Two major types of theories about how information systems affect organizations are: economic theories and behavioral theories.



Economic Impacts

It‘s sometimes cheaper to hire a computer than to hire a person. To better illustrate this concept, let‘s take a look at how a company can find it cheaper to use an information system to develop and disseminate a Human Resources policy for employee dress codes. The HR assistant may write the first draft of the policy and give it to the HR director on paper. The director will review it and make changes. The assistant then must incorporate the changes and reprint the document. If there is an information system, the assistant can submit the draft to the director electronically and the director can make changes to the electronic version of the file and return it to the assistant. This will reduce time and cost of the task.


Of course others in the organization must review the new dress code policy. The proposed policy can be printed in 15 copies, a person can manually send the copies out, track who they went to and when, and then track all the changes made to the proposal. If we use information systems, the proposed policy can be sent electronically to reviewers who will electronically collaborate on necessary changes. Each of the reviewers can see what the others think and the changes they would like to make. This is another point where we can huge amount of human effort and some amount of time and money also. One manager can oversee ten employees (agents) rather than four employees because information is cheaper and easier to disseminate.



Organizational and Behavioral Impacts

IT Flattens Organizations

Rather than five layers of management in an organization, information technology allows companies to flatten the layers to three, maybe even two. Here‘s how:


  • IT pushes decision-making rights lower in the organization because lower-level employees receive the information they need to make decisions without
  • Managers now receive so much more accurate information on time, they become much faster at making decisions, so fewer managers are
  • Management costs decline as a percentage of revenues, and the hierarchy becomes much more


The Internet and Organizations

The example used earlier of posting personnel policies to the company intranet is just one small example of how businesses are using network technologies to reduce costs and enhance their business processes. Business-to-business commerce is growing at a tremendous pace because of the cost savings the Internet allows. The Internet provides an open platform technology that allows

transaction processing between businesses at much cheaper costs and provides an easy-

to-use interface. The innovative ways organizations are using the Internet, intranets, and extranets to improve their business processes and lower costs is simply fascinating.