S trat eg ic Management o f the Informat ion S

Func t ion

February

S tra t eg ic Management o f the Informa t ion Sys t ems

Func t ion : Changing Role s and Planning Linkage s

N yenkatraman

T . S . Raghunathan

February 1 98 6

STRATEGIC

N . Venkatraman

E52—55 3 Sloan S choo l of Managemen t

Mas sa chus e t t s Ins t i tut e o f Te chnology

Cambridge,MA 0213 9

( 617 ) 253-504 4

an d

T . S . Raghunathan

College o f Busines s Admini s t rat i onUnivers i ty of ToledoToledo , OH 436 0 6

( 419 ) 537-242 7

Draf t for Dis cus si on : Do Not Ouo t e

January 1 986

Acknowledgement s : We thank Mr . K . Eri c Knut s en fo r providing us wi th the da t ac ollec t ed By him on behalf of Cre sap , Mccormi ck

,and Paget

,Inc . The analys i s

and int erpre ta ti on pre sent e d here ar e tho s e of the authors .

STRATEGI C MANAGEMENT OF THE INFORMATION SYSTEMS FUNCTI ON

CHANGING ROLES AND PLANNING

Summary

Recent wri t ing s argue tha t the management informat ion sys t ems ( I S )

f unc t ion should no longer be viewed in i t s t radi t i onal rol e , but in t erms of a

s trat egi c rol e fo r exploi t ing I S— base d compe t i t ive advantage s . Roote d in such

a s t rategi c role p erspec t ive , thi s paper d eve lop s a re s earch model o f I S

planning e ffec t ivene s s where e ffe ct ivene s s i s viewed in terms o f the degre e

o f I S support t o s trat egi c management o f an o rgani za t i on . Thi s model i s

t es t e d us ing probi t analysi s on da ta from 311 US organi zat i ons . Researc h

resul t s are employed t o arrive a t a s e t of important guideline s for rede fining

the rol e o f the I S func t i on . In addi t i on,broade r impli ca ti ons for

func ti onal- level planning and future d irec t ions for planning sys t ems res earch

are d eveloped .

Wi thin the s t ra tegic management fi eld , the three-level ca t egori zati on of

the s t rat e gy concep t ( in t erms o f corpora te , busines s , and func t i on ) i s widel y

a ccep t ed ( Grant and King , 19 79 , 1 982 ; Hofe r and S chendel , 1978 ; Lorange and

Vancil,

Thes e thre e level s o f s t ra tegy are formally linke d through th e

s t ra t egi c planning proces s es and sys t ems ( se e for example , the thre e-cycle

planning proc e s s in Lorang e and Vancil , 1977 , and an al ternat e two- cycl e

proce s s in Cami llus and Grant , Such linkage s t ypify tha t the

func t ional-leve l s t rat egie s are di rec tly de rived from the#

highe r level

s t ra t egi e s .

I f one subs cribe s t o the above vi ewpoint , planning ac tivi ti es a t the

differen t func t i onal level s have a well- de fine d func t ional focus . As Hofe r

and S chendel (1 9 78 ) not ed , [A ] t the func t i onal a rea l evel , the principal

focu s o f s t ra t egy i s on the maximi zat ion of re sourc e ( and )

func ti onal area s t ra t egy ( i s ) t o be cons t rained by busines s s t rat egy and i s ,

in turn , t o b e cons traine d by corpora t e s t rat egy . ( p . Accordingly ,

func ti onal planning focuse s on the development o f ac t ion plans and programs t o

implement r elevant area s o f the overall bus ines s-leve l s trat eg i c plan (King

and Cleland , 1 9 78 , Lorange and Vanci l , whi ch i s derived from the

organi zat i onal ( or ,corporat e-level ) s tra t egi c plan .

Howeve r , in re cent t i me s,there a re inc reas ing conce rns that the

subordinat ion o f func t ional s t ra t egie s t o the bus ines s-leve l s t rat egy may b e

t oo res t ri c t ive for exploi t ing po tent ial s ource s of compet i t ive advantages that

may li e wi thin vari ous func t ional areas . More prominent and cent ral role s a r e

b eing accorded t o many func tions in the overall s t ra tegi c management a ct ivi ty .

Emerging theme s include s tra t egi c marke t ing management -a s t rat egi c o r a

firm—wi de role of the market ing func t ion Abell and Hammond, 1 9 79 ; Wind

and Robert son, 1 983 ; Thoma s and Gardner , and s t rat egi c human re sourc e

management highlight ing the importance o f the human resource funct i on

Fombrun ,Ti chy , and Devanna ,

Along s imilar lines , r ecent d i scus si ons have focus ed on the pos s ibili t ie s

o f exploi t ing func t ion base d compe t i t ive advantages . For ins tance , Skinne r

and Wheelright ( 19 84 ) di s cuss d i ffe rent mode s that can be employed for

obtaining compe t i t ive edge through the manufac turing func t i on ( s e e als o Haye s

and Wheelright , S imilarly , Port er and Millar ( 19 85 ) and Rockart and

S cot t—Morton ( 1984 ) di s cus s not ions o f exploi t ing informati on-base d compe t i t ive

a dvantage s .

S uch concep tuali zat ions ac cord a more p rominent ( or s t ra t egic role s

t o thes e func t ions by virtue o f thei r abil i t y t o provid e importan t source s o f

c omparat ive advantages . Consequent ly , the sc0 pe o f funct i onal-l evel planning

i s broade r than the development of ac ti on plans and programs t o implement th e

chosen s tra t egy , but in fac t drive the formulat i on and evaluat i on o f

s t rat egies , bo th at the bus ines s and corpora t e levels .

