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MGT504 - Organization Theory and Design - Lecture Handout 16

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MANUFACTURING AND SERVICE TECHNOLOGIES (CONTD.)

FRAMEWORK

The dimensions of variety and analyzability form the basis for four major categories of technology: routine, craft, engineering, and no routine

Routine Technologies are characterized by little task variety and the use of objective, computational procedures. The tasks are formalized and standardized. Examples include an automobile assembly line and a bank teller department.

Craft Technologies are characterized by fairly stable stream of activities, but the conversion process is not analyzable or well understood. Tasks require extensive training and experience because employees respond to intangible factors on the basis of wisdom, intuition, and experience. Although advances in machine technologies seem to have reduced the number of craft technologies in organizations, a few craft technologies remain. For example, steel furnace engineers continue to mix steel based on intuition and experience, pattern makers at apparel firms still convert rough designers’ sketches into salable garments, and gas and oil explorations use their internal divining rod to determine where millions will be spent on drilling operations.

Engineering technologies tend to be complex because there is substantial variety in the tasks performed. However, the various activities are usually handled on the basis of established formulas, procedures, and techniques. Employees normally refer to a well – developed body of knowledge to handle problems. Engineering and accounting tasks usually fall in this category.

Non routine technologies have high task variety, and the conversion process is not analyzable or well understood. In Non routine technology, a great deal of effort is devoted to analyzing problems and activities. Several equally acceptable options typically can be found. Experience and technical knowledge are used to solve problems and perform the work. Basic research, strategic planning, and other work that involves new projects and unexpected problems are Non routine.

Routine versus Non routine. Variety and analyzability can be combined into a single dimension of technology. This dimension is called routine versus Non routine technology. The analyzability and variety dimensions are often correlated in departments meaning that technologies high in variety tend to below in analyzability, and technologies low in variety tend to be analyzable. Departments can be evaluated along a single dimension of routine versus Non routine that combines both analyzability and variety, which is a useful shorthand measure for analyzing departmental technology.

The following questions show how departmental technology can be analyzed for determining its placement on Perrow’s Technology framework. Employees normally circle a number from one to seven in response to each question.

Variety

To what extent would you say your work is routine?
Does most everyone in this unit do about the same job in the same way most of the time?
Are unit members performing repetitive activities in donning their job?

Analyzability

To what extent is there a clearly known way to do the major types of work you normally encounter?
To what extent is there an understandable sequence of steps that can be followed in doing your work?
To do your work, to what extents can you actually rely on established procedures and practices?

If answers to the above questions indicate high scores for analyzability and low scores for variety, the department would have a routine technology. If the opposite occurs, the technology would be Non routine. Low variety and low analyzability indicate a craft technology, and high variety and high analyzability indicate an engineering technology. As a practical matter, most departments fit somewhere along the diagonal and can be most easily characterized as routine or Non routine.

WORKFLOW INTERDEPENDENCE AMONG DEPARTMENTS

So far, we have explored how organizations and department technologies influence structural design. The final characteristic of technology that influences structure is called interdependence. Interdependence means the extent to which departments depend on each other for resources or materials to accomplish their tasks. Low interdependence means that departments can do their work independently of each other and have little need for interaction, consultation, or exchange of materials. High interdependence means departments must constantly exchange resources.

TYPES

James Thompson defined three types of interdependence that influence organization structure. These interdependencies are illustrated in Example and are discussed in the following sections.

Pooled: Pooled interdependence is the lowest form of interdependence among departments. In this form, work does not flow between units. Each department is part of the organization and contributes to the common good of the organization, but works independently. McDonald’s restaurants or branch banks are examples of pooled interdependence. An outlet in Chicago need not interact with an outlet in Urbana. Pooled interdependence may be associated with the relationships within a divisional structure. Divisions or branches share financial resources from a common pool, and the success of each division contributes to the success of the overall organization. Thompson proposed that pooled interdependence would exist in firms with what he called a mediating technology. A mediating technology provides

EXAMPLE: Thompson’s Classification of Interdependence and Management Implication

Thompson’s Classification of Interdependence and Management Implication

Products or services that mediate or link clients from the external environment and, in so doing, allows each department to work independently. Banks, brokerage firms, and real estate offices all mediate between buyers and sellers, but the offices work independently within the organization.

The management implications associated with pooled interdependence are quite simple. Thompson argued that managers should use rules and procedures to standardize activities across department. Each department should use the same procedures and financial statements so the outcomes of all departments can be measured and pooled. Very little day – to – day coordination is required among units.

Sequential: When interdependence is of serial form, with parts produced in one department becoming inputs to another department, then it is called sequential interdependence. the first department must perform correctly for the second department to perform correctly. This is higher level of interdependence than pooled, because department exchange resources and depend upon others to perform well. Sequential interdependence creates a greater need for horizontal mechanisms such as integrators or task forces.

