The Effect of IT on Organizational Structure (Case study: Refah bank in Guilan) Received 17 March 2012, Accepted 20 May 2012 Afshin Mirmasoudi Yaghob Farjami Alireza Pourebrahimi M.A of Information Technology Manage- Assistant Prof. Faculty of Engineering, Assistant Prof. of Islamic Azad University, ment, Islamic Azad University, E-Campus University of Ghom, Ghom, Iran E-Campus Refah Bank, Emam Khomeini St., Rasht, Iran P.O.Box: 37161-46611 No. 166, Zafar St., Tehran, Iran +98 911 1343929 +98 912 7472685 +98 21 22221632 [email protected] [email protected] [email protected] ABSTRACT 140 managers and heads of branches and experts of ‘Refah’ Undoubtedly, information technology (IT) has undergone Bank in Guilan. The collected data was subsequently ana- extensive developments in various social and economic lyzed by using software SPSS 18 the propounded hypothe- spheres; its effect on human society is in such a way that sis based on research model were duly analyzed with t-test, the world today is referred as information society. Besides, which confirmed significant relationship in the impact of information technology, attributed as the main agent of IT on organizational structure. The obtained results pin- global change, is to achieve meta- organization purposes. It pointed the importance of IT in easing the complexity and also pertains to appropriate information formulated in the Centralization and reducing bureaucracy (Formalization) strategic policy of a given organization to achieve its ulti- in organizational structure of the ‘Refah’ Bank in Guilan. mate organizational goals. Extensive research from differ- ent aspects is conducted on the impact of IT on organiza- Keywords tional structure over the past three decades. Nevertheless, IT, Organizational structure, Complexity, Formalization findings of the respective research are posited as inconsis- tent and incongruous. The sustained developments, enor- 1. INTRODUCTION mous potential of information technology and its appli- cability in various domains have raised the question of the In recent decades, information technology has significant accuracy of earlier research findings. The study is to explain effects performance and position on many societies, organi- the results of previous research, based on modern infor- zations and individuals. Following the dramatic advances in mation technology instances, including various informa- this field, the societies, organizations and individuals relied tion systems e.g., internet, intranet, extranet, etc in order to heavily on modern technology, which accentuated a deep give coherence to the review of the related literature and to understanding on the influence of information technology. further identify the impact of IT on organizational struc- It can be taken for granted that IT can be acknowledged ture of ‘Refah’ Bank in Guilan by tapping into 24-question of great importance, which can make a profound impact Robbins standardized questionnaire distributed among on status, performance and fate of communities, organi- zations and individuals. It can consequently lend service International Journal of Information, Security and Systems Management, 2012, Vol. 1, No. 2, pp. 48-54 IJISSM, 2012, 1(2):48-54 to the organizations to strengthen boost their resources for middle managers, officials and staff forces resulted in through adopting proper management in generation pro- truncation of organizational levels in the pyramid of orga- cesses, storage exchange and utilization of information to nization. Modern technology has led to strong electronic derive competitive advantages. communication between the units and bodies; consequently, Organizational transformation process is very complex, it has caused elimination of time and distance barriers. In- demanding long-term alterations. In order to apply the creased use of credit cards instead of cash in banks and elec- changes in the organization, information technology should tronic business prompted the banks offer valuable service to play a fundamental role on the culture, strategies both in customers. Information technology facilitated management short and long-term goals of the organization. Accord- process in terms of sharing the tools of production, process- ingly, paving for original infrastructure comply with orga- ing and distribution of information to managers at various nizational culture and information technology is of para- levels, raising the accuracy of monitoring on flow of informa- mount importance in fostering an appropriate change in tion in the organization and managing technical measures. business processes. Information technology supplies blood Hence, extensive researches are conducted in organizations into the artery of the organization, facilitating the transfer and scientific circles to assess the impact of IT on various of information through the lowest to the highest level no dimensions, including the structure of organization. time. It can also accelerate the organization transformation process, which can eventually empower the organization to 2. LITERATURE REVIEW adopt an advisable business strategy compatible with the Experts in ‘management and organization’ are fully aware changing environment. Obviously, a booming business in that information technology can be defined in terms of a an organization is feasible through application of informa- set of tools ,which enable the customers of an a given or- tion technology following fundamental transformations in ganization to spend their quality time to reach a landmark its structure in compliance with the changing environment decision by getting access to accurate data. The experts en- [1]. Alvin Toffler said that Present era would be called post- dowed with science and technology knowledge will save industrial or information era. Industrial revolution in the time utilizing a wide range of resources. It can eventually 1970s began based on power of information technology improve working processes and raise quality in the respec- and information systems. It was the effective motor for this tive field. revolution and had changed everything, including method According to ‘Information Technology Association of of management and framework of organizations. Most of America’, information technology is defined as the study, organizations had hierarchical structure and governed by which paves the way for designing, development, imple- bureaucracy until 1370s. The elapse of time has proved that mentation, support and management of computer informa- hierarchical structures and bureaucratic system are inflex- tion systems with both hardware and software applications. ible and inefficient. New forms of organization without Accordingly, information technology can encompass three borders, post-bureaucracy organization, knowledge-based main components: hardware, software and database [2]. organization, a network-oriented organization, cellular or- ganization, spider’s web organization and virtual organiza- Organizational structure is defined in terms of distinct tion have emerged since 1980s. Five major factors in shap- dimensions in which the investigators paid heed to three ing the organization can be enumerated: 1. Organizational aspects, namely ‘Centralization’, ‘Formalization’ and the structure is disfigured to be flexible, 2. Organizations will be ‘Complexity’. “The complexity components are respectively assigned to create strategic network of companies, 3. Cen- formed from three integral parts in terms of the division of tralization in separation will act as a norm, and 4. Distribu- tasks, determining the hierarchical number, and distribu- tion of information fosters change in terms of authority in tion of organization in different regions” [3]. the organization and 5. It will dismantle technical jobs and Since information technology in the same mould of other standardization due to the permutation in individual roles. technologies plays a paramount role in the structure of an Organization›s ability to respond to environmental changes organization, it should proportionally undergo appropri- and customer demands in today›s competitive environment ate change. To determine the relationship between or- is seriously taken into consideration. However, many factors ganizational structure and technology, scholars such as limit the possibility of matching organizations with envi- Woodward, James Thompson, Charles Peru, etc., have done ronmental changes and provide pave the way for organiza- numerous studies on contingency management school, tions to be posited as a threat. concluding that “the technology has a direct effect on or- The aforementioned concerns and aspirations indicate that ganizational structure” [3]. the respective organizations equipped with this technology The relationship between technology and organization struc- will be enabled to increase efficiency in their arrangements. ture, in a classical study in 1960 was reviewed by John Wood- Advances in information technology have reduced the need ward. It also continued by people like Peru and Thompson 49 IJISSM, 2012, 1(2):48-54 within the framework of ‘Effective of information technol- technology in a given organization seems inevitable . To- ogy on organizational hierarchy’, ‘Centralization’, and ‘Lack day’s organizations tendency in eliminating the hierarchi- of organizational centralization, which diminished the com- cal structure in Information Technology is a tool that can plexity governing bureaucratic organizations. Robbins be- play an important