PHAM HOANG HIEN [ORGANIZATIONAL THEORY, DESIGN, AND CHANGE]
CHAPTER 9 ORGANIZATIONAL DESIGN, COMPETENCES, AND TECHNOLOGY TEACHING OBJECTIVES 1. To define technology as the combination of skills, knowledge, machines, and other equipment used to convert inputs into outputs. (9.1) 2. To show that technology is used at all stages in the value creation process: input, conversion, output. (9.2) 3. To consider how technology can improve organizational effectiveness using three approaches: external resource, internal systems, and technical. (9.2) 4. To examine Joan Woodward’s theory that technical complexity differentiates technologies. (9.3) 5. To analyze how technical complexity affects organizational structure. (9.3) 6. To review the technological imperative and the Aston Studies. (9.3) 7. To examine Charles Perrow’s theory that differences between routine and nonroutine tasks result from task variability and task analyzability. (9.4) 8. To review the structural characteristics of routine and nonroutine tasks. (9.4) 9. To examine James D. Thompson’s theory that task interdependence affects technology and structure. (9.5) 10. To consider the costs of intensive technology and cost reduction through specialism. (9.5) 11. To review the major elements of traditional mass production: dedicated machines, fixed workers, and inventory stockpiles. (9.6) 12. To examine innovations in materials technology: computer-aided design (CAD), computer-aided materials management (CAMM), just-in-time (JIT) inventory, and computer-integrated manufacturing (CIM). (9.7)
CHAPTER SUMMARY
Three models examine the effect of technology on organizational design. Technical complexity, routine and complex tasks, and task interdependence are reviewed. According to Joan Woodward, technical complexity, the extent to which the production process can be controlled, differentiates technologies. Three types of technology, in order of complexity include: small-batch and unit, mass production and large-batch, and continuous-process. Small-batch and continuous-process technology have organic structures, whereas mass production has a mechanistic structure. The concept that strategy determines structure is called the technological imperative. The Aston Studies found that size determines structure more than technology. Charles Perrow distinguished between routine and nonroutine tasks according to task variability and task analyzability. These two dimensions classify four types of technology: routine manufacturing, craftswork, engineering production, and nonroutine research. As tasks become more complex, an organization moves from a mechanistic to an organic structure.
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Technology is the combination of skills, abilities, machines, computers, and other tools used to transform inputs into outputs. Technology exists at three levels: individual, functional, and organizational. It creates value and increases effectiveness at all three stages: input, conversion, and output. The external resource approach uses technology to help manage and control outside stakeholders. The internal systems approach uses technology to increase innovation and reduce design and production time. The technical approach uses technology to improve efficiency and quality while reducing costs.
PHAM HOANG HIEN [ORGANIZATIONAL THEORY, DESIGN, AND CHANGE]
In the third model, James D. Thompson considers task interdependence, mediating technology and pooled interdependence, long-linked technology and sequential interdependence, and intensive technology and reciprocal interdependence. The strategy of specialism reduces the costs associated with intensive technology. Technology relates to culture, so a change in technology impacts culture. Sociotechnical theory is explained. Mass production has moved toward advanced manufacturing technology. Traditional mass production uses dedicated machines and fixed workers to facilitate economies of scale and a low-cost advantage. New technologies allow for flexibility and cost control. Advanced manufacturing technology (AMT) consists of innovations in materials technology and in knowledge. Innovations in materials technology involve machinery and computers. Traditionally, organizations stockpiled inventory to protect the conversion process, but AMT coordinates input, conversion, and output activities. Computer-aided design (CAD), computer-aided materials management (CAMM), justin-time (JIT) inventory systems, and computer-integrated manufacturing (CIM). CAD and CAMM coordinate the input and conversion stages. CPA uses robots in the conversion stage. These technologies increase technical complexity and task interdependence and make tasks more nonroutine, achieving flexibility at little or no cost increase. Changes have affected both structure and culture.
CHAPTER OUTLINE 9.1
What Is Technology?
Technology is the combination of skills, abilities, techniques, materials, machinery, and other equipment that people use to transform inputs into outputs. It also applies to services. Technology exists at three levels: individual, personal skills and individual knowledge; functional or departmental, group techniques to perform work and create value; and organizational, the way inputs are converted into outputs (i.e., mass production and craftswork). Mass-production technology involves using conveyor belts and a standardized assembly process to produce goods. Craftswork involves skilled workers interacting to make a customized product.
