Impact of IT on Organization's performance

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Degree project in

Impact of IT on Organization's performance

Md Saifullah

Stockholm, Sweden 2013 ICS Master thesis

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Impact of IT on Organization’s performance

Md. Saifullah May 30, 2013

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Abstract

Organization Performance Analysis Framework (OPAF) is a Metamodel which analyzes performance of organizational structure using Enterprise Ar- chitecture Analysis Tool (EAAT). This quantitative analysis is used to find out which structure is good at learning, motivation, efficiency, productivity, etc. and how to change it. Current framework does not include IT and how it affects the organizational structure. This thesis work will try to find out how IT affects organizational structure, directly and indirectly. The effect is translated in Object Constraint Language (OCL) and inserted in the model.

The framework IT-OPAF is used to analyze three real life organizations and see the changes in performance when IT is introduced. This will validate the findings and also recognize pattern of the effect of IT on organizational structure.

Keywords: IT impact on Organization’s performance, OPAF, Analy- sis Framework, Enterprise Architecture, Performance Analysis, Case study validation

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Acknowledgements

My greatest gratitude goes to my supervisor Pia N¨arman for her contin- uous support, patience, motivation, enthusiasm, and encouragement. Her guidance helped me in all the time of research, and her advices inspired me to improve the project and without them, this thesis would not have been possible.

Thanks to my examiner Pontus Johnson for his support during the development process of this thesis.

I would also like to thank my parents, brother, sister, and sister-in-law for their patience and support despite the distance. Special thank goes to my niece Tasneem for just being present in our lives. Thanks also to my friends who were always there when I needed them. Thanks to all my colleagues in IT division of UCB, especially to my friends in software section for their unequivocal support throughout, as always, for which my mere expression of thanks likewise does not suffice.

Needless to say, this thesis would not have been possible without the uncon- ditional support of my loved ones.

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List of Figures

3.1 Effect of Information Technology [16] . . . 17

4.1 IT effect on OPAF . . . 23

4.2 Direct effect of IT to OPAF 1 . . . 24

4.3 Direct effect of IT to OPAF 2 . . . 25

4.4 Indirect effect of IT to performance measurements attribute . 30 4.5 Effect on employee motivation . . . 31

4.6 Effect on decision coordination 1 . . . 32

4.7 Effect on decision coordination 2 . . . 33

4.8 Effect on unit’s flexibility . . . 34

4.9 Effect on unit’s learning pace . . . 35

5.1 Loan Processing Workflow . . . 40

5.2 Organogram for Loan Processing System of Sonali Bank . . . 41

5.3 Sonali Bank Learning viewpoint 1 . . . 42

5.4 Sonali Bank Motivation viewpoint 2 . . . 43

5.5 Sonali Bank Learning viewpoint 2 . . . 43

5.6 Sonali Bank Motivation viewpoint 2 . . . 44

5.7 Organogram for Loan Processing System of Janata Bank . . . 45

5.8 Janata Bank Learning viewpoint . . . 45

5.9 Janata Bank Motivation viewpoint . . . 46

5.10 Organogram for Loan Processing System of UCB . . . 47

5.11 Committee structure of UCB in Loan Processing Workflow . 48 5.12 UCB Learning viewpoint . . . 48

5.13 UCB Motivation viewpoint . . . 49

6.1 Performance measurements result - before IT effect . . . 53

6.2 Learning vs Motivation . . . 54

6.3 Effect of IT to Sonali Bank . . . 55

6.4 Effect of IT to Janata Bank . . . 56

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6.5 Effect of IT to UCB Bank . . . 56

6.6 Indirect effect of IT to unit’s motivation . . . 57

6.7 Indirect effect of IT to unit’s motivation . . . 57

6.8 Indirect effect of IT to unit’s external coordination . . . 58

6.9 Indirect effect of IT to unit’s external coordination . . . 59

6.10 Indirect effect of IT to unit’s internal coordination . . . 60

6.11 Indirect effect of IT to unit’s internal coordination . . . 60

6.12 Indirect effect of IT to quality of unit’s decision and output . 61 6.13 Direct effect of IT to information . . . 61

6.14 Indirect effect of IT on unit.efficiency . . . 62

6.15 Result of effect of IT on unit.efficiency . . . 62

6.16 Indirect effect of IT on unit.flexibility . . . 63

6.17 Indirect effect of IT to unit’s flexibility . . . 64

6.18 Indirect effect of IT on unit.variability . . . 65

6.19 Result of effect of IT on unit.variability . . . 65

6.20 Indirect effect of IT on unit.learningPace . . . 66

6.21 Indirect effect of IT to unit.learningPace . . . 66

A.1 Sonali Bank Organogram[23] . . . 69

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List of Tables

3.1 Findings from literature study . . . 18 4.1 Non-matching findings from literature study . . . 36 5.1 Similarities & Dissimilarities between the study subjects . . . 51 6.1 Result on average value based on all viewpoints . . . 53 6.2 Direct effect of IT on CreditSection unit . . . 54 6.3 Indirect effect of IT on CreditSection unit . . . 54

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Chapter 1

Introduction

1.1 Background

Information Technology (IT) has changed the traditional ways of people to acquire and process information by drastically changing the communication medium and processing power. It also profoundly change organization structure in space and time, breaking the balance of organizations interests both inside and outside of the organization, which leads to changes in organization structure.[1][2] Not only are we observing rapid changes in IT but also organizations increasingly invest in IT for their concern about their market competitiveness and organizational performance.[3] Many organizations have become totally reliant on IT for success and recognize that IT is becoming one of their main organizational assets.[4]

The performance of an organization is said to be greatest when they em- phasize on both IT and organization structure. Measuring the contributions of IT in isolation, without considering contextual variables like organization structure cannot produce a meaningful indication of IT’s business value.[5]

Also it should be said that measuring the benefit of IT and its impact on organizational performance is a complicated task.[3]

To measure the performance of organization, many framework/tools have been used. The framework in question in this thesis work is Organization Performance Analysis Framework (OPAF). Using this model based framework along with Enterprise Architecture Analysis Tool (EAAT), one can analyze the performance of an organization. This quantitative analysis can be used to find out which organization structure is good for different performance measurements. Although a number of enterprise architecture software tools are available on the market, including etis, System Architect,

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Aris, Qualiware, etc. and some of these provide possibilities to sum costs or strategic value of a set of modeled objects. But none of them have such significant capabilities for quality analysis as presented in EAAT.[6] Using this we can find quantitative analysis between organization structure and its performance, but the framework uses technology as a helping object, rather seeing it as a viewpoint.

