1 Chap 6 :Information System and Organization Change (Change Management) [Curry] chap 7Dr. Yeffry Handoko Putra, S.T. M.T Magister of Information System Universitas Komputer Indonesia

2 Born, change and die

3 Change in OrganizationStructure and Culture People Process Support process Business Network Process Management Process Structure and culture regard to information systems. The concept of and culture were extensively discussed with In the previous chapter organisational structure company is to make successful progress in the be determined by strategic objectives if the organisational ‘fit’ is very important and must structure: be changed in a number of ways in terms of its right business direction. An organisation may the extent to which it is centralised/decentralised physical design, which may involve changing • It needs to have an appropriate shape and • It has to be in the right location. This may of layers of management. and the hierarchical levels, in terms • It has to have the right type of ownership. It business units in remote areas. involve the creation of subsidiaries or independent need to become a public limited one. A privately owned company may may benefit from privatisation or nationalisation. Culture has to fit with structure. An atmosphere professional, motivated, innovative workforce. control works better in an organisation with a of informality, trust and absence of strict empowerment, strong departmental or functional requires collaboration, teamwork and What is more, if radical performance improvement a culture of stringent cost control will create focus is on customer and supplier relationships, loyalties may become an obstacle. If the work being done by imposing new behavioural which may impact the very nature of conflicts. Organisational culture is most import-ant when implementing technological innovations, requirements on users (Cabrera et al., 2001). of how well the social and technical systems task and organisational effectiveness is a function Aligning technology and culture is not an easy The balance within the workforce may need People are designed with respect to one another training of various types and at various levels of a result. The skills-base may be inadequate and altering and redundancies may be necessary as workforce may have to shrink to reduce overhead new technology is to be introduced. The core the organisation may be needed, particularly if costs and make way for contracting out to flexible as a result of new communication Location of workers has become increasingly independent agencies or specialised consultancies. networking may improve the quality of working hours of working. More in the way of technologies, resulting in teleworking and flexible each day to travel into heavily populated eliminating the need to face rush-hour traffic life by allowing people to work from home and metropolitan areas. Business processes have internal or external Processes throughout this chapter in business process Their change is discussed in some detail customers and cross-organisational boundaries. require change (see also Chapter 2, Figure 2.14). there are different business processes that may re-engineering. At this point it suffices to say that of the business and relate directly to external Core processes, which are central to the functioning These are (Murdick and Munson, 1986): customers. activities in the organisational value chain, e.g. They are usually the primary sales, operations. usually the secondary activities in the organisational provide support for the core processes. They are Support processes have internal customers and beyond the organisational boundary to suppliers, Business network processes, which often extend value chain, e.g. administration, finance. Management processes, which are those used by an logistics. customers and other stakeholders, e.g. outbound management review. resources and then make decisions, e.g. senior organisation to plan, organise and control Technology serve to integrate internal operations, and CRM, change in a number of ways, such as ERP, which Information technology supports and facilitates both. Two particular aspects of technology customers, with the aim of increasing value for which serve to integrate the organisation and its to increase the scope of organisational 1 The potential of telecommunications technology worth noting at this point are the following: 2 The potential of shared information systems and reduce the costs of that coordination. and inter-organisational coordination in a timely way to those who need it. and databases to provide relevant information

