Citation
Information and control

Material Information

Title:
Information and control the effects of information on program performance
Creator:
Loraine, Donna Trelease
Publication Date:
Language:
English
Physical Description:
xiii, 198 leaves : illustrations, forms ; 28 cm

Subjects

Subjects / Keywords:
Information resources management ( lcsh )
Organizational effectiveness ( lcsh )
Information resources management ( fast )
Organizational effectiveness ( fast )
Genre:
bibliography ( marcgt )
theses ( marcgt )
non-fiction ( marcgt )

Notes

Bibliography:
Includes bibliographical references.
General Note:
Submitted in partial fulfillment of the requirements for the degree, Doctor of Philosophy, Graduate School of Public Affairs.
General Note:
School of Public Affairs
Statement of Responsibility:
by Donna Trelease Loraine.

Record Information

Source Institution:
|University of Colorado Denver
Holding Location:
|Auraria Library
Rights Management:
All applicable rights reserved by the source institution and holding location.
Resource Identifier:
25739120 ( OCLC )
ocm25739120
Classification:
HD58.9 .L86 1991a ( lcc )

Full Text
INFORMATION AND CONTROL
THE EFFECTS OF INFORMATION
, ON PROGRAM PERFORMANCE
by
Donna Trelease Loraine
B.A., Park College, 1976
M.S., Troy State University, 1980
M.P.A., University of Colorado, 1990
A thesis submitted to the
Faculty of the Graduate School of the
University of Colorado in partial fulfillment
of the requirements for the degree of
Doctor of Philosophy
Graduate School of Public Affairs
1991
,i r .4.. t
irnmrtni


(c)1991 by Donna Trelease Loraine
All rights reserved.
ii


This thesis for the Doctor of Philosophy
degree by
Donna Trelease Loraine
has been approved for the
Graduate School
of Public Affairs
by
H -i^t
Date


Loraine, Donna Trelease (Ph.D., Public Administration)
Information and Control: The Effects of Information
on Program Performance
Thesis directed by Professor E. Samuel Overman
The concepts of information and control are
interrelated in an organizational setting. Organizations
rely on the managerial control function to ensure that
resources are acquired and utilized efficiently in
achieving organizational goals, and most organization
theory suggests that the key to successful managerial
control is information. Information not only assists in
maintaining daily operations but serves managerial
decision making and assists in establishing strategic
direction for an organization. Information presents
itself as a primary resource to managers and must itself
be utilized effectively towards the accomplishment of
organizational objectives. But phenomena such as
overmanagement, tight controls, and information overload
challenge pur traditional theoretical notions. What is
the actual relationship between information and control
in the organization?
During the late 1960s the U.S. Department of
Defense developed specific reporting criteria for
contractors in response to previous problems in
performance and control of major contracts. A system of
cost, schedule and quality variance reporting was


developed, requiring information ranging from minimal to
detailed. This system was meant to provide information
which would lead to better control of contract
performance. The reporting criteria have expanded to
include several additional agencies and departments and
have been utilized during the performance of many major
contracts.
The following research observed 99 completed
contracts utilizing minimum to extensive information
reporting requirements in order to observe the effects on
project control. Data were collected concerning the
specific quantity, cost, and quality of required
information and compared with data on the specific cost,
schedule and quality performance of each contract. The
hypothesis is that increased information provides greater
control. The findings of this research, for the most
part, refuted this hypothesis but suggested that the
symbolic appeals of information for control are
important. Because of this symbolic importance,
i
information will be collected regardless of its signal or
economic impact on an organization.
v


The form and content of this abstract are approved. I
recommend its publications
Signed]
vi


DEDICATION
Many people supplied their assistance and support
during this research and I would like to take the
opportunity to acknowledge and thank them. Dr. Michael
Judd and Frank Menealy from the Defense Systems College
provided me with the initial contacts for finding the
data observed. Walter Weedman from the Army Materiel
Command spent several hours of his busy day supplying me
with anecdotal data as well as some very important leads
for future information. A special word of thanks goes to
Robert Neff, Robert Schwenke, Michael Welch, Karen
Cummins and Sandy McCardle for permitting me access to
their very detailed and organized data base, and for
their professionalism and kind treatment during my visit
to their facility at Wright-Patterson Air Force Base.
I would like to thank Dr.Sam Overman, my committee
chairman, for his direction and assistance and committee
member Kevin March for providing a sounding board for
ideas and some valuable alternative viewpoints. In
addition, I would like to recognize my remaining
committee members, Dr. Jody Fitzpatrick, Dr. Larry
Eubanks and Dr. Franklin James, for their detailed
review, critique and resulting input.


On a personal note, I would like to acknowledge
several people who supplied inspiration and support
during the trials and tribulations of the dissertation
process. My parents-in-law, Carol and Richard Loraine,
provided enthusiasm, continuous interest and
encouragement over the entire four years of my doctoral
endeavors. A special word of thanks goes to my parents,
Marge and Tom Trelease, for their support and for
encouraging me at a young age to take on insurmountable
challenges and see them through to completion. Finally,
and most importantly, I would like to thank my husband,
Steve, whose unwavering faith in my abilities and
extremely good sense of humor were my true inspirations.


CONTENTS
Figures..........................................xii
Tables...........................................xiii
CHAPTER
1. INTRODUCTION....................................1
The Concepts of Information and Control......2
The Effects of Information on Control........9
Study Background............................14
Research Description........................16
Summary.....................................19
2. INFORMATION AND CONTROL IN ORGANIZATIONS.......21
Introduction................................21
Early History of Control....................22
Theories and Approaches to Control..........26
Control Processes...........................36
Issues in Control...........................48
The Growth of Information as a Field of
Study.......................................52
Information in Organizations................58
Issues in Information.......................74
Information as an Element of the Control
Process.....................................78
Project Management..........................86


91
Studies in Information and Control
Summary......................................97
3. RESEARCH DESIGN................................102
Introduction................................102
Method of Research..........................102
Sample......................................103
Data Collection........................... 109
Data Analysis........................... 115
Summary.....................................116
4. QUANTITATIVE RESULTS...........................117
Introduction................................117
Information and Control of Cost.............117
Learning and Cost Control...................122
Other Program Incentives and Cost Control
Variables................................. 123
Cost Control Summary........................126
Information and Control of Schedule.........127
Learning and Schedule Control...............132
* 'i
Other Program Incentives and Schedule
Control Variables...........................134
Schedule Control Summary....................134
Information and Control of Quality..........135
Learning and Quality Control................139
Other Program Incentives and Quality
Control Variables...........................141
Quality Control Summary.....................141
x


142
Summary of Quantitative Findings...
5. QUALITATIVE RESULTS...................
Introduction........................
Qualitative Findings................
Information and Control of Cost....
Information and Control of Schedule
Information and Control of Quality.
I
Summary of Qualitative Findings....
6. CONCLUSIONS...........................
I
Research Implications...............
Overview............................
Summary.............................
APPENDIX
A. COST PERFORMANCE REPORTING FORMATS...
B. INFORMATION AND CONTROL DATA..........
REFERENCES.'.................................
146
146
147
150
153
155
156
157
157
162
166
168
175
188
xi


FIGURES
Figure
2.1. The organization as an information
processing entity.................................69
2.2. A schematic presentation of an
information system................................70
2.3. Information systems in the context of the
organization......................................84
2.4. Work breakdown structure for building a
house; (levels 1 and 2).......................... 89
2.5. Work breakdown structure for building a
house (levels 1,2 and 3)...........................89
2.6. Work breakdown structure for building a
house (levels 1,2,3 and 4)............90
3.1. Project management and customer relationship.... 104
4.1. Average cost variance per program start year....124
4.2. Average schedule variance per program start
year............................................ 133
4.3. Average quality variance per program start
year......................................... 140
A-l. Format 1 of 1-Cost Schedule Status Report.......169
A-2. Format 1 of 5-Work Breakdown Structure..........170
A-3. Format 2 of 5-Functional Categories............ 171
A-4. Format 3 of 5-Baseline..........................172
A-5. Format 4 of 5-Manpower Loading..................173
A-6. Format 5 of 5-Problem Analysis Report...........174
xii


TABLES
Table
2.1. The Nature of the Information Systems Field.......71
3.1. Summary of Variables.............................114
4.1. Multiple Regression Analysis with Negotiated
Change as a Numerical Value......................128
4.2. Multiple Regression Analysis with Negotiated
Change as an Occurrence..........................129
4.3. Multiple Regression Analysis with Negotiated
Change as a Numerical Value and an Occurrence
(results the same for both)......................136
4.4. Multiple Regression Analysis with Negotiated
Change as a Numerical Value (Logistic
Regression).................................... 143
4.5. Multiple Regression Analysis with Negotiated
Change as an Occurrence (Logistic
Regression)......................................144
B-l. Information and Control Data................... 176
B-2. Learning and Control Data........................182
B-3. Other Incentives and Control Data................185
xiii


CHAPTER 1
INTRODUCTION
A key ingredient in the managerial control process
is information. The size of organizations, complexity of
function specialization as well as diversity of
objectives will generally determine the quantity and
quality of information systems that are necessary for
maintaining managerial control. Technological progress,
particularly in the form of greater automation, has
increased amount, speed and frequency of, as well as
requirements to generate information used in managerial
control. In the advent of these changes, the question
has arisen as to whether this increased generation of
information has improved the effectiveness of the control
function.
During the past 20 years certain departments of the
United States federal government have increased their
requirements for generation of information in the hopes
of increasing management control. Increased and more
detailed reporting requirements have been levied upon
contractors wishing to do business with these
department^. The intent is that increased information
will assist in improving control on the part of the


involved contractors.
What are the effects of information on management
control? The results of this study will suggest some
answers and test traditional theoretical assumptions
regarding the positive effects of various aspects of
information on several forms of control.
The Concepts of Information and Control
The theoretical basis for this research lies in
components of organizational theory, specifically the
understanding of the concept of control, and the
development of information systems as a specific approach
to organizational theory. Most importantly, there is a
need to theoretically interrelate the two components,
information and control. The following discussion will
attempt to set this theoretical framework in place and
show a strong relationship between these two components,
using recent important literature relevant to the topic.
The thoughts of the classical, neoclassical and
systems theorists have brought us from studying only
direct control exercised between superior and subordinate
to a more wide-ranging definition of control affecting
efficiency, plans, goals and the structure of an
organization, as well as its ability to adapt to change.
Additionally, behavioral and human motivation theorists
2


have further flavored the concept of control with
applications of how to use it to align organizational
needs with the needs of individuals. Because of the wide-
ranging thoughts and influences emerging, it may be
helpful to define control in terms of being a management
function and, specifically, describe the form of control
relevant to this research.
There are several definitions of control as it
applies in a management sense that should be considered.
Control is defined as "the determination of progress
toward objectives in accordance with the predetermined
plan...to what extent there may have been deviations from
the plan" (Dale, 1973, p. 444). Control also involves "
measurement of accomplishment of
events against the standard of plans and the corrections
of deviations to ensure attainment of objectives
according to plans" (Koontz, O'Donnell & Weihrich, 1980,
p. 717). In many textbook accounts these definitions
lead to a discussion of an auditing and evaluation
service, primarily in the finance area. The importance
of historical records, budgets and evaluation processes
such as break-even analysis is emphasized. In a business
sense, since the objective is profit-maximization,
control of costs is of primary importance.
3