Thi s pape r focuse s on the role playe d by the informat i on sys tems ( I S )

func t i on in the overall s t rat egi c management . I t begins by cont ras t ing th e

t radit i onal role a s s i gned t o thi s funct i on wi th the emerging no ti ons o f

s t rategi c role Based on the s t rat egi c rol e requi rement s , important plannin g

s ys tem d esign imperat ives are ident i fi ed t o develop a research model of I S

planning e ffec t ivenes s . Here,I S planning effec t ivenes s i s viewed in terms o f

t he ove rall support provided by 1 8 in s t rat egi c management . Subsequent ly,thi s

model i s te s t ed using dat a from ove r 30 0 U . S . organi za t ions t o evalua t e th e

r ela tive importance o f the various sys t ems de s ign fac t ors presumed t o influence

I S planning e ffe c t ivene ss .

Thi s pape r i s base d on two as sumpti ons . One i s tha t formali z e d planning

s ys t ems play a maj or role in enhancing organi za t ional capabili ty t o exploi t

I S—base d compe t i t ive advantage s . Whil e we d o no t di s count the role o f o the r

fact ors e specially the ex ternal compe t i t ive condi t i ons in enhancing the se

advantage s (and in the t ransforma t i on o f the s e advant age s t o superio r

performance ) , we beli eve that formali z ed sys t ems play an important role in

provi ding an ins t i tut ionali z e d mechani sm t o exploi t such advantage s .

Alt ernat ively , the s e sys tems ( as als o the ove rall formal s t rat egi c planning

sys t ems ) can b e cons t rued a s nece s sary but no t suffi ci en t fo r the developmen t

o f superi or s t rat egi e s , and the a t tainment o f superi or performance .

The othe r as sumpt i on i s tha t the ini t iat ive t o chang e the rol e o f th e I S

f unct ion and to reo rgani z e the chart e r and the proce s s o f planning a t di ffe rent

level s i s a general management ta sk which canno t be relega t e d t o the I S

func t i on . The magni tude of rede fini t ion in the role s pe ci fi cat i on of thi s

func t i on and the pe rce ive d po t ent ial t o al t e r th e bas i s o f compe t i t i on tha t

t he informat i onal t e chnology a pparently po s s e s s e s McFarlan , 1 9 84 ) make s

i t an impo rtant s trat egi c management i s sue . As Port e r and Milla r ( 1 9 85 ) no t ed ,

The management o f informat ion t e chnology can no longer be the s ole province

o f the EDP general manager s mus t be involved t o ensure tha t

c ros s-func t i onal linkages,mo re pos sible t o achi eve wi th informat i on

t echnology , are exploi t ed#

(p . Hence,thi s theme i s examined he re fro m

a s t ra t egic management perspec t ive than from a typi cal func t i onal l ens .

Key Shi f t s in the Role De fini tion of the IS Function

Tradi ti onal S ervice#

Role . The t rad i t ional role a s si gned t o the I S

func t i on can b e derive d from the defini t i ons o f I S tha t are commonly employed .

Fo r example, Ein—Dor and S egev ( 19 78 ) define I S a s a se t o f facili t i e s an d

p ersonnel for c ollec t ing , s orting , re t rieving , and p roce s s ing informat ion whi ch

i s us ed,or desi red

,by one o r more manager s i n the performanc e o f thei r

dut ie s ( p . S imilar views are e choed by Ive s , Hamil ton , and Davi s

( 19 80 ) who define I S#

a s a comput er— base d organi za t ional informat i on sys t e m

whi ch provide s informati on support for management a ct ivi ti es and func t i ons

( p . Bo th defini t ions imply a s ervi ce rol e t o the I S func t ion , charge d

primarily wi th the task of effici ent and effec t ive data proce s s ing to provide

the required informat ion fo r dec is i on making .

Such a role spe ci fi ca t ion i s typi cal although some have argued d efining

the rol e in line wi th the organi zat ional s tra t egy . Fo r example ,Zani ( 19 70 )

not ed that s trat egy should exerc is e a cri t i cal influence on informat ion

sys tems de s i gn ( p . whil e King ( 1 978 ) argue d tha t the#

I S- st ra tegy s e t

( composed o f I S ob j ec t ives , I S cons traint s,and I S de s ign s tra t eg ies ) should

be derive d from the organi za ti on ' s s t ra t egy se t ( compose d o f organi zat i ona l

mi s s ion , o bj ec t ives , and s t ra tegie s ) . However,such conceptual argument s d o

no t appea r t o have produce d the ne ces sary resul t s , a s indicat e d by Ki ng ' s

o bservat ion in 1 9 83 . He not ed that I S i s s t ill viewed a s a s ervi ce funct ion

that i s pe riodically turned on and off a s neede d,much a s the ho t wat e r an d

a ir condi t i oning a re turned on and o ff a s needed#

(King ,

g athered momentum over the las t two t o three years . The current thinking i s

tha t the I S func ti on i s a cri t ical area o f ope ra ti ons (much like produc t

q uali ty , t e chnological development s,and e ffi ci ent manufacturing ) tha t may

provide opportuni t ie s fo r exploi t ing informat i on— bas e d comparat ive advantage .

In thi s perspec tive , informa t ion sys t ems and the cons t ituent t e chnologi e s

can be use d to al te r the defini ti on of the indus try s t ructure,redefine

c orporate s t ra t egy , and reori ent a company ' s bus ine s s ( compe ti t ive ) s t ra tegy .

