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Vast et levina 2006
1. OrganizationScience Vol. 17, No. 2, March–April 2006, pp. 190–201 issn 1047-7039 eissn 1526-5455 06 1702 0190 informs® doi 10.1287/orsc.1050.0171 © 2006 INFORMS Multiple Faces of Codiﬁcation: Organizational Redesign in an IT Organization Emmanuelle Vaast School of Business, Public Administration, and Information Sciences, Long Island University, 1 University Plaza—H700, Brooklyn, New York 11201, email@example.com Natalia Levina Information Systems Group/IOMS, Stern School of Business, New York University, 44 West Fourth Street, Suite 8-78 (KMC), New York, New York 10012, firstname.lastname@example.org This paper details a longitudinal interpretative ﬁeld study of an information technology (IT) organization in which a new chief information ofﬁcer (CIO) implemented a major organizational redesign. The redesign increased the degree of codiﬁcation in activities of the IT organization so as to control, coordinate, and deliver services more cost effectively to its business clients. We examine different stakeholders’ views of the change, the implementation processes, and the consequences of the redesign. The case analysis emphasizes speciﬁc challenges that designers of support organizations face when increasing the degree of codiﬁcation. Key implications include the need for these designers to (1) pay as much, if not more, attention to the local organizational context as they do to the external environmental conditions; (2) communicate and negotiate constantly with various stakeholders concerning the appropriate degree of codiﬁcation and control; (3) be wary of how a strict alignment of all design elements can blind the designer to important, unrecognized issues; and (4) consider that increased codiﬁcation may help support organizations compete more efﬁciently with external vendors, but may also ease the process of outsourcing. Key words: organizational change; redesign; qualitative methods; ethnography; information technology; codiﬁcation; outsourcing In their preface to the Handbook of Organizational Design Nystrom and Starbuck emphasized that organi- zation design concerned explicit and intended attempts to change organizations. They argued that understand- ing organizations comes from attempts to change them (1981, p. xii). Although researchers rarely change orga- nizations directly, they can gain valuable insights from “natural experiments,” such as when they observe orga- nizations that have implemented alternative designs. This paper describes such a natural experiment—an organiza- tional redesign effort targeted at improving project efﬁ- ciency and control in the IT organization of a European insurance company. In the last decade, corporate IT organizations have been reorganizing to meet the challenges of increasing performance pressures and changing technology. Cost- saving pressures have been, and remain, a constant theme (Cross et al. 1997). These pressures are particu- larly hard to address because of IT workers’ skill short- ages, high turnover, and rising salaries (Slaughter and Ang 1996). At the same time, IT organizations are asked to develop novel IT applications that offer unique com- petitive advantages to their ﬁrms (Sambamurthy et al. 2003). Developing such applications requires long-term investments in cross-functional teams with shared lan- guage and norms for interaction, which are difﬁcult to achieve under cost-cutting pressures (Kraut and Streeter 1995, Levina 2005). Case studies of organizational design efforts in IT organizations most frequently focused on post hoc analy- ses of successful redesign efforts (Ross et al. 1996, Clark et al. 1997, Cross et al. 1997, Brown 1999, El Sawy et al. 1999). Nystrom and Starbuck (1981), however, argued that much can be learned about organizational design from observing organizational transformations unfold before outcomes are known (Pettigrew 1990, March et al. 1991). We used this approach, as we collected data about an IT redesign effort before anybody knew its outcomes. Methods Our research continues the tradition of interpretive lon- gitudinal studies of organizational change (Barley 1986, Prasad 1993, Orlikowski 1996, Boudreau and Robey 2005). An interpretive approach assumes that agents and ﬁeld researchers subjectively understand and construct social reality (Burrell and Morgan 1979). Speciﬁcally, we followed Klein and Myers’s (1999) guidelines for interpretive ﬁeld work. Field Setting The ﬁeld study was conducted at the IT department of ServCo, a pseudonym for a European insurance com- 190
Vaast and Levina: Organizational Redesign in an IT Organization Organization Science 17(2), pp. 190–201, © 2006 INFORMS 191 pany. In 1999, a new chief information ofﬁcer (CIO), Peter, undertook a major redesign of ServCo’s corpo- rate IT department (henceforth, SIT). Our study exam- ines implementation of Peter’s redesign and describes what happened one year before, and two years after, his arrival. Data Collection One author (“the ﬁeld researcher”) observed departmen- tal practices from March to September 2000. She inter- viewed staff about the department’s recent history and maintained contact with key staff members for a year after she left the department. Participant observations (three days each week, eight-hour days on average) started 15 months after Peter’s hiring, but before the results of his redesign were clear. The ﬁeld researcher studied SIT and how Peter’s new project management approach affected the transformation. She investigated what Peter did, what transpired before and after his arrival, and how diverse stakeholders perceived the results. Peter granted the ﬁeld researcher widespread access because he anticipated an independent and “sci- entiﬁc” validation of his redesign. Data collection relied on ethnographic methods to understand what SIT’s staff did and how they made sense of their work (Van Maanen 1988, Patton 1990). The ﬁeld researcher followed SIT’s members on their daily tasks, observing individual activities and informal interactions with each other, Peter, and internal clients. Although it is unrealistic to assume that the researcher’s presence had no impact, she soon became an accepted and inconspicuous part of the department’s routine. Peo- ple became