ORGANIZATIONAL DESIGN,
COMPETNCES, AND TECHNOLOGY
CHAPTER 9
I. TECHNOLOGY
A. Definition: the combination of skills, knowledge, techniques,
materials, machines, computers, tools, goods and other equipment used
to change raw materials into goods and services.
Technology is used to add value to the goods and services produced and
is an important source of its’ competences, giving the company a
competitive advantage. Examples: Microsoft- The most successful
software company, McDonalds, the most efficient fast food org. and
Walmart the most successful retailer. Each organization excels in the
one aspect of the development, management and use of technology to
create competences that lead to higher value for stakeholders.
B. Technology exists at 3 levels in the organization
1. Individual level – The personal skills, knowledge and competences that
individuals possess.
2. Functional Level – The procedures and techniques that groups work
out to perform their work. They create the competences that constitute
technology. For example: surgical team, or an assembly line
3. Organizational Level - The way an organization converts inputs into
outputs. There are 2 forms of technology at the organizational level
a) Mass production - A form of organizational technology which
uses conveyor belts and a standardized progressive assembly process to
manufacture goods.
b) Craftwork - Technology involving groups of skilled workers who
closely interact and blend their competences to produce custom
designed products
C. Technology is present at each of the 3 levels: Input, Conversion,
and Output
1. Input - Technology is used to manage relationships with outside
stakeholders so that it can manage the organization’s specific environment.
For example:
a) HR dept. has techniques it used to select and recruit employees
b) Materials Management has competences which deal with its’
relationships with suppliers,
c) Finance department has competences which let them get
financing under good terms
2. Conversion Stage – Technology is used in the forms of machines,
techniques, and work procedures to transform into inputs into outputs to
improve the efficiency of the conversion process.
a) The best technology adds the most value to its inputs at the least
cost of the organizational resources.
(1) For example time management techniques let employees
find a better way to do their jobs
3. Output Stage – Technology is used for the disposal of finished goods to
external stakeholders.
a) Competences are needed in:
(1) Testing quality of finished product
(2) Selling and marketing products
(3) Managing after sales service to customers
D. Measuring increased effectiveness due to technology (3 types)
1. External Resources Approach- using technology to manage and control
outside stakeholders For example, better customer service or more reliable
products which leads to an increase in organizational effectiveness.
2. Internal Systems Approach- using technologies to increase the success
of its attempts to innovate, develop new products, and reduce development
time.
3. Technical Approach - Use different technologies to increase efficiency,
innovation, reduce costs and find better ways to meet the needs and desires of
stakeholders.
II. 3 Theories of Technology –First Technical Complexity (Woodward)
The extent to which the production process can be programmed so that
it is controlled and predictable.
A. Technology is more complex when it is more difficult to control,
i.e. more difficult to program – plan ahead of time
B. Technology is said to be PROGRAMMED when the procedure for
transforming inputs into outputs is SPECIFIED IN ADVANCE so that the
tasks can be standardized and the work process made PREDICTABLE
C. Technical complexity categorizes the various technology based on
to what extent you can program the production process so that it can be
controlled and predictable.
1. High Technical Complexity- When the conversion process can be
programmed in advance and be fully automated. Work activities and their
outputs can be standardized and predicted accurately ahead of time.
2. Low Technical Complexity – The conversion process depends primarily
on people and their skills and knowledge- not machines- Can not program
work activities in advance. The results depend on the people involved.
a) For example: when producing a service. You need to depend on
people and so it is difficult to standardize and program work act ivies it
is difficult to control the work process. TECHNICAL COMPLEXITY IS LOW
because it is difficult to maintain high quality and consistent production.
D. Woodward identified 10 levels of technical complexity which we
are grouping into 3 different levels.
1. Small Batch and Unit Technology-Produce customized products or
small quantities. For example: customized furniture, custom engraved
invitations, hair stylists
a) Can not be programmed in advance
b) Low technical complexity
c) People’s skills and knowledge are more important than machines
used during conversion of inputs to outputs.
d) Advantages- Flexibility for wide range of customized products,
more costly, but ideal for new or complex products.
e) Disadvantages- Expensive, unpredictable, can’t program the
work process in advance
2. Large Batch and Mass Production- Machines are used to increase
technical complexity and efficiency and to have more control over the work
process. For example, cars, soft drinks,
a) Good for large volumes of standardized products where tasks are
programmed into machines
b) The production process is very well controlled
c) Production costs are lower because when you use the assembly
line methods volume is higher, costs are lower, no customization.