( Fo r an ove rview,s e e Benjamin

, Rockart , S co t t-Morton , and wyman , 1984 ;

Parsons, 1 983 ; Porte r and Millar

, 1985 ; Rockart and S co t t-Mo rton , Many

illus t rati ons o f exploi t ing I S-base d compe t i t ive advantage s have been ci t e d i n

the popular pre s s Bus ines s Week , where the more popular e xample s

include : Merri ll Lynch ' s Cash Management Account , and Dun and Bradst re et ' s

new produc t bl i t z a s illus t ra ti ons o f informat i on—bas ed new product s ; F oremos t

McKesson's us e o f informat ion sys tems t o ga in a compe t i tive edge in a wholesal e

d i s t ributi on busine s s ( tha t i s no t t radi t i onally viewed a s informat i on

int ens ive S e e Wi s eman ( 19 85 ) fo r de ta ile d des crip t i ons o f variou s us e s o f

info rma t i on s ys t ems t o gain compe ti t ive advantages . What i s int ere s t ing and

perhap s s i gni fi cant i s tha t the pos s ibili t i e s o f exploi ting I S—bas e d s t ra t egi c

a dvantage s are no t l imit ed t o s ome s pe ci fi c , so- calle d informa t ion— int ensive

indus t ri e s which argue s well fo r a generi c t ransformat ion in the rol e

d efini t i on o f the I S funct i on .

The Planning Sys tems Imperative s

The role t rans formati on r equires appropriat e changes in management

s t ruc ture ( such as res pons ibili t y and report ing rela t i onships ) and managemen t

s ys t ems and proce s s e s ( e spe cially , I S planning sys t ems and i t s l inkage t o

bus ines s planning ) . A logical corollary i s tha t appropria t e change s shoul d b e

made in the goals s e t fo r I S planning a s well a s the c ri t e ria for evaluat ing

I S planning e ffec t ivenes s . We elabora t e on thi s not i on below .

When charged wi th a service role , I S planning ac t ivi t i e s focus largely

on the t e chni cal and organi zat ional requi rement s t o suppor t informa t ion

d i s semina t i on for de c i s ion making at di ffe rent l evel s of the organi za t ional

hierarchy . Here,the goa l i s t o effe c t ively mee t the organi za t i on ' s infor

mat ion nee ds while managing the uncertainty that t ends t o s urround the informa

ti on resource ( Zmud , 19 83 ; p . Hence , I S planning effe c t ivenes s can b e

evaluate d using indi ca tor s such a s (a ) sys t em us e Ein—Dor and S egev ,

1 9 78 ) or ( b ) use r informat ion sat i sfac t ion Bailey and Pearson,

In cont ras t,the goal s fo r I S planning and approache s t o evaluat e I S

p lanning e ffect ivene s s are vastly di fferent when the I S func t ion i s charged

wi th a s t rat egi c rol e a s di s cus s e d earli er . I S planning ac t ivi t i e s res embl e

o rgani zati onal s trat egi c planning ac t ivi t i e s t hat s eek t o explo i t opportuni ti e s

in the marketplac e by appropriat ely mat ching them t o internal capabili t ie s an d

r esources ( se e King and Cleland , 1 978 ; Lorange and Vancil, 1 9 77 for de tails o f

organizat i onal s tra t egi c planning pro ce s s e s ) . S pec i fi cally , I S plannin g

a c tivi ti es are no t l imi te d t o hardware configurat i ons and s oftware support but

ext end t o s canning relevant t echnologi cal se c t or s t o ident i fy opportuni t i e s

t ha t can be exploi t ed . S imilarly,I S planning effectivness should be evalua t ed

in t erms o f the degre e o f achi evemen t o f I S planning ob j ec t ive s whi ch

r eflec t the redefined s t ra t egi c r ol e .

R oo ted in the s t rat egi c role perspe ct ive o f the I S func ti on , a res earch

model spec i fying the impac t o f important chara ct eri s t i c s o f I S planning sys t em s

on I S planning e ffe ct ivenes s i s developed in the next s ec ti on .

The r esearch model i s bas ed on two component s a s e t o f independent

variable s ( important theore t i cal dimensions o f I S planning sys t em ) tha t ar e

r elated to a dependent variable ( I S planning effec t ivenes s c onceptuali zed in

terms o f achi evement o f mult i ple goal s o f I S planning ) .

Theore ti cal Dimens ions of I S Planning

The res earch s t ream on I S planning can benefi t from the p rogres s made in

the research s t ream on s trat egi c planning sys t ems,and severa l guideline s have

b een sugge s ted (Venkatraman , S peci fi cally,i f one i s int e re s t ed in

unde rs tanding the complex nature o f the rela t ionshi p be tween planning

a ct ivi t i e s and planning e ffec t ivenes s , a uni—dimens i onal concep tuali za t i on o f

planning i s t o b e avoi ded . Base d on a revi ew o f the planning li t erature , we

i dent i fi ed f ive theore t ical d imensi ons . Our int ere s t was t o balance pars imony

on the one hand,and relevanc e and importanc e on the o the r hand . The

d imensions are :

( i ) the degre e of perceived dependence on I S

( ii ) the responsibili t y as s igne d fo r the I S planning func t i o n

( i ii ) the degree o f linkage be twe en informat i on sys t ems p lanning and

bus ines s planning

( iv ) the span of t e chnology c overage in I S plan development ; and

(v ) the comprehensivene s s o f the I S plan .

Each dimens ion i s d i s cus s ed below to provide jus t ifi cati ons fo r i t s inclus i on

in the re s ea rch model . Hypo these s rela t ing the s e dimens ions t o I S planning

e ffe ct ivene s s are als o developed .

rol e perspe c t ive i s l ikely t o be the perceive d opportuni t y o r a vi si on in th e

minds o f s enior managers tha t I S-ba sed s t ra t egi c a dvantage s can acc rue t o the

organi za t i on . Al te rnat ively , we not e tha t managers'

perception tha t thei r

bus ines s ( and thei r s t ra tegi es ) are cri ti cally d ependent on 1 8 i s an important

requi s i t e t o reorient the rol e o f the I S funct i on . Wi s eman ( 19 85 ) at t ribut e s

the succe s s ful exploi tat ion of I S— ba sed c ompet i t ive a dvantages in compani es

like Dun and Brads t ree t, McKes son and Bancone t o the managerial vi si on an d

p ercep t i on o f the l ink be tween the ir s trat egi e s and I S .

