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Information systems and organisational issues

Information systems and organisational issues

Information systems and organisational issues

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

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