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Chapter 9
Organizational Design,
Competences, and Technology
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Learning Objectives
This chapter focuses on technology and examines how organizations use it to build
competences and create value. Then it discusses why certain forms of
organizational structures are suitable for different types of technology, just as earlier
chapters used a similar contingency approach to examine why certain environments
or strategies typically require the use of certain forms of structure.
After studying this chapter you should be able to:
1. Identify what technology is and how it relates to organizational
effectiveness.
2. Differentiate among three different kinds of technology that create different
competences.
3. Understand how each type of technology needs to be matched to a certain
kind of organizational structure if an organization is to be effective.
4. Understand how technology affects organizational culture.
5. Appreciate how advances in technology, and new techniques for managing
technology, are helping increase organizational effectiveness.
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What Is Technology?
When we think of an organization, we are likely to think of it in terms of what it does.
We think of manufacturing organizations like Whirlpool or Ford as places where
people use their skills in combination with machinery and equipment to assemble
inputs into appliances, cars, and other finished products. We view service
organizations like hospitals and banks as places where people apply their skills in
combination with machinery or equipment to make sick people well or to facilitate
customers’ financial transactions. In all manufacturing and service organizations,
activities are performed to create value—that is, inputs are converted into goods
and services that satisfy people’s needs.
Technology is the combination of skills, knowledge, abilities, 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. When people at Ford, the Mayo Clinic, H&R Block, and Google use their
skills, knowledge, materials, machines, and so forth, to produce a finished car, a
cured patient, a completed tax return, or a new online application, they are using
technology to bring about change to something to add value to it.
Technology
The combination of skills, knowledge, abilities,
techniques, materials, machines, computers, tools,
and other equipment that people use to convert or
change raw materials into valuable goods and
services.
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Inside an organization, technology exists at three levels: individual, functional or
departmental, and organizational. At the individual level, technology is the personal
skills, knowledge, and competences that individual women and men possess. At the
functional or departmental level, the procedures and techniques that groups work
out to perform their work create competences that constitute technology. The
interactions of the members of a surgical operating team, the cooperative efforts of
scientists in a research and
development laboratory, and techniques developed by assembly-line workers are
all examples of competences and technology at the functional or departmental
level.
Mass production
The organizational technology that uses conveyor
belts and a standardized, progressive assembly
process to manufacture goods.
The way an organization converts inputs into outputs is often used to characterize
technology at the organizational level. Mass production is the organizational
technology based on competences in using a standardized, progressive assembly
process to manufacture goods. Craftswork is the technology that involves
groups of skilled workers interacting closely and combining their skills to produce
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custom-designed products. The difference between these two forms of technology
is clearly illustrated in Organizational Insight 9.1 .
Craftswork
The technology that involves groups of skilled
workers who interact closely to produce custom-
designed products.
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Organizational Insight
9.1 Progressive Manufacture at Ford
In 1913, Henry Ford opened the Highland Park plant to produce the Model
T car. In doing so, he changed forever the way complex products like cars
are made, and the new technology of “progressive manufacture” (Ford’s
term), or mass production, was born. Before Ford introduced mass
production, most cars were manufactured by craftswork. A team of
workers—a skilled mechanic and a few helpers—performed all the
operations necessary to make the product. Individual craftsworkers in the
automobile and other industries have the skills to deal with unexpected
situations as they arise during the manufacturing process. They can modify
misaligned parts so that they fit together snugly, and they can follow
specifications and create small batches of a range of products. Because
craftswork relies on workers’ skills and expertise, it is a costly and slow
method of manufacturing. In searching for new ways to improve the
efficiency of manufacturing, Ford developed the process of progressive
manufacture.
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Brian Delft © Dorling Kindersley
Ford outlined three principles of progressive manufacture:
1. Work should be delivered to the worker; the worker should not have
to find the work. 1
At the Highland Park plant, a mechanized, moving
conveyor belt brought cars to the workers. Workers did not move
past a stationary line of cars under assembly.
2. Work should proceed in an orderly and specific sequence so each
task builds on the task that precedes it. At Highland Park, the
implementation of this idea fell to managers, who worked out the
most efficient sequence of tasks and coordinated them with the
speed of the conveyor belt.
3. Individual tasks should be broken down into their simplest
components to increase specialization and create an efficient
division of labor. The assembly of a taillight, for example, might be
broken into two separate tasks to be performed all day long by two
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different workers. One person puts lightbulbs into a reflective panel;
the other person screws a red lens onto the reflective panel.