There are other non-financial activities which
require monitoring for control such as quality, plans for
future product lines and production schedules (meeting
consumer demands). Employee motivation and management
performance are areas that require evaluation, for
example by appraisals or attitude surveys. In fact, it
is suggested that control comes into play whenever a
possible deviation from an organizational objective can
occur (Dale, 1973).
There are three forms of control which are
recognized within organizational theory literature,
primarily. Operational control is relevant to line
functions, scheduling and monitoring of specific tasks,
acquiring items of inventory and measuring shop
performance. This form of control is task-oriented,
measuring the efficient and effective accomplishment of
these tasks (Anthony, Dearden, & Vancil, 1972).
Administrative control, also known as internal control,
is the second form which deals with organizational plans,
records and procedures. This process leads to and
embodies accounting control ensuring that organizational
transactions are executed and recorded as intended by
management and in accordance with general principles of
accounting. In addition, administrative control provides
that action is taken to correct deficiencies if they
4


exist in these areas (Simon, 1977).
f,
The third form of control, and the form which this
research is primarily concerned with, is managerial'
control. Managerial control addresses the whole
organization as opposed to the sub-units. It is the
process by which "managers assure that resources are
obtained and used effectively and efficiently in the
accomplishment of the organization's objectives" (Anthony
et al., 1972, p. 5). Management control systems, with
few exceptions, use a financial framework to evaluate
organizational goal compliance.
Organizations rely heavily on information as a
primary resource in achieving control. Although this has
always been the case, recent technological advances have
created an information explosion as the
generation of more and more data is required to fuel
these advances. The fast paced changes have increased
the difficulty and complexity of a manager's role and
have made greater diversity necessary in decision making.
The growth of systems theory and the attempts to
understand the organization as interdependent units has
increased the emphasis on information flow as a valuable
resource. In addition, the development of computers has
added to this rapid increase of information. Although
computers are not necessities when dealing with
5


information systems, they have enhanced data storage and
availability, frequency, as well as cost-effectiveness of
information gathering (Senn, 1987).
Lucas (1978) refers to the organization as an
"information-processing entity" (p. 7). As such, need
for information is one commonality between organizations.
He suggests that the success in achieving objectives is
based on an organization's ability to gather, analyze and
interpret this information. The importance of
information in this respect has encouraged its growth as
a field of study. This study centers around the
effective use of information as an organizational
resource (Information Systems field) and management's use
of information (Management Information Systems,
Management Control Systems). Because every facet of the
organization is affected, the field of study is
j
interdisciplinary in nature encompassing mathematical
theory, computer science and operations research as well
as communications, systems theory, and more behavioral
disciplines such as sociology and psychology.
Information must be studied by realizing the various
components of other fields and relating these ideas to
organizations (Lucas, 1978).
6
t


Information is typically described in two ways,
formal and: informal. Informal information within an
i
organization is generated through personal, direct
contacts, normally social in nature, taking place between
individuals or groups of individuals as they attempt to
adjust to each other's views, attitudes and objectives.
Formal information encompasses all incoming, internal or
outgoing information generated and processed through the
formal organization structure and utilized in achieving
the formal goals of the organization. Although viewed
separately, tension and interaction often occur between
the formal: and informal systems (Stamper, 1973).
Organizations utilize information for two primary
purposes, to maintain current operations and to assist
management in decision making. Information for
operational purposes is generated daily and permits the
organization to continue its routine affairs.
Information for management use provides a tool for
control and decision making in current or future
!!
processes and methodology. Often organizations collect
: I
potentially usable information in great volume and detail
level. This information, if never used, loses value and
becomes strictly data (or mere representations of
physical world occurrences). Part of developing
effective information systems is the idea of putting
7


these data to use (Ein-Dor & Segev, 1978).
Within this management decision making environment,
information is received and dealt with differently
dependent upon the level. There are varied decision
making models which deal with collection of information
at different levels. An example is Robert Anthony's
(1965) three levels of management process in decision
making. His first process is operations control which
ensures the efficient accomplishment of specific tasks
assigned by management at a lower level in the
organizational structure. The second process, at an
interim level, is management control or the assurance
that needed resources are acquired and utilized
efficiently and effectively. A third management process,
occurring at top levels, is strategic planning which
accounts for decisions made on setting or changing
organizational objectives as well as planning the
necessary policies and resources to achieve these
objectives (Anthony, 1965). Ein-Dor and Segev (1978) add
a fourth management process dealing directly with
routine operations, or the provision of required goods
and services to the public. They further apply Simon's
model (1977) for use of information in managerial
decision making towards these processes to show how
information is collected and used. Ideally, raw,
8


detailed data are collected at the operations level to
provide completely programmed decisions. At the
l
operations control level aggregates of raw data will be
utilized t decision making. At the management control level only
summary information is collected and decision making is
partially programmed. At the strategic planning level,
information consists of analysis only and decisions are
primarily based on experience or judgement, flavored by
this analysis (Ein-Dor & Segev, 1978).
The Effects of Information on Control
The previous discussions suggest that certain very
necessary ingredients be available in order to
successfully use information for control. First, the
organizatiqn must have clear-cut objectives and plans for
meeting these objectives. These plans can be further
defined as procedures and guidelines. A second important
ingredient is information. Evaluation of whether or not
objectives are being met can not occur without accurate
collection and transmission of information. Sound
evaluation techniques imposed on this information are
also necessary. Operation research methods, Program
Evaluation and Review Techniques (PERT), milestone
budgeting and cost-benefit analysis are some methods
9


suggested !for research and evaluation in a control
capacity. Audits from financial, program and operational
viewpoints also are implemented by control agencies. A
final necessary ingredient suggested is that of feedback.
Results need to be relayed back to the involved
organizations as well as suggestions for corrections of
deviations, or better methods for reaching a goal (Koontz
et al., 1980).
Lawler and Rhode (1976) contend that information
systems used for control purposes can cause rigid
bureaucratic behavior, strategic behavior where the
resultant actions are aimed at manipulating information
system data to produce acceptable results, and invalid
reporting of data. All three behaviors can be
dysfunctional to the control system and the goals of the
organization. On the positive side, Lawler and Rhode
describe these information systems as creating new and
automated expertise and developing the potential to
collect more accurate data, especially in the area of
individual performance. Use of these systems can alter
social structures and create new ones, produce greater
feedback and therefore assist in employee needs
fulfillment. On the flip side again, they conjecture
that if information systems reduce the amount of employee
autonomy existent in the organization, the opposite can
10


occur.
The gradual move towards understanding control as a
system effected by other components, such as information,
has linked it with cybernetics. There are certain stages
required to ensure effective cybernetic control. These
stages include planning, communicating organizational
objectives and monitoring the compliance of these
objectives. To administer control effectively requires
near-perfect knowledge and the potential for error is
great (Stout, 1980). Information flow appears to be the
key to success.
An important aspect of the cybernetics concept
is its focus on flows, not least of which are
information flows. These are crucial because
information gleaned from the environment and
generated internally, perhaps through feedback,
as well as historical information, data and
accumulated knowledge, are the inputs upon
which controllers make decisions and coordinate
activities. Moreover, the controller's output
is information in the form of instructions
given to actuators, and subsequently to
processors to implement these decisions.
(Spulber & Horowitz, 1976, p. 36)
To look further at the idea of feedback, Senn (1982)
describes two situations in which information flow
affects the control process. Negative feedback is
information of a corrective nature that helps keep the
organizational system operating within a necessary range
and minimizes fluctuations in performance around an
established standard. This information is transmitted in
11


control loops introducing external inputs to the system
which make the necessary adjustment to remain within
operating range. Positive feedback emphasizes
continuance of operations without change and reinforces
present activities and performance. To develop
information systems which enhance control functions,
understanding of the feedback processes and effects on
the organizational system, as well as the open or closed
nature of the system in question, is necessary.
The development and use of automated information
networks in public organizations has had an impact on
concepts of managerial control. There are two basic
schools of thought on the issue. The Orwellian view
emphasizes computers as a tool for management to increase
rigid control over subordinates since they now have
unlimited as well as unobserved access to an employee's
work. Secondly, in a public setting, this information
may now also be available for legal review or legislative
scrutiny. The multiple layers of involvement in a
punishment/reward setting can cause stifling of
creativity and informality in an organization. In
I
addition, it appears that dysfunctional behavior such as
the rigid bureaucratic and strategic behaviors as well as
invalid data reporting activities could result. The
Martinites (based on views of computer advocate James
12


Martinite) see the development of computer based
information systems as freeing employees to become more
creative by automating previously mundane and time-
consuming duties. Creative work policies such as flex-
time and greater freedom with work space concepts result
(Gortner, Mahler, & Nicholson, 1987).
I
Regardless of the school of thought, modern
information systems call for an expansion of management
knowledge and responsibilities. Technical understanding
]
of computerized information flow as well as new
understanding of employees' duties in relation to new
methods are necessary. There are major impacts on
communication. Information is not filtered or modified;
there is no delay and it flows freely to all levels.
Informal communication networks may expand due to speedy
availability of and greater access to information.
Reliance on computerized networks may actually inhibit
informal communication and cause increased rigidity. Fear
I
of new networks may cause lack of input and therefore
systems may not meet their capacity. In the public
sector, with its involvement between agencies and
accountability to the public, information security is an
additional concern. Because control processes involve
all organizational levels, the use and generation of
information is paramount. The impact of these problem
13


areas will affect the success or failure of control
functions.
Study Background
In 1967 the United States Department of Defense
(DOD) introduced the Cost/Schedule Control System
Criteria (C/SCSC) to specify minimum information
requirements from all contractors who desired to do
business with them. The U.S. Air Force and,
specifically, members of what is now the Aeronautical
Systems Division (ASD) at Wright-Patterson Air Force
Base, Ohio, were early proponents of these information
criteria. In the 1960s they had attempted their own
version of a system of program standards to achieve
better cost and technical performance control.
They piloted these criteria, called Total Package
Procurement System (TPPS), with the multi-billion dollar
C-5A aircraft contract. Rather than the simple cost plus
fixed fee contracts of the past which offered little or
no cost or performance control incentive for the
contractor, TPPS combined establishing and monitoring
commitment to an initial cost and performance goal with
an incentive cost share approach. Although highly
commended biy all players during the actual contract
duration, TPPS was later scrapped as being ineffective
14


