Towards an information model of organizations

Chun Wei Choo
Faculty of Library and Information Science
University of Toronto
Toronto, Ontario M5S 1A1

Choo, Chun Wei. 1991. Towards an Information Model of Organizations.
The Canadian Journal of Information Science 16 (3):32-62.

 

Abstract

An information model of the organization would provide a theoretical framework for analyzing the information needs of an organization, the processes by which information is acquired and utilized, and the purposes which underlie the use of information. By concentrating on the information-use behavior of organizations, this perspective would complement the large number of studies on the application of information technology and information systems in organizations.

Organization theory recognizes the central role of information in organizations. Research has taken the information processing approach to analyze how an organization searches for information on alternative courses of action, to develop principles for designing organizational structure, and to understand the processes by which an organization creates a shared interpretation of its environment. Its main concern is managerial decision making, and information is treated as an input to this primary activity. A detailed exploration of the nature and role of information that sustains organizational activity is not attempted, and little is known about the behaviors of organizational members as information seekers and users. This paper proposes that an information perspective focusing on the acquisition and use of information in organizations would enrich our understanding of organizational behavior. A selection of perspectives on information in organizations is compared so as to identify a number of conceptual elements that could be used to construct an information model of the organization.

1. Introduction

A growing number of organization theories include an analysis of the role of information in organizations. The use of information is typically examined in the context of some other organizational activity such as decision making, problem solving, or interpreting environmental changes. An information model of the organization, on the other hand, would focus on the acquisition and use of information in organizations, and directly address issues such as:

• What determines the information needs of organizations?
• How do organizational members acquire and process information?
• What purposes motivate the use of information in organizations?

This paper compares a selection of perspectives on information in organizations so as to identify some conceptual elements that could be used to construct an information model of the organization.

 

2. Models of organizational information processing

The information processing approach to organizational analysis seeks to understand and predict how organizations perceive stimuli, interpret them, store, retrieve, and transmit information, generate judgements, and solve problems (Larkey and Sproull, 1984). Although there is no unified theory of organizational information processing, the field has two main research themes: organizational participants as information processors, and organizational systems and structures that contribute to information processing. The accelerating interest in the information processing view is driven by the deficiencies of theoretical views that ignore information processing behaviors, the rapid diffusion of information processing technologies, and the increasing information processing content of organizational tasks.

For the purpose of this review, we differentiate between two broad streams of research. The first stream views organizations as rational, decision making systems, and analyzes organizational decision making behavior in terms of information processing activities. This decision making perspective was developed by Herbert Simon, James March and Richard Cyert, and became very influential in organization theory. Starting from this theoretical foundation, Jay Galbraith, Oliver Williamson, and William Ouchi proposed organizational models in which information processing was a central component. The second stream views organizations as loosely-coupled systems whose individual actors create or enact the organizational environments and process information to resolve equivocality in the information inputs from the environment. This ‘enactment’ perspective was suggested by Karl Weick, who together with Richard Daft, later proposed a model of organizations as interpretation systems. Weick’s view has similarities with that proposed by James March and his associates on the ambiguity and anarchy of organizational information processing.

Although the two points of view are almost diametrically opposite, as will become clear in the ensuing discussion, Daft and Lengel (1984, 1986) attempted an integration in their information richness model.

 

2.1 The principle of bounded rationality

The cornerstone of the organizational decision making theories developed by Simon and his associates at the then Carnegie Institute of Technology is the principle of bounded rationality. Simon, who formulated the principle, states it in this way:

"The capacity of the human mind for formulating and solving complex problems is very small compared with the size of the problems whose solution is required for objectively rational behavior in the real world - or even for a reasonable approximation to such objective rationality." (Simon 1957: 198)

 

What precisely constitute the bounds that limit the capacity of the human mind? Simon defines a ‘triangle of limits’: the individual is limited by skills, habits, and reflexes; by values or conceptions of purpose which may diverge from organizational goals; and by the extent of knowledge and information possessed (Simon 1976: 40-41;241). As a result, the individual of limited rationality, or the administrative man, behaves in two distinctive ways when making decisions. First, the administrative man satisfices - looks for a course of action that is satisfactory or good enough. Second, the administrative man constructs a simplified model of the real world in order to deal with it - the simplification is acceptable because most of the facts of the real world have no bearing on the particular situation being faced. (Simon 1976: xxviii-xxx)

There is a larger consequence of the administrative man’s bounded rationality:

"It is only because individual human beings are limited in knowledge, foresight, skill, and time that organizations are useful instruments for the achievement of human purpose; and it is only because organized groups of human beings are limited in ability to agree on goals, to communicate, and to cooperate that organizing becomes for them a ‘problem’."

(Simon 1957:199)

 

The organization can therefore alter the limits to rationality of its members by creating or changing the organizational environment in which the individual’s decision making takes place. One of Simon’s major propositions is that the organization influences its members’ behaviors by controlling the decision premises upon which decisions are made, rather than controlling the actual decisions themselves (Simon 1976:223). A fundamental problem of organizing is then in defining the decision premises that form the organizational environment: "The task of administration is so to design this environment that the individual will approach as close as practicable to rationality (judged in terms of the organization's goals) in his decisions." (Simon 1976: 240-1)

 

2.2 Bounded rationality in organizations

The implications of the individual’s bounded rationality for the organization are further pursued in March and Simon (1958). Here, the theme is that the basic features of organization structure and function derive from the characteristics of human problem-solving processes and rational human choice. Because of the limits of the human mind, decision making in organizations requires ‘simplifications’:

"The simplifications have a number of characteristic features:

(1) Optimizing is replaced by satisficing - the requirement that satisfactory levels of the criterion variables be attained.

(2) Alternatives of action and consequences of action are discovered sequentially through search processes.

(3) Repertories of action programs are developed by organizations and individuals, and these serve as the alternatives of choice in recurrent situations.

(4) Each specific action program deals with a restricted range of situations and a restricted range of consequences.

(5) Each action program is capable of being executed in semi- independence of the others - they are only loosely coupled together."

(March and Simon 1958:169)

 

The key simplification is in the use of action or performance programs. These programs guide the decision behaviors of individuals - while some of these programs that deal with repetitive situations can be routinized, others that deal with novel situations will have to be developed through problem-solving activities that first construct a definition of the situation and then develop appropriate new programs. In any case, much of the decision making in organizations is driven by performance programs. To elaborate,

"... an environmental stimulus may evoke immediately from the organization a highly complex and organized set of responses. Such a set of responses we call a performance program, or simply, a program. For example, the sounding of the alarm gong in a fire station initiates such a program. So does the appearance of a relief applicant at a social worker’s desk. So does the appearance of an automobile chassis in front of the work station of a worker on the assembly line... Most behavior, and particularly most behavior in organizations, is governed by performance programs."