As a result of this new work system, by 1914 Ford plants employed 15,000
workers but only 255 supervisors (not including top management) to
oversee them. The ratio of workers to supervisors was 58 to 1. This very
wide span of control was possible because the sequence and pacing of the
work were not directed by the supervisors but were controlled by work
programming and the speed of the production line. 2
The mass production
system helped Ford control many workers with a relatively small number of
supervisors, but it also created a tall hierarchy. The hierarchy at a typical
Ford plant had six levels, reflecting the fact that management’s major
preoccupation was the vertical communication of information to top
management, which controlled decision making for the whole plant.
The introduction of mass production technology to auto making was only
one of Henry Ford’s technological manufacturing innovations. Another was
the use of interchangeable parts. When parts are interchangeable, the
components from various suppliers fit together; they do not need to be
altered to fit during the assembly process. With the old craftswork method of
production, a high level of worker competence was needed to fit together
the components provided by different manufacturers, which often differed in
size or quality. Ford insisted that component manufacturers follow detailed
specifications so that parts needed no remachining and his relatively
unskilled work force would be able to assemble them easily. Eventually, the
desire to control the quality of inputs led Ford to embark on a massive
program of vertical integration. Ford mined iron ore in its mines in Upper
Michigan and transported the ore in a fleet of Ford-owned barges to Ford’s
steel plants in Detroit, where it was smelted, rolled, and stamped into
standard body parts.
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As a result of these technological innovations in manufacturing, by the early
1920s Henry Ford’s organization was making over two million cars a year.
Because of his efficient manufacturing methods, Ford reduced the price of a
car by two-thirds. This low-price advantage, in turn, created a mass market
for his product. 3
Clearly, as measured by standards of technical efficiency
and the ability to satisfy external stakeholders such as customers, Ford
Motor was a very effective organization. Inside the factories, however, the
picture was not so rosy.
Workers hated their work. Ford managers responded to their discontent with
repressive supervision. Workers were watched constantly. They were not
allowed to talk on the production line, and their behavior both in the plant
and outside was closely monitored. (For example, they were not allowed to
drink alcohol, even when they were not working.) Supervisors could
instantly fire workers who disobeyed any rules. So repressive were
conditions that by 1914 so many workers had been fired or had quit that 500
new workers had to be hired each day to keep the work force at 15,000. 4
Clearly, the new technology of mass production was imposing severe
demands on individual workers.
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Technology and Organizational
Effectiveness
Recall from Chapter 1 that organizations take inputs from the environment and
create value from the inputs by transforming them into outputs through conversion
processes (see Figure 9.1 ). Although we usually think of technology only at the
conversion stage, technology is present in all organizational activities: input,
conversion, and output.5
At the input stage, technology—skills, procedures, techniques, and competences—
allows each organizational function to handle relationships with outside
stakeholders so that the organization can effectively manage its specific
environment. The human resource function, for example, has techniques such as
interviewing procedures and
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Figure 9.1 Input, Conversion, and Output Processes
psychological testing that it uses to recruit and select qualified employees. The
materials management function has developed competences in dealing with input
suppliers, for negotiating favorable contract terms, and for obtaining low-cost, high-
quality component parts. The finance department has techniques for obtaining
capital at a cost favorable to the company.
At the conversion stage, technology—a combination of machines, techniques, and
work procedures—transforms inputs into outputs. The best technology allows an
organization to add the most value to its inputs at the least cost of organizational
resources. Organizations often try to improve the efficiency of their conversion
processes, and they can improve it by training employees in new time-management
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techniques and by allowing employees to devise better ways of performing their
jobs.
At the output stage, technology allows an organization to effectively dispose of
finished goods and services to external stakeholders. To be effective, an
organization must possess competences in testing the quality of the finished
product, in selling and marketing the product, and in managing after-sales service to
customers.
The technology of an organization’s input, conversion, and output processes is an
important source of a company’s competitive advantage. Why is Microsoft the most
successful software company? Why is Toyota the highest-quality carmaker? Why is
McDonald’s the most efficient fast-food company? Why does Walmart consistently
outperform Kmart and Sears? Each of these organizations excels in the
development, management, and use of technology to create competences that lead
to higher value for stakeholders.
