ENGM 742: Engineering Management and Labor Relations Session Two – 17 January 2017 Systems Thinking Innovation Technology Cycles

Modified Nadler-Tushman Open-Systems Model Boundary Internal Supply Chain Formal Organization Structure Vertical Horizontal Standard Operating Procedures Formal Reward System Competitors Informal Organization Culture Politics Inter-departmental Relations Technical Systems Organization Level Department Level Individual Level Information Systems Stake Holders Inputs Outputs Human Resources Selection Roles Personal Dynamics Employee Needs Positive and Negative Feedback Technology Change Market

KEY ELEMENTS OF O.S THEORY

Definitions Environment – All factors existing outside the boundary of the organization that have a potential impact on all or part of the organization. Environment Sectors – Subdivisions of the external environment that contain similar elements. Task Environment – Sectors with which organization interacts directly and that have a direct impact on the organizations ability to achieve its goals. General Environment – Sectors that may not have a direct impact on the operations of the firm but indirectly influence it.

An Organization’s Environment (g) Recession, unemployment rate, inflation rate, rate of investment, economics, growth (h) City, state, federal laws and regulations, taxes, services, court system, political processes (i) Age, values, beliefs, education, religion, work ethic, consumer and green movements (j) Competition from and acquisition by foreign firms, entry into overseas markets, foreign customs, regulations, exchange rates (a) Competitors, industry size and competitiveness, related issues (b) Suppliers, manufacturers, real estate, services (c) Labor market, employment agencies, universities, training schools, employees in other companies, unionization (d) Stock markets, banks, savings and loans, private investors (e) Customers, clients, potential users of products and services (f) Techniques of production, science, computers, information technology International Context (j) International Sector (a) Industry Sector (i) Sociocultural Sector DOMAIN (b) Raw Materials Sector (c) Human Resources Sector (h) Government Sector ORGANIZATION (g) Economic Conditions Sector (d) Financial Resources Sector (e) Market Sector (f) Technology Sector

Analytic Questions based on O.S. Model

Open-Systems Theory Organizational Effectiveness Best Organization- Environment Fit Organizational Effectiveness --Customers --External Stakeholders --Employees Internal Social and Technical Systems Fit

Environments External Environment Internal Environment forces outside the organization that have the potential to significantly influence the likely success of products or services Internal Environment the general conditions that exist within an organization Organizational Culture a system of shared values, assumptions, beliefs, and norms that unite the members of an organization

External Environments Mega-Environment Task Environment Culture of Organization

External Environments Mega-Environment International Element Technological Element Sociocultural Element Economic Element Legal-Political Element

Mega-Environment Technological Element Economic Element reflects the current state of knowledge regarding the production of products and services Economic Element the systems of producing, distributing and consuming wealth, e.g. capitalist economy is governed by market forces and the means of production are privately owned socialist economy in which the means of production are owned by the state and economic activity is coordinated by the plan international economies have significant impact on operations

Mega-Environment Legal-Political Element the legal and governmental systems within which an organization must function Clean Air and Clean Water Act Occupational Health and Safety Act SEC computerized tracking for illegal insider trading

Mega-Environment Sociocultural Element the attitudes, values, norms, beliefs, behaviors, and associated demographic trends that characteristic of a given area McDonald’s allows menu modifications in foreign countries American trends delay marriage aging of large baby boomer group growing birth rate growing diversity of work force

Mega-Environment International Element the developments in countries outside an organization’s home country that have the potential to influence the organization North American Free Trade Agreement

Xerox Environments Mega-Environment International Fuji-xerox Rank xerox Xerox Canada Competition Technological Smart copiers Robotics Color copiers Xerox Economic Global capital markets Growth of service sector Low US inflation Sluggish economy Sociocultural Employee Involvement Globalization of Mgmt. Home use of machines Older consumers and workers Legal-Political Patent laws Trade restraints Deregulation of financial services

Task Environment Mega-Environment Task Culture of Organization Customers & Clients Competitors Suppliers Labor Government Agencies

Task Environment Customers & Clients Competitors those individuals and organizations that purchase an organization’s products and services Competitors other organizations that either offer or have a high potential of offering rival products or services benchmarking

Task Environment Suppliers Labor Supply organizations and individuals that supply the resources an organization needs to conduct its operations trend is towards fewer more dependable suppliers Labor Supply those individuals who are potentially employable by an organization Bureau of Labor Statistics: increasingly diverse workforce

