Adaptive Capacities of State IT Departments: Perceptions of CIOs Coping with Change Margaret F. Reid University of Arkansas Department of Political Science & Public Administration Fayetteville, AR 72701 1-479-575-5352 [email protected] Myria W. Allen University of Arkansas Department of Communication Fayetteville, AR 72701 1-479-575-5952 [email protected] Cynthia K. Riemenschneider University of Arkansas Information Systems Department Fayetteville, AR 72701 1-479-575-6120 [email protected] Deborah J. Armstrong Florida State University Management Information Systems Department Tallahassee, FL 32306 1-850-644-8228 [email protected] H H H ABSTRACT The purpose of this article is to ascertain how state IT departments, specifically Chief Technology or Information Officers (CTOs/CIOs) view changes in their external environment and their departments’ ability to adopt and implement new information technologies. The research is based on a recently completed national survey of state IT departments in the US. Employees at three levels in the organization were surveyed: CIOs, managers and employees. This article only focuses on the CIO responses. It contributes to the scant systematic empirical research of state IT departments and their capacities to adapt to and manage technological change. Preliminary findings suggest that CIOs generally perceive their external environments as relatively stable and rich in opportunities. They see their offices as central in the formation, implementation, and evaluation of IT policy and practices throughout their state governments. They perceive their IT employees as actively scanning the external environment for relevant information and as being capable of importing, adapting, and utilizing new technology-related information. Interesting correlations emerged in that CIOs who described their environment as relatively stable and rich in opportunities also indicated their employees were actively engaged in knowledge scanning, their department had a high absorptive capacity, and their office is more central in IT policy formation. Future research will include information regarding the states’ economic conditions, strategic and management environment as well as the states’ policy innovativeness considering the adoption of various technologies. Categories and Subject Descriptors Management, Human Factors Keywords Organizational Change, Adaptive Capacities, State Information Technology Departments, CIOs 1. INTRODUCTION 0B The purpose of this article is to ascertain how state IT departments, specifically Chief Technology or Information Officers (CTOs/CIOs) view their external environment and their departments’ ability to adopt new information technologies. IT departments have shown considerable willingness to adopt fundamental changes in their internal operations, and, in some states, may be on the verge of becoming change agents for state governments as a whole . IT departments, once largely seen in a technical support role, have assumed critical strategic planning functions for their respective levels of government. With passage of the Clinger-Cohen Act (also known as the Informational Technology Management Reform Act) of 1996, the federal government under the auspices of the Office of Management and Budget (OMB) centralized IT initiatives to achieve OMB’s overall vision for integrated federal enterprise architecture. These centralization efforts were by no means seen as meaningful by all federal CIOs . A widely discussed study by the General Accountability Office in 2004 found that since the passage of Clinger-Cohen, the average tenure of federal CIOs has been approximately two years, far shorter than what most CIOs consider to be a sufficient length of time to implement complex policy changes  and significantly shorter than their private sector counterparts whose average tenure hovers around 5.7 years . It is clear from all accounts that federal CIOs are under tremendous pressure to respond to political forces while simultaneously managing their own internal affairs. Such observations echo Bordia, Hobman, Jones, Gallois, and Callins’  conclusions that uncertainty is one of the most commonly reported outcomes of change and that associated stresses are one of the primary negative consequence that often results in voluntary turnover in organizations. Problems coping with change-related uncertainties may explain the short tenure of many federal CIOs. While IT environments at the federal level have been the subject of a number of studies, far less is known about conditions in the 50 states. Like their federal counterparts, state IT departments have experienced considerable external environmental pressures to adopt strategic changes, have suffered similar adverse effects from CIO turnovers, and have struggled with finding a suitable organizational model that can balance centralized and decentralized approaches to managing IT innovations [5, 22]. The current research presents preliminary findings of a national survey of US state IT departments with focus on the perceptions of CIOs. Specifically, we address how they view their external environment and their agencies’ ability to learn and adapt in order to cope with technology-related changes. We pose three research questions: (1) how do state CIOs view their external environments; (2) how central do they see their office’s role in shaping and implementing the state’s IT strategies; and, (3) how do they judge their departments’ ability to learn and adapt? 2. LITERATURE REVIEW We begin our literature review with a discussion of the unique challenges facing state IT departments and their CIOs. We then offer a brief discussion of the consequences of rapid organizational change and appropriate change leadership approaches. We were especially interested in the perceived adaptive abilities of the CIOs and their departments. We then outline the study’s methodology, present our findings, and conclude with implications for researchers and public sector managers. 