and actually blamed for causing a loophole in the system
which gave the contractor an incentive to overrun costs.
The program at conclusion was a cost disaster as were
most programs of its type at the time, but the C-5A
gained additional notoriety by not meeting technical
performance standards, as well. To add to the problem,
control reports from the contractor throughout the
duration of the program failed to indicate serious
problems. Failures of this and other programs to control
costs and performance paved the way for a substantial
change in the information reporting criteria (Lynn,
1980).
,1
Department of Defense Instruction (DODI) 7000.10 was
established to set standards for consistent information
i
to be reported in the areas of cost, schedule and quality
performance. The criteria required preparation of a
detailed Performance Measurement Baseline (PMB) through
which cost and schedule performance (or contract earned
value) may be determined. Programs are defined and
operational data collected at lowest task levels by
development of a Work Breakdown Structure (WBS). This
WBS, organized by task item or function, requires that
each lower level be budgeted for and cost accounts
established accordingly. Reports are then provided at
detail and summary levels to track variances between
15
I


actual costs and budgeted costs, actual schedule and
budgeted schedule, and costs associated with performance
problems (Fleming, 1983).
The information reporting systems may require as
many as five very detailed formats submitted monthly to
as few as one summary level format submitted at program
completion. A variety of factors have determined the
amount of information required. These factors have
included cost of program, length of contract,
availability of program budget, as well as contractor or
i
government discretion. By 1983 over 1,200 DOD contracts
had utilized some form of C/SCSC reporting. The
directive had also been adopted by other federal agencies
such as the U.S. Department of Energy, Department of
Transportation and NASA (Fleming, 1983).
Research Description
The purpose of this research is to show the effects
of information on control. The theoretical framework
previously discussed supports the premise that
information leads to and enhances the control function.
This, then, is the general hypothesis this research
tests. More specifically several hypotheses align
themselves with the study as it was conducted.
1) The larger the quantity of information provided
16


the bettef the control results.
2) More frequent information submittals provide for
better control results.
3) More detailed information results in better
control.
3) Higher cost of information results in better
control.
4) Information systems which are fully automated
lead to better control.
5) Availability of information for learning purposes
leads to better future control.
The research study observed completed U.S. Air Force
contracts, randomly selected, which required submittal of
C/SCSC information. The effect of this information on
control was measured by evaluating contract compliance
results in the areas of cost containment, schedule
adherence and quality of product performance as dependent
variables. Information, as an independent variable, was
operationalized to characterize quantity, quality and
cost factors involved in the actual information
reporting. Quantity of information was measured by
observing the number of pages per control report
submittal as well as the frequency of submittals
(monthly, quarterly or at completion of contract).
17


Quality of information was determined by the detail level
of reporting as characterized by the number of lower
level elements as well as the number of levels in each
work breakdown structure. The cost factor was determined
by recording the actual cost of control reporting per
contract. Level of system automation was also recorded
l
to measure ease of reporting as well as possible added
cost for information.
Additional data were collected to determine if
control results were being effected by other variables
besides information. Differences in program type,
contract type, total size of budget, impact of contract
changes and the time frame in which programs occurred
were analyzed against control results to determine the
effects of other incentives to perform and the occurrence
of learning.
The existence of many variables being tested led to
the use of multiple regression as the method of
statistical analysis. In addition, conversations and
interviews with many people involved in relevant
information gathering, analysis or decision making roles
occurred during the search for a significant, usable data
population. These testimonies were used to enhance,
contrast and question the quantitative findings.
18


Summary
The purpose of Chapter 1 was to provide an overview
of relevant theory and history, to define terms and to
briefly describe the research problem and methodology, as
, i
way of an introduction to future chapters. In Chapter 2
the literature relevant to information and control will
be thoroughly reviewed. Chapter 3 will describe the
research process in detail. An in-depth discussion of
the results and findings of the study will take place in
Chapter 4, and Chapter 5 will explore the implications of
these results.
The findings of this research hold important
consequences for the field of organizational theory.
Knowledge regarding the effects of information on the
control function is vital to planning information systems
of the future. Justification for organizations to
further expand or streamline systems can be provided as a
tool for better management decision making. Further
research can assist in generalizing these results to
other organizational areas. Information requirements can
also be studied in relation to other management functions
- planning, organizing, directing, staffing, etc.
Information can also be further operationalized to study
types of information generated and to look at automation
19


levels in more detail.
The results of this study will place a greater
emphasis oh looking carefully at the effects of
information systems, rather than assuming that more means
better. This emphasis, as well as expanded research, has
the potential to add valuable knowledge and increased
substance to organizational theory as we study it today.
20


CHAPTER TWO
INFORMATION AND CONTROL IN ORGANIZATIONS
Introduction
The concepts of information and control are founded
in the vast and diverse literature of management theory.
It is important, for the purposes of this research, to
understand the role of management control within the
organization and how the key element of information
integrates with, and enhances that role. This chapter
will first, present an overall history of the growth of
management concepts which influenced development of the
control function within organizations, as well as an
overview of the function itself. Secondly, the growth of
information as a field of study and the important role it
plays in the organization will be developed. Current
issues and research involving both information and
control concepts will be explored to add greater depth to
understanding. Finally, project management and its
specific evaluation tools will be discussed as a
particular area of relevance to this research.


Early History of Control
The history of control as a principle of management
aligns itself with the growth of management and
organizational theory as a field of study. As early as
1300 B.C. interpretations of Egyptian papyri illustrate
j
that concepts of administration and organization were
recognized as important. In early Greece Socrates
discussed the idea of management as a separate skill from
that of technical knowledge and practical experience.
Although early records do not give much visibility to
specific principles of management, the development of the
Athenian commonwealth with its various courts, officials,
and councils illustrates the underlying prevalence of
management thought. The success of the Roman empire is
believed to have stemmed from the vast organizational
abilities of these people. This is one clear area in
early history where the organizational characteristic of
scalar relationship existed in the clear cut functional
authority, as well as established degrees of importance
for this authority, of early Roman magistrates. The Roman
Catholic Church has enjoyed a long, organizational life
j
due to development and use of managerial techniques.
Early use of carefully thought out techniques in
staffing, brganization by scalar territory,
22


specialization of activities by function and establishing
a hierarchy of authority are examples of employment of
what later came to be principles of management. Only the
lack of early study in this area prevented the Roman
Catholic Church from being of influence to other
organizations until more recently (Koontz et al., 1980).
Military organizations prior to the nineteenth
century depended upon the emphasis of authority
relationships, however, some leaders, including Napoleon,
developed the principle of "unity of doctrine (Mooney,
1947, p. 65) by informing their subordinates of the
purpose behind orders, plans and objectives.
A group of early (sixteenth to eighteenth century)
intellectuals involved in public administration in
Germany and Austria aligned the beliefs of the British
mercantilists and the French physiocratics. This school
of thought, known as cameralism, emphasized that
characteristics which increased individual wealth should
also be used in the administration of state. They were
one of the earliest groups to attempt to develop
principles of a systematic administration including
function specialization, careful selection and training
processes, simplifying of administrative procedures,
following of legal processes, and the development of a
government controller office (Koontz et al., 1980).
23


In addition to these examples, there were a few
individuals who made contributions to the later
development of the field of study. In Great Britain in
1796, James Watt, Jr., and Matthew Robinson Boulton took
over management of their fathers' engineering foundry.
They developed managerial techniques highly advanced for
the times. They did market research and planning, set
production plans and standards and developed detailed
statistical records for computing the costs and profits
for each machine and department. In addition they
developed training and work study programs, an employee
payment by result system, and additional employee
benefits in the health and welfare areas. In Scotland,
Robert Owen, often referred to as the father of modern
personnel management, experimented in textile mills from
1800 until 1828. Owen improved employee working
conditions and introduced the idea that the worker,
although considered a machine, needed to be cared for to
produce better results. Charles Babbage, a British
mathematician invented in 1822 a mechanical calculator
(then called a difference machine) to do simple
accounting functions and conceived, in 1833, a machine
that had all of the basic elements of the modern-day
computer. In addition, Babbage published the book On the
Economy of Machinery and Manufactures in 1832 which
24


revealed the development of certain scientific principles
which would guide the manager in use of facilities, labor
. \
and materials towards the best results. In the last half
of the nineteenth century, Henry Varnum Poor, editor of
the American Railroad Journal recognized mismanagement in
the American railroad systems and recommended a
management system with an organizational structure to
include report communication in the area of operations,
costs and revenues. In addition, he emphasized
organizational unity inspired by leadership, work
appreciation and esprit de corps (Koontz et al., 1980).
In the development of management thought, the period
prior to the 1880s is generally known as the
prescientific-management period. No concise, organized
I,
group of concepts or principles surrounding
administration, management or the organization existed or
were studied. Generally, people who held positions of
authority wielded control over the existent economic and
i
social systems. Within the business world, craftsmen
formed guilds, but these appeared to have little
influence beyond their home villages. With the exception
of the examples discussed earlier, there are few recorded
illustrations of attempts to develop or use a body of
consistent management concepts until the period known as
the scientific management period (Hicks, 1972).
25


v Theories and Approaches to Control
i
With the emergence of the scientific management
school of thought, came the development of specific
principles, techniques and approaches to management. One
of these principles was that of control. The classical
approach to the idea of control embodies the writings of
Frederick Taylor, Henri Fayol, Frank and Lillian
Gilbreth, and Henry Gantt. Classical organization theory
is based ujaon four major elements -the division of labor,
the scalar and functional processes, organizational
structure land span of control. All four elements involve
or influence control. The division of labor determines
the number of specialized functions under a manager's
responsibility. The scalar and functional process
determines the chain and unity of command as well as
delegation of responsibility and authority. Structure,
normally line and staff within a classical organization,
implies relationship between functions. Span of control
relates specifically to the number of subordinates a
manager can supervise effectively. Span of control
partially influences structure in that the greater the
span, the flatter the structure (Skousen & Needles,
1973).
26