(March and Simon 1958:141-2)

 

2.3 Organizational decision making

Expanding on the work of Simon, Cyert and March (1963) have placed their focus on the processes of organizational decision making. They seek to answer the question: how does a firm behave as an information-processing and decision-making system? To start with, an organization is not monolithic, but acts like a continually shifting multiple-goal coalition. Managers, workers, shareholders, suppliers, customers, bankers, tax collectors, and so on all have a stake in the firm, but their goals or preferences about what should be done differ. Organizational goals are set by a negotiation process that occurs among members of the dominant coalition. An organization consists of various groups, each seeking to further its own interests or goals, without any single group being able to completely determine what goals the organization should pursue. Group members thus look for allies in those groups whose interests are similar, and they negotiate with those groups whose interests are divergent but whose participation is essential. Each negotiated agreement between groups places constraints on what the organization can regard as an acceptable course of action: the goals themselves become complex preference statements which summarize the multiple conditions that any acceptable choice must meet. It is not surprising then that managers spend much of their time managing the coalition, as decisions cannot be taken without taking into consideration all the diverse and often conflicting interests.

The decision making process itself is characterized by four concepts which together form a theory of how these decisions are arrived at: (1) quasi-resolution of conflict, (2) uncertainty avoidance, (3) problemistic search, and (4) organizational learning.

Because an organization is a coalition of conflicting interests, it has to resort to a number of methods to resolve conflict. These methods do not actually achieve consensus, but enable the organization to continue to operate despite unresolved divergencies. The devices for the quasi-resolution of conflict are: ‘local rationality’ (the subunit solves problems rationally within its own specialized domain); ‘acceptable level decision rules’ (rules that are acceptable to all interests rather than being optimal overall); and ‘sequential attention to goals’ (organization attends first to one goal, then another in sequence).

All organizations must face uncertainty - uncertainty about the market, suppliers, shareholders, government agencies, and so on. Organizations act to avoid uncertainty by two main strategies. They use decision rules that emphasize short-run reaction to short-run feedback rather than try to anticipate long-run uncertain events. They arrange for a negotiated environment through the imposition of plans, standard procedures, industry tradition, and contracts on the environment. (Cyert and March 1963: 119)

Problemistic search is the means by which organizations determine what choices are thought to be available. Search is ‘motivated’ - the occurrence of a problem initiates the search for ways to solve it, and once a way is found then the search stops. Search is ‘simple-minded’ - when a problem occurs, search for a solution is concentrated near the old solution. Search is ‘biased’ - it reflects the training, experience and goals of the participants.

Finally, organizational learning takes place in the decision making process through the individual members of the organization. Goals are adapted by assessing past experience and comparing with other organizations. Changed goals lead to adaptation in attention, whereby different sets of events or problems would now need to be addressed.

 

2.4 Organizations as information processing systems

Building on the work of Simon, March and Cyert, Galbraith (1973, 1977) proposes the theory that an organization processes information in order to reduce task uncertainty, defined as the difference between the amount of information required to perform the task and the amount of information already possessed by the organization. Organization structures must then be designed so that they have the information processing capability required to perform the task to the desired level of performance.

Galbraith presents a hierarchy of alternative organization structures that provide increasing capabilities to process information in the face of increasing task uncertainty. Starting with a bureaucratic organization, its first strategy is to specify the necessary task execution behaviors in advance in the form of rules or programs. As uncertainty and complexity increase, the second strategy is for managers in the organizational hierarchy to handle the exceptions and new situations that arise. As uncertainty grows, the volume of information from the points of action to the managers overload the hierarchy and the third strategy of goal setting is employed - the organization specifies targets to be achieved and allows the employees to select behaviors appropriate to the target. These three strategies of rules, hierarchical referral, and goal setting are characteristic of the basic, mechanistic, bureaucratic organization. As task uncertainty continues to rise, the number of exceptions increases until the hierarchy is unable to cope. At this stage, the organization has two choices. Either it can reduce the amount of information that needs to be processed, or it can increase its capacity to handle more information.

The organization can reduce information need by the creation of slack resources or the creation of self-contained tasks. In the creation of slack resources (increasing budget, delaying the completion schedule), the organization reduces the number of exceptions that occur by simply reducing the required performance level. In the creation of self-contained tasks, the number of exceptions is reduced by forming work groups which contain all the resources required to perform their designated tasks.

The other choice is for the organization to increase its information processing capacity. It can do so by an investment in vertical information systems. Vertical information systems, based on computers and information technologies, increase the capacity of existing channels of communication, creates new channels, and introduce new decision mechanisms. Information is collected at the points of origin and directed at appropriate times to the appropriate places in the hierarchy for decision making. The organization can also increase its information processing capacity by the creation of lateral relations. This strategy moves the level of decision making down to where the information exists rather than bringing it up to the points of decision. Galbraith lists seven forms of lateral relations in order of their increasing ability to handle more information, and in order of increasing cost to the organization. As task uncertainty grows, the organization will sequentially adopt these lateral mechanisms. The mechanisms are also cumulative - higher forms are added to, rather than substituted for, lower forms. The seven forms of lateral relations are:

"1 Utilize direct contact between managers who share a problem.

2 Establish liaison roles to link two departments which have substantial contact.

3 Create temporary groups called task forces to solve problems affecting several departments

4 Employ groups or teams on permanent basis for constantly recurring interdepartmental problems.

5 Create a new role, an integrating role, when leadership of lateral processes becomes a problem.

6 Shift from an integrating role to a linking-managerial role when faced with substantial differentiation.

7 Establish dual authority relations at critical points to create the matrix design."

(Galbraith 1973:48)

 

Galbraith’s four information strategies (two for reducing information need, two for increasing information capacity) are meant to be exhaustive, so that the organization’s information processing capacity always balances out with the task information requirements. If the organization does not consciously match them, reduced performance through budget or schedule overruns will occur in order to bring about equality (Galbraith 1973:19).