Manage ria l percept i ons have long been a rgue d t o b e an important variabl e

i n s trat egi c management r e search . The unde rlying l og ic i s tha t i t i s the

managerial pe rcept ion ( ra the r than some abs t rac t no t i on o f ob j ec t ive reali ty )

t hat guide s manage rial ac t i on and de ci s ion making Anders on and Paine,

19 75 ; Weick Based on such argument s , our view i s tha t thi s perceive d

d ependence i s likely t o be posi t ively relat ed t o I S planning e ffec t ivene s s .

S tat e d more formally,we have our firs t hypo the si s a s follows

H1 : Perce ived dependence on I S wi ll have a po s i t ive and s ignifi cant

effe c t on I S planning effec t ivenes s .

in effec t ively organi zing the planning ac t ivi t i e s tha t s eek t o integra t e

d ifferent i slands o f t e chnology#

(McFarlan and McKenney , 1 984 ) a s well a s

identi fying new avenue s fo r exploi t ing compara t ive advantages . Effect ive

planning re qui re s the a s signment o f managerial talent and resource s

commensura t e wi th the importanc e a t tached t o the ac t ivi ty . I f a fi rm reali z e s

the po t ent ial o f I S in i t s own cont ext and perceives the importance o f I S

planning , then i t woul d be re flec t e d in as s igning senior-leve l managers t o

carry out t he planning func t i on ( se e S t einer , 1 9 79 for a di s cus s i on in a

parallel context o f s t rat egi c planning ) . On the o the r hand , i f the planning

re sponsibili ty l ie s wi th ad ho c and t ransi ent planning s taff , then the

planning a c t ivi t i e s are no t likely t o b e co-ordinated ,which i s unlikely t o

enhance I S planning effe ct ivenes s . Thus,our s econd hypothe s i s i s

H2 : Planning responsi bi li t y wil l have a pos i t ive and s igni fi can t

e ffe c t on I S planning e ffec t ivenes s .

influencing I S planning e ffec t ivene s s by vi rtue o f l inking the func ti onal

level I S planning act ivi t ie s wi th bus ine s s planning . Such a linkage serve s a s

an important two-way c onduit . By ensuring appropria te l inkage s acros s the two

level s , the requirement s and cons t raint s o f the I S func t ion can b e refle c te d

in bus ines s-level c onside rat ions,and the concerns o f the busine s s level can

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Comprehensivene s s o f M18 Plan . Whil e the above dimension focus e s on th e

t e chnologi cal s ec t or , thi s dimension refle c t s t he degree of comprehensivene s s

o f the I S plan document . We vi ew a comprehensive plan document a s one tha t

incorporat es a wide a rray of s t rategi c fac t ors such as alt erna t ive technolo

gical pro j e c t i ons and al t ernat ive bus ine s s pro j ec t ions , a s well a s specifi c

plans for areas such as e quipment , s oftware,sys t ems development

,e t c . The

comple tene s s o f the plan document may no t b e a s cri t i ca l a s the plannin g

p roc es s tha t p roduce s the final plan do cument (King and Cleland,

S ince

the comprehensivenes s o f the proces s canno t b e adequa t ely cap ture d , excep t

p erhaps through part i cipant obse rva ti on o r laborat ory s tudi e s , we make the

as sump t ion tha t the comprehensivenes s o f the plan document i s a t leas t an

a dequat e indi ca tor of the underlying proces s and will be pos i t ively relat e d t o

I S planning effe c t ivene s s . Thus , our fi fth , and final hypo thes i s i s

H5 : Comprehens ivene s s o f the I S plan will have a pos i t ive and

s i gnifi cant effe c t on I S planning effec t ivenes s .

I S Planning Ef fectivenes s

As se s sing the e ffect ivenes s o f I S planning ( or i t s broade r versi on of

organi zat i onal s trat egi c planning ) ha s be en an area o f controvers y and deba t e .

We reflec t the important conce rns in the li t era ture on s trat egi c planning

effe c t ivenes s Camillus, 1 9 75 ; Hax and Majluf , 19 84 ; King , 1 983 ; Lorang e

and Vancil , 1 9 77 ) and I S planning effe c t ivenes s King , in

conceptuali z ing I S planning effec t ivenes s . We derive two guideline s for ou r

c onceptuali za t ion . The fi rs t i s tha t a goal-bas ed a pproach ( evalua ting in

rela t ion t o a speci fied ob j e ct ive fo r I S planning ) should b e employed ins t ea d

o f using ei the r generi c indi ca tors o r financial performance surrogat e s (King ,

The othe r reflec t s concerns o f the broade r organiza t ional effe c t ivene s s

l i t e rature ( S t eers , 1 9 75 ) and call s for the u se o f mul t iple indi cat ors t o

capture the complex not ion of I S planning e ffec t ivene s s .

_11_

Base d on thes e guidelines,I S planning e ffec tivenes s i s vi ewed in term s

busine s s programs ar e as sured o f I S support ; ( b ) development o f a s tra tegy fo r

the s ele c ti on of informati on t e chnologie s ; and ( c ) d evelopment o f appropriat e

s cheme for alloca t i on o f I S rsources . The firs t indi cato r i s refle c t ive o f a

po si t ion tha t I S i s int e rwoven wi th the bus ines s p rograms (King , forthcoming ;

Benjamin e t . a1 , The s econd s eek s t o cap ture the no t ions o f technolog v

s t ra t egy wi thin the I S func t i on , but one that reflec t s b roader impli cat ions

and ramifi ca t ions (McFarlan and McKenney , The third indi ca to r tap s a

more convent i onal face t o f I S planning , namely alloca t ing I S re sources whi ch ,

i n re cent years , has been s t eadily increas ing in value and importance for mo s t

o rgani zat i ons .

