Create a 15- to 20-slide Microsoft® PowerPoint® presentation with speaker notes, using the organization you selected in Week 1 and include the following:
- Illustrate the difference between technical innovation and organizational effectiveness.
- Evaluate thedifferent types of technology available, and recommend the most appropriate technology for your organization.
- Apply at least three different types of technology to your selected organization and explain why one should be selected over the other two.
- Recommend the best technology for improving the organization’s efficiencies or competencies while also reducing risk.
- Apply a given technology to your organization and explain its impact on your organization’s culture as part of its change management process.
- Illustrate the rationale for your decision using either graphs or flow charts.
Format your presentation consistent with APA guidelines.
Jones, G. R. (2013). Organizational theory, design, and change (7th ed.). Upper Saddle River, NJ: Prentice Hall.
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Competences, and Technology
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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
2. Differentiate among three different kinds of technology that create different
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.
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
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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
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 .
The technology that involves groups of skilled
workers who interact closely to produce custom-
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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
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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
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
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
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
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
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.
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
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.
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
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
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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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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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
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
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
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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
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
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
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
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
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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 .
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
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.
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In a series of studies known as the Aston Studies, researchers agreed that
technology has some effect on organizational structure: The more an organization’s
technology is mechanized and automated, the more likely is the organization to
have a highly centralized and standardized mechanistic structure. But, the Aston
Studies concluded, organizational size is more important than technology in
determining an organization’s choice of structure. 17
We have seen in earlier
chapters that as an organization grows and differentiates, control and coordination
problems emerge that changes in the organization’s structure must address. The
Aston researchers argue that although technology may strongly affect the structure
of small organizations, the structure adopted by large organizations may be a
product of other factors that cause an organization to grow and differentiate.
We saw in Chapter 8 that organizational strategy and the decision to produce a
wider range of products and enter new markets can cause an organization to grow
and adopt a more complex structure. Thus the strategic choices that an
organization—especially a large organization—makes about what products to make
for which markets affect the design of an organization’s structure as much as or
more than the technology the organization uses to produce the outputs. For small
organizations or for functions or departments within large organizations, the
importance of technology as a predictor of structure may be more important than it
is for large organizations.18
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Routine Tasks and Complex
Tasks: The Theory of Charles
To understand why some technologies are more complex (more unpredictable and
difficult to control) than others, it is necessary to understand why the tasks
associated with some technologies are more complex than the tasks associated
with other technologies. What causes one task to be more difficult than another?
Why, for example,
do we normally think the task of serving hamburgers in a fast-food restaurant is
more routine—that is, more predictable and controllable—than the task of
programming a computer or performing brain surgery? If all the possible tasks that
people perform are considered, what characteristics of these tasks lead us to
believe that some are more complex than others? According to Charles Perrow, two
dimensions underlie the difference between routine and nonroutine or complex
tasks and technologies: task variability and task analyzability.19
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Task Variability and Task Analyzability
Task variability is the number of exceptions—new or unexpected situations—
that a person encounters while performing a task. Exceptions may occur at the
input, conversion, or output stage. Task variability is high when a person can
expect to encounter many new situations or problems when performing his or her
task. In a hospital operating room during the course of surgery, for example, there is
much opportunity for unexpected problems to develop. The patient’s condition may
be more serious than the doctors thought it was, or the surgeon may make a
mistake. No matter what happens, the surgeon and the operating team must have
the capacity to adjust quickly to new situations as they occur. Similarly, great
variability in the quality of the raw materials makes it especially difficult to manage
and maintain consistent quality during the conversion stage.
The number of exceptions—new or unexpected
situations—that a person encounters while
performing a task.
Task variability is low when a task is highly standardized or repetitious so a worker
encounters the same situation time and time again. 20
In a fast-food restaurant, for
example, the number of exceptions to a given task is limited. Each customer places
a different order, but all customers must choose from the same limited menu, so
employees rarely confront unexpected situations. In fact, the menu in a fast-food
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restaurant is designed for low task variability, which keeps costs down and
Task analyzability is the degree to which search and information-gathering
activity is required to solve a problem. The more analyzable a task, the less search
activity is needed; such tasks are routine because the information and procedures
needed to complete it have been discovered, rules have been worked out and
formalized, and the way to perform a task can be programmed in advance. For
example, although a customer may select thousands of combinations of food from a
menu at a fast-food restaurant, the order taker’s task of fulfilling each customer’s
order is relatively easy. The problem of combining foods in a bag is easily
analyzable: The order taker picks up the drink and puts it in the bag, then adds the
fries, burger, and so on, folds down the top of the bag, and hands the bag to the
customer. Little thought or judgment is needed to complete an order.
The degree to which search activity is needed to
solve a problem.
Tasks are hard to analyze when they cannot be programmed—that is, when
procedures for carrying them out and dealing with exceptions cannot be worked out
in advance. If a person encounters an exception, the information needed to create
the procedures for dealing with the problem must be actively sought. For example,
a scientist trying to develop a new cancer-preventing drug that has no side effects
or a software programmer working on a program to enable computers to
understand the spoken word has to spend considerable time and effort collecting
data and working out the procedures for solving problems. Often, the search for a
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solution ends in failure. People working on tasks with low analyzability have to draw
on their knowledge and judgment to search for new information and procedures to
solve problems. When a great deal of search activity is required to find a solution to
a problem and procedures cannot be programmed in advance, tasks are complex
Together, task analyzability and task variability explain why some tasks are more
routine than others. The greater the number of exceptions that workers encounter in
the work process, and the greater the amount of search behavior required to find a
solution to each exception, the more complex and less routine are tasks. For tasks
that are routine, there are, in Perrow’s words, “well-established techniques which
are sure to work and these are applied to essentially similar raw materials. That is,
there is little uncertainty about methods and little variety or change in the task that
must be performed.” 21
tasks that are complex, “there are few established techniques; there is little certainty
about methods, or whether or not they will work. But it also means that there may
be a great variety of different tasks to perform.” 22
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Four Types of Technology
Perrow used task variability and task analyzability to differentiate among four types
of technology: routine manufacturing, craftswork, engineering production, and
nonroutine research. 23
Perrow’s model makes it possible to categorize the
technology of an organization and the technology of departments and functions
inside an organization.
Routine manufacturing is characterized by low task variability and high task
analyzability. Few exceptions are encountered in the work process, and when an
exception does occur, little search behavior is required to deal with it. Mass
production is representative of routine technology.
In mass production settings, tasks are broken down into simple steps to minimize
the possibility that exceptions will occur, and inputs are standardized to minimize
disruptions to the production process. There are standard procedures to follow if an
exception or a problem presents itself. The low-cost advantages of mass production
are obtained by making tasks low in variability and high in analyzability. One reason
why McDonald’s has lower costs than its competitors is that it continually
streamlines its menu choices and standardizes its work activities to reduce task
variability and increase task analyzability.