 

2.5 The transaction cost model of organizations

Williamson (1975, 1981) proposes that the unit of analysis in organizational study should be the transaction or the exchange of goods or services. An organization is seen as a pattern of transactions between individuals or groups of individuals, and it therefore adopts the structure which offers the lowest transaction costs for the exchanges it wishes to enter into. Market transactions of goods or services consist of contractual relationships. Williamson argues that the efficacy of the contracting mechanism depends on a pair of human factors interacting with a pair of environmental factors. The human factors are bounded rationality (Simon 1957) and opportunism. The latter implies that individuals are capable of "self-interest seeking with guile" (Williamson 1975:26) - they are not trustworthy and can seek ways to gain personal advantage. The environmental factors are the uncertainty/complexity that characterize the environment in which the transaction takes place, and the ‘small numbers’ factor, which refers to a situation where there is only a small number of bidders or alternative partners. The pairwise interaction of these factors is then apparent: the limits of bounded rationality are reached or exceeded when the environment increases in uncertainty and complexity; and the hazards of opportunism are greater in small-numbers exchange situations. The interaction between uncertainty and opportunism produces a condition of ‘information impactedness’, which "exists in circumstances in which one of the parties to an exchange is much better informed than is the other regarding underlying conditions germane to the trade, and the second party cannot achieve information parity except at great cost - because he cannot rely on the first party to disclose the information in a fully candid manner" (Williamson 1975:14). Information impactedness can in turn give rise to a small-numbers exchange condition.

Williamson calls his model the organizational failures framework: any interactive pairing of the four factors can lead to the breakdown of the governance structure that supports the exchange. Organizations move from the market to the hierarchical structure as transactions become more complex and uncertain. The hierarchy extends the bounds on rationality by allowing specialization in decision making and savings in communication expense; it curbs opportunism by allowing incentive and control techniques to be applied; it ‘absorbs’ uncertainty and allows interdependent units to adapt to contingencies; it resolves small- numbers indeterminacies by fiat; and it reduces the information gap between exchange agents (in information impactedness) by being empowered to perform audits and other checks (Williamson 1975:257).

 

2.6 Markets, bureaucracies, and clans

Ouchi (1980, 1981) extends the organizational failures framework with a third governance structure - the ‘clan’. Just as hierarchies replace markets when transactions become moderately uncertain and complex, so clan structures replace hierarchies when transactions become very uncertain and complex. This happens because the costs of monitoring very complex exchanges by traditional or authority systems are prohibitive and will lead to the search for alternative control structures. A viable alternative is the clan structure in which members share common internalized goals and have strong feelings of solidarity. Ouchi (1981) suggests that a defining characteristic of the clan is that it offers long-term, if not lifelong, employment to its members. The clan structure operates in different ways from the hierarchy or bureaucracy:

"Although clans may employ a system of legitimate authority (often traditional rather than the rational-legal form), they differ fundamentally from bureaucracies in that they do not require explicit auditing and evaluation. Performance evaluation takes place instead through the kind of subtle reading of signals that is possible among intimate coworkers but which cannot be translated into explicit, verifiable measures. This means that there is sufficient information in a clan to promote learning and effective production, but that information cannot withstand the scrutiny of contractual relations. Thus, any tendency toward opportunism will be destructive, because the close auditing and hard contracting necessary to combat it are not possible in a clan."

(Ouchi 1980:137)

 

To summarize the transaction cost perspective, an organization adopts the governance structure which offers the lowest transaction costs for the exchanges it takes part in. Bureaucratic organizations are most common because under specifiable conditions, the bureaucratic structure is the most efficient way of mediating transactions between parties. Under other conditions, market and clan structures exist because they reduce transaction costs.

 

2.7 Weick’s model of organizing

In contrast to the Carnegie perspective of organizations as decision-making systems that guide the behaviors of members through decision premises and performance programs, Karl Weick (1969, 1979) proposes a model of organizations as ‘loosely coupled’ systems in which individual participants have great latitude in interpreting and implementing directions. He stresses the autonomy of individuals and the looseness of the relations linking individuals in an organization. Although he also views organizations as information processing systems, the purpose of processing information is not decision making or problem solving in the first instance. Instead, the focus is on reducing the equivocality of information about the organization’s external environment. Weick summarizes his organizing model as follows:

"The central argument is that any organization is the way it runs through the processes of organizing... This means that we must define organization in terms of organizing. Organizing consists of the resolving of equivocality in an enacted environment by means of interlocked behaviors embedded in conditionally related processes.

To summarize these components in a less terse manner, organizing is directed toward information processing in general, and more specifically, toward removing equivocality from informational inputs."

(Weick 1969:90-91)

 

The actors of an organization enact the environment by creating the environment to which they then adapt - they separate out for closer attention selected portions of the environment based on their experience. In fact, the enacted environment is based on the retrospective interpretations of actions already completed. Enactment takes place through interlocked behaviors - repetitive, reciprocal, contingent behaviors that develop and are maintained between two or more organizational actors. These interlocked behavioral cycles are embedded in three processes that constitute the organizing activity: (1) the enactment process creates the information that the system adapts to; (2) the selection process sorts through the variety present in the equivocal information, and admits those portions which satisfy criteria established by past experience; and (3) the retention process basically stores the interpreted segments for future application.

In the enactment phase, managers as individual information processors receive information about the external environment and then create the environment to which they will attend. In creating the enacted environment, managers construct, rearrange, single out, or even demolish many 'objective' features in their surroundings. The enacted environment is a sensible rendering of previous events stored in the form of causal assertions, and made binding on some current enactment and/or selection (Weick 1979: 166).

In the selection phase, the organizing process generates answers to the question, ‘What is going on here?’. The selection process acts as if it contains solutions in search of problems. Selection activity matches solutions with people, problems and choices. The criteria for selection are typically lodged in the minds of decision makers in the organization. What the decision makers attend to and enact, the cues they use, why they use those cues, and their processes for scanning and monitoring, all become influential as sources of selection criteria.

In the retention phase, the organizing process determines what information is to be retained for future reference. Although the entire process operates to reduce equivocality, some equivocal features do and must remain if the organization is to be able to survive into a new and different future. Indeed, "organizations continue to exist only if they maintain a balance between flexibility and stability."

An interesting corollary of Weick’s model is that organizational action often occurs first, and is then interpreted or given meaning. The connection between action and planning is thus topsy-turvy:

"Our view of planning is that it can best be understood as thinking in the future perfect tense. It isn’t the plan that gives coherence to actions... It is the reflective glance, not the plan per se, that permits the act to be accomplished in an orderly way. A plan works because it can be referred back to analogous actions in the past, not because it accurately anticipates future contingencies... Actions never performed can hardly be made meaningful, since one has no idea what they are. They simply are performed and then made sensible; they then appear to be under the control of the plan." (Weick 1969:102)

 

2.8 Organizations as interpretation systems

Weick, together with Daft, later introduced a model of organizations as interpretation systems.

"Organizations must make interpretations. Managers literally must wade into the swarm of events that constitute and surround the organization and actively try to impose some order on them... Interpretation is the process of translating these events, of developing models for understanding, of bringing out meaning, and of assembling conceptual schemes."

