The Impact of Technology on Organizational Transformations

In recent times, technology has become an ever increasing presence in the workplace and it is one of the hot topics among the business world. More and more businesses, large and small, are trying to incorporate the latest technology into their operations. This notion is evidenced by the fact that the popular business publications now have technology sections, and information systems departments are becoming critical components of most organizations. Even this week’s issue of Business Week (February 27, 1995) carries a cover story on cyberspace and its application to business. The appeal of the whole information technology arena is that it is designed to make people and organizations more knowledgeable, efficient, and/or profitable.

The scope of technology that an organization can adopt or employ is vast, ranging from something seeming simple, such as buying a personal computer with a word processor, to investing in the latest state-of-the-art computer-aided manufacturing machinery. Regardless of the complexity of the system or the size of the organization, one thing is certain – the incorporation of such technology or information systems will accompany change. Purposely, I have not said that they will cause change because the reverse is also true. Implementation of technological systems can either act as a catalyst for change or be the means of achieving a desired change. Regardless of the motivation, a properly integrated system ideally will take into account the impact on the organization before it is put into place. This paper will look at the relationship between technological advances/information technology and change in an organization. It will also give some examples of how information technology has been implemented in some specific cases in industries such as aerospace, computers, oil and gas, railroad, and manufacturing.

The contribution of information technology and its impact on the organization is emphasized by Nadler, who states “perhaps the largest single influence on organizational architecture and design has been the evolution of information technology.”(Gerstein, p.5) Technology certainly has its place among the key elements which shape an organization. The model used by Andersen consultants is typical when it lists technology as an equal attribute, along with strategy, people, and business processes. The interconnectivity of these elements should be obvious, for one cannot be changed in a transformational sense without at least consideration of the others. While the formal structure or arrangements within an organization will likely be affected by the arrival of new technology, this does not have to be the case in all situations. A transformation can also occur through the business changing the way it operates. More specifically, information technology can be linked to changes in factors such as job design, physical layout or location, supervisory relationships and autonomy, cooperation inside and outside the organization, and formation of work teams.

One futuristic idea whose time has come is the notion of the virtual workplace. This concept is based on the idea of employees being able to work independently as a result of having access to information. One article proposes “the virtual workplace provides access to information you need to do your job anytime, anyplace, anywhere. . . employees do not have to be tied to their offices to do their jobs.”(Jenner, p.16) The idea of not even having a set office space certainly would be a change from the typical routine of showing up at the office from 9 to 5 (ideally) and performing your work at your desk. Such a plan would obviously be dependent on the job to be accomplished, but it is interesting to think of the supervisory implications. Such employees would have the ultimate amount of autonomy and would have to be managed accordingly. Tasks would have to be more objective or goal oriented and measures of job performance could no longer depend on face to face interaction, but rather would have to be tied strictly on the ability to complete assigned tasks.

It seems to be a common theme that information systems will change even more traditional supervisory relationships. Computer networks allow people to communicate quickly, share ideas, and transfer information without regard to physical locations, or to a reasonable extent, even without regard to the temporal dimension. Therefore, a supervisor will be able to monitor the activities of a larger number of subordinates without requiring them to report directly to him/her. Both David Nadler and Jeremy Main refer to this “span of control” as a measure of how many individuals or teams that a supervisor can effectively manage. Main makes the point that such spans will give way to “spans of communication” which he defines as the number of people that an executive can reach through a good information system.(Main, p.52) Nadler makes the prediction that such an executive could supervise hundreds of empowered individuals and groups.(Gerstein, p.173) It is important to note that again interdependency of people and technology comes up in the form of empowerment. Obviously, such relationships would not be possible under traditional job limitations, but through empowerment of employees, such a stage can be appropriately set. This implies that the employees are properly trained on the technology and that they understand the direction taken by the organization and their role in it. Thus the informal organization is also affected because now the culture is changing by giving employees more authority and self-direction. The renowned management theorist Peter Drucker sums up the autonomy of this new empowered employee by saying ” employees in the new information-based company will know what they have to do without a flock of vice-presidents feeding them information and orders.”(Main, p.50)

The use of information systems can also impact a firm’s relationship with suppliers or customers. The ability to gain information from others up or down a process or distribution channel makes having control over that process or entity less of an issue. This is especially true of companies that may have considered a vertical integration strategy, but now realize that “vertical integration becomes less necessary when companies use information systems imaginatively.”(Main, p.51) The ability to share information and the ease of transferring designs can also lead to an increase in outsourcing, which is a growing trend as companies try to reduce their own workforces and may find themselves shorthanded. As an example, Troy Pioneer Group has capitalized on this very concept by drawing designs and building prototypes and models for the top three U.S. auto manufacturers.(Main, p.52)

The tasks that employees perform within an organization are being drastically affected by the increased mechanization and application of technology as a part of the production process. In many settings, tasks previously performed directly by human operators are being automated, changing the human’s task to one of supervisory control. Now the expectations of an average employee in such an environment has to change, because they are no longer performing repetitive tasks, but rather must be able to recognize and react to problem situations. Such progress has to start somewhere, and in reality this movement towards robotics has its roots in the theories of scientific management.

