Information Systems: the
Foundation of E-Business
(CIS 108)
Organisational Structure & Technology
Lecture SIX (21st February 2005)
Amare Michael Desta
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Aims
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To explain the concept of organisation
and organisational structure
To explain the different types of
structure that exist within organisations
To highlight the relationship between
organisational structure and technology
To describe the various ways in which
the IT function can be organised
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Organisations
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A social unit created specifically to
achieve certain goals. These goals are
realised through the division of labour
and the implementation of rules that
make it possible to control performance
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Classification of Organisations
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Economic – businesses
Protective – police, armies, trades unions
Public service – hospitals, local authorities,
schools
Leisure – clubs, societies
Voluntary – charities, TA
Religious - churches
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Organisational Structure

“…the pattern of relationships among positions in
the organisation and amongst members of the
organisation. Structure makes possible the
application of the process of management and
creates a framework of order and command through
which the activities of the organisation can be
planned, organised, directed and controlled.”
(Mullins, 1999, p.520)
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Purpose of Structure
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Divide up organisational activities and allocate them
to sub units
Co-ordinate and control organisational activities so
that the goals of the organisation can be met
Facilitate the flow of information within the
organisation, thus reducing uncertainty in decisionmaking
Co-ordinate the diverse activities within the
organisation, thereby integrating the activities of the
different individuals, groups and units
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Organisation Charts
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Organisation charts graphically depict
the organisation’s formal structure, the
locations of individuals, jobs,
departments, divisions etc within the
hierarchy.
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Ways of Organising Tasks
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By
By
By
By
function
product or service
market
process
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Types of Structure
Function-based
IT
Chief Executive
PERSONNEL
MANUFACTURING
FINANCE
Product A Product B Product C
Product-based
P
M
Product B
F
S
IT
Geographical-based
P
P
M
Area Y
Area z
F
M
Product C
F
S
IT
P
M
F
S
Chief Executive
AREA X
IT
Area X
Chief Executive
Product A
IT
SALES
AREA Y
S
IT
P
M
AREA Z
F
S
IT
P
M
F
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S
Matrix Organisation
Production
Marketing
Finance
Research
Project A
Manager
Project B
Manager
Project C
Manager
Vertical Flows of Functional Authority
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Horizontal Flows of Project Authority
Chief Executive
Process Based Approach
Customer
Production
Marketing
Sales
Customer
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By Process
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A process is a succession of actions that lead to the attainment
of some result
A process has an input and an output and consists of a series of
individual tasks through which the input passes to become an
output. During the process, value is added to the input to
transform it into an output
The process approach to structure looks at the way a new
product or service is created, customer order is filled etc.
without regard for functional boundaries
The majority of activities a business undertakes are part of nonstrategic processes
Some processes are core to the business because of they
capabilities they it for competitiveness, e.g. production of
goods, alliance management, marketing and branding
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Engineering Firms
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Designing
Producing
Selling
Delivering
After-sales service
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Processes in a Restaurant Chain
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Purchase supplies
Store food
Take orders
Cook food
Serve food
Bill customer
Receive payment
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Centralisation v Decentralisation
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Centralisation
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Centralisation describes a
state in which all major
decisions are taken by one
central body. These
decisions are implemented
by those lower in the
organisation and are
binding on them.
