Complete Site Outline

Introduction: Motivations and Backgrounds
Literature Reviews
Research Method
Findings
Discussion, Implications
Conclusion & Limitations




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CHAPTER 1:
INTRODUCTION

"Recently, such is the pace of development and so rapid is our adaptation to it that one revolution is not over before the next had begun."
(Myron W. Krueger in Forward to The Metaphysics of Virtual Reality, 1993)

1.1. PURPOSE OF EXPLORATORY STUDY

Informal communication is at the heart of organization communication. It has been acknowledged time and again as the primary mode to disseminate information and to enable mutual understanding. The structured and formal channel of communication in the typical hierarchical organization tends to be inadequate and artificial by comparison. So it is not surprising that numerous research studies have found that people have often resorted to informal communication, of which face-to-face is seen as the predominant medium. Indeed, trends towards a flatter and network structured organization further reinforce this emphasis on informal communication, because in such organizations lateral communication is encouraged and is necessary to hold the organization together.[1] Lateral communication is where informal communication media excel.

With the rapid introduction of information technologies in organizations, more media choices are available. The question that arises is whether, and if so how, this changes the informal communication process in organization. This thesis submits that these modern communication media have greatly liberated and enhanced the informal communication process in organizations. This submission is explored through the perspective of communication media choice. More specifically, the research agenda is to examine the chief financial officers' (CFOs) choice of communication media under different task situations. This is illustrated on Figure 1.1.

Media, or channel, in this thesis is defined as any means that enable communication or transfer of information between two or more persons. Examples of communication media are outlined in Table 1.1.

Communication media are further divided into two categories in this thesis: traditional communication media and modern communication media (or technologies). As the name suggests, modern communication media have a more recent origin and they tend to be based on some electronic or computer technologies.[2]

The remaining sections of this introductory chapter outline the background and motivations of this thesis.

1.2. BACKGROUND AND MOTIVATIONS

1.2.1. The Rising Importance of Information Technology (IT)

In the 1990s the business environment is highly turbulent and complex, where competitive pressure is increasing with globalization. Topping this off is the dramatic, pervasive and quickly felt implications of the information revolution. In this climate new paradigms are created and with it new opportunities. To capitalise on these opportunities and to handle the complex environment, an organization requires timely and relevant information more than even before. Information has always been the life blood of the organization; it enables an organization to make sense of the world, to resolve ambiguity and to facilitate decision making and coordination. Information is an important source of competitive advantage.[3]

Information technology (IT) refers to the means that facilitate the handling of information. It provides the mechanisms to store, retrieve, sort, analyse the information (data) and to ensure that the information is available to those who need it.

IT is, in fact, central to the provision of competitive advantage. Increasingly, IT is recognised as an enabler of fundamental organisation change, from work practices, human inter-relationships to structural change.[4] Nowadays, an organization needs to be flexible and responsive to external needs and to make effective use of all assets, have employees that behave as owners and actively contribute to the goals of the organisation, and a management system that provides feedback to promote fast organisational learning.[5] IT enables such qualities of modern organisation.[6]

Thus, it is not surprising that billions of dollars are spent on IT and improvements. Yet our understanding of the impacts of IT on organizations is sparse. This provides the general motivation for this study.

1.2.2. Organization Information Processing

Information processing is required for the coordination of the interdependent activities of the subgroups in organizations. The greater the task uncertainty the greater the amount of information that has to be processed in decision making during task execution in order to achieve a given level of performance (Galbraith, 1973).

1.2.2.1. Impact of IT on Information Processing

The problem that arises is that as the amount of information processing increases, it will eventually overload the capacity of the organization. Galbraith (1973) advocated strategies that decrease the need for information processing and increase the information processing capacity.[7] In this era, information technology needs to be considered and integrated as part of such strategies. Two points about these strategies can be made.

First, with the adoption of new management philosophy, like JIT, the creation of slack resources would no longer be a viable option. Indeed, to reduce slack an online-realtime system is required. Even Galbraith (1973) recognised that this approach is "perfect in theory" because it ensures consistency of action, timely response to situation; but he identified two significant problems: (i) expense, and (ii) structure and cultural inhibition.[8] But this is 20 years ago. Now, IT is relative cheap and arguably with years of assimilation the cultural and structural constraint is eroding away.[9]

Second, with IT triggering flatter organization structure, investment in vertical information systems may be less important compared to the creation of lateral relations. Galbraith recognised this, and he even identified 10 points to facilitate the creation of lateral relation. However, a point that has been alluded to, but not drawn out explicitly is the important role of IT. IT ensures the availability of information that is central to the creation of lateral relations and information processing in a flatter, customer-focused and dynamic organization (Galbraith and Lawler, 1993). Hence, it would aid organization design to understand the implications of IT in the creation of lateral relations. And integral to this is the informal communication process in organization.