Although it seemed to have merit in its time, Taylorism and scientific management is viewed now as the basis of the monotonous jobs typically performed on assembly lines and other piece rate labor. In a sense, the application of these principles de-humanized the tasks by breaking them up into a series of simple motions. This approach in turn led to the individual tasks being candidates for early numerical control efforts, eventually evolving into automation by robots. Some researchers feel that “without factory environments providing an abundance of requirements for such simple motions, it is questionable whether the industrial robot could have been developed at all” and that “industrial robots can only find use in areas where, in a very real sense, the human work has already been robotized.”(Fleck, p.625) The fact that today such work has been automated to a great extent leads to the issue of restructuring the work. A pattern which seems to be catching on is illustrated by Rosenbrock in his description of a workforce which shares in the purpose of production through the organization of production ‘islands’ or ‘cells’. These cells would be self-managing and responsible for scheduling, quality, supplies for their area, and the maintenance of their machinery.(Rosenbrock, p.169) He basically sees the automated facility as an opportunity to shift the emphasis towards work teams with a great deal of autonomy. In reality, these concepts have been implemented at the much celebrated Volvo production plant at Kalmar.

Although I started out by stating that the formal structure does not have to change to qualify as a transformation, the above discussions point to the fact that the structure will nearly always be affected by the implementation of technological systems. In his Fortune article, Main speaks about winning companies, saying “they will adopt fluid structures that can be altered as business conditions change. More than being helped by computers, companies will live by them, shaping strategy and structure to fit new information technology.”(Main, p.50) This emphasis on flexibility points out the fact that there is no one formula for determining how the formal organization will look after such a change. In his simile between organizations and architecture, Nadler points out that “in organizational terms, the role of the hierarchy as the principle means to coordinate, control, and facilitate communication is dramatically impacted by the capabilities of information technology…The existence of these capabilities, however, does not determine the organizational architecture of the future; it mearly makes a new architecture possible.”(Gerstein, p.25) Nonetheless, the efficiency gained from technology and associated information systems will generally serve to reduce the number of people in an organization. (Except perhaps in the information systems department/area. But with tightening budgets, even these departments are feeling the need to downsize.) Main also makes the prediction that corporate staffs could disappear, and that after implementing IT programs, it is common for an organization to move from a dozen layers of middle management between the front-line supervisor and the Chief Executive to about six.(Main, p.52)

Thus, a key advantage of information systems is to be able to simplify organizational structures. Although they served a purpose at one time, the benefits of improved coordination and increased supervision discussed earlier replace the need for tall, hierarchial organizations. In fact firms with well-developed management information systems lend themselves to a move towards flat structures. However, caution needs to be exercised. One author warns that delayering is not right for every organization and should not be done indiscriminately.(Nelson, p.56)

While implementation of information systems and technology in general can be a boon to an organization and be part of a transformation that results in radical improvement, it is also essential to at least consider the drawbacks associated with this progress. By doing so, the organization can avoid some of the associated pitfalls. These disadvantages can be categorized as behavioral and non-behavioral. To begin with the second of these groups, there are potential problems with the networks that would be established to allow information to flow. First of all is that as the number of users increases, strains on the system and on the ability to monitor users’ activities will begin to emerge. Furthermore, companies want systems that can cross organizational boundaries, which would be needed for the utmost level of outsourcing or collaborating design efforts. As many frustrated computer users would understand, there are potential constraints due to compatability between systems. In addition, such a system would make it easier for a potentially hostile company to gain sensitive information that it could use to its advantage.(Friedmann)

The behavioral issues revolve around two major themes. One is that people and organizations tend to reject new technology because they are reluctant to change. For this reason it is important that the change come about as part of accompanying change in the organizational practices and culture. It is also essential to incorporate organizational learning in to the acceptance of information technology. It is through learning (with coaching from those familiar with the technology) that the organization’s members will allow the change to take hold and reach new heights of productiveness.(Seybold, p.264) The second theme concerns employee involvement in the change and the resulting job satisfaction. This aspect relates back to the discussion of empowerment needed to effectively implement automated processes. If it is not viewed as part of an overall transformation, the addition of technological process improvements or information systems which on the surface take away human responsibility is likely to lead to job dissatisfaction. In one sense such advancements remove the last bit of skill that employees put into their job. Evidence of such discontent is given by absenteeism within the auto industry and by acts such as sabotage at a state-of-the-art General Motors facility at Lordstown, Ohio.(Alexander, p.401) The bottom line is that as good as technology may be, it cannot act alone as a cure-all to improve organizational effectiveness.

At this point it will be illustrative to give some examples of how information technology has been implemented in some example companies and industries.