The literature on information technology and organizational changes does not currently support reliable generalizations about the relationships between information technology and organizational change. One of the reasons for this is the conflicting and unclear definitions and measures of information technology and organizational structure by biased researchers from several academic disciplines.[7] It is also seen that, although technology seems to be everywhere, over 95% of the articles published in leading management journals do not consider or take into account the role and influence of technology in organization life.[8]

So, even though no one can deny the significance of Information Tech- nology as an organizational variable, but there is disagreement over whether technology is an independent or dependent variable, and over the weight to be given to technology compare to other variables.[9] This defined the question about whether or not Information Technology (IT) has significant effect on the changes of organization structure, and the significance of its effect.

This thesis is based on work done in the context of creating a framework to measure performance of organization, and analysis tool that is used to design the organization structure as per the organization’s need. Accord- ing to N¨arman[10] there are nine viewpoints present in the OPAF. They are Motivation, Learning, Information, Productivity, Efficiency, Variability, Coordination, and Flexibility. Using these frameworks, the tool allows organization to design and analyze the outcome from these nine viewpoints. In this framework, Technology is used as a helping object rather seeing Infor- mation Technology as a viewpoint. Also it lacks empirical data to perform a validation.

1.1.1 Organizational Structure

According to wiki, the definition of Organizational Structure is “an organizational structure consists of activities such as task allocation, coordination and supervision, which are directed towards the achievement of organizational aims. It can also be considered as the viewing glass or perspective through which individuals see their organization and its environment.”[11]

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It is interesting to see how the structure of an organization changes over time, as it needs to adjust with changing environment and business strategies.

In the field of Information Systems (IS), the relationship between information technology and organizational changes is one of the central concerns.

There are few researchers in the IS field questions the importance and role of information technology in organizations and its implications for organizational design[7].

To understand the effect of Information Technology on organization structure we need to first look into what organization structure consists of. According to Baligh [12], contingency theory suggest that an appro- priate organization design is contingent/dependent upon factors like size, technology, etc. and to find out the effect of Information Technology on organization structure we can see how does it affect the contingency factor.

1.1.2 Information Technology

Wiki defines it as, “Information technology (IT) is the use of computers and telecommunications equipment to store, retrieve, transmit and manipulate data.”[13]

IT System in an organization now takes on many shapes and sizes, from replacing the typewriter with computer with a word processor, to state-of- the-art computer-aided manufacturing machinery. For organizations, IT is an enabling technology. It may also play the role of a constraint, in the sense of “not being enabling enough”. IT applications can help develop core capabilities in companies. It can also play an active role in the difficult task of making the slow evolving organizational context change faster. It can contribute effectively to firms’ competitiveness. To sum up, organizational capabilities are developed by going through organizational routines whereas IT helps to turn these capabilities to core capabilities/competence by enhancing the learning. [14]

1.2 Goal

The goals of this thesis can be present as follows:

Investigate whether IT has any effect on organizational structure

• Identify through reading previous research papers

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• Find any qualitative data in those research papers that shows the effect of IT on organizational structure dimensions, examining documentary evidence in case study form.

• Identify how IT effect the dimensions of the structure, directly, or indirectly

Verify the framework through collecting data from different organization

• Translate the effect in to OPAF

• Investigate three financial organization in Bangladesh and create 3 model using OPAF

• Introduce the changes on OPAF and investigate the changes in their performance

• Validate the framework through analyzing the changes

1.3 Outline

The rest of the thesis is organized as follows: In Chapter 2 research method- ology is introduced. Then in Chapter 3 in literature review, I will discuss about the research done previously and the findings related to the effect of IT in organizational structure. Then I will move to chapter 4, where I will discuss about the effect of IT on Organization Performance Analysis Framework (OPAF) and how does it effect. Then I will discuss which effects are not being mapped in OPAF and why not. Next chapter 5 case study, the next part of my thesis will get started and will discuss how I model studied subjects using Enterprise Architecture Analysis Tool (EAAT) and will follow-up in chapter 6 result & analysis will be performed. Then I will close this paper with conclusion and future work.

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Chapter 2

Research Method

This thesis work is about exploring a different side of an existing framework, OPAF. The knowledge about OPAF is taken from studying paper by N¨arman[10] and through exploring the framework using Abstract Mod- eler. The knowledge about how IT effect organization’s structure is taken by studying different research paper published in different time period.

2.1 Overview of the Method

To examine the effect of IT on organization structure, it is also necessary to first define what belongs to an organization structure. This is in this case the organizational structure dimension. Then the search is performed through previous research, which was done in this field on how IT affects the dimensions. After finding out the key sections, where previous researchers points out how IT affects the organizational structure, those key points are then translated in to OPAF.

This allows us to extend OPAF while keeping its original stature, by adding a new class that will represent the effect of IT on structure. This new class will affect its connected class and this will show some difference in performance of the organization, and will validate the new model.

To validate the model and to have some empirical data, I, then will model a workflow of three real life organizations. The model that is designed by using original OPAF will provide the performance data of organization without IT, and the modified model that is designed by using IT-OPAF metamodel, will provide the performance data of organization with IT. The difference in performance data should validate our finding.

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2.2 OPAF Model

Organization Performance Analysis Framework (OPAF) is an object based model, which uses OCL language to define how object should behave. It can be used in EAAT to analyze the performance of an organization. The objects in this model represent the entities in organization and objects are connected with different objects based on the rule defined in the metamodel.

These rules include how they should be connected, what is the minimum requirements for a model, and can be used to give an initiation value for each attribute.

OPAF also have viewpoints, which represent how objects affect another object according to that viewpoint. This defines the relationship of the objects and also creates requirements for modeling. In this thesis work, a new viewpoint will be introduced which will reflect the changes IT introduce in an organizational structure.

2.3 Literature Study

To collect information related to whether IT has any effect on Organizational Structure/Performance, I search through previous research done in this field with keywords like ‘IT’ + ‘Organization Structure’, ‘IT’ + ‘Organization Dimension’, ‘IT Capability’ + ‘Organization Structure’, etc. which gave me the opportunity to study both part, whether or not IT has any effect on Organizational Structure/Performance.

I choose organization structure design parameters that are mentioned in research paper[12], which is the basis for OPAF (Organization Performance Analysis Framework). They are Contingency factor like Size, Strategy, En- vironment, etc., Design parameter such as Structure, and Properties such as Complexity, Formalization, Centralization, Span of control, etc. and many more.

I also choose to study the effect of IT on organization structure that does not fit into OPAF. This is necessary to eliminate the biased view of the study by studying the effect on organization structure in broader sense than to study specific structure which are mentioned in OPAF. In my belief this unfit affect on structure will help me to validate the effect on OPAF by answering the question ‘what else is out there?’ Also hopefully this will leave a trail for future study.

After finishing the study, the list of required changes is made, and changes are incorporated within OPAF to create an IT-OPAF Meta model.

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These changes should reflect during case study and the analysis part will tell us that.

