One would be hard pressed to find any CIO who doesn't believe in and argue for IT's ever-growing stature within the organization. New Research from Harvard Business School, however, suggests a surprising new angle on the power CIOs really have to influence the way their companies run.
In the paper "The Distinct Effects of Information Technology and Communication Technology on Firm Organization," HBS strategy professor Raffaella Sadun and colleagues from Stanford University and the London School of Economics theorize that the kinds of technology systems a company employs determines in large part the decision-making culture of that organization. Specifically, the key difference lies in whether the prevailing system a company uses is information-based, such as ERP software, or communication-based, with heavier emphasis on e-mail, instant messaging, intranets, and other networking capabilities.
According to their research, Sadun and co-authors Nicholas Bloom of Stanford and Luis Garicano and John Van Reenen from London find that information-based systems, by making information easily accessible, enable managers and workers on the lower rungs of the corporate ladder to make educated decisions without having to wait for the green light from the higher-ups.
By contrast, in organizations that give more play to communication-based systems, decision-making gets centralized at the top ranks. This is because the easier it is to communicate with employees at all levels of the company, the more closely the CEO and other senior executives can monitor the quotidian activities of running the organization -- you know: the stuff they pay managers to do?
Which brings us to a kind of cautionary tale in Sadun's research. While no one would argue that communication isn't extremely valuable, it can, in fact, hamper progress if not used discerningly. The availability of communications technologies, while enabling easy access to information by employees at all levels of the firm, can also present a kind of pitfall. That is, executives who get too caught up in monitoring day-to-day activities instead of entrusting that task to their managers may find themselves trapped in micromanagement mode. You don't need an MBA from Wharton to know that when the CEO's focus gets diverted from the big picture of leadership, organizational progress, or, more to the point, innovation goals slows its pace. As Sadun told HBS Working Knowledge, "If a CEO can trust his senior managers, he will be more willing to decentralize decision-making."
As I said at the beginning of this post, you already know how much IT can propel your company toward profits. But who knew CIOs have the potential, through thoughtful strategic decisions about IT, to influence how the chief executive himself spends his time?