(Weick and Daft 1983:74)

 

What is being interpreted is the organization’s external environment, and how the organization goes about its interpretation depends on how analyzable it perceives the environment to be and how actively it intrudes into the environment to understand it. Whether the organization perceives that the environment is objective and that events and developments are analyzable, or that the environment is subjective and essentially unanalyzable, will affect its choice of interpretation mode. Furthermore, some organizations actively search the environment for answers and may also test or manipulate the environment, while others may just accept whatever information the environment gives them. (Daft and Weick 1984:287-88) The interpretation process itself varies according to the means for reducing equivocality, and the ‘assembly rules’ that govern information processing behavior among managers. Equivocality is reduced by managers who extensively discuss ambiguous information cues and so arrive at a common interpretation of the external environment. Assembly rules are the procedures or guides that organizations use to process information into a collective interpretation.

 

2.9 Ambiguity and choice in organizations

James March, who collaborated with Simon in the early landmark work on decision making in organizations (March and Simon 1958), went on to develop theories that challenge the fundamental assumptions of the rational systems framework. March and his associates define their starting point as follows:

"We remain in the tradition of viewing organizational participants as problem-solvers and decision-makers. However, we assume that individuals find themselves in a more complex, less stable, and less understood world than that described by standard theories of organizational choice; they are placed in a world over which they often have only modest control."

(March and Olsen 1976:21)

 

They suggest viewing organizations as organized anarchies that are characterized by three features: the preferences used in making decisions are ill-defined and inconsistent (‘problematic preferences’); the processes by which the organization survives and produces are not understood by its members (‘unclear technology’); and the involvement of participants changes from time to time (‘fluid participation’). Under these conditions, the making of choices becomes especially ambiguous.

"Although organizations can often be viewed conveniently as vehicles for solving well-defined problems or structures within which conflict is resolved through bargaining, they also provide sets of procedures through which participants arrive at an interpretation of what they are doing and what they have done while in the process of doing it. From this point of view, an organization is a collection of choices looking for problems, issues and feelings looking for decision situations in which they might be aired, solutions looking for issues to which they might be the answer, and decision makers looking for work."

(Cohen, March and Olsen 1972:2)

 

Furthermore, they model the decision-making situation or choice opportunity as a "garbage can into which various kinds of problems and solutions are dumped by participants as they are generated." (Cohen, March and Olsen 1972:2-3) Which solutions are attached to which problems is a matter of chance, depending on which participants with what goals happen to be on the scene, when the solutions and problems are entered, and so on. A major feature of the garbage can process is the ‘partial decoupling’ of problems and choices. Problems are worked upon in the context of some choice, but choices are made only when the shifting combinations of problems, solutions, and decision makers happen to make action possible. Although such a model of decision making may seem uncanny, it does produce decisions under highly uncertain conditions. The garbage can process is not to be seen as an undesirable organizational dysfunction. By understanding the process, organizations can take account of its existence and, to some extent, manage it.

There is much that is in common between March’s point of view and the organizing model of Weick. March agrees with Weick that actions often precede rather than follow goals, that human preference are neither precise nor stable, and that these often have to be discovered. Weick argues that individuals enact the environment by a process in which they "construct, rearrange, single out, and demolish many ‘objective’ features of their surroundings" (Weick 1979:164). March and his associates extend this concept with the notion of ‘attention structure’ to describe the distribution of connections among individuals, the kinds of information they send and receive, the distribution of problems, and the rules about who is entitled to make choices about what is known (March and Olsen 1976:40-41). Thus although individuals may enact their environment, they do this within an organizational structure which influences the types of information cues reaching them and sets constraints on their decisions and actions.

 

2.10 The information richness model

Galbraith (1973, 1977) and Weick (1969, 1979) suggest respectively that an organization processes information in order to reduce task uncertainty and in order to reduce equivocality in the environmental information. Daft and Lengel (1984, 1986) propose an information richness model that integrates these two organizational information tasks. They extend Galbraith’s model by stating that in processing information for internal coordination, the organization needs both to have sufficient information and to reduce equivocality. This is because the departments of an organization are interdependent and at the same time differentiated. The amount of information needed between departments depends on their interdependence. The need to reduce equivocality arises because each department has developed its own functional specialization, goals, time horizons, language, and attitudes, resulting in different frames of reference across the departments. The way to reduce equivocality is for the organization to process rich information:

"Information richness is defined as the ability of information to change understanding within a time interval. Communication transactions that can overcome different frames of reference or clarify ambiguous issues to change understanding in a timely manner are considered rich. Communications that require a long time to enable understanding or that cannot overcome different perspectives are lower in richness."

(Daft and Lengel 1986:560)

 

The information media used in organizations determine the richness of information processed. Typical organizational information media may be arranged in order of decreasing information richness as follows: face-to-face meetings, telephone, written personal communications, written formal communications, and numeric formal reports. Face-to-face meetings are the richest information medium because they provide instant feedback, include multiple cues such as voice inflections and body gestures, add a personal touch, and use language variety. Numeric formal reports rank low in the scale because they lack all these qualities. Rich media enable people to interpret and reach agreement about difficult, unanalyzable, emotional and conflict-laden issues. Media of low richness are appropriate for the accurate and efficient transmission of unequivocal messages about the routine activities of the organization.

There are seven organizational structural mechanisms with varying capacities for reducing equivocality, and for handling amounts of information to reduce task uncertainty. The least rich mechanism is the establishment of rules and regulations. They dictate a standard response to a known situation and play no part in reducing equivocality. Formal information systems include reports provided by computer-based information systems. They tend to report on defined and measurable aspects of the organization and do not help in reducing equivocality. Special reports or one-time studies and surveys are mainly used to obtain enough data to reduce uncertainty and are not important for reducing equivocality. Planning is at the middle of the scale because it involves both data processing and equivocality reduction - initial planning resolves ambiguity, while plans, schedules and feedback provide data for uncertainty reduction. Direct contact, integrators, and group meetings provide increasing information richness and they all use rich information media such as face-to-face meetings and personal means of communication.

Daft and Lengel also extend Weick’s model of organizing as processing information to reduce equivocality in the environmental information. They suggest that the information task of reducing equivocality is a function of hierarchical level. Top managers must confront ambiguous and conflicting cues about the environment, and then create and maintain a shared interpretation among themselves. They use rich media to discuss, analyze and interpret the environment, and to develop goals and strategies for the organization. At the lower organizational levels, the activities of employees and first-line supervisors are governed by policies, rules and regulations, formal authority, and the physical requirements of the work technology. Because most of these are defined, interpretation is less equivocal, and information is processed through less rich media. The information richness model implies that the effective organization should balance its use of rich and less rich information mechanisms depending on the differentiation and interdependence of its subunits, and on the uncertainty and equivocality of its environment.