comfortable with her and expressed opinions about their work, colleagues, clients, and manager. Beyond casual discussions, the researcher conducted formal semistructured one-on-one interviews (recorded and transcribed, lasting from 45 minutes to 2 hours) with SIT’s managers (5 interviews) as well as with SIT’s permanent employees (20 interviews). The researcher conducted these interviews in the middle of the par- ticipant observation period. Respondents described how the reorganization affected their positions and relation- ships with coworkers and business clients. Peter did not authorize interviews with temporary SIT’s workers or clients because he believed that the researcher should not be concerned with their views. The ﬁeld researcher nonetheless availed herself of these interviews by the virtue of being in the organization on a daily basis. She informally interviewed 10 temporary workers and ﬁve managers of ServCo’s business units (clients of SIT). She also met with ServCo’s CEO, Peter’s direct superior, and several of the CEO’s close collaborators. The ﬁeld researcher also informally interviewed sev- eral former SIT’s employees who left during or after the redesign. They provided additional data about the department’s history. She also analyzed archival doc- uments, ofﬁcial policy announcements, annual reports, and several public statements. After she left, key infor- mants updated the ﬁeld researcher on new developments. Data Analysis Data analysis occurred in two stages. First, the ﬁeld researcher categorized her observations, ﬁeld notes, and interview transcripts. She wrote monographs summariz- ing her observations and analyses, reﬁned her mono- graphs as she received feedback, and as SIT changed (Pettigrew 1990). She applied various qualitative anal- ysis techniques (Miles and Huberman 1984) and prin- ciples of grounded theory development (Strauss and Corbin 1998) to address and interpret linked stages of data reduction (see Vaast 2003 for details of the analysis). The second stage of analysis involved collaborative work between the coauthors. The coauthor challenged the ﬁeld researcher’s accounts and interpretations of events by asking questions and suggesting alternative explanations, which, in turn, generated further questions. This collaboration helped address the dilemma of the need to be both involved and detached from the study ﬁeld (Patton 1990). We use vignettes to describe the changes envisioned and enacted at SIT (Carlile 2002). We leave conceptual analyses of the changes for the discussion section. Redesigning the IT Department: An Interpretive Case Study Before the Redesign ServCo is a traditional, medium-sized, European mutual insurance company with 6,000 employees, 500 local branches, and annual revenue over E2 billion. ServCo holds 50% market share of property and life insurance for small businesses in its home country, and its market strategy traditionally relies on long-term relationships with loyal customers. ServCo’s employees perceive this solid customer base as a source of security that allows the company to adjust slowly and deliberately to indus- try changes. ServCo’s senior managers stated that with any change it was important to maintain their underlying principles and reputation of providing loyal customers with superior service and treating employees humanely. Layoffs were a taboo at ServCo. ServCo’s organizational structure is depicted in Figure 1. Located at ServCo’s headquarters, SIT employed about 400 IT professionals, two-thirds of whom were permanent workers, while the rest were temporary (con- tract) workers. SIT’s mission was to maintain and update existing (mostly mainframe) claim processing, sales sup- port, HR, and various other support systems (imple- mented in the late 1970s and early 1980s); to equip local
Vaast and Levina: Organizational Redesign in an IT Organization 192 Organization Science 17(2), pp. 190–201, © 2006 INFORMS Figure 1 ServCo’s Organization Chart General management Support departments Operational departments IT department Life insurance department Small business department General products department Communication department Human resources department Legal department National network of local branches branches with hardware and software; and to introduce new systems gradually for ServCo business units (or “clients”). Many projects dealt with reﬁning query capa- bilities and adding users to existing applications. Bigger projects consisted of upgrading existing applications or migrating data into newer technologies. Albert, the former CIO, was an old-timer at ServCo. Although he had no formal IT training, he had been at ServCo for 25 years and had gradually climbed the man- agerial ladder. He had been the CIO for about 10 years and enjoyed the full conﬁdence of ServCo’s CEO. According to SIT’s old-timers, Albert believed that his department’s purpose was to provide high-quality cus- tomized services and user-friendly systems to its clients. Under Albert’s leadership, SIT’s teams consulted clients frequently, involved clients in decisions, and worked with them continuously throughout projects. Back-and- forth iterations often delayed a project’s completion, but allowed SIT to “keep its clients happy.” The department’s internal organization reﬂected col- laboration and long-term commitment to clients. Perma- nent employees worked alongside temporary workers, who typically had long-term contracts. Many ServCo employees from other departments joined SIT after com- pleting IT training. Position assignments and promotions were based on clients’ satisfaction and only partially related to formal technical backgrounds. The following vignette illustrates the atmosphere in SIT under Albert’s tenure. Vignette 1 Daniel’s Story During Albert’s Management Daniel, a project manager in his early forties with a bachelor’s degree in computer science, had worked at SIT for 18 years. Over the last few years, Daniel had specialized in IT projects for the HR department. Five of SIT’s people (two temporary and three permanent workers) permanently worked with him on these projects in a dedicated ofﬁce space. Moreover, Daniel could easily get advice on issues from any other SIT employee. To start a new project, HR department members would typically phone Daniel and explain their project. Once the project started, clients would visit their SIT’s group at least twice a week to review prototypes and provide feedback. Phone calls and e-mails were used to schedule meetings or adjust requirements. Daniel recalled: “Before the reorganization, I was a project manager, and everyone else almost was a project manager at times. I took care of the realization of projects from beginning to end. We were the HR freaks [laughs]. We worked together all the time, and we had done so for years. That helped because we