Thus , t he thre e indi ca tors re flec t non-overlapping face t s o f I S planning

e ffe c t ivene s s , and taken toge the r capture the cen tral not i ons o f the

e ffe c tivene s s concep t . Ins t ead o f combining them int o one overall concep t

(whi ch may no t b e meaningful ) , we te s t the hypo thes e s s eparately fo r eac h

indi ca to r . The res earch model i s shown in F igure l .

INSERT FIGURE 1 ABOUT HERE

Thi s s ec t i on d e s c ribe s our re search me thod and focuse s on the following

i s sue s : ( a ) the da t a collec t i on procedure ; ( b ) operationali zati on o f

c ons t ruc t s -including a s s es sment of measurement propert i e s ; and ( c ) the data

analyt i cal s cheme for t es t ing the s e t o f five hypothe se s .

_12_

Data

Data fo r thi s re s earch s tudy were ob tained f rom a large r p ro j e c t on the

rol e o f informa ti on sys t ems planning in mee t ing busines s ob j ec t ives . Thi s

p ro j e c t was conduct ed in 1 982 by Cresap , Mccormi ck and Page t , Inc . , a manage

ment consul t ing firm,and a de taile d des cript i on o f the da t a colle ct i on

pro cedure and general trend s uncovered by the s tudy are provided in a report

publi she d by them . Brie fly,the ques t ionnaire wa s pre t es t e d wi th the help o f

s enior execut ive s o f informat i on sys t ems func t i on in e leven companies . The

finali z e d ins t rument wa s maile d t o the chi e f execut ive s o r chi e f financia l

o ffi cers o r s eni or managers of the informat i on sys t ems func t i on o f 1500 large

U . S . co rpora t i ons . 334 fi rms re sponde d t o the s tudy repre sent ing a respons e

rate o f over ZZZ . A subse t of the da tabas e consi s t ing o f 311 cas es ( that

provided full da ta on the variable s nec es sary fo r t e s t ing the res earch model )

i s employed for the analysi s carried out here .

Operationali zation of Cons truc t s

Operationalization and measurement i s sue s gene rally have receive d

inadequat e at t ent i on in s tra t egy re search (Venkatraman and Grant , 19 8 6 ) whic h

l imi t s the subs tant ive int erpre tat ion and cumulat ive t heory development and

tes t ing . To addre s s thi s requirement,we paid parti cula r at t ent i on t o th e

operationalization and measurement i s sue s in thi s s tudy . Four o f the five

independent variable s ( excep t planning re spons ibili t y ) were opera ti onaliz e d

u sing mult i— i tem s cale s . The dimensi on r eflec t ing planning responsibil i ty was

scored a s e i the r 1 ( dedi cat e d s enior— leve l planner ) o r 0 ( ad hoc plannin g

s taff ) , and I S planning effe c t ivenes s was ope ra ti onali z ed us ing the three

indi cator s no te d earli er,each s core d a s l ( reali zat i on o f the planning goal )

o r 0 (no t reali zed ) . De tailed operat ionali z ing s cheme ( and as s e s sment o f

measurement prope rt i e s ) for the four mult i— i t em independent variable s i s

dis cus s ed below . The spe ci fi c se t o f indi cator s repres ent ing the four

cons t ruc t s along wi th the anchors employed for calibra ting them are li s ted in

the Append ix .

Likert— typ e s cal e a s indi cat e d in the Appendix . The unidimens ionali t y an d

measure rel iabili ty of thi s const ruc t was a s s es sed us ing the principle s o f

confi rmatory fac t o r analysi s tha t allow fo r the incorpora t i on o f measuremen t

e rrors ( Bagoz z i , 1 980 ; Jore skog and Sorbom, Analys es were carri ed out

us ing the LI SREL IV program (Joreskog and Sorbom , Maximum likelihoo d

e s t imat e s for the unidimensi onali t y cri t eri on were : X2( df : 5 ) p

. 01 , Bent ler and Bonne t ( 19 80 ) index ; A and the mea sure

reliabili t y i s indi ca t e d by DC

and Cronbach alpha The s e

s tati s t i c s p rovide s t rong s upport that the c ons t ruct i s unidimensional and

tha t the measure i s reliable .

type s cal e a s shown in the Appendix . Measurement t e s t pro cedure s were s imila r

t o t he one for the DEPEND dimens ion , and maximum likelihood e s t imate s from the

L I SREL IV p rogram we re : X2( df : 5 ) p A p

c

and Cronbach alpha Again,thes e s tat i s ti c s suppor t no t onl y

the uni dimensi onali ty c ri t erion but als o the reliabili ty re qui rement .

Span o f Technology Coverage ( TECH ) . One overall measure refle ct ing th e

numbe r o f di fferent te chnologie s tha t ar e formally coordina ted , moni to red , an d

overseen by the 1 8 funct ion i s employed a s the ope ra t i onal measure for thi s

dimensi on . Thi s i s an indi ca t i on o f the breadth o f coverage o f the t e chnolog y

s ec to r .

Comprehens ivene s s o f M18 Plan ( COMPR) . Eight s trategi c fac tors were

rat e d as t o whe the r each i s included or no t in the d evelopment o f the plan .

Dat a analys i s t o evaluat e the exi s t enc e o f a cumulat ive hi e rarchical pat t e rn

a Gu t tman— type s cale ) indi ca t ed po s i tive r esul t s ( coe ffi ci ent o f

reproducibili ty Gut tman-t ype s cale s have been shown t o be us eful i n

measuring s t rat egi c planning (Wood and LaForge , 1 9 81 ) ins t ead o f adopting

crude di cho t omi za t i ons . Thus,a Gut tman- type s cal e wi th rang e from 0 (no t

c omprehensive ) t o 8 ( fully comprehensive ) was used t o measure thi s dimens ion .