 

2.11 Summary

To summarize our survey of organization theories that view organizations as information processing systems, we contrast the two perspectives that have framed our discussion - the decision making view (Simon 1957, 1976), and the social enactment view (Weick 1969, 1979).

The decision making perspective analyzes organizations as rational, decision making systems. Unfortunately, the individual as decision maker is bounded by cognitive limitations. The task of organization design is thus to control the decision premises that guide the members’ behaviors. Information is processed in order to reduce or avoid uncertainty. The organization sets its goals first, then searches for alternatives, and selects courses of action which lead to goal attainment.

The enactment perspective analyzes organizations as social, loosely coupled systems. Individual actors enact or create the environment to which the organization then adapts. The task of organizing is to develop a shared interpretation of the environment and then to act on the basis of this interpretation. Information is processed in order to reduce or resolve equivocality. Actions are often taken first and then interpreted retrospectively: in other words, action can precede goals.

Both perspectives offer valuable insights, and any attempt to understand and model the use of information in organizations will have to take into account the two points of view.

 

3 Towards an Information Model of the Organization

Although a unified theory of the organization as an information processing system does not exist, the research that has been done suggests that the exploration of a number of issues would contribute towards an information model of the organization. In this section, we direct our attention at six such basic issues:

• The information processing requirements of organizations.

• The acquisition of information by organizations.

• Information processing behaviors of organizational participants.

• The nature of information in organizations.

• The use of information in organizations.

• The role of information technology in organizational information processing.

 

3.1 The information processing requirements of organizations

Why do organizations process information? Our review of the organization theory provides two answers. Organizations process information to reduce uncertainty and to reduce equivocality. Uncertainty is the absence or lack of information, information that is needed to make decisions on the selection of an appropriate course of action, or information that is needed to perform tasks that involve coordination and problem solving. Organizations respond to uncertainty by searching for and acquiring a sufficient amount of information in order for it to make a choice or execute a task. Equivocality is the ambivalence in the information from the environment, information that is subject to multiple and conflicting interpretations. Organizations respond to equivocality by allowing its members to exchange information and opinions so as to collectively develop a common interpretation about environmental changes. Actions may then be taken based on the shared interpretation.

Galbraith (1973, 1977) discusses the need to process information in order to reduce uncertainty. Consider an organization that performs a fairly large and complex task which involves several interdependent subtasks, division of labor, and a high level of performance. A good deal of information must then be processed to coordinate the various interdependent activities. If the task itself is well understood, much of its execution can be pre-planned. If the task is not understood, then during its execution more information and knowledge are acquired, which lead to changes in the task execution. In other words,

"... the greater the task uncertainty, the greater the amount of information that must be processed among decision makers during task execution in order to achieve a given level of performance."

(Galbraith 1973:4)

 

Uncertainty is defined as the difference between the amount of information required to perform the task and the amount of information already possessed by the organization. The amount of information needed to perform a task is a function of the diversity of the outputs of the organization, the number of different input resources, and the level of goal or performance difficulty. A principal problem in organizing is therefore to design organization structures that would have the information processing capability required to perform the task to the desired level of performance.

Daft and Lengel (1986) summarize three sources of uncertainty and equivocality which determine organizational information processing requirements - (task) technology; interdepartmental relations; and the environment. Technology is the knowledge, tools and techniques used to transform inputs into organizational outputs. Following the typology of Perrow (1967), the technology is defined by two underlying task characteristics: task variety and task analyzability. Task variety is the frequency of unexpected and novel events that occur in the conversion process. Task analyzability is the extent to which the conversion process is analyzable and can be controlled by set procedures or standard practices. Thus, in organizations which apply technology with high task variety and where the task is not analyzable, large amounts of information are used to handle exceptions and rich information media are used to resolve unanalyzable issues. In interdepartmental relations, it is the differentiation and interdependence of the departments which affect information requirements. Differentiation is the extent that each department has developed its own functional specialization, goals, frame of reference, time horizon, and language (Lawrence and Lorsch, 1967). Interdependence is the extent to which departments depend on each other to accomplish their tasks (Thompson, 1967). When the departments are highly differentiated and highly interdependent, large amounts of information would need to be processed and rich media would need to be used to resolve differences. In interpreting the environment, organizations assume the extent to which the cause-effect relationships in the external environment are analyzable (Thompson, 1967; Weick and Daft, 1983), and then take up an active or passive policy in data collection (Weick and Daft 1983). When the environment is unanalyzable and the organization is actively collecting data, large amounts of information are generated and rich media are needed to resolve equivocal cues.

At the individual level, the information processing requirements of an organization’s members are influenced by certain organizational properties. Structural and cultural features of the organizational setting can constrain the acquisition and processing of information by its participants. One of Simon’s main arguments is that the organization influences its members’ behaviors by controlling the decision premises upon which decisions are made (Simon 1976:223). There are two categories of decision premises: one concerns establishing attitudes, habits, and a state of mind within the individual; and the other concerns imposing on the individual decisions reached elsewhere in the organization.

"The first type of influence operates by inculcating in the employee organizational loyalties and a concern with efficiency, and more generally by training him. The second type of influence depends primarily upon authority and upon advisory and informational services."

(Simon 1976:11)

 

The organizational properties that embody decision premises would include the organizational structure that defines authority positions, goals, and differentiation between departments; incentive systems that reward behaviors leading towards goal attainment; and group norms that become part of the individual’s set of attitudes and values. This organizational context creates preferences and biases in the individual’s acquisition of information: by influencing the availability or supply of information, the flow or distribution of information, the choice of information types and media, the setting of time constraints, and so on. It also creates preferences and biases in the individual’s processing of information: by controlling the definition of goals, the formulation of rules and programs, the choice of preferred outcomes, the opportunities for sharing information, and so on. Both of these interactions are further discussed in the following subsections.

 

3.2 The acquisition of information by organizations

In the study of organizational information processing, the topic of information acquisition has attracted much less attention, although its importance has been emphasized. For example, Nobel laureate Kenneth Arrow has pointed out that:

"Decisions, wherever taken, are a function of information received; then when information remains unchanged, no decision is made, or, to put the matter in a slightly more precise way, the implicit decision is made not to change the values of certain variables. In turn, the acquisition of information must be analyzed, since it is itself the result of decisions."

(Arrow 1974:48)

 

Arrow goes on to make explicit the distinction between two kinds of decisions: decisions to act in some concrete sense, and decisions to collect information. Cyert and March (1963:10) make a similar distinction between the need for a ‘theory of choice’ and a ‘theory of search’.