4 Reason for organisational ChangeInternal reason Resources have to be adequate and distributed Technology may be introduced into the organisation People within an organisation are themselves a stimulus for internal change Priorities may need to be changed Problems of different types arise within organisations and these are often powerful motivators of change Internal reasons for change Organisations can be structured and restructured in different ways according to the decision- making and political processes within their own boundaries. As there is a reciprocal relationship major task for senior managers is to determine between structure and strategy, a the most appropriate organisational form for various situations. If organisational effectiveness is to be improved be the right ones and need to be met. Resources to ensure future survival, goals need to have to be adequate and have to be distributed in the right way across the organisation. Managers and staff may be inadequately trained, Lines of communication and information flows demotivated and dissatisfied and lack cohesion. may be unsatisfactory or inappropriate. There may be contradictions and conflicts within and between the different elements of the organisation, such as strategic objectives, critical success factors, management style, degree of centralisation and information flows and networks. Resources have to be adequate and have to be appropriately distributed across the organisation. Resources may decrease or increase and need to be reallocated, restricted or concentrated in certain business priority areas as part of a change process. Technology may be introduced into the organisation. It may be an extension to what was already there or may be completely new. In either case, changes within the organisation will be triggered. People within an organisation are themselves a stimulus for internal change. Redundancies require redeployment of tasks and responsibilities and skills shortages require training and staff development to be updated. Priorities may need to be changed if, for example, achieved. Priority activities relate to critical organisational targets are not being success factors and organisational goals. The necessity to readjust internal priorities is a powerful force for change which will affect internal Problems of different types arise within organisations control mechanisms. and these are often powerful motivators of change. Wastage costs may be seriously affecting profits, and information flows may be communication. Increasing customer dissatisfaction inadequate, resulting in inefficiencies and poor requires attention as does an unprofitable product range. Marks & Spencer have had to reconfigure their product range quite the organisation with market demand. drastically on more than one occasion to realign The internal forces of change centre on the notion of ‘fit’. Culture and structure must dovetail with management tasks and behaviour to whole. Mismatching elements, internal inefficiency produce a cohesive, integrated, cooperative and ineffectiveness will transgress the organisational boundary, creating negative external perceptions among customers, suppliers Internal change may start from a new business and stakeholders in general. vision, translated into aims and objectives to ensure future success. An example is given in Figure 7.2.

5 It is good to change vission?

6 Reason for organisational ChangeExternal reason Culture Demographic Legislation Political Climate Economy Technology Advance Competition and increasing customer demands Inter-organisational relationships create powerful synergies Public Opinion External reasons for change The external environment accounts for a great sequential changes that arise as a result of previous imposed and which is more difficult, if not impossible, to control. There may also be deal of organisational change, change which is The culture in different countries affects local reasons for change. different business approach when establishing be aware of the necessity to take an entirely operation of companies. Multinationals have to Europe. Culture impacts significantly on local subsidiaries in the USA, Japan, China and Demographic trends are predictors of market for the future. business behaviour/protocol and on strategies need to cater for an increasing ageing population opportunities which bring about change. The is another. The greater sophistication of the in growing or declining metropolitan areas is one factor and the location of organisations requirements of the young upwardly mobile Legislation in force is a powerful motivator for to occupy select market niches. population has created opportunities for organisations dramatic changes of various kinds in response change. Organisations are having to tackle Discrimination Acts. Environmental Protection and Disability to health and safety requirements and the affecting organisations, and political pressures The political climate brings about the legislation and increasing privatisation are both examples industry sectors. Reduction in public spending will reduce or boost investment in different The economy will shape the ways organisations of powerful external forces of change. Interest rates and currency exchange fluctuations and rationalisation in periods of recession. operate in terms of confidence in times of boom will dramatically alter organisational business opportunities for organisations which can capitalise Technological advances have created numerous policies. lag behind, especially if the particular industry on their use, but pose threats for those who Competition and increasing customer demands such as in the financial services sector. sector is heavily dependent on up-to-date technology, Customers are taking charge and their requirements have generated very powerful forces of change. intensified to the extent where companies must in business in the longer term. Competition has must be met if organisations wish to stay the game. work both harder and smarter to stay ahead of technologies. Developing these relationships synergies, particularly with the help of new communication Inter-organisational relationships create powerful is an increasingly important factor in the challenge, but necessary changes may give are presented to those who can respond well to doing business in the longer term. Opportunities unless well handled. rise to increasing organisational complexity, example, a perceived fall in educational standards often with respect to issues of the day. For Public opinion will shape and prompt change, Curriculum in the UK. Long working hours of provoked the introduction of the National change in the UK health care sector. The have motivated public opinion to instigate junior doctors and the shortage of hospital beds has also provoked corporate responses to maintain increasing importance of environmental issues favourable public perceptions.

