as Boddy et al. (2005) stated: “However sophisticated the technical elements of an IS, it will depend on people to

make it work effectively” (Boddy et al., 2005, p14). Human agents also influence the information capacity of an organization, as effectiveness of the information function can be increased by educating human actors, recruiting human actors (human resource management) or restructuring of the (overall) organization (organizational development). Mantelaers (1995) discussed that the IT function performs activities to seek opportunities to apply and/or develop IT-applications, to manage and maintain existing IT-applications, and to operate the IT applications (Olsen and Chervany, 1980), in order to influence the information capacity of the information function, defining the IT function as: “consisting

out of all activities aimed to maintain or increase the information capacity of an organization with use of IT and the allocated resources needed to perform these activities” (Mantelaers, 1995, p12).

Following this notion, referring to the information function using IT organization (function) would be inappropriate. In discussing information processing activities, and the combination of the human and technology components to perform these activities, it is more appropriate to refer to information systems function, more conform to the definition of an information system as defined by Boddy et al. (2005), in which also the elements human actors and technology are distinguished.

30 maintain IS. Thus referring to information function using IT function, may be applicable. While unequivocality in research is desired, perhaps also in practice, the IS function or IT function (department, unit, organization) concur with the information function used here if: (1) the goal of the function is to provide the organization the information processing capacity to provide itself and the environment with the required information, (2) concerning all (or combination of) information processing activities comprehended (activities that process/provide information) and allocated resources needed to perform these activities.

4.1.4 IS Literature Terminology

Before further discussing the organization of the information function, valuable concepts not unequivocal are clarified.

First, the concepts information function and information systems (IS) function are used interchangeable, and are (as used here) generally interchangeable, keeping in mind that the information function only includes resources and activities allocated for information processing. However, as of here, the term IS function is not used to refer to the information function, while using the term IS function could cause confusion. IS can be interpreted in various ways with different meanings. An information system could refer to an (single) information system, or to the information function (all information systems ‘in’ an organization. (Bussaard, 1995, p10)), or even to a whole organization as Mantelaers (1995) and Galbraith (1973, 1977) have done. Further the abbreviation IS is used to refer to a single information system, but also to multiple information systems, which is also possible in the concept IS function. Therefore the term IS is confined to an (single) information system, which might behold multiple information systems, placed in perspective of in the information function, limiting the use of this term. When occasionally IS is not confined to this perspective, it is made obvious in the context or will be clarified. The concepts IS activities or IS resources, therefore, will only relate to an information system and not to the information function. To illustrate, when discussing IS activities or IS resources these concepts relate to an IS as defined by Boddy et al. (2005) but, if used, could also relate to an IS function as defined by Looff (1995) as: “the aggregate of

activities and the associated human and other resources needed to establish and sustain the information systems needed by the organization” (Looff, 1995, p18). A distinct use of concepts, e.g. between IS activities and IS function activities, could resolve this issue. However, this resolution is here not necessary anymore. Next to that, the concepts like IS activities and IS function activities might also become interchangeable again. Therefore the term information function is used comprising the concept information systems function.

31 autonomous organization, maintaining the opportunity to define whatever organization wanting to consider with respect to the information function.

Finally, in discussing the information function the concept information is positioned central in this discourse. Simplistic, information is considered the input and (processed/transformed) the output of the information function (Mantelaers, 1995). However, the concepts data and knowledge are not ignored or excluded, while these concepts are linked to each other, often placed in an hierarchical order (Boisot, 1998; Koutsoulis and Mitra, 2003; Ackoff and Rovin, 2003; Boddy et al., 2005), as Boiset (1998) formulated: knowledge builds on information that is extracted from data (Boisot, 1998,

p12), and figure <7> illustrates.

Figure <7>: Link data, information and knowledge (Source: Boddy et al., 2005, p10)

Data refers to the property (recorded descriptions) of things (events, activities and transactions), that may or may not convey information to an agent depending on an agent’s prior stock of knowledge (Boisot, 1998, p12; Boddy et al., 2005, p9). Knowledge builds on information and is a property of agents predisposing them to act in particular circumstances (Boddy et al., 2005, p9). Information is a subset of data that means something to an agent, which the agent judges to be useful, significant, urgent and so on (Boisot, 1998, p12; Boddy et al., 2005, p9). Information comes from data that has been processed so that is has meaning and value for the agent, making information subjective since one agent sees information as valuable, another might see data with no particular significance (Boddy et al., 2005, p9). Information converts to knowledge once processed in the mind of a person (Alavi and Leidner, 2001). Tuomi (1999) and Alavi and Leidner (2001) suggest that articulated, verbalized and structured knowledge becomes information again. While these concepts are not used differentiated in discussing the information function in general for clarification purposes, the more in-depth discourse of the information function will differentiate, if necessary, between the concepts data, information and knowledge in accordance with prior literature, preserving differences between concepts like data architecture, data management, information architecture, knowledge management.

The IS literature terminology is clarified to aid the discussion on the structuring options for the organization and information function. Reviewing IS literature made apparent terms are not always used clear-cut, which could lead to confusion. Therefore some common ground is established to review more organized.

4.2 Issues Organizing the Information Function

32 4.2.1 Importance of the Information Function

Ranganathan and Kannabiran (2004) pointed out the need for top management to understand the potential and importance of the information function, as their commitment in terms of resource allocation determines the performance of the organization of the information function. Earl and Feeny (2000) underlined the importance for a chief executive officer (CEO) to understand their role in IT strategy, stating that being “IT-oriented” and “IT-savvy” has become a critical survival factor for CEOs (Earl and Feeny, 2000, p23). On the other hand, Ranganathan and Kannabiran (2004) discussed the importance of the relationship of CEO with the chief information officer (CIO), as an ‘healthy’ relationship enhances the available resources for the information function. Earl and Feeny (1995) pointed out that the CIOs ability to add value to the business especially depends on the attitude of the CEO. For an CIO to add value, the CEO should, according to Earl and Feeny (1995) see an CIO as agent of change, focus on achieving effectiveness not efficiency of IT, institutionalize business values for IT, build an executive team that includes the CIO and manage IT as integral to the business (Earl and Feeny, 1995, p159). Earl and Feeny (1995) and Feeny and Willcocks (1998a; 1998b) profiled an adding value CIO having business skills as well as interpersonal skills and technical skills. Rockert et al. (1996) also pointed out the need for business skills in addition to technical skills. The importance of interpersonal skills is also underlined stating that an effective IT-business relationship (along with IT human resources and the technology infrastructure) must be managed well by CIOs in order to deliver value to an organization (Rockart et al., 1996, p47). These issues and associated needed skills are referred to by Feeny and Willcocks (1998a; 1998b; 2006) as core capabilities needed to (re-)design the organization of the information function. The discussed characteristics of the CEO, CIO and CEO-CIO relationships should aid in understanding the importance of the information function. Not understanding the importance of the information function has its effect on the allocation of the resources for the information function.

4.2.2 Aligning the Information Function

Depending on allocation of resources, activities and business strategy, the organization of the information function realizes its strategy. Generally postulated that the structuring of the organization of the information function depends on the overall organization, Henderson and Venkatraman (1999) pointed out that IT strategy could also be guiding for achieving alignment. As the overall organization influences the organization of the information function, the growing role of IT and its increasing distribution throughout the organization, also effects the overall organization. Feeny and Willcocks (1998b) stated: “A company must consistently focus information system (information function) efforts