1. Technology, Environment, And Organization Design
Chapter Thirteen
Technology, Environment,
And
Organization Design
Thomson South-Western Wagner & Hollenbeck 5e

2. Chapter Overview This chapter examines the following topics:
An Adaptive Model of Organization Design
Organizational Effectiveness
Structural Alternatives
Structural Contingencies
Lifecycle Contingencies: Age and Stage of Development
Inception Contingencies
Formalization and Elaboration Contingencies
Core Technology
The External Environment
Transformation Contingencies
Environmental Turbulence
Transaction Costs
Final Considerations

3. Introduction
Organization design, the process of managing organization structure, has important implications for the competitiveness and continual survival of business organizations
Contemporary managers need to know about the different kinds of structures as well as the key strengths and weaknesses of each structural type

4. An Adaptive Model of Organization Design
The fact that many different kinds of structures exist implies that no one type will be suitable for all organizations
Structuring an organization involves making well-considered choices among the various alternatives available
Organization design is the process of making these choices
The process of organization design is consciously adaptive and is guided by the principle that the degree to which a particular type of structure will contribute to the effectiveness of an organization depends on the contingency factors that impinge on the organization and shape its business

5. Organizational Effectiveness
Organizational efficiency means minimizing the raw materials and energy consumed by the production of goods and services
Efficiency means doing the job right whereas effectiveness means doing the right job
Effectiveness is a measure of whether a company is producing what it should in light of the goals, objectives, and constituency demands that influence its performance and justify its existence
Organizational effectiveness is a measure of an organization’s success in achieving goals and objectives
An effective organization must satisfy the demands of the various constituency groups that provide it with the resources necessary for its survival
Effectiveness differs from organizational productivity in that productive measures do not take into account whether a firm is producing the right goods or services

6. Structural Alternatives
The structure of an organization strongly influences its effectiveness
To clarify the fundamental differences among the various types of structures, alternatives are classified along a dimension ranging from mechanistic to organic
Purely mechanistic structures are:
Machine-like
Lacking in flexibility
Centralized with tall hierarchies of vertical authority
Purely organic structures are:
Analogous to living organisms
Flexible and able to adapt
Decentralized with flat hierarchies

7. Structural Contingencies
It is critically important that managers identify key structural contingency factors that can help determine whether a particular type of structure will function successfully in the organization
These factors constitute the situation that managers must perceive and diagnose correctly to determine how to conduct business most effectively

8. Lifecycle Contingencies: Age and Stage of Development
Company age and stage of development are lifecycle contingencies associated with organizational growth
Developmental stages include:
Inception
The organization is created and its purpose is identified
Formalization
Work becomes divided into different functional areas and organizational direction is determined through formal planning and goal setting
Elaboration
Firm seeks out new product, location, or client opportunities
Transformation
Firm is confronted by extremes of both change and complexity in its business situation

9. Inception Contingencies
Organizations at the inception stage are typically new, small, and fairly simple in form
They are most likely to have prebureaucratic structures
The type of structure is influenced by the organization size, which is considered to be the number of members within the organization

10. Formalization and Elaboration Contingencies
Organizations that have progressed beyond the inception stage and outgrown prebureaucratic structures must consider the adoption of more bureaucratic forms of structure
The most influential contingency factors at the formalization and elaboration stages of development consist of core technologies and the environment that surrounds the firm

11. Core Technology
An organization’s technology includes the knowledge, procedures, and equipment used to transform unprocessed resources into finished goods or services
Core technology is a more specific term that encompasses the dominant technology used in performing work in the operational center of the organization
Two contingency models that delineate basic differences in core technology are:
The Woodward manufacturing model
The Thompson service model

12. Woodward’s Manufacturing Technologies
Joan Woodward began studying organizations in the early 1950s
Woodward discovered that not all companies with the same type of structure were equally effective
Woodward devised a classification scheme to describe the three basic types of manufacturing technology
Small-batch production
Mass production
Continuous process production
In the years since Woodward’s studies, flexible-cell production technology has evolved

13. Thompson’s Service Technologies
James D. Thompson’s model examines the technologies often employed in service organizations
His study included the following technologies:
Mediating technology
Long-linked technology
Intensive technology

14. Technological Contingencies: Integration
Both the Woodward and Thompson technology models help identify which general form of organization structure is most likely to enhance the effectiveness of a firm whose primary operations incorporate a specific type of core technology
Standardization and mechanistic structuring generally enhance the effectiveness of firms using core technologies that are suited to more routine work – mass production, mediating, and long-linked technologies
Mutual adjustment and organic structuring promote effectiveness in firms that use core technologies suited to unpredictable, often rapidly changing requirements – small-batch, continuous process, flexible-cell, and intensive technologies

15. The External Environment
An organization’s environment encompasses everything outside the organization
The environment influences structural effectiveness by placing certain coordination and information-processing restrictions on the firm
Five specific environmental characteristics influence structural effectiveness:
Environmental change concerns the extent to which conditions in an organization’s environment change unpredictably
Environmental complexity comprises the degree to which an organization’s environment is complicated and therefore difficult to understand
Environmental uncertainty reflects a lack of information about environmental factors, activities, and events
Boundary spanner
Environmental receptivity is the degree to which an organization’s environment supports its progress toward fulfilling its purpose
Environmental diversity refers to the number of distinct environmental sectors or domains served by an organization

16. Environmental Contingencies: Integration
Diagnosing the nature of a firm’s environment during the process of organization design requires that managers perform five environmental analyses more or less simultaneously – (no separate analysis or question is needed regarding uncertainty because this property is a combination of change and complexity and is assessed by questions 1 & 2 below)
Is the environment stable or dynamic?
Is the environment simple or complex?
Is the environment munificent or hostile?
Is the environment uniform or diverse?

17. Transformation Contingencies
Transition beyond bureaucratic structuring occurs because the standardization intended to stimulate efficient performance can actually reduce efficiency and production
This reduction can happen for several reasons:
The very existence of bureaucratic rules and procedures can encourage the practice of following them to the letter
Rigid adherence to rules and regulations can discourage workers from taking the initiative and being creative
Standardization can narrow the scope of workplace activities

18. Environmental Turbulence
Environmental turbulence describes the speed and scope of change that occurs in the environment surrounding an organization
Conditions of high turbulence are sometimes referred to as hypercompetitive conditions
By determining the degree of flexibility and adaptability an organization must have to perform effectively, the level of environmental turbulence can also act as a contingency factor that influences choices between the two postbureaucratic alternatives

19. Transaction Costs
Transaction costs associated with preserving a single company or maintaining contractual relationships are affected by two considerations:
Information processing that proves to be overwhelming
Threat of opportunism

20. Final Considerations
If successful, transitions that occur during an organization’s stages of development can have a vast impact on the structure of an organization