Sequential interdependence occurs in what Thompson called long-linked technology, which “refers to the combination in one organization of successive stages of production: each stage of production uses as it inputs the production of the preceding stage and produces inputs for the following stage.” Large organizations that use assembly line production, such as in the automobile industry, use long-linked technologies and are characterized by sequential interdependence between plants or departments. For example, a United Auto Workers’ strike at two General Motors parts plants in the summer of 1998 eventually halted production at all but one of GM’s assembly plants in North America. Assembly plants were unable to continue work because they could not get the parts they needed.

The management requirements for sequential interdependence are more demanding than for pooled interdependence. Coordination among the linked plants or departments is required. Since the interdependence implies a one-way flow of materials, extensive planning and scheduling are generally needed. Plant B needs to know what to expect from Plant. A so both can perform effectively. Some day – to – day communication among plants is also needed to handle unexpected problems and exceptions that arise.

Reciprocal: The highest level of interdependence is reciprocal interdependence. this exist when the output of operation A is the input to operation B, and the output of operation B is the input back gain to operation A. the outputs of departments influence those departments in reciprocal fashion

Reciprocal interdependence tends to occur in organizations with what Thompson called intensive technologies, which provide a variety of products or services in combination to a client. Hospitals are an excellent example because they provide coordinated services to patients. A patient may move back and forth between X ray, surgery, and physical therapy as needed to be cured. A firm developing new products is another example. Intense coordination is needed between design, engineering, manufacturing, and marketing to combine all their resources to suit the customer’s product need.

Management requirements are greatest in the case of reciprocal interdependence. Because reciprocal interdependence requires that departments work together intimately and be closely coordinated, a horizontal structure may be appropriate. The structure must allow for frequent horizontal communication and adjustment. Extensive planning is required in hospitals, for example, but plans will not anticipate or solve all problems. Daily interaction and mutual adjustment among departments are required. Managers from several departments are jointly involved in face-to-face coordination, teamwork, and decision making. Reciprocal interdependence is the most complex inter-dependence for organizations to handle.

STRUCTURAL PRIORITY

Since decision making, communication, and coordination problems are greatest for reciprocal interdependence, reciprocal interdependence should receive first priority in organization structure. New product development is one area of reciprocal interdependence that is of growing concern to manager as companies face increasing pressure to get new product to market fast. Many firms re revamping the design-manufacturing relationship by closely integrating computer –aided design (CAD) and computer –aided manufacturing (CAM) technologies discussed earlier. Activities that are reciprocally interdependent should be grouped close together in the organization so managers have easy access to one another for mutual adjustment. These units should report to the same person on the organization chart and should be physically close so the time and effort for coordination can be minimized. A horizontal structure, with linked sets of teams working on core processes, can provide the close coordination needed to support reciprocal interdependence. Poor coordination will result in poor performance for the organization. If reciprocally interdependent units are not located close together, the organization should design mechanisms for coordination, such as daily meetings between departments or an intranet to facilitate communication. The next priority is given to sequential inter-dependencies, and finally to pooled interdependencies.

This strategy of organizing keeps the communication channels short where coordination is most critical to organizational success. For example, Boise Cascade Corporation experienced poor service to customer because customer service reps located in New York City were not coordinating with production planners in Oregon plants. Customers couldn’t get delivery as needed. Boise was reorganized, and the two groups were consolidated under one roof, reporting to the same supervisor at division headquarters. Now customer needs are met because customer service reps work with production planning to schedule customer orders.

STRUCTURAL IMPLICATIONS

Most organizations experience various levels of interdependence, and structure can be designed to fit these needs. In manufacturing firms, new product development entails reciprocal interdependence among the design, engineering, purchasing, manufacturing, and sales departments. Perhaps a horizontal structure or cross-functional teams could be used to handle the back and – forth flow of information and resources. Once a product is designed, its actual manufacture would be sequential interdependence, with a flow of goods from one department to another, such as among purchasing, inventory, production control, manufacturing, and assembly. The actual ordering and delivery of products is pooled interdependence, with warehouses working independently. Customers could place an order with the nearest facility, which would not require coordination among warehouses, except in unusual cased such as a stock outage.

When consultant analyzed NCR to learn why the development of new products was so slow, they followed the path from initial idea to implementation. The problem was that the development, production and marketing of products took place in separate divisions, and communication across the three interdependent groups was difficult. NCR broke up its traditional organization structure and created several stand-alone units of about five hundred people, each with its own development, production, and marketing people, the new structure enabled new products to be introduced in record time.

The three levels of interdependence are illustrated by a study of athletic teams that examined interdependency among players and how it influences other aspects of baseball, football, and basketball teams.

IMPACT OF TECHNOLOGY ON JOB DESIGN

The relation between a new technology and organization seems to follow a pattern, beginning with immediate effect on the content of jobs followed (after a longer period) by impact on design of the organization. The ultimate impact of technology on employees can be partially understood through the concepts of job design and sociotechnical system.

