How Information Technology Is Changing The Nature Of Work And The Organization?

“Information technology and business are becoming inextricably interwoven. I don’t think anybody can talk meaningfully about one without the talking about the other.”- Bill Gates

Introduction:

Globalization and competition among the companies have led to the expansion of the organizations and complexity in their structures. Information Technology can be used to manage and control this complexity. The bar graph below shows the annual spending done by corporations on information technology from 2014 to 2017. 

From the above graph, it is quite clear that the spending on information technology operations is increasing. Hence it can be concluded that the information technology is of immense importance to corporations and will be a source of competitive advantage for the firms. 

Nature of Work: 

Coordination:  

The B-2 stealth bomber is a military aircraft built for the US air force and the perfect example of how information technology can be used for coordination and communication within the organization and with the other strategic partners. It was built by four large firms; Northrop, Boeing, Vaught and General Electric. The most crucial requirement was that the various sections of an aeroplane to fit together precisely. Therefore a communication system was required for engineering coordination about the design of B-2 stealth bomber and compatible with all the four firms. The project was too large for one company to take responsibility for it. Secondly, some companies had relatively unique capabilities like General Electric possesses the expertise to design the engines. Hence, resulting in the formation of synergies. The online centralized database called product definition system was established at Northrop and was made accessible to all the major sub-contractors and suppliers. Comprehensive information on the sizes, shapes, parts and components was stored in a centralized database. This allowed much better communication between designers, manufacturer and maintenance people. Even access was made available before the design was finalized so that those in manufacturing and quality control can check that the design met their requirements. There were several different designing rules available. Systems used for communication ensured standardization. Before anything was entered into a centralized database, all the models and drawing were verified according to the modeling rules. Thus the system assured consistency in data. Another important feature was this system was an automatic updating mechanism. This ensured that the engineers are always working on the latest version of the models. Product definition system was transmitting large volume of data in a very economical way and also reduced human asset specify by removing the third party for the coordination and communication. Information technology also helped managers to prevent measurement cost. Whenever a network of independent contracting firms is working on a single project, it may lead to a measurement cost. Which means that the individual performance of a firm would be difficult to monitor and can result in a less contribution by any one firm. However, the Product definition system avoided this issue and ensured that every firm contributed to its best.  

The above diagram shows the division of work of aircraft among four firms.

Decision Making:

Everyone is quite acquainted with the fact that the information technology has assisted managers in making quick and sound decisions. But the real question is how the decision-making process has changed since the advent of information technologies? 

The answer is based on the propositions provided by George P. Huber in his article “A Theory of the Effects of Advanced Information Technologies on Organizational Design, Intelligence, and Decision Making.”

• The first change is that information technology leads to a diversified and larger number of people participating as a source of information in the decision-making process.
• Information technology will decrease the number of people recruited for face-to-face decision units.
• Information technology has reduced the number of decision-related meetings. Information Technology can rapidly analyse the vast amount of information stored in the database and can provide relevant conclusions to the managers.
• Information Technology has made the information accessible for everyone. It implies that employees are familiar with the current situation, problems and policies of their firm. Consequently, Information Technology enables employees to make decisions which are compatible with the goals of their firm. Since the decisions made by the low-level managers are in accordance with the policies of the firm, top-managers grant more autonomy to low-level managers and it leads to the decentralization
• Information technology has also reduced the number of organizational levels involved in authorization of a decision. 

Organization Form and Design:

Information technology completely changed the organizational forms and design. New organizational forms came into existence after the advent of information technology. The four most common organization forms are a virtual organization, negotiated organization, traditional organization and vertically integrated conglomerate.

Virtual Organization:  In virtual organizations, there is no need for a shared office and physical presence of employees. The only thing required is the information technology system to support their work and communication. Employees can connect to each other; attend meetings and discussions regardless of time and geography. Regarding this Galbraith said, “Using IT and various groupware technologies, the members of a department may be scattered throughout the world, but still have the feeling and experience of working closely with one another”. Outsourcing is the most important aspect of a virtual organization. Firms join together electronically to produce a service or product. For instance, Jay Chiat, an advertising firm has eliminated physical offices for many employees. These employees can even work from their homes.

Negotiated Organizations: Negotiated organizations are those firms whose existence and profitability depend on the agreements it has with other strategic partners. Calyx and Carolla, a flower company in California, is based on two negotiated agreements. The  first agreement is with Federal Express for the delivery of flowers to customers on time and the second agreement is with flower grows to provide them with the best quality of flowers.

Traditional Organizations: Traditional organizations are those organizations which are using technology to make some changes in the structure without making any major modifications to the entire organization. They take advantage of technology to reduce layers of management, improve coordination and to reduce paper handling. Due to rapid changes in the environment, slow companies like traditional organizations will be at a major disadvantage.

Vertically Integrated Conglomerate:  Large companies with multiple suppliers and partners exchange data electronically under the control of that large company. Making the suppliers and other partners part of their business, thus forming a conglomerate. This organizational form has a control orientation. General Motors requires all its suppliers to use EDI system for coordination. For some suppliers, the large portion of their income depends on General Motors that they become part of a large conglomerate that is controlled by General Motors.

Conclusion:

Information technology is redefining the way organizations used to operate. It has changed the nature of work by utterly evolving the landscape of coordination within and outside the organization and making decision process more simple and sound. B-2 stealth bomber aircraft is a very good example of showing how the information technology assisted a network of independent firms in coordinating the design of aircraft with perfection while reducing the communication cost. Information technology has drastically changed certain organizational design variables which have given birth to some new organizational forms like virtual organizations, negotiated organizations etc.          

Key Practitioner References:                                                                                                                                             

• Nicholas S. A. (1999). The Impact of Information Technology on Coordination: Evidence from the B-2 “Stealth” Bomber. Organization Science, Vol. 10, No. 2, pp. 162-180.

• Henry C. L., & Jack B. (1994). The Role of Information Technology in Organization Design.  Journal of Management Information Systems, Vol. 10, No. 4, pp. 9-23

• George P. H. (1990). A Theory of the Effects of Advanced Information Technologies on Organizational Design, Intelligence, and Decision Making. Academy of Management Review, Vol. 15, No. 1, pp. 47-71

• J. Yannis B., &  Michael E. T. (1986). Information Technology and Corporate Strategy: A Research Perspective. MIS Quarterly, Vol. 10, No. 2, pp. 107-119

• Constantinos S. L., Jeffrey J. R., & Maurizio Z. (2016). Effects of Information Technology Capabilities on Strategic Alliances: Implications for the Resource-Based View. Journal of Management Studies 53:2, pp. 162-182