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CHAPTER 8 – ORGANIZING IT_________________________
CHAPTER OBJECTIVES
Study of this chapter will enable the student to:
1. Understand Organizational Theory and how it can be applied in the design of the IT organization
2. Be familiar with the classical organizational structures common to business firms
3. Be familiar with current common business structures
4. Be familiar with ways that IT is organized today
5. Understand the federalist IT model
7. Appreciate how the appropriate organizational structure can improve IT and the firm
CHAPTER OVERVIEW
This chapter covers organization theory, popular organizational structures for businesses, and popular
organizational structures for IT. The merits and pitfalls of these organizational structures are discussed.
Organizations need to examine possible structures and decide whether it is right for them with the goal
of enhancing strategic alignment. The chapter stresses the need for determining the best organizational
structure and IT organizational structure so that the firm is more likely to achieve a favorable position in
the marketplace.
CHAPTER OUTLINE
I. Organization Theory: Early History
A. Organization Theory Entering into the 20th Century
B. A Discussion of Succeeding Organization Theories
C. Human Relations Organizational Theory
D. Modern Structural Organizational Theory
E. Power and Politics Organizational Theory
F. Systems Theory
G. Institutional Organizational Theory
H. Forces That Have an Impact on Organizational Design
II. The Changes to the Environment upon Entering the 21st Century
III. What Can Be Learned from Organizational Theory?
A. Organizational Infrastructure
B. Organizational Types
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IV. How Can IT Be Organized?
A. Traditional IT Organizational Forms
2. Decentralized IT
3. Federal or Hybrid IT
B. Benefits of the Federal IT Model
C. Adhocracy (Internal or Virtual) Organization Concept
V. Is There a Proper Fit for IT in a Business Organization?
VI. Strategic Alignment and Organizational Structure
VII. Why Adopt the Federal IT Model?
VIII. How Does a Firm Prosper if the IT Organization Is Right?
EXAMPLES IN ACTION
• A List of Organization Theory Highlights from Early World History – pp.197-198
• Nortel – p.218
• Calyx & Corolla – p.211
ANSWERS TO END-OF-CHAPTER REVIEW QUESTIONS
1. What are the major differences between machine bureaucracy and professional bureaucracy?
A machine bureaucracy is usually a large organization with a formal organization. Technology
2. How are the roles of managers affected by organizational structure?
3. What are the benefits and drawbacks of a centralized organizational structure?
Benefits of the centralized organizational structure are:
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Drawbacks of the centralized organizational structure are:
4. What are the benefits and drawbacks of a decentralized organizational structure?
Benefits of the decentralized organizational structure are:
1. Priorities are set by needs of products and processes reaching markets
Drawbacks of the decentralized organizational structure are:
1. Limited upward career paths
5. What are the benefits and drawbacks of a federalist organizational structure?
Benefits of the federalist organizational structure are:
Drawbacks of the federalist organizational structure are:
6. What are the benefits and drawbacks of an adhocracy?
Benefits of the adhocracy organizational structure are:
Drawbacks of the adhocracy organizational structure are:
1. Expertise gained from the project is not retained in the firm
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7. What is a vertical functional stovepipe?
A vertical functional stovepipe is usually a business function or business unit in a large,
8. What is a horizontal process tunnel?
A horizontal process tunnel is usually a business unit in a decentralized organization. These
9. What are the benefits and drawbacks of a matrix organization?
Benefits of the matrix organizational structure are:
Drawbacks of the matrix organizational structure are:
1. Conflict and confusion due to workers having at least two bosses
10. What should be the determining factor in how IT should be organized?
ANSWERS TO END-OF-CHAPTER DISCUSSION QUESTIONS
1. What would you consider some of the key considerations in organizing IT?
2. Why is the way IT is organized so important to the entire organization?
The IT organization should be organized so that strategic alignment with the business is achieved
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3. Why is the way business is organized so important to the IT organization?
The business will organize itself to best respond to its market forces. IT should then structure
4. Can IT be organized centrally while the business is organized decentrally? And vice versa?
There is no reason that IT and the business must follow the same organizational structure.
5. What are the merit and drawbacks to adhocracy? Why is adhocracy so popular?
Merits of the adhocracy organizational structure are:
Drawbacks of the adhocracy organizational structure are:
1. Expertise gained from the project is not retained in the firm
6. What impact does the current organization of the business have on how IT should be organized?
7. Why do organization theorists believe that they can find universal laws that can be applied to
management of firms?
Firms can select an organization structure that best enables them to deal with whatever market
8. Are there any laws about organizational structures that make sense? Explain.
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9. Why do companies reorganize their business so often? How could reorganizing help a firm?
Organizations are finding that they must quickly adapt to the market and competitive changes
10. How does IT improve if it adopts standards in development, procedures, testing, etc.?