Vaast and Levina: Organizational Redesign in an IT Organization Organization Science 17(2), pp. 190–201, © 2006 INFORMS 193 Figure 2 SIT’s Organization Chart: Before Redesign Albert’s managerial team Division for operational systems Division for support systems Service for general products’ systems Service for branches Service for HR systems Service for legal systems Service for communications systems Service for small business systems Service for life insurance systems knew what we knew and we did it well. Depending on the project, we had other colleagues with us. It was very ﬂexible. Not like now [laughs, referring to the new organization of the department].” Services and self-organized teams followed ServCo’s departmental structure supporting key applications for each client (as illustrated in Figure 2). Teams often tapped the other team’s expertise by simply asking for help. In each project, one or two IT professionals communi- cated with clients. Typically, such people had previously worked in the clients’ department, so they understood the clients’ practices and interests. Véronique’s situation was typical. Vignette 2 Véronique Helps the “Computer Geeks” Understand Clients Véronique had worked in ServCo’s legal department for 15 years before making a career change after participating in IT’s professional training, sponsored by an internal mobility program. She had been an analyst at SIT for ﬁve years, providing IT service to the legal department. Véronique often visited her former colleagues and discussed IT issues, especially when a new project was under way. Recently, Véronique was involved in implementing a new database for the legal department. Initially, IT people suggested someone from SIT should act as administrator for the legal database. The clients, however, rejected the proposal. Véronique understood why clients wanted to control management of the database and why SIT was concerned with the lack of computer skills among legal professionals. After numerous meetings, everyone agreed to appoint an administrator who would work for the legal department after being trained by SIT. Véronique commented on her role: “Apparently, I was a success: I could make the ‘book geeks’ talk to the ‘computer geeks,’ and vice-versa!” Liaisons like Véronique also helped explain to clients the trade-offs associated with choosing particular tech- nological platforms for a project. Clients and SIT’s workers jointly negotiated and agreed on technological investments. SIT’s workers and managers appreciated both Albert’s management style and his trust in them. Most clients, especially those with a liaison like Véronique, valued being involved throughout projects. Some clients had liaisons with no prior experience in their ﬁeld, and these projects took longer to decide on the scope and nature of work, and appropriate technological choices. Peter’s Arrival and Redesign of SIT In 1998, Albert resigned because of poor health, and a committee was appointed to ﬁll his position. The search committee consisted of managers from client depart- ments and the HR department; it also consulted with SIT’s middle managers. ServCo’s CEO made the ﬁnal hiring decision based on the committee’s recommenda- tion. No candidate satisﬁed the search committee: Current middle managers from SIT had insufﬁcient manage- rial experience; senior managers from other departments were not technically trained and might treat clients unequally; and most external candidates did not under- stand ServCo’s culture. Peter was an external candidate. He had a technical education and was the former CEO
Vaast and Levina: Organizational Redesign in an IT Organization 194 Organization Science 17(2), pp. 190–201, © 2006 INFORMS of a small electronics company that supplied hardware to SIT. Because Peter had had previous dealings with SIT, some search committee members thought he understood ServCo. Moreover, Peter had just started a prestigious part-time graduate degree program in business, which indicated to some committee members that he had man- agerial potential. The search committee’s recommended that ServCo’s CEO hire Peter, which he did, although no one was fully satisﬁed with this choice. On taking over his new position, Peter assessed SIT by relying heavily on his experiences as its former sup- plier. He had observed redundant orders and last-minute changes in hardware choices that convinced him that SIT could, and should, be run more efﬁciently, so Peter undertook a drastic reorganization. He did not consult clients or most tenured managers about his decision, although he did explain it to the CEO, promising him that the new, redesigned organization would deliver the same IT services at a lower cost and without person- nel layoffs. Attracted by the promised savings without layoffs, the CEO accepted Peter’s plan. Peter’s organizational redesign had three aspects. First, Peter believed that the department should have a clear structure, with deﬁnite roles for everyone. Instead of self-organizing teams, Peter documented task respon- sibilities so that no time or resources would be lost searching for “who knows what and where.” Second, Peter streamlined relationships with clients because he believed the high degree of customization common under Albert’s tenure was a poor use of scarce IT resources. Peter thought that most ServCo projects were mid-sized, had substantially routine dimensions, relied on similar technologies, and satisﬁed similar needs. In his view, a standardized approach would reduce costs while providing timely and relatively simple services. Third, Peter strongly believed that SIT should spearhead ServCo’s technological infrastructure decisions because SIT had superior technical expertise. Given clients’ lim- ited expertise, Peter maintained that SIT should not discuss new technologies with clients, but rather, SIT should lead them toward technologies that SIT consid- ered best. The new CIO also believed that he had CEO’s full support: There is a strong will from the CEO for the IT depart- ment to play the part of a “conductor” [coordinating requests of diverse clients] with regard to their IT invest- ments. You can feel a strong appetite at ServCo for so- called “new” technologies. But, this appetite does not always go with a deep understanding of what these tech- nologies are. When it comes to new technologies, the main question has to do with the arbitrage between the swank and the cost. Peter thought SIT’s clients wanted technologies that “looked good and sounded good,” even if they were risky, expensive, and would not meet clients’ expec- tations. He was convinced that the CEO saw SIT as ServCo’s technological authority: Very soon [after I was appointed], he [the CEO] let the management of the IT department decide on the tech- nologies and platforms, because [the CEO] or the other departments did not have the required competencies in these matters. Although Peter believed that he had the support of ServCo’s CEO, the ﬁeld researcher observed that the CEO and his associates presented their support more tentatively and cautiously than Peter acknowledged. Internal Reorganization. Peter radically restructured SIT: formal groups were reorganized to work on spe- ciﬁc technologies (e.g., new media group, Unix server group), as illustrated in Figure 3. Daniel (cf. Vignette 1), who previously had worked on several technological platforms for HR, now had no direct contact with HR. Instead, he managed 25 Unix specialists and was exclu- sively in charge of ServCo’s Unix projects. Figure 3 shows the functional specializations of the new SIT’s groupings. Within each group, everyone now documented their work exhaustively. Peter explained the documentation process: My ﬁrst step was to give everyone clear job descriptions and to provide them with a well-documented information base of the technologies that they had to know inside out. I had been ﬂabbergasted to discover that there was no such thing as a clearly determined man/task relation, and you would never have been able to ﬁnd the manual for any technology—whether old or new. Documentation consisted mostly of vendors’ applica- tion manuals, descriptions of system architectures, and functionalities developed by department members: orga- nizational charts, procedural templates, and individual job descriptions. Every department member received some documents, such as organizational charts. Other documents were available to select department mem- bers, depending on their job. For instance, only those involved with a particular project had access to the doc- uments for this project. Documentation was originally paper based, but gradually was stored on the depart- ment’s intranet. Interactions were less frequently face to face and more often based on written communications. In ongoing communications to staff, Peter relied primar- ily on e-mail memos. In each group, tasks and jobs were precisely described and differentiated along a “design” versus “implemen- tation” dimension. The system analysts’ job description stated: “Analysts produce outline designs for others to program and deliver.” Peter proclaimed that SIT’s core competencies should be analysis and design, not pro- gramming and production. He believed that permanent employees should provide analysis and design, and tem- porary employees should implement them.
Vaast and Levina: Organizational Redesign in an IT Organization Organization Science 17(2), pp. 190–201, © 2006 INFORMS 195 Figure 3 SIT’s Organization Chart: After Redesign Peter’s managerial team Division for telecommunications systems Division for functional architecture systems Service for e-mail deployment Service for Unix servers Service for client /server applications Network applications service New media service Division for transaction systems (TS) TS support service TS maintenance development service Staff changes accompanied the redesign. Between 1998 and 2000, contracts of temporary workers, who had previously worked in SIT for up to two years, were not renewed, although some with formal IT degrees and design experience were hired permanently as designers. New temporary workers with programming backgrounds received short, nonrenewable contracts. Turnover pre- vailed among permanent employees, and although the reorganization did not involve any layoffs, many old- time permanent workers resigned or took early retire- ment, as illustrated in Vignette 3. All in all, about half of the department membership changed during two years. Vignette 3 Philippe’s Story: Permanent Employee Who Retired After the Reorganization Philippe, in his late 50s, had worked for 25 years in SIT. He had no formal training in IT, but had acquired IT design and analysis skills. He had gradually become critical in supporting and developing ServCo’s accounting information system. Moreover, he had worked for many different projects and with many different people, which made him a “living” history of SIT. When the department was reorganized, Philippe was not offered a management position because he did not have any formal IT training. Instead, he became the subordinate analyst of a newly hired manager for the “Transaction Systems Support Services” group. Philippe decided to retire. Those who stayed felt a loss when people like Philippe left. Sandra, an old-timer permanent employee, noted: “Philippe [leaving]—it is such a pity. With the old-timers who departed, it is a whole part of speciﬁc knowledge of [SIT] that left with them. Peter does not see that. It has to be his way. It is everyone [working] in their own place, but it does not really work that way” [emphasis added]. Early in the reorganization, some veteran workers resisted Peter’s changes and refused to use prescribed documents. Some created their own documents, which they stored on a secret shared computer drive. They soon realized that this double documentation created redundancies and work overloads, and they gradually abandoned these guerilla tactics. As many knowledge- able old-timers left, those remaining realized that they needed to rely on the extensive documentation to imple- ment projects. During Peter’s tenure virtually no one from other departments applied to work at SIT, and several SIT employees applied for transfers out of the department. Reorganization of the SIT-Client Relationships. Peter wanted to reshape SIT’s relationships with clients by using rules and forms to identify and assign projects. He proposed a new Web-based information system that for- malized relationships and tracked workﬂow, task assign- ments, and mutual responsibilities. Peter directed SIT to develop a “Clients’ Project Management” (CPM) appli- cation. SIT did not consult clients about this applica- tion, nor were clients invited to discuss its purpose, user-friendliness, or functionalities. The CPM applica- tion included forms to be completed by clients, SIT
