Many business scholars consider information processing, in all of its forms, the lifeblood of organizations. Information in this context is defined broadly to encompass ideas, documents, records, personal communications, and most of all, knowledge shared within an organization. According to some experts, in fact, information processing is primarily concerned with knowledge acquisition and dissemination.

The management and processing side is what businesses do with their information. (Although there are subtle differences, management and processing will be considered synonymous in this discussion.) Information may be retrieved and distributed over computers or on paper, or it may simply reside in the consciousness of employees at the company. Much information processing can be aided by computers, but ultimately a great deal of organizational information must be processed by individual decision makers in some fashion. Successful information management is widely seen as a harbinger of a successful business enterprise; if a company is able to sift through the glut of available information, amplifying what is relevant and suppressing what isn't, it may enjoy a competitive advantage over other firms.

As an academic field, information processing first gained prominence in the 1970s through the work of organization theory specialists like Jay R. Galbraith, David Nadler, and Michael L. Tushman. It is now related to a wide number of management specializations, including organization theory and design, managerial cognition, communication in organizations, and technology management. Recent academic inquiries into information management and processing have focused on how information processing impacts the development of organizational knowledge.


As highlighted by John L. Kmetz in The Information Processing Theory of Organization, there are four main stages of processing information: (1) acquisition or retrieval, (2) storage, (3) transformation, and (4) transmission. They generally occur in this order, but not always. First, acquisition and retrieval is the phase in which an individual seeks—or is given—some piece of information or knowledge. It may originate from inside the organization, outside the organization, or even within the mind of the individual who came upon it. Second, storage may occur in the individual's memory, or via computer or media. When information is stored (and/or disseminated) so that a wide number of employees, present and future, can retrieve it over time, it may lead to organizational learning and become part of the organizational memory. Third, transformation happens when individuals modify the information they receive for various purposes. They may analyze it to arrive at a judgment or inference about the information, or they may expand on it or condense it for some specific need, such as reporting a synopsis to colleagues or management. Fourth, transmission is the means by which the information is disseminated to others, beginning the acquisition process for them anew.

Kmetz also identified four components in what he termed the framework of information processing. These components specify the structure of an information processing system, whether human or machine. They are (1) sensors, (2) memory, (3) processing mechanisms, and (4) access mechanisms. Some of these correspond directly to stages of information processing, but there is some crossover. Sensors are input channels for acquiring information. They may include computer devices (e.g., a keyboard for data entry) or simply human senses like eyes and ears. Similarly, memory involves using the human mind or computer storage media for saving information for future use, whether it is needed for a few seconds or a few years. Related to the transformation stage, processing mechanisms are tools to control, organize, and modify information. The human mind and computer processors running application software are the most important kinds of information processing mechanisms. Lastly, access mechanisms allow retrieval and additional processing of information that has already been acquired and processed. Again, the human brain can serve as its own access device, but these mechanisms also include printed publications, computer interfaces, and other information retrieval tools.


The subject of information processing can be difficult to grasp because it is so general and pervasive. Indeed, according to information processing theory, organizational control is exercised through information management, and all business activities center around one form of information or another. Sometimes information management is presented as providing managers—particularly decision makers—with all the information they need in a timely fashion. This is of course an essential function, but it's only one aspect of how businesses must channel information in order to be effective. Other examples include training and educating employees, handling feedback from customers and vendors, unearthing details about market forces, and communicating innovations and changes.


Communication is at the heart of information management. An otherwise valuable idea is useless if the right individuals don't know about it at the right time. At the same time, irrelevant information clogs communication channels and can cause more important information to be lost or ignored. Importantly, most businesses now recognize that the flow of information isn't simply from the top down. An organization that is effective at processing information will be able to regularly accommodate information flowing from the bottom up and laterally within peer groups, not to mention information entering the organization from the outside and information being sent to the outside by the organization.