Recall from Chapter 1 the three principal approaches to measuring and
increasing organizational effectiveness (see Table 1.1 ). An organization taking
the external resource approach uses technology to increase its ability to manage
and control external stakeholders. Any new technological developments that allow
an organization to improve its service to customers, such as the ability to customize
products or to increase products’ quality and reliability, increases the organization’s
effectiveness.
An organization taking the internal systems approach uses technology to increase
the success of its attempts to innovate; to develop new products, services, and
processes; and to reduce the time needed to bring new products to market. As we
saw earlier, the introduction of mass production at the Highland Park plant allowed
Henry Ford to make a new kind of product—a car for the mass market.
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An organization taking the technical approach uses technology to improve efficiency
and reduce costs while simultaneously enhancing the quality and reliability of its
products. Ford increased his organization’s effectiveness by organizing its
functional resources to create better quality cars at a lower cost for both
manufacturer and consumer.
Organizations use technology to become more efficient, more innovative, and better
able to meet the needs and desires of stakeholders. Each department or function in
an organization is responsible for building competences and developing technology
that allows it to make a positive contribution to organizational performance. When
an organization has technology that enables it to create value, it needs a structure
that maximizes the effectiveness of the technology. Just as environmental
characteristics require organizations to make certain organizational design choices,
so do the characteristics of different technologies affect an organization’s choice of
structure.
In the next three sections we examine three theories of technology that are
attempts to capture the way different departmental and organizational technologies
work and affect organizational design. Note that these three theories are
complementary in that each illuminates some aspects of technology that the others
don’t. All three theories are needed to understand the characteristics of different
kinds of technologies. Managers, at all levels and in all functions, can use these
theories to (1) choose the technology that will most effectively transform inputs into
outputs and (2) design a structure that allows the organization to operate the
technology effectively. Thus it is important for these managers to understand the
concept of technical complexity, the underlying differences between routine and
complex tasks, and the concept of task interdependence.
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Technical Complexity: The
Theory of Joan Woodward
Some kinds of technology are more complex and difficult to control than others
because some are more difficult to program than others. Technology is said to be
programmed when rules and SOPs for converting inputs into outputs can be
specified in advance so that tasks can be standardized and the work process be
made predictable. McDonald’s uses a highly programmed technology to produce
hamburgers and so does Ford to produce its vehicles, and they do so to control the
quality of their outputs—hamburgers or cars. The more difficult it is to specify the
process for converting inputs into outputs, the more difficult it is to control the
production process and make it predictable.
Programmed technology
A technology in which the procedures for converting
inputs into outputs can be specified in advance so
that tasks can be standardized and the work process
can be made predictable.
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According to one researcher, Joan Woodward, the technical complexity of a
production process—that is, the extent to which it can be programmed so it can be
controlled and made predictable—is the important dimension that differentiates
technologies. 6
High technical complexity exists when conversion processes can be
programmed in advance and fully automated. With full automation, work activities
and the outputs that result from them are standardized and can be predicted
accurately. Low technical complexity exists when conversion processes depend
primarily on people and their skills and knowledge and not on machines. With
increased human involvement and less reliance on machines, work activities cannot
be programmed in advance, and results depend on the skills of the people involved.
Technical complexity
A measure of the extent to which a production
process can be programmed so that it can be
controlled and made predictable.
The production of services, for example, typically relies much more on the
knowledge and experience of employees who interact directly with customers to
produce the final output than it relies on machines and other equipment. The labor-
intensive nature of the production of services makes standardizing and
programming work activities and controlling the work process especially difficult.
When conversion processes depend primarily on the performance of people, rather
than on machines, technical complexity is low, and the difficulty of maintaining high
quality and consistency of production is great.
Joan Woodward identified ten levels of tech. i#al complexity, whi#h she associated
with three types of production technology: (1) small-batch and unit technology, (2)
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large-batch and mass production technology, and (3) continuous-process
technology (see Figure 9.2 ). 7
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Small-Batch and Unit Technology
Organizations that employ small-batch and unit technology make one-of-a-kind
customized products or small quantities of products. Examples of such
organizations include a furniture maker that constructs furniture customized to the
needs and tastes of specific clients, a printer that supplies the engraved wedding
invitations that a particular couple desires, and teams of surgeons who work in
specialized hospitals that provide a specific set of services such as eye or knee
surgery. Small-batch and unit technology scores lowest on the dimension of
technical complexity (see Figure 9.2 ) because any machines used during the
conversion process are less important than people’s skills and knowledge. People
decide how and when to use machines, and the production operating process
reflects their decisions about how to apply their knowledge. A custom furniture
maker, for example, uses an array of tools—including lathes, hammers, planes, and
saws—to transform boards into a cabinet. However, which tools are used and the
order in which they are used depends on how the furniture maker chooses to build
the cabinet. With small-batch and unit technology, the conversion process is flexible
because the worker adapts techniques to suit the needs and requirements of
individual customers.
