Vol. 8, No.2
Systems Theory and Information
Resources Management:
Integrating Key Concepts
RAYMOND McLEOD, JR.
Texas A&M University
Since the introduction of the computer as a business tool some forty years ago, its role in the firm has become
increasingly complex. In the middle of this evolving complexity is the person who has the greatest responsibility
for computer use in the firm—the chief information officer, or CIO. The 1980s saw an ascension in the CIO’s status
within the firm, reaching a position of parity with vice presidents of other functional areas. The 1990s, however,
are seeing indications that the CIO’s responsibility is eroding. Firms are beginning to pursue strategies that
disburse more and more of their information resources throughout the organizational units, and give information
processing responsibilities to outsourcers. If firms are to engage in strategic planning for their information
resources and engage in information resources management, there must be a clear understanding of the forces
that influence computer use and the role of the CIO in managing these forces. As a means of achieving such an
understanding, the author explores the possible application of systems theory. The result is a normative structure
that makes it possible to evaluate the extent to which a firm practices information resources management, and to
project future trends in the role of such component elements as the CIO and the information systems unit.
The management information systems (MIS) field has
never been short on concepts—views in people’s minds of
phenomena. In fact, MIS itself is a concept—a view of how
the computer can be used to provide managers with information for decision making (Aron, Dearden, Zani). The decision
support system (DSS) is also a concept (Gorry and Scott
Morton, Sprague). Since computer and management scientists have been free to view these systems as they see fit, there
has always been a certain amount of disagreement concerning
the concepts and their interrelationships.
The 1980s saw interest in computer use shift from applications that meet individual needs to those designed to meet
organizational needs, and the idea that information can be used
to achieve and maintain an advantage in the marketplace led
to the concept known as competitive advantage (Porter and
Millar).
In a like manner, the concept of strategic planning for
information resources, or SPIR, was devised to describe the
way that the firm’s executives develop long-range plans
describing how their information resources will be used to
support the attainment of the firm’s strategic objectives (King,
1988).
During this same period, a concept emerged that captured
the idea of a person on the executive level having primary
responsibility for all of the firm’s information resources. This
idea assumed more than simply a title, and became known as
the chief information officer (CIO) concept (Rockart, 1982).
These concepts—competitive advantage, SPIR, and the
CIO—all reflect organizational views of computer use. Another concept of the same type, perhaps the loftiest of all in that
it was intended to represent a global view of computer use at
the top-management level, was named information resources
Manuscript originally submitted December 20, 1993; Revised May 18, 1994; Accepted July 27, 1994 for publication.
Spring • 1995
Information Resources Management Journal
5
management, or IRM. Several different views of IRM have
been offered (Guimaraes; March and Kim; Cheng and
Kanabar), but essentially it recognizes that data and information are given as much management attention as such physical
resources as personnel, materials, machines, and money.
Another concept that came to fruition during the 1980s
probably stimulated more interest than all the others combined. This was the concept of end-user computing (EUC),
which captured the capability of users to actively contribute to
the development of their own computer-based systems
(Yaverbaum). Although EUC would appear to focus on
individual users, firms quickly recognized the potential impact on the organization. The interest in EUC grew so quickly
that many firms lost control of their information resources and
took inappropriate actions due to lack of proper technical
training (Alavi and Weiss; O’Donnell and March). In response to this loss of centralized control, firms modified their
organizational structure and enacted policies and practices
aimed at ensuring the growth of EUC in a coordinated way
(Munro, Huff, and Moore; Pyburn; Rockart and Flannery;
Simmons, Burbridge, Harris, and Ames) So, end-user computing had its organizational implications.
Although one would suspect that all of these organizationally based concepts affect each other in some way, very little
study has been aimed at identifying and explaining the interrelationships. Ein-Dor and Segev (1988) explained the relationship of EUC and IRM, and Henderson and Treacy (1986)
related EUC to competitive advantage. But, there has been no
effort aimed at establishing a structure to encompass all of the
concepts.
If all of the concepts are interrelated, practically everyone
in the firm would benefit from knowing what those interrelationships are. The firm’s executives would benefit by better
understanding the importance of strategic planning for the
firm’s information resources in achieving IRM, the need to
accomodate end-user computing in IRM, and the role that the
CIO plays in IRM. The CIO would benefit by understanding
the need to participate with other executives in all aspects of
IRM, and the role of the information systems (IS) unit in EUC.