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With craft technology, task variability is low (only a narrow range of exceptions is
encountered), and task analyzability is also low (a high level of search activity is
needed to find a solution to problems). Employees in an organization using this kind
of technology need to adapt existing procedures to new situations and find new
techniques to handle existing problems more effectively. This technology was used
to build early automobiles, as we saw earlier. Other examples of craftswork are the
manufacture of specialized or customized products like furniture, clothing, and
machinery, and trades such as carpentry and plumbing. The tasks that a plumber,
for example, is called on to perform center on installing or repairing bathroom or
kitchen plumbing. But because every house is different, a plumber needs to adapt
the techniques of the craft to each situation and find a unique solution for each
With engineering production technology, task variability is high and task
analyzability is high. The number or variety of exceptions that workers may
encounter in the task is high, but finding a solution is relatively easy because well-
understood standard procedures have been established to handle the exceptions.
Because these procedures are often codified in technical formulas, tables, or
manuals, solving a problem is often a matter of identifying and applying the right
technique. Thus, in organizations that use engineering production technology,
existing procedures are used to make many kinds of products. A manufacturing
company may specialize in custom building machines such as drill presses or
electric motors. A firm of architects may specialize in customizing apartment
buildings to the needs of different builders. A civil engineering group may use its
skills in constructing airports, dams, and hydroelectric projects to service the needs
of clients throughout the world. Like craftswork, engineering production is a form of
small-batch technology because people are primarily responsible for developing
techniques to solve particular problems.
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Nonroutine research technology is characterized by high task variability and low
task analyzability and is the most complex and least routine of the four technologies
in Perrow’s classification. Tasks are complex because not only is the number of
unexpected situations large, but search activity is high. Each new situation creates
a need to expend resources to deal with it.
High-tech research and development activities are examples of nonroutine
research. For people working at the forefront of technical knowledge, there are no
prepackaged solutions to problems. There may be a thousand well-defined steps to
follow when building the perfect bridge (engineering production technology), but
there are few well-defined steps to take to discover a vaccine for AIDS, and
hundreds of teams of researchers are continuously experimenting to find the
breakthrough that will lead to such a universal cure.
An organization’s top-management team is another example of a group that uses
research technology. The teams’ responsibility is to chart the future path of the
organization and make the resource decisions that will be needed to ensure its
success five or ten years ahead. Managers make these decisions in a highly
uncertain context; however, they never know how successful their choices will be.
Planning and forecasting by top management, and other nonroutine research
activities, are inherently risky and uncertain because the technology is difficult to
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Routine Technology and Organizational
Just as the types of technology identified by Woodward have implications for an
organization’s structure, so do the types of technology in Perrow’s model. Perrow
and others have suggested that an organization should move from a mechanistic to
an organic structure as tasks become more complex and less routine. 24
Table 9.1 summarizes this finding.
When technology is routine, employees perform clearly defined tasks according to
well-established rules and procedures. The work process is programmed in
advance and standardized. Because the work process is standardized in routine
technology, employees need only learn the procedures for performing the task
effectively. For example, McDonald’s uses written rules and procedures to train new
personnel so the behavior of all McDonald’s employees is consistent and
predictable. Each new employee learns the right way to greet customers, the
appropriate way to fulfill customer orders, and the correct way to make Big Macs.
Because employee tasks can be standardized with routine technology, the
organizational hierarchy is relatively tall and decision making is centralized.
Management’s responsibility is to supervise employees and to manage the few
exceptions that may occur, such as a breakdown of the production line. Because
tasks are routine, all important production decisions are made at the top of the
production hierarchy and transmitted down the chain of command as orders to lower-
level managers and workers. It has been suggested that organizations with routine
technology, such as that found in mass production settings, deliberately “de- skill”
tasks, meaning that they simplify jobs by using machines to perform complex tasks
and by designing the work process to minimize the degree to which workers’ initiative
or judgment is required.25
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If an organization makes these design choices, it is using a mechanistic structure to
operate its routine technology. This certainly is the choice of huge global
Table 9.1 Routine and Nonroutine Tasks and Organizational Design
companies such as Foxconn and Flextronics, whose factories in China extend over
thousands of acres. Flextronics’ main plant in China, for example, employs over
40,000 workers who work in three shifts for six days a week to assemble flat-screen
TVs, Blu-ray players, and so on. Control is rigid in these factories; workers are only
motivated by the prospect of earning three times the normal wage for such work,
Structural Characteristic Nature of Technology
Routine Tasks Nonroutine Tasks
Standardization High Low
Mutual adjustment Low High
Specialization Individual Joint
Formalization High Low
Hierarchy of authority Tall Flat
Decision-making authority Centralized Decentralized
Overall structure Mechanistic Organic
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but even this was not enough, as the experience of Foxconn discussed in
Organizational Insight 9.3 describes.
The use of low-cost outsourcing by companies to make products is not the only way
to remain competitive, however, and many companies have reevaluated the way
they manufacture products. In Japan, in particular, the soaring value of the yen
against the dollar put pressure on carmakers and electronics manufacturers to look
for new ways to organize their production operations to lower costs. Innovative
electronics products command high prices, and the need to ensure consistent high
quality and protect their proprietary technology are important concerns of Japanese
electronics makers. So, to keep the assembly of complex new products at home
and reduce operating costs, Japanese companies have scrutinized every aspect of
their operating technology to find ways to improve routine assembly-line production.
Traditionally, Japanese companies have used the straight or linear conveyor belt
system that is often hundreds of feet long to mass produce identical products.
When reexamining this system, Japanese production managers came to realize
that a considerable amount of handling time is wasted as the product being
assembled is passed from worker to worker, and that a line can only move as fast
as the least capable worker. Moreover, this system is only efficient when large
quantities of the same product are being produced. If
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9.3 Honda, Apple, and Foxconn Have Mass
Production Problems in China
In 2010, Honda’s Beijing-based Chinese subsidiary announced that strikes
at three different Honda-owned mass production vehicle assembly and
parts production factories had arisen because, “Poor communication led to
a great deal of discontent and eventually developed into a labor dispute.
Our company will reflect deeply on this and strengthen communication with
employees and build mutual trust.” 26
The strikes shut down all of Honda’s
Chinese operations for many days. Honda is just one of many overseas
companies with operations in China that have become used to dealing with
uneducated, compliant Chinese workers willing to work for China’s minimum
wage of around $113 or 900 Yuan a week. Chinese factory workers
employed by overseas companies like Honda, Toyota, and GM have raised
little opposition to these companies’ pay and labor practices—even though
they are represented by government-sanctioned labor unions.
This all began to change during 2010, when rising prices and changing
attitudes in China led Chinese workers to protest their harsh work
conditions—monotonous jobs, long hours, and low pay. However,
companies such as Honda, used to a compliant workforce, had not
bothered to establish formal communication channels with workers that
would allow them to gather information about workers’ changing attitudes.
Honda’s Japanese managers ran the factories, its Chinese supervisors
trained the workers to perform their jobs, and Honda’s Japanese managers
had no feeling for the attitudes of workers in its factories, hence their shock
when Chinese employees went on strike.