Henry Ford manufactured cars using craftswork, but in 1913 he opened a “progressive manufacture” or mass-production plant, which reduced car prices by two-thirds and created a mass market. Yet, workers hated their jobs and were constantly monitored. Q. Describe the system of progressive manufacture.
A. Work was delivered via conveyor belts and performed sequentially (i.e., tasks built on preceding tasks); tasks were broken down into simple components, and parts were interchangeable; vertical integration controlled inputs. Q. Why was the new manufacturing process so efficient?
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Organizational Insight 9.1: Progressive Manufacture at Ford
PHAM HOANG HIEN [ORGANIZATIONAL THEORY, DESIGN, AND CHANGE] A. The process was so controllable and predictable that direct supervision was eliminated and the span of control widened. Mass-production technology simplified tasks, reduced the need for skilled workers, and created specialization and division of labor. Notes________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________
9.2
Technology and Organizational Effectiveness
Q. Describe the three stages of the value creation process. A. Technology is used at all three stages in the value creation process—input, conversion, and output. (Fig. 9.1) The input stage uses technology, such as skills and procedures, to manage relationships with outside stakeholders, the organization’s specific environment. The finance department obtains money at a favorable interest rate. Q. Describe technology at the conversion stage. A. The conversion stage combines machines, techniques, and procedures to transform inputs into outputs. To improve efficiency, employees learn time management techniques. The output stage uses technology for distribution to external stakeholders (e.g., procedures for quality testing, selling and marketing, and managing after-sales service). Q. What approaches measure and increase effectiveness using technology?
Because each function develops technologies to create value, the organizational structure must maximize the effectiveness of technology. Technology influences structure. Three theories consider the relationship between technology and design. Managers should understand technical complexity, the differences between complex and routine tasks, and task interdependence. Notes________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ •
9.3
Refer to discussion question 1 here to review three approaches for measuring effectiveness using technology. _________________________________________________________________________________ _________________________________________________________________________________
Technical Complexity: The Theory of Joan Woodward
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A. 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.
PHAM HOANG HIEN [ORGANIZATIONAL THEORY, DESIGN, AND CHANGE]
When standardized procedures transform inputs into outputs, making work predictable, technology is programmed; the more difficult the program, the more difficult the control. Technical complexity refers to the extent of programming, controlling, and predictability. Researcher Joan Woodward argues that technical complexity is the dimension that distinguishes technologies. High technical complexity occurs when conversion processes, programmed in advance and fully automated, make work standardized and predictable. Low technical complexity occurs when the conversion process relies mainly on individual skills, not machines. Low technical complexity makes quality and consistent production difficult. Woodward associated 10 levels of technical complexity with three types of technology: small-batch and unit technology, large-batch and mass-production technology, and continuous-process technology. Small-batch and unit technology produce customized products or small quantities. The technology has low technical complexity, because personal skills are more important than machines. Q. Give examples of small-batch technology. A. Hospital surgical teams and customized furniture makers Q. What advantages does small-batch offer? A. This technology offers the flexibility for a wide range of products tailored to individuals. It is costly but ideal for new or complex products. Large-batch and mass-production technology use machines to increase technical complexity and efficiency. Large volumes of standardized products are produced with tasks programmed into machines, resulting in standardized work and controlled production. Q. Give examples of companies with mass-production technology. A. Ford, Gillette, and Coca-Cola
A. Lower production costs lead to lower prices. Ford used mass production to decrease production costs and create a mass market. Mass production is generally connected with automated equipment, but people perform assembly operations when labor costs are low. •
Refer to discussion question 2 here to review small-batch and mass-production technology. _________________________________________________________________________________ _________________________________________________________________________________
Continuous-process technology is the height of technical complexity because production is almost totally automated and mechanized. Employees only handle exceptions in the work process, such as machine breakdowns. (Fig. 9.2)
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Q. What are the advantages?