Data Analys is

S ince the dependent variable ( s ) in thi s s tudy was measured us ing a two

leve l di cho t omous s cale ( reali zati on o f goal s o r not ) , the re search mode l wa s

t e s t ed us ing probi t analys i s . An o rdinary l eas t s quare s ( OLS ) regres si on

canno t be us e d s inc e the unde rlying as sumpt i on o f cont inuou s dependent variabl e

i s viola t ed , and the impli ca ti on i s that the e s t ima t e s o f sampling variance

will be biase d and the t e s t s o f s igni fi canc e and confidenc e inte rval s comput e d

based on thi s variance will be invali d,even for large sample s ( se e , fo r

ins tance , Aldri ch and Nel son ,

In thi s probi t model e s t imat i on,the dependent variable can be int er

preted a s#

propensi t y t o reali z e the goal s e t fo r I S planning The equat i o n

underlying the model developed in thi s s tudy can be s pe c ifi ed a s follows :

C BliDEPEND B

Z iRESP B

BiLINK B

41TECH

BS iCOMPR

Effec t ivene s s in I S planning for i=l , 2 ,3

three s epara t e indi cat ors )

Perceive d dependenc e on 1 3

Planning re sponsibili ty

Linkage be tween 1 8 planning and busines s plannin g

_15_

S pan o f t e chnolog y coverag e

Comprehens ivenes s o f I S p lan

The hypo the se s develope d in the previou s s e ct ion predi c t tha t al l -th e

c oeffi cient s , B1 , B 2 , B3 , B4 , and B5 ( for each o f the thre e indi cato rs o f

e ffe c t ivene s s ) would b e pos i t ive and s ta t i s ti cally di fferent from ze ro .

Two addi t i onal s t eps of da ta analys i s were carri ed out t o t e s t the

s tabili t y o f the coeffi ci ent t o ensur e internal validi t y o f re sul t s . In th e

f irs t s t ep , the model was reanalyz ed in four subsample s wi th 25% o f the sample

randomly dele t e d each t ime . I f the s igni fi canc e o f the coeffi ci ent s fluc tuat e

in the subsample s , t hen the int e rnal vali di ty c ri t erion i s no t sa t i sfi ed,and

more focus e d subsampl e analys e s bas e d on speci fi c de s c rip t ive cri teri a may

have t o b e carri ed out . In the s econd s t ep,the model was rees t imat ed u s ing a

two— group di s criminan t analys i s , which s erve s t o ensure tha t the resul t s ar e

no t s ens i t ive t o the various a s sump ti ons that underli e the di fferent

s tat i s t i cal models .

RESULTS

Tabl e 1 report s the des cri p t ive s tat i s t i c s and Pearson # s ze ro— ord e r

c orrela t i ons among the independent variabl es . Table 2 report s the re sul t s o f

th e Probi t analys e s fo r the three runs us ing the CRAWTRAN program (Avery ,

INSERT TABLES l 2 ABOUT HERE

Thre e overall s ta t i s t i c s ar e o f int ere s t in addi t i on t o the magni tud e

and s ta t i s t i cal s igni fi cance o f the indivi dual coeffi ci ent s . These a re : ( 1 )

overall likelihoo d ra t i o s tat i s t ic ; ( i i ) p seud o r2; and ( i i i ) th e proport i o n

o f corre c t cla s s i fi ca t ion . The se a re di s cus s ed below .

_16 _

Firs t,the likelihood ra t i o s ta t i s t i c which follows a x

2di s t ribut i o n

t e s t s the j oint hypo thes es that all the c oeffi ci ent s in e quat i on ( 1 ) except C

are z ero . Thi s i s analogous t o the F-S tat i s t i c in the OLS regres s ion equat ion .

Thus , the full model ' s abili ty t o explain a s igni fi cant port ion of the

varia t i on in the effec t ivenes s o f I S planning i s t e s t e d us ing the following

l ikelihood rat io s ta t i s ti c (Al tman , Avery , Ei s enbei s , and S inkey, 1 9 81 )

- 2 [ 1n L ln L ] w x2( In—l )

where ,

m number o f independent variable s

In L log likelihood o f the func t ion o f the Probi t analys i s

In L

a number of effe ct ive planners ( thos e that reali z ed the part i cular

goal

number of ine ffe c tive planners , ( thos e that did not reali z e the

part i cula r goal ) , and

a+b ( to tal number of observa ti ons u sed )

As report e d in Tabl e 2 ,the chi-s quared s tat i s ti c fo r each o f the thre e run s

i s s i gnifi cant a t p . 01 .

The s econd indi ca t ion of the overall explanatory power i s the p seudo r2

s tat i s t i c a s define d by Domencich and McFadden ( 1 9 75 )

oz

l— ln L#ln L ( 3 )

t he value s of 02for the three runs range from t o and can be

2interpre t ed s imilar t o r value s o f OLS reg res s ions . The thi rd procedure

fo r evaluat ing the model ' s explanatory powe r i s t o examine the percentage o f

c orrect clas s i fi cat i ons . For the fi rs t goal,the full model from the p robi t

analys i s corre c tly clas si fi ed o f the companie s ,whil e a naive mode l tha t

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. 18_

t he a s si gnment o f planning re spons ibili ty ) . Planning re spons ibil i ty di d not

emerg e s ignifi cant in any o f the probi t runs ( including the subsampl e analyse s

and the di s criminant analys e s ) indica t ing that i t has a negl igible role in the

at tainment o f the goal s . I t appear s tha t i t i s more important t o focu s on th e

development of a comprehensive plan , widely s can the t e chnology s ec tor and

link the I S plan wi th the s t ra t egi c plan than be concerne d wi th who i s

o rgani z ing and co-ord inat ing the planning effort s . The ensuing di s cus s ion

focus e s on the inte rpre ta t i on o f thos e hypo these s tha t receive d empiri ca l

s upport in thi s s tudy .