The flexibility of small-batch technology gives an organization the capacity to
produce a wide range of products that can be customized for individual customers.
For example, high-fashion designers and makers of products like fine perfume,
custom-built cars, and specialized furniture use small-batch technology. Small-
batch technology allows a custom furniture maker, for example, to satisfy the
customer’s request for a certain style of table made from a certain kind of wood.
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Figure 9.2 Technical Complexity and Three Types of Technology
Joan Woodward identified ten levels of technical complexity, which she associated
with three types of production.
Source: Adapted from Joan Woodward, “Management and Technology,” London: Her
Majesty’s Stationery Office, 1958, p. 11. Reproduced with permission of the Controller of Her
Britannic Majesty’s Stationery Office on behalf of Parliament.
Small-batch technology is relatively expensive to operate because the work process
is unpredictable and the production of customized made-to-order products makes
advance programming of work activities difficult. However, flexibility and the ability
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to respond to a wide range of customer requests make this technology ideally
suited to producing new or complex products. Google uses small-batch technology
when it assigns a team of software engineers to work together to develop new
software applications; so does a maker of doughnuts.
Founded in 1937 in Newington, Connecticut, Krispy Kreme is a leading specialty
retailer of premium-quality yeast-raised doughnuts. Krispy Kreme’s doughnuts have
a broad customer following and command a premium price because of their unique
taste and quality. The way it uses small-batch production to increase its operating
efficiency and responsiveness to customers is instructive. Krispy Kreme calls its
store production operations “doughnut theater” because its physical layout is
designed so that customers can see and smell the doughnuts being made by its
impressive company-built doughnut-making machines.
What are elements of its small-batch production methods? The story starts with the
65-year-old company’s secret doughnut recipe that it keeps locked up in a vault.
None of its franchisees know the recipe for making its dough, and Krispy Kreme
sells the ready-made dough and other ingredients to its stores. Even the machines
used to make the doughnuts are company designed and produced, so no doughnut
maker can imitate its unique cooking methods and thus create a similar competing
product.
The doughnut-making machines are designed to produce a wide variety of different
kinds of doughnuts in small quantities, and each store makes and sells between
4,000 and 10,000 dozen doughnuts per day.
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Krispy Kreme constantly refines its production system to improve the efficiency of
its small-batch operations. For example, it redesigned its doughnut machine to
include a high-tech extruder that uses air pressure to force doughnut dough into row
after row of rings or shells. Employees used to have to adjust air pressure manually
as the dough load lightened. Now this is all done automatically. A redesigned
doughnut icer tips finished pastries into a puddle of chocolate frosting; employees
had to dunk the doughnuts two at a time by hand before the machine was invented.
Although these innovations may seem small, across hundreds of stores and millions
of doughnuts, they add up to significant gains in productivity—and more satisfied
customers. The way in which Zynga, the social networking game maker, designs its
games using small-batch or craftswork technology shows how adaptable this type
of technology can be for Internet software companies, as discussed in
Organizational Insight 9.2 .
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Organizational Insight
9.2 How Zynga Crafts Its Online Social Games
Zynga Inc., based near Marina del Rey, California, is the most popular
maker of online social games—a rapidly growing and highly competitive
segment of the games industry. Every month, one out of ten users of the
WWW plays one or more of Zynga’s 55 games, which include FarmVille,
Zynga Poker, and Mafia Wars. About four-fifths of the U.S. population—
around 250 million people—play its games each month. In May 2011 Zynga
rolled out its newest online game, Empires & Allies, that took the company
into a new gaming arena, that of “action and strategy” games, which have
been dominated by established global game developers like Electronic Arts
(EA), some of whose blockbuster games include Crysis 2, Star Wars, The
Sims, and Portal 2.