To enable effective information processing, channels of communication must be supported by at least two additional resources: technology infrastructure and management policies. In the modem business climate, it's hard to overstate the value of an efficient information technology infrastructure. This includes everything from being able to store and retrieve information on computers to being able to disseminate information to others through the use of e-mail, corporate intranets, extranets, and other means. In their own right, computers have always been used to process raw data and routine information into more meaningful forms, and this ability is growing ever more sophisticated through the use of expert systems, neural networks, data mining programs, and other advanced software applications. Ultimately, however, high-level information must be processed by humans, and therefore management policies and practices must be in place to facilitate the flow of appropriate information, and in some cases, to discourage the flow of inappropriate information. Such policy areas might include:

Thus, communication channels, facilitated by information infrastructure and management policies, are the basis for nearly all information processing. Even when information is being processed in the mind of a sole actor, say a sales representative dealing with a customer, it's critical that the appropriate infrastructure and policies be in place to allow that individual to perform in a manner most consistent with corporate objectives.


For example, if the company wishes to maintain a liberal customer satisfaction policy, customer service representatives must be trained not to refuse customers who want to return merchandise under unusual circumstances not be specifically documented in training manuals. If the corporate objective is to always provide amicable, hassle-free customer service, these employees must be taught the broad customer service philosophy and probably should be empowered to evaluate specific circumstances using that basic knowledge. In other words, assuming that generous customer service is consistent with the business strategy, information processing in this case probably should involve disseminating to employees broad objectives that they then can process themselves and apply to specific instances—a targeted decentralization of information processing.

The primary alternatives would be to try to devise a detailed, comprehensive customer service policy manual covering each return scenario, which could omit some obscure scenarios, or to have employees direct questions about unusual situations to a manager who is empowered to make such a judgment. Depending on the specifics, any combination of these three alternatives—employee empowerment, detailed manuals, and manager intervention—could be the most cost-efficient or deliver the highest quality service, and yet under other circumstances could lead to inefficiencies and poor service. The choice is largely one based on information processing abilities, specifically those of the frontline representatives. The greatest efficiencies are likely to be found in empowering these individuals by providing them with selected information, through training and reinforcement exercises, to make the best decisions using their own judgment, i.e., processing the information themselves. Too much reliance on manuals or managers would slow the customer service process, making it more time-consuming for customers, more costly for the company, and possibly demoralizing for the workers. Hence, this small application of information processing can affect any number of strategic objectives.


As noted earlier, certain kinds of information processing are considered fundamental to maintaining effective control over business organizations. Control in this sense is ensuring that members of the organization (i.e., employees) behave in ways consistent with management policies and business objectives. Usually the concern here is not to micromanage employees' actions in a disciplinarian manner, but rather to coordinate diverse human activities in order to maximize quality, productivity, efficiency, and other measures of organizational effectiveness.

Research on this aspect of information processing suggests that the kind of control mechanisms an organization should employ depend on the information processing involved in the tasks to be regulated. Specifically, Richard Leifer and Peter K. Mills proposed in a 1996 Journal of Management paper that managers should consider to what degree tasks involve a high degree of uncertainty or variability. They argue that formal, explicit rules work best when there is minimal uncertainty or variance in the task (i.e., routine work), and conversely, implicit rules (communicated through organizational norms, for instance) work best when high uncertainty and variance create the need for individual discretion (e.g., research, creative or complex processes). Naturally, in practice business use a combination of formal and informal controls, but the lesson is that information processing plays a fundamental role in corporate management and operations.

SEE ALSO : Communication in Organizations ; Organization Theory


Anand, Vikas, Charles C. Manz, and William H. Glick. "An Organizational Memory Approach to Information Management." Academy of Management Review, October 1998.

Garud, Raghu, and Joseph F. Porac, eds. Advances in Managerial Cognition and Organizational Information Processing, vol. 6. Greenwich, CT: JAI Press, 1999.

Kmetz, John L. The Information Processing Theory of Organization. Brookfield, VT: Ashgate Publishing Co., 1998, 18-19.

Leifer, Richard, and Peter K. Mills. "An Information Processing Approach for Deciding upon Control Strategies and Reducing Control Loss in Emerging Organizations." Journal of Management, spring 1996, 113.

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