Organizational Design, Competences, and Technology

Learning Objectives Identify what technology is and how it relates to organizational effectiveness Differentiate among three different kinds of technology that create different competences Understand how each type of technology needs to be matched to a certain kind of organizational structure if an organization is to be effective

Learning Objectives Understand how technology affects organizational culture Appreciate how advances in technology, and new techniques for managing technology, are helping increase organizational effectiveness

What is Technology? Technology: The combination of skills, knowledge, abilities, techniques, materials, machines, computers, tools, and other equipment that people use to convert or change raw materials into valuable goods and services

What is Technology? Technology exists at three levels Individual level - The personal skills, knowledge, and competences that individuals possess Functional or department level - The procedures and techniques that groups work out to perform their work and create value

What is Technology? Technology exists at three levels (cont.) Organizational level - The way an organization converts inputs into outputs Mass production: the organizational technology based on competences in using standardized, progressive assembly process to manufacture goods Craftswork: the technology that involves groups of skilled workers who interact closely to produce custom-designed products

Technology and Organizational Effectiveness Technology is present in all organizational activities: Input: Allows each organizational function to handle relationships with outside stakeholders Conversion: Transforms inputs into outputs Output: Allows an organization to effectively dispose of finished goods and services to external stakeholders

Figure 9.1 - Input, Conversion, and Output Processes The technology of an organization’s input, conversion, and output processes is an important source of competitive advantage

What approaches measure and increase effectiveness using technology? External resource approach for managing and controlling outside stakeholders. Internal systems approach for innovation, product development, and reduced development time. Technical approach for increasing efficiency and quality, and reducing costs.

Three theories consider the relationship between technology and design Technical complexity Complex tasks and routine tasks Task interdependence

Technical Complexity: The Theory of Joan Woodward Programmed technology: A technology in which the 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 (cont.) Technical complexity: The 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

Technical Complexity (cont.) Woodward identified 10 levels of technical complexity that are associated with three types of production technology: Small-batch and unit technology Large-batch and mass production technology Continuous-process technology

Figure 9.2 - Technical Complexity and Three Types of Technology

Technical Complexity (cont.) 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

Technical Complexity (cont.) Large-batch and mass production technology Involves producing large volumes of standardized products 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

Technical Complexity (cont.) 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

Technical Complexity and Organizational Structure

Technical Complexity and Organization Structure (cont.) Technological imperative: The argument that technology determines structure For small organizations the importance of technology as a predictor of structure may be more important than it is for large organizations

Routine Tasks and Complex Tasks: The Theory of Charles Perrow Perrow’s two dimensions underlie the difference between routine and nonroutine or complex tasks and technologies: Task variability: The number of exceptions— new or unexpected situations—that a person encounters while performing a task Is low when a task is standardized or repetitious Task analyzability: The degree to which search activity is needed to solve a problem Is high when the task is routine

Theory of Charles Perrow (cont.) Four types of technology Routine manufacturing: characterized by low task variability and high task analyzability Craftswork: 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

Figure 9.4 - Task Variability, Task Analyzability, and Four Types of Technology

Theory of Charles Perrow (cont.) When technology is routine, employees perform clearly defined tasks – work process is programmed and standardized Mechanistic structure Nonroutine technology requires the organization to develop structure that allows employees to respond quickly to manage exceptions and create new solutions Organic structure

Table 9.1 - Routine and Nonroutine Tasks and Organizational Design

Task Interdependence: The Theory of James D. Thompson Task interdependence: The manner in which different organizational tasks are related to one another affects an organization’s technology and structure Three types of technology Mediating Long-linked Intensive

Theory of James D. Thompson (cont.) Mediating technology: a technology characterized by a work process in which input, conversion, and output activities can be performed independently of one another Based on pooled task interdependence Each part of the organization contributes separately to the performance of the whole organization

Theory of James D. Thompson (cont.) Long-linked technology: based on a work process in which input, conversion, and output activities must be performed in series Based on sequential task interdependence Actions of one person or department directly affect the actions of another Slack resources: surplus resources that enable an organization to deal with unexpected situations

Theory of James D. Thompson (cont.) Intensive technology: a technology characterized by a work process in which input, conversion, and output activities are inseparable Based on reciprocal task interdependence The activities of all people and all departments are fully dependent on one another Specialism: producing only a narrow range of outputs

Figure 9.5 - Task Interdependence and Three Types of Technology

From Mass Production to Advanced Manufacturing Technology Mass production is based on: Dedicated machines: Machines that can perform only one operation at a time, such as repeatedly cutting or drilling or stamping out a car body part Fixed workers: Workers who perform standardized work procedures increase an organization’s control over the conversion process

From Mass Production to Advanced Manufacturing Technology (cont.) Attempts to reduce costs by protecting its conversion processes from the uncertainty of the environment Makes an organization inflexible Fixed automation is a combination of dedicated machines and fixed workers Expensive and difficult to begin manufacturing a different kind of product when customer preferences change

From Mass Production to Advanced Manufacturing Technology (cont.) Advanced manufacturing technology: Technology which consists of innovations in materials and in knowledge that change the work process of traditional mass- production organizations

Figure 9.5A - The Work Flow in Mass Production

Figure 9.5B - The Work Flow with Advanced Manufacturing Technology

Advanced Manufacturing Technology: Innovations in Materials Technology Materials technology: Comprises machinery, other equipment, and computers Organization actively seeks ways to increase its ability to integrate or coordinate the flow of resources between input, conversion, and output activities

Advanced Manufacturing Technology (cont.) Computer-aided design (CAD) Computer-aided materials management (CAMM) Just-in-time inventory (JIT) system

Advanced Manufacturing Technology (cont.) Computer-aided design (CAD): An advanced manufacturing technique that greatly simplifies the design process Computers can be used to design and physically manufacture products

The advantages of CAD Reduced design costs and a differentiation advantage Improved manufacturing efficiency Easier selling and servicing with improvements made during design Risk of failure reduced by solving problems during design Competitive advantage and reduced costs through quality Increased flexibility and lower cost Customized product design Quick response to environmental changes

Advanced Manufacturing Technology (cont.) Computer-aided materials management (CAMM): An advanced manufacturing technique that is used to manage the flow of raw materials and component parts into the conversation process Develops master production schedules for manufacturing and controls inventory

Advanced Manufacturing Technology (cont.) Just-in-time inventory (JIT) system: Requires inputs and components needed for production to be delivered to the conversion process just as they are needed Input inventories can then be kept to a minimum CAMM is necessary for JIT to work effectively Increases task interdependence between stages in the production chain

Figure 9.7 - Just-in-Time Inventory System

Flexible Manufacturing Technology Technology that allows the production of many kinds of components at little or no extra cost on the same machine Each machine is able to perform a range of different operations Machines in sequence able to vary operations so that a wide variety of different components can be produced

Computer-Integrated Manufacturing (CIM) An advanced manufacturing technique that controls the changeover from one operation to another by means of commands given to the machines through computer software Depends on computers programmed to: Feed the machines with components Assemble the product from components and move it from one machine to another Unload the final product from the machine to the shipping area Use of robots integral to CIM

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