PHAM HOANG HIEN [ORGANIZATIONAL THEORY, DESIGN, AND CHANGE] Q. What companies use continuous-process technology? A. Oil producers, such as Exxon; chemical companies, such as DuPont; and brewing companies, such as Anheuser-Busch Q. What are the advantages? A. Continuous production, little variation, greater technical efficiency, more predictability in production, and lower costs Woodward found that an increased use of machines decreased costs. Automating production is not always practical. Research for new drugs cannot be programmed in advance. Many customers will pay a premium price for customized products. Notes________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ Technical Complexity and Organizational Structure Because technology affects structure, Woodward developed a model showing the structure of each type of technology. Increased technical complexity makes organizations taller with a wider span of control. First-line supervisors have narrow span of control in small-batch technology, wide in mass production technology, and small in continuous-process technology. (Fig. 9.3) Small-batch technology needs a flat, three-leveled hierarchy, with decentralized decision-making and a narrow span of control for supervisors (23 employees). Decisions are managed as they occur, so mutual adjustment is needed. An organic structure fits small-batch technology. Mass production technology can program tasks for a standardized manufacturing process. Q. Describe the hierarchy and span of control for mass production.
Continuous-process technology uses programmable tasks and a predictable work process, but breakdowns are possible, so close monitoring to prevent disasters makes the hierarchy eight levels. Supervisors have a narrow span of control and use mutual adjustment, as teams deal with unanticipated events. The need for quick responses makes an organic structure fits continuous-process technology. Researcher Charles Perrow argues that unpredictable events happen when technical complexity is extremely high (e.g., nuclear plants use continuous-process technology), making it impossible to solve all problems. He implies that nuclear power stations should be closed, but others argue that continuousprocess technology can be operated safely if a balance of centralized and decentralized control is attained.
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A. The structure is taller and wider, the hierarchy increased to four levels, and decision-making centralized. The first-line supervisor’s span of control increases to 48, because rules and procedures coordinate activities. A mechanistic structure fits mass production.
PHAM HOANG HIEN [ORGANIZATIONAL THEORY, DESIGN, AND CHANGE] The technological imperative suggests that technology determines structure, so an organization must fit its structure to its technology. Others observed that Woodward studied small firms, 82 percent having less than 500 employees, and that the sample biased her results. They conceded that technology affects structure in small organizations, but far less in large organizations, such as GM and IBM. The Aston Studies on technology and structure concluded that size determines structure more than technology. The structure of large organizations may result from other factors that cause growth and differentiation. Q. What causes organizational growth? A. Strategy can cause growth. An organization may decide to produce a wider range of products and enter new markets. Notes________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________
9.4
Routing Tasks and Complex Tasks: The Theory of Charles Perrow
Charles Perrow asserts that the difference between routine and nonroutine technologies is task variability and task analyzability. Task variability is the number of new or unexpected situations faced while performing a task. Exceptions at any stage in the value-creation process and new situations make task variability high, whereas standardization and repetition make task variability low. Task analyzability is the need for search activity to solve problems. Procedures make routine tasks easier to analyze, whereas nonprogrammed tasks make analysis difficult. Serving fast food is easier to analyze than research and development tasks. Perrow considered technology according to task variability and analyzability. (Fig. 9.4) Perrow identified four types of technology: 1. Routine manufacturing has low task variability and high task analyzability. New situations are few, and an exception does not require much search activity to correct it.
A. Mass production is routine manufacturing with inputs standardized and standard procedures followed to handle exceptions. Tasks low in variability and high in analyzability offer a low-cost advantage. 2. Craftswork has low task variability and analyzability. Exceptions rarely occur, but new situations take time to resolve by adapting existing procedures to new situations. Craftswork is a form of small-batch technology. 3. Engineering production has high task variability and analyzability. An employee encounters exceptions but handles them with standard procedures; existing procedures make many types of products. Because people develop problem-solving procedures, engineering is a form of small-batch technology.
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Q. Give an example of routine manufacturing.
