1 Session Theme  How core technology for the organisation as a whole influences organisation structure/design  How the technologies influence the design and management of different sub-units (functions, departments)  How interdependence – flow of materials and information – among departments affect structure

2 Service and Manufacturing Technologies  Technology  Work processes, techniques, machines and actions used to transform input into outputs  An organisation’s ‘production process’ – includes work procedures as well as machinery  Influences organizational structure  Levels: Individual, Functional or Departmental, Organisational  Core technology: is the work process that directly relates to the organization’s mission  There are also non-core technology

3 Pressures Affecting Organization Design

Input, Conversion, and Output Processes

5 Core Transformation Process for a Manufacturing Company

6 Technical Complexity: Joan Woodward Programmed technology:  Procedures for converting inputs into outputs can be specified in advance  Tasks can be standardized and the work process can be made predictable Technical complexity:  Extent to which a production process can be programmed so that it can be controlled and made predictable  High technical complexity: exists when conversion processes can be programmed in advance and fully automated  Low technical complexity: exists when conversion processes depend primarily on people and their skills and knowledge and not on machines

7 Woodward’s Classification Based on System of Production

8 Technical Complexity (Unit-Small Batch)  Small-batch and unit technology  Involves making one-of-a-kind, customized products or small quantities of products  The conversion process is flexible, thereby providing the capacity to produce a wide range of goods that can be adapted to individual orders  Is relatively expensive  Scores lowest on the dimension of technical complexity A few luxury, handcrafted products, Kelly’s Handbagsfrom Hermes International priced at USD 7000 a piece!! Rockwell Collins – Electronic Equipments for airplanes – eachassembly involves highly skilled human operators – output is 10 pieces a month

9 Technical Complexity (Large Batch-Mass Production)  Large-batch and mass production technology  Involves producing large volumes of standardized products  Customers do not have special needs  Output goes into inventory  The conversion process is standardized and highly controllable  Allows an organization to save money on production and charge a lower price for its products  Scores higher on the technical complexity dimension Automobiles, Assembly Line Products

10 Technical Complexity (Process)  Continuous-process technology  Involves producing a steady stream of output  Production continues with little variation in output and rarely stops  Individuals are only used to manage exceptions in the work process  Tends to be more technically efficient than mass production  Scores highest on the technical complexity dimension Chemical Plants, Oil Refineries, Liquor, Nuclear Power, Crude Steel

Technical Complexity and Organizational Structure Low Technological Complexity High Structural Characteristic Unit ProductionMass ProductionContinuous Process Vertical Levels346 Span of Control of CEO 4 (23)7(48)10(15) Manager/Total Employee ratio 1:231:161:8 Proportion of skilled workers HighLowHigh Overall complexityLowHighLow FormalisationLowHighLow CentralisationLowHighLow

12 Technical Complexity and Organization Structure  Small-batch technology - organic structure  Mass production technology – mechanistic structure  Continuous Process?

 Technological imperative  The argument that technology determines structure  Caution!  Technology is one determinant of structure  Organizational size is a more important determinant of structure  Other external influences

Strategy, Technology, and Performance  Strategy, structure, and technology need to be aligned  Successful firms have complementary structures and technologies  Failing to adopt a new technology or failing to realign strategy can lead to poor performance

15 Flexible Manufacturing Systems  The shop floor has been revolutionized  Computer-aided design (CAD)  Computer-aided manufacturing (CAM)  Integrated Information Network  FMS means that new products can be designed, prototyped and mass produced without human hands

Flexible Manufacturing Technology vs. Traditional Technologies

Lean Manufacturing  Highly trained employees at every stage of production  Cut waste and improve quality  Incorporates technological elements  Paved the way for mass customization  Using mass-production technology to quickly and cost- effectively assemble individual goods for customers

Performance and Structural Implications  Flexible manufacturing allows diverse products to be made on one assembly line  Mass customization to meet customer needs  Efficient machine utilization  Labor productivity increases  Scrap rates decrease  Increased productivity

Core Organization Service Technology

Service Firms  Production and provision of services  Intangible output  Simultaneous production and consumption  Labor and knowledgeable intensive  Direct interaction between customer and employee  Quality is perceived  Site selection is very important

Designing the Service Organization  Service organizations are not necessarily large  Often small, locations close to customers  Service organizations require technical core employees – close to customer  Service customers interact directly with technical employees  The skills of technical employees need to be high  Employees need knowledge, awareness and interpersonal skills  Decision making is often decentralized

Non-Core Departmental Technology  Every department in an organization has a production process  Variety: frequency of unexpected and novel events  Analyzability: ability to apply standard procedures  Routine vs. Non-routine Dimension

Analyzability-Variability Matrix  Four types of technology  Routine manufacturing: characterized by low task variability and high task analyzability  Crafts-work: both task variability and task analyzability are low  Engineering production: both task variability and task analyzability are high  Nonroutine research: characterized by high task variability and low task analyzability

Framework for Department Technologies

25 Departmental Technology-Structure  Routine Technology - employees perform clearly defined tasks – work process is programmed and standardized  Mechanistic structure  Nonroutine Technology – requires to develop structure that allows employees to respond quickly to manage exceptions and create new solutions  Organic structure

Routine and Non-routine Tasks and Organizational Design

27 Department Technology to Structural and Management Characteristics

28 Workflow Interdependence Among Departments  The extent to which departments depend on each other for resources or materials  Low interdependence means that departments can do their work independently  High interdependence means departments depend on each other  Three types of interdependence:  Mediating Technology (Pooled Interdependence)  Long-linked Technology (Sequential Interdependence)  Intensive Technology (Reciprocal Interdependence)

29 Interdependence and Management Implications

30 Technology, Interdependence and Design

31 Coordination for Interdependence

32 Structural Priority and Implications  Reciprocal interdependence should receive first priority  Reciprocal activities should be grouped together  Poor coordination will cause poor performance  Organizations should be designed to address interdependence

Design Essentials  Key research notes that technology and structure can be co- aligned  It is important to apply the correct management system to a department  Interdependence among departments dictates the amount of communication and coordination required in design