2.1. Accelerating changes in state government IT departments Over the past two decades, public agencies have encountered accelerating changes in at least five areas with significant technology implications: 1) improved service delivery (government to citizens and government to business); 2) data integration; 3) data standardization and sharing across organizational boundaries; 4) protection of critical information and systems in the wake of recurring attacks on public information infrastructures; and 5) the adaptation of existing structures and processes to a constantly changing external environment [21,36]. Despite most IT departments’ enthusiasm for technological change, the reported implementation challenges and failures are legend . Given the complexity of such projects and the high expectations associated with their implementation, such outcomes are not surprising. Moreover, as Yang and Melitski have cogently argued, each of these five areas of technological change are associated with often competing values, such as external versus internal priorities, or effectiveness versus efficiency criteria . While these observations about recurring challenges do not appear to differ much from those in the private sector, actors and organizations in the public sector work in unique institutional environments in which these technological changes are happening: political and policy priorities that cannot always be properly synchronized with the technological changes [8, 21,38]. This disjuncture produces conditions that are not easily captured by traditional change and leadership theories, as we will see below. Suffice it to say, states have undertaken valiant efforts to respond to the demands of the federal government to safeguard the nation’s wellbeing as well as their own state governments’ calls for improved service delivery and internal efficiencies. In the following we will discuss theories of organizational change and associated change management concepts, noting the limitations of traditional change concepts when applied to IT settings in state government. 2.2. Organizational adjustments in rapidly changing public sector environments Public organizations are facing spending cuts, increased external environmental turbulence, stakeholder hostility, coupled with increased demands for efficiency, effectiveness , and a client focus . As a consequence, public sector managers must be prepared to consider a broad range of proactive changes that can improve organizational functioning . Unlike changes in the private sector, public sector managers find that such changes have been difficult to implement given the often contradictory demands from multiple stakeholders  as well as resistant organizational cultures [17, 27]. Some authors view innovation and change as complex but manageable processes that rely on extant organizational capacities to deal with new knowledge, often referred to as path dependency [10, 25]. However, innovations, technological or otherwise, have the potential to create disruptions of institutionalized patterns of interactions between individual actors as well as between interdependent organizations. When change exceeds current capacities of the organization to absorb it into its existing processes, organizational leaders must decide if the costs of change are too severe, especially when coupled with a high degree of uncertainty about likely positive outcomes. Traditionally, contingency theorists have suggested that organizations must carefully scan their external environments  to determine the nature of the costs and benefits to derive reliable information to make decisions that seek to create a suitable “fit” between the goals of the change and the organizational design . Change often also results in realignment of power structures, resources and influence, and resistance to change is thus not uncommon as uncertainty looms large. 2.3. Leadership and change management Change management is a critical leadership role, especially when an organization’s external environment is dynamic or when organizational performance is lagging . Considerable work on transformational leadership (sometimes called charismatic or visionary leadership) has been conducted in the last few decades . Transformational leaders are said to be adept at articulating ambitious group goals, inspirational in spurring workers to achieve group goals, and supportive of organizational members in reaching goals . Yet, unlike in the private sector, transformational leaders within public sector organizations must also account for issues involving “the public interest, collaboration, constitutional values, citizenship, democratic values, networks of relationships, multiple layers of accountability, and a view of public administration as part of the governance process” [15:567]. Many contemporary researchers have been far less sanguine about the abilities of leaders to provide definitive answers to the problems they face . As Brunsson [9:4] notes: “when an organization is specifically designed to deal efficiently with one set of objectives, tasks and situations, problems may easily arise when it has to handle other objectives, tasks and situations.” Likewise, the earlier literature has largely overlooked the political dynamics associated with the emergence and embedding of innovative knowledge-based structures [12, 21]. When knowledge is emerging in an environment of uncertainty, leaders cannot rely on the traditional rational responses (scanning, cost-benefit analyses, etc.) to provide them with reliable answers. The nature of emergent knowledge is that little about its value is predictable. Instead, leaders must seek to create learning organizations where organizational members together seek ways to adapt to and manage change. In the current study, we focus on the CIOs’ perceptions of the external environment (e.g., turbulent, opportunity rich, controllable), and their office’s ability to develop, implement, monitor, and evaluate technology-related practices and policies throughout state government. Because there is no objective way of knowing what constitutes “the environment”, leaders and organizations "enact" an external environment that is consistent with their mental models . The way CIOs enact the institutional environment in which their departments operate, will lead to different organizational responses depending on the nature of the technological challenges they face. In some cases, organizations may experiment with structural adaptations that allow them to change without exposing their employees to inordinate stresses. Others may succumb to the temptation to “control” their internal responses . In some public sector organizations this has led to a tendency to centralize IT functions and to elevate IT departments to cabinet-level units. Therefore, it is very important to identify how CIOs perceive and characterize their environments. 2.4. Adaptation challenges and determinants of absorptive capacities: The view from the top Outside sources of knowledge are critical to induce innovation . Inputs of new knowledge can provide the trigger for innovation, or remove barriers that have prevented innovation. An organization’s ability to adapt can be viewed as a function of that organization’s absorptive capacity. Absorptive capacity, originally proposed by Cohen and Levinthal, is defined as the ability to recognize the value of new information, assimilate it, and use it for organizational purposes [11, 46]. Using the definitions provided by Zahra and George , the absorptive capacity process consists of acquisition, assimilation, transformation and exploitation. Acquisition is an organization’s capability to identify and acquire externally generated knowledge; assimilation refers to the organization’s routines and processes that allow it to analyze, interpret, and understand the information; transformation is an organization’s capability to develop and refine the routines for combining its existing knowledge and the new knowledge; and exploitation is its routines that leverage the existing knowledge and integrate the new knowledge such that it may be applied in the firm . This paper focuses on the acquisition phase, which is the first step in the knowledge creation process of absorptive capacity. The first component of the acquisition phase requires some understanding of the external environment. Within the field of IT, technology is changing at an ever increasing rate. As stated previously, CIOs are faced with increasing changes in the environment. Organizations must adapt to these changes or risk obsolescence. CIOs’ perceptions of the external environment will influence their perceptions of the external information. To gain external information, pathways to import new information into an organization need to exist. Powell, Koput and Smith-Doerr  found that the quality of exposure to the external environment provides opportunities for better access to information. In some cases, organizational members may be unaware of the information available in the environment. Another component of the acquisition phase involves an organization’s ability to monitor the external environment and for organizational members to synthesize this information into concepts and/or ideas that may be useful.. This is often referred to as knowledge scanning. The third component of the acquisition phase is the ability to import the knowledge into the firm. Does the CIO have the authority and responsibility to see the acquisition through the absorptive capacity process? Without this authority it does not matter how much environmental scanning is occurring in the organization, the knowledge will not be absorbed into the organization. From a technology perspective, while Aladwani  found that absorptive capacity is an important determinant of positive IS project outcomes, Lei and Hitt  argue that relying extensively on external technology could degrade an organization’s absorptive capacity. Without investing in the organizations’s absorptive capacity, technological knowledge is of little long-term benefit to it . Therefore, in the current study, we investigate CIO perceptions regarding whether or not their department has the capacity to effectively absorb information related to technological changes. 3. DATA and METHODS 3.1. Participants and procedure Data were collected from CIOs and CTOs across the United States. The names and e-mail addresses of the state CIOs/ CTOs were obtained from the NASCIO head office in Lexington, KY. The Executive Director of NASCIO contacted each of the state CIOs by e-mail, giving them the URL for the survey website and encouraging them to complete the survey. A reminder e-mail went out two weeks later. The on-line survey took approximately 25 minutes to complete and consisted of 125 questions. In order to maintain anonymity, personal identification data were not collected. The sample for this study consisted of 27 respondents from 16 states (with three states having multiple respondents). Sixty-one percent of the respondents were male, their ages ranged from 24 to 66 (M = 49, SD = 8.4), and they had worked in IT from 1.5 to 40 years (M = 23.4, SD = 10.5). In terms of education, 50% had a graduate degree, 38% held a bachelor’s degree and 12% had an associate’s degree or less. 3.2. Measures All survey items came from previously validated scales. However, we did pre-test the on-line instrument to be sure that the electronic entry worked correctly. For this research we will use responses from questions which we believe best characterized the CIOs’ views of their external environment (external environment), how they rated the absorptive capacity of their department (absorptive capacity), how much they believe their office influences the state’s