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Foxconn, a giant outsourcer owned by the Taiwanese company Hon Hai
Precision Engineering, employs hundreds of thousands of workers in its
Chinese factories and these workers had also been compliant for years.
They performed repetitive assembly line work along fast-moving production
lines often for 80 hours a week, after which they were allowed to eat in the
company’s canteens before returning to their dormitories. This all changed
in 2010, when Foxconn found itself in the spotlight when its biggest factory
in Shenzhen, which assembles Apple’s iPhone, reported that over 11
workers had committed suicide by jumping off buildings in the past year.
Because most workers are young, uneducated, and come from small
farming communities, Foxconn had just taken advantage of workers’
passivity and willingness to work at minimum wage. Indeed, Foxconn had
steadily increased the number of hours workers were forced to work on
assembly lines that moved at a rapid speed—a workweek of 80 hours
performing the same repetitive task for $113 was common. U.S. companies
such as Apple and Dell had sent inspectors to monitor factory conditions
and had found many violations. However, once again, inspectors made no
attempt to communicate directly with workers; they simply studied the
companies’ employment records.27
In any event, Honda, Foxconn, and many other foreign-owned companies
have been forced to rapidly change their labor practices. In 2010, for
example, Foxconn announced it would double the pay of its workers to
make their work more palatable and Honda also agreed to increase the
wages of its workers by over 60% and establish formal channels so
managers can meet with union representatives regularly to find ways to
improve work practices. 28
Problems of operating a mass production
technology are likely to increase in the years ahead as companies in China
find it harder to attract and keep workers who want better pay and working
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customized products are what is needed, something increasingly common today,
the production line is typically down while it is being retooled for the next product.
Recognizing these problems, production engineers searched for new ways to
organize and control assembly-line layouts that could solve these problems. They
began to experiment with layouts of various shapes, such as spirals, Ys, 6s, or even
insects. At a Sony camcorder plant in Kohda, Japan, for example, Sony dismantled
its previous assembly-line production system in which 50 workers worked
sequentially to build a camcorder, and replaced it with a spiral arrangement in which
four workers perform all the operations necessary to assemble the camcorder. Sony
found this new way of organizing is 10% more efficient than the old system because
it allows the most efficient assemblers to perform at a higher level. 29
craftswork-like organizing structure has replaced the mechanistic structure to
achieve the advantages of flexibility at lower cost.
In the United States too, these new production layouts, normally referred to as cell
layouts, have become increasingly common. It has been estimated that 40% of
small companies and 70% of large companies have experimented with the new
designs. Bayside Controls Inc., for example, a small gear-head manufacturer in
Queens, New York, converted its 35-person assembly line into a four-cell design
where seven to nine workers form a cell. The members of each cell perform all the
operations involved in making the gear heads, such as measuring, cutting, and
assembling the new gear heads. Bayside’s managers say that the average
production time necessary to make a gear has dropped to two days from six weeks,
and it now makes 75 gear heads a day—up from 50 before the change—so costs
have decreased significantly. 30
An additional advantage is that cell designs allow
companies to be very responsive to the needs of individual customers, as this
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organizing approach permits the quick manufacture of small quantities of
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Nonroutine Technology and Organizational
Organizations operating a nonroutine technology face a different set of factors that
affect the design of the organization. 31
As tasks become less routine and more
complex, an organization has to develop a structure that allows employees to
respond quickly to and manage an increase in the number and variety of exceptions
and to develop new procedures to handle new problems. 32
As we saw in
Chapter 4 , an organic structure allows an organization to adapt rapidly to
changing conditions. Organic structures are based on mutual adjustment between
employees who work together, face to face, to develop procedures to find solutions
to problems. Mutual adjustment through task forces and teams becomes especially
important in facilitating communication and increasing integration between team
The more complex an organization’s work processes, the more likely the
organization is to have a relatively flat and decentralized structure that allows
employees the authority and autonomy to cooperate to make decisions quickly and
The use of work groups and product teams to facilitate rapid
adjustment and feedback among employees performing complex tasks is a key
feature of such an organization.
The same design considerations are applicable at the departmental or functional
level: To be effective, departments employing different technologies need different
In general, departments performing nonroutine tasks are likely to have
organic structures, and those performing routine tasks are likely to have
mechanistic structures. An R&D department, for example, is typically organic, and
decision making in it is usually decentralized; but the manufacturing and sales
functions are usually mechanistic, and decision making within them tends to be
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centralized. The kind of technology employed at the departmental level determines
the choice of structure. 35
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Task Interdependence: The
Theory of James D. Thompson
Woodward focused on how an organization’s technology affects its choice of
structure. Perrow’s model of technology focuses on the way in which the complexity
of tasks affects organizational structure. Another view of technology, developed by
James D. Thompson,
focuses on the way in which task interdependence , the method used to relate
or sequence different tasks to one another, affects an organization’s technology and
When task interdependence is low, people and departments are
individually specialized—that is, they work separately and independently to achieve
organizational goals. When task interdependence is high, people and departments
are jointly specialized—that is, they depend on one another for supplying the inputs
and resources they need to get the work done. Thompson identified three types of
technology: mediating, long linked, and intensive (see Figure 9.4 ). Each of them
is associated with a different form of task interdependence.
The manner in which different organizational tasks
are related to one another.
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Mediating Technology and Pooled
A technology characterized by a work process in
which input, conversion, and output activities can be
performed independently of one another.
Mediating technology is characterized by a work process in which input,
conversion, and output activities can be performed independently of one another.
Mediating technology is based on pooled task interdependence, which means that
each part of the organization—whether a person, team, or department—contributes
separately to the performance of the whole organization. With mediating
technology, task interdependence is low because people do not directly rely on
others to help them perform their tasks. As illustrated in Figure 9.4 , each person
or department—X, Y, and Z—performs a separate task. In a management
consulting firm or hair salon, each consultant or hairdresser works independently to
solve a client’s problems. The success of the organization as a whole, however,
depends on the collective efforts of everyone employed. The activities of a
gymnastic team also illustrate pooled task interdependence. Each team member
performs independently and can win or lose a particular event, but the collective
score of the team members
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Figure 9.4 Task Interdependence and Three Types of Technology
James D. Thompson’s model of technology focuses on how the relationship among
different organizational tasks affects an organization’s technology and structure.
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determines which team wins. Mediating technology has implications for organizational
structure at both the departmental and the organizational level.