While the classical approach to control emphasizes
the formal mechanics of an organization, the
neoclassisists softened the approach somewhat by
modifying the scientific principles with the results of
human behavior and the emergence of formal and informal
groups. A manager's span of control within the formal
organization is believed to be determined by individual
abilities, types of people involved and effectiveness of
communication rather than by a precise mathematical
formula. In addition, neoclassical theory emphasizes
problems which may arise while delegating authority and
responsibility due to human failing overlapping or gaps
in authority causing personality conflicts and
performance deterioration. Structure and line and staff
relationships are critiqued based on the potential
disruption of plans and friction between functions caused
by human behavior and remedial possibilities in the areas
of management participation and more effective
communication. Neoclassisists recommend individual
solutions based upon each organizational situation,
although the tendency is to encourage a flatter structure
with wider span of control which lessens the potential
for autocratic leadership. In addition, neoclassical
theory emphasizes informal organizations and the social
control they exert by setting cultural standards and
27


values possibly conflicting with those of the formal
'I
organization (Skousen & Needles, 1973).
There were many early influences in the area of
human behavior and social or group theory. One of these
was Max Weber and his writings on bureaucracy emphasizing
authority and hierarchy in all social organizations.
Vilfredo Pareto, known as the father of the social
systems approach to management, wrote about society as
many interdependent units seeking to reach equilibrium
when disturbed by internal or external influence. Mary
Parker Follett was an early voice writing about human
reaction to the acceptance of orders and how to influence
this by developing specific supervisory and leadership
skills. An additional important early influence, among
others, was Elton Mayo who conducted experiments in a
Western Electric plant on the effects of lighting and
other conditions on the productivity of workers. Mayo
discovered what was later termed the Hawthorne effect,
where worker productivity increased, not due to changes
in condition, but because of the notoriety and motivation
involved with being the observed group (Boon & Bowen,
1987).
The human relations school of thought continued and
expanded its influence, in particular in the area of
motivational theory. Maslow (1943) developed a
28


theory of structuring human needs in a hierarchy, basing
motivation on the order of needs fulfillment. Herzberg
(1968) delineated employee needs into hygiene and
motivational factors to give insight into effects on job
attitudes and how to effectively motivate employee
performance. McGregor (1957) described what he termed as
the Theory X and Y forms of management. Theory X is based
upon traditional, more classical views of management's
responsibility to organize and harness the human machine
to achieve organizational goals. Theory Y was a new
approach based upon consideration of the human element
involved and the best ways to motivate performance.
Argyris (1957) began writing of the effects of individual
personality on the needs of the formal organization. He
specifically criticized the principle of span of control
in limiting the number of subordinates to five or six in
that this will increase the closeness of supervision and
will create dependent, passive and immature participants
and superiors who tend to have increased control. Simon
(1947) criticized limiting span of control because it
places distance between individuals in an administrative
capacity, increases red tape because of increased contact
and results in inefficiency, waste of time and energy.
29


Modern approaches to control are influenced by more
recent viewpoints in organizational theory and management
practice. Perhaps the most influential of these was the
i
advent of systems theory. The study of organizations as
systems involves understanding the interrelationships of
many subunits, dependent variables and events making up
the whole. This attempt at understanding requires in-
i
depth analysis, further facilitated in the areas of
planning and control by the introduction of operations
research techniques in management. The systems approach
combined with operations research techniques requires
clear-cut objectives and quantifiable measures of
performance towards these objectives (Koontz et al.,
1980). As such, development of mathematical modeling
techniques and event networking has greatly contributed
towards control perceptiveness. In addition, systems
theory emphasizes the importance of the role of
informatibn and feedback in the control process, as well
as the relevant concepts of cybernetics. Significant
contributions to the development of systems theory and
, II
its applications towards management were made by Boulding
(1956), and Johnson, Kast and Rosenzweig (1973), Katz and
Kahn (1978) in developing and studying the concept of
social systems, and Weiner (1948) in constructing and
placing emphasis on feedback theory.
30


Modern-day approaches to management are many and
varied, based upon the influences of earlier management
theory and thought. Each of these approaches will effect
the way the control function is developed and viewed
within an organization.
Hicks (1972) describes twelve more recent approaches
to management thought and the control function. The
traditional school of thought recognizes early supporters
of the management principle philosophy, such as Henri
Fayol. Control is viewed as a universal principle of
management, applicable to all organizations. The
empirical school emphasizes experience as the only
teacher in.a management situation. Managers are
encouraged to participate in an apprentice environment
where certain truths are passed from practitioner to
student. These truths are, as in the traditional school,
believed to be generalizable to all organizations and
management environments. The human relations school
stresses that the primary importance of the manager is to
supervise,'lead and improve relationships among members
of the organization by analyzing the social and
psychological needs of the individual. In this
environment, control would be achieved through individual
motivation. The decision-theory school emphasizes the
rational decision making process and analysis of this
31


process. In this management environment, organizational
performance is delineated by the results of thousands of
decisions made by managers. The control function
analyzes these results through economics, value analyses
and information transmittal. The mathematical school
employs models and mathematics in the control situation,
stressing that if principles of management are based upon
logic, then the logical science of mathematics should be
applied. The formalism school of thought supports the
premise that members of organizations will perform best
when their jobs are clearly defined and there is a
heavily structured organization existent. This viewpoint
thrives on organizational charts, formal chains of
command, detailed definitions of organizational
relationships, and clearly structured information flow.
This school of thought takes its roots from classical
theory in emphasizing a formal hierarchy and limited span
of control. The spontaneity school believes in the
emergence of natural leadership through the informal
organization. Control is viewed as needing to be minimal
and informal. The participative school focuses on
decision making by participation of organization members,
emphasizing committees and conferences, as opposed to
individualmanager decision making and control.
Proponents of the directive school of thought believe
32


that people need to be told what to do and that the
manager is in the best position, as the most
knowledgeable, to make decisions. This way of thinking
is in direct conflict with the participative school of
thought. Formal structure is the emphasis along with the
autocratic power and authority of the manager in a
control situation. The check-and-balances school of
thought supports the prediction that power will
ultimately corrupt, and sees the manager in this position
of power. As such, the proponents of this school
I
recommend an additional control layer to observe
individuals and limit their behavior.
Hicks (1972) appears to support what he calls the
process-of-organizations approach to management where the
complexity1 of organizations is understood and the
possibility of using many different approaches exists.
He views the organization as a total mix of many
variables and recommends managers adjust their style and
make decisions accordingly.
Koontz et al. (1980) describe six additional
approaches to management and the control function. The
groups behavior approach studies organizations as a
system of group relationships and behavioral patterns and
attempts to fit in traditional management concepts
behaviorally and sociologically. The cooperative social
33


systems school of thought takes its emphasis from
sociology in viewing the organization as a social system.
Proponents of this school tend to overlook principles and
concepts of management entirely in their desire to
understand the organization from the broader scope of
human relationships and organizational effect on society.
The sociotechnical systems approach places its emphasis
on how the technical system of an organization (machines
and methodology) influences individual attitudes and
group behaviors, or the interaction of the existent
social and technical system in an organization. The
contingency or situational school of thought is close to
that of Hick's (1972) process-of-organizations approach
in that it stresses the understanding of many approaches
and the ability to apply different techniques dependent
upon the specific management environment or situation.
I
The managerial roles approach supports the studies of
MintZberg (1979) that managers fill ten basic roles
within three different categories. The first category is
the interpersonal one with managers acting as
figureheads, liaisons or leaders for the organization.
The second category is an informational one where
managers play the roles of receivers of information,
disseminators of information, or spokesmen outside of the
organization. The third category is that of liaison and
34


shows managers in the roles of entrepreneur, allocator of
1 j
resources, disturbance-handler, and negotiator. This
school of thought ignores management principles and
functions and replaces them with these behavioral roles.
I
Koontz et al. (1980) support what they call the
operational approach to management. This approach also
parallels the process-of-organizations and contingency
schools of thought in that it emphasizes drawing all
theories and viewpoints together as a core of management
knowledge. This knowledge should then be analyzed with
regards to:specific relevance in a management
environment.
There are other modern-day managerial schools of
thought and approaches, such as the laissez faire or
hands-off approach to management, where the less a
manager practices controls the better for the
organization, or the paternalistic approach where
managers take active responsibility and care for
subordinates even in situations outside of work (Hicks,
1972). Each approach presents a different way to look at
the control function and its role in the organization but
does not detail how the actual process of control might
differ. The following discussion will look specifically
at what recent literature has to say about the differing
definitions and levels of control and how control
35


processes are developed and work within the organization
Control Processes
There,are many definitions of management control
which vary slightly in emphasis based on the management
approach of the author. Mockler (1970) presents the
following definition viewing management control as a
science.
Management control is a systematic effort to
set performance standards consistent with planning
objectives, to design information feedback
systems, to compare actual performance with
these predetermined standards, to determine
whether there are any deviations and to measure
their significance, and to take any action required
to ensure that all corporate resources are being
used in the most effective and efficient way
possible in achieving corporate objectives, (p. 14)
This definition is similar to those of other authors on
the subject. Jerome (1961) calls executive control "some
sort of systematic effort to compare current performance
to a predetermined plan or objective, presumably to take
any remedial action required" (p. 24). Anthony (1965)
calls management control "the process by which managers
assure that resources are obtained and used effectively
and efficiently in the accomplishment of the
organization's objectives" (p. 17). Emphasizing early
scientific management influence, Fayol (1949) defines the
management1 principle of control as consisting of
36


"verifying1 whether everything occurs in conformity with
the plan adopted, the instructions issued, and principles
established" (p. 107). Stressing the supervisory role
of management Koontz and O'Donnell (1972) classify
control as a management function and define it
accordingly.
Controlling is the measuring and correcting of
activities of subordinates to assure that events
conform to plans. Thus it measures performance
against goals and plans, shows where negative
deviations exist, and, by putting in motion actions
to correct deviations, helps assure accomplishment
of plans, (p.49)
Horngren (1972) presents a broader definition from a
decision making point of view.
Control is the implementation of a decision
model, and the use of feedbacks so that objectives
are optimally obtained. This definition of control
is comprehensive and flexible. It is concerned
with the successful implementation of a course of
action as predetermined by a decision model; but it
is also concerned with feedback that might (a)
change the future plans given the model, and (b)
possibly change the decision model itself or change
the prediction method that provides input to the
decision model, (p. 5)
A similar definition is presented by Dopuch, Birnberg and
Demski (1974).
We view control as a system or process in
which expectations and actual performance are
compared and the comparisons serve as a basis for
determining the proper responses to operating
results. These responses include taking corrective
action at the planning or decision making level as
well as at the performance level, (p. 291)
Eilon (1971) describes managerial control from the
37


perspective of an engineer viewing the servo-mechanism
theory.
Servo-mechanism theory tells us that control
is associated with an adjustment, namely with a
corrective action designed to guide the system to
function to a predetermined standard. A governor
of a steam engine, a navigator of a ship, a driver
of a car all are controllers of their respective
systems....
No corrective action is possible without
feedback. The purpose of feedback is to provide
information about the way the system is operating,
so that the discrepancy between actual performance
and the desireable level of performance can be
assessed.
There is no reason why such concepts may not
be used in the study of administrative systems.
The manager is the controller of a system.... There
must be certain fundamental elements of the control
function that are both essential and valid,
irrespective of whether the controller is a human
being or a mechanical device, (p. 14)
Joseph Litterer (1973) places the emphasis on
maintaining standards in his definition.
We are concerned with control in relation to
matching performance with necessary or required
conditions to obtain a purpose or objective. The
essence here is on directivity and integration of
effort, required accomplishment of an end....
Control is concerned not only with the events
directly related to the accomplishment of major
purposes, but also with maintaining the
organization in a condition in which it can
function adequately to achieve these major
purposes, (p. 528)
Tannenbaum (1964) looks at control from an individual or
group behavior point of view. Control is "any process
in which a person (or group of persons or organization of
persons) determines or intentionally affects what
38