PHAM HOANG HIEN [ORGANIZATIONAL THEORY, DESIGN, AND CHANGE] 4. Nonroutine research has high task variability and low task analyzability, making it the most complex and least routine in the classification. Q. Why is nonroutine research so complex? A. The number of unexpected situations is large, and each exception requires search activity. Nonroutine research includes high-tech R&D, such as finding a cure for diseases and the activities of top management team, such as planning and forecasting. Routine Technology and Organizational Structure Perrow’s types of technology affect structure. Perrow and others have proposed that an organization should move from a mechanistic to an organic structure as tasks become more complex and less routine. With routine technology, employees perform clearly defined tasks, and the work process is standardized. (Table 9.1) Q. What is the best structure for routine technology? A. A tall structure with centralized decision-making fits. Because decisions are made at the top, organizations with routine technology simplify jobs by using machines for complex tasks and minimizing the judgment needed by employees. A mechanistic structure fits. Nonroutine Technology and Organizational Structure Complex tasks need a structure that facilitates quick responsiveness. Q. What is the best structure for nonroutine technology? A. A flat structure with decision-making decentralized is best, using mutual adjustment through teams and task forces. An organic structure fits. Notes________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________
9.5
Refer to discussion question 4 here for examples of task complexity. _________________________________________________________________________________ _________________________________________________________________________________
Task Interdependence: The Theory of James D. Thompson
James D. Thompson looked at the relationship among tasks, task interdependence, and the impact on technology and structure. People and departments who work independently have low task interdependence. Those who rely on each another have high task interdependence. Thompson identified three types of technology: mediating, long-linked, and intensive, each associated with a different type of task interdependence. (Fig. 9.5) Mediating Technology and Pooled Interdependence Mediating technology is a work process in which input, conversion, and output can be performed independently. It is based on pooled task interdependence. Each part of the organization contributes independently to performance. Because individuals do not work with others, task interdependence is low.
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Q. Give an example of mediating technology at the department and organizational levels. A. The sales department uses mediating technology because one salesperson does not affect another, but each person’s performance affects the department’s total sales. Mediating technology exists when little integration between departments is required. In a franchise, the performance of one store has no effect on another, but collectively, the stores determine organizational performance. Q. What are the advantages of mediating technology? A. Monitoring, controlling, and evaluating performance are easier by measuring outputs objectively. Costs are low because of control through standardization. Computers facilitate mediating technology to coordinate production. Companies using mediating technology may use outsourcing. Long-Linked Technology and Sequential Interdependence Long-linked technology is based on sequential interdependence, which means that one person’s actions affect another’s; activities are performed in a series. Mass-production technology is founded on sequential task interdependence, which requires coordination. Errors at the beginning of production are enlarged later. Q. How are sequentially interdependent activities coordinated? A. Program conversion processes standardize procedures. Planning and scheduling manage connections between input, conversion, and output. Slack resources and extra resources handle unexpected situations. Vertical integration acquires a supplier or distributor. Coordination costs are higher, yet long-linked technology has the advantages of specialization and division of labor to increase productivity. Sequential interdependence simplifies tasks, reduces task variability, and increases task analyzability, making tasks routine. Repetition of routine tasks increases efficiency. Organizing tasks sequentially and controlling the work pace result in cost savings.
A. Employees do not become skilled and have no opportunity for skill enhancement because they adhere to designated procedures. Sequential interdependence uses outputs to serve as inputs for another department, so each department affects the next. Manufacturing depends on material management to secure quality inputs in a timely fashion. Global competition increases interdependence, so firms are adopting a product team structure. Interdepartmental coordination results in more product innovation and efficiency.
Organizational Insight 9.2: USAA: Improving the Delivery of Intangible Services The United States Automobile Association (USAA) changed from mediating to long-linked technology. Q. How did USAA improve customer service? How did the new methods affect structure?
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Q. What are the disadvantages?
PHAM HOANG HIEN [ORGANIZATIONAL THEORY, DESIGN, AND CHANGE] A. With mediating technology, there was no interdepartmental communication to solve problems. Decision-making was centralized. Poor customer responsiveness encouraged the move to more interdependent departments. Policy-writing and service departments were joined, then divided into five groups and evaluated on the number of complaints. Technology resulted in a flatter hierarchy with decentralized decision-making. Intensive Technology and Reciprocal Interdependence Intensive technology is based on reciprocal task interdependence, the work of all people and departments is inseparable, making tasks impossible to program. More complex and nonroutine tasks decrease technical complexity. Hospitals and R&D departments use intensive technology. Because the task sequence cannot be preset, much coordination is required, making intensive technology more costly. Mutual adjustment is the means of coordination. Q. What structures fit intensive technology? A. Product team and matrix structures provide coordination and decentralized control to operate intensive technology. These structures are flat, promote mutual adjustment, and permit a firm to capitalize on new developments.
Organizational Insight 9.3: A New Approach at Hewlett-Packard In 1989 Hewlett-Packard (HP) lagged behind competitors in introducing products to market. The CEO moved to reciprocal interdependence. Q. How did HP improve development time and change structure? A. HP increased departmental interdependence. The sequential process required new projects to go to each department and for committee approval. Slow decision-making increased development time. HP reorganized several functions into cross-functional teams, eliminated two layers in the hierarchy, decentralized control, and abandoned the committee structure. This organic structure reduced new product development time. Q. Why would a company avoid intensive technology?