Decision makers in organizations are noticeably biased in their acquisition of information - they are biased by their own individual preferences as well as by the organizational contexts in which their information seeking takes place.

For example, in the selection of information sources, a rational approach would be to use sources which are known to be of high quality. However, information user studies have found that it is the accessibility of the source that is the most important factor in source selection. Gertsberger and Allen (1968) found in their study of engineers that information channels which were considered more accessible were used first in the course of information search. When choosing among several information channels, the engineers seemed to apply a simplified form of the law of least effort - they picked channels that required the least average rate of probable work, but in doing this they did not consider future effort required in making decisions and the subsequent need to seek additional channels. O’Reilly (1982) in his study of welfare workers concluded that although decision makers recognized information sources of high quality, they used sources that provided lower quality information but were more accessible. Similar findings have been reported in studies by Menzel and Katz (1955), Clausen (1973), and Culnan (1984). An explanation for the preference of accessible sources may be that significantly higher costs are involved in obtaining information from less accessible sources. Decision makers in organizations work under time constraints, have to divide their attention among several issues at a time, and are subject to frequent interruptions. Under these conditions, it may be that they are simply unable to seek out higher quality information from less accessible sources.

Decision makers in organizations favor sources that they perceive as credible or trustworthy. Clausen (1973) for example, noted that congressmen frequently cast votes on legislation based more on the advice of a trusted colleague than on a personal understanding of the issue. In an organization, subunits may have conflicting interests and objectives, and they consequently become untrustworthy in terms of source credibility, even though a particular subunit may have the expertise and information required to make the decision.

Decision makers in organizations are also biased in their selection of information media. Many studies have shown that managers have a strong preference for oral, human sources of information rather than written or formal sources. Mintzberg found in his study of managers in five diverse corporations that verbal media (ie. meetings, telephone calls, and tours) accounted for 78% of the managers’ time and 67% of their activities (Mintzberg 1973:38-39). Managers prefer face-to-face meetings and the telephone as information sources because they provide a high level of information richness the managers need to understand the social and hidden aspects of the problem, and to negotiate or persuade others with differing points of view. (Daft and Lengel 1984, 1986)

Decision makers in organizations tend to prefer information sources which have a capacity to do what March and Simon call ‘uncertainty absorption’:

"Uncertainty absorption takes place when inferences are drawn from a body of evidence and the inferences, instead of the evidence itself, are then communicated. The successive editing steps that transform data obtained from a set of questionnaires into printed statistical tables provide a simple example of uncertainty absorption."

(March and Simon 1958:165)

 

Unfortunately, through the process of uncertainty absorption, the recipient of such a communication is severely limited in the ability to judge its correctness - the decision maker relies on the confidence level in the source and the transformation process. Notwithstanding this, and mainly because of the heavy and competing demands on their time and attention, decision makers may choose sources that summarize voluminous detailed data, provide condensed treatments of complex issues, and supply the implications upon which courses of action may then be more speedily selected.

To recapitulate, when acquiring information, decision makers in organizations prefer sources which are accessible and trustworthy. They prefer sources that can provide rich information and absorb uncertainty. Rational selection criteria such as the quality of the source, or the expertise that the source has, are not important. Thus, the selection of information sources, channels, and media is strongly influenced by individual preferences as well as the biases that are formed as a result of the individual’s participation in the organization.

3.3 Information processing behaviors of organizational participants

As our literature review suggests, this issue has been a recurrent motif in the research on organizational information processing. The starting point is that individuals are subject to cognitive limitations so that they behave with bounded rationality when making decisions: they construct a simplified model of the complex real world based on partial information, and they satisfice by looking for a course of action that is ‘good enough’ rather than the best possible (Simon 1957). Theories are then put forth on how these cognitive limits may be overcome, largely through organizational structural mechanisms.

According to the ‘decision making’ Carnegie school, the information processing model of organizational decision making is characterized by these activities: sequential search (‘one thing at a time’ approach), the activation of predefined action programs, (March and Simon 1958), the quasi-resolution of conflict, and the avoidance of uncertainty (Cyert and March 1963).

According to Weick’s ‘enactment’ model of organizing, organizational information processing takes place through three processes: enactment, selection, and retention. During enactment, members create their own conceptual model of the environment. In selection, members reduce equivocality by using past experience to make sense of environmental changes. Finally, in retention, interpretations are stored for future application. (Weick 1969, 1979)

Mick et al (1980) adopt Weick’s framework to develop a model of information seeking in an organizational setting. Using Weick’s three stages of information processing, Mick et al see the enactment stage as establishing a context within which to view information, which is then followed by the selection of information inputs based on the enactment, and finally there is the retention of those inputs which are judged as relevant to accomplishment of a specific task. They present a ‘generalized model of information seeking’ in which "a stimulus, generated within the context of a particular situation which occurs within an environment and a set of attitudes, generates an information need. A general plan of action is generated in response to this need, resulting in a specific action. Once the specific action is performed, its results are evaluated and results of the evaluation provide feedback to attitude and need (ie. was the need met?)." (Mick et al 1980:352)

Individual information processing may also be limited or biased in other ways. Given that decision makers can cope with a relatively small amount of information, how are they to choose which information to process and use? The answer may be that organization members constrain their processing of information towards the attainment of preferred outcomes which are what they personally desire or what the organization has set as its goals. The organization provides clear signals about what these preferred outcomes are through its reward and incentive systems. In this scenario, organization members perform what O’Reilly (1983,1987) calls selective processing. Organization members may selectively process information that supports their preferred outcomes. They may process and present information in such a way as to bolster their own positions, or put themselves in a favorable light. They may also process information so as to avoid undesirable consequences.

So far, we have seen how two sets of constraints can influence the use of information in organizations: the organization sets up goals, incentive systems, and norms; the individual exercises certain preferences for information sources and channels, and processes information in biased or limitedly rational ways.

 

3.4 The nature of information in organizations

What is the nature of information used in organizations? To begin with, information in organizations is partial, equivocal, and of variable richness. Organizational information is often partial or incomplete when it describes the real world for the purpose of problem solving. This brings the problem within the bounds of the decision maker’s cognitive capacity to handle complexity. Organizational information is often equivocal - information stimulii come from several sources, and their interpretations are frequently ambiguous or conflicting. Organizational information varies substantially in richness and detail. Managers may prefer rich information media such as face-to-face communications, while shop-floor operators are given clear, concise instructions.

Land and Kennedy-McGregor (1981) propose a taxonomy of five organizational information types:

• Descriptive information describes the state and changes of the real world as well as the rules that govern or constrain the affairs of the real world.