JOB DESIGN

Job design includes the assignment of goals and tasks to be accomplished by employees. Managers may consciously change job design to improve productivity or worker motivation. For example, when workers are involved in performing boring, repetitive tasks, manager may introduce job rotation. Which mean moving employees from job to job to give them a greater variety of tasks? However, managers may also unconsciously influence job design through the introduction of new technologies, which can change how jobs are done and he very nature of jobs. Managers should understand how the introduction of a new technology may affect employee’s jobs. The common theme of new technologies in the work place is that they in some way substitute machinery for human labor in transforming inputs into outputs. Automated teller machines (ATMs) have replaced thousands of human bank tellers, for example IBM has even built a plant in Austin, Texas, that can produce laptop computers without the help of a single worker.

In addition to actually replacing human workers, technology may have several different effects on the human jobs that remain. Research has indicated that mass production technologies tend to produce job simplification, which means that the variety and difficulty of tasks performed by a single person is reduced. The consequence is boring, repetitive jobs that generally provide little satisfaction. More advanced technology, on the other hand, tends to cause job enrichment meaning that the job provides greater responsibility, recognition, and opportunities for growth and development. These technologies create a greater need for employee training and education because workers need higher-level skills and grater competence to master their tasks. For example, ATMs took most the tine tasks (deposit and withdrawals) away from banks tellers and left them with the more complex tasks that require higherlevel skills. Studies of computer – integrate manufacturing found that it produces three noticeable results for employees: more opportunities for intellectual mastery and enhanced cognitive skills for workers; more worker responsibility for results; and greater interdependence among workers, enabling more social interaction and the development of team work and coordination skills. Advanced manufacturing technology may also contribute to job enlargement, which is an expansion of the number of different tasks performed by an employee. Because fewer workers are needed with the new technology, each employee has to be able to perform a greater number and variety of tasks.

With advanced technology, workers have to keep learning new skills because technology, is changing so rapidly, advances in information technology are having a significant effect on jobs in the service industry, including doctors’ offices and medical clinics, law firms, financial planners, and libraries. Workers may find that their jobs change almost daily because of new software programs, increased use of the internet, and other advances in information technology.

Advanced technology does not always have a positive effect on employees, but research findings in general are encouraging, suggesting that jobs for workers are enriched rather that simplified, engaging their higher mental capacities, offering opportunities for learning and growth, and providing greater job satisfaction.

SOCIOTECHNICAL SYSTEMS

The sociotechnical system approach recognized the interaction of technical and human needs in effective job design, combining the needs of people with the organization’s need for technical efficiency. The socio portion of the approach refers to the people groups who work in organization and how work is organized and coordinated. The technical portion refers to the materials, tools, machines, and processes used to transform organization inputs into outputs.

The social system includes all human elements – such as individual and team behaviors, organizational culture, management practices, and degree of communication openness—that can influence the performance of work. The technical system refers to the type of production technology, the level of interdependence, the complexity of tasks, and so forth. The goal of the sociotechnical system approach is to design the organization for joint optimization, which means that an organization functions best only when the social and technical systems are designed to fit the needs of one another. Designing the organization to meet human needs while ignoring the technical system, or changing technology to improve efficiency while ignoring human needs, may inadvertently cause performance problems. The sociotechnical system approach attempts to find a balance between what workers want and need and the technical requirements of the organization’s production system.

One example comes from a museum that installed a closed – circuit TV system. Rather than having several guards patrolling the museum and grounds, the television could easily be monitored by a single guard. Although the technology saved money because only one guard was needed per shift, it led to unexpected performance problems. Guards had previously enjoyed the social interaction provided by patrolling; monitoring a closed – circuit television led to alienation and boredom. When a federal agency did an eighteen—month test of the system. Only 5 percent of several thousand experimental covert intrusions were detected by the guard. The system was inadequate because human needs were not taken into account.

Sociotechnical principles evolved from the work of the Tavistock Institute, a research organization in England, during the 1950s and 1960s. Examples of organizational change using sociotechnical systems principles have occurred in numerous organizations, including General Motors, Volvo, the Tennessee Valley Authority ( TVA) and Procter & Gamble, Although there have been failures, in many of these applications, the joint optimization of changes in technology and structure to meet the needs of people as well as efficiency improved performance. Safety, quality, absenteeism, and turnover, in some cases, work design was not the most efficient based on technical and scientific principles, but worker involvement and commitment more than made up for the difference. Thus, once again research shows that new technologies need not have a negative impact on workers, because the technology often requires higher- level mental and social skills and can be organized to encourage the involvement and commitment of employees, thereby benefiting both the employee and the organization.

The sociotechnical systems principle that people should be viewed as resources and provided with appropriate skills, meaningful work, and suitable rewards becomes even more important in today’s world of growing technological complexity. One study of paper manufactures found that organization that put too much faith in machines and technology and pay little attention to the appropriate management of people do not achieve advances in productivity and flexibility. Today‘s most successful companies strive to find the right mix of machines, Computer systems, and people and the most effective way to coordinate them. Systems based on maximum technical efficiency, tight top – down control, and assumptions that workers are irresponsible and mindless are increasingly ineffective.

Although many principles of sociotechnical system theory are still valid, current scholars and researchers are also arguing for an expansion of the approach to capture the dynamic nature of today’s organizations, the chaotic environment, and the shift from routine to Nonroutine jobs brought about by advances in technology.

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