Organizations can reduce costs through specialism, producing only a narrow range of outputs. A hospital can specialize in cancer treatment. This strategy uses resources efficiently and decreases coordination problems. Notes________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ •
Refer to discussion question 4 here for examples of task interdependence. _________________________________________________________________________________ _________________________________________________________________________________
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A. Intensive technology is expensive, so organizations reduce task interdependence to coordinate activities. They return to long-linked technology, which is easier to control and predict. Hospitals forecast the resources needed for patient demands.
PHAM HOANG HIEN [ORGANIZATIONAL THEORY, DESIGN, AND CHANGE] Managerial Implications: Analyzing Technology Managers should analyze the input-conversion process, the level of technical complexity, task variety, task analyzability, and task interdependence of an organization or department. Then managers should evaluate the fit between technology and structure. Notes________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________
9.6
From Mass Production to Advanced Manufacturing Technology
A company can maximize gains from economies of scale and division of labor by using dedicated machines, standardized processes, and avoiding slowdowns. Dedicated machines perform one operation at a time and produce a narrow range of low-cost products. Retooling a dedicated machine can take days, and it takes long production runs to maximize efficiency and minimize costs. An assembly line and fixed workers, performing standardized procedures, increase control over production. An organization decreases costs by protecting conversion processes from environmental uncertainty. Q. How can environmental uncertainty be reduced? A. Inventories of raw materials and semi finished components are stockpiled to avoid shortages that slow production. Finished goods are kept in inventory to respond quickly to customer demands. An organization might advertise to sustain customer demand. Vertical integration protects access to inputs and to customers. (Fig. 9.6a) Q. What is the disadvantage of mass production? A. Mass production, characterized by high technical complexity, routine tasks, and sequential task interdependence, is inflexible and often termed fixed automation. Dedicated machines, fixed workers, and large inventories make it difficult to change production when a customer needs change.
Notes________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________
9.7
Advanced Manufacturing Technology (AMT): Innovations in Materials Technology
Innovations in materials technology, machinery, computers, and other equipment are based on a new perspective of input, conversion, and output. AMT increases integration and coordination between these activities. Inventory is no longer stockpiled.
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New technologies have facilitated customer responsiveness at a low cost: flexible manufacturing, lean production, and computer-aided production.
PHAM HOANG HIEN [ORGANIZATIONAL THEORY, DESIGN, AND CHANGE] Innovations coordinate input and conversion activities: computer-aided design (CAD), computer-aided materials management (CAMM), and just-in-time (JIT) inventory systems. Computer-integrated manufacturing (CPA) is an innovation in the conversion stage. Computer-Aided Design Design costs represent a large portion of mass production’s total costs and explain the production of large quantities of few products. More complex products, like cars, have higher design costs. Designing new parts requires building prototypes and scale models. Now, computer-aided design (CAD) simplifies this process and designs detailed prototypes according to a computer program and redesigns quickly. Q. Name the advantages of CAD. A. Reduced design costs, a low cost, 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; and quick response to environmental changes. Computer-aided materials management manages the flow of resources in the conversion process, using computers to make decisions. Computer-aided materials management (CAMM) can manage the flow of raw materials and parts, develop manufacturing production schedules, and control inventory. In mass production, materials are pushed into the conversion process according to a predetermined plan. With CAMM, the flow of input materials is regulated by customer demand for finished goods. Thus inputs are pulled from the output stage, not pushed from the input stage. Mass production has independent stages, so conversion workers take inventory without coordination from input workers. CAMM combines activities and increases task interdependence. Output workers inform input workers about supplies. Technical complexity increases because combined activities create a continuous process, linking raw materials to the customer. Coordination requires an organic structure. Like CAD, CAMM allows for a low-cost or a differentiation strategy. Controlling the flow of materials avoids the costs of carrying excess inventory and is flexible enough for quick response.