Vaast and Levina: Organizational Redesign in an IT Organization 196 Organization Science 17(2), pp. 190–201, © 2006 INFORMS managers, design team, and implementation team during projects. A project request form included the rationale for a new system or upgrade, expected functional capa- bilities, capacity, and desired completion date. The new CPM application came online in mid-1999, and SIT policy required that clients and project teams use it for all new projects, regardless of size. Clients submitted request forms to SIT, which used the request forms to develop speciﬁcations and prototypes. Project managers sent these “deliverables” to clients, who used other CPM forms to note their reactions. CPM detailed all formal interactions about each project, but did not allow clients to discuss their issues, concerns, or tech- nological preferences. Peter thought that these decisions were SIT’s responsibility and did not require discussions with clients. SIT’s permanent employees were assigned to design teams based on their formal education and technical skills, not on their prior experiences at ServCo. An old- timer permanent worker commented: Today, we need to write down all the speciﬁcations, because an altogether different team is going to be in charge of implementation. It is not easy to relate the work of the two teams. We need ﬁles [forms from the CPM applications] that document the knowledge that we [the design team] developed. Vignette 4 illustrates how the CPM application strictly limited project accountability by clients, SIT project managers, design teams, and implementation teams. Vignette 4 Three IT Designers Discuss Accountability During their coffee break, two permanent employees, Chris and Jasmine, explain to a newly hired permanent employee, Maureen, how SIT works. Maureen was hired into the New Media Group two weeks ago, where she works in close collaboration with Jasmine. Maureen: “How do we know if we meet HR’s speciﬁcations? Jasmine: “You do not have to worry too much about this. We send speciﬁcations to them [the implementation team composed of temp workers] and that’s it. So far, I don’t think we’ve had any problem with that. It must work.” In client relationships, special liaisons no longer existed, as illustrated in Vignette 5. Vignette 5 Veronique’s New Role: Liaisons Removed Véronique (cf. Vignette 2) is now working in the Unix department under Daniel’s supervision. She describes her new situation: “ now, [Peter] decided to implement the CPM application that clearly facilitates management of new projects for our department. For most projects now, I am not dealing with the legal department any more, they do not need me any more.” Project managers, assigned to their roles based on technical qualiﬁcations and formal project management training, now assumed responsibility for relationships with clients. They veriﬁed that clients and project teams fulﬁlled obligations recorded in the CPM. Only team members involved in the project, not clients, attended project team meetings. Change Implementation. Peter relied on three addi- tional practices to accomplish the reorganization. First, he organized training sessions for permanent employ- ees on “proven project management techniques,” such as deﬁning project stages and efﬁciency measures. Sec- ond, he reorganized the work space. Previously, rooms were assigned for speciﬁc projects; now, each special- ist service, involving 20 to 30 people, occupied several rooms. Permanent employees designing projects were located on the ﬁrst ﬂoor, while the temps implement- ing these designs were located on the second ﬂoor. Third, Peter communicated with his department through monthly meetings with managers and permanent work- ers, minutes of which were e-mailed to SIT’s members. Table 1 shows SIT structures and activities before and after redesign. Consequences of Redesign SIT’s transformation resulted in several expected and some unanticipated consequences. As expected, the redesign saved resources. Projects were delivered, on average, about 1.5 person days faster than previously, which reduced costs by 20%. Eventually, most perma- nent employees accepted Peter’s new approach to IT management. An old-timer commented: Before [under Albert’s tenure], we worked as a big team and our work was somewhat anarchic, but we did a good job. I must admit that [SIT] deserved reorgani- zation because this big messy team needed a bit of formalization. Clients without a “special IT liaison” during Albert’s tenure expressed satisfaction with the new SIT, espe- cially the time savings. SIT permanent workers were proud that they delivered systems closely matching CPM speciﬁcations and did so on time. Peter and his supporters, however, did not know that some clients had grown increasingly dissatisﬁed with the CPM system and its deliverables. Many delivered applications did not match clients’ wants or expectations. Clients struggled to describe system requirements using CPM’s unfamiliar terms and were frustrated that they could not discuss technological plat- forms (clients increasingly desired newer technological platforms). Peter permitted newer platforms only when he deemed them necessary and cost efﬁcient. Mostly,