At the departmental level, piecework systems best characterize the way this
technology operates. In a piecework system, each employee performs a task
independently from other employees. In a machine shop, for example, every
employee operates a lathe to produce bolts and is evaluated and rewarded on the
basis of how many bolts each of them makes each week. The performance of the
manufacturing department as a whole depends on each employee’s level of
performance, but their actions are not interdependent—one employee’s actions do
not affect the behavior of others. Similarly, the success of a sales department
depends on how well each salesperson performs their activities independently. As a
result, the use of a mediating technology to accomplish departmental or
organizational activities makes it easy to monitor, control, and evaluate the
performance of each individual because the output of each person is observable
and the same standards can be used to evaluate each employee.37
At the organizational level, mediating technology is found in organizations where
the activities of different departments are performed separately and there is little
need for integration between departments to accomplish organizational goals. In a
bank, for example, the activities of the loan department and the checking account
department are independent. The routines involved in lending money have no
relation to the routines involved in receiving money—but the performance of the
bank as a whole depends on how well each department does its job.38
Mediating technology at the organizational level is also found in organizations that
use franchise arrangements to organize their businesses or that operate a chain of
stores. For example, each McDonald’s franchise or Walmart store operates
essentially independently. The performance of one store does not affect another
store, but together all stores determine the performance of the whole organization.
One common strategy for improving organizational performance for an organization
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operating a mediating technology is to obtain more business from existing
customers and attract new customers by increasing the number of products it
offers. A fast-food chain can open a new restaurant or offer a wider menu; a retail
organization can open a new store or expand the brands of clothing it sells; a bank
can increase the number of financial services it offers customers to attract more
Over the past decades the use of mediating technology has been increasing
because it is relatively inexpensive to operate and manage. Costs are low because
organizational activities are controlled by standardization. Bureaucratic rules are
used to specify how the activities of different departments should be coordinated,
and SOPs control the way a department operates to ensure its activities are
compatible with those of other departments. SOPs and advanced IT including
electronic inventory control provide the coordination necessary to manage the
business. Walmart, for example, coordinates its stores through advanced IT that
provides store managers with realtime information about new product introductions,
store deliveries, and changes in marketing and sales procedures.
As IT becomes more important in coordinating the activities of independent
employees or departments, it becomes possible to use a mediating technology to
coordinate more types of production activities. Network organizations, discussed in
Chapter 6 , are becoming more common as IT allows the different departments
of an organization to operate separately and at different locations. Similarly, IT has
spurred global outsourcing and today companies frequently contract with other
companies to perform their value-creation activities (like production or marketing)
for them because it is much easier to use mediating technology.
Recall from Chapter 3 how Nike contracts with manufacturers throughout the
world to produce and distribute products to its customers on a global basis. Nike
designs its shoes but then uses IT to contract its manufacturing, marketing, and
other functional activities out to other organizations around the globe. Nike
constantly monitors production and sales information from its network by means of
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a sophisticated global IT system to ensure its global network follows the rules and
procedures that specify the required
quality of input materials and the way its shoes should be manufactured to ensure
the quality of the finished product.
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Long-Linked Technology and Sequential
Long-linked technology , the second type of technology that Thompson
identified, is based on a work process where input, conversion, and output activities
must be performed in series. Long-linked technology is based on sequential task
interdependence, which means that the actions of one person or department
directly affect the actions of another, so work cannot be successfully completed by
allowing each person or department to operate independently. Figure 9.4
illustrates the dynamics of sequential interdependence. X’s activities directly affect
Y’s ability to perform her task, and in turn the activities of Y directly affect Z’s ability
A technology characterized by a work process in
which input, conversion, and output activities must be
performed in series.
Mass production technology is based on sequential task interdependence. The
actions of the employee at the beginning of the production line determine how
successfully the next employee can perform his task, and so forth on down the line.
Because sequential interactions have to be carefully coordinated, long-linked
technology requires more direct coordination than mediating technology. One result
of sequential interdependence is that any error that occurs at the beginning of the
production process becomes magnified at later stages. Sports activities like relay
races or football, in which the performance of one person or group determines how
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well the next can perform, are based on sequential interdependence. In football, for
example, the performance of the defensive line determines how well the offense
can perform. If the defense is unable to secure the ball, the offense cannot perform
its task: scoring touchdowns.
An organization with long-linked technology can respond in a variety of ways to the
need to coordinate sequentially interdependent activities. The organization can
program the conversion process to standardize the procedures used to transform
inputs into outputs. The organization can also use planning and scheduling to
manage linkages among input, conversion, and output processes. To reduce the
need to coordinate these stages of production, an organization often creates
slack resources —extra or surplus resources that enhance its organization’s
ability to deal with unexpected situations. For example, a mass production
organization stockpiles inputs and holds inventories of component parts so the
conversion process is not disrupted if there is a problem with suppliers. Similarly, an
organization may stockpile finished products so it can respond quickly to an
increase in customer demand without changing its established conversion
processes. Another strategy to control the supply of inputs or distribution of outputs
is vertical integration, which, as we saw in Chapter 8 , involves a company taking
over its suppliers or distributors to control the supply and quality of inputs.
Extra or surplus resources that enhance an
organization’s ability to deal with unexpected
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The need to manage the increased level of interdependence increases the
coordination costs associated with long-linked technology. However, this type of
technology can provide an organization with advantages stemming from
specialization and the division of labor associated with sequential interdependence.
Changing the method of production in a pin factory from a system where each
worker produces a whole pin to a system where each worker is responsible for only
one aspect of pin production, such as sharpening the pin, for example, can result in
a major gain in productivity. Essentially, the factory moves from using a mediating
technology, in which each worker performs all production tasks, to a long-linked
technology, in which tasks become sequentially interdependent.
Tasks are routine in long-linked technology because sequential interdependence
allows managers to simplify tasks so the variability of each worker’s task is reduced
and the analyzability of each task is increased. In mass production, for example, the
coordination of tasks is achieved principally by the speed of the assembly line and
by the way specialization and the division of labor are used to program tasks to
increase production efficiency. This system, however, has two major
disadvantages. Employees do not become highly skilled (they learn only a narrow
range of simple tasks), and do not develop the ability to improve their skills because
they must follow the specified procedures necessary to perform their specific task.
At the organizational level, sequential interdependence means that the outputs of
one department become the inputs for another, and one department’s performance
determines how well another department performs. The performance of the
manufacturing department depends on the ability of the materials management
department to obtain adequate amounts of high-quality inputs in a timely manner.
The ability of the sales function to sell finished products depends on the quality of
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the products coming out of the manufacturing department. Failure or poor
performance at one stage has serious consequences for performance at the next
stage and for the organization as a whole. The pressures of global competition are
increasing the need for interdependence between departments and thus are
increasing organizations’ need to coordinate departmental activities. As we saw in
Chapter 6 , many organizations are moving toward the product team structure to
increase interdepartmental coordination. This type of coordination encourages
different departments to develop procedures that lead to greater production
innovation and efficiency.
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Intensive Technology and Reciprocal
Intensive technology , the third type of technology Thompson identifies, is
characterized by a work process where input, conversion, and output activities are
inseparable. Intensive technology is based on reciprocal task interdependence,
which means that the activities of all people and all departments fully depend on
one another. Not only do X’s actions affect what Y and Z can do, but the actions of
Z also affect Y’s and X’s performance. The task relationships of X, Y, and Z are
reciprocally interdependent (see Figure 9.4 ). Reciprocal interdependence makes
it impossible to program in advance a sequence of tasks or procedures to solve a
problem because, in Thompson’s words, “the selection, combination, and order of
[the tasks’] application are determined by feedback from the object [problem]
Thus the move to reciprocal interdependence and intensive technology has
two effects: Technical complexity declines as the ability of managers to control and
predict the work process lessens, and tasks become more complex and nonroutine.