1.2.2.2. Informal Communication Process

Numerous studies have identified managers' tendency to rely on informal communication because the formal system is regarded as not timely and grossly inadequate to capture the information needs or processes of managers (Mintzberg, 1972; Preston, 1986; Bruns and McKinnon, 1993):[10]

"Much of the detail necessary to run a company has characteristics that make informal oral transmission more efficient than entering it into a formal system. (emphasis added)"

Indeed, the modern organization paradigm suggests a movement away from a hierarchical structure to an "adhocracy".[11] The net effect is that informal communication is likely to become more prevalent. Thus, the need to better understand this process arises.

1.2.3. Choice of Communication Media

The study of informal communication in this thesis is achieved through the perspective of media choice theories. These theories address how and why people choose particular communication media to transmit informal information. Literatures on media choice have yielded significant insight into this media choice process. Yet, some inadequacies persist. In particular, findings that involve modern communication media are mixed.[12]

1.2.3.1. Inadequacy 1: Ignoring Choices Presented by Modern Media

Prior media choice research did not address the consequence of information technologies. Arguably for research before the 1990s, IT and related communication media was not a big issue. Now it is.

With the convergence of telecommunications and computers, the distributed processing of modern IT and the development of the `information superhighway', information of all variety can readily be moved throughout the world on a massive scale.[13] Managers are no longer confined by the physical location of the organization database; they can now access information anywhere, anytime. Nor do they have to rely on someone who knows how to access the information required because of `user friendly' technology. At the same time, the raw power of modern computer increases the managers' ability to process the information.

An implication is that there are more communication media to choose from. The question that arises is whether informal source of information is necessarily restricted to oral or face-to-face communication. Previous research such as Mintzberg's 1972 study focused on oral communication as a source of informal information. Today there are many other informal sources as well. Email, for example, is a rather common informal mode of communication these days. And increasingly internet,[14] intranet and groupware[15] technologies have opened additional powerful and versatile avenues of informal communication. These technologies provide an especially interesting source of research because there is little known about how these modern communication media are chosen and used in practice.

1.2.3.2. Inadequacy 2: Fragmented Approach

Prior studies addressed media choice in a piece-meal fashion. Some adopted a rational perspective and some social. And the focus is often on a small aspect of each. Little attempt is made to provide a comprehensive model integrating these diverse elements. A contribution of this study is the formulation of a more comprehensive framework to address media choice.

1.2.3.3. Inadequacy 3: No Study on CFOs

Media choice literatures lack an accounting focus and they tend to examine non-financial managers only. This study contributes to the literature by studying CFOs communication choice related to accounting tasks.

Further, a study of CFOs is interesting in that the role and function of CFOs itself is sparsely addressed in the literature. This suggests that a study of CFOs per se should prove to be informative. This is particularly the case given that the role of the CFOs is rapidly changing. As competition increase in the global market, they are adopting more proactive roles in the organization. These broad roles can be summed up as follows:

(i) They are no longer restricted to the traditional function of management accountants, such as costing and budgeting; their task often involves tying together a whole range of information, both financial and non-financial, to help raise shareholder values;[16]

(ii) At a time where an organization is undergoing massive re-engineering to capture the improvement in performance and the increase in competitive advantage enabled by advanced information technology, financial controllers have been urged to be more like a "business advocate",[17] or, a "business strategist"[18]. Consistent with this, there are evidence to suggest that controllers are often the main instigator behind the adoption of new IT in organization.[19]

(iii) Increasingly there is also a shift from the traditional closed and "need to know" channels of communication supported by independent financial systems, to one where the communication channels are more open and integrate financial information with business operations.[20] In this context, financial controllers serve a vital link in the organization communication channel. They are the ones "who link the business-getters (who know what to do to win) with the information-providers (who understand the technology."[21]

These trends raised the natural implication that the information and the source of information required would shift. The new strategic and proactive role requires different information and different information channels (ie. the communication media) to resolve uncertainties and to coordinate activities. In this regard, the modern informal communication tools would seem to be invaluable.

1.2.4. Summary of Motivations

In summary, the motivations for this study are:

1. Consistent with the features of modern organization, informal means of communication are likely to become more prevalent. Couple with the advent in IT that has the potential to facilitate such informal means of communication, our understanding of this area is inadequate.

2. While media choice literatures in the information system literatures offer a substantial body of theories that shed light on this area, these theories are themselves fragmented.

3. CFO is a little understood group. This plus their changing roles invites study. Also, previous research examined only general managers and not the more accounting oriented tasks of the CFO.