Vaast and Levina: Organizational Redesign in an IT Organization Organization Science 17(2), pp. 190–201, © 2006 INFORMS 197 Table 1 SIT’s Organization Before and After Redesign Before redesign After redesign Strategy Delivering customized services to clients. Increasing efﬁciency and control over projects. Structure Different divisions and services based on type of systems used by various clients: claim processing, legal, HR, etc. Different divisions and services based on type of technology involved in different systems: Unix, TPS, new media service. Human resources —400 employees, 2/3 permanent, 1/3 temporary. —400 employees, 2/3 permanent, 1/3 temporary. —Temporary workers’ contract often repeated: typical 2–3 year tenure at SIT. —Temporary workers’ contracts shorter and not renewed: typical 3–6 month tenure at SIT. Project organization —Deﬁned around clients. —Deﬁned around project technologies. —Within projects, authority given by previous experiences in SIT and with clients. —No distinction among stages of projects. —Authority given by formal IT training. —Clear distinction among design and implementation tasks. Project processes Recursive: Projects realized in an iterative and recursive way, all parties contribute to and constantly challenge the design of information system. Linear: Projects accomplished through three consecutive phases (Requirements Solicitation, Design, and Implementation) with little overlap among phases and people involved. Project control Mutual control, with both clients and SIT people sharing common goals, and deciding on appropriate technology platforms. SIT controls implementation and chooses technological platforms. Clients accept or reject systems and decide on sourcing options. Liaison roles Business analysts and project managers with work experience in both SIT and clients’ business units coordinate work between parties. SIT’s project managers oversee project implementation. Communication with clients —Ad hoc and continuous: Meetings, phone calls, e-mail. —Fax, slides, and e-mail present and discuss ongoing projects with clients. —Standardized at project’s milestones, mostly electronically mediated: Using intranet application (CPM) and e-mail to exchange speciﬁcations and deliverables among clients, and workers. he continued using older mainframe platforms for economical reasons. By early 2000, however, increasing numbers of clients wanted Web platforms, as illustrated in Vignette 6. Vignette 6 HR Managers Don’t Get What They Want In early 2000, the HR general manager heard of new Web-based groupware applications and wanted HR to get such a system. His collaborator ﬁlled out a CPM request form that expressed the main expected features of groupware applications (ﬁle sharing and collaborative discussions). The HR manager anticipated a ﬂexible and user-friendly Web-based application. Based on the requirements ﬁlled out in the CPM forms, SIT provided the HR department with access to shared folders on a (mainframe) server where they could share documents. Members of the HR department viewed these folders as not user-friendly and lacking in the functionality they had expected. Several HR managers expressed their frustration to the ﬁeld researcher over SIT’s unwillingness to listen to their real needs. HR managers argued that the groupware project was characteristic of the inadequate and “arrogant” way SIT worked on most projects. HR managers did not express this dissatisfaction directly to SIT’s managers; instead, they chose to talk to ServCo’s CEO. Temporary workers implementing designs developed by permanent employees were the only SIT peo- ple directly confronting clients’ growing dissatisfaction. Often, they provided on-the-spot ﬁxes for clients’ most pressing needs, but ﬁxes were limited, as temporary workers lacked authorization to deviate from design speciﬁcations. Due to their subordinate role, temporary workers did not relay clients’ concerns to SIT’s manage- ment. One of them explained: I do work here, for the moment. Dealing with imple- mentation, I apply projects’ speciﬁcations. Sometimes clients ask for different things, so I do this, or this, or that. It’s no big deal; it’s part of my job. You always have to “re-specify” things to some extent when you implement I’m not sure they understand this here [at SIT]. But this is not really my business, anyway. In early 2000, the HR department complained to the CEO about the groupware project. They convinced the CEO that SIT had mishandled the task, and ServCo’s CEO authorized HR to award a contract to an exter- nal vendor. Other clients soon began outsourcing. As customers of external service providers with control over payments, ServCo business units had more inﬂu- ence on projects than they did internally. Outsourced projects included joint development sessions between clients and the vendor’s system designers to discuss busi- ness needs and system features. Most vendors assigned
Vaast and Levina: Organizational Redesign in an IT Organization 198 Organization Science 17(2), pp. 190–201, © 2006 INFORMS a key project manager to liaise with clients, visiting weekly to discuss the project and to receive feedback. Because of extensive outsourcing, SIT’s activity level dropped and the CEO reallocated IT resources according to departmental needs. The CEO asked Peter to resign. Peter went on to complete his master’s degree and become CEO of a small IT company that specialized in developing software applications for insurance compa- nies. At SIT, one of the CEO’s close collaborators, with a background similar to Albert’s, replaced Peter. SIT shrank: All temporary workers left and half the perma- nent workers were reallocated to other departments. Sev- eral reassigned workers began acting as liaisons between ServCo and external IT vendors. SIT’s redeﬁned mis- sion was to maintain and support preexisting systems. All new developments or big enhancement projects were outsourced. The CPM application tool remained to sup- port routine maintenance tasks. Discussion: When Codiﬁcation Turns Sour Nystrom and Starbuck (1981) noted that organizational redesign strives to change and improve the existing order. The existing order of SIT indisputably changed, but the organization almost disappeared, and its key designer resigned. We argue that the transformation had multiple aspects (see Table 1) that involved exploit- ing individuals’ technical competencies while increasing codiﬁcation and SIT’s control over technical decisions and project execution. These changes built clear