7 Forces Again Change

8 What and how of organisational changeEvolutionary change Evolutionary change, as its name suggests, refers to a change process that evolves over time, gradually rather than dramatically or radically. It may take the form of a series of projects carried out by task teams, followed by absorption of new work processes into everyday working life over a period of time. An example of this type of change is total quality management, which is a process of continuous improvement over a number of years. The underlying principle is that a thousand process are of greater value than one single quantum leap. The aim is to make total quality part of every activity in the organisation and to enlist commitment to getting things done right first time and taking on responsibility for one’s own quality of work. Commitment is not something that can be gained quickly, nor does the habit of building quality into activities and tasks become ingrained over night! Change of this kind takes time and demands sustained effort to reach a successful outcome. The impetus for evolutionary change, such as TQM, may be the need for greater efficiency and effectiveness, the desire for better productivity or the wish to change the corporate culture. Staff morale and motivation may need to be improved and absenteeism and labour turnover reduced. Changing corporate culture is neither quick nor easy. Service organisations, which have worked at it over time, have however seen considerable benefits, particularly in terms of more effective service delivery, enhanced customer satisfaction levels and good staff relations. Figure 7.5 provides a useful model for the various activities embraced by TQM. Some or all of them may be undertaken at different time intervals and in varying order of priority. Revolutionary change Unlike evolutionary change, revolutionary change is dramatic and intends to be achievable within a relatively restricted time interval. The impetus for this type of change is often more imperative and frequently triggered by external forces that cannot be controlled, such as sharp competition and new legislation. Organisational response needs to be immediate and corporate survival may be in jeopardy if radical change is not undertaken. Table 7.1 contrasts some elements of continuous improvement and business process re-engineering (BPR), which is an example of revolutionary change.

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10 Contiunous Improvement (Kaizen) dan BPRBusiness process re-engineering There is some debate as to whether BPR in continuous incremental change rather than Arguably the Japanese have only ever engaged involves evolutionary or revolutionary change. many small steps along a journey to improvement anything dramatic or radical. ‘Kaizan’ refers to companies. The reality is that continuous concept and philosophy adopted by Western and has been incorporated into the TQM improvement has been sustained over time by their Western competitors, however, need to their organisations to stay ahead of the field; the Japanese, who have effectively redesigned Gradualist initiatives may be insufficient for embark on something more drastic to catch up. potential of computers and telecommunications now deemed the only route to realising the huge contemporary survival and radical change is to succeed in business. The Midland Bank, for purpose of offering good home-banking services, organisational design was inadequate for the example, having decided that their existing of the business entailed an independent entity created First Direct. This radical redesign While definitions of BPR may vary, it typically to tackle the way forward. able to articulate a vision and objectives specifically 1 It attempts to achieve dramatic improvements has four critical characteristics: practices. 2 It involves radical departure from existing in performance. 4 It is a deliberate and planned endeavour 3 It is usually enabled by information technology. These four elements of BPR can be illustrated 1991). (Alter, 2002; Hammer, 1990; Venkatraman, in the box on p. 210. order to improve performance dramatically redesign of work-flows and business processes in BPR involves a critical analysis and radical need to be considered, with particular regard where it matters most. Both the physical and informational aspects of business processes to delineate their structure as they has provided a means for organisations to the information-processing activities. Reengineering (Dibrell and Miller, 2002). Huff (1992) become more adaptable to the task environment processes, while Hammer (1990) regards reengineering the reorganisation of tasks using IT to automate sees the basic concept behind re-engineering as challenging old assumptions and shedding the as involving a change of mindset, that an organisation should focus on larger Hammer and Champy (1993) suggested rules leading to organisational underperformance. objectives by embracing technology and recognised input as to how to use IT most effectively. catalysts in the re-engineering process, providing that IT plays a critical role. IT staff act as competitive capability by combining radical The assumption is that BPR improves approaches. The aim of BPR is to transform the with new strategies, i.e. more effective operational changes, i.e. doing things more efficiently, and data into value-added outputs of products, organisational resources of materials, labour orientation replaces a functional orientation, both internal and external customers. A process services and information that are important to improvement of each business process are highlighted whereby the current value and potential for consideration.

