Role of Information Technology in
Managing Organizational Change and Organizational Interdependence

4. IT-Organizational Interdependence Understood Through Open Systems Theory

Three sets of propositions are offered.

(A) IT's Role in Managing Organizational Change
(A-1) Environment-Goals-Structure
(A-2) Organic Structure
(A-3) Differentiation & Integration
(B) IT's Role in Managing Organizational Interdependencies
(C) The IT Paradox

(A) IT's Role in Managing Organizational Change

(A-1) IT and Environment-Goals-Structure

Churchman (1968) defined environment as those factors which not only are outside the system's control but which determine in part how the system performs. Uncertainty is the difference between the amount of information required to perform the task and the amount of information already possessed by the organization (Galbraith, 1973:5; Schoderbek, 1967).

Proposition 1: Turbulent environment drives organizations to use IT for monitoring the preferences of the environment.

System theorists have recognized the importance of "feedback" for the survival of the system (Miller, 1955) and for maintaining a "steady state" or "homeostasis" (Katz and Kahn, 1966). Organizations are purposive systems that learn of the impending threats by scanning. Scanning is the process by which the organization acquires information for decision making. The modes (surveillance and search) of scanning are primarily determined by the external environmental stimuli and are determined by the magnitude and by the direction of the discrepancy between the goal and its realization (Schoderbek, Schoderbek & Kefalas, 1980). While surveillance is useful for information-gathering process, search is oriented toward finding a satisfactory solution to a specific problem. Complex systems require complex controllers (Ashby, 1956). IT will provide the "complex controller" to the increasingly complex organization. The information systems of an organization need to evolve to remain consistent with the changing organizational structure (Daniel, 1961). Referring to the obscurity of causal laws of turbulence, Aldrich (1979: 73) argued that scanning could provide the firm with the desired "competitive edge."

Proposition 2: Turbulent environment drives organizations to use IT for translating the information on environmental preferences into goals.

Continuously changing environment requires organizations to continuously reassess their goals (Thompson and McEwen, 1958). Effective structuring requires a consistency among the design parameters and contingency factors (Mintzberg, 1979). Maniha and Perrow (1965) have demonstrated that organizations' goals can be generated by external forces, such as other groups seeking to use the organization to further their own ends.

Proposition 3: Turbulent environment drives organizations to use IT to align their structure with environmental preferences.

The very efforts of the organization to maintain a constant external environment produce changes in organizational structure (Katz and Kahn, 1966). Scott (1987) argued that organizational structure and goals are driven by the preferences in the environment. The structure is determined by the information- processing capacity requirements of the organization (Galbraith, 1977: 36) which in turn are governed by the IT being used. Aldrich (1972), Perrow (1967), Walker (1962) and Woodward (1958, 1965) have attributed structural differences to the organization's technology. Mintzberg (1979: 221) had suggested that the organization's environment and technology are the independent (contingency) variables that determine the structural variables of the organization.

Fowles (1987), in his narrative on the history of organizational communications technologies contends that the phenomenal expansion of organizations can be largely attributed to advances in the technologies of organizational communication. Yates (1987) argued that in absence of technological communication organizations could have evolved differently. Preliminary econometric analyses of the overall U.S. economy for the period 1975-1985 further confirms that the increased use of IT is correlated with decreases in firm size and vertical integration (Brynjolfsson, et al., 1989).

(A-2) IT and Organic Structure

Proposition 4: Turbulent environment drives organizations to make more use of IT for increasing their "organic" characteristics.

"Organic" firms are better equipped to sustain themselves in turbulent environment (Burns and Stalker, 1961). A dynamic environment will drive the structure to an organic state despite other forces (Mintzberg, 1979); the more complex the environment, the more decentralized the structure. Introduction of IT (automation) at the "operating core" level transforms a bureaucratic administrative structure into an organic one (Mintzberg, 1979: 265). Effectively, automation of routine tasks (Woodward, 1965) eliminates the source of many of the social conflicts throughout the organization.