In a like manner, computer users throughout the firm would
benefit by understanding the influence of strategic planning on
their developmental efforts, and the way that responsibilities
are to be shared with IS.
Whereas several approaches to exploring the interrelationships between these organizational views of computer use
and responsibility no doubt are possible, one that would be
expected to hold substantial promise is systems theory. Systems theory is appropriate because it has provided the basis for
the design of computer-based systems. The computer is a
physical system, as are the firm, and the people within the firm
who use the computer. Computer applications take the form
of input-processing-output modules that incorporate feedback
mechanisms.
Also, such methodologies as the system development life
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Spring • 1995
cycle, prototyping, and rapid application development (RAD)
are expressions of an application of systems theory known as
the systems approach.
The task of this paper is to use systems theory as a means
of understanding the constituent relationships within IRM,
and projecting those relationships as they apply to the CIO and
IS.
Systems Theory
Systems theory defines phenomena in systems terms.
Ackoff (1971) recognized that a system must consist of
multiple component parts by definining a system as “a set of
interrelated elements.” Churchman (1968) recognized that the
elements exhibit goal-oriented behavior by stating that a
system “is a set of parts coordinated to accomplish a set of
goals.”
Open and Closed Systems
Systems can be classified based on their relationships with
their environments. The two types are open systems and
closed systems. Andrew (1965) distinguished between the
two as follows (Andrew’s italics): A closed system is isolated
from its environment. There is no import or export of material
and its final state is unequivocally determined by its initial
conditions. An open system, on the other hand, exchanges
materials with the environment and has the basic characteristic
of self-regulation.
System Elements
An open system must include component elements that
facilitate an interaction with its environment and contribute to
the self-regulation. Von Bertalanffy (1962) used the diagram
of a simple feedback model in Figure 1 to illustrate the basic
structure of an open system.
As the system regulates itself so as to achieve its goals, it
seeks to maintain a steady state, a constant composition that
is achieved by a continuous exchange and flow of component
material. This steady state is also known as the goal state
(Andrew).
Source: Ludwig von Bertalanffy, General Systems Theory: A Critical
Review. General Systems (1962), p.6.
Figure 1: An Open System
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Vol. 8, No.2
The feedback mechanism is essential to achieving the goal
state. Johnson, Kast, and Rosenzweig (1967) state that “any
system, if it is to achieve a predetermined goal, must have
available to it at all times an indication of its degree of
attainment. In general, every goal-seeking system employs
circuits, or feedback.”
Systems Hierarchies
Systems can exist in a hierarchical array, with a system on
one level being incorporated in the system immediately above.
When attention is directed at a level, the system immediately
above is the supersystem or suprasystem, and the system
immediately below is a subsystem.
Although some systems assume a greater status than
others
because of their position within the hierarchy, it is important
to recognize that systems on all levels have the same basic
structural composition. This means that systems theory can
be applied just as well at the bottom level in the hierarchy as
at the top.
General Systems Theory
Applied in its broadest sense, systems theory is known as
general systems theory (GST). GST is the view that all
phenomena can be explained in systems terms, and its founder
was Ludwig von Bertalanffy, a German biologist (von
Bertalanffy). Another contributor was Kenneth E. Boulding,
an American economist and social scientist, who recognized
that the purpose of GST is to “provide a framework or structure
of systems on which to hang the flesh and blood of particular
disciplines and particular subject matters in an orderly and
coherent corpus of knowledge” (Boulding).
Since the pioneering work of von Bertalanffy and
Boulding, GST has been applied a variety of ways. For
example, Forrester (1958); Brewer and Rosenzweig (1961);
and Katz and Kahn (1966) used GST to describe business
organizations. Duncan (1964); Hopeman (1969); Thompson
(1975); Brix (1980); Kefalas (1980); and Hambrick (1981)
applied GST to the environments in which business organizations can be positioned.
Viewing the Firm as a System
The efforts of systems theorists show that business organizations can be explained in systems terms. When someone
regards a phenomenon as a system, it is known as taking a
systems view. Figure 2 illustrates such a systems view of the
firm.
When a manager takes a systems view, the management
task boils down to four basic steps (Tilles):
1.