11 7 stages to BPR Success confirm business vision and customer valuesidentify aims for each process evaluate effectiveness of existing processes set new performance standards and targets redesign the business processes implement the redesigned processes evaluate process performance and refine processes BPR challenges established ways of operating and doing business. Managers must rethink objectives and activities; determine key business processes from the customers’ viewpoint and then model new approaches to meet their needs. Specific aims may be cost reduction, quicker response, improved productivity or flexibility. Many processes may need to be redesigned from scratch, while others may need merely fine tuning. Processes that add no or insufficient value need to be eliminated. Outdated processes need to make way for innovative ones and multidisciplinary task teams may be needed to breach functional barriers. Undertaking BPR involves potential risks and cannot be casually approached if it is to succeed. The seven stages to BPR success are detailed below:

12 3 common reason for BPR failurelack of senior management commitment poor communication among those involved in BPR poor implementation of the redesigned processes Three of the most common reasons for BPR failure are the following: 1 lack of senior management commitment 2 poor communication among those involved in BPR 3 poor implementation of the redesigned processes These problems relate largely to inadequate understanding and poor management of organisational change. Both technological and human change have to be managed simultaneously: structures and policies have to fit with technological change and staff have to accept organisational change. Fear, anxiety and additional job responsibilities can all create problems, while the increasing use of IS/IT may arouse suspicions of staff monitoring and even workforce reductions. The preceding boxed example illustrates a failed BPR project. Table 7.2 illustrates these potential problems in a bit more detail. It is clear from the table that problems come from a combination of organisational, technological and project management sources. Organisational change is complex and that

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14 IT as a key element What is important is the understanding and harnessing of IS/IT so that business processes can be redesigned in ways that would otherwise have not been feasible. Bearing in mind the potential for integrating IS and databases and for networking, Table 7.3 summarises the IT opportunities in terms of reducing costs. The potential of IT for business change is achieved by viewing IT as an enabler of process innovation. Certain activities help identify key change enablers, which must then be analysed in terms of feasibility and constraints imposed

15 The Impact of IT on process innovationby existing technology, activities such as the opportunities for process innovation; • identify potential technological and human following: • seek out opportunities with respect to specific constraints; Opportunities and constraints must be identified, • identify which constraints are acceptable. processes; planning have to be undertaken and decisions under consideration. Cost/benefit analysis and along with their relevance to the process acceptable and which need to be overcome. must be made as to which constraints are to implement a process rather than enabling it. more accurately represented as IS/IT helping The notion of IT as an enabler may well be ways to improve existing processes and advantages in terms of providing innovative Suffice to say, IT can offer organisations considerable as valuable tools for shaping processes, process change enablers all need to be considered better design new processes. IT and other can have a positive or negative effect on though it must be remembered that such tools The potential impact of IT on process and impose constraints on process design. processes. IT may provide opportunities for The automational benefit of IT lies in its ability (1993) under nine categories (see Table 7.4). change has been summarised by Davenport and automated call distributors in structured process. The use of robotics in manufacturing to eliminate human labour and produce a more benefit. The informational impact of IT captures telephone-intensive services are examples of this making decisions (see also the analytical impact then be analysed and used as the basis for process performance information, which can resource and energy consumption, while in a variety of chemical processes to optimise of IT). Computer-based tools are used extensively thereby reducing corporate risk and of large numbers of credit card purchases, credit card companies benefit from rapid authorisation Sequential benefit is provided when processes maintaining customer confidence. possible to design in parallel, components that previously had to be designed in sequence. The thereby reducing process cycle times. It is often can be carried out simultaneously or in parallel, result. 35mm camera was dramatically reduced as a design and development cycle for the Kodak and distribution chain. Federal Express have and scanning at different stages of the logistics Tracking often implies bar-coding of items and parcels throughout the delivery process, so always tracked and monitored all their letters system. of mail can at least know where it is in the that a customer who has not received an item mail and teleconferencing enable more rapid be connected globally. Worldwide electronic Geographical benefits of IT enable processes to The integrative impact of IT helps improve well as cooperative decision-making. availability and exchange of information, as across jobs and functions, making process process performance where tasks are scattered policy underwriting can be managed better by such as patient care management and insurance management very difficult. Whole processes, unless formally captured and readily available. experience of individuals is frequently lost using relational databases. Knowledge and American Express Travel Related Services and in excellent service organisations, such as The intellectual impact of IT can be seen requirements easily accessible to staff. built with customer service procedures and customer British Airways, where extensive databases were processes or make them less efficient in terms of middle man’. Intermediaries may slow down Finally, disintermediation serves to ‘cut out the example, has not only cut lead times dramatically Electronic trading of stocks and shares, for passing on information quickly and effectively. but has also saved a great deal of money.