The way in which Zynga develops its games is unique in the gaming
industry because it employs a craftswork technology in which small teams
of game designers and developers work continuously to create, develop,
and then perfect games over time so that the games themselves are
constantly changing. Zynga employs several hundred game developers and
designers in a relaxed, campus-like environment in which they are even
allowed to bring their dogs to work if they choose. Mark Skaggs, Zynga’s
senior vice president of product, summed up the way the company’s design
technology works as “fast, light, and right.” 8
Zynga’s games take only a few
weeks or months to design. Why? Because its teams of developers work in
self-managed groups that have around 30 members. All the activities of
each team member’s performance, and the way they continuously
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iStockphoto.com/luismmolina
make changes to a game, is immediately obvious to other team members
because they are all linked through interactive realtime software that allows
them to evaluate how the changes being made will affect the nature of the
game. Team members can continuously approve, disapprove, or find ways
to improve on the way a game’s objectives and features are developing, to
ensure the game will eventually appeal to Zynga’s hundreds of millions of
online users when it is released.
However, the other aspect of craftswork technology that works so well for
Zynga lies in its competence to continue to customize and change every
game it develops to better appeal to the likes and dislikes of its users—even
after the game has been released online. Unlike more established game
makers like EA, much of the game development that takes place after a
Zynga game is released occurs as its designers work—often round-the-
clock—to add content, correct errors, test new features, and constantly
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adjust the game based upon real-time feedback about how game players
are “interacting” with it, and to find out what users enjoy the most. One of
Zynga’s unique competences is its ability to track the performance of each
feature and design element of a game. By what it calls A/B testing, Zynga
creates two different groups of online players—A and B—who act as guinea
pigs as their responses to a game that has been modified or improved with
new features are monitored. By counting how many players click on the new
feature, Zynga knows if players like it and what they want, so its developers
can continuously change the dynamics of the game to make it more
satisfying to users.
The result is that its online games get better and better over time in the
sense that they become more appealing to users. As Greg Black, Empires
& Allies’ lead game designer, says, “We can mine our users and see in real
time what they like to do.” 9
So, for example, while the first thousands of
players of Empires & Allies were trying to work out how to play the game
and conquer their rivals on their computer screens, the game’s developers
were watching their efforts and using their experiences to continually craft
and improve the way the game is played to make it more exciting.
This amazing interactive approach to online game development is quite
different from the technology used by game developers like EA, which may
use hundreds of developers who take two years or more to finalize a new
game before it is released for sale. EA, of course makes its money from the
revenues earned on the sales of each game, which are often priced at $50
–75, and a successful game can sell 50 million copies. In Zynga’s model,
however, all the online games are provided free of charge to hundreds of
millions of online users. Online social games focus on the number of daily
active users, which in Zynga’s case is 50 million a day (it has an audience
of 240 million players on Facebook alone). So, if only 2–5% of its players
spend money on the extra game features that can be bought
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cheaply—often for nickels or dimes—with 50 million users a day Zynga is
already obtaining revenues of over $200 million a year. And, the more
games that Zynga can encourage users to play, the more money its earns!
Small wonder that when the company announced a public offering of its
shares in 2011, analysts estimated the company would be worth $20 billion!
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Large-Batch and Mass Production
Technology
To increase control over the work process and make it predictable, organizations try
to increase their use of machines and equipment—that is, they try to increase the
level of technical complexity and to increase their efficiency. Organizations that
employ large-batch or mass production technology produce massive volumes of
standardized products, such as cars, razor blades, aluminum cans, and soft drinks.
Examples of such organizations include Ford, Gillette, Crown Cork and Seal, and
Coca-Cola. With large-batch and mass production technology, machines control the
work process. Their use allows tasks to be specified and programmed in advance.
As a result, work activities are standardized, and the production process is highly
controllable. 10
Instead of a team of craftsworkers making custom furniture piece by
piece, for example, high-speed saws and lathes cut and shape boards into
standardized components that are assembled into thousands of identical tables or
chairs by unskilled workers on a production line, such as those produced in the
factories of IKEA’s global suppliers (see Closing Case, Chapter 3 ).
The control provided by large-batch and mass production technology allows an
organization to save money on production and charge a lower price for its products.