2.4 Case Study

To validate the findings on how IT affects the organizational structure, I need to model organizations structure without IT and with IT, and see the effect. To model organizations structure, I choose 3 banks as case subjects.

To model a bank with huge number of workers and tasks, it would have been very challenging with the time that I have. So, I choose to model one of the workflow that all 3 banks uses. To understand the basic of this workflow process and to validate the workflow, I interviewed 3 different officials from these banks, Assistant General Manager from Sonali Bank, Divisional Gen- eral Manager from Janata Bank, and Assistant Vice President from United Commercial Ltd. Bank. The process is defined and changed according to their description which helps me to define the workflow according to their interpretation. To specify a boundary of this process, I limit myself to only retail loan processing workflow. Although it is true that specific loan processing workflow does have specific task/decision relate to it, but for study purpose it was needed to specify the boundary.

This study will show how performance varies with different organizational structure. As this study is conducted on different financial institute who perform this same workflow using different structure, so it will tell us whether the performance did vary or not. Also we can perform the study using IT or without using IT, so that it will be interesting to observe if any changes occur or not. In this way it will fulfill my goal for this thesis.

To perform this study, one can follow the questionnaire and map different parameters value in OPAF. The result should concur with current study. Although as different organizations have different structures and follow different strategies, so it is unlikely to get the exact same result from two different studies.

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Chapter 3

Literature Review

Chapter 2 already discusses how the research is conducted. It also discusses the structure parameters of an organization in this study, contingency factor like Size, Strategy, Environment, etc., design parameter such as Structure, and properties such as Complexity, Formalization, Centralization, Span of control, etc. and many more. In this chapter I am going to discuss more detail about them and will try to find out how IT affects them.

3.1 Area of Changes in Organizational Structure

As the study is conducted using some key focus term, like ‘IT’ + ‘Organiza- tion Structure’, ‘IT’ + ‘Dimension Organization’, ‘IT Capability’ + ‘Organi- zation Structure’, etc., some key areas are noted through out the literature study. These can be depicting in Figure 3.1, and these areas are defined below.

3.1.1 IT effect on Differentiation

Vertical differentiation reflects how information is transported, integrated, coordinated among all levels of the organization. Higher score in this means organization’s operation is more effective and more efficient. On the other hand lower score means organization structure is more complex and managers have to spend more time in communicating and coordination. IT helps organization to continue a smooth communication to convey message from headquarter to employees.[1]

Grouping employees into unit is done by organization based on market/

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functionality, where market grouping is based by output, client, or place, while functionally grouping is based on knowledge and skills or work processes and functions. Workers in such grouping should share supervisor, resources, and have common measures of performance[10]. Complexity between such groups exists, and horizontal differentiation reflects the degree of professionalism and differences in such groups[1].

Using IT application organizations can greatly save money and time in gathering information, and worker can handle more extensive and volatile work and activate their full potential. Also by using it, cooperation between different group increased and thus complexity of organization structure is decreased. As a result, organization can have higher score, which means horizontal differentiation is more reasonable.[1]

Also, to the extent information technology (IT) is employed; the manager is aided in controlling and coordinating the differentiated structure, and thus, can effectively manage a more complex organization. So we can say that information technology (IT) would be positively associated with horizontal differentiation in organizations.

3.1.2 IT effect on Coordination

Information Technology (IT) reduces the need for coordination itself, rather than primarily be used for supporting existing coordination mechanisms.

Sometimes it is argued that computers take over routine decision making at lower and middle levels, thereby increasing the capacity of these levels to handle less routine decisions[15]. It also substantially alters the mechanisms and the nature of organizational coordination and control, and, therefore, has direct causal effects on the structure of the organization[16]. Also it is being proposed that IT not solely focusing on internal coordination cost minimization, but a powerful tool to enable the reduction of coordination need[17].

3.1.3 Decentralization and Formalization

Decentralization means decentralized decision rights, which according to wiki, is “any process where the decision making authority is distributed throughout a larger group. It also connotes a higher authority given to lower level functionaries, executives, and workers”[18]. On the contrary, centralized decision rights mean the decision rights are concealed within higher authority. In a fully centralized organization, the decision power lies with one person[10]. Formalization of organization structure denotes how

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the work processes and methods are formalized and normalized by building up operation rules and procedures[2].

A key reason that IT may lead to centralization is the coordination advantages that it provides by increasing the processing capacities of managers or decreasing communication costs which equips managers with more information[19]. Henry C. Lucas [20] talks about 4 new organizational structures induce by IT and they are virtual, negotiated agreement, traditional with electronic components, and vertically integrated conglomerates. All mentioned structure talks about how they differ from traditional structure by distributing decision making.

In favor of decentralization, IT increases available information (information overload) reduce burden on top management and cut unnecessary communication up and down the hierarchy[19]. Both IT and organizational structure are caused by the organizations environment. Heterogeneity - ho- mogeneity and stability-change causes centralized or decentralized decision making, which means rapid changes in the organization environment induce more decentralized decision making. It is when the organization faces a complex and rapidly changing environment that information technology is both necessary and justified, thus it is associated with decentralization, less formalization, and more differentiation within the organization[16]. IT also provide rapid and accurate performance feedback concerning aspects of organizational and managerial performance, thus make it decentralized and less formalize.

On the other-hand some argue that by using Information Technology, working processes are integrated and more standardized, as well as IT applications requires higher worker’s education and personal quality. So it formalizes organization’s processes[1]. According to some, superior IT infrastructure provides a globally integrated platform that enforces standard- ization and integration of data and process[21].

Previous study shows that changing decision right structure with the help of IT has positive performance impact on both centralized decision and decentralized decision rights. Rapid changes produce more performance than changing slowly, whereas big size organizations induce more positive performance than smaller sized organization[19].

3.1.4 Hierarchy

In an organization, the hierarchy usually consists of a singular/group of power at the top with subsequent levels of power beneath them[18]. Hier- archical organization means structure with more levels and structured that

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we can see more in large organization, whereas, flat organization structure means few or less level of management between staff and manager.

By the introduction of IT, it enhances manager’s capability to deal with organizational complexity, and further can provide the manager with more rapid and comprehensive feedback concerning the performance of the organization. It also permits the manager to control and coordinate more complex, and differentiated organization[16]. All of this emphasizes on flattening the organizational structure.

In Structure category of traditional variable Staffing”, which represent the size of a unit/organization, mentioned by Mintzberg becomes Technolog- ical leveling in IT design variables. Technology makes it possible to increase the span of control and possibly eliminate layers in the organization, leveling it in the process[20].

Figure 3.1: Effect of Information Technology [16]

3.2 Previous Research Point-of-View

Among the two task in this thesis, my first task is to find out the effect of IT on organization structure and map that to OPAF. To find out how IT affects the structure of an organization, I studied a range of articles and table 3.1 shows some important note from the papers.