A technology characterized by a work process in
which input, conversion, and output activities are
Hospitals are organizations that operate an intensive technology. A hospital’s
greatest source of uncertainty is the impossibility of predicting the types of problems
for which patients (clients) will seek treatment. At any time, a general hospital has to
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have on hand the knowledge, machines, and services of specialist departments
capable of solving a great variety of medical problems. For example, the hospital
requires an emergency room, X-ray facilities, a testing laboratory, an operating
room and staff, skilled nursing staff, doctors, and hospital wards. What is wrong with
each patient determines the selection and combination of activities and technology
to convert a hospital’s inputs (sick people) into outputs (well people). The
uncertainty of the input (patient) means that tasks cannot be programmed in
advance—as they can be when interdependence is sequential.
Basketball, soccer, and rugby are other activities that depend on reciprocal
interdependence. The current state of play determines the sequence of moves from
one player to the next. The fast-moving action of these sports requires players to
make judgments quickly and obtain feedback from the state of play before deciding
what moves to make.
On a departmental level, R&D departments operate with an intensive technology,
the sequence and content of their activities are determined by the problems the
department is trying to solve—for example, a cure for lung cancer. R&D is so
expensive because the unpredictability of the input-conversion-output process
makes it impossible to specify in advance the skills and resources that will be
needed to solve the problem at hand. A pharmaceutical company like Merck, for
example, creates many different research and development teams. Every team is
equipped with whatever functional resources it needs in the hope that at least one
team will stumble onto the wonder drug that will justify the immense resource
expenditures (each new drug costs over $500 million to develop).
The difficulty of specifying the sequencing of tasks that is characteristic of intensive
technology makes necessary a high degree of coordination and makes intensive
technology more expensive to manage than either mediating or long-linked
technology. Mutual adjustment replaces programming and standardization as the
principal method of coordination. Product team and matrix structures are suited to
operating intensive technologies
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because they provide the coordination and the decentralized control that allow
departments to cooperate to solve problems. At Google and Accenture, for
example, each company is organized into product teams so it can quickly move its
specialists to the projects that seem most promising. Also, mutual adjustment and a
flat structure allow an organization to quickly take advantage of new developments
and areas for research that arise during the research process itself. Another way is
to use self-managed teams, as Organizational Insight 9.4 illustrates.
Organizations do not voluntarily use intensive technology to achieve their goals
because it is so expensive to operate. Like IBM and Accenture, they are forced to
use it because of the nature of the products they choose to provide customers.
Whenever possible, organizations attempt to reduce the task interdependence
necessary to coordinate their activities and revert to a long-linked technology, which
is more controllable and predictable. In recent years, for example, hospitals have
attempted to control escalating management costs by using forecasting techniques
to determine how many resources they
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9.4 IBM and Accenture Use Technology to
Create Virtual Organizations
Accenture, a global management consulting company, has been one of the
pioneers in using IT to revolutionize its organizational structure. Its
managing partners realized that since only its consultants in the field could
diagnose and solve clients’ problems, the company should design a
structure that facilitates creative, on-the-spot decision making. To
accomplish this, Accenture decided to replace its tall hierarchy of authority
with a sophisticated IT system to create a virtual organization. First, it
flattened the organizational hierarchy, eliminating many managerial levels,
and set up a shared organization-wide IT system that provides each of
Accenture’s consultants with the information they need to solve clients’
problems. If consultants still lack the specific knowledge needed to solve a
problem, they can use the system to request expert help from Accenture’s
thousands of consultants around the globe.40
To implement the change, Accenture equipped all its consultants with state-
of-the-art laptops and smartphones that can connect to its sophisticated
corporate intranet and tap into Accenture’s large information databases that
contain volumes of potentially relevant information. The consultants can
also communicate directly using their smartphones and use
teleconferencing to help speed problem solving. 41
For example, if a project
involves installing a particular kind of IT system, a consultant has quick
access to consultants around the globe who have installed the system.
Accenture has found that its virtual organization has increased the creativity
of its consultants and enhanced their performance. By providing employees
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with more information and enabling them to confer with other people easily,
electronic communication has made consultants more autonomous and
willing to make their own decisions, which has led to high performance and
made Accenture one of the best-known of all global consulting companies.
Similarly, IBM, which has been experiencing tough competition in the
2000s, has been searching for ways to better utilize its talented workforce to
both lower costs and offer customers specialized kinds of services its
competitors cannot. So IBM has also used IT to develop virtual teams of
consultants to accomplish this.42
IBM has created “competency centers” around the globe that are staffed by
consultants who share the same specific IT skill; its competency centers are
located in the countries in which IBM has the most clients and does the
most business. To use its consultants most effectively, IBM used its own IT
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expertise to develop sophisticated software that allows it to create self-
managed teams composed of IBM consultants who have the optimum mix
of skills to solve a client’s particular problems. To form these teams, IBM’s
software engineers first analyze the skills and experience of its consultants
and input the results into the software program. Then they analyze and
code the nature of a client’s specific problem and, using this information,
IBM’s program then matches each specific client problem to the skills of
IBM’s consultants and identifies a list of “best fit” employees. One of IBM’s
senior managers then narrows down this list and decides on the actual
consultants who will form the self-managed team. Once selected, team
members assemble as quickly as possible in the client’s home country and
go to work to develop the software necessary to solve and manage the
client’s problem. This new IT allows IBM to create an ever-changing set of
global self-managed teams that form to solve the problems of IBM’s global
clients. In addition, because each team inputs knowledge about its activities
into IBM’s intranet, then as at Accenture, consultants and teams can learn
from one another so that their problem-solving skills increase over time.
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Managerial Implications Analyzing
1. Analyze an organization’s or a department’s input-conversion-
output processes to identify the skills, knowledge, tools, and
machinery that are central to the production of goods and
2. Analyze the level of technical complexity associated with the
production of goods and services. Evaluate whether technical
complexity can be increased to improve efficiency and reduce
costs. For example, is an advanced computer system
available? Are employees using up-to-date techniques and
3. Analyze the level of task variety and task analyzability
associated with organizational and departmental tasks. Are
there ways to reduce task variability or increase task
analyzability to increase effectiveness? For example, can
procedures be developed to make the work process more
predictable and controllable?
4. Analyze the form of task interdependence inside a department
and between departments. Evaluate whether the task
interdependence being used results in the most effective way
of producing goods or servicing the needs of customers. For
example, would raising the level of coordination between
departments improve efficiency?