technology policies (centrality), and what types of activities they engage in to prepare their organizations for ongoing and rapid changes (scanning). Responses were recorded using a 7-point Likert-type scale (1 = strongly disagree, 7 = strongly agree) or a 7-point control scale (1 = full control, 7 = no control). CIOs were asked to assess their organizations’ external environment. The question used a bipolar scale  using three items ( = .79) where the lower scale indicates a more stable, opportunity-rich environment. Nine items from the absorptive capacity scale  were used ( = .96). CIOs commented on their staffs’ ability to identify, acquire, evaluate, assimilate, integrate, exploit, and use new information and knowledge. A score of 1 would suggest that the state is not considering the adoption of a specific technology and score of 7 would indicate that the state has fully adopted and implemented the respective technologies. To determine how central the IT department was in shaping technology policies and policy implementation in the state, ten items were adapted from a centrality scale developed by Anderson and associates . Lower numbers indicate higher perceived control. Centrality had an alpha of .91. Scanning the external environment for new knowledge  was measured using seven questions ( = .92). Specifically, we investigated the acquisition and absorption of six IT technologies or technology/processes and how extensively they were being used. We selected 3 technologies (Voice over the Internet Protocol (VoIP), Web2.0, and Geographic Information Systems (GIS), and three technologies that involve both technical and process elements: Enterprise Resource Planning (ERP), Customer Relationship Management (CRM), and Service Oriented Architecture (SOA). Based on the review of the literature and the suggestions of the Executive Director of NASCIO, these six appear to either currently be used in state government IT departments or are being considered for use in such departments. Regarding the technologies, while GIS has been used in the public sector for quite some time, the other two (i.e., Web 2, VoIP) are more recent technologies. ERP was first used in the 1970s and 1980s in the private sector and incorporated in the 1990s in governmental IT departments. Because processes are much more difficult to implement ERP failures were quite extensive [14, 33]. ERP implementation is influenced by economic conditions and the maturity of the IT organizations because more mature organizations have a better understanding of the IS environment . CRM and SOA are newer entrants into governmental agencies (1990s to early 2000s). SOA was especially heavily pushed by the federal government and NASCIO has an active program in place to help states with its implementation. 4. RESULTS Research question 1 asked how CIOs view their external environment. Responses ranged from 1.33 to 6.67 (Mean = 3.67, SD = 1.35) which suggests that most CIOs felt that their environments are somewhat stable, rich in opportunities, and controllable. Those who described their environment more positively were more likely to report that their staffs engaged in more knowledge scanning (r = -.65) and had a high level of absorptive capacity (r = -.59), and rated their office as more central in formulating their state’s IT policy and practices (r = .70). Research question 2 asked how central the CIOs saw their departments’ roles in actions such as formulating IT policies for the state, developing and enforcing IT standards, or writing and monitoring the implementation the state’s IT strategies. Responses ranged from 1 to 6.2 (Mean = 3.51, SD = 1.45) which suggests that many CIOs felt their departments are somewhat central in formulating, implementing, and assessing the state’s IT policy and processes. Those CIOs who thought their departments were more central in the state IT policy formation and processes reported their staffs engaged in significantly more knowledge scanning (r = -.72) and rated their department’s absorptive capacity higher (r = -.40). Finally, with research question 3 we also wanted to know what CIOs are doing to track new IT developments, given the increasing uncertainty with regard to technological changes, how much they may be learning from other states or from industry. In terms of knowledge scanning, the range was between 2.57 and 7.0 (Mean = 5.23, SD = 1.09) which suggests a high level of knowledge scanning in many state IT departments. In terms of absorptive capacity, CIOs’ responses ranged from 2.67 to 7.0 (Mean = 5.11, SD = 1.81) which indicates that many feel their staffs can effectively absorb information related to new technologies. As would be expected there was a significant relationship between knowledge scanning and absorptive capacity (r = .57). (Table 1 about here) Table 1 1 2 3 Absorptive Capacity 1 Knowledge Scanning .57** 1 Centrality -.40* -.72** 1 External Environment -.59** -.65** .70** *significant at .05 4 MEAN 5.11 5.22 3.51 1 3.67 **significant at .01 As a post-hoc analysis, we were interested in getting a more nuanced picture of absorptive capacities regarding the six specific technologies or processes using technologies identified earlier. All responses to this question were recorded on 1 to 7 scale (with 1 being not considering or adopting the technology and 7 indicating complete infusion into the unit). Twenty-one of the 27 CIOs responded that they used GIS and reported that it was well infused into their units’ technology usage (Mean = 5, SD = 1.4). Fewer departments reported use of VoIP (n=11) and Web 2.0 (n=10), with infusion means of 5.5 (SD = 1.08) and 3.9 (SD = 1.5), respectively. This would suggest that VoIP has been adopted by fewer states, but those who use it have strong levels of acceptance. In terms of the technologies with technical and process elements, ERP was present in 10 states, but those who had adopted it showed high absorption