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Table 3.1: Findings from literature study

Quotation Translate to

Framework Cost-effective IT reduces external coordination costs in a va-

riety of ways and can lead firms to turn to markets rather than to integrate vertically with factor suppliers. [Gurbax- ani et al.][22]

Positive effects on Unit .market- Based and Unit .externalCoordi- nation

Horizontal differentiation reflects the degree of professionalism and differences in departments. IT capability has positive impact on horizontal differentiation of organization structure.[Gao et al.][1]

Negative effects on DecisionType .horizontalSpe- cialization by increasing the amount of tasks

workers can

perform Vertical differentiation reflects how information is trans-

ported, integrated, coordinated among all levels of the firm.

IT capability has positive impact on vertical differentiation of organization structure.[Gao et al.][1]

Positive effects on Unit .verticalEn- largement by al- lowing workers to perform variety of tasks and decisions

Formalization of organization structure denotes how the processes and methods are formalized and normalized by building up operation rules and procedures. IT capability has positive impact on formalization of organization structure.[Gao et al.][1]

Positive effect

on TaskType

.behaviourFor- malized, if IT imposes any rule Information Technology is associated with decentralization,

less formalization, and more differentiation within the organization.[Pfeffer et al.][16]

IT, through its provision of more rapid and accurate performance feedback, would be associated both with more decentralization and less formalization.[Pfeffer et al.][16]

Positive effect Task .Perfor- manceMeasured Continued on next page

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Table 3.1 – Continued from previous page

Framework Modern IT can reduce the costs of communicating informa-

tion by improving the quality and speed of information processing and management´s decision making, leading to more centralized management.[Gurbaxani et al.][22]

for rapid and accurate performance feedback, and positive effect on Information .quality

IT should not primarily be used for supporting existing coordination mechanisms, but to reduce the need for coordination itself, thus emphasizing on flattening the organizational structure, i.e. reducing hierarchical depth (scalar chain length) and width (span of control).[Cordella et al.][17]

Improve Decision .mDecisionCo- ordination and negative effect on .horizontalCen- tralization IT is not simply a tool for automating existing processes, but

is more importantly an enabler of organizational changes, such as in communication and coordination, that can lead to improve firm´s performance.[Chen et al.][5]

& .verticalCen- tralization by flattening the structure

IT substantially alters the mechanisms and the nature of organizational coordination and control, and, therefore, has direct causal effects on the structure of the organization.[Pfeffer et al.][16]

In Structure category of traditional variable “Staffing” mentioned by Mintzberg becomes Technological leveling in IT design variables. Technology makes it possible to increase the span of control and possibly eliminate layers in the organization, leveling it in the process.[Lucas et al.][20]

Positive effect on Unit .directSu- pervision which reflect the span of control

According to Whisler IT cause following changes: 1. Sub- units are consolidated; 2. Number of level in hierarchy is reduced; 3. Span of control reduced; 4. Functional department replace parallel department; 5. Control become more centralized; etc.[Pfeffer et al.][16]

Huber(1990) IT independent variables and 1) characteristics of organization integelligence and decision-making, 2) aspects of organization design (size and heterogeneity of decision units, number of levels), is dependent to IT.[Orlikowski et al.][8]

Effect the size of the organization, thus effect Unit .mutualAdjust- ment

Continued on next page

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Framework IT enables organizations to process decision-relevant infor-

mation in a more cost-effective way, thus improving the quality and speed of upper management´s decision making processes. This phenomenon may lead decision rights to move upward in the organizational hierarchy, leading to more centralized management. [Gurbaxani et al.][22]

Effect on decision right.

A firm may use IT to centralize some decision rights while decentralizing others, leading to a hybrid structure. Clearly, the choice depends on the specific cost structures of the firm and the industry. All in all, therefore, the net effect of cost- effective IT on the location of decision rights is not so obvious.[Gurbaxani et al.][22]

IT capability has positive impact on decentralization of organization structure.[Gao et al.][1]

IT provides the ability to improve monitoring and performance measurement, reducing agency costs and thus inducing the decentralization of decision rights.[Gurbaxani et al.][22]

Firms that were able to use IT to radically centralize or decentralize generally experienced a positive effect, whereas not as many firms that performed only minor changes in decision rights perceived such an effect.[Kanamori et al.][19]

4 new organizational structure induce by IT and they are Virtual, Negotiated agreement, Traditional with electronic components, and Vertically integrated conglomerates. All mentioned structure shows how they difer from traditional structure by distributing decision making.[Lucas et al.][20]

The degree of centralization and formalization of organizational structure is negatively related to the cross-functional team interaction during the new product development period.[Chen et al.][5]

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Framework The broad hypothesis holds good; technology and structure

are related; but the strength of multivariate research design is that it prevents premature conclusions. Data have already demonstrated that although technology does have a diffused relationship with the structural dimensions, it always takes second place to other variables.[Aldrich et al.][9]

Effect by IT to structure.

The reduction of uncertainty due to the introduction of IT basically results in a reduction of both coordination costs and transaction costs. However, due to the investments in infrastructure and technology, higher fixed costs are generated initially.[Cordella et al.][17]

Effect on cost.

Information technology can be used for reducing the cost being associated to transactions, This argument is based on the idea of using information technology to make more information available to decision makers, thus contributing to the reduction of uncertainty.[Cordella et al.][17]

There are positive correlation between IT and number of departments, and levels in hierarchy.[Pfeffer et al.][16]

Effect on structure.

Data support the fact that conceptualization of organizational structure being affected by the information and control technology that is employed, rather that environment effect both IT and structure.[Pfeffer et al.][16]

IT can become disabler for agility by the limitations of in- flexible legacy IT systems, rigid IT architectures, or complex nests of disparate technology silos.[Lu et al.][21]

Dewett & Jones (2001) - IT thus moderates the relationship between organization characteristics (size, structure, inter- organizational relations) and strategic outcomes (efficiency and innovation).[Orlikowski et al.][8]

Attewell & Rule (1984) view IT as an independent variable affecting: 1) Number and quality of jobs, 2) centralization of management decision-making, 3) organizational interactions with their environments.[Orlikowski et al.][8]

Effect on size, decision right, communication.

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Chapter 4

Effect of Information

Technology(IT) on OPAF

This chapter will try to explain in detail about OPAF, how we can change OPAF to introduce the effect of IT and the new design of IT-OPAF model.

Then it will also explain in detail about how the effects are introduced, both direct effect and indirect effect. At the end of this chapter, I will talk about how some of the findings from literature study did not get introduced in this IT-OPAF model and why not.

4.1 What is OPAF

OPAF stands for Organization Performance Analysis Framework, uses model- based architecture. As I have mentioned already in chapter 1, there are several viewpoints in this framework, they are Motivation, Learning, Infor- mation, Productivity, Efficiency, Variability, Coordination, and Flexibility.

