1.3 More About People

Organizational Structure and Strategy

We discussed the different people who use AIS, but let’s also look at the organizations in which they work as a whole. Earlier, we discussed how publicly traded companies must have SOX-compliant systems. Other company characteristics, such as organizational structure, will also influence each company’s AIS requirements.

Ideally, organizations are structured in the most efficient way to achieve company objectives and goals. It is important to examine the relationship between an organization’s structure and its workforce strategies and how this relationship affects (and is affected by) company information systems. Let’s take a quick tour of the most common organizational structures to compare and contrast their system needs.

Most organizations are hierarchies of some sort, resembling a pyramid. Traditional hierarchical structures broadly fit under one of the following categories: functional, matrix, divisional, or horizontal.

Functional Structures

Functional structures group employees with similar roles, responsibilities, or specialties, who then report to management within that function. This structure is popular because it clearly defines employee roles and expectations. However, it can insulate functions and unintentionally create silos between groups.

AIS Impact: Enabling AIS access (with appropriate user permissions) to other departments can reduce silos and facilitate collaboration toward shared goals. Alternatively, continuing to restrict access may reinforce silos and “it’s not my job” work cultures ruled by existential conflicts of interest.

Figure 1.3: Functional structure groups employees with similar roles, responsibilities, or specialties. Each group of employees reports to management within that function.

Matrix Structures

Matrix structures are organized similarly to functional structures and are often used in large multinational organizations to promote the sharing of skills and knowledge across departments. Employees with similar skill sets are grouped and can report to more than one manager, such as a functional manager and a program manager. The dual reporting system can create some confusion about authority and resource tracking. In some instances, matrix organizations use “dotted line” reporting structures so that only one manager is defined as the formal “solid line” manager on the organizational chart.

AIS Impact: Sharing skills and knowledge across departments may also include data sharing across departments. In the example below, if each project is getting financial information from different finance managers with different ways of tracking project finances, the Director of Projects may be comparing project financials that are actually “apples and oranges.”

Figure 1.4: Matrix structure groups employees with similar skill sets who can report to more than one manager.

Divisional Structures

Divisional structures separate an organization into divisions based on product, service, geography, or market. These divisions then operate independently using their own resources. While this allows each division some autonomy to focus on its specific operations, it does create a duplication of resources and activities across the organization.

AIS Impact: Under the guise of consistency and efficiency, some parent companies attempt to develop one-size-fits-all systems to work for all divisions, regardless of their product, service, geography, or market. This blatant PPT framework violation ends up costing a lot more time and money to implement a new system, only to entirely scrap it later.

Figure 1.5: Divisional structures separate employees based on product, service, geography, or market, so each group of employees has its own autonomous hierarchy.

Horizontal (Flat) Structures

Horizontal (flat) structures operate without extra layers of management. The absence of middle management reduces budgets and facilitates efficient decision-making. This structure is commonly used in early-stage start-up companies, which begin with small teams of key employees. However, when employees maintain similar levels of authority, identifying key decision-makers can be difficult.

AIS Impact: Small start-up companies often begin as a side project with no full-time employees and no finesse for financials. These “idea guys” may decide to save a few dollars and get by on an Excel database DIY until tax season arrives.

Figure 1.6: Horizontal (flat) structure operates with an absence of middle management, which can reduce budgets and facilitate efficient decision-making.

You can see how an organization’s AIS decision can directly impact the business and its efficiency. As we mentioned before, information systems continually need fine-tuning for one reason or another—no technology implementations go without change. Referencing the PPT framework is always a good rule of thumb for any phase of organizational change management.

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