5. After analyzing an organization’s or a department’s
technology, analyze its structure, and evaluate the fit between
technology and structure. Can the fit be improved? What costs
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and benefits are associated with changing the technology
need to have on hand to meet customer (patient) demands. If, over a specified
period, a hospital knows on average how many broken bones or cardiac arrests it
can expect, it knows how many operating rooms it will need to have in readiness
and how many doctors, nurses, and technicians to have on call to meet patient
demand. This knowledge allows the hospital to control costs. Similarly, in R&D, an
organization like Microsoft needs to develop decision-making rules that allow it to
decide when to stop investing in a line of research that is showing little promise of
success, and how to best allocate resources among projects to try to maximize
potential returns from the investment—especially when aggressive competitors like
Google and Facebook exist.
Producing only a narrow range of outputs.
Another strategy that organizations can pursue to reduce the costs associated with
intensive technology is specialism , producing only a narrow range of outputs. A
hospital that specializes in the treatment of cancer or heart disease narrows the
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range of problems to which it is exposed and can target all its resources to solving
those problems. It is the general hospital that faces the most uncertainty. Similarly,
a pharmaceutical company typically restricts the areas in which it does research. A
company may decide to focus on drugs that combat high blood pressure or
diabetes or depression. This specialist strategy allows the organization to use its
resources efficiently and reduces problems of coordination.43
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From Mass Production to
As discussed earlier, one of the most influential advances in technology in this
century was the introduction of mass production technology by Henry Ford. To
reduce costs, a mass production company must maximize the gains from
economies of scale and from the division of labor associated with large-scale
production. There are two ways to do this. One is by using dedicated machines and
standardized work procedures. The other is by protecting the conversion process
against production slowdowns or stoppages.
Traditional mass production is based on the use of dedicated machines
—machines that can perform only one operation at a time, such as repeatedly
cutting or drilling or stamping out a car body part. 44
To maximize volume and
efficiency, a dedicated machine
produces a narrow range of products but does so cheaply. Thus this method of
production has traditionally resulted in low production costs.
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Machines that can perform only one operation at a
time, such as repeatedly cutting or drilling or
stamping out a car body part.
When the component being manufactured needs to be changed, a dedicated
machine must be retooled—that is, fitted with new dies or jigs—before it can handle
the change. When Ford retooled one of his plants to switch from the Model T to the
Model A, he had to close the plant for over six months. Because retooling a
dedicated machine can take days, during which no production is possible, long
production runs are required for maximum efficiency and lowest costs. Thus, for
example, Ford might make 50,000 right-side door panels in a single production run
and stockpile them until they are needed because the money saved by using
dedicated machines outweighs the combined costs of lost production and carrying
the doors in inventory. In a similar way, both the use of a production line to
assemble the final product and the employment of fixed workers —workers who
perform standardized work procedures—increase an organization’s control over the
Workers who perform standardized work procedures
increase an organization’s control over the
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A mass production organization also attempts to reduce costs by protecting its
conversion processes from the uncertainty that results from disruptions in the
external environment. 45
Threats to the conversion process come from both the
input and the output stages, but an organization can stockpile inputs and outputs to
reduce these threats (see Figure 9.5A ).
A. The Work Flow in Mass Production
B. The Work Flow with Advanced Manufacturing Technology
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At the input stage, an organization tries to control its access to inputs by keeping raw
materials and semifinished components on hand to prevent shortages that would lead to a
slowdown or break in production. The role of purchasing, for example, is to negotiate with
suppliers contracts that guarantee the organization an adequate supply of inputs. At the
output stage, an organization tries to control its ability to dispose of its outputs. It does so
by stockpiling finished products so it can respond quickly to customer demands. An
organization can also advertise heavily to maintain customer demand. In that case, the
role of the sales department is to maintain demand for an organization’s products so
production does not need to slow down or stop because no one wants the organization’s
outputs. The high technical complexity, the routine nature of production tasks, and the
sequential task interdependence characteristic of mass production all make an
organization very inflexible. The term fixed automation is sometimes used to describe the
traditional way of organizing production. The combination of dedicated machines (which
perform only a narrow range of operations), fixed workers (who perform a narrow range of
fixed tasks), and large stocks of inventory (which can be used to produce only one product
or a few related products) makes it very expensive and difficult for an organization to
begin to manufacture different kinds of products when customer preferences change.
Suppose an organization had a new technology that allowed it to make a wide
range of products—products that could be customized to the needs of individual
customers. This ability would increase demand for its products. If the new
technology also allowed the organization to rapidly introduce new products that
incorporated new features or the latest design trends, demand would increase even
more. Finally, suppose the cost of producing this wide range of new customized
products with the new technology was the same as, or only slightly more than, the
cost of producing a narrow standardized product line. Clearly, the new technology
would greatly increase organizational effectiveness and allow the organization to
pursue both a low-cost and a differentiation strategy to attract customers by giving
them advanced, high-quality, reliable products at low prices.46
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What changes would an organization need to make to its technology to make it
flexible enough to respond to customers while controlling costs? In the last 20
years, many new technological developments have allowed organizations to
achieve these two goals. The new developments are sometimes called flexible
production, lean production, or computer-aided production. Here we consider them
to be components of advanced manufacturing technology.47
Advanced manufacturing technology (AMT) consists of innovations in
materials technology and in knowledge technology that change the work process of
traditional mass production organizations.
Advanced manufacturing technology
Technology that consists of innovations in materials
technology and in knowledge technology that change
the work process of traditional mass production
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Technology: Innovations in
Materials technology comprises machinery, other equipment, and computers.
Innovations in materials technology are based on a new view of the linkages among
input, conversion, and output activities. 48
Traditional mass production tries to
protect the conversion process from disruptions at the input and output stages by
using stockpiles of inventory as buffers to increase control and reduce uncertainty.
With AMT, however, the organization actively seeks ways to increase its ability to
integrate or coordinate the flow of resources among input, conversion, and output
activities. AMT allows an organization 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
(see Figure 9.5B ). 49
Several innovations in materials technology allow
organizations to reduce the costs and speed the process of producing goods and
services. Computer-aided design, computer-aided materials management, just-in-
time inventory systems, and computer-integrated manufacturing affect one another
and jointly improve organizational effectiveness. The first three are techniques for
coordinating the input and conversion stages of production. The last one increases
the technical complexity of the conversion stage.
Technology that comprises machinery, other
equipment, and computers.
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Mass production systems are set up to produce a large quantity of a few products.
To some degree, this arrangement reflects the fact that a large part of the cost
associated with mass production is incurred at the design stage. 50
In general, the
more complex a product, the higher the design costs. The costs of designing a new
car, for example, are enormous. Ford’s recent world car, the Focus, cost over $5
billion to develop.
Traditionally, the design of new parts involved the laborious construction of
prototypes and scale models, a process akin to unit or small-batch production.
Computer-aided design (CAD) is an advanced manufacturing technique that
greatly simplifies the design process. CAD makes it possible to design a new
component or microcircuit on a computer screen and then press a button, not to
print out the plans for the part but to physically produce the part itself. Also,
“printers” exist that squirt a stream of liquid metal or plastic droplets to create three-
dimensional objects. Detailed prototypes can be sculpted according to the computer
program and can be redesigned quickly if necessary. Thus, for example, an
engineer at Ford who wants to see how a new gear will work in a transmission
assembly can experiment quickly and cheaply to fine-tune the design of these
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Computer-aided design (CAD)
An advanced manufacturing technique that greatly
simplifies the design process.