Using this framework, organizational structure can be designed and ran for analysis, and the outcome of this analysis is performance.

OPAF uses Partial Positive Contingency theories to define the rules in

“If A Then B” manner and my work in this thesis is to try to find if and how Information Technology (IT) effect A’ and ultimately B’ or effect B’

directly.

Enterprise Architecture Analysis Tool (EAAT) is used to analyze the organization performance. It uses OCL language to define properties or constraints. It also guides the creation of enterprise information system scenarios in the form of enterprise architecture models and generates quantitative assessments of the scenarios[6].

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Another task for this thesis is to try to verify the existing framework by collecting input data from the selected 3 banks. These data will help us to define the structure of each organization in the framework, and it also should help us to find the performance output of the organization and validate the findings regarding the effect of IT on these performance outputs.

4.2 Effect of IT on OPAF

To design organization structure, there are 23 classes, like- Organization, Worker, Unit, Task, Decision, Skill, Artefact, Environment, and many more.

These classes represent entities of an organizational structure. There is a

‘Information’ class exists in OPAF but it is shown as the knowledge you get/need to perform a task/decision. So, to introduce the effect of IT in OPAF, I had to introduce a new class named ‘ITSystem’, whose connection with classes like ‘Task’, ‘Decision’, and ‘Worker’ reflects the changes on organization structure, which is shown in figure 4.1.

Figure 4.1: IT effect on OPAF

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Based on the literature review and opinion from experts of OPAF, I found that classes that are directly affected by ITSystem are Unit, Decision, DecisionType, TaskType, RuleBook, and Information. These direct effect to OPAF by IT means that, the attributes value gets affected by introducing IT, thus ITSystem represents changes in their internal code. Figure 4.2 shows how ITSystem effect the attribute of the classes inside the framework and in which way (positive or negative) they affect them. Figure 4.3 shows how IT effect OPAF which can be represent by structural changes only.

These direct effects translate to OCL code as a direct association.

Figure 4.2: Direct effect of IT to OPAF attribute

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Figure 4.3: Direct effect of IT to OPAF attribute represent by organizational structure changes

4.2.1 Effect on Coordination

As shown on table 3.1 it has been said many times that IT improve decision coordination by enhancing the capabilities and by reducing coordination cost or need [17, 5, 16]. To map the effect, all the decisions that needs to be coordinated, if those decisions involve the ITSystem, then their coordination value will increase.

IF getDependentDecisions().iTSystem THEN Decision.mDecisionCoordination INCREASE

The OCL code to represent such effect is:

i f g e t D e p e n d e n t D e c i s i o n s ( )−>n o t E m p t y ( ) t h e n

i f g e t D e p e n d e n t D e c i s i o n s ( ) . i T S y s t e m −>n o t E m p t y ( )

t h e n 1 . 0

e l s e i f c o m m i t t e e−>n o t E m p t y ( ) and d e c i s i o n M a k e r −>n o t E m p t y ( ) . . . .

This effect on decision also effect ExternalCoordination, which will be explained in next section.

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4.2.2 Effect on Formalization

The impact of IT on how the behavior is formalized is divided into both ways. On one hand, Gao [1] suggest that IT helps organization to be more formalized by building up rules and procedures. But on other hand, Pfeffer [16] mention several times on his article about how IT makes the structure less formalized. But as Pfeffers definition lack how does it make less formalize.

So I choose to map the effect in such way that, if there exists a ruleBook, that is created by IT system, then the process is more formalized.

IF ruleBook.iTSystem THEN TaskType.behaviourFormalized IN- CREASE

. . . .

e l s e i f r u l e B o o k . i T S y s t e m −>n o t E m p t y ( ) t h e n 1 . 0

e l s e 0 . 0

. . . .

This effect on formalization also effect the externalCoordination & the flexibility on unit level, which will be discussed in section 4.3.

4.2.3 Effect on Performance

According to Pfeffer, IT improve performance measured by providing rapid and accurate feedback. So if the task involve a iTSystem, then the performance measured value will be high.

IF Task.iTSystem THEN Task.performanceMeasured INCREASE The OCL code to represent such effect is:

i f t a s k T y p e . p e r f o r m a n c e D a t a −>n o t E m p t y ( ) t h e n 1 . 0

e l s e i f i T S y s t e m −>n o t E m p t y ( ) t h e n 1 . 0

. . . .

And this value will affect the motivation of employee and the unit, this will be discussed in section 4.3.

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4.2.4 Effect on Quality

According to Gurbaxani[22] IT can be used to reduce cost of communicating information by improving the quality, so I can map that, the quality attribute of Information will get higher, if the task/decision that produce the Information involves ITSystem.

IF producingDecision.iTSystem or producingTask.iTSystem THEN Information.quality INCREASE

. . . .

i f p r o d u c i n g D e c i s i o n −>n o t E m p t y ( )

t h e n i f p r o d u c i n g D e c i s i o n . i T S y s t e m−>n o t E m p t y ( ) t h e n 1 . 0

e l s e p r o d u c i n g D e c i s i o n . q u a l i t y e n d i f

e l s e

i f p r o d u c i n g T a s k −>n o t E m p t y ( )

t h e n i f p r o d u c i n g T a s k . i T S y s t e m−>n o t E m p t y ( ) t h e n 1 . 0

e l s e p r o d u c i n g T a s k . q u a l i t y e n d i f

e l s e

i f p r o d u c i n g E n v i r o n m e n t −>n o t E m p t y ( ) t h e n 1 . 0

e l s e 0 . 0 e n d i f e n d i f

e n d i f

. . . .

This effect on information quality also effect DecisionQuality and Out- putQuality on unit level, which will be discussed in section 4.3.

4.2.5 Effect on Mutual Adjustment

MutualAdjustment on Unit, reflects the effect on size of the organization, and as IT is an independent variable affect size, according to Orlikowski [8], thus it affect the value of MutualAdjustment, by increasing it. This effect will come to play when a unit in that organization will use IT, by that, their mutual adjustment value will be increased.

IF unit.iTSystem THEN Unit.mutualAdjustment INCREASE

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. . . .

e l s e i f i T S y s t e m−>n o t E m p t y ( )

t h e n 1 − ( ( 0 . 0 5∗ worker−>size ( ) ) /( iTSystem−>size ( ) +1) ) . . . .

This effect on mutual Adjustment also effect on unit’s flexibility, which will be discussed in section 4.3.

4.2.6 Effect on Centralization

According to Cordella[17], IT effect the organization structure by flattening it, so this decrease the value of horizontalCentralization & verticalCentral- ization.