The fi rs t hypo the s i s on the importance o f pe rce iving the d ependence on

I S and I S-bas e d t echnologi e s wa s support e d in two ou t o f the thre e probi t runs .

I t i s part i cularly interes t ing that i t emerged s igni fi cant in relat ion t o the

achi evement o f I S support fo r bus ine s s programs and the development o f a

s trat egy for the s ele c t ion of informat i on t echnology but no t for the allocat ion

of I S resource s . Percept ion o f opportuni t i e s roo te d in I S and informat io n

t e chnology could be expec t ed t o resul t in support ing the bus ines s programs but

nee d no t play a ma j o r rol e in the res ourc e allocat ion proces s . Thus , th e

failure o f the coeffi cient B1

t o a chi eve s ta t i s ti cal s igni fi canc e in the

t hird run i s no t a ma j or weakne s s in the model . Re sul t s o f t e s t ing the fourth

hypo the si s o f the importanc e o f the span o f t e chnology coverage were s imila r

t o the re sul t s for the firs t hypo the si s and can be s imilarly interpret ed .

The thi rd hypo the s i s s pe ci fi e d tha t the link between I S planning an d

busine s s planning would be pos i tively and s igni fi cantly relat ed t o the three

indi cators of I S planning effec t ivenes s . As indi ca t e d in Tabl e 2 , the thre e

c oeffi ci ent s a re in the expect ed di rec ti on,and s ta t i s t i cally s ignifi cant a t

p-level s be t t e r than The magni tude s o f the s e coeffi ci ent s and thei r

c orresponding s t rong t-value s a t t es t t o the importance o f l inking the

formali z ed proce s se s o f I S planning wi th the ove rall firm— leve l planning whi c h

s eek s t o mat ch organi zat i onal capabili t i e s wi th marke t opportuni t i e s . Th e

r esul t s support King ' s ( 19 78 ) call fo r linking I S s t ra tegy s e t wi th

organi zat i onal s t ra t egy s e t .

The final hypothes i s l inking the comprehens ivene s s o f I S plan wi th

diffe rent indi ca tor s o f I S e ffec t ivenes s wa s support e d in al l the thre e runs .

The s t ronges t support was in rela ti on t o the s econd indi cat or o f e ffe ct ivene s s

( development o f a s tra t egy fo r the selec t i on o f informat i on technologi e s ) .

Thi s i s in l ine wi th the expec tat i on that the exhaus t ive c overage of s t rat egi c

fac to rs such a s t echnology pro j ec t i ons o r bus ine s s pro j ec t i ons ( detail s in th e

Appendix ) i s l ikely t o re sul t in sys t emat i cally i dent i fying the s pe ci fi c subse t

of informat i on t echnologi e s tha t are likely t o be use ful for the organi zat ion .

I f we vi ew the comprehensivenes s of I S plan as a refl ect ion o f McFarlan and

McKenney's (1 984 ) call for integra t ing diff eren t i sland s o f t e chnology , th e

r esul t s can be int e rpre ted t o provide empi rical support t o their call for

organi z ing t o int egrat e di fferen t face t s o f the I S func t ion .

Implicat ions for Functional-Level Planning

The resul t s o f thi s s tudy can b e us e d t o develop impli ca t i ons beyond I S

p lanning for func t ional-leve l planning in general , e specially those that have

impo rtant rol e s in th e s t ra t egi c managemen t o f the organi za t ion .

The fi rs t impli ca t i on focuse s on the linkage b e tween func t ional planning

and organi za t i onal planning . Al though s t rong conceptual argument s have bee n

a dvanced in favor of such l inkage s Lorange and Vancil , d eveloping

and implement ing such linkage s pos e s s eri ou s challenge s . Fo r example , Golde n

and Ramanujam ( 1985 ) d i s cus s the p roblems as sociat ed wi th int egra t ing human

resourc e planning wi th s t ra t egi c planning,and no t e tha t the int egra t i on can

b e bes t de s c ribe d as be tween a dream and a nightmare#

. If bene fi t s from

emergent concept s l ike s t ra t egi c market ing s t ra t egi c human re source s have

-20_

t o be reali z e d by organizat i ons , appropria t e planning linkage s have t o b e

ensured . Thi s i s a ma j or admini s trat ive challenge for managers a t the

func t ional level s and a t the int egrat ive leve l o f corpora t e management .

The s e cond important impli cat i on for func ti onal-level planning relate s

t o planning goals . Thi s pape r argued fo r a#

s t rat egi c perspec t ive on the 1 8

func t ion and i dent i fi ed goals reflec t ing thi s perspec t ive . Every func t i on

should b e viewed in terms o f two integra t e d goal-s e t s one reflec t ing i t s

r ole in the general management o f the organi zat ion , and the o ther refle ct ing

i t s ope rat i onal rol e ( ac t i on plans and programs ne ces sary t o implement th e

plans ) . Our emphasi s on the ' s t rat egi c#

role o f the I S func t i on in the model

development should no t be cons true d a s neglec t ing the operat ional role o f

i nformat i onal s upport . While the r es earch model , by nece s s i ty , focus ed on a

narrow fac e t o f goal s re fle ct ing the s t ra t egi c role#

, we would like t o

emphas i z e that the ope ra ti onal role i s e qually important and that planning

ac t ivi t i e s should b e organi z e d t o achi eve bo th se t s o f goals .