bound- aries between SIT and clients, and among IT profes- sionals. We focus on, ﬁrst, the environment-design ﬁt, second, the transformation process, and third, reasons the redesign failed. We discuss how diverse stakeholders perceived the codiﬁcation and its consequences. Environment-Design Fit: Negotiation of the Relevant Aspects of the Environment For over 40 years, organizational design researchers have grappled with what is the optimal degree of formalism (or codiﬁcation). Mechanistic organizing, with high lev- els of codiﬁcation, seem to work well when routine tasks must be performed efﬁciently in stable environments. Less formal (organic) approaches seem better suited for turbulent environments (Burns and Stalker 1961, Lawrence and Lorsch 1967, Thompson 1967, Argote 1982, Volberda 1996). Albert and Peter worked for the same ﬁrm in similar environments, characterized by demands for cost savings while at the same time growing technological competen- cies and customizing services to address everchanging needs. Albert’s approach was organic, while Peter’s was more mechanistic. Albert viewed SIT’s tasks as highly varied, while Peter viewed them as routine. Like SIT, IT departments and external vendors have long faced technological and business changes (Kraut and Streeter 1995). To deal with change, some IT orga- nizations build close organic relationships with clients (see Clark et al. 1997, Cross et al. 1997, El Sawy et al. 1999). Others try building close client relationships, but struggle to contain costs and are eventually outsourced (Levina and Ross 2003). Many successful IT service vendors have prospered by relying on highly codiﬁed maintenance and development activities (Garud et al. 2003, Levina and Ross 2003). These observations put into question whether tasks are intrinsically routine or nonroutine, and whether codiﬁcation and external envi- ronmental stability are directly linked. ServCo’s case suggests that parties in the relationship collectively deﬁne relevant aspects of the environment and, hence, the appropriate degree of codiﬁcation. For Albert, clients, and the CEO, collaboration, customiza- tion, and ﬂexibility of IT services were more impor- tant than cost savings in an everchanging world. Peter ignored prior perceptions of the local SIT’s context and imposed his vision on clients without discussion. In communications with the CEO, he focused only on the anticipated increased efﬁciency. Restricted communica- tions with key stakeholders meant Peter did not argue his case, which focused on codiﬁcation of project activ- ities in anticipation of long-term gains through resource savings and limited IT investments in targeted areas. As SIT’s work became more mechanistic, clients adjusted and started making only routine IT requests. Ironi- cally, by focusing on the big picture, Peter exhibited reverse “organizational myopia”—the term that refers to managers ignoring changing environmental conditions (Leonard-Barton 1992). Design Implementation Process The literature on organizational change has ample exam- ples of delays that prevented designs from being imple- mented (e.g., Schultze and Boland 2000, Staudenmayer et al. 2002, Boudreau and Robey 2005). Remarkably, Peter profoundly transformed SIT’s work practices in a relatively short period of time. Peter’s redesign changed the organization because its components reinforced each other, and supported his vision for SIT as a cost-efﬁcient service provider (Nadler and Tushman 1988, Milgrom and Roberts 1995). Table 1 shows that changes in stafﬁng practices, task delineation, client relationships, communication prac- tices, and ofﬁce space were well aligned (McCann and Galbraith 1981, Galbraith 1995). Peter also com- municated changes effectively (Kotter 1995). More- over, implementing the CPM application and extensive electronic documentation accelerated the transformation, while supporting other components of the redesign. It helped delineate responsibilities for tasks between design and implementation, avoid reliance on “costly” interpersonal relationships with clients, and increase SIT’s control over clients’ technology choices.
Vaast and Levina: Organizational Redesign in an IT Organization Organization Science 17(2), pp. 190–201, © 2006 INFORMS 199 While alignment helped implement rapid changes, it also eliminated negotiations about alternative designs. Before CPM, SIT members talked to clients informally and learn about their “undocumented” concerns. Also, had more old-timers remained, there could have been more reports of trouble. Peter’s system and its supporters highlighted only efﬁciency. Multiple Faces of Codiﬁcation Codiﬁcation proved deceiving, as Peter and perma- nent workers perceived that the changes were working well and were unaware of clients’ dissatisfaction. They believed they had created a new reproducible organiza- tional competence in information system design, with no external competition and measured improvements in terms of timeliness and cost savings. Clients per- ceived that the change was not working because SIT no longer understood the clients’ needs, was less respon- sive than external providers, and did not deliver systems clients could use productively. We explore the multiple dimensions of codiﬁcation that resulted in these diverse perceptions. Codiﬁcation and Change in Client’s Interests. SIT’s managers saw that codiﬁcation helped IT produce out- comes more efﬁciently because they no longer relied on expensive interpersonal relationships. Clients saw IT producing the same outcomes even when needs had changed. Codiﬁcation and SIT’s Competence. Many perma- nent workers appreciated codiﬁed relationships with clients and temporary workers because they could grow their competencies in IT design. This ﬁt IT profes- sionals’ belief that competence and satisfaction lie in producing well-engineered systems (Gouger and Colter 1985, Truex et al. 1999). However, product development organizations derive superior competencies by deeply comprehending technological capabilities and clients’ needs (von Hippel 1988). Using technology effectively depends on users experimenting with systems and IT professionals closely interacting to adjust systems to newly discovered needs (Ahituv et al. 1984). For many clients, a focus on