Law of requisite variety (Ashby, 1956) implies that the rate of change of organizational systems must correspond to the rate of change of environmental systems, i.e., organizations with complex environmental interactions would develop complex structures (Becker and Neuhauser, 1975: 71) like adhocracies or networks. Adhocracy is suitable for a dynamic and complex environment, when the firm has sophisticated technical systems and the focus is upon consistently offering differentiated products (Mintzberg, 1979) for retaining the customers. Future organizations would be "networks" (Keen, 1991) characterized by adhocracies with flexible systems of projects and teams (Drucker, 1988; Malone and Rockart, 1993; Mintzberg, 1979) brought together quickly to accomplish specific tasks (Ramstrom, 1974; Rockart & Short, 1989; Toffler, 1985). Some existing organizations have already "farmed out" their operations by establishing them as separate organizations or contracting them out to other organizations (Mintzberg, 1979).

Proposition 4a: Turbulent environment drives organizations to use IT for empowering workers at all levels.

Growing availability of telecommunications has offered technologies like distributed systems and client-server architecture (Keen, 1991) that facilitate the process of empowerment of the lower levels (Mintzberg, 1979: 183). In the "informated" (Zuboff, 1988) organization, workers would be "empowered" by virtue of access to necessary information to perform higher-level tasks. Ramstrom (1974) has argued that tactical decisions relating to "soft" information would be delegated to the "grass-roots" where there is easy access to relevant information concerning the immediate environment, at the same time providing these levels with the information generated within the system by means of "cheap" (with internal coordination costs becoming negligible) internal information systems.

Proposition 4b: Turbulent environment drives organizations to use IT for increasing the spans of control.

Information technologies, by facilitating the standardization of coordination (Malone and Crowston, 1991), would facilitate larger spans of control or work units (Mintzberg, 1979: 139) which would be characterized by extensive lateral communication and self- contained authority structures.

Proposition 4c: Turbulent environment drives organizations to use IT for increasing lateral communications.

Selective use of lateral decision processes for situations involving task uncertainty increase the information processing capacity of the organization (Galbraith, 1973: 18; Ramstrom (1974). Bringing the points of decision down to the points of action (where the information originates) reduces the information overload on the managers. Since specification of "procedures" in complex situations (Becker and Neuhauser; 1975) creates inefficiencies, organizations in turbulent environments would use more IT resource for delegating the decision-making to workers ("empowerment"). Increased use of groupware (Wilke, 1993) for lateral coordination will spell the demise of middle-management (Bluementhal, 1963; Leavitt and Whisler, 1958, 1970).

(A-3) IT and Differentiation-Integration

Proposition 5: Turbulent environment drives organizations to reduce their "dimensions" by focusing on core competencies by leveraging their use of IT.

Proposition 5a: Turbulent environment drives organizations to use IT to reduce differentiation and integration to focus on increased specialization.

Organizations structure themselves to minimize coordination costs (Galbraith, 1970) and group together similar activities to achieve the benefits of process specialization (March and Simon, 1958). Environmental uncertainty or "task predictability" is the basic independent variable influencing the design of the organization (Galbraith, 1970; Perrow, 1967; Thompson, 1967). Faced with increased uncertainty, organizations can reduce the need for information processing by decreasing the "diversity of outputs" (Galbraith, 1973). Reduced differentiation and integration (Lawrence and Lorsch, 1967) of activities would decrease the coordination effort involved thus reducing the information processing requirements. Reduced coordination costs with IT would result in the substitution of IT for human coordination (Malone and Rockart, 1993). Greater specialization would be achieved by focusing on few core competencies.

(B) IT's Role in Managing Organizational Interdependencies

Proposition 6: Turbulent environment drives organizations to actively seek interorganizational (interfirm) relations to leverage their core competencies.