Implications for Planning Systems Research

The rol e o f formali ze d planning sys t ems in s t ra t egi c management i s a n

i mportant a rea o f re s earch ( S chend el and Hofer , While mos t s tudie s

have focus ed on the link between di cho tomou s view o f planning ( planne r vs . non

planner ) and f inanc ial performance , a re cent s e t o f s tudi e s (Ramanujam ,

Venkatraman , and Camillus 19 86 ; Rhyne, 1 985 ; Venkatraman and Ramanujam , 1 9 85 )

have s igni fi cantly d epart ed from such a mode . These s tudie s employed mult iple

dimens ions o f planning sys t ems and mult ipl e dimens ion s o f planning

e ffec t ivene s s . Howeve r , thos e dimensions di d not r eflec t func t ional— level

planning tha t wa s shown here t o have a s t ra t eg i c role . We would urge tha t

future re search on formali z ed planning sys t ems and p roce s se s incorporat e

important face t s o f func t ional planning tha t l ink the ke y func t ions t o th e

overall s t rat egic planning .

_21_

CONCLUSIONS

A theore t i cal model o f important cha rac t e ri s t i c s o f I S planning that

s eek t o enhanc e the at tainment o f a#

s t ra t egic rol e o f the I S funct ion wa s

d eveloped and t e s t ed u sing da ta from 311 U . S . organi zat ions . The important

charact eri s t i c s se em t o b e the degre e o f linkag e be tween I S planning and

s tra t egi c planning , perc eived dependence on I S , the comprehensivenes s o f I S

plan , and the span o f t e chnology coverage . The s e po s e admini s t ra tive

challenge s bo th a t the l evel o f the I S func t ion and a t the l evel o f the

corporat e management . Impli ca t ions fo r func t i onal leve l planning and futur e

r es earch di rec t ions on planning sys t ems are a ls o not ed .

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_24_

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Tabl e 1

Desc ript ive S tat i s t i c s and‘Pearson

's Product-Momen t

C orrelat i ons Among Independent Variables

(n=3ll )

CORRELATION MATRIX

DEPEND

TECH

_27_

Tabl e 2

S ummary of Probi t Resul t s

Variable s

Planning

Responsi bili t y

( RES P )

Fi rm ' sDependenc e onI S a c t ivi t i e s

(DEFEND )

Linkage be tween

1 8 and bus ine s s

planning (LINK )

S pan of Technolog

cove rage ( TECH )

Comprehens ive o f

I S Plan ( CONFR )

S ample s i z e (n )

log-likel ihood

func t ion

X2 ( df )

p-l evel

PROPORTION OF CLAS S I FI CATION

Naive Model

Full Model

P seudo r2

Figur e 1

Theore t i cal Model o f Key Relat ionship s

B e tween I S Planning Dimensi ons and

I S Planning Effec t ivene s s

PERCEIVED DEPENDENCEON THE IS FUNCTION

(DEPEND )

PLANNING RESPONS IBILITY

LINKAGE BETWEEN

Is PLANNING AND

BUSINES S PLANNING

(LINK)

SPAN OF TECHNOLOGYCOVERAGE IN I S

PLAN (TECH )

COMPREHENS IVENES S OF

1 3 PLAN ( COMPR )

H1 t o H5 indi ca te the corresponding hypo these s developed in the t ext . The

s igns indi cat e the hypo thes i z e d s ign fo r the rela t ionships .

I I .

I I I .

IV .

-29_

APPENDIX : MEASUREMENT SCALES

Pe rceive d De endence on MI S ( DEPEND ) . Thi s wa s measure d us ing aEEEEE2 53IEE

‘ IIEEEEZEyfiz‘

SEEIE‘

s figIhg from appli e s prec i sely t o does

no t apply ) on the following five i tems : ( 1 ) our ent erpri s e could

func t ion wi thout informa t ion s ys t ems , although l e s s e ffi ci ently (R ) ;( i i ) informat ion sys t ems provid e opera t i onal support ; ( i i i ) our

ent e rpri s e i s cri t i cally dependent on smoo thly func t i oning informat ionsys t ems ; ( iv ) informat ion sys tems are an int egral par t o f our produc t s

and s ervi ce s ; and ( v ) informat i on s ys t ems haur been o f vi tal importance .

Plannin LINK ) . Thi s wa s measured using a three-point

Likert- type S cale ranging from appli e s pre ci s ely t o does not apply ) on

the following five i t ems : ( i ) bus ine s s plan s ta t e s informat ion sys t e m

needs ; ( i i ) the I S plan re fers t o bus ine s s plans ; ( i i i ) I S plans areclosely checke d agains t bus ines s plans ; ( iv ) line and s taff manager s

par t i cipa t e a c t ively in informat ion s ys tems planning ; and ( v ) bus ine s s

planning calendar s and I S planning calendar s are carefull y synchroni z ed .

numbe r of di fferen t t echnologi e s from among the following li s t tha t th eI S func t i on co

—ordinate d , or moni tor : ( 1 ) c ompute r-based sys t ems ; ( i i )dat a communi ca t i ons ; ( i i i ) voi c e communi ca t i ons ; ( iv ) pe rsonal

c omputers ; ( v ) word proc es s ing ; and ( vi ) da ta base management sys t ems .

Comprehens ivene s s o f the MI S PLAN (COMPR ) . Thi s wa s measure d bas e d on a

Gut tman—type hi erarchi cal pat t ern refle c t ing the cons iderat ion o f the

following fac tor s in the developmen t o f the plan ( 1 ) al t ernat ive

t echnology pro j ec t i ons ; ( i i ) s taff d evelopment ; ( i i i ) financial

pro j ec t ions ; ( iv ) t elecommunica t ions plans ; (v ) dat a bas e plans ; (vi )s ys t em d evelopment pro j e c t s ; (vii ) equipment plans ; and ( vii i ) s oftware

plans . The suppor t for the hierarchi cal pat t ern i s provided by the

c oeffi ci ent o f reproducibili ty of great er than the thre sholdleve l of