Automated equipment is usually used but you can use people instead of
machines when the cost of labor is low.
3. Continuous Process Technology – The highest level of technical
complexity. The production is totally automated and mechanized. Employees
are generally not directly involved in the production unless you have an
Exception- machine breaking down. For example, oil refineries, chemical
processing plants, brewing company.
a) Production is a smooth operation with little variation
b) Production rarely stops
c) This is the highest level of technological efficiency with increased
use of machines and decreased costs.
d) When they are able and it is practical companies want to move
from small batch large batchcontinuous process to save $.
e) Can not use continuous process for R&D, customized products.
E. Technological Complexity and Organizational Structure – Each
type of technology has different control and coordination problems and
so they need different structures
a) Small Batch and Unit Technology- ORGANIC -A flat 3 leveled
structure, decentralized decision making, narrow span of control,
mutual adjustment face to face communication with coworkers
b) Large Batch or Mass production – MECHANISTIC STRUCTURE,
Taller- 4 levels, and wider with a greater span of control, since rules and
procedures coordinate activities, Decision making is centralized and
vertical communication is used to control the work
c) Continuous Process – The tasks are highly programmed and the
work process is very predictable but there is still the possibility of
mechanical breakdown. Close monitoring is needed to prevent disaster.
The number of levels in the hierarchy is 8. Supervisors have a narrow
span of control (only a few employees under them). Mutual adjustment
and teams are used to deal with unexpected events. An ORGANIC
structure is used so that you have the flexibility to deal with problems
before unexpected disaster occurs.
F. Perror- A researcher who said that with regard to Nuclear Power
Plants, since the technological complexity is very high, and
unpredictable events CAN occur it is better to close down all nuclear
power plants since it is impossible to solve ALL problems which may
occur.
Other people argue that as long as a balance of centralized and decentralized
control is kept you will be able to safely operate the technology.
G. TECHNOLOGICAL IMPERATIVE- (WOODWARD)
a) It’s the type of technology which determines the structure of the
organization. A company must fit their structure to their technology. A
more mechanized and automated factory has a structure which is more
centralized and mechanized.
b) Woodward did the research on research on technology and
structure studying small firms.
c) Aston studies technology and structure and showed that SIZE
determines structure more than the technology does.
d) The structure of a large organization may result from factors
other than technology
e) What causes organizational growth? A strategy put into place to
produce a wider range of products and enter new markets.
III. ROUTINE AND COMPLEX TASKS – Theory of Charles Perrow
A. There are 2 characteristics of tasks which make them
unpredictable and difficult to control.
1. Task variability – The number of new or unexpected situations faced
while performing a task.
a) High Task Variability means you have many exceptions or new
situations occurring. For example: surgery, writing a book.
b) Low Task Variability- The tasks have a lot of standardization and
repetition. For example: manufacturing if assembly line is used and
inputs are easily obtained
2. Task Analyzability – The degree to which search activity and
information gathering activity is needed to solve problems.
a) High Task Analyzability- Tasks which are more routine, where
the procedure for completing a task has been worked out in advance, are
more analyzable.
b) Low Task Analyzability- Tasks which are hard to analyze because
they can’t be programmed or worked out in advance. For example,
coming up with a new drug, software or any type of new product
development.
(1) You need to spend a lot of time and effort to solve problems
and you may not succeed.
(2) One needs to draw on knowledge and judgment to find new
procedures to solve problems. You need more search activity and
can not program these complex tasks in advance.
More exceptions More Search Activity More complex tasks - Less Routine tasks
B. 4 Types of Technology according to Perrow- Using task variability
and analyzability we categorize 4 groups of technology
1. Routine Manufacturing- Low task variability and High task
Analyzability –
a) There are few new situations – There are few exceptions and if
there is an exception it does not require much search activity to correct
it.
b) For example: mass production of routine manufacturing. Here
tasks are broken down into simple steps, few exceptions, which follow
standard procedures. This creates a low cost advantage for low
variability and highly analyzable tasks
2. Craftwork - Low task variability and low task analyzability.
a) There are only a narrow range of exceptions possible.