technical design and the departure of many old-timers erased SIT’s key competence. Codiﬁcation and Control over Projects. In SIT’s view, using CRM to document what clients should control (systems’ features and delivery deadlines) and decid- ing on what clients should not control (technological platforms, system’s features, and delivery processes) allowed the organization to set priorities and streamline operations. Prior to Peter’s arrival, SIT personnel and clients jointly and informally controlled developmen- tal processes and outcomes. With increased codiﬁcation, clients clearly saw that they had little control over many aspects of processes or outcomes important to them. Codiﬁcation and SIT’s Value-Add. In Peter’s view, codifying coordination practices with clients helped cut costs and exploit economies of scale by making SIT more cost competitive than alternative service providers. For clients, codiﬁcation erased SIT’s unique value-add, which was based on interpersonal relationships, and led them to seek external IT service providers to replace the “faceless” internal provider. Codiﬁcation also lowered outsourcing transaction costs as business units learned to specify their requirements in formal terms, thus easing coordination with external vendors (Nam et al. 1996). As the department no longer delivered unique value based on interpersonal service, it had to compete with external vendors who had greater economies of scale, scope, and expertise (Levina and Ross 2003, Gurbaxani and Jorion 2005). Codiﬁcation and Performance Assessment. Peter per- ceived that his changes were effective because there was no deviation from his envisioned design (all pieces of the transformation worked well together and reinforced cod- iﬁcation) or expected outcomes (technological priorities were set, costs saved, and on-time delivery achieved). Codiﬁcation, however, highlighted positive aspects of transformation while hiding client’s views and priori- ties. Peter was blinded to clients’ views by the very codes he had created to judge performance. Overzeal- ous reliance on CPM, along with the new segregation of temporary workers, eliminated feedback. Unfortunately, SIT learned about its shortcomings too late. Implications and Future Directions Leo Tolstoy wrote that “every unhappy family is unhappy in its own way” (1886). Similarly, organi- zational failures have their own idiosyncrasies, yet in-depth examinations of single cases reveal particular- ities beyond a given context (March et al. 1991). The SIT case revealed key insights concerning design, imple- mentation, and consequences of increased codiﬁcation for support organizations. Analysis of this case suggests that, in choosing an appropriate degree of codiﬁcation, support organiza- tion designers cannot merely react to seemingly objec- tive external environmental conditions. Organizational designs emerge from historically and socially embedded relationships between designers and stakeholders, rather than as straightforward responses to environmental con- ditions. Environments are everchanging social construc- tions and require collective action to mutually deﬁne and address uncertainties (Tsoukas 1996, Grandori and Kogut 2002). Designers need to communicate and con- vince others of their views of the environment and the proper design, as well as discuss and possibly renegoti- ate these views. The paper highlights the dangers of a well- aligned, perfectly implemented organizational design
Vaast and Levina: Organizational Redesign in an IT Organization 200 Organization Science 17(2), pp. 190–201, © 2006 INFORMS that focused on increased codiﬁcation of activities. While different components of the highly codiﬁed design reinforced each other and speeded the transformation (Nadler and Tushman 1988, Milgrom and Roberts 1995), this integrated vision blinded its designer to design ﬂaws. Our work recommends that managers implement change slowly and incrementally (Nystrom and Starbuck 1981), and suggests that managers should be particularly cautious when all components are aligned around codi- ﬁed activities. Designs are usually not so simple. Increased codiﬁcation also impacts the mechanisms and nature of control between the support organization and various stakeholders (Kirsch 1996). If control is not fairly distributed, the increased transparency of control mechanisms may expose inequities and lead those stake- holders who feel disadvantaged to ﬁght back. One of the reasons why highly codiﬁed relationships may work bet- ter with external rather than internal service providers is that through the contractual structures clients typically retain control over issues that matter to them the most (Levina and Ross 2003). Finally, this paper showed how increased codiﬁca- tion can prove a mixed blessing for support organiza- tions. At the ﬁrm level, scholars have highlighted the risks and beneﬁts of codifying cross-functional rela- tionships (Kogut and Zander 1992, Hansen and Nohria 2004). A strategy based on interpersonal relationships limits growth because such relationships are difﬁcult to replicate. Codifying lateral relationships, however, increases the risk of strategic innovations being imitated by competitors (Kogut and Zander 1992). For support organizations, codifying may help these organizations compete with external vendors by streamlining pre- dictable activities, focusing on technical competencies, and creating accountability. However, with increased codiﬁcation, support organizations risk being outsourced as their unique value-add diminishes, loyalty erodes, and transaction costs of outsourcing decrease. We have argued how codiﬁcation in organizational design had multiple faces, and how the organization designer and his supporters were blinded by the seem- ingly perfect transformation. Most studies of organiza- tional redesigns highlight how difﬁcult it is to change the organization due to resistance and inertia (Kotter 1995). Some scholars even say that organizations never change in profound ways (Hannan and Freeman 1984). Mainstream literature often focuses on aligning multi- ple design components and getting consensus about the change (Nadler 1988). Our study suggests that some resistance to change may be prudent. 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