2.
3.
4.
Define the company as a system.
Establish system objectives.
Create formal subsystems.
Integrate the subsystems.
Spring • 1995
Figure 2: The Firm as a System
Unfortunately, friction can exist among subsystems due to
the fact that they often have different and partially incompatible requirements (Etzioni). As a means of avoiding such
conflict, Etzioni recommends that subsystem managers recognize that intersubsystem concessions are necessary.
Andrew (1965) also recognizes the need to make concessions. He observes that some subsystem goals can be achieved
without affecting the other subsystems, but other goals require
the subsystems to adapt to each other. Subsystem goals,
therefore, must be compatible. A subsystem that stays in its
goal state at the expense of the other subsystems may be
extruded from the system.
The reality of subsystem friction in business organizations
does not diminish the value of systems theory. To the contrary,
the theory provides a means of projecting how the organization will deal with such friction. According to Andrew, “The
system model makes it possible to predict the likelihood of
such ‘shape-ups’ and the actual purpose they serve in a given
instance” (Andrew).
Competitive Advantage
Managers seek to gain a favorable position for their firms
within their environments—a status called competitive advantage. Such an advantage can be gained in many ways, such as
quality products, low prices, and fast service. Recently,
management has become aware of the potential of information
Information Resources Management Journal
7
Figure 3: An Environmental Systematic Construct
as a competitive weapon.
Most of the descriptions of how information can be used to
achieve competitive advantage have focused on the firm’s
customers (Johnston and Vitale). Although obviously effective, this customer-oriented approach is rather narrow. Systems theory provides the basis for taking a broader view. The
firm’s environment contains elements in addition to the firm’s
customers, as shown by the diagram in Figure 3. The five
major functional areas of the firm, in the center, are connected
to the environmental elements by resource flows. Each
functional area has primary responsibility for resource flows
to and from certain environmental elements, and the IS function assists the other functional areas in establishing and
maintaining information flows.
Competitive advantage can be achieved by improving the
information flow between the firm and its each of the environmental elements. For example, an improved information flow
between the firm and its suppliers will ensure that raw materials are available when needed; an improved flow between the
firm and its stockholders and owners, and the financial community will ensure that funds are available when needed; an
improved flow between the firm and labor unions will ensure
a continuing supply of skilled workers; and so on.
A systems view enables the firm’s executives to see that
relationships with each of the environmental elements can
contribute to competitive advantage. Further, it becomes
clear
that information flows play key roles in these relationships.
Systems theory contributes a systematic, rather than haphazard, approach to the design of environmental information
systems.
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Spring • 1995
Strategic Planning for Information Resources
In his classic study of management systems, Anthony
(1965) described strategic planning as the process of deciding
on objectives of the organization, on changes in the objectives,
on the resources used to attain the objectives, and on the
policies that govern the acquisition, use, and disposition of the
resources.
Functional Strategic Plans
It is not unusual for the functional areas of the firm to
engage in their own strategic planning, and during the late
1970s and early 1980s, the prescribed approach was to gear the
functional plans to the strategic plan of the firm. In describing
how IS followed this top-down approach, King explained that
“The heart of MIS strategic planning is the process through
which the organizational strategy set is transformed into a set
of system objectives, system constraints, and system design
principles which comprise the MIS strategy set” (King, 1978).
This top-down influence on strategic plans for IS worked
well until the firm’s executives recognized the potential contribution of the computer as a competitive weapon. The
executives began to evaluate their information resources prior
to finalizing the firm’s strategic plan. Now, in addition to the
information resources being influenced by the strategic plan,
the plan is influenced by the information resources. King
(1988) used the term strategic planning for information resources (SPIR) to describe this approach. Figure 4 illustrates
the two-way relationship that exists between the firm’s strategic plan and the resources of each functional area.
The Chief Information Officer (CIO)
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Vol. 8, No.2
Figure 4: A Participatory Approach to Developing the
Firm’s Strategic Plan
As the firm’s executives began to recognize the strategic
value of information, they also began to regard the top computer manager as an executive. This recognition reflects what
is known as the CIO concept. According to this concept, the
top-level IS manager participates equally with top-level managers of other functional areas in making the firm’s strategic
decisions (Rockart, 1982).