Just-in-time Inventory Systems A. A just-in-time inventory system, developed from the Japanese kanban (card) system, requires inputs and components to be transferred as needed. Components are stored in bins, and empty bins are returned to the supplier for refilling. CAMM links an organization to suppliers, making JIT function effectively. Links to suppliers facilitate the quick transfer of information. A just-in-time system works for raw materials and components, but increases task interdependence. Mass production has boundaries between stages, and only the conversion stage has sequential activities. JIT systems diminish these barriers and cause the entire process to become one chain of sequential activities. This continuous process increases technical complexity. Q. Name the advantages of JIT.
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Q. Describe just-in-time inventory.
PHAM HOANG HIEN [ORGANIZATIONAL THEORY, DESIGN, AND CHANGE] A. Increased efficiency and flexibility to customize products, obtaining the benefits of small-batch technology JIT requires coordination and management of relationships with suppliers. Buying a minority stake in suppliers is an option. Yet, ownership increases costs, so long-term contracts with suppliers is another alternative. JIT systems, CAMM, and CAD coordinate the input and conversion stages. Flexible Manufacturing Technology and Computer-Integrated Manufacturing Dedicated machines placed in a series are called transfer machines and perform one operation on a component and quickly transfer it to the next machine, making mass production more like continuousprocess production. Technical complexity and quality increase as costs decrease. Yet, transfer machines are expensive to retool, and a change in one machine requires a change in others, which reduces flexibility. Flexible manufacturing allows for many kinds of components to be made at no extra cost. Each machine performs many operations, and the machines in a series perform more than one task, which increases flexibility. Computer-integrated manufacturing (CPA) keeps costs down by using software to control changes of operation, eliminating retooling. Computer-controlled machines produce a wide range of components and are controlled by a master computer. Computers give the machines components, assemble the product, transfer it to a different machine, and unload the final product. Robots are used and quickly programmed for different operations. Reprogramming robots costs less than retooling transfer machines.
Organizational Insight 9.4: Motorola’s Factory of the Future Motorola, a company that operates in the competitive information technology market, uses AMT to focus on customers. It has a futuristic factory in which a series of robots can respond to individual orders within hours.
A. Motorola, a company that makes cellular telephones and pagers, uses AMT to increase customer responsiveness. Salespeople are placed at the top of the organization, and a futuristic factory quickly customizes products. A salesperson sends an order to the factory electronically, using bar codes, which are scanned by a computer with design software, and robots perform the conversion operations. Finished products are tested and sent to customers. Motorola has a differentiation advantage because customers pay more for customization. CIM increases technical complexity and efficiency by speeding up the production process, making mass production like continuous-process production. These four innovations in materials technology—CPA, JIT inventory systems, CAMM, and CAD—offer flexibility and diminish barriers by combining input, conversion, and output activities. They reduce the need for expensive inventory and increase product reliability by increasing automation and technical complexity. Notes________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________
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Q. How does Motorola use AMT, and what are the benefits?
PHAM HOANG HIEN [ORGANIZATIONAL THEORY, DESIGN, AND CHANGE]
DISCUSSION QUESTIONS AND ANSWERS 1. How can technology increase organizational effectiveness? The external resource approach measures effectiveness using technology to manage and control outside stakeholders. New technological developments, such as customization, improve customer service. The internal systems approach uses technology to innovate and to reduce product development time. Mass production enabled Ford to make cars for the mass market. The technical approach uses technology to improve efficiency and quality while reducing costs. Mass production produced better-quality, lowerpriced cars. 2.
How does small-batch technology differ from mass production technology?
Small-batch technology makes customized products or small quantities relying on employee skills and knowledge not machines. Mass production produces large volumes of standardized products and relies on machines. Mass production has more technical complexity than small-batch technology. Machines control the work in mass production, so tasks are programmed and costs are reduced. Small-batch technology facilitates customer responsiveness, and many are willing to pay a higher price for customized products. 3. Why is technical complexity greatest with continuous-process technology? How does technical complexity affect organizational structure? Continuous-process technology has an automated conversion process. Employees are not involved in production, but monitor the machinery and manage exceptions, such as machine breakdowns. Technical complexity increases the levels in the hierarchy: small-batch technology needs three levels; mass production, four levels; and continuous-process, six levels. Span of control is narrow for small-batch technology with decision-making decentralized and wide for mass production with decision-making centralized. Span of control is narrow for continuous-process technology with decision-making centralized. Small-batch or continuous-process technology need organic structures whereas mass production needs a mechanistic structure.