rates (Mean = 6.1, SD = 1.1). Thirteen states reported adoption of CRM and 12 had adopted SOA (with reported means of 4.6 (SD = 1.3) and 5.4 (SD = 1.4) respectively. This again would suggest that these technologies have been adopted by fewer states, but those of use it show fairly high infusion rates. Finally, we correlated all 6 technologies/technology processes with our 4 variables. Knowledge scanning was significantly correlated at the .05 level with Web2.0 (r = .73), CRM (r = .55,), SOA (r = .58), VoIP (r = .69), and with GIS (r = .68) and with ERP (r = .83) at the .01 level. GIS (r = -.52, p < .05), VoIP (r = - .72, p < .05), and Web2.0 (r = -.73, p < .05) were correlated with centrality. GIS (r = ,79, p < .001), VoIP (r = .83, p < .01), and Web2.0 (r = .56, p < .10) were correlated with absorptive capacity. VoIP (r = -.71, p < .05), GIS (r = -.61, p < .01), and CRM (r = -.54, p < .10) correlated with the external environment. 5. DISCUSSION and PRELIMINARY IMPLICATIONS This paper has provided us with an initial glimpse at state IT organizations’ responses to technological changes facing them. IT adoption and implementation in state government is influenced by two primary drivers: organizational/internal factors and external environmental conditions. Successful agencies manifest a high degree of awareness of their own agency culture as well as the receptivity of their key stakeholders to the introduction of a new technology. Fiscal and political conditions in a state often temper IT professionals’ and other governmental administrators’ enthusiasm for the adoption of new technologies. Likewise, citizens and businesses may lack trust or confidence in governmental agencies . Our first research question sought to identify how CIOs view their external environment. The range of their responses varied widely from those who described their environment as very stable, opportunity rich and controllable to those who described their environment as more turbulent, lean, and unmanageable. How they viewed their environment was significantly related to how they described their staff’s efforts at knowledge scanning and their absorptive capacity. Those who functioned in less problematic environments also reported playing a more central role in their state’s IT policy formation and processes. The second research question asked CIOs how they described the centrality of their offices in the adoption and infusion of new technologies in their own departments as well as across state government. Again, responses varied considerably. CIOs, being aware that the introduction of new technologies, and even more so technology based processes, require considerable amounts of time, have recognized that they must be proactive and assume critical leadership roles for their states. As mentioned earlier, in some states, CIOs may be on the verge of becoming change agents for state government as a whole The ability to absorb and integrate new knowledge into extant technological infrastructures remains foremost on CIOs’ minds. Examples such as Utah and Michigan come to mind: "Until we can get very high adoption rates, it will slow down our being able to get efficiencies out of electronic government," said thenMichigan CIO Teresa Takai . The results of this study suggest that CIOs attempt to create departmental environments that encourage their staff to assemble clues both internally and externally regarding if and to what extent to adopt technologies. This, of course, is typical of the IT profession. IT managers must constantly be alert to new developments that may affect their field. Technologies to be successfully implemented require a high degree of adoption rate . With technologies that are largely implemented internally, or whose adoption can be mandated, there is a greater chance that adoption will actually occur. However, in answering research question three, once again we see that the state CIOs vary widely in their description of their staffs’ ability to engage in knowledge scanning and absorptive capacity. The introduction of complex technologies such as CRM and SOA carry a high risk of implementation failure in the public sector because of the myriad of vertical and horizontal linkages that must be maintained as well as the plethora of legacy systems . CIOs who are more likely to be attentive to external environmental pressures are more likely to make such serious commitment. In the public sector, however, external influences or forces are both political and economic in nature, and can send conflicting signals to these managers (fiscal exigencies in state government, experiences in the private sector, and political commitments from their political principals). It would thus be important to address such factors in future analyses. More research is needed to determine what accounts for the differences in correlations of various technologies with our four variables. Among others we will: (1) correlate the survey data with other information available about individual state’s innovation efforts, (2) create a website that will be accessible to all states which participated in the survey and that will allow them access to aggregate findings produced by survey as well as summaries of efforts underway by participating states gleaned from their states’ websites, and, (3) provide individual states that generated sufficient responses at all three levels (CIO/managers/employees) with individualized reports to assist the CIOs in better understanding their state’s technology and management environment. 6. ACKNOWLEDGMENTS 1B The researchers are indebted to the National Association of State CIOs (NASCIO) for its support of this project, and the generous funding provided by the Diane D. Blair Center of Southern Politics and Society and the Sam M. Walton College of Business, University of Arkansas. 7. REFERENCES 2B  Aladwani, A.M. 2002. 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