As Organizational Insight 9.1 describes, Henry Ford changed manufacturing
history when he replaced small-batch production (the assembly of cars one by one
by skilled workers) with mass production to manufacture the Model T. The use of a
conveyor belt, standardized and interchangeable parts, and specialized progressive
tasks made conversion processes at the Highland Park plant more efficient and
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productive. Production costs plummeted, and Ford was able to lower the cost of a
Model T and create a mass market for his product. In a similar way, IKEA today
also operates its own factories where its engineers specialize in finding ways to
make furniture more efficiently; IKEA then transfers this knowledge to its global
suppliers.11
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Continuous-Process Technology
With continuous-process technology, technical complexity reaches its height (see
Figure 9.2 ). Organizations that employ continuous-process technology include
companies that make oil-based products and chemicals, such as Exxon, DuPont,
and Dow, and brewing companies, such as Anheuser-Busch and Miller Brewing. In
continuous-process production, the conversion process is almost entirely
automated and mechanized; employees generally are not directly involved. Their
role in production is to monitor the plant and its machinery and ensure its efficient
operation. 12
The task of employees engaged in continuous-process production is
primarily to manage exceptions in the work process, such as a machine breakdown
or malfunctioning equipment.
The hallmark of continuous-process technology is the smoothness of its operation.
Production continues with little variation in output and rarely stops. In an oil refinery,
for example, crude oil brought continuously to the refinery by tankers flows through
pipes to cracking towers, where its individual component chemicals are extracted
and sent to other parts of the refinery for further refinement. Final products such as
gasoline, fuel oil, benzene, and tar leave the plant in tankers to be shipped to
customers. Workers in a refinery or in a chemical plant rarely see what they are
producing. Production takes place through pipes and machines. Employees in a
centralized control room monitor gauges and dials to ensure that the process
functions smoothly, safely, and efficiently.
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Continuous-process production tends to be more technically efficient than mass
production because it is more mechanized and automated and thus is more
predictable and easier to control. It is more cost efficient than both unit and mass
production because labor costs are such a small proportion of its overall cost. When
operated at full capacity, continuous-process technology has the lowest production
costs.
Woodward noted that an organization usually seeks to increase its use of machines
(if it is practical to do so) and move from small-batch to mass production to
continuous-process production to reduce costs. There are, however, exceptions to
this progression. For many organizational activities, the move to automate
production is not possible or practical. Prototype development, basic research into
new drugs or novel computer hardware or software applications, and the day-to-day
operation of hospitals and schools, for example, are intrinsically unpredictable and
thus would be impossible to program in advance using an automated machine. A
pharmaceutical company cannot say, “Our research department will invent three
new drugs—one for diabetes and two for high blood pressure—every six months.”
Such inventions are the result of trial and error and depend on the skills and
knowledge of its researchers. Moreover, many customers are willing to pay high
prices for custom-designed products that suit their individual tastes, such as
custom-made suits, jewelry, or high-end gaming computers. Thus there is a market
for the products of small-batch companies even though production costs are high.
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Technical Complexity and Organizational
Structure
One of Woodward’s goals in classifying technologies according to their technical
complexity was to discover whether an organization’s technology affected the
design of its structure. Specifically, she wanted to see whether effective
organizations had structures that matched the needs of their technologies. A
comparison of the structural characteristics of organizations pursuing each of the
three types of technology revealed systematic differences in the technology
–structure relationship.
On the basis of her findings, Woodward argued that each technology is associated
with a different structure because each technology presents different control and
coordination problems. Organizations with small-batch technology typically have
three levels in their hierarchy; organizations with mass production technology, four
levels; and organizations with continuous-process technology, six levels. As
technical complexity increases, organizations become taller, and the span of control
of the CEO widens. The span of control of first-line supervisors first expands and
then narrows. It is relatively small with small-batch technology, widens greatly with
mass production technology,
and contracts dramatically with continuous-process technology. These findings
result in the very differently shaped structures. Why does the nature of an
organization’s technology produce these results?