another... will do" (p. 299). Similarly, Hofstede (1968)
states that "control within an organization system is the
process by which one element... intentionally affects the
action of another element" (p. 11).
Regardless of the differing viewpoints prevalent in
the preceding definitions, there are certain common
elements in each. Each definition looks at control as a
process within a system which measures performance
against objectives and forecasted plans and recommends
remedies for deviations. Another common element in many
definitions is that of feedback and information systems
or flows. This discussion will now look at how various
literature deals with the control process, distinguished
first by levels of control.
Generally control is recognized, in management
literature, to be a management function, thus the
commonly used terminology of management control.
Although a managerial function, control can be further
classified in terms of area of influence. Control
concepts can be defined as either operational or
organizational. Organizational control evaluates the
organization in entirety or, at the least, a significant
portion. Operational control measures more routine,
daily performance by comparing this performance to set
i
standards and suggesting immediate corrective action when
39


necessary. Operational control, delineated as such,
makes use of performance measures like productivity
ratios, unit costs and workload measures to base its
evaluation on (Johnson et al., 1973).
Another categorization of control is based upon the
time element. Concurrent or real-time controls measure
performance as it is occurring and provide immediate
feedback, for example, some of the more recent inventory-
control systems made possible by computer technology. A
second form of time-based control is predictive control.
This form of control is related to the planning process
and takes its form in forecast or projection methods.
The third form of control categorized in this way is
called after-the-fact control, providing management
feedback well after an event occurred. Some financial
statements fall into this category, showing an overall
financial view of the organization in a preceding time
frame (Hicks & Gullett, 1976).
Anthony (1965) separates management control from
technical control. He supports the premise that
management control is the process of securing and using
resources in an effective manner from the viewpoint of
the organization as a whole. Technical control evaluates
acquisition and use of resources and the resultant output
at a lower level, where the technique rather than
40


management judgement is the dominant process. This
approach aligns itself somewhat with the preceding
definitions of organizational and operational control.
When discussing control from a public perspective,
Gortner et al. (1987) describe control as internal or
that occurring from inputs and outputs within the
organization, and external, resulting from public bureau
accountability to outside and environmental forces.
The categorization which includes most of the
important concepts from the previous discussion, as
mentioned in Chapter 1, is one which delineates control
as operational, administrative and managerial.
Operational control is task related and takes place on a
lower organizational level as previously described.
Administrative, most closely related to internal control,
deals with organizational transactions, such as plans,
records, and procedures, leading to and including
accounting!control. Managerial control uses primarily
the financial framework to review the organization as a
whole assuring that objectives are being met (Anthony et
al., 1972).
Understanding that control takes place at different
levels and in different ways, but is considered a
responsibility of management, it is important to also
comprehend! what the actual process of management control
41


consists of. Again there are differing philosophies
based upon the approach towards management the authors
support.
Most authors agree that the term management control
embodies all forms of control. As such, Mockler (1972)
sees the process of management control as an
extension of the organizational planning and decision
making process. This includes the development of
.1
financial budgets to report on and evaluate
organizational performance against these budgets. In
addition, management control has the responsibility of
setting performance standards consistent with objectives,
to design systems which enhance informational feedback,
and to compare the actual performance of the organization
against these standards. After comparison and analysis,
it is then a function of management control to measure
the significance of any deviations and implement
corrective action. Mockler (1972) recommends a five step
1
process for dealing with most management control
situations1.
1. Diagnose the situation in order to define the
control problem and the method for dealing with it.
This investigation should result in definitions
(i.e., simple statements) of:
a. The specific kind and level of control
situation that is being dealt with.
b. ,: The objective and scope of the control
effort.
c. The method to be used in solving the
42


problem.
d. The organization of the control effort.
2. Examine the control problem and review the
facts, in order to find the key factors effecting
the problem and its solution....
3. Develop and evaluate alternative controls....
4. Exercise control....
5. Prepare a report.... (pp. 17-18)
Step two involves investigating planning factors,
objectives, system characteristics and the standards
against which performance will be compared and measured.
Step three includes designing and implementing the actual
control system whether it be financial, operational or
informational. Where the system designed does not
provide automatic control, step four would entail the
management activity of comparing performance against
established standards, measuring accuracy of the system,
determining extent of deviations and taking corrective
actions.
In addition to suggesting this process, which is
similar to the basic problem-solving process, Mockler
(1972) presents a traditional model of the management
control process, where standards are set, performance
compared and measured against these standards, deviations
identified and corrective action designed and implemented
He warns against the simplicity of this model, however,
and presents his process as a move towards adjusting to
the complexity of control and use of the process as one
43


which integrates many other activities.
Koontz et al. (1980) present a three step general
process for achieving control. Initially, establishing
standards is important to define performance criteria and
provide a yardstick for future comparisons. They
recommend setting verifiable objectives in either
quantitative (such as budgets or financial forecasts) or
clear qualitative language. The second step would then
be the actual measurement of performance which may be
accomplished very precisely, where quantitative measures
are recorded as in production or financial performance,
or very vaguely in situations where attitudes or
behaviors are involved. Overall department success,
satisfaction of subordinates, measurement of management
achievement may require general appraisals or be compared
against more qualitative, vague standards. The final
step, correction of deviation, entails suggesting and
J
implementing solutions. These solutions may be more
clear cut such as adding staff or supplying training, or
may require redefinition of plans or objectives. Other
authors suggest that the control function stops here and
other management functions take over, however Koontz et
al. feel, as does Mockler, that this is an area of
overlap and integration with other functions.
44


Another viewpoint, with more emphasis on behavioral
aspects, is presented by Itami (1977) in a basic control
model involving the controlling manager or entity giving
instructions to the operational process, measuring actual
performance through feedback and then altering
instructidns to correct deficiencies. This closed-loop
system is also effected by inputs from the environment
which influence the performance of the operating process.
Itami then adds the superior/subordinate relationship at
the control point which adds to the complexity of the
process by introducing an additional level of feedback
and instruction. Itami introduces the situation of
structural hierarchy as well as the necessity for
superiors to motivate and meet the human needs and goals
of their subordinates. He contends that the control
process becomes more complex when other than physical
operating processes are being dealt with, considering a
superior at the control point in the hierarchy, more than
one subordinate and the basic process. He also
recommends three basic activities for superiors,
recognizing the need for action, selecting the action
required and implementing that action.
45


Another way of trying to understand the complexity
and complete range of approaches to control, within the
actual process, is to consider four methods of control
(Gortner et al., 1987).
1. Controls using quantitative measures of work
outputs for review.
2. Controls based on quantitative and qualitative
reports of activities and behaviors.
3. Controls that rely on the active participation
of the workers themselves for monitoring and, in
some cases, corrective action.
4. Controls based on a worker's identification
with the organization, its mission, or a profession
within it. (p. 209)
Of these methods, the first two are thought to be the
most established and developed through advances in
program evaluation and information systems. Gortner et
al. (1987) recommend a quantitative control system using
productivity and workload measures and project management
techniques, which will be discussed in more detail at a
later point, to achieve control of work outputs. They
describe methods such as observation, time clocks,
activity reports and even the use of informants as part
of the behavioral control process. Thirdly, they discuss
participatory control methods through job-enrichment
programs, at a minimum, or worker councils and quality
circles. Fourthly, they describe intrinsic controls
where conformance to the organization takes place through
loyalty, socialization to norms, careful application
46


screening in selection, or strong alignment with the
organizational mission. Finally, they discuss the
important role external control plays, particularly in
public bureaus, where external pressures from the public,
interest groups or policy makers introduce an additional
control point to be dealt with by agencies through
regulation, compromise or negotiation.
Regardless of the approach or what type, level and
complexity of control is being discussed, there are four
clearly recognizable functions in all descriptions of
control processes. The first is that standards be
established. Secondly performance needs to be observed
or recorded. Thirdly, this performance should be
compared with the established standards and, finally,
correction to any significant deviations recommended and
implemented. Implementation of control processes within
organizations over the years have presented complex
problems and issues for management to deal with. The
following discussion will deal with some of the more
recent issues and concerns influencing the management
control environment.
47


Issues in Control
Recent literature has pointed out some concerns
and issues surrounding the control function in
organizations. These issues have formed the basis of
current research and speculation as well as identified
areas for future contribution to the field.
One area of concern is that the control function has
evolved into a highly analytical cost control exercise
with little consideration of the human element. Wolf and
Ostwald (1980) support the premise that behavioral
considerations within the cost control world will lead to
a more effective system and to improved financial health
within an organization. They outline four principles
combining analytical costing techniques and concerns with
behavioral considerations. The first principle is that
organizational objectives and standards in the costing
area be clearly understood, reasonable, and be consistent
with the present day environment of the organization.
The second principle states that cost control measures
should be accurate and thorough. Thirdly, deviations
from the set standards should be corrected in a
consistent, appropriate manner and in an objective,
unemotional way. The fourth principle then states that
whenever possible, psychological needs of the
48


organizational members should be met. According to them,
the best method for carrying out these principles is to
motivate at the individual level, by making cost control
a personal objective.
A second issue is that of containing costs within
existent control systems. There are several remedies
suggested for cost control in this area. Managers should
utilize feedback from the environment and the customer or
consumer more effectively. Information can be better
quantified and information systems streamlined to provide
less conflicting information. Frequently information
received will call for cost containment and at the same
time recommend higher technology expansion. The key is
for managers to be in close and constant touch with
information feedback to provide better service
simultaneously with meeting cost containment goals
(Batie, 1978).
An additional issue is the importance with which
organizations view the control function. Managers should
rank the control function as high as the most important
responsibility they have. Many view control as more
complicated than it need be at their level. Simple
tools, such as the ratio chart, utilized effectively can
ensure timely analyses and response to problem areas.
This type of analysis can be used to look at managerial
49


issues such as absenteeism and tardiness and compare
previous manpower and time lost against present levels,
in addition to the ordinary cost goal issues (Fendrock,
1972).
Another method of assuring managers take the control
process seriously is called responsibility accounting,
which is a; method designed to establish where the work in
an organization begins and who manages it. The premise
is that groups or individuals be charged for only those
items they, have heavy influence on or control. The key
to success in responsibility accounting lies in keen
observation and employing preventive controls. The
organization's primary challenge under this system is to
merge reporting knowledge and consistency of objectives
with strategic planning (Ferrara, 1982).
Another issue in this area is the possibility of the
control process occurring indifferently of the planning
function. ,In research and development organizations,
i
particularly when project management principles are
employed, the changing needs of industry as well as
limited available operating strategies makes the role of
planning even more important in light of the control
function (Croft & Finlay, 1987). In addition,
organizations need to review existent control systems at
least every three years to ensure that new methods of
50