It is the tightest means of
co-ordinating decisionmaking within the
organisation and of
ensuring control
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Decentralisation
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Decision-making power is
dispersed throughout the
organisation
As organisations expand,
particularly geographically,
some decentralisation is
inevitable to enable the
organisation to respond to
local problems
May occur naturally through
the setting up of
subsidiaries, divisions,
strategic business units etc
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Flat Organisations
Characteristics
• Few levels of authority and
management
• Short chain of command
• Broad span of control
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Tall Organisations
• Found in larger organisations
• Numerous levels of authority and
management
• Narrow span of control
• Long chain of command
• High levels of formality,
specialism and standardisation
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Classical Approach: Fayol
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Worker should have only one boss
Work should be divided into discrete,
specialised tasks
Management should create stable work
groups and offer job security
Management should devise plans centrally
and set objectives throughout the
organisation so it has unity of direction
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Classical Approach: Max Weber
(1864-1920)
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Organisation should be governed by rules and
regulations defined by officials
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Clear division of labour
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Appointments based on technical competence
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Roles should be clearly defined
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High level of specialisation
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Authority based on hierarchical division
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Contingency Approach
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Organisations may share some similar characteristics
but they differ in important ways
There is no one right way to manage them
The structure of an organisations should reflect its
unique characteristics
Structure is influenced by the organisation’s mission,
its external environment, size, technology,
demography, labour force characteristics
Decisions about structure rest with senior
management but structure is also created by the
daily interactions of staff
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Bureaucracy
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Advantages
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Rational form of
organisation
Clear rules governing
behaviour facilitates
consistency in behaviour
and high level of
predictability
Enables managers to
cope with the demands
of large-scale enterprise
and need for
specialisation & division
of labour
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Disadvantages
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Inflexible and resistant
to change
Encourages conformity
and passivity
Problems with
communication
Often slow to react to
threats
Stifles innovation and
creativity
Can result in red-tape
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Implications for IS Design
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The way an IS is designed will to some extent be determined by
the structure of the organisation, e.g. in a function based
organisation, IS will be designed to meet the specific
requirements of the function. Historically, IS have evolved as
federations of functional information systems.
There are problems with designing systems around existing
structures – the structure may be inappropriate, structures
frequently change etc.
When designing systems it is important to try to base IS design
on business strategy and objectives since this influences the
structure of the organisation and defines the goals of the
system
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Implications for IS Design
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IT can facilitate structural change in organisations by enabling
those in functional areas and in the various operating divisions
to communicate and have access to shared information. IT has
a crucial role to play in facilitating the shift from tall to flat
organisations and function to process-based structures.
Once systems are in place, they can become an obstacle to
organisational restructuring and change
Flexibility needs to be built into systems to allow for change
The position of the IS function within the organisation may be
influenced by the dominant structural arrangements
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The IS/IT Function
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In many large organisations, IS is so central to operational and
strategic effectiveness, there is a separate IS/IT department or
division
Changes in the use of IT within organisations as well as
dissatisfaction with the way central IT/IS departments operate
have led many companies to break up their IT/IS
departments/divisions and to devolve responsibility for IT/IS to
the business areas or to deploy teams of IS/IT professionals to
work with business managers in particular areas
In a federated IT/IS structure, a small central IT/IS unit
develops strategy for the organisations, sets standards for the
organisation, etc but day to day responsibility for IT/IS rests
with managers in the business units.
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IS/IT Function: Some of the Options
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All IS/IT staff work in the same department that serves the
needs of the entire organisation
All IS/IT staff work in a central department but are organised
into teams that look after systems in particular areas of the
business
The main operating divisions/units have their own IT staff who
are controlled by the relevant business manager
IT/IS staff work in the operating divisions/units but there is a
central IT/Is unit or ‘think tank’ responsible for devising
strategy, overseeing projects, purchasing equipment,
maintaining standards etc.
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Summary
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IS/IT professionals need to understand the structural
characteristics of organisations if they are to design effective
systems
There are a variety of ways organisations can group functions,
allocate roles and assign decision-making responsibilities. The
particular structure that is adopted will be determined by senior
management and will be influenced by both external and
internal factors.
IS/IT systems can both facilitate and impede change in
organisational structure
IS/IT systems should reflect the goals of the organisation and
must be amenable to change since both the goals and structure
of an organisation are likely to change over time.
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Reading
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For further understanding, read:
Mintzberg, H. (1975) The Manager’s
Job: Folklore and Fact, Harvard
Business Review, 53, 4, pp.49-61 as it
is available in the library.
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