• Probabilistic information constructs a model of the real world typically through a limited set of observations or measurements of the real world, and attempts to provide a model of the real world in the future on the basis of knowledge or statistical predictions.

• Explanatory and evaluative information explains why a real world situation arose, and includes the norms, values, attitudes and judgmental information used to explain and evaluate.

• Unexpected information is information that comes from an unanticipated source or information that was not at first seen to be relevant.

• Propaganda is information used to shape attitudes, beliefs and behaviors.

Mintzberg (1979) proposes a functional view in which an organization consists of five groups of participants: workers at the operating core, middle-line managers, administrators at the strategic apex, analysts of the technostructure, and support staff. In the operating core, the information resources used are simple and concrete, and relate directly to the task at hand. Middle managers are information transmitters and translators who collect and summarize raw data about the operating core to pass up to top administrators (cf. the ‘uncertainty absorption’ process of March and Simon (1958)). Top administrators need trend information from inside and outside the organization. Because they deal with broad, long-range problems, their information needs are fluid and their information resources are less predictable. The analysts of the technostructure (such as accountants and engineers) require specialized information in order to standardize outputs and work processes. Finally, the support staff engage in activities like research and development, public relations, and legal counsel, information-intensive activities which do not contribute directly to the attainment of task objectives.

Swanson (1978) proposes a ‘locus’ for organizational information in which information is classified along three scales as being either inner- or other-directed; internally- or externally-produced; and self- or other-referencing. Information is inner-directed when it is employed for self-learning and internal management; it is other-directed when it is used for other influence and external propagation. Inner-directed information is ‘the stuff of decision making’, while other-directed information is ‘the stuff of manipulation’. Most of organizational information is thought to be ‘two-faced’, that is, the product of inner- and other-directed needs taken together:

"But if decision making and manipulating are really the two sides of a single coin, ie. two aspects of one organizational activity, then inner- and other-directed information must be similarly co-existent and non-separable."

(Swanson 1978:242)

 

In other words, organizational information exists in response to the organization’s need to know and the organization’s need to influence its environment.

Both the ‘decision making’ school (Simon, March, Cyert) and the ‘enactment’ school (Weick, Daft, March, Olsen) are concerned with the role of information in decision making and problem solving. From an information science perspective, MacMullin and Taylor (1984) identify a set of information traits that could be related directly to the dimensions of a problem. Information traits concern the need for information and refer to the processes and contexts for presenting information. Problem dimensions are those characteristics that go beyond specific subject matter, and set the criteria for assessing the relevance of information to specific problems. MacMullin and Taylor put forth two sets of eleven problem dimensions and nine information traits as follows:

Problem dimensions
• design/discovery
• well-structured/ill-structured
• complex/simple
• specific/amorphous goals
• initial state understood/not
understood
• assumptions agreed upon/
not agreed upon
• assumptions explicit/
not explicit
• familiar pattern/new pattern
• risk great/not great
• susceptible/not susceptible to
empirical analysis
• internal/external imposition

Information traits
• quantitative continuum
• data continuum
(hard or soft data)
• temporal continuum
(historical or forecasting)
• solution continuum
(single solution or options
range)
• focus continuum
(precision or diffusion)
• specificity of use continuum
(applied or theoretical)
• substantive continuum (applied
or descriptive)
• aggregation continuum (clinical
or census)
• causal or diagnostic continuum

The idea here is that by enumerating general sets of information traits and problem dimensions, it would then be possible to match particular information traits to particular problem types.

 

3.5 The use of information in organizations

Organizations use information in order to make decisions, solve problems, or build up their knowledge base. Goldstein and Zack (1988) propose an information supply model that examines the effect of information supply and distribution on organizational information use, which in turn affects knowledge acquisition. Information supply and distribution here include the amount and type of data as well as the analytical tools which are made available. Thus, the dimensions of information supply would cover the availability of computer hardware (personal computers), software (databases, decision support tools), and the training and support needed to use them; the accessibility of data; the number and type of information sources; and the currency and reliability of the data. Information use is defined as the interpretation and analysis of information, which may be done with or without the help of analytical or decision support tools. The result of information use is knowledge acquisition, a process by which insights are gained into the relationship between the organization and its environment. Organizational information processing is driven by the organization's information requirements. These needs depend on their level of complexity and load, uncertainty, and equivocality. The model predicts that information use will increase with the supply and distribution of information, as well as its fit to the organization's information requirements. More information use will then lead to greater knowledge acquisition and a larger knowledge base.

Organizations continually enact cycles of information gathering, interpretation, and learning or knowledge development — new information is both interpreted within the context of an existing knowledge base, and added to that base. Social factors within the organization such as culture and power could also influence information processing capabilities. Organizational culture as expressed through the values and attitudes of its members may affect the supply and use of information. Those in power could set decision making agendas, control information resources, and impose meanings on ambiguous information. To sum up, the information supply model suggests that given some degree of fit between information supply and demand in the organization, the greater the amount of technology and resources allocated to information supply and distribution, the greater would be the level of information use and knowledge about the environment.

Although organization theory emphasizes the use of information for rational decision making, it is important to recognize that organizations also use information for reasons that do not make strict rational sense. Feldman and March (1981) point out that:

"Organizational participants seem to find value in information that has no great decision relevance. They gather information and do not use it. They ask for reports and do not read them.... information use symbolizes a commitment to rational choice. Displaying the symbol reaffirms the importance of this social value and signals personal and organizational competence."

(Feldman and March, 1981:182.)

 

Quite apart from actually using information to make rational decisions, the decision maker uses information as a social symbol of commitment to the principle of rational choice. The act of decision making is more important than the outcomes it produces. Decision making is an opportunity "for displaying authority, and for exhibiting proper behavior and attitudes with respect a central ideological construct of modern western civilization: the concept of intelligent choice." (Feldman and March, 1981:177.)

Information may be used as a political resource. Since organizational goals and objectives are negotiated among groups of participants (Cyert and March 1963), it is unlikely that any allocation of resources will meet with general agreement. The divergence of goals and the contention for scarce resources make organizational decision making inherently a political process (Pfeffer and Salancik 1978), often marked by conflict and disagreement. The ability to use information to reduce the primary uncertainty which faces the organization can also be a source of organizational power. Hickson et al (1971) suggest that such power may vary according to how critical the uncertainty is which the subunit can reduce, how effective the subunit is in reducing it, and how substitutable is the function served by the subunit. In general terms, when competing for resources, information may be used to support a position, to weaken an opposing one, or to justify decisions that have already been made. Pettigrew (1973) studied a large manufacturing organization and found a vivid example of how the ability to control information flow was used as a source of power. In the course of evaluating a large scale capital investment decision, a senior manager who was positioned at the junction of the information flows between his subordinates, the vendors, and the company board, "was able to exert biases in favour of his own demands and at the same time feed the board negative information about the demands of his opponents." (Pettigrew 1973:232-240) Meltsner’s (1976) study of policy analysts made the useful differentiation between two categories of information sought by decision makers: information used to make decisions and information used to support decisions that have already been made (p.72-79).