Task Environment Government Agencies agencies hat provide services or monitor compliance with laws and regulations at local, state or regional, and national levels

Xerox Task Environment Customers & Clients AT&T DuPont Sun Microsystems DOD Competitors Canon Ricoh Kodak IBM Suppliers Reell Precision Rogers Corp Nationwide Precision Labor Amalgated Clothing and Textile Workers Other Unions Varying labor markets Government Internal Revenue EEC Commission SEC EPA Xerox

Organization/Environment Population Ecology Model focuses on populations or groups of organizations and argues that environmental factors cause organizations with appropriate characteristics to survive and others to fail natural selection model of 100 largest companies in 1917, only 22 remained in 100 largest category in 1987 (Forbes, 1987) managerial actions are of limited consequence in dealing with the environment

Organization/Environment Resource Dependent Model highlights organizational dependence on the environment for resources and argues that organizations attempt to manipulate the environment to reduce that dependence organizations attempt to be as independent as possible by controlling critical resources managers have strategic choices that influence organizational success

Environmental Uncertainty A condition in which future environmental circumstances affecting an organization cannot be accurately assessed and predicted function of complexity and dynamism Environmental Complexity the number of elements in an organizations environment and their degree of similarity homogeneous heterogeneous

Environmental Uncertainty Environmental Dynamism the rate and predictability of change in the elements of an organization’s environment

Environmental Complexity Environmental Dynamism Environmental Complexity Homogeneous Hetergeneous Stable Unstable Low Uncertainty 1. small # of similar elements 2. elements change slowly funeral homes Moderately Low 1. large # of dissimilar elem. Insurance Moderately High rapidly Women’s Apparel High Uncertainty Software Co.

Environmental Munificence Environmental Munificence (capacity) the extent to which the environment can support sustained growth and stability organizations operating in rich environments can build up internal resources; capital, equipment, experience organizations operating in rich environments can also attract competition

Managing Environmental Elements Adapt to existing environmental conditions attempt to influence environmental elements shift domain of operations away from threatening environmental conditions James D. Thompson

Adaptation Buffering Smoothing Forecasting Rationing stockpiling either inputs or outputs from a process in order to cope with environmental fluctuations Smoothing taking actions aimed at reducing the impact of fluctuations given the market Forecasting predict future environmental conditions Rationing providing limited access to a product or service that is in high demand

Favorability Influence Advertising/Public Relations Boundary Spanning Recruiting Negotiating Co-oping Joint Ventures Trade Associations Political Activity

Domain Shifts Changes in the mix of products and services offered so that an organization will interface with more favorable environmental elements.

Organizational Culture Factors Impacting Corporate Culture Direction the degree to which a culture supports reaching organizational goals Pervasiveness the extent to which a culture is widespread among members Strength degree to which members accept the values and other aspects of a culture

Manifestations of Culture Symbol object, act, event that serves as a vehicle for conveying meaning Corning quapple (Q pin) Stories a narrative based on true events which sometimes may be embellished to highlight the intended value B-52 vs F15 - shut down two engines Rites & Ceremonials elaborate planned set of activities to convey cultural values

Definitions System – A set of interacting elements that acquires inputs from the environment, transforms them, and discharges outputs to the external environment. Subsystem – Elements within a system that perform the specific functions required for organizational survival. Production & service Boundary spanning Adaptation Maintenance Management

Definitions Closed system – A system that exists without dependence on its environment. Autonomous / Independent Enclosed / Non-interactive with external envt. Stable Internal focus Open system – A system that must interact with the environment to survive. Contingent / Dependent Resource consumption and exportation Dynamic External focus

Open systems theory IS a contingency theory. Open Systems Paradigm Contingency Theory Perspective which states that effective orgs. must have a “goodness of fit” b/w structure and conditions in the external environment. “It depends” – no such thing as one best way. Ex: stable/unstable environment  bureaucratic/flexible control Open systems theory IS a contingency theory.