4. An overarching motivation is to lay the foundation for further work in this area. A better understanding of how communication media fits with the diverse range of communication tasks clearly would have practical and design implication given the large sum of money organization spent on IT in recent years.

1.3. AN OVERVIEW OF THE THESIS

The essence of this thesis is to examine how CFOs choose between the different communication media available when faced with different communication tasks. Intuitively, there is little doubt that the choice varies in response to different tasks. So far the literature has focused only on one task characteristic: the equivocality of the task. Whilst this task characteristic explained the choice within the confines of information richness theory and in relation to the more traditional (older) communication media, it represents a rather narrow perspective. The media choice literatures are reviewed in Chapter 2. In addition, it does not explain the research findings in studies of modern communication media such as email.

In response to this narrow focus, an important aim of this thesis is to examine the media choice process with a broader and more realistic range of task characteristics. To this end a framework is established to guide analysis in Chapter 3.

Chapter 4 outlines the research methodology adopted. This involved a questionnaire instrument together with a structured interview.

The findings canvassed in Chapter 5 reveal a substantial consistency with the proposed framework and establish that task characteristics do have an impact on media choice.

Within the limitation of this study, Chapter 6 concludes on the note that: (i) communication task characteristics do influence media choice, and (ii) informal communication processes in organization have been augmented by modern communication technologies.

 

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[1] See Hind and Kiesler (1995), where it was found, inter alia, that the rise of horizontal organization of technical workers has increased the use of non-hierarchical communication.

[2] While the modern telephone system uses a significant amount of computer and digital switches it is not regarded as a modern communication media in this thesis because it has been available for a very long time. This is consistent with classification in the literature.

[3] This is explained by the concept of "value chain" and "value system". Briefly, a company's activities can be divided into a system of interdependent "value activities" that are connected by linkages. Such linkages also exist between the firm's and its suppliers and customers and other stakeholders. Of particular relevance here is the idea that careful coordination of these linkages provide competitive advantage. IT facilitates such coordination by sustaining and creating linkages. See Porter and Millar (1985), Kaye (1995a).

[4] The point to note is that IT is an `enabler'; it does not itself provide any sustainable competitive advantage. The adoption of IT per se will not lead to sustainable competitive advantage. Some even argued that it would be counter productive. See Cragg and Finlay (1991). It is the use of the IT to generate new information thereby adding value that enables it to contribute towards competitive advantage. See also Morton, M. (1992).

[5] Ie. "The bigger the world economy the more powerful its smallest players" Naisbitt (1994), p2. As companies become more global, they tend to break up into small autonomous, market-aligned business units. Rapid decentralisation is in progress. And in this environment the ability to learn faster could be the organisations only source of competitive advantage. See Steingraber (1996).

[6] Morton (1992), p277.

[7] As organizations became bigger and more complex, the problem of coordination needs to be handled by explicit mechanism. Initially, the use of rules, procedures, hierarchical structure and goal setting is adequate. But eventually the amount of information that need to be processed will overload the system. Galbraith (1973) proposed four strategies: (i) creation of slack resource, (ii) self-contained tasks/ units, (iii) investment in vertical information, and (iv) creation of lateral relations.

[8] Galbraith (1973), p42.

[9] Ie. Whereas previously hierarchical structure is the norm, nowadays organization is global and network orientated.

[10] Bruns and McKinnon (1993) at p104.

[11] Malone and Rockart, 1991. These features of modern organization include: globalization, team orientated, customer-focus, lateral or network structure, turbulent and rapidly changing environment. See also Galbraith, et al (1993).

[12] See Chapter 2.

[13] See Sproull and Kiesler, 1991.

[14] Kaye (1995b).

[15] Groupware refers to communication technology that facilitate the communication, collaboration and coordination of group oriented work in an organization. It integrates the organization database, electronic massaging services in a single system; it provides text, graphics, sounds, etc. A notable proprietary approach is Lotus Notes. An alternative approach is through an intranet, which is an internet like set up that works within an organization. It uses the same communication protocol as the internet to transfer the files. Eg. Netscape Communicator. See Ryrie (1996). A more practical definition is offered in the first part of the questionnaire instrument in Appendix 1.

[16] Harisak (1996), Ottolini (1996), and Wilson and Ervin (1996)

[17] Jablonsky and Keating (1995)

[18] Harisak (1996)

[19] 'Controllers Lead Technology Innovations' (1995), Management Accounting Vol. 77 No. 3, pp28- 30.

[20] Jablonsky and Keating (1995)

[21] Sheridan (1994), p50.

 

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Copyright © 1997 Raymond Yu.