monitoring performance are not being overlooked. Control
systems in the costing area become redundant and should
j
be tailored to ensure they are meeting the current needs
of the organization (Wise, 1987).
An additional concern is that public sector and
non-profit organizations are not exercising effective
controls. These organizations are better known for
planning and implementing skills than those of managing
and controlling. More comprehensive financial controls
and audit functions are necessary to improve upon scarce
resource allocation, and accountability of staff (Rogers,
' ii
1978). Nonprofit organizations typically lack a
correlation between expenditures and results in their
control systems. Control systems should be designed to
measure the achievement of performance objectives within
i
these organizations and should be evaluated for I
I
effectiveness periodically based on cost and benefit
criteria (Ramanathan, 1985).
Finally, is the question of whether or not control
is as important to the organization as has been
emphasized in the literature. One school of thought
proposes that development of control systems are
politically motivated to ensure domination over the
organization and the ability to answer effectively to
superiors.; Because organizational control requires near-
51


perfect knowledge that is rarely attainable and involves
an unpredictable environment as well as differing
responses among members, proponents of this school of
thought emphasize the improvement of management to the
development of tighter control systems. It is the role
of the manager, then, to determine which situations
warrant effective management or require rigid control
(Stout, 1980).
The key to success of control systems seems,in
light of the literature, to depend on the value of the
input into,the system, adequate evaluation of that input
and the effectiveness of the output, or recommended
performance change, to meet organizational objectives.
Both input i and output take place in the form of
information, a primary element necessary to ensure an
effective control function. The following discussion
will describe the growth of information as a field of
study as well as relevant organizational concepts, and
tie information and control together in light of recent
literature!
The Growth of Information as a Field of Study
Unlike control, which is seen as a principle or
function of management, information has primarily been
viewed as a resource. Until recent expansion of
52


technology placed the emphasis on learning to utilize
this resource more effectively, little was studied about
information itself. As such, the field of information
study finds its roots in other disciplines, the primary
field being communication. Information is transmitted
through communication causing a dependence relationship.
Information can exist but is of no use unless
transmitted. Communication is of no value unless
I
information exists to be communicated.
During the past century mathematicians discovered
that information could be dealt with scientifically, by
viewing a message as being composed of discrete digits
and letters or a continuous, however varying, signal.
This led to the notion of binary symbols (meaning that it
is most effective to send messages of two symbols 0 and
1). More clearly, this means that it is less complex to
express a symbol representing the choice between only two
possible meanings, rather than many. This concept led to
the idea that a unit of information was a binary digit
which was called a bit by mathematicians John Tukey and
Claude Shannon (Weaver & King, 1955). The idea of the
bit as a unit of information is the basis for
understanding the modern-day electronic transmission of
information by computer.
53


Communication theory discusses three levels of
information transmittal in which problem areas may occur;
technical,1 semantic, and influential or effectiveness.
Technical problems exist in all forms of communication
and involve the accuracy with which messages are
transferred from sender to receiver. This may be as
simple as the written word or as complex as electronic
transmission. The semantic area is concerned with
interpreting the actual meaning of the message by the
receiver and influence looks at whether the final action
taken by the receiver is the effective result of the
meaning conveyed. At any of the three levels distortions
could occur which detract from the success of the
communication.
Some early contributions were made in looking at the
relationships between the three levels of communication.
The nineteenth century physicist Ludwig Boltzmann first
began looking at the possibility of applying statistical
mechanics to the concept of information. Later, in the
early to mid-twentieth century, work was done by Shannon,
Nyquist and Hartley of Bell Telephone Laboratories in
describing the overlaps between technical, semantical and
influential areas, rather than segregating the technical
area. Weiner and his work with the concept of
54


cybernetics also added to this early theory development
(Weaver & King, 1955).
In addition to the development and expansion of
communication theory along with its relationship to
science and mathematics, the development of computer
technology and the field called operations research led
to the isolation of information as a unique study area
(Whistler, 1970). Application of principles which led to
the development of computer technology has been traced to
around 450 B.C. with the development of the Chinese
abacus and the early calculating machines developed
between the seventeenth and nineteenth century. Charles
I
Babbage, however, is credited with creating the first
analytical engine in 1833 which provided the basic
concepts for today's computer. The modern age of
computer technology began in 1925 when Dr. Vannevar Bush
of the Massachusetts Institute of Technology built the
first analogue computer powered by electricity instead of
steam. Dr. Bush built a more advanced computer in 1935.
Howard Aiken, a Ph.D student at Harvard University,
convinced the International Business Machines Company
(IBM) to sponsor him and four IBM engineers to develop a
further automated computer called Mark I. It was fully
operational in 1944, was able to receive instructions and
data on a paper tape and was as fast as twenty humans on
55


calculators. Mark I was improved upon by Dr. Mauchley
and Dr. Eckert who built the Electronic Numerical
integrator and Computer or ENIAC for the U.S. Army.
ENIAC inspired John Von Newman, a professor at Princeton
University and two associates to write the paper entitled
"Preliminary Discussion of the Logical Design of an
I
Electronic Computing Instrument" in which they developed
the idea of building certain operations into the computer
circuitry and assigning code numbers to these operations.
Secondly, they adopted the idea that the electronic
computer should utilize the binary system. These ideas
were the major innovations that permitted the advances in
computer technology that we see today (Whistler, 1970).
Another area which influenced the study of
information is the growth of operations research or, what
is now called management science. The field of
operations research grew rapidly in the research and
development environment during World War II. It
emphasized the search for and use of mathematical models
to describe and study organizational situations. In
addition, research teams were made up of experts from
many fields to develop powerful, comprehensive models.
The idea was that this comprehensiveness would lead to
broader, more effective solutions to problems in the
decision making area. Operations research ideas led to
56


the function of systems analysis in modern-day
organizations (Whistler, 1970).
The discussion of operations research leads to
another primary influence on information studies, the
development of systems theory. The idea, previously
described, of organizations being made up of
interrelating subunits and variables, made the study of
the role and effect of information in organizations an
important concept. In addition, information was looked
upon as a system in itself a set of data, individuals
and processes that interact together (Senn, 1982).
Systems theory was considered to have originated
through the work of a biologist, Von Bertalanffy, when he
attempted to find a way to tie together separate
scientific disciplines. Boulding then developed nine
levels of systems, setting the framework for the idea of
a hierarchy, or lower level systems being components of
larger systems. Weiner then expanded this theory to
include the communication process interrelated with the
control of performance. He saw information and
communication as basic elements in the processes of
planning, control and decision making. Simon further
expanded the systems theory of Von Bertalanffy, Boulding
and Weiner to apply this theory to specific business
environments, recognizing the business organization as a
57


decision making information system (Mockler, 1974).
Sincb the Industrial Revolution in the United States
accelerated the pace of technological advancement, we
have been experiencing a dramatically increasing need for
j
information. This information is the fuel for rapid
advances in current technology and improvement in the
quality of our lives. The information explosion, in
addition to the previously described influences, has
created an emphasis on the isolated study of the role of
information in today's organizational environment.
Information in Organizations
Communication within an organization involves the
flow of information "within a network of interdependent
relationships" (Goldhaber, 1974, p. 9). Because of this,
i
the structure of the organization effects and is effected
by this information flow. In a formal hierarchy,
communication flows vertically (downward or upward)
between superiors and subordinates, as well as
horizontally between those performing related tasks.
Downward communication is thought of as being typically
directive in nature, informative in terms of policies,
goals and procedures or exists in the form of performance
appraisal. Upward communication provides information
from subordinates to superiors on activities,
58


performance, problem areas or a view of the overall
operation (Gortner et al., 1987).
There are some specific problem areas involved when
dealing with vertical communication. Superiors typically
use this type of information flow as a method of
direction and control. If the climate of the
organization does not foster open communication,
resentment, de-motivation, minimal performance and
subversion may result starting a vicious circle of sub-
standard performance, increased directives, and so on.
Often use of downward communication to relay feedback
about performance is neglected further isolating
superiors and subordinates. Upward information flow
faces equally severe problem areas. The hierarchical
structure typically inhibits free upward flow of
i*
information due to strict lines of authority and the
possibilities of punishment or reward. Therefore,
I
frequently, information of a positive nature is all that
is revealed upward leaving out important details and
further widening the gap between superior and subordinate
(Gortner et al., 1987).
Theorists, particularly those from the human
relations or behavioral schools of thought, have
suggested that cultivation of open communication within
an organization is the answer. However, recent research
59


has pointed out that open communication may not be the
solution. Human relations supporters called for openness
between superiors and subordinates in that this
communication would result in the development of uniform
goals causing the supervisor and employee to become an
integrated machine (Mayo, 1945). Supervisors would
communicate in a directional, assistance-giving manner,
eager to listen while employees were encouraged to talk
freely and relieve stress. Through this give and take,
supervisors would discover sources for motivating
employees (Perrow, 1986). Likert developed his System-4
model and other theories which were specifically designed
to encourage supportive relationships between supervisors
and employees through open communication (Eisenberg &
Witten, 1987).
Opposition to the idea of open communication has
called for a cautious disclosure of information instead.
Drucker (1974) wrote that the previous exchange described
between superior and subordinate was nothing more than a
psychological manipulation through using the employee's
emotions and fears to control him. He claimed that in
early examinations economic rewards, stricter discipline
and national economic conditions were better motivators
than open,communication. Miner studied Likert's models
and determined that there was mixed support for the
j
60


importance of supportive relations and this support
varied across hierarchical levels (Eisenberg & Witten,
1987). Goldhaber (1974) claimed that greater
dissatisfaction with the job can sometimes result from
open communication and that the relationship is not that
simple. McGregor (1967) contended that open
communication is a relative rather than an absolute and
that dysfunction can occur at both extremes of very open
or very closed communication systems.
In an article entitled "Reconsidering Openness in
Organizational Communication," Eisenberg and Witten
(1987) describe opening communication as a "panacea for
organizational ills" (p. 418). They contend that there
are specific reasons for not communicating everything to
everyone within an organization. Open communication can
endanger plans and strategies, reveal important secrets
(especially in the public sector), lead to crisis
situations and loss of control and respect between
supervisor and subordinate. In their analysis,
communication should be used by the supervisor to relate
big picture information leading to career development and
motivation. Supervisors should develop skills as
empathetic listeners, try to build mutual respect and be
willing to entertain ideas. All of this should be
developed and practiced with a measure of caution. They
61