IF decision.iTSystem THEN DecisionType.horizontallyCentralized DECREASE

IF decision.iTSystem THEN DecisionType.verticallyCentralized DECREASE

i f ( decision−>a s O r d e r e d S e t ( )−>i n c l u d e s A l l ( d e c i s i o n . d e c i s i o n M a k e r . ←- p e r f o r m e d T a s k s . d e c i s i o n−>a s O r d e r e d S e t ( ) ) )

t h e n 0 . 0

e l s e i f d e c i s i o n . i T S y s t e m −>n o t E m p t y ( ) t h e n 0 . 1 6 5

. . . .

, and

i f d e c i s i o n I n f l u e n c i n g −>n o t E m p t y ( )

t h e n i f d e c i s i o n . i T S y s t e m −>n o t E m p t y ( ) t h e n 0 . 0

e l s e d e c i s i o n I n f l u e n c i n g . i n f l u e n c e−>sum ( ) e n d i f

e l s e 0 . 0

e n d i f

The OCL code represent such effect by stating that- if the decisionType influence other decisionType, then this value should increase, but if the

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decisions are taken by the help of the ITSystem, then this value should decrease.

This verticallyCentralized attribute also has a direct effect on unit.verticallyCentralized.

4.2.7 Effect on Structure

DirectSupervision attribute in unit represent the span of control, and according to Lucas and Pfeffer[20, 16] IT effect the span of control, thus IT effect this attribute.

Gurbaxani suggest that IT helps the organization turns to MarketBased, which should affect unit.MarketBased. Also according to Gao[?], IT has a direct effect on Worker.horizontalSpecialization (which means workers perform how many task and how many times, IT will have a negative effect on this attribute as it will allow user to perform more task with less special- ization), and on Worker.verticalEnlargement (which means how variety of task/decision can a worker perform).

But these effects are on structural level, where by introducing IT, the structure will be changed to accommodate the effect. The changes I am refereeing states that by introducing IT, more decisions are taken by worker or more tasks are performed by the worker. These effects can be visible only by modeling an organization without IT and again model the same organization after they implement IT (clearly the structure will be different, i.e. IT will make it possible for worker to perform more task/decision).

4.3 Indirect effect of IT to business performance measurements

The attributes from different entity (class in OPAF) affect the value of attributes of Unit entity, which is known as Business Performance Measure- ments (BPM). These affect are already mapped in OPAF. For example, the quality of a units output depends on quality of information that it receives.

This logical map is already exists in OPAF. So as IT affect some of the attributes of different entity, it has an indirect effect on the Business Per- formance Measurements (BPM). This is known as indirect effect of IT on organizational structure. This section will investigate these effects as shown by figure 4.4.

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Figure 4.4: Indirect effect of IT to performance measurements attribute 4.3.1 Effect on Unit.employeeMotivation

Figure 4.5 shows how IT indirectly affecting unit.employeeMotivation, which is a collection of all worker’s motivation value. Worker’s motivation depends on several attributes, among them if workers performance is measured then the motivation should increase, if worker get to perform more task/decision through Worker.horizontalSpecialization then the value should increase, also if they get to perform variety of task/decision that should also increase the motivation.

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Figure 4.5: (a) Indirect effect of IT to Motivation attribute, (b) direct effect of IT to Worker.horizontalSpecialization, Worker.verticalEnlargement, and TaskType.performanceMeasered

As the figure 4.5 suggests, IT has a positive effect on TaskType.performanceMeasured and Worker.verticalEnlargement, but has a negative effect on Worker.horizontalSpecialization.

If the structure where worker get more task/decision is not changed, then we can say that IT has a positive effect on unit.employeeMotivation.

4.3.2 Effect on Unit.externalCoordination

Figure 4.6 shows how IT indirectly affecting unit.ExternalCoordination. As

the figure shows, the attribute has positive impact of Decision.mDecisionCoordination, TaskType.variability, and negative impact of Worker.horizontalSpecialization.

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Figure 4.6: (a) Indirect effect of IT to externalCoordination attribute, (b) direct effect of IT to Decision.mDecisionCoordination, (c) indirect effect of IT to TaskType.variability, (d) direct effect of IT to Worker.horizontalSpecialization

As IT has direct impact of Decision.mDecisionCoordination and Worker.horizontalSpecialization, it increases the value of Unit.externalCoordination. But, IT has indirect ef-

fect on TaskType.variability, where it may decrease the value, and by doing so, may decrease the value of Unit.externalCoordination.

4.3.3 Effect on Unit.internalCoordination

Figure 4.7 shows how IT indirectly affecting unit.internalCoordination. As the figure shows, the attribute has positive impact of Unit.DirectSupervision, TaskType.behaviourFormalized, and Unit.MutualAdjustment. This means that, if there is direct supervision, more task are formalized, there is better mutual adjustment in the unit, then the internal coordination score will be high. These all three attribute have direct positive effect from IT, thus we can say:

IF unit.iTSystem AND ruleBook.iTSystem THEN Unit.internalCoordination INCREASE

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Figure 4.7: Indirect effect of IT to internalCoordination attribute 4.3.4 Effect on Unit.flexibility

Flexibility score of a unit represent the fact that they there is mutual adjustment inside the unit, task are less formalize, there is more task to perform which means more options. Figure 4.8 shows how IT indirectly affecting unit.flexibility. As the figure shows, the attribute has positive impact of Decision.horizontallyCentralize, and negative impact of Task- Type.behvaiourFormalized, and Unit.mutualAdjustment.

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Figure 4.8: (a) Indirect effect of IT to flexibility attribute, (b) direct effect of IT to DecisionType.horizontallyCentralize, Unit.mutualAdjustment, and TaskType.behvaiourFormalized

As IT has direct impact of DecisionType.horizontallyCentralize and Unit.mutualAdjustment, it increases the value of Unit.flexibility. But, IT has positive effect on Task-

Type.behvaiourFormalized, where it may increase the value, and by doing so, may decrease the value of Unit.flexibility.

4.3.5 Effect on Quality

If the decision/task that produce a information involve ITSystem, then the quality of the information will be high, and thus the quality of the output from the decision/task, or the quality of the decision taken from that information will be high too. As figure 4.4 shows, IT has a positive impact on Information.quality, which has a positive impact on Unit.OutputQuality and Unit.decisionQuality. So we can say,

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IF producingDecision.iTSystem OR producingTask.iTSystem THEN Unit.outputQuality AND Unit.decisionQuality INCREASE

4.3.6 Effect on Unit.efficiency

If worker perform routine task, and the information quality is high, then the efficiency will be higher. As figure 4.4 shows, IT has a positive impact on Information.quality and negative impact on Unit.verticalCentralization, which has a positive impact on Unit.efficiency. So we can say,

IF producingDecision.iTSystem AND decision.iTSystem THEN Unit.effeciency INCREASE

4.3.7 Effect on Unit.learningPace

Figure 4.9: Indirect effect of IT to unit.learningPace

As figure 4.9 shows, IT decrease horizontalSpecialization of the worker, which means worker will perform more task/decision, which means learning pace will be increased as worker will learn faster by performing task/decision.