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The main coordination problem associated with small-batch technology is the
impossibility of programming conversion activities because production depends on
the skills and experience of people working together. An organization that uses small-
batch technology has to give people the freedom to make their own decisions so they
can respond quickly and flexibly to the customer’s requests and produce the exact
product the customer wants. For this reason, such an organization has a relatively flat
structure (three levels in the hierarchy), and decision making is decentralized to small
teams where first-line supervisors have a relatively small span of control (23
employees). With small-batch technology, each supervisor and work group decides
how to manage each decision as it occurs at each step of the input-conversion-output
process. This type of decision making requires mutual adjustment—face-to-face
communication with coworkers and often with customers. The most appropriate
structure for unit and small-batch technology is an organic structure in which
managers and employees work closely to coordinate their activities to meet changing
work demands, which is a relatively flat structure.13
In an organization that uses mass production technology, the ability to program
tasks in advance allows the organization to standardize the manufacturing process
and make it predictable. The first-line supervisor’s span of control increases to 48
because formalization through rules and procedures becomes the principal method
of coordination. Decision making becomes centralized, and the hierarchy of
authority becomes taller (four levels) as managers rely on vertical communication to
control the work process. A mechanistic structure becomes the appropriate
structure to control work activities in a mass production setting, and the
organizational structure becomes taller and wider.
In an organization that uses continuous-process technology, tasks can be
programmed in advance and the work process is predictable and controllable in a
technical sense, but there is still the potential for a major systems breakdown. The
principal control problem facing the organization is monitoring the production
process to control and correct unforeseen events before they lead to disaster. The
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consequences of a faulty pipeline in an oil refinery or chemical plant, for example,
are potentially disastrous. Accidents at a nuclear power plant, another user of
continuous-process technology, can also have catastrophic effects, as accidents at
Three Mile Island, Chernobyl, and most recently the meltdown at the Fukushima
nuclear plant in Japan in 2011 following a disastrous tsunami have shown.
The need to constantly monitor the operating system, and to make sure that each
employee conforms to accepted operating procedures, is the reason why
continuous-process technology is associated with the tallest hierarchy of authority
(six levels). Managers at all levels must closely monitor their subordinates’ actions,
and first-line supervisors have a narrow span of control, which creates a very tall,
diamond-shaped hierarchy. Many supervisors are needed to supervise lower-level
employees and to monitor and control sophisticated equipment. Because
employees also work together as a team and jointly work out procedures for
managing and reacting to unexpected situations, mutual adjustment becomes the
primary means of coordination. Thus an organic structure is the appropriate
structure for managing continuous-process technology because the potential for
unpredictable events requires the capability to provide quick, flexible responses.
One researcher, Charles Perrow, argues that complex continuous-process technology
such as the technology used in nuclear power plants is so complicated that it is
uncontrollable.14 Perrow acknowledges that control systems are designed with backup
systems to handle problems as they arise and that backup systems exist to compensate
for failed backup systems. He believes nevertheless that the number of unexpected
events that can occur when technical complexity is very high (as it is in nuclear power
plants) is so great that managers cannot react quickly enough to solve all the problems
that might arise. Perrow argues that some continuous-process technology is so complex
that no organizational structure can allow managers to safely operate it, no standard
operating procedures can be devised to manage problems in advance, and no integrating
mechanism used to promote mutual adjustments will be able to solve problems as they
arise. One implication of Perrow’s view is that nuclear power stations should be closed
because they are too complex to operate safely. Other researchers, however, disagree,
arguing that when the right balance of centralized and decentralized control is achieved,
the technology can be operated safely. However, in 2011, after the catastrophe in Japan,
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Germany announced it would close all 22 of its nuclear power plants by 2022, and Japan
was evaluating the safety of continuing to operate its other reactors in a country prone to
earthquakes.
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The Technological Imperative
Woodward’s results strongly suggest that technology is a main factor that
determines the design of organizational structure. 15
Her results imply that if a
company operates with a certain technology, then it needs to adopt a certain kind of
structure to be effective. If a company uses mass production technology, for
example, then it should have a mechanistic structure with six levels in the hierarchy,
a span of control of 1 to 48, and so on, to be effective. The argument that
technology determines structure is known as the technological imperative .
Technological imperative
The argument that technology determines structure.
Other researchers also interested in the technology–structure relationship became
concerned that Woodward’s results may have been a consequence of the sample
of companies she studied and may have overstated the importance of
technology. 16
They point out that most of the companies that Woodward studied
were relatively small (82% had fewer than 500 employees) and suggested that her
sample may have biased her results. They acknowledge that technology may have
a major impact on structure in a small manufacturing company because improving
the efficiency of manufacturing may be management’s major priority. But they
suggested the structure of an organization that has 5,000 or 500,000 employees
(such as Exxon or Walmart) is less likely to be determined primarily by the
technology used to manufacture its various products.