Task complexity depends on task variability and task analyzability. Task variability is the number of new or unexpected situations or exceptions that an employee encounters while performing a task. Task analyzability is the degree to which search activity is required to solve a problem. Low task variability and analyzability implies that tasks that are easy to analyze, routine, and less complex. GM uses routine manufacturing, mass production, to make cars. Roto-Rooter, a plumbing company that adapts techniques to each house, uses craftswork. An architecture firm uses engineering production technology. Merck uses nonroutine research to discover new drugs. 5. What level of task interdependence is associated with the activities of (a) a large accounting firm, (b) a fast-food restaurant, and (c) a biotechnology company? What different kinds of structure are you likely to find in these organizations? Why?
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4. What makes some tasks more complex than others? Give an example of an organization that uses each of the four types of technology identified by Perrow.
PHAM HOANG HIEN [ORGANIZATIONAL THEORY, DESIGN, AND CHANGE] (a) Task interdependence is low in an accounting firm, which has pooled interdependence. People perform tasks independently, but organizational success depends on collective efforts. The structure is flat and organic, because activities are controlled through standardization. (b) Task interdependence is medium in a fast-food restaurant, which has sequential interdependence. The actions of one employee affect the actions of others. The structure is tall and centralized; tasks are routine and programmed in advance. (c) Task interdependence is high in a biotechnology company, which has reciprocal interdependence. The activities of each person affect others. This organization needs a flat, organic structure to facilitate mutual adjustment. 6. Find an organization in your city and analyze how its technology works using the concepts discussed in this chapter: technical complexity, nonroutine tasks, and task interdependence. In a movie theater, technical complexity is low because people are more important than machines; a person operates the movie reel. Task variability is low and task analyzability is high. New situations rarely arise and tasks are routine; people buy a ticket and standard procedures are available for exceptions. Long-linked technology is used and task interdependence is sequential. The cashier takes the money and issues a ticket. The usher then takes the ticket and directs customers, and another employee turns on the movie. 7. .Discuss how AMT and innovations in materials technology and in knowledge technology have increased task interdependence and the technical complexity of the work process. How have these innovations changed the structure of organizations operating a mass-production technology? Innovations in materials technology increased technical complexity as machines replace humans to perform tasks. Computer-aided design (CAD) physically produces a part, eliminating a worker from retooling a machine. Computer-aided materials management (CAMM) uses computers to track inventories eliminating much manual work. Task interdependence increases as these techniques make value creation a continuous process. The output side coordinates with the input side.
ORGANIZATIONAL THEORY IN ACTION Practicing Organizational Theory: Choosing a Technology In small groups, students are investors in a large computer store. Each group analyzes the level of technical complexity, task variability, and task analyzability and recommends the type of task interdependence appropriate for their strategy. Students then discuss the type of technology to be used in the store.
The Ethical Dimension Students examine the ethical issues regarding an organization’s ability to monitor and control employees. One relevant theory that you can use to frame the issue is Agency Theory from Chapter 2. You might
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Mass production sequences activities only for the conversion process. Innovations in knowledge technology increase task interdependence, as functional members cooperate to develop products. Crossfunctional teams replace fixed workers, who perform sequential activities. These changes require a flat, decentralized, organic structure with mutual adjustment and low formalization for control. A product team structure is appropriate.
PHAM HOANG HIEN [ORGANIZATIONAL THEORY, DESIGN, AND CHANGE] discuss with the students the ethical issues associated with not allowing the workers to socialize on the factory floor.
Making the Connection Ask students to find an example of a company using one of the technologies described in this chapter and to identify the technology. Students will explain why it is being used and how it affects the organization’s structure.
CASE FOR ANALYSIS The Shape of Things to Come Japanese companies used mass production but realized that there was excessive handling time. Thus, they adopted production forms called “cell layouts.” Layouts provide for customer responsiveness. 1. How do the new “cell” designs change the level of technical complexity, task variability and task analyzability, and task interdependence? Cell designs are small-batch rather than mass-production technology. They have lower technical complexity because processes are not programmed in advance and workers have more skills. Task variability is higher, and task interdependence increases from sequential to reciprocal because workers perform more tasks. Task analyzability is lower because tasks are nonroutine, and less search time is needed to handle exceptions. 2. Based on this analysis, what type of technology discussed in the chapter does the new system remind you of? This system is similar to small-batch technology with lower costs. 3. What are the advantages associated with the use of the new technology? Reduced handling time, handling costs, and inventory costs are achieved due to faster production and employee motivation. The cell layout enables organizations to be responsive to customer needs by making production of small quantities feasible.
