Information systems and organisational issues

Agency theoryThe Agency Theory of the Impact ofInformation Technology on the Organization•Firm is nexus of contracts among self‐interestedparties requiring supervision•Firms experience agency costs (the cost of managingand supervising) which rise as firm grows•IT can reduce agency costs, making it possible forfirms to grow without adding to the costs ofsupervising, and without adding employees25 © Prentice Hall 2011 3-25FIGURE 3-7As firms grow in size and complexity, traditionally they experience risingagency costs. 26 © Prentice Hall 2011 3-26Organizational and behavioral impactsFlattening Organizations•IT flattens organizations– Decision making pushed to lower levels– Fewer managers needed (IT enables faster decisionmaking and increases span of control)• Postindustrial organizations– Organizations flatten because in postindustrialsocieties, authority increasingly relies on knowledgeand competence rather than formal positionsInformation systemscan reduce the numberof levels in anorganization byproviding managerswith information tosupervise largernumbers of workersand by giving lowerlevelemployees moredecision-makingauthority.FIGURE 3-827 © Prentice Hall 2011 3-2728 © Prentice Hall 2011 3-28