1 Chapter Six Manufacturing and Service Technologies - 6 -

2 Focus of Discussion Understanding how technology (tools, techniques, machines, and other used to perform organizational inputs) is related to organizational structure How should the organization be designed to accommodate and facilitate the production process?

3 Transformation Process for a Manufacturing Company ENVIRONMENT Organization Raw Material Inputs Product or Service Outputs Transformation Process Departments Materials Handling Milling Inspection Assembly

4 Comparison of Organizational Characteristics Associated with Mass Production and Computer Integrated Manufacturing CharacteristicMass ProductionCIM Structure: Span of ControlWideNarrow Hierarchical levelsManyFew TasksRoutine, repetitiveAdaptive, craft-like SpecializationHighLow Decision makingCentralizedDecentralized OverallBureaucratic, mechanistic Self-regulating, organic Source: Based on Patricia L. Nemetz and Louis W. Fry, “Flexible Manufacturing Organizations: Implications for Strategy Formulation and Organization Design.” Academy of Management Review 13 (1988); ; Paul S. Adler, “Managing Flexible Automation,” California Management Review (Spring 1988); 34-56; Jeremy Main, “Manufacturing the Right Way,” Fortune, 21 May 1990,

5 Comparison of Organizational Characteristics Associated with Mass Production and Computer Integrated Manufacturing CharacteristicMass ProductionCIM Human Resources: InteractionsStand aloneTeamwork TrainingNarrow, one timeBroad, frequent ExpertiseManual, technicalCognitive, social Solve problems Source: Based on Patricia L. Nemetz and Louis W. Fry, “Flexible Manufacturing Organizations: Implications for Strategy Formulation and Organization Design.” Academy of Management Review 13 (1988); ; Paul S. Adler, “Managing Flexible Automation,” California Management Review (Spring 1988); 34-56; Jeremy Main, “Manufacturing the Right Way,” Fortune, 21 May 1990,

6 Comparison of Organizational Characteristics Associated with Mass Production and Computer Integrated Manufacturing CharacteristicMass ProductionCIM Interorganizational: Customer DemandStableChanging SuppliersMany, arm’s length Changing Few, close relations Source: Based on Patricia L. Nemetz and Louis W. Fry, “Flexible Manufacturing Organizations: Implications for Strategy Formulation and Organization Design.” Academy of Management Review 13 (1988); ; Paul S. Adler, “Managing Flexible Automation,” California Management Review (Spring 1988); 34-56; Jeremy Main, “Manufacturing the Right Way,” Fortune, 21 May 1990,

7 Differences Between Manufacturing and Service Technologies Manufacturing Technology 1.Tangible product 2.Products can be inventoried for later consumption 3.Capital asset intensive 4.Little direct customer interaction 5.Human element may be less important 6.Quality is directly measured 7.Longer response time is acceptable 8.Site of facility is moderately important Service Technology 1.Intangible product 2.Production and consumption take place simultaneously 3.Labor and knowledge intensive 4.Customer interaction generally high 5.Human element very important 6.Quality is perceived and difficult to measure 7.Rapid response time is usually necessary 8.Site of facility is extremely important Service: Airlines, Hotels,Consultants, Healthcare, Law firms Product and Service: Fast-food outlets, Cosmetics, Real estate, Stockbrokers, Retail stores Product: Soft drink companies, Steel companies, Auto manufacturers, Food processing plants Sources: Based on F. F. Reichheld and W. E. Sasser, Jr., “Zero Defections: Quality Comes to Services,” Harvard Business Review 68 (September-October 1990): ; and David E. Bowen, Caren Siehl, and Benjamin Schneider, “A Framework for Analyzing Customer Service Orientations in Manufacturing,” Academy of Management Review 14 (1989):

8 Relationship between technology & structural characteristics Formalization –Standardization and division of labor into small tasks & governed by policies/rules, etc. Decentralization Worker Skill Level –Routine work (little education & experience) –Higher level of variety (advanced education) Span of Control –Number of employees reporting to a manager/supervisor Communication & Coordination –Increases with task variety

9 DEPARTMENT DESIGN - Relationship of Department Technology to Structural and Management Characteristics 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 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

10 Thompson’s Classification of Interdependence and Management Implications Form of Interdependence Demands on Horizontal Communications, Decision Making Type of Coordination Required Priority for Locating Units Close Together Pooled (bank) Low communication Standardization, rules, procedures Divisional Structure Low Sequential (assembly line)Medium communication Plans, schedules, feedback Task Forces Medium Reciprocal (hospital) High communication Mutual adjustment, cross- departmental meetings, teamwork Horizontal Structure High Client

11 Primary Means to Achieve Coordination for Different Levels of Task Interdependence in a Manufacturing Firm Reciprocal (new product development) Sequential (product manufacture) Pooled (product delivery) COORDINATIONINTERDEPENDENCE High Low Horizontal structure, cross-functional teams Face-to-face communication, Unscheduled meetings, Full-time integrators Scheduled meetings, task forces Vertical communication Plans Rules Mutual Adjustment Planning Standardization Source: Adapted from Andrew H. Van de Ven, Andre Delbecq, and Richard Koenig, “Determinants of Communication Modes Within Organizations,” American Sociological Review 41 (1976): 330.

12 Impact of Technology on Job Design Job design – the assignment of goals and tasks to be accomplished by employees. –Job rotation –Job simplification –Job enrichment –Job enlargement Sociotechnical systems approach – interaction of technical and human needs in effective job design, combined with the needs of employees with the organization’s technical needs

13 Design for Joint Optimization Work roles, tasks, workflow Goals and values Skills and abilities Design for Joint Optimization Work roles, tasks, workflow Goals and values Skills and abilities 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 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, CIM, etc.) Level of interdependence (pooled, sequential, reciprocal) Physical work setting Complexity of production process (variety and analyzability) Nature of raw materials Time pressure The Technical System Type of production technology (small batch, mass production, CIM, etc.) Level of interdependence (pooled, sequential, reciprocal) Physical work setting Complexity of production process (variety and analyzability) Nature of raw materials Time pressure Sources: Based on T. Cummings, “Self-Regulating Work Groups: A Socio-Technical Synthesis,” Academy of Management Review 3 (1978): ; Don Hellriegel, John W. Slocum, and Richard W. Woodman, Organizational Behavior, 8 th ed. (Cincinnati, Ohio: South-Western College Publishing, 1998), 492; and Gregory B. Northcraft and Margaret A. Neale, Organizational Behavior: A Management Challenge, 2 nd ed. (Fort Worth, Tex.: The Dryden Press, 1994), 551.