Chapter 9: Organizational Design, Competences, and Technology PDF

§9 Organiza onal design, competences, and technology 9.1 What is technology? Technology is the combinaon of skills, knowledge, abilies, techniques, materials, machines, computers, tools, and other equipment that people use to convert or change raw materials, problems, and new ideas into valuable g...

§9 Organiza onal design, competences, and technology 9.1 What is technology? Technology is the combinaon of skills, knowledge, abilies, techniques, materials, machines, computers, tools, and other equipment that people use to convert or change raw materials, problems, and new ideas into valuable goods and services. Technology exists at three levels: individual (personal skills, knowledge and competences), funconal or departmental (procedures and techniques that groups work out to perform their work create competences), and organizaonal. The way an organizaon converts inputs into outputs is o2en used to characterize technology at the organizaonal level. CraKswork is the technology that involves groups of skilled workers interacng closely and combining their skills to produce custom-designed products. 9.2 Technology and organiza onal eec veness Technology is present in all organizaonal acvies: input, conversion, and output. There are three principal approaches to measuring and increasing organizaonal e*ecveness. An organizaon taking the external resource approach uses technology to increase its ability to manage and control external stakeholders. An organizaon taking the internal systems approach uses technology to increase the success of its a9empts to innovate. An organizaon taking the technical approach uses technology to improve e;ciency and reduce costs while simultaneously enhancing the quality and reliability of its products. Managers can use these theories to (1) choose the technology that will most e*ecvely transform inputs into outputs, and (2) design a structure that allows the organizaon to operate the technology e*ecvely. 9.3 Technical complexity: the theory of Joan Woodward Technology is programmed technology when rules and SOPs for converng inputs into outputs can be specied in advance so that tasks can be standardized and the work process be made predictable. The technical complexity of a producon process is the important dimension that di*erenates technologies (Joan Woodward). 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 not on machines. Joan Woodward idened ten levels of technical complexity, which she associated with three types of producon technology: (1) small-batch and unit technology, (2) large-batch and mass producon technology, and (3) connuous-process technology. Small-batch and unit technology 42 Organizaon that employ small-batch and unit technology make one-of-akind customized products or small quanes of products. They score lowest on the dimension of technological complexity because any machines used during the conversion process are less important that people’s skills and knowledge. The conversion process is :exible because the worker adapts techniques to suit the needs and requirements of individual stakeholders. The :exibility of a smallbatch technology gives an organizaon the capacity to produce a wide range of products that can be customized for individual customers. It is relavely expensive to operate because the work process is unpredictable and the producon of customized made-to-order products makes advance programming or work acvies di;cult. However, this technology is ideally suited to producing new or complex products. Large-batch and mass produc on technology To increase control over the work process and make it predictable, organizaon try to increase their use of machines and equipment – that is, they try to increase the level of technical complexity and to increase their e;ciency. The control allows an organizaon to save money on producon and charge a lower price for its products. Con nuous-process technology Organizaons that employ connuous-process technology include companies that make oil-based products and chemicals. The conversion process is almost enrely automated and mechanized. The role of employees is to monitor the plant and its machinery and ensure its e;cient operaon, but it’s primarily to manage excepons in the work process. Connuous-process producon tends to be more technically e;cient than mass producon because it is more mechanized and automated and thus is more predictable and easier to control. It is more e;cient than both unit and mass producon because labour costs are such a small proporon of its overall costs. Connuous-process technology has the lowest producon costs. Technical complexity and organiza onal structure One of Woodward’s goals in classifying technologies according to their technical complexity was to discover whether an organizaon’s technology a*ected the design of its structure. She argued that 43 each technology is associated with a di*erent structure because each technology presents di*erent control and coordinaon problems. Organizaons with small-batch technology typically have three levels; organizaons with mass producon technology four levels; and organizaons with connuous-process technology six levels → as technical complexity increases, organizaons become taller. In an organizaon that uses mass producon technology, the rst-line supervisor’s span of control increases, decision making is centralized, and the hierarchy of authority becomes taller → the most appropriate structure is a mechanisc structure. In an organizaon that uses connuous-process