build a contingency model for communication in
organizations by defining four areas of individual,
relational, organizational and environmental factors that
should be considered in whether to communicate openly or
not.
Information within an organization can be
categorized as formal and informal. Formal information
consists of messages in clearly worded or numerical form
which are initiated from and sent to established systems
within an organization or of external influence to it
(i.e., customers or government agencies). This
information can also be received about or from
organizational resources reporting on performance, plans
or objectives. The receivers will select some of this
information for processing, some for filtering or storing
(Stamper, 1973).
Informal information, transmitted through informal
communication, exists within a task-related network where
information is exchanged horizontally rather than
vertically,. This exchange is typically made personally
or on a social level. The face-to-face nature of this
exchange lends itself to development of trust, informal
learning, social support and feedback. Organizational
results can be useful in terms of increased employee
satisfaction and motivation (the filling in of formal
62


communication gaps) or dysfunctional (the development of
norms and loyalties which are opposed to the formal goals
or rules of the organization) (Gortner et al., 1987).
Research in the area of informal communication has
centered primarily around the grapevine theory. Several
studies (Jacobsen & Seashore, 1951; Davis, 1953; Walton,
1961; Sutton & Porter, 1968; Rudolf, 1971) were conducted
determining the characteristics of this organizational
phenomenon. The studies describe an informal message
networking which is highly accurate, passes information
by cluster and carries much information quickly through
the organization. The primary drawback of the grapevine
is its prdpensity to start and embellish rumors with
sometimes tragic and, at the least, very frustrating
results to organizational management. The grapevine can
also, however, be utilized by management as a positive
tool for transmission of information (Goldhaber, 1974).
Many researchers appear to believe that information
feedback is enhanced by informal networks. The first
question which presents itself is whether or not the
feedback is of the type that is worthwhile to the
organization. Secondly, within the formal hierarchical
structure of most organizations, does this informal
communication cross between the boundaries of rank. The
barriers approach to communication theory suggests that
63


organizational power and status present formidable
barriers to communication in that lower ranks do not
communicate easily with higher ranks and vice-versa. An
additional' barrier of job specialization would exist even
|
in task-related horizontal structures (Lesikar, 1972).
Interestingly enough, recent research has shown
that informal information networks in organizations can
be more successful at assisting implementation of high-
risk, complex change than formal networks.
Informal interpersonal channels provide the unit
that is adopting innovations with social support
and are more likely to meet the specific needs and
questions of the adoption unit as a result of their
immediacy of feedback and the situational
specificity of their communication. (Fidler &
Johnson, 1984, p. 706)
In attempting to understand the role of
information in an organization, current literature
describes not only types of organization information
transmittal but sources of that information. Initially,
the distinction is made between information and data.
Data "are facts, records of an event that has occurred
or is about to take place. Facts are independent,
unrelated* and limited in number" (Senn, 1982, p. 19).
Information may not be described as facts although it
originates from data. "That is, information is actually
data transformed so that they communicate meaning or
knowledge, ideas or conclusions" (Senn, 1982, p. 20).
64


Senn (1982) describes the six attributes of information
as being accuracy, form or structure, the frequency with
which information is acquired, the breadth or scope of
events represented, the origin or source from which it is
received, and the orientation towards a certain time
period. He adds the three additional characteristics of
relevance,, completeness and timeliness when dealing with
a set of information. These characteristics determine
the quality of information used by managers.
Sen; ,(1982) contends that information sources are
either primary or secondary. Primary sources consist of
observation, survey, experiment, or estimation. Primary
sources are firsthand, time consuming and often expensive
.1
methods of, acquiring information. Secondary sources
include available company information, information
purchased from an outside source, publications, and
government agencies. Secondary sources, although not
firsthand,, may be the effective method for gaining
information when primary sources are not available or
feasible. It is necessary to evaluate sources for
impartiality, validity, reliability, consistency and the
age of their information as these are problem areas that
may effect overall quality.
65


Another concept addressed by current literature is
the actual value of information to the organization.
Senn (1982) determines that the value of information is
not easily calculated as it involves the relativity of
the message to an entire body of knowledge. In addition
to this incremental value, there is the physical cost
associated with collection and transmission. Ein-Dor and
Segev (1978) associate the utility of information with
its ability to increase profits or otherwise contribute
beneficially, such as cost reductions or increased
performance effectiveness in public or non-profit
organizations. Bedell (1985) contends that it is not
possible to calculate information value quantitatively.
The value is not intrinsic, but relates to the benefit
received by the organization. He describes six
categories! of value which might influence an
organization to select an information system.
* to achieve quantifiable cost reductions or
improvements to operational efficiency....
* to improve product quality, technology, or
reliability....
* to improve service to the organization's
customers;
* to create the products or services offered or
markets served by the organization;
* to improve decision making; and
* to meet legal, government, and operating
requirements, (p. 26)
In addition, Bedell contends that organizational politics
can add an element to deciding the value of information.
66


Exploring this line of thought, March and Feldman
(1981) emphasized the value of information to the
organization as being largely symbolic. Because
political actions are often understood by their
underlying relationship to myths, rituals and symbols,
the meaning of information develops within this context.
The idea that more information equates with better
decision making forms the basis for legitimizing
decisions through intensive use of information. The
content of the information used is not as important as
the existence of an abundance of this information.
The Intensive need for information then causes the
subsequent requesting and gathering to be viewed as a
signal towards realizing economic value. Understood in
this light, the actual price of attaining information is
equal to the value of opportunities not pursued.
Information investment, classically, should stop when one
additional dollar spent will not equal a dollar of
return. March and Feldman (1981) contend that the
opposite more frequently occurs, where information
investments have no value to the decision making process,
where information is gathered and not used and where
actions and choices occur first and information is
requested later. They also see value in information as
an incentive for organizational learning, as a
67


surveillance device and as a tool for strategic
maneuvering. These ideas and the case studies they are
based on will be discussed again later as they are
important in considering the results of this research.
Until now, we have been primarily discussing
information as a resource to the organization and as a
part of the communication process. The majority of
recent literature surrounding information in
organizations deals with development and evaluation of
information systems. Lucas (1978) describes the
organization as an entity which processes information,
therefore the information system exists as an integral
part of the organizational system (refer to Figure 2.1).
He describes the study of information systems as
interdisciplinary in nature including influences from
psychology, organizational theory, business management,
operations research, engineering and computer science
(refer to Table 2.1).
Lucas (1978) specifically defines an information
system as "a set of organized procedures which, when
executed, provides information to support decision
making" (pi 5). These procedures include collection and
processing of data, information output to a user, and
subsequent decision making (refer to Figure 2.2).
68


Figure 2.1.' The organization as an information
processing entity.
From Information Systems Concepts for Management (p. 9)
by H. C. Liicas, Jr., 1978, New York: McGraw-Hill Book
Company. Cppyright 1978 by McGraw-Hill, Inc. Reprinted
by permission.
69


Figure 2.2. A schematic presentation of an information
system.
From Information Systems Concepts for Management (p. 5)
by H. C. Liicas, Jr., 1978, New Yorks McGraw-Hill Book
Company. Copyright 1978 by McGraw-Hill, Inc. Reprinted
by permission.
70


Table 2.1. The Nature of the Information Systems Field.
Continuum
Psychology Organizational Functional studies areas of business Information systems
Decision making Use of information impact of systems Impact of Accounting, information marketing, on the finance, organization production Combination and synthesis of fields: effective use of information technology in organization
Continuum
Operations. research Electrical engineering Computer science
Problem- solving techniques Machine design Hardware theory
Software design Management techniques File design Software theory File structures
Note. From Information Systems Concepts for Management
(p. 11) by H.C. Lucas, Jr., 1978, New York: McGraw-Hill
Book Company. Copyright 1978 by McGraw-Hill, Inc.
Reprinted by permission.
71


Information systems can be categorized by model.
Prince (1969) describes three models of information
systems. The first model, the traditional information
system, presents a closed system which encompasses all
information flows, both vertical and horizontal, within a
given business process environment. The second model
describes a production and operation information system
which is a partially open system reacting to an
environment of changing materials and markets,
encompassing only certain relevant information flows
within the organization. The third model presents a
marketing information system which is an open system
containing many different and varied information flows
from within the business organization as well as the
environment. The inadequate provisions of this type of
modelling has called for movement towards a total
information systems concept which encompasses all
information flows, processes and environments within the
organization.
The above models of information systems align fairly
closely to attempts to distinguish what types of
information systems are normally needed by managers.
Mockler (1974) divides these into five categories. The
first, financial information systems, provide management
with historical, budgetary, cost-related and forecast
72


information to use in the management functions of
planning and control. Mockler contends that this is the
most important of business organization information
systems. A second type of system is a marketing
information system which collects and analyzes a variety
of financial, product and market information to use in
strategic planning. A third type deals with operations
and collects scheduling, resource, inventory and
production related information to use in developing
detailed operational plans and budgets. A fourth type
consists of information systems designed for project
management. This type integrates all project specific
information for planning and control purposes. A final
type of information system required by management is
termed advanced information systems. These types of
systems embody operations research techniques
(statistical and mathematical analysis) to assist in both
strategic and operational decision making. In addition,
Mockler distinguishes between systems for management
decision making and applications systems for operational
use, warning against the inefficient use of applications
systems for managerial purposes.
In addition to considerations of type and level of
system, it is important to understand what makes an
information system effective in an organization. Bedell
73