16 Five levels of IT-enabled business transformation Source: adapted from Venkatraman (1994)High Business Scope redefinition Business network redesign Revolutionary levels Degree of business transformation Business process redesign International integration Evolutionary levels Localised use Venkatraman (1994) maintains that the role of IT in organisations has evolved from a focus on efficiency (automation) to a focus on creating and maintaining flexible business networks, alliances and partnerships (see also Chapter 5 for inter-organisational IS and Chapter 8 for IS and competitive advantage). In his five-level framework, localised use and internal integration correspond to the lowest level at which IT impacts upon business functions. Business network redesign and business scope redefinition involve reconfiguring the scope and tasks of the business network that delivers the products and services (see Figure 7.6). It must, however, be remembered that, while higher levels of business transformation may bring greater benefits, they also entail risk and a higher degree of changes in organisational routines, such as logical structuring and lines of reporting. Each organisation needs to decide which level of transformation fits with potential costs and required effort to implement the necessary changes. The five-level model of IT-induced reconfiguration charts the increasing use made of IT and provides a means of assessing current and future potential positions of organisations. The range and value of potential benefits are predicted to increase from each level to the next but only if accompanied by a greater degree of change in the way the business is operated (Brown, 1994). Low Low

17 How can business processes be transformed by IT?The recursive relationship between IS/IT and BPR Source: adapted from Davenport and Short (1990) How can IT Support Business processes? IT Capabilities BPR It is important to recognise that IT-enabled transformation is more likely to succeed when everyone involved accepts that IT is not a magic bullet (Markus and Benjamin, 1997). Good ideas and good designs together are not enough and change management involves listening, understanding and giving people a chance to learn. Change management activity must be undertaken as an integral part of initiating, designing and building technology enabled change. It is also essential to merge technological and process innovations in order to transform organisations, processes and relationships (Clark and Stoddard, 1996). It is important to understand the recursive relationship between IT and BPR. Thinking about IT should stimulate thinking about BPR. IT needs consideration of how it supports new or redesigned business processes. Conversely, business processes and process improvements need consideration in terms of the capabilities IT can provide. This relationship is illustrated in Figure 7.7. BPR and IT are not one and the same, nor are they inseparable. Re-engineering of business processes should take place before introducing technology. Applications of IT may well be crucial to those redesigned processes but IS/IT architectures constructed to serve the organisation in the past may impose constraints on BPR. IS/IT infrastructure contributes to successful implementation of BPR, and organisations having developed a higher level of IS/IT infrastructure capability have been able to implement extensive changes to their business processes over relatively short time-frames (Broadbent et al., 1999). This extends further to the mutually supportive nature of BPR and information architecture. A stable information architecture can support existing as well as improved business processes and reciprocally BPR provides a highprofile justification for the information architecture endeavour (Kettinger et al., 1996). BPR contains the three core elements of processes, IT and transformation, where IT is a key enabler rather than a necessity. IT can surmount time and distance constraints, contributing considerably to increased responsiveness and flexibility. Communication technologies increase the extent of collaboration, while shared information resources, such as relational databases, increase the extent of direct involvement by managers and users. BPR aims to optimise IT use and align more closely different IS to the value added or support processes they service. How can business processes be transformed by IT?