A high level of search activity is needed to find solutions.
b) Existing procedures need to be adapted to new situations. It is a
form of small batch technology.
c) Examples: Furniture and clothing manufacturing, plumbing and
carpentry.
3. Engineering Production – High task variability and High task
analyzability
a) There is a high number of exception or new, unexpected
situations but, finding a solution is easy i.e. they can be handled with
standard procedures. . The correct technique needs to be identified and
applied.
b) This is a form of small batch technology. People and not
machines are primarily responsible for solving problems.
4. Nonroutine Research - high task variability and low task analyzability
a) Most complex type of technology with the least amount of routine
situations. The number of unexpected situations is high. Search activity
is also high. With each new situation you need to expend resources to
deal with it.
b) For example: Research especially high tech; strategic planning
and forecasting by top management team
C. Technology and Organizational Structure (Perrow)
1. As tasks become more complex and less routine you move from a
mechanistic structure to an organic structure
2. Very routine technology- clearly defined tasks which follow
established rules and regulations. Mechanistic structure, which is tall with
centralized decision making works well.
3. Nonroutine technology – Complex tasks work best with an organic
structure, flat, decentralized decision making, using mutual adjustment, often
through teams and task forces. This is applied in industries of functions which
are fast changing and complex.
IV. TASK INTERDEPENDENCE (THOMPSON)
A. Technology is categorized based on how the various tasks are
related to one another. Thompson identified 3 types of technology each
associated with a different level of task interdependence.
1. Low Task Interdependence – People and/or departments who work
independently
2. High Task Interdependence – When people and departments rely on
each other. They may depend on each other for supplying the inputs and
resources needed to get the work done, or the components.
B. Mediating Technology and Pooled Task Interdependence – The
entire value creation chain of inputconversion output is performed
independently.
1. The various parts of the organization {people, teams, or departments}
contribute to its’ performance independently
2. Examples at the Departmental Level:
Sales department- each salesperson works independently
Hair Salon- each hairdresser works independently
Management consulting firm where each consultant works on their own.
In manufacturing, a set-up where each person manufactures one entire
product beginning to end.
3. Examples at the organizational level: Franchise- performance of one
store does not have an effect on the others. However, all of the stores together
determine the performance of the organization
4. Benefits of Mediating Technology - Much easier to monitor, control,
and evaluate performance of each, person, team group or division. Output can
be measured in a standardized manner.
a) Network- example of mediating technology; Outsourcing where
other firms are employed to perform value creation activities is another
form of this technology
C. Long Linked Technology and Sequential Interdependence- One
person’s actions affect another’s and the work must be performed in a
set sequence.
1. The work can not be completed by any one person or department
working independently. For example: mass production.
2. Here if there are errors at the beginning of production they will be
magnified or enlarged later on. More coordination is needed.
3. The process of converting inputs to outputs must be programmed and
standardized
4. Planning and scheduling is employed to manage the connections here.
5. SLACK RESOURCES- The creation of excess inputs, partially finished, or
totally finished outputs held in reserve. A way of dealing with contingencies:
last minute orders or prepare for possible shortages of raw materials.
6. Vertical Integration – When a company takes over its suppliers or
distributors another way o coordinate sequentially interdependent activities.
7. Coordination costs are higher in sequential interdependence but you
get t he benefits of specialization and division of labor leading to increase in
productivity and savings of costs.
8. Disadvantages include:
a) Employees are unskilled
b) One employee’s output is the next employee’s input so errors
become magnified
D. Intensive Technology and Reciprocal Interdependence- The work
of all the workers and/or all of the departments are totally dependent
on each other. They are completely inseparable and the work cannot be
programmed in advance.
1. Technical complexity decline because the manager’s ability to control
and predict the work process declines. Tasks become more complex and non-
routine. For example: hospitals, basketball teams.
2. This technology is expensive because it is difficult to specify the
sequence of tasks ahead of time.
3. Structure: Product teams and matrixes provide the coordination and
the decentralized control that allow this intensive technology to operate.
Structure is kept flat heavy dependence on mutual adjustment very organic.
4. SPECIALISM- Producing a narrow range of outputs. One way to mange
intensive technology. A hospital which specializes only in cardiology or only in
cancer narrows the range of problems it’s exposed to and can target its
resources toward solving only those illnesses.