When a systems view is taken of the CIO concept in today’s
world of distributed information resources, it becomes obvious that responsibility for managing those resources should
not be borne by a single individual. Rather, the key decisions
should be made jointly by executives from all of the firm’s
functional areas.
This joint responsibility is an important consideration. The
CIO cannot prepare a strategic plan for information resources
without a knowledge of the strategic plans of the other functional areas (Evans and Hague). Conversely, the functional
managers cannot engage in their own strategic planning without a knowledge of the capabilities of IS to support their plans.
A reciprocal planning relationship therefore exists among the
functional areas, as shown in Figure 5.
End-User Computing
As users throughout the firm saw the benefits of doing their
own computer work, the functional areas then began establishing their own IS operations, complete with computer specialists and often utilizing minicomputers and even mainframes.
This rapid growth in end-user computing too often turned
into a nightmare. The firms’ executives realized that they had
lost control over the information resources, and were forced to
take actions designed to provide the necessary constraints.
Two of these actions were organizational in nature.
The first action involved the MIS steering committee, the
group within the firm that enforces the firm’s computerrelated policies, and oversees the various developmental ef-
Spring • 1995
Figure 5: A Joint Approach to Developing Functional
Strategic Plans
forts. The executives began to charge their MIS steering
committees with enterprise-wide responsibility for establishing policies concerning systems development, computer acquisition, and computer use (Doll and Torkzadeh).
The second action saw firms implement information centers as a means of controlling the acquisition of hardware and
software. Rather than provide everyone with their own
resources, the information center includes the hardware, software, and technical assistance that a person needs when
engaged in end-user computing.
By giving the MIS steering committee the responsibility
for achieving the firm’s strategic plan for information resources, and providing users with the necessary resources
within an organizational setting, firms were able to achieve
and maintain control over end-user computing. Such actions
are important ingredients in the strategic plan for information
resources.
An Integrative IRM Feedback Model
The organizationally based topics (competitive advantage,
SPIR, the CIO, EUC, and IRM) discussed above do not all
exist on the same hierarchical level. IRM can be regarded as
the system, with the other concepts existing as subsystems.
The subsystems are connected in a chain-line fashion, as
shown in the IRM model illustrated in Figure 6. The numbers
in the model correspond to the sections below.
1. Competitive Advantage
The environment of the firm provides the context for all of
the firm’s activities. The firm interfaces with the environmen-
Information Resources Management Journal
9
Figure 6: An IRM Model
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Spring • 1995
Information Resources Management Journal
Vol. 8, No.2
tal elements by means of resource flows. These flows are
external influences on the firm’s activities. The firm strives to
achieve a competitive advantage in this environment.
The firm remains alert to environmental activity by engaging in business intelligence. This intelligence is made available to those persons in the firm who are responsible for certain
of the firm’s environmental interfaces. The executive committee is a primary user of business intelligence.
2. Strategic Business Planning
The executive committee engages in strategic business
planning, and considers the levels of support that can be
provided by the functional areas. These functional resources
represent internal influences.
The CEO serves as committee chairperson. The top-level
managers of the functional areas comprise the remainder of the
membership. The CIO is a member, as are the vice-presidents
of finance, human resources, manufacturing, and marketing.
One of the tasks of the strategic business plan is to chart the
future course of the firm as it seeks to achieve and maintain
a long-term competitive advantage.
3. Strategic Planning for Information Resources
The firm’s strategic business plan influences the strategic
plans developed for each of the functional areas. Each
functional plan is coordinated with the plans of the other
functional areas. The CIO participates in the planning for all
of the functional areas as required. In terms of the strategic
plan for information resources, the CIO may play the primary
role.
4. MIS Steering Committee
It is the task of the MIS steering committee to ensure that
the strategic plan for information resources is accomplished.
The committee performs its duties by overseeing all aspects of
computer use, and applying policies and standards as needed.
Particular attention is focused on the system development life
cycles of ongoing projects, ensuring that the systems are
implemented as intended.
5. Information Resources
The strategic plan for information resources describes how
user needs will be satisifed by resources in three main locations—the central computing facility, user areas, and perhaps
one or more information centers. Users who do not engage
in end-user computing make use of the resources located in the
central facility and, when present, in their own areas. Users
who do engage in end-user computing make use of information resources in all three areas.