technology, the principal control problem facing the organizaon is monitoring the producon process to control and correct unforeseen events before they lead to disaster. The need to constantly monitor the operang system is the reason why connuous-process technology is associated with the tallest hierarchy of authority. → thus, an organic structure is the most appropriate structure, because the potenal for unpredictable events requires the capability to provide quick, :exible responses. The technological impera ve The argument that technology determines structure is known as the technological impera ve. 9.4 Rou ne tasks and complex tasks: the theory of Charles Perrow To understand why some technologies are more complex than others, it is necessary to understand why the tasks associated with some technologies are more complex than the tasks associated with other technologies. According to Charles Perrow, two dimensions underlie the di*erence between roune and nonroune/complex tasks and technologies: task variability and task analysability. Task variability is the number of excepons that a person encounters while performing a task. It is high when a person can expect to encounter many new situaons or problem when performing his or her task. It is low when a task is highly standardized or repeous. Task analysability is the degree to which search and informaon-gathering acvity is required to solve a problem. The more analysable a task, the less search acvity is needed; such tasks are roune because the informaon needed has been discovered. Tasks are hard to analyse when they cannot be programmed. Four types of technology Perrow used task analysability and task variability to di*erenate among four types of technology: roune manufacturing, cra2swork, engineering producon, and nonroune research. Roune manufacturing is characterized by low task variability and high task analysability; few excepons are encountered in the work processes, and when an excepon does occur, li9le search behaviour is required to deal with it → mass producon is representave of roune technology. Craswork has a low task variability and also a low task analysability; a narrow range of excepons, but a high level of search acvity is needed to nd a soluon to problems. Employees in an organizaon using this kind of technology need to adapt exisng procedures to new situaons and nd new techniques to handle exisng problems more e*ecvely. Engineering producon has a high task variability and also a high task analysability. There might be encounter many excepons, but nding a soluon is relavely easy. Like cra2swork, engineering 44 producon is a form of small-batch technology because people are primarily responsible for developing techniques to solve parcular problems. Nonroune research is characterized by high task variability and low task analysability and is the most complex and least roune of the four technologies. Tasks are complex because not only the number of excepons is high, but search acvity is also high. Rou ne technology and organiza onal structure Perrow and others have suggested that an organizaon should move from a mechanisc to an organic structure as tasks become more complex and less roune. When technology is roune, employees perform clearly dened tasks according to well-established rules and procedures. The work process is advanced and programmed. Nonrou ne technology and organiza onal structure As tasks become less roune and more complex, an organizaon has to develop a structure that allows employees to respond quickly to and manage an increase in the number and variety of excepons and to develop new procedures to handle new problems. To more complex an organizaon’s work processes, the more likely the organizaon is to have a relavely :at and decentralized structure. 9.5 Task interdependence: the theory of James D. Thompson Another view on technology focuses on the way in which task interdependence, the method used to relate or sequence di*erent tasks to on another, a*ects an organizaon’s technology and structure. When task interdependence is low, people and departments are individually specialized. When it is high, people and departments are jointly specialized. Thompson idened three types of technology: mediang, long linked, and intensive. Media ng technology and pooled interdependence Media ng technology is characterized by a work process in which input, conversion, and output acvies can be performed independently of one another. With mediang technology, each part of the organizaon contributes separately to the performance of the whole organizaon, so task interdependence is low. It is also found in organizaon that use franchises: the performance of one story doesn’t a*ect the other, but together all stores determine the performance of the whole organizaon. Long-linked technology and sequen al interdependence Long-linked technology is based on a work process where input, conversion, and output acvies must be performed in series. It is based on sequen al task interdependence, which means that the acons of one person or department directly a*ect the acon of another. Mass producon technology is based on sequenal interdependence. Long-linked technology requires more direct coordinaon than mediang technology. An organizaon with long-linked technology can respond in a variety of ways to the need to coordinate sequenally interdependent acvies: (1) program the conversion process, (2) use planning and scheduling to manage linkages. To reduce the need to coordinate these stages of producon, an organizaon o2en creates extra/surplus resources that enhance its organizaon’s ability to deal with unexpected situaons. But long-linked technology has two major disadvantages: the employees do not become highly skilled and do not develop the ability to improve their skills. 