V. MASS PRODUCTION
A. Benefits of mass production include:
1. Economies of scale
2. Division of labor
B. Mass production uses:
1. Dedicated machines- Each machine does one operation at a time to
produce a narrow range of products inexpensively. Retooling the machine
may take many days so you need a long production run to maximize efficiency
and decrease costs.
2. Standardized work process- assembly line with fixed workers who
perform standardized work procedures increase a company’s control over
production.
3. A company keeps costs down by making sure that environmental
uncertainty is reduced. How?
a) Keep inventories of raw materials and semi-finished components
stockpiled to avoid shortages that slow production.
b) Keep finished goods in stock in case of increased customer
demand.
c) Vertical Integration- Another tool to protect access to inputs and
customers.
4. Disadvantages of Mass Production:
a) Inflexible due to dedicated machines, fixed workers, and large
inventories. Customization is difficult.
New technologies allow for customer responsiveness at a lower cost.
VI. ADVANCED MANUFACTURING TECHNOLOGY (Flexible
manufacturing, lean production, or computer aided production)- Four
Tools are used in this process
A. Using machinery and computers to better integrate and
coordinate the input conversion output process. Allows for better
customer responsiveness at lower costs. Can achieve differentiation
and low cost advantage simultaneously.
B. CAD- Computer Aided Design – A technique used to simplify the
design process. A computer program is used to design and redesign
detailed prototypes.
1. Advantages include reduced cost in designing products, as changes can
be made quickly and inexpensively. There is improved efficiency in
manufacturing, selling, and servicing. There is a smaller risk of failure if you
can solve design problems at the prototype phase. There is better flexibility
and ease in designing custom made products.
C. CAMM- Computer Aided Materials’ Management – Use of
computers to manage the flow of resources in the conversion process. .
1. CAMM allows for the management of the flow of materials and parts,
helps design the production schedule, and control inventory.
2. The flow of materials is regulated by customer demand for finished
goods.
3. The inputs are pulled from the output stage, not pushed from the input
stage. i.e., you manufacture what the customers want to buy not what the
suppliers want to sell you.
4. CAMM combines activities and increases task interdependence. There
is a continuous linkage of raw materials to customer demands. . You need to
react quickly to demands of customers. The high level of technical complexity
makes the input conversion output process continuous.
5. Structure which works best is organic extra coordination is needed to
allow a firm to follow low cost or differentiation strategy.
D. JIT- Just In Time Inventory- Developed from the Japanese Kanban
or card system. Components were stored in bins and as they were used
up the bins were sent back to the supplier to be refilled.
1. Inputs and components are transferred to the factory as needed for
production. No stockpiling of slack resources because you receive exactly
what you need when you need it.
2. JIT works for raw material and components.
3. Task interdependence increases and the entire value creation process
becomes one CONTINUOUS chain of sequential activities.
Customer Store Manufacturer Supplier
4. Advantages of JIT increased efficiency and flexibility to customize
products , and get the benefits of small batch technology without loss of
technical efficiency..
5. Need to have a lot of coordination and an excellent relationship with
suppliers. Some companies accomplish this by owning a minority stake in
supplier’s company but that does increase costs since you are owning a part of
another company. Entering into a long term contract also accomplishes this.
All of these 3 tools coordinate the input and conversion stages.
E. Flexible Manufacturing Technology and Computer Integrated
Manufacturing (CIM)
1. Flexible manufacturing technology allows for the production of many
different types of components because each machine can do MANY
DIFFERENT of operations at no extra cost.
2. Mass production uses dedicated machines which can do only one task
at a time. And transfer machines which do 1 operation and quickly transfer
the unfinished product to the next machine.
3. Flexible Manufacturing- each machine does many operations, more
than one task at a time to increase flexibility.
4. CIM Computer Integrated Manufacturing is an advanced manufacturing
technique which costs less because software is used to control changes in the
operation process.
a) A master computer controls the manufacturing process and
schedules the movement of parts to assemble different products.
b) Robots are used as they can be quickly reprogrammed at a much
lower cost than retooling machines.
All of these tools, CAMM, CAD, JIT, and CIM provide for more flexibility,
lowering of barriers between functions by combing the input,
conversion, and output activities. There is less need for expensive
inventories. There is increased product reliability due to increased
automation and technical complexity. It is easier to predictably program
the production process.