Cutting the costs of product design by using CAD can contribute to both a low-cost
and a differentiation advantage. Design advances that CAD makes possible can
improve the efficiency of manufacturing. Well-designed components are easily fitted
together into a subassembly, and well-designed subassemblies are easily fitted to
other subassemblies. Improvements at the input design stage also make selling and
servicing products easier at the output stage. The risk of later failure or of
breakdown is reduced if potential problems have been eliminated at the design
stage. Designing quality into a product up front improves competitive advantage
and reduces costs. Toyota’s core competence in product design, for example,
evidenced by its relatively low recall rates, gives its cars a competitive advantage.
Finally, CAD enhances flexibility because it reduces the difficulty and lowers the
cost of customizing a product to satisfy particular customers. In essence, CAD
brings to large-scale manufacturing one of the benefits of small-batch production-
customized product design—but at far less cost. It also enhances an organization’s
ability to respond quickly to changes in its environment.52
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Computer-Aided Materials Management
Materials management, the management of the flow of resources into and out of the
conversion process, is one of the most complex functional areas of an
Computers are now the principal tool for processing the information
that materials managers use for sound decision making, and computer-aided
materials management is crucial to organizational effectiveness.
Computer-aided materials management (CAMM) is an advanced
manufacturing technique used to manage the flow of raw materials and component
parts into the conversion process, to develop master production schedules for
manufacturing, and to control inventory. 54
The difference between traditional
materials management and the new computer-aided techniques is the difference
between the so-called push and pull approaches to materials management. 55
Computer-aided materials management (CAMM)
An advanced manufacturing technique that is used to
manage the flow of raw materials and component
parts into the conversation process, to develop
master production schedules for manufacturing, and
to control inventory.
Traditional mass production uses the push approach. Materials are released from
the input to the conversion stage when the production control system indicates that
the conversion stage is ready to receive them. The inputs are pushed into the
conversion process in accordance with a previously determined plan.
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Computer-aided materials management makes possible the pull approach. The flow
of input materials is governed by customer requests for supplies of the finished
products, so the inputs are pulled into the conversion process in response to a pull
from the output stage rather than a push from the input stage. Consider how VF
Corporation, the manufacturer of Lee jeans, meets customer demand. As jeans sell
out in stores, the stores issue requests by computer to Lee to manufacture different
styles or sizes. Lee’s manufacturing department then pulls in raw materials, such as
cloth and thread, from suppliers as it needs them. If Lee were using the push
approach, Lee would have a master plan that
might say, “Make 30,000 pairs of style XYZ in May,” and at the end of the summer
25,000 pairs might remain unsold in the warehouse because of lack of demand.
CAMM technology allows an organization to increase integration of its input,
conversion, and output activities. The use of input and output inventories (see
Figure 9.6 ) allows the activities of each stage of the mass production process to
go on relatively independently. CAMM, however, tightly couples these activities.
CAMM increases task interdependence because each stage must be ready to react
quickly to demands from the other stages. CAMM increases technical complexity
because it makes input, conversion, and output activities a continuous process, in
effect creating a pipeline connecting raw materials to the customer. Because the
high levels of task interdependence and technical complexity associated with
CAMM require greater coordination, an organization may need to move toward an
organic structure, which will provide the extra integration that is needed.
CAMM also helps an organization pursue a low-cost or differentiation strategy. The
ability to control the flow of materials in the production process allows an
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organization to avoid the costs of carrying excess inventory and to be flexible
enough to adjust to product or demand changes quickly and easily.
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Just-in-Time Inventory Systems
Another advanced manufacturing technique for managing the flow of inputs into the
organization is the just-in-time inventory system. Developed from the Japanese
kanban system (a kanban is a card), a just-in-time inventory (JIT) system
requires inputs and components needed for production 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. 56
Components are kept in bins, and as they
are used up, the empty bins are sent back to the supplier with a request on the bin’s
card (kanban) for more components. Computer-aided materials management is
necessary for a JIT system to work effectively because CAMM provides
computerized linkages with suppliers—linkages that facilitate the rapid transfer of
information and coordination between an organization and its suppliers.
Just-in-time inventory (JIT) system
A system that requires inputs and components
needed for production to be delivered to the
conversion process just as they are needed, neither
earlier nor later, so that input inventories can be kept
to a minimum.
In theory, a JIT system can extend beyond components to raw materials. A
company may supply Ford or Toyota with taillight assemblies. The supplier itself,
however, may assemble the taillights from individual parts (screws, plastic lenses,
bulbs) provided by other manufacturers. Thus the supplier of the taillight assembly
could also operate a JIT system with its suppliers, who in turn could operate JIT
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systems with their suppliers. Figure 9.6 illustrates a just-in-time inventory system
that goes from the customer, to the store, and then back through the manufacturer
to the original suppliers.
A JIT system increases task interdependence between stages in the production
chain. Traditional mass production draws a boundary between the conversion stage
and the input and output stages and sequences conversion activities only. JIT
systems break down these barriers and make the whole value-creation process a
single chain of sequential activities. Because organizational activities become a
continuous process, technical complexity increases, in turn increasing the efficiency
of the system.
At the same time, JIT systems bring flexibility to manufacturing. The ability to order
components as they are needed allows an organization to widen the range of
Figure 9.6 Just-in-Time Inventory System
The system is activated by customers making purchases.
makes and to customize products. 57
JIT systems thus allow a modern mass
production organization because it is not tied to one product by large inventories to
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obtain the benefits of small-batch technology (flexibility and customization) with little
loss of technical efficiency.
Like CAMM, JIT systems require an extra measure of coordination, and an
organization may need to adopt new methods to manage this new technology. One
of these, as we saw in Chapter 3 , is to implement new strategies for managing
relations with suppliers. Toyota, which owns a minority stake in its suppliers,
periodically meets with its suppliers to keep them informed about new product
developments. Toyota also works closely with its suppliers to reduce the costs and
raise the quality of input components, and it shares the cost savings with them.58
Because owning a supplier can increase costs, many organizations try to avoid the
need to integrate vertically. Long-term contracts with suppliers can create
cooperative working relationships that have long-term benefits for both parties.
In sum, just-in-time inventory systems, computer-aided materials management, and
computer-aided design increase technical complexity and task interdependence
and thus increase the degree to which a traditional mass production system
operates like a continuous-process technology; they also increase efficiency and
reduce production costs. The three advanced manufacturing techniques also give
modern mass production the benefits of small-batch production: heightened
flexibility and the ability to respond to customer needs and increased product
quality. Together these techniques confer a low-cost and a differentiation advantage
on an organization.
Now that we have looked at advanced techniques for coordinating the input and
conversion stages, we can look at new developments inside the conversion stage.