The aerospace industry has been under tremendous pressure to change the way that they do business as a result of the shrinking availability of defense funds. GE’s Aerospace Division underwent a restructuring that was described by Phil Magrogan, a systems architect for GE, in saying “we’ve completely revolutionized our corporate structure, our management strategies, and the way we use technology.”(Vitiello, p.401) The technology change came in the form of new Sun Micosystem SPARC workstations which were networked together and equipped with Computer-Aided Design/Computer-Aided Manufacturing software. With this new system, engineers can track projects, share information and data, and even view images simultaneously. This advance came at the expense of 50% of the engineering staff, but with a savings of $12 million. (The system cost $3 million to put in place, but was funded by the savings from former salaries.) Under the new structure, several layers of reporting relationships were eliminated. The final product left only five levels between the president and the engineers. Furthermore, teams are used extensively. When a problem arises, a team of technical professionals will form to solve it, then disband. In this example, the restructuring of the information systems was done as part of an overall plan and resulted in radically different processes and relationships. Magrogan also says “it is likely that the next IS organizational chart will not show standard boxes and lines. Instead, it will indicate interlocking circles representing people whose job functions mesh to perform certain tasks.”(Vitiello, p.86) (As a footnote, these changes still didn’t prevent GE from divesting of its aerospace division by allowing it to merge with Martin Marietta a year later.)

Information technology was also a core element of the turnaround of Union Pacific Railroad. The overall goal was to eliminate layers of unnecessary middle management, increase their efficiency, and improve customer service radically. Accomplishing this goal would not have been possible without the technology implemented in their revised, centralized operations. All customer service functions were consolidated into one National Customer Service Center in St Louis, where customers could be given up to the minute information on their shipments and UP’s schedules. This in turn, is made possible by the world’s largest computer controlled dispatching facility located in Omaha, Nebraska. In this facility, a 100 yard long screen displays all of the railroad’s trains and 10,000 miles of track and constantly monitors the movements of each by means of electronic sensors on the train cars.(Kupfer, p.142) Their success at implementing this technology along with the other accompanying changes, both formal and informal, enabled UP to make a dramatic turnaround.

Independent petroleum companies face extremely hard times, given the domination of the industry throughout the world by state-owned companies and large corporations such as Exxon. In 1990, there were less than 15 independent oil companies, all struggling to survive. This is the type of crisis that prompts companies to rethink their strategies, and in the case of these independents, they saw that to remain competitive, they “must develop and apply a strategy based on technology and multidisciplinary team dynamics.”(Greene, p.49) With the aid of Gemini consultants, these independents have identified critical issues that they must focus on. These areas are improving internal communications, integrating information systems, simplifying processes, rewarding contributors, and streamlining organizational structure. Although information systems is specifically listed as one, they understand that this aspect is also linked inseparably from the others. Of the most significance is the fact that the traditional organizational structure of having an exploration division and production division, each with their own hierarchy was completely replaced by cross-functional teams. The implementation of these teams was assisted by new information systems and computing resources which allowed communication between teams and allowed all of the independents to share a common database. As in the previous example, the system was designed to give them all of the tools needed to autonomously perform any needed geoscience functions.(Greene, pp.49-51)

Many information systems departments themselves are also discovering that they can stimulate improvement in overall company performance by integrating information systems to internal structural change. To do so involves establishing self-directed work teams with more responsibility and freedom. For example, West Coast Energy, Inc. is a natural gas transportation company in Vancouver, British Colombia. They found that the original support provided by their systems and information systems staff did was not aligned with the way that the company did business. After failing at one attempt to fix the problem, they realized that the key was in the linkage between the processes and the information technology. The division manager of information systems and technology summed it up as “originally, we tried to disperse the staff out to the business units, but we were getting little receptiveness. Later, we implemented a reorganization to align IS with business processes. We used to be functionally aligned. Now we are business process aligned.”(Goff, p.100) Another example of this same issue in a different industry is Metronic Corp in Minneapolis, which makes medical implant devices. Their 90 member information systems department is organized into sixteen functional teams that are aligned with the corporations six lines of business. But there still is flexibility. As the project load changes, team members may cross over to other teams to provide assistance.(Panepinto, p.84)

From this discussion and the examples given, it is apparent that technology is a critical element of organizational transformations. While it is generally viewed as progressive and a means to increase the efficiency and overall performance of a company, this can only happen if it is done as part of a larger change effort, regardless of whether the change is driving the technology, or technology is driving the change. Companies that are able to successfully undergo such changes will be better prepared for the future, since there is no doubt that the emphasis on increased use of information technology and advanced automated systems will continue. As one source put it, “the trend toward a highly mobile, flexible, dynamic, informed and networked workforce is growing exponentially.”(Jenner, p.15) With this fact in mind, Nadler’s quote regarding the evolution of technology is as relevant today as when it was written.

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