Students determine the role of technology in their organization and the level of technical complexity. They analyze task variability, task analyzability, and task interdependence. They determine how technology affects their organization’s structure.
TEACHING SUGGESTIONS 1. To illustrate how technology can affect organizational structure, divide the class into five groups. Each group is assigned a company and must determine the type of technology used, using Woodward’s classifications of technical complexity and/or Perrow’s classifications based on task variability and task analyzability. Each group determines the structure.
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ANALYZING THE ORGANIZATION
PHAM HOANG HIEN [ORGANIZATIONAL THEORY, DESIGN, AND CHANGE] Group 1: A customized furniture maker that uses craftswork and small-batch technology and has low technical complexity, low task variability, and low task analyzability. It uses an organic structure. • Group 2: A standard refrigerator manufacturer that uses mass production and has high technical complexity, low task variability, and high task analyzability. It uses a mechanistic structure. • Group 3: A beer manufacturer that uses continuous-process technology and has a tall, centralized, mechanistic structure. • Group 4: An architectural firm that specializes in customized houses, uses engineering production, a type of small-batch technology, and has low technical complexity, high task variability, and high task analyzability. Its structure is organic. • Group 5: A biotechnology company that uses nonroutine research and has high task variability, low task analyzability, and an organic structure. A role-play illustrates that intensive technology causes decreased technical complexity and increased task complexity. Work processes cannot be programmed in advance. The organization is a hospital. You are the administrator and six students volunteer. Divide the class into departments: radiology, cardiology, labor and delivery, and clinical labs. On day one, two students come in to have babies, so send them to labor and delivery; and one student has fainting spells, so send that student to clinical labs. Note that radiology and cardiology do nothing. On day two, two students have broken bones, so send them to radiology; and one student has heart problems and is sent to cardiology. Note that labor and delivery and clinical labs do nothing. Intensive technology costs money. The class determines how to reduce hospital costs. Forecasting can tell what resources will meet patient demands. The hospital can pursue the strategy of specialism and provide a narrow range of services, such as the treatment of cancer. Use Figure 9.4 to show Perrow’s classification of four technologies: routine manufacturing, craftswork, engineering production, and nonroutine research. Divide the class into two groups to explain and give examples of craftswork and mass production. Craftswork has low task variability and task analyzability; plumbing has low task variability, but exceptions take time to resolve. Existing technology needs to be adapted to solve the unique situation. Engineering production has high task variability and high task analyzability; an architect who builds customized houses faces new situations, but exceptions require little search because of standard procedures. Discuss mediating technology and pooled interdependence, long-linked technology and sequential interdependence, and intensive technology and reciprocal interdependence. Use Figure 9.5 to illustrate the differences between the three levels of task interdependence. Students will give examples of each. A consulting firm has pooled interdependence. Mass production has sequential interdependence, and a biotechnology company has reciprocal interdependence. Students will look at Ford’s web site and determine what changes in technology are on the horizon. Students will report their findings to the class. It is helpful to clarify the difference between push and pull strategies. With traditional mass production, the plan is preset; inputs move down the assembly line, and large volumes are produced to achieve economies of scale. With CAMM, production is determined by customer demand. Inputs are pulled into the system; salespeople submit orders that are electronically transferred to manufacturing. JIT inventory is the responsibility of the materials management function to control inputs. In JIT, inputs arrive as they are needed, keeping inventories at a minimum. A JIT system needs CAMM to operate successfully. Figure 10.2 demonstrates how a JIT system works. CIM is used by the manufacturing function and involves using robots. Use role-play to distinguish between JIT inventory systems and traditional mass production systems. Four students volunteer to do a simple task, such as collating and stapling training instructions for new workers. A stockpile of paper exists. Worker one piles up the raw materials, sheets of instructions. Worker two grabs from the pile and collates the pages. Worker three staples the pages.
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[PHAM HOANG HIEN
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PHAM HOANG HIEN [ORGANIZATIONAL THEORY, DESIGN, AND CHANGE]
[PHAM HOANG HIEN
Worker four places the product in a bin. With JIT, no inventories are needed. Copies are produced on demand. Workers one and four are no longer needed. Worker two receives an order, receives the pages directly from the supplier, and collates them. Worker three continues to staple and hands the product to marketing, instead of a stockpiler.
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