Innovation vs. Invention Creation of something new Innovation Both creation/adoption and implementation

Organization and Innovation Organic Encourage bottom-up innovation process May not be the best structure for production Mechanistic Emphasis on rules and regulations Very good structure for producing routine products Ambidextrous Organic for innovation, mechanistic for production

Sequence of Elements for Successful Change Environment Internal Creativity and Inventions Suppliers Professional Associations Consultants Research literature Organization 1. Ideas 3. Adoption 4.Implementation 2. Needs Customers Competition Legislation Regulation Labor force 5. Resources Perceived Problems or Opportunities

Techniques for Encouraging Technology Change Switching Structures Creative Departments Venture Teams Corporate Entrepreneurship

Probability of New Product Success Technical completion (technical objectives achieved) .57 Commercialization (full-scale marketing) .31 Market Success (earns economic returns) .12 Source: Based on Edwin Mansfield, J. Rapaport, J. Schnee, S. Wagner, and M. Hamburger, Research and Innovation in Modern Corporations (New York: Norton, 1971), 57.

Components for Innovation Success Specialization Boundary Spanning Horizontal Linkages These components are called the Horizontal Linkages Model.

Horizontal Linkages Model Environment Organization Environment General Manager Technical Developments Customer Needs Linkage R&D Department Linkage Marketing Department Linkage Linkage Linkage Production Department

The Need for Speed The ability to rapidly develop new products is a strategic weapon in today’s marketplace. Time-based competition

Separate boundary roles Geographical dispersion Structural Characteristics of Service Organizations vs. Product Organizations Service Product Structure: Separate boundary roles Few Many Geographical dispersion Much Little Decision making Decentralized Centralized Formalization Lower Higher Human Resources: Employee skill level Skill emphasis Interpersonal Technical

Relationship of Department Technology to Structural and Management Characteristics Low Mostly Organic Structure 1. Moderate formalization 2. Moderate centralization 3. Work experience 4. Moderate to wide span 5. Horizontal, verbal communications CRAFT Organic Structure 1. Low formalization 2. Low centralization 3. Training plus experience 4. Moderate to narrow span 5. Horizontal communications meetings NONROUTINE Analyzability Mechanistic Structure 1. High formalization 2. High centralization 3. Little training or experience 4. Wide span 5. Vertical, written communications ROUTINE Mostly Mechanistic Structure 1. Moderate formalization 2. Moderate centralization 3. Formal training 4. Moderate span 5. Written and verbal communications ENGINEERING High Low High Variety

Craft Department Technologies Mostly Organic Structure 1. Moderate formalization 2. Moderate centralization 3. Work experience 4. Moderate to wide span 5. Horizontal, verbal communications CRAFT Craft Low analyzability Low variety Requires extensive training and experience Technology has significantly reduced number of craft organizations Examples Performing arts Trades Fine goods manufacturing Organic Structure 1. Low formalization 2. Low centralization 3. Training plus experience 4. Moderate to narrow span 5. Horizontal communications meetings NONROUTINE Mechanistic Structure 1. High formalization 2. High centralization 3. Little training or experience 4. Wide span 5. Vertical, written communications ROUTINE Mostly Mechanistic Structure 1. Moderate formalization 2. Moderate centralization 3. Formal training 4. Moderate span 5. Written and verbal communications ENGINEERING

Non Routine Department Technologies Low analyzability High variety Great deal of effort devoted to analyzing problems and activities Experience and technical knowledge used to solve problems and perform work Examples Strategic planning Social science research Applied research Mostly Organic Structure 1. Moderate formalization 2. Moderate centralization 3. Work experience 4. Moderate to wide span 5. Horizontal, verbal communications CRAFT Organic Structure 1. Low formalization 2. Low centralization 3. Training plus experience 4. Moderate to narrow span 5. Horizontal communications meetings NONROUTINE Mechanistic Structure 1. High formalization 2. High centralization 3. Little training or experience 4. Wide span 5. Vertical, written communications ROUTINE Mostly Mechanistic Structure 1. Moderate formalization 2. Moderate centralization 3. Formal training 4. Moderate span 5. Written and verbal communications ENGINEERING

Routine Department Technologies Mostly Organic Structure 1. Moderate formalization 2. Moderate centralization 3. Work experience 4. Moderate to wide span 5. Horizontal, verbal communications CRAFT Routine High analyzability Low variety Broad applications for standard work instructions Significant use of objective and computational procedures Examples Sales Clerical Drafting Auditing Organic Structure 1. Low formalization 2. Low centralization 3. Training plus experience 4. Moderate to narrow span 5. Horizontal communications meetings NONROUTINE Mechanistic Structure 1. High formalization 2. High centralization 3. Little training or experience 4. Wide span 5. Vertical, written communications ROUTINE Mostly Mechanistic Structure 1. Moderate formalization 2. Moderate centralization 3. Formal training 4. Moderate span 5. Written and verbal communications ENGINEERING