45 Intensive technology and reciprocal interdependence Intensive technology is characterized by a work process where input, conversion, and output acvies are inseparable. Intensive technology is based on reciprocal interdependence, which means that the acvies of all people and all departments fully depend on one another. The move to reciprocal interdependence and intensive technology has two e*ects: Product team and matrix structure are suited to operang intensive technologies because they provide the coordinaon and the decentralized control that allow departments to cooperate to solve problems. Organizaon can also use specialism to reduce costs: producing only a narrow range of outputs. 9.6 From mass produc on to advanced manufacturing technology To reduce costs, a mass producon company must maximize the gains from economies of scale and from the division of labour associated with large-scale producon. There are two ways to do this: using dedicated machines and standardized work procedures, or protecng the conversion process against producon slowdowns or stoppages. Tradional mass producon is based on the use of dedicated machines, which are machines that can perform only one operaon at a me. To maximize volume and e;ciency, a dedicated machine produces a narrow range of products but does so cheaply. Both the use of a producon line to assemble the nal product and the employment of =xed workers (workers who perform standardized work procedures) increase an organizaon’s control over the conversion process. Advanced manufacturing technology (AMT) consists of innovaons in materials technology and in knowledge technology that change the work process of tradional mass producon organizaons. The new developments in technology are somemes called :exible producon, lean producon, or computer-aided producon. 9.7 Advanced manufacturing technology: innova ons in materials technology Materials technology comprises machinery, other equipment and computers. Innovaons in material technology are based on a new view of the linkages among input, conversion, and output acvies. AMT allows an organizaon to reduce uncertainty not by using inventory stockpiles, but by developing the capacity to adjust and control its procedures quickly to eliminate the need for inventory at both the input and the output stages. Computer-aided design (CAD) is an advanced manufacturing technique that greatly simplies the design process. CAD makes it possible to design a new component or microcircuit on a computer screen and then press a bu9on, not to print out the plans, but to physically produce the part itself. Detailed prototypes can be sculpted according to the computer program and can be redesigned quickly if necessary. Cu3ng the costs of product design by using CAD can contribute to both a lowcost and a di*erenaon advantage. Computer-aided materials management (CAMM) is an advanced manufacturing technique used to manage the :ow of raw materials and component parts into the conversion process, to develop master producon schedules for manufacturing, and to control inventory. The di*erence between tradional materials management and the computer-aided materials management is the di*erence between the push and pull approaches to materials management: tradional mass producon uses the push approach, which means that inputs are pushed into the conversion process in accordance 46 with a previously determined plan. Computer-aided materials management makes possible the pull approach: the inputs are pulled into the conversion process in response to a pull from the output stage (customers) rather than a push from the input stage. CAMM increases task interdependence because each stage must be ready to react quickly to demands from the other stages. It also increases technical complexity because it makes input, conversion, and output acvies a connuous process. Just-in- me inventory systems require inputs and components needed for producon to be delivered to the conversion process just as they are needed, neither earlier nor later, so input inventories can be kept to a minimum. CAMM is necessary for a JIT system to work e*ecvely. JIT increases task interdependence between stages in the producon chain and brings :exibility to manufacturing. However, JIT requires an extra measure of coordinaon. In sum, JIT, CAMM and CAD increase technical complexity and task interdependence and thus increase the degree to which a tradional mass producon system operates like a connuous-process technology; increases e;ciency and reduces producon costs. They also have the benets of small-batch producon: :exibility and the ability to respond to customer needs and increased product quality. Flexible manufacturing technology allows the producon of many kinds of components at li9le or no extra cost on the same machine. This combines the variety advantages of small-batch producon with the low-cost advantages of connuous-process producon. Computer-integrated manufacturing (CIM) is an advanced manufacturing technique that controls the changeover from one operaon to another by means of the commands given to the machines through computer so2ware. CIM depends on computers programmed to (1) feed the machine with components, (2) assemble the product from components and move it from one machine to another, and (3) unload the nal product from the machine to the shipping area. 47