(1985) outlines four characteristics of an effective
information system.
Information systems are effective if they:
* are focused on supporting those activities that
are most important strategically to the
organization and in which computing can provide
the greatest benefit to the organization as a
whole,
* are functionally appropriate i.e., deliver the
correct amount of sufficiently accurate
information with the required timeliness,
* have high technical quality, and
* are cost-effective, (p. 10)
Relating the above requirements to the needs of the
organization is necessary, because information systems
can only be effective if they contribute to achievement
of the goals and objectives of an organization.
Issues in Information
There are several issues and concerns which have
been visible regarding information systems in the past
few years. The first, and perhaps most controversial is
the cost effectiveness of information and new information
technology. As with control systems, it has been
recommended that the user or project management team be
accountable and responsible fiscally. A case study of
Merrill Lynch and Company in 1987 showed their ability to
control upward moving application system development
costs by installation of a project planning and
development software for purposes of monitoring the end
74


cost of a project with the budget. Adding to their
success was a more centralized charge-back system so
development costs would be more accurately incurred by
end users (Radding, 1989).
Another recommendation is to require information
specialists and a centralized information officer in the
information department so that processing staffs reflect
the same knowledge and sophistication as the existent
system (Calhoun, 1987). Also discussed, is that
management must take a more involved role in their
information systems movement to include consolidating
networks, ensuring adequate staffing and facilities, and
developing suitable plans (Beere, 1984). The Office of
Management and Budget requires all major information
technology systems initiatives be accompanied by a cost-
benefit analysis, and involved managers believe that,
while helpful, this form of analysis does not take the
place of sound decision making nor will it comfortably
merge with political considerations (Gordon, 1987). To
add to the problem of cost-effectiveness is the necessity
to change organizational cultures to include information
systems in their overall business strategy (Gralla,
1988). In a recent study of health-cost containment, the
survey conducted among 100 corporate-health-benefit
executives indicated a lack of involvement on the part of
75


top management and the need for strategic planning in
this area (Chernow, 1988). Managers tend to agree that
information systems pay for themselves in most financial
based organizations, but are concerned with reaching a
higher level of return on investment and integrating
systems into the overall strategy of the organization
(Freedman, 1987). Information processing has three major
areas of expense to control; data processing,
administrative processing and staffing. A recommended
course of action again deals with integrating strategies,
especially non-computer tools and information networks
with the electronic ones (Scamell & Winkler, 1979).
Another concern in the area of information systems
is lack of management understanding and involvement,
already touched upon in the cost effectiveness area.
Today's technology is putting the power of knowledge in
the hands of the end-user, with the growth of personal
computing. Because of this, end-users are more
responsible for their own cost and asset control in this
area. The earlier important roles of information systems
managers are diminishing. This causes a dilemma for
senior management in traditional control positions
(Freiser, 1987). Another related problem area is
behavioral in nature. Managerial decision makers
frequently lack computer experience and cause major
76


obstacles for information systems development staff.
Educational and psychological difficulties often pose
greater drawbacks than technical problems (Cooper, 1978).
A final major area of concern is that of the rapidly
growing technology in the information systems area. In a
recent case study the experiences of four companies
entering a new information technology showed that neither
the users nor the information services departments could
predict all of the uses or results of the new technology
(McFarlan & McKenney, 1983). The tremendous rate of
information technology growth should force management to
review how long information should be kept. Research
studies show that after one year only two to five percent
of stored information is actually used for decision
making. Purging of these storage systems or finding
alternate filing methods can save costs which can then be
recycled into new technology (Burch, 1984).
Compaine (1988) contends that the growth in
information technology has brought about a cultural
movement towards a new literacy, from the traditional
printed word to new electronic skills and the need to
understand more visual than linguistic presentations. He
views this as a positive movement in organizations,
particularly, because they will have the ability to
access more information (possibly knowledge and power).
77


However, this will also change the structure of
organizations because boundaries between jobs become
vague in the light of new technology. In addition,
traditional concepts of management, such as span of
control, take on a whole new meaning.
Information as an Element of the Control Process
The concept of information and its key relationship
in the control process has its foundations in the theory
of cybernetics and the development of the idea of
feedback. Weiner (1948) expanded upon this relationship
in an organizational setting by detailing the scientific
relationships of information, feedback and control. He
used the term information to mean any mechanical energy
transfer in which messages were transmitted, from
electrical impulses to written or oral communication.
The science of cybernetics showed that all systems used
this energy to feedback information, comparing a standard
to actual performance.
Early concepts of cybernetic control were influenced
by developments in the physical sciences and biology. In
1788 a young construction supervisor named John Rennie
working for a well known Scottish millwright created a
device to separate millstones if they began too quick a
rotation. This device sensed and regulated the mill's
78


speed through the principle of centrifugal pendulum.
Matthew Boulton, then working with James Watt on a new
engine for a mill they were originating/ visited the
plant and noticed the device. They then used the idea of
centrifugal pendulum to create a device called the
flyball governor to control their continuously rotating
engine. This governor became an important symbol in the
transformation of Europe from an agricultural to an
industrial society. It also became an important example
of automatic control. The principle was that, as the
engine increased rotation, the force pushed out spinning
balls through a valve which, by a connection, reduced the
supply of fuel and slowed the engine down. This machine
demonstrated the idea of feedback very clearly and was
quickly adopted as a textbook example by the engineering
community and other areas of technology. A century later
scientists began to relate this same idea to animals,
then human nervous systems and, finally, to groups of
human and animal organisms, as well as other systems
(Angrist, 1973).
Another popular example of a cybernetic control
system is the thermostat, which measures the temperature
of a surrounding environment against what the standard or
desired temperature should be and then corrects it to
that standard. This example is widely used in drawing
79


analogies to management control. In a comprehensive
management control system, desired standards are
established, performance measured and compared to these
standards, results analyzed, and a corrective program
developed and implemented to bring the organization in
line with the desired performance (Koontz et al., 1980).
The key to the success of this process is feedback
of information. Angrist (1973) defines feedback as the
ability to use previous performance to regulate future
behavior. Systems which feed back information are
commonly referred to as servomechanisms and serve as a
foundation for the study of management information and
control systems. Conditions within the environment of
these systems cause a decision to be made which leads to
action further affecting the environment and impacting
future decisions. These systems rely on available
information that normally describes past events and is
used to base future decisions on. Therefore the behavior
of these information-feedback systems display three
characteristics; structure, delays and amplification.
Structure refers to the relationships between all
components in the system. Delays exist when information
is unavailable, in decision making time, and in taking
action. Amplifications take place when an action or
resultant reaction bears consequences that were not
80


implied by the information received. The growth of
computer technology has enhanced the process and reduced
some of the problem areas inherent in the above
characteristics (Hodge & Hodgson, 1969).
The characteristic of time delay of information has
caused control systems to develop as feedback systems.
Computer and electronic data transmission has made real-
time information a more common occurrence. As such, the
movement towards understanding control as a feedforward
system has begun. This means that managers will use more
accurate forecast information to implement corrections
before or during the actual performance period.
Feedforward of information will effectively predict,
based on more accurate real-time information, what will
happen and control then becomes future-directed. In this
situation managers will still have to measure the actual
performance when it occurs and implement any correction
required (Koontz et al., 1980).
The growth of information technology has had an
effect on the concept of control within organizations.
In a study conducted concerning the effects of computers
on the span of control in ten companies some reduction in
span was reported as was a reduction in the amount of
management control necessary, dependent upon the
department type. In addition, there is evidence that
81


control becomes more centralized as technology advances.
An additional change observed was that of lateral shift
in control. A 1965 study of 34 firms in different
industry categories and experiencing computer information
technology changes, showed a movement away from
functional departments to broader, more neutral ones. A
shift from line to staff responsibility was also observed
regularly, and a shift of controller responsibilities to
neutral departments (Whistler, 1970).
The movement towards more advanced information
systems and a better understanding of the role of
information within the control function has led to an
emphasis on designing comprehensive management
information and control systems. These systems seem to
have some basic characteristics.
1. They all collect, store, and transmit
information in the form of abstract measures of
reality. Usually, they deal with information about
the condition of the organization in the form of
measures that are quantitative (e.g., the cost and
quantity of production) and that can be understood
only by trained personnel.
2. The collected abstract information is stored
and transmitted in a specific form and with a
specific frequency. For example, a company makes
quarterly profit reports based on a particular set
of accounting practices regarding its method of
inventory and depreciation.
3. The summarized information is distributed to a
specific, usually predetermined group of people.
The group may or may not include all members of the
organization. Some information is given to only a
82


few people in the organization while other
information is more public (e.g., earnings reports
for corporations). (Lawler & Rhode, 1976, pp. 5-
6)
A more clear example of how information systems
relate to the control process is developed by Steiss
(1982). Information is taken in from both internal and
external sources and used in the decision making process.
Effects of decisions are compared with standards and
corrective action is implemented, the results of which
are fed back into the decision making process closing the
loop. An expanded model showing the effects of
information systems on the organization and,
consequently, the control process is also shown in Figure
2.3. This model emphasizes that user attitudes and
perceptions effect the success of the system and how it
ultimately influences the control function (Lucas, 1978).
Lawler and Rhode (1976) suggest several areas where
information systems result in user behavior which can be
dysfunctional to the control system. Users may attempt
to influence the control system so that results will look
favorable. In a study of management practices in the
Soviet Union by Berliner in 1956, managers under extreme
pressure to meet standards participated in excessive
strategic planning or "storming" to keep plants open for
longer periods of time than would normally have been
83


Figure 2.3. Information systems in the context of the
organization.
From Information Systems Concepts For Management (p. 67)
by H. C. Lucas, Jr., 1978, New York: McGraw-Hill Book
Company. Copyright 1978 by McGraw-Hill, Inc. Reprinted
by permission.
84


'
cost-effective. Invalid reporting and distorting of data
was observed by Whyte in 1955 and later by Argyris,
Hofstede and Hopwood in the 1960s. Studies conducted
involved workers under pay incentive programs who altered
data fed into production measuring systems. This
behavior is also prevalent in budgeting functions, where
lower budget forecasts are presented to get programs
approved or higher budgets presented than necessary to
pad programs. The combination of information and control
systems can, in addition, cause rigid bureaucratic
behavior, which results in employees meeting control
standards by performing to requirements with no
flexibility. This may be dysfunctional to the overall
goals of the organization, especially in the area of
innovation. In addition, resistance to control and
information systems, as well as new or advanced
technology occurs on every level. If the resistance is
effectively dealt with and overcome, users find that
I information and control systems can expand their
expertise and opportunity for advancement, measure
performance more accurately, however changing the
organizational structure.
85


Project Management
An area of specific interest to this research is
project management. Project management is a recent
technique for developing a set of objectives, specific to
one project, and managing accomplishment of these goals
through to completion. These projects have a fairly well
defined life span and will not then continue as a normal
part of the organization's activities. A project is
typically identified as such by upper level management,
works to a unique set of requirements, and is staffed by
a team of people normally dedicated full time to the
project work. This form of management has been adopted
by the building industry, the Department of Defense, NASA
and the Department of Transportation as well as
subcontractors for these agencies (Martin, 1976).
A unique aspect of project management is that it, in
addition to reporting through to the central control
organization, has its own internal control system
relative to unique project standards and requirements. A
simplified model of the project management process
illustrates a closed loop feedback system within the
project itself. Requirements are fed from the customer
to the project team which then is responsible for
planning, project direction, execution and evaluation.
86


At this point, reports or information is generated back
to the customer and project planning in an attempt to
gain additional external or internal feedback leading to
performance correction (Martin, 1976).
Evaluation of progress is important to the success
of project management, and use of various control systems
which emphasize specific tasks and schedules has become
closely associated with this form of management. Because
projects have specific time requirements, these systems
emphasize setting specific milestones for scheduling,
monitoring adherence closely, then adjusting for
inaccuracies. The system commonly referred to for
accomplishing this is a method of task networking called
Project Evaluation and Review Technique (PERT). This
method was developed by a research project team from
Lockheed Aircraft Corporation, the Navy Special Projects
Office and the consulting firm of Booz, Allen and
Hamilton. They used.traditional milestone reporting
systems such as line-of-balance and Gantt charts to
develop this new system which requires all possible
combinations of tasks involved with the project to be
networked, including time estimates for duration of the
tasks. Recent research has expanded this method to
inclusion of costs and to elements which can measure
87