Engineering Department Technologies High analyzability High variety Activities handled on basis of established formulas, procedures, and techniques Refer to well-established bodies of knowledge in performing tasks Examples Legal Tax accounting General accounting Mostly Organic Structure 1. Moderate formalization 2. Moderate centralization 3. Work experience 4. Moderate to wide span 5. Horizontal, verbal communications CRAFT Organic Structure 1. Low formalization 2. Low centralization 3. Training plus experience 4. Moderate to narrow span 5. Horizontal communications meetings NONROUTINE Mechanistic Structure 1. High formalization 2. High centralization 3. Little training or experience 4. Wide span 5. Vertical, written communications ROUTINE Mostly Mechanistic Structure 1. Moderate formalization 2. Moderate centralization 3. Formal training 4. Moderate span 5. Written and verbal communications ENGINEERING

Sociotechnical Systems Model The Social System Individual and team behaviors Organizational/team culture Management practices Leadership style Degree of communication and openness Individual needs and desires The Technical System Type of production technology (small batch, mass production, FMS, etc.) Level of interdependence (pooled, sequential, reciprocal) Physical work setting Complexity of production process (variety and analyzability) Nature of raw materials Time pressure Design for Joint Optimization Work roles, tasks, workflow Goals and values Skills and abilities

Coercive vs. Enabling Organizations Are all bureaucracies the same? Are all organic organizations the same? High Bureaucracy Low Coercive Enabling Organic Coercive Bureaucracy Enabling Bureaucracy Empowered employees Minimum rules & procedures Little hierarchy Rules & procedures as enabling tools Hierarchy supports organizational learning Autocratic Rigid rule enforcement Extensive written rules & procedures Hierarchy controls Top down control Minimum written rules & procedures Technical Structure Social Structure Source: Adapted from P.S. Adler, “Building Better Bureaucracies,” Academy of Management Executive, 13:4, November, 1999, 36-47.

Coercive vs. Enabling Organizations Coercive Systems and Procedures Enabling Systems and Procedures Systems focus on performance standards so as to highlight poor performance. Focus on best practice methods:information on performance standards is not much use without information on best practices for achieving them. Standardize the systems to minimize gameplaying and monitoring costs. Systems should allow customization to different levels of skill/experience and should guide flexible improvisation. Systems should be designed so as to keep employees out of the control loop. Systems should help people control their own work: help them form mental models of the system by “glass box” design. Systems are instructions to be followed, not challenged. Systems are best practice templates to be improved. Source: P.S. Adler, “Building Better Bureaucracies,” Academy of Management Executive, 13:4, November, 1999, 36-47.

Two Models of Design Iterative Model synthesize analyze modify Convergent Model 3

Point-Based Serial Engineering styling marketing body chassis manufacturing etc.      Point-Based Concurrent Engineering: Styling Example marketing body Design Solution Analyze & Critique chassis Modify manufacturing Styling 4

Set-Based Concurrent Engineering Subsystem 1 Subsystem 2 Manufacturing System Designs converge in parallel 5

? A Simple Example Set up a meeting using the point-based model. B: No, 3:00 is bad. 9:00? A: My best time is 10:00. Can you make it? ? A: Uh, already booked. Can you meet at 3:00? B: No, I can’t. How about 2:00? 6

A Set-Based Approach Now set up the meeting by communicating about sets. A: I can meet 10:00 - 1:00 or 3:00 - 5:00. Can you make any of these times? B: Let’s meet 12:00 - 1:00. 7

Exercise: Technology Comparison McDonald’s Subway Family Restaurant Organization Goals Authority Structure Mechanistic vs. Organic Teamwork vs. Individual Interdependence Routine vs. Non-routine tasks Task Specialization Task Standardization Technical vs. Social Expertise Centralized vs. Decentralized

For Review Questions How does the framework we choose impact our decision making as engineering managers? Can we truly be engineering managers if innovation is not part of our framework? Why or why not?