IRM as an Open System
environment, and consisting of a transformation process, a
control mechanism, and feedback.
The Environment
The environment is that of the
firm, and is the setting where competitive advantage is achieved.
Transformation Process Information is gathered both
within the firm and from its environment, and is transformed into
plans, policies, and standards,
which represent the system outputs. The outputs guide users and
end-users as they use the information resources.
Control Mechanism
The control mechanism consists
of the executive committee, supported by the MIS steering committee.
Feedback
Feedback flows keep management aware of the outcome of their
planning and control efforts.
• At the top of the model, feedback exists in the form of
business intelligence, which keeps the executive committee
informed concerning environmental activity, both current
and projected.
• In the center of the model, feedback is directed from the MIS
steering committee to the executive committee, which uses
the information in monitoring the performance of the firm
in terms of the strategic business plan.
• At the bottom of the model, feedback is directed from the
information resources to the MIS steering committee, which
uses the information in monitoring computer-related activity.
IRM is therefore a system, with subsystems that achieve
competitive advantage, prepare strategic plans, and manage
the firm’s information resources.
Application of the Theory
Systems theory can be applied to the management of
information resources in two ways. First, the IRM model can
represent a normative framework that a manager can use to
gauge the extent to which her or his firm is practicing IRM.
Second, the theory can be used to study any of the IRM
The model depicts IRM as an open system, existing in an
Spring • 1995
Information Resources Management Journal
11
subsystems, or component concepts, for the purpose of understanding why they behave as they do and what their behavior
might be, given certain stimuli.
The IRM Model as a Normative Framework
If a firm is to practice IRM in accordance with systems
theory, its management will:
1. Recognize that the firm exists in an environment that exerts
an influence on the firm’s activities.
2. Identify competitive advantage as an environmental objective of the firm. Such an objective will enable the firm to
best serve all of the elements in the environment, excluding
competitors.
3. Gather business intelligence, which keeps the firm informed
of environmental activities.
4. Engage in strategic business planning, which takes into
account the level of support that can be provided by all
functional areas as the plans are made, and spells out how
to achieve competitive advantage.
5. Engage in strategic planning for information resources,
which considers the information needs of the entire firm,
and spells out the firm’s policies in relation to end-user
computing.
6. Designate a group within the firm, such as the MIS steering
committee, to carry out the strategic plan for information
resources.
7. Make information resources available to users who prefer
to rely on IS for systems support, as well as to end-users who
prefer to do some, or all, of their systems development
work.
These are the key ingredients to achieving IRM in terms of
systems theory. In applying the ingredients to a particular
firm, management must determine the extent to which each is
carried out.
Systems Theory as an Explanation of
IRM Component Concepts
Systems theory can explain any of the IBM component
concepts in terms of how they should function. The CIO is an
excellent candidate for such a study. The question of who in
the firm should be responsible for its information resources is
one that has persisted throughout the computer era (Thurston).
However, the question is especially relevant today in view of
changes that are taking place as many firms cope with the
challenges of information resources management.
Outsourcing, downsizing, and distribution of resources
throughout the firm are all options that a firm can follow, and
all have a profound effect on the CIO’s scope of responsibilities. The path that the CIO and IS follow during coming years
will depend to a great extent on their power in relation to that
of other functional areas.
The Power Position of the CIO and IS
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Spring • 1995
One way to achieve a position of power within an organization is to offer a product or service that others desire. Brix
(1980) elaborates:
The most important social attribute of an element, that is,
a human being, a group or organization, is the possession
of some desired good or service which can be dispensed
as a surplus. This good or service must be in relatively
short supply.
In seeking a position of power within the organization, IS
has an advantage in that information is recognized as one of the
basic resources and, hence, has value. More importantly,
information is seen as giving power. Miller (1972) hypothesized that the ability of a subsystem to provide information to
the control unit of the system gives that subsystem a power
advantage over the other subsystems.
During the first thirty or so years of the computer era, IS
was, for all practical purposes, the sole supplier of computerbased information. This power position was one of the main
reasons for the ascension of the CIO to executive status during
the mid-1980s. The thrill of accomplishment, however, was
short-lived as end-user computing and other encroachments
on IS responsibilities began to erode the CIO’s power base.
