Information Systems and Organizational Structure

2.5. Information Systems and Organizational Structure

Managerial decisions are made within the structure of an organization. According to Uma G.Gupta, “Organizational structure identifies the level of responsibility, authority, management, and scope of control of employees in the organization.”

There are two types of organizational structure:
• Pyramid or Hierarchical structure.
• Task-based structure.

2.5.1. Pyramid or Hierarchical Structure
One of the most popular organizational structures is the traditional pyramid, or hierarchical, structure.

According to Gupta, “The pyramid structure is an organizational hierarchy with the chief executive officer (CEO) at the top and non-managerial employees (staff) at the bottom. Middle managers are somewhere between top management and non-managerial employees.”

The Pyramid Structure divides management into three layers:
a. Top level or Top management
b. Middle level or Middle management
c. Lower level or Lower management

a. Top Level or Top Management
Top layer of the pyramid consists of top managers, who established the vision and the long-term goals of the organization and chart its overall course.

“Top executive develop overall organizational goals, strategies, policies, and objectives through long-range strategic planning. They also monitor the strategic performance of the organization and its overall direction.”- James A. O’Brien

The decisions of top managers tend to be unstructured- that is, decisions that rely heavily on intuition, judgment, and experience.

Unstructured decisions include-
• Assessing the way competitors react to a new marketing strategy
• Predicting the impact of changes in the global economy, and
• Developing global competitive strategies, and so on.
Sometimes it is difficult even to simply identify the kind of information needed to solve unstructured problems. The relevant information may be incomplete, inconsistent, or unavailable.

b. Middle Level or Middle Management
The next layer in the hierarchical organization comprises of middle managers who coordinate, control, and monitor various activities in an organization and act as liaison between operational managers and top managers.

“Middle managers develop short-and medium-range plans and budgets and specify the policies, procedures, and objectives for sub units of the organization. They also acquire and allocate resources and monitor the performance of organizational sub units, such as departments, divisions, and other work groups.” – James A. O’Brien

The task perform by middle managers are partly structures and partly ambiguous, or unstructured; hence these tasks are called semi structured. Semi structured task include-
• Assessing the impact of different marketing strategies on product sales.
• Determining the impact of an increase in operational costs on company profits.
• Appraising the impact of a new tax law on returns on investment, and so on.

c. Lower Level or Lower Management
Lower-level managers are responsible for the day-to-day operations, activities, and transactions of an organization, which include inventory control, payroll, processing sales transactions, and keeping track of employee hours.

“Supervisory managers develop short-range planning devices such as production schedules. They direct the use of resources and the performance of tasks according to established procedures and within budgets and schedules established for the work groups of the organization.” James A. O’Brien

Lower level managers are responsible for the short-term performance of the company and mostly performed structured tasks, which are routine, are easily understood, and do not require intuition or judgment. For example, calculating the simple interest on a loan is a structured task. Usually, the information necessary to solve structured problems is readily available and easily applicable to the given problem.

The type of information required by managers is directly related to the level of management and the amount of problems in the decision situations they face. For example, the strategic management level requires more summarized, ad hoc, unscheduled reports, forecasts, and external intelligence to support its more unstructured planning and policy-making responsibilities

The operational management level, on the other hand, may require more regular internal reports emphasizing detailed current and historical data comparisons that support its more structured control of day-to-day operations.

Top and middle managers are more likely to be heavy users of external information- that is, information generated outside the firm by entities such as government, laws, regulations, competitors, and stockholders-than lower-level managers. Lower-level managers, on the other hand, need information to address short-term problems such as number of units to be produced, how to eliminate defective parts, number of transactions generated, number of hours worked by part-time employees, and so on.

2.5.2. The Task-Based Structure
Another type of organizational structure is called task-based organization.
“A Structure in which a group of people required to accomplish a given task is brought together based on their skills rather than on their places in the organizational hierarchy.”- Gupta

A good example of a task-based team is one that is assembled to perform surgery. A group of medical specialist and physicians comes together to accomplish the task, regardless of their levels within the structure of the hospital.

Task-based organizations also work well for companies that operate in highly dynamic business environments. The success of task-based teams depends a great deal on the ability of the team to share and disseminate information, so computers and information system play a vital role in such organizations.

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