As firms grow, management costs rise. According to this theory, information systems can permit organizations to reduce overall management costs by reducing the costs of acquiring and analyzing information. The theory holds that managers never have complete information and knowledge, and they can never examine all alternatives even though they would like to. Organizations are decision-making structures, arranged so as to reduce uncertainty and to ensure survival. Organizations must centralize decision making because they have the information needed to make decisions.
Middle management is necessary to gather information, analyze it and pass it up to senior managers.
Information technology could change this rigid structure by lowering the costs of information acquisition and broadening the distribution of information. IT could bring information directly from operating units to senior managers, thereby eliminating middle mangers and their clerical support workers and centralizing decision making further. Alternatively, IT could distribute information to lower-level workers who could then make their own decisions based on their own knowledge and information without management intervention. Sociological theory focuses on the growth of hierarchical, bureaucratic structures and standard operating procedures as primary coping tools for organizations trying to cope in unstable environments. Organizations hone and refine SOPs until they become extremely efficient.