The question today is just how far the erosion will go. In
order for systems theory to provide an answer, IS must be
evaluated in terms of its environment, management, objectives, inputs, transformations, outputs, and feedback mechanism.
The IS Environment
The IS environment consists of elements that exist outside
and inside the firm.
External Environment
Using Hopeman’s (1969) classification, the external elements with
which IS most often interacts include the government, competitors, and suppliers. Of these, only
competitors appear to have a direct influence on the future role of
IS in the firm. The competitors
include outsourcers that can assume some portion of the IS
workload, but the likelihood of
this happening depends primarily
on IS relationships with its internal environment.
Internal Environment
In its internal environment, IS interacts with peer organizations,
such as other functional areas that
use the information output, as well
as groups on higher levels in the
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Vol. 8, No.2
organizational hierarchy, such as
the executive committee and MIS
steering committee. The task of IS
is to avoid friction with the other
units, and establish a power position in relation to them.
Avoid Friction
Friction can be avoided by pursuing a three-pronged strategy. The
origin of each strategy, from systems theory, is identified in parentheses.
1. Ensure that IS goals are compatible with goals of user
organizations (Andrew).
2. Identify users who have critical responsibilities in terms of
the industry’s dominant environmental requirement, and
make special efforts to ensure that those users receive the
needed support (Etzioni, Hambrick).
3. Emphasize joint, rather than unilaterial, effort with users
in systems development projects (Morgan).
Achieve Power
The CIO can achieve a position of
power for IS by applying the two
following recommendations
while providing user support.
1. Understand the activities and needs of peer units (Brix).
2. Place a premium on information support for the firm’s
executives, as in the form of executive information systems
(Miller).
Systems theory, therefore, identifies for the CIO the appropriate strategies for particular environmental elements. Some,
such as those designed to avoid friction, emphasize cooperation. Others, such as those designed to achieve a position of
power, are more aggressive in nature.
IS Management
The CIO should assemble a management team that can
perform the control function in the IS system. Applied at the
IS level, this activity consists of establishing objectives, creating subsystems within IS, and integrating the subsystems
(Tilles). With the management team in place, its task is to keep
IS on track in terms of its goal state (Andrew).
IS Objectives
IS management should establish objectives that are directly
related to, and provide maximum support for, the objectives of
the firm (Etzioni). Further, objectives should emphasize
building positive relations with users rather than focusing
strictly on the end products of those relations (Morgan).
IS Inputs, Transformations, and Outputs
Spring • 1995
The CIO and IS management team should assemble information resources that can outperform any other supplier,
inside or outside the firm, in providing a quality information
product at an attractive price. The quality product can be
achieved, in part, by achieving higher levels of specialization
within the IS staff (Katz and Kahn). The attractive price can
be achieved by refraining from predatory pricing policies
(Brix).
IS Feedback Mechanism
IS management should assemble a feedback mechanism
that is capable of keeping themselves informed of IS performance in relation to its objectives (Johnson, Kast, and
Rosensweig). Such a mechanism would take the form of a
functional information system similar to those pioneered in
marketing and more recently achieved in human resources.
The Future of the CIO
By applying the underlying systems theory, it is possible to
prescribe certain strategies that the CIO can follow in solidifying his or her position, and the position of IS, in the firm.
These are not the only strategies available to the CIO. Others,
emphasizing components such as economic and behavioral
considerations, should also be taken into account. If the CIO
will follow the prescribed strategies, then he or she should
continue to be included among the firm’s top-level executives,
and IS should continue to be a major functional area.
Conclusion
IRM is an excellent candidate for the application of systems theory. IRM is a multi-dimensional phenomenon, subject to influences by the business environment. IRM has an
objective, and the firm’s management team serves as the
control mechanism to ensure that the objective is met. Feedback circuits keep management informed of IRM performance. It is unlikely that any other theory would capture the
intricate nature of IRM as well as systems theory.
Systems theory can also be used to explain subsidiary IRM
concepts, such as the CIO. The CIO is a part of the control
mechanism, serving on the executive committee, the MIS
committee, and managing the IS unit. The CIO is a major role
player in IRM, having a strong influence on the extent to which
the key elements are achieved. Systems theory provides some
prescriptions for CIOs to follow in solidifying their position as
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