4.3.8 Effect on Unit.variability

Variability of a unit depends on the finale artefact variability, which depends on the variability of the taskType that produce the artefact. If the behavior is formalized, then variability will be low. As figure 4.4 shows, IT has a positive impact on TaskType.behaviourFormalized, and if the finale artefact belong to this taskType, then the artefact’s variability is lowered by this effect. Thus it will lower the Unit.Variability value. So we can say,

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IF ruleBook.iTSystem THEN Unit.variability DECREASE

4.4 Non-matching effect of IT on OPAF

Following table will explain how some of the findings from literature study cannot be placed inside the IT-OPAF model.

Table 4.1: Non-matching findings from literature study

Quotation Reason for non

match IT enables organizations to process decision-relevant

information in a more cost-effective way, thus improving the quality and speed of upper management´s decision making processes. This phenomenon may lead decision rights to move upward in the organizational hierarchy, leading to more centralized management.

[Gurbaxani et al.][22]

It effect the decision right and thus effect the structure of the organization and this also effect the motivation of the employees. So indirectly IT effects the IT capability has positive impact on decentralization

of organization structure.[Gao et al.][1]

motivation of a organization [10]. But this effect

IT provides the ability to improve monitoring and performance measurement, reducing agency costs and thus inducing the decentralization of decision rights.[Gurbaxani et al.][22]

to organization performance is relevant to each and every organization itself. although study

4 new organizational structure induce by IT and they are Virtual, Negotiated agreement, Traditional with electronic components, and Vertically integrated conglomerates. All mentioned structure shows how they differ from traditional structure by distributing decision making.[Lucas et al.][20]

shows that this effect also dependent on size and transaction strategy of the organization.

Bigger organization find Continued on next page

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match Firms that were able to use IT to radically centralize

or decentralize generally experienced a positive effect, whereas not as many firms that performed only mi- nor changes in decision rights perceived such an effect.[Kanamori et al.][19]

performance spike than smaller organization, and it also dependent on whether structure is shifted from being centralize to decentralize or vice versa.

A firm may use IT to centralize some decision rights while decentralizing others, leading to a hybrid structure. Clearly, the choice depends on the specific cost structures of the firm and the industry. All in all, therefore, the net effect of cost-effective IT on the location of decision rights is not so obvious.[Gurbaxani et al.][22]

As per the author, the net effect is not so obvious.

The broad hypothesis holds good; technology and structure are related; but the strength of multivariate research design is that it prevents premature conclusions. Data have already demonstrated that although technology does have a diffused relationship with the structural dimensions, it always takes second place to other variables.[Aldrich et al.][9]

In this study it is shown that, IT act as a in- fluencing helper. So to find out the effect of IT after the effect of another variable to organization structure is difficult to find out.

The reduction of uncertainty due to the introduction of IT basically results in a reduction of both coordination costs and transaction costs. However, due to the investments in infrastructure and technology, higher fixed costs are generated initially.[Cordella et al.][17]

The effect of IT in this case is too broad to put in OPAF

Information technology can be used for reducing the cost being associated to transactions, This argument is based on the idea of using information technology to make more information available to decision makers, thus contributing to the reduction of uncertainty.[Cordella et al.][17]

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match There are positive correlation between IT and num-

ber of departments, and levels in hierarchy.[Pfeffer et al.][16]

This is too specific on organization structure Attewell & Rule (1984) view IT as an indepen-

dent variable affecting: 1) Number and quality of jobs, 2) centralization of management decision- making, 3) organizational interactions with their environments.[Orlikowski et al.][8]

rather than organization performance.

Huber(1990) IT independent variables and 1) characteristics of organization integelligence and decision- making, 2) aspects of organization design (size and heterogeneity of decision units, number of levels), is dependent to IT.[Orlikowski et al.][8]

Dewett & Jones (2001) - IT thus moderates the relationship between organization characteristics (size, structure, inter-organizational relations) and strategic outcomes (efficiency and innovation).[Orlikowski et al.][8]

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Chapter 5

Case study

In this chapter, I will try to describe the workflow that I am going to model on OPAF, and the organizational structure of each of the studied subject.

This chapter will also describe the properties of the studied subject on how they are similar or dissimilar from each other.

5.1 Loan Processing System

Figure 5.1 shows a basic loan processing workflow which involve actors like Customer, FrontDesk, LoanOfficer, HeadOffice, and 3rd Party.

Workflow starts when Customer initiates the process through front desk. In- volvement of front desk worker is optional for some cases, but in some cases it requires certain skill and also some output depends on it. Loan Officer perform most of the tasks and take most of the decisions, but after evaluation from loan officer the process involve committee of some decision maker from head office or senior executives. It also involves some 3rd party actors to evaluate loan security, which in some cases performed by loan officer workers. Expert opinion has been taken to design the process, along with the opinion from the interviewee. Although there are several process like this is involved in every one of the studied bank, but I choose to work with this workflow because it is generic and most of the task in Loan Processing System has been covered in this workflow.

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40

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After these evaluating and processing the request, loan disbursement happens and loan application goes to monitoring stage from which it finishes after loan credit is fully paid. During this workflow all the decisions can either pass the application to next stage or decline the request thus finish the workflow.

5.1.1 Sonali Bank

In figure 5.2 unit structure of loan processing system of sonali bank is shown.

The unit HeadOffice is parent for unit CreditCommittee, BranchLevel where role of each unit is described by the tasks they performed. Branch- Level unit also has two sub unit FrontDesk and CreditSection where most of the decision related to loan take place. Each of these units contains one or more worker. The structure of this workflow is such that line worker such as Loan Officer 1 have sufficient decision power to process the workflow.

Figure 5.2: Organogram for Loan Processing System of Sonali Bank The task and decision distribution between the lower level to upper level managers confirm this that the decision rights are very much decentralized

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where some of the critical decision can be taken by lower level management, thus their skill level has to be very good.

This workflow depends heavily on the skill of LoanOfficer, as these workers on the CreditSection unit perform most of the task related to loan processing, and take initial loan evaluation decisions to whether or not pass the application to higher authority. So in a way, they work as an initiator for this workflow. In this case study, we have two LoanOfficer, where one of them perform task with less significance, and other one perform task and take decision on proper loan request. Figure 5.3 shows a snapshot of skills, Tasks, and Decisions that are associated with LoanOfficer1 worker. Tasks like CreditReportCreation and SelectionOfBorrower belongs to task type ApplicationProcess which requires skill like RetailBanking. Task like LoanDocumentCreation requires both RetailBanking and General- Banking skill.