Cooperation, especially in the international context, will be necessary to gain a competitive advantage in the future (IBM, 1990; Cummings, 1980). To survive in an increasingly competitive environment, firms would form alliances that would bring together their core competencies to create the "best of all" products (Byrne, 1993; Drucker, 1988).

Proposition 6a: Turbulent environment drives organizations to reduce environmental complexity and uncertainty by seeking interdependencies (complex relationships) with other organizations in the environment.

Proposition 6b: Turbulent environment drives organizations to use more IT-effort to establish coordinating mechanisms with other firms.

To survive in the fast-changing environment the "adaptive organization" would be more like a shifting "constellation" (Mintzberg, 1979; Toffler, 1985) that has [IT] "linkages" (Pinfield, Watzke and Webb, 1974) with independent and semi- autonomous organizations. Use of interorganizational linkages such as EDI (electronic data interchange) would enable new forms of organizations and reduce the coordination costs of increasingly market-driven organizations (Malone and Crowston, 1991). Increasingly, electronic linkages are becoming the necessary condition of doing businesses with larger firms (Keen, 1991).
Using an analogy to the study of community chests conducted by Litwak and Hylton (1962), we observe that in the increasingly global competition, the firms are competing for the common customers' "fund" and the increase in one firm's revenue would come at the expense of other firm's loss [of customers]. Coordination, being a function of interdependency, should grow in periods of increased competition for "funds." (For a typology of interorganizational configurations based upon interorganizational control, see Lehman, 1975.)

(C) The IT Paradox

Proposition 7: Increasingly turbulent environment would feed the need for further [and greater] advancements in IT which would further increase turbulence.

Business needs are incessantly driving the demands for increased capabilities of IT. In turn, increasingly advanced IT is being utilized in more and more sophisticated ways by the businesses to outdo competition (Rockart & Short, 1989). IT, which is being deployed as a solution to the increased complexity and uncertainty of the environment, has paradoxically contributed to the situation by "compressing time and distance." In absence of the present day advances in IT, would we be talking of globalization or time-based competition? Perhaps, not. The pace of complexity is increasing fast. Hopefully, the advances in technology would be able to keep up with the environmental changes.

Discussion and Summary of Propositions

For researchers as well as practitioners, open systems theory provides a 'wholistic' perspective of the organizational issues which involves all the interactions in the environment- organization interaction matrix. Moreover, L22 (the 'turbulent environment') is increasingly significant because most organizational change is externally induced. "Survival of the fittest" is a function of the fitness of the environment (Terreberry, 1968). Organizational adaptability is a function of the ability to learn and to perform according to changes in the environment. Complexity and rapidity of change in 'external connectedness' (L22) results in increasingly unpredictable change in the organization's transactional dependencies (L12, L21). Adaptability exists to the extent that a system (L11) can survive externally induced (L22) change in its transactional interdependencies (L21, L12) in the long run. To confront increasing environmental turbulence, organizations are seeking to increase their transactional interdependencies (L21, L12).

In this article, the issues of organizational change and organizational interdependence have been used to illustrate some potential contributions of open systems theory. Tentative propositions outline research questions and hypotheses that might assist in solving some of the problems encountered by organizations. The propositions might be summarized as follows.

Proposition 1 asserts that faced with increasing environmental change, organizations will scan their environments more intensely and IT can be effectively used for this purpose. Proposition 2 and 3 argue that the feedback from the environment will be used to plan the organizational goals and the organizational structure by making effective utilization of IT. Proposition 4 contends that faced with increasingly turbulent environment, organizations will devise more organic structures by application of IT. Proposition 5 states that in the increasingly turbulent environment organizations would leverage their core competencies by deploying IT. Proposition 6 argues that organizations would use IT-enabled coordination-mechanisms for linking with other organizations in a turbulent environment to leverage their core competencies. Proposition 7 contends that increasingly complex and uncertain environment drives the increase in IT capability, and the use of newer IT capabilities further increases the turbulence.

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