In an organization, information is not a homogeneous resource, but is exploited differently by the various participants. For some, it is the basis for decision making; for others it may be more a social symbol, a political resource, or a means to justify actions taken.

 

3.6 The role of information technology in organizational information processing

The possible interactions between information technology and organizational information processing are complex and multifarious, and we can only touch on a handful of issues that pertain to the present discussion.

(1) Information technology may be used to reinforce and shape the decision premises of an organization. Simon (1976) argues that the organization influences its members not through the determination of individual decision outcomes, but through the determination of the decision premises upon which the decisions are based. Information technology may be used to reinforce the decision premises in several ways. Information systems may be designed to function according to the steps and decision rules ensconced in standard operating procedures. For the system user, they may pre-define a limited set of problem parameters or situation variables and constrain choice of action to a few alternatives. Information systems may also be used to regularly monitor, measure, and report on the performance of members in relation to objectives set by the organization. In addition, by controlling the collection, availability, and distribution of information, information systems can also shape what March and Olsen (1976:40-41) call the ‘attention structure’ of the organization (see Section 1.9). Pfeffer and Salancik (1978) make a similar analysis:

"The information system is conceptualized as the reports, statistics, facts, or information that are regularly collected and their pattern of transmission through the organization. The fact that certain information is regularly collected focuses the organization's attention on it. The collection of certain information occupies the time and attention of the organization, which necessarily restricts the time and attention elsewhere." (p.74)

 

(2) Information technology may change the perception of information sources. Information technology may alter the information users’ perception of sources available within the organization with regard to source accessibility, media richness, and the ability to absorb uncertainty. On source accessibility, information technology can blur the distinction between external and internal information sources. For example, CD-ROM drives will increasingly become standard fare with personal computers, and can be used to access very large amounts of data which are clearly supplied from ‘external’ sources, but which now appear to the user as a readily accessible ‘internal’ information source. Similarly, the notion that information delivered by computers is by necessity low in information richness may have to be revised. Electronic mail has many characteristics similar to the telephone or written memos, because it provides for rapid feedback and can quickly reach a large, geographically dispersed audience. Rice and Love (1987) found that 30% of the total electronic message content in a cross-organizational study of medical professionals was used to express emotions. Video-conferences have greater information capacity than the telephone, but are less rich than face-to-face contact. Undergoing trial use in a few organizations are various forms of computer-based support for meetings (‘group decision support systems’) that apply information technology in highly equivocal meeting situations. These systems seem to promise the best of both worlds - they support face-to-face discussion as well as provide access to hard information in databases. Information technology is also being used in systems that ‘absorb uncertainty’ by automatically filtering and summarizing information from streams of incoming reports.

(3) Information technology may be used to augment the information processing capacity of organizations. Information technology may be applied to enable an organization’s members to cope with uncertainty, to process larger amounts of information, and in a more limited sense, to help reduce equivocality in the information inputs. Information technology can help to manage complexity through the use of for example, decision support systems which allow more variables to be analyzed and related. Uncertainty may be reduced by using information technology to deliver data to where it is needed more efficiently and expeditiously. Information load can be lowered by using computer systems to filter, sort, route, or otherwise organize incoming information. (Goldstein and Zack 1988) Equivocality can be reduced when managers use computer-based communication systems in conjunction with face-to-face interactions. An organization may set up elaborate procedures to give the appearance that information is processed in a highly rational manner - Simon (1978) calls this ‘procedural rationality’. Such procedures typically involve reporting, review, evaluation, and control activities in order to ensure, insofar as possible, that decision makers have complete information and are making their choices rationally. Information technology may again be used to support ‘procedural rationality’: information systems may be implemented to supply the data and feedback required for planning and control.

(4) Information technology may alter the organizational structures used to coordinate economic activity. According to Williamson (1975), organizations exist for the primary economic purpose of coordinating transactions, and they will adopt the organizational structure that lowers the costs of transactions. The two main structures are the market and the bureaucracy. The market structure coordinates the flow of goods and services through supply and demand forces. Transactions take place between many individuals and firms; buyers compare and choose from many sources; and market forces determine the design, price, quantity and delivery schedules. In contrast, the hierarchy structure controls the flow of goods and services by directing it at a higher level in the managerial hierarchy : buyers buy from predetermined sources and managerial decisions determine design, price, and so on. Using this transaction cost framework, Malone et al (1987) predict that information technology, by reducing the costs of coordination, will lead to an overall shift towards proportionately more use of markets rather than hierarchies to coordinate economic activity. Information technology enables three forces that drive this shift: a communication effect in which computers and telecommunications are used to transfer information, a brokerage effect in which many buyers and suppliers are connected through a central database which functions as a broker, and an integration effect in which information technology is used to tightly couple the processes that create and use information (as in for example, ‘just in time’ inventory systems). Already a number of examples of this shift toward electronic markets can be seen in the airline industry (ticketing systems), health care services (hospital supply systems), and financial services (home banking).

 

4 Conclusion

We may summarize our discussion as follows. An organization processes information in order to reduce uncertainty and to resolve equivocality in the informational inputs. Its information processing requirements are determined by the task technology, environment, and organizational structure. Information is acquired and processed by the individual members. In acquiring information they exercise their own preferences as well as the biases that are formed as a result of their belonging in the organization. They selectively process information within the bounds of their cognitive limitations. The use of information in the organization pursues many purposes: information is used for decision making, as social symbol, and as power resource. Our discussion thus suggests a number of conceptual components that would need to be included in a theoretical model on information use in organizations, as shown in the figure below.

Elements of an information model of the organization

 

Organizational research has to date employed the information processing approach to analyze how an organization searches for alternatives and selects courses of action, to develop guiding principles for organization design, and to understand the processes by which an organization creates a shared interpretation of its environment. The emphasis of organization theory is on managerial decision making. There is rather less analysis on the nature and role of the information that sustains organizational activity: the various faces of organizational information, the seeking and acquisition of information, the modes and channels of information transformation, and the human and social purposes that information serves. There is insufficient knowledge about the behaviors of organizational members as information seekers and information users. This paper proposes that an information perspective that focuses on the use of information in organizations would enrich our understanding of organizational behavior.

 

 

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