Figure 5.3: LoanOfficer1 Task and Decision based on Learning viewpoint From figure 5.4 we can see depending on this performed task type, it creates artifact type PreliminaryLoanDocument and FinaleLoanDocu- ment which holds artifact such as ProofOfIdentity, SanctionLetter, CIBRe- port, CreditReport, etc and these artifact get used in taking decisions type ApplicationEvaluation and ApplicationValidity.

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Figure 5.4: LoanOfficer1 Task and Decision based on Motivation viewpoint As we see in figure 5.5 compare to LoanOfficer1, LoanOfficer2 does not require to perform a task which requires GeneralBanking skill. Similar to LoanOfficer1, as we can see in figure 5.6 the viewpoint looks similar, and sometimes the task of FrontDeskOfficer1 is performed by LoanOfficer2.

Figure 5.5: LoanOfficer2 Task and Decision based on Learning viewpoint

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Figure 5.6: LoanOfficer2 Task and Decision based on Motivation viewpoint 5.1.2 Janata Bank

As we can compare the organogram of Janata Bank to Sonali bank is that the involvement of Head Office unit, over here, Branch Level unit have the ultimate say to these sample loan scenario. Here the Head of Branch acts as CEO for this workflow and provide the ultimate decision. Here, mid level manager from different unit come together as a committee to evaluate the loan and evaluate the different aspect of each loan (Foreign Exchange unit, General Banking unit, etc).

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Figure 5.7: Organogram for Loan Processing System of Janata Bank We can see from figure 5.7 that the structure is very much centralized.

The task allocation come from the head of the branch and it also gets eval- uated by top management.

Figure 5.8: Head of Branch Task and Decision based on Learning viewpoint

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Figure 5.8 shows us a snippet of how much Head of Branch gets involved in this workflow. From accepting the application task to Application Ap- proval decision, he is involved. HeadOfBranch have to heavily depend on HOBRetailSkill to perform the tasks and take decisions.

Lower level employee SODIncharge1 and SODIncharge2 involved in preparing the documents and taking decision about the routine evaluation of the loan like CRG calculation, Transaction Profile evaluation, etc and all their decision type and task type involve both FinaleDocuments and InitialDocuments artefact type. Figure 5.9 shows the task and decision performed by SODIncharge based on motivation viewpoint.

Figure 5.9: SOD Incharge Task and Decision based on Motivation viewpoint 5.1.3 United Commercial Bank

In figure 5.10 unit structure of loan processing system of united commercial bank (UCB) is shown. The unit HeadOffice is parent for unit Credit- Committee, BranchLevel where role of each unit is described by the tasks they performed. BranchLevel unit also has two sub unit FrontDesk and CreditSection where most of the decision related to loan take place.

Each of these units contains one or more worker. The structure of this workflow is such that line worker such as Loan Officer 1 have sufficient decision

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power to process the workflow.

Figure 5.10: Organogram for Loan Processing System of United Commercial Bank

All the mentioned cases require a committee to judge the loan request before approving them, In figure 5.11 the committee structure is different from other cases. Here two committee require to validate the loan request, RetailCredit committee validate the loan request with internal retail division and only after approving though this committee senior management gets to take decision on those.

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Figure 5.11: Committee structure of UCB in Loan Processing Workflow In figure 5.12 shows the task and decision performed by RetailDivision worker, as he takes most of the decision.

Figure 5.12: Decision Task performed by Retail Officer of UCB Head Office based on Learning viewpoint

In figure 5.13 shows the task performed by CreditSection unit and shows

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how the performance is measured.

Figure 5.13: Task performed by Credit Officer of UCB credit section based on Motivation viewpoint

5.2 Similarities & Dissimilarities between study subjects

To understand the result, we need to understand the similarities and dissimilarities in the structure, their way of doing task, and the circumstance that they are in.

5.2.1 Importance of the workflow

The workflow that I am studying is one of the most recognized and important workflow for a bank. It is also one of the money making & core functionality for each of these banks.

So for obvious reasons, they invest a fair amount of resources in this workflow. Although the number of people involved in this workflow vary due to different size of the branch and number of functionality they have in the branch. But they all have specialized skilled employee in the core of this workflow. These specialized employees have training about how to work in a credit section of a branch, internally and from outside of the organization, before joining the unit. They also have this trainee program for junior

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employee’s to work in credit section on a mentoring program, which would require a training object to calculate how they learn by doing the work.

5.2.2 Unit structure

All of these banks have functional hierarchy, Head office and branches. Each branch has CEO who is known as Head of Branch. Their structure is further divided based on functionality, such as Credit Section deals with loan/ad- vance.

The structural difference between the banks can be found on how they perform certain task, For example, Janata bank form a committee with all other functional unit’s head in the branch, but Sonali bank form more like a traditional committee with only the credit unit’s personal. UCB, on the other hand has two committee, Retail division committee to assess risk of loan proposal, and Approval committee to assess the potential of the loan and approval.

5.2.3 Decision rights

Decision rights in Janata Bank are more centralized as the main decision is taken by Head of the Branch. But Sonali bank is a little more decentralized, as some of the decision on evaluating the loan, is taken by the credit officer. UCB, credit unit in branch take very less or no decision on the loan application. They perform some predefined task on the application and pass it to their Retail division of head office, where most of the decisions take place. So we can say, they also take centralized decision making approach.

The involvement of Head of Branch of Janata Bank is much higher than other banks and the involvement of credit officer in this workflow is higher in Sonali Bank.

5.2.4 Central office involvement

The involvement of Head office in the model is limited for Sonali Bank for special circumstance. As the limit of loan depends on the designation and disbursement right of the Head of branch, thus the involvement of Head Office is also defined by that. The involvement also depend on the outside environment of the branch, previous credit history of the branch, loan amount, applicant, etc and based on the interview, I choose to accept the default situation. As for UCB the involvement is much higher and in their case the head office takes the role of centralized decision maker.

Impact of IT on Organization's performance

Impact of IT on Organization's performance

Md Saifullah

Impact of IT on Organization’s performance

Contents

List of Figures

List of Tables

Chapter 1

Introduction

1.1 Background

1.2 Goal

1.3 Outline

Chapter 2

Research Method

2.1 Overview of the Method

2.2 OPAF Model

2.3 Literature Study

2.4 Case Study

Chapter 3

Literature Review

3.1 Area of Changes in Organizational Structure

3.2 Previous Research Point-of-View

Chapter 4

Effect of Information

Technology(IT) on OPAF

4.1 What is OPAF

4.2 Effect of IT on OPAF

4.3 Indirect effect of IT to business performance measurements

4.4 Non-matching effect of IT on OPAF

Chapter 5

Case study

5.1 Loan Processing System

5.2 Similarities & Dissimilarities between study subjects