At the center of AMT’s innovations of conversion processes is the creation of a
system based on flexible workers and flexible machines.
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Flexible Manufacturing Technology and
Traditional mass manufacturing technology uses dedicated machines, which
perform only one operation at a time. Flexible manufacturing technology , by
contrast, allows the production of many kinds of components at little or no extra cost
on the same machine. Each machine in a flexible manufacturing system is able to
perform a range of different operations, and the machines in sequence are able to
vary their operations so a wide variety of different components can be produced.
Flexible manufacturing technology combines the variety advantages of small-batch
production with the low-cost advantages of continuous-process production. How is
Flexible manufacturing technology
Technology that allows the production of many kinds
of components at little or no extra cost on the same
In flexible manufacturing systems, the key factor that prevents the cost increases
associated with changing operations is the use of a computer-controlled system to
manage operations. Computer-integrated manufacturing (CIM) is an
advanced manufacturing technique that controls the changeover from one operation
to another by means of the commands given to the machines through computer
software. A CIM system eliminates the need to retool machines physically. Within
the system are a number of computer-controlled machines, each capable of
automatically producing a range of components. They are controlled by a master
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computer, which schedules the movement of parts between machines in order to
assemble different products from the various components that each machine
Computer-integrated manufacturing depends on computers programmed
to (1) feed the machines with components, (2) assemble the product from
components and move it from one machine to another, and (3) unload the final
product from the machine to the shipping area.
Computer-integrated manufacturing (CIM)
An advanced manufacturing technique that controls
the changeover from one operation to another by
means of the commands given to the machines
through computer software.
The use of robots is integral to CIM. A group of robots working in sequence is the
AMT equivalent of a dedicated transfer machine. Each robot can be quickly
programmed by software to perform different operations, and the costs of
reprogramming robots are much lower than the costs associated with retooling
dedicated transfer machines.
In sum, computer-integrated manufacturing, just-in-time inventory systems, computer-
aided materials management, and computer-aided design give organizations the flexibility
to make a variety of products, as well as different models of the same product, rapidly and
cost effectively. They break down the traditional barriers separating the input, conversion,
and output stages of production; as a result, input, conversion, and output activities merge
into one another. These four innovations in materials technology decrease the need for
costly inventory buffers to protect conversion processes from disruptions in the
environment. In addition, they increase product reliability because they increase
automation and technical complexity.
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Technical complexity, the differences between routine and nonroutine tasks, and
task interdependence jointly explain why some technologies are more complex and
difficult to control than others and why organizations adopt different structures to
operate their technology. In general, input, conversion, and output processes that
depend primarily on people and departments cooperating and trading knowledge
that is difficult to program into standard operating routines require the most
coordination. An organization that needs extensive coordination and control to
operate its technology also needs an organic structure to organize its tasks.
Chapter 9 has made the following main points:
1. Technology is the combination of skills, knowledge, abilities, techniques,
materials, machines, computers, tools, and other equipment that people use
to convert raw materials into valuable goods and services.
2. Technology is involved in an organization’s input, conversion, and output
processes. An effective organization manages its technology to meet the
needs of stakeholders, foster innovation, and increase operating efficiency.
3. Technical complexity is the extent to which a production process is
controllable and predictable. According to Joan Woodward, technical
complexity differentiates small-batch and unit production, large-batch and
mass production, and continuous-process production.
4. Woodward argued that each technology is associated with a different
organizational structure because each technology presents different control
and coordination problems. In general, small-batch and continuous-process
technologies are associated with an organic structure, and mass production
is associated with a mechanistic structure.
5. The argument that technology determines structure is known as the
technological imperative. According to the Aston Studies, however,
organizational size is more important than technology in determining an
organization’s choice of structure.
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6. According to Charles Perrow, two dimensions underlie the difference
between routine and nonroutine tasks and technologies: task variability and
task analyzability. The higher the level of task variability and the lower the
level of task analyzability, the more complex and nonroutine are
7. Using task variability and analyzability, Perrow described four types of
technology: craftswork, nonroutine research, engineering production, and
8. The more routine the tasks, the more likely an organization is to use a
mechanistic structure. The more complex the tasks, the more likely an
organization is to use an organic structure.
9. James D. Thompson focused on the way in which task interdependence
affects an organization’s technology and structure. Task interdependence is
the manner in which different organizational tasks are related to one another
and the degree to which the performance of one person or department
depends on and affects the performance of another.
10. Thompson identified three types of technology, which he associated with
three forms of task interdependence: mediating technology and pooled
interdependence; long-linked technology and sequential interdependence;
and intensive technology and reciprocal interdependence.
The higher the level of task interdependence, the more likely an
organization is to use mutual adjustment rather than standardization to
coordinate work activities.
12. Advanced manufacturing technology consists of innovations in materials
technology that change the work process of traditional mass production
organizations. Innovations in materials technology include computer-aided
design, computer-aided materials management, just-in-time inventory
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systems, flexible manufacturing technology, and computer-integrated
1. How can technology increase organizational effectiveness?
2. How does small-batch technology differ from mass production technology?
3. Why is technical complexity greatest with continuous-process technology?
How does technical complexity affect organizational structure?
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
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
6. Find an organization in your city, and analyze how its technology works. Use
the concepts discussed in this chapter: technical complexity, nonroutine
tasks, and task interdependence.
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
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Organizational Theory in Action
Practicing Organizational Theory Choosing a Technology
Form groups of three to five people and discuss the following scenario:
You are investors who are planning to open a large computer store in a big city on
the West Coast. You plan to offer a complete range of computer hardware, ranging
from UNIX-based workstations, to powerful PCs and laptop computers, to a full
range of printers and scanners. In addition, you propose to offer a full range of
software products, from office management systems to personal financial software
and children’s computer games. Your strategy is to be a one-stop shopping place
where all kind of customers—from large companies to private individuals—can get
everything they want from salespeople who can design a complete system to meet
each customer’s unique needs.
You are meeting to decide which kind of technology—which combination of skills,
knowledge, techniques, and task relationships—will best allow you to achieve your
1. Analyze the level of (a) technical complexity and (b) task variability and task
analyzability associated with the kinds of tasks needed to achieve your
2. Given your answer to item 1, what kind of task interdependence between
employees/departments will best allow you to pursue your strategy?
3. Based on this analysis, what kind of technology will you choose in your
store, and what kind of structure and culture will you create to manage your
technology most effectively?
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The Ethical Dimension #9
The chapter discussed some of Henry Ford’s strict labor practices that caused such
high turnover. Workers were not allowed to talk on the production line, for example,
and he employed detectives to spy on them when they were at home.
1. What limits should be placed on a company’s right to monitor and control its
employees from an ethical perspective?
2. What moral rules would you create to help managers decide when, and
which actions and behaviors, they have a right to influence and control?
Making the Connection #9
Find an example of a company operating with one of the technologies identified in
this chapter. Which technology is the company using? Why is the company using it?
How does this technology affect the organization’s structure?
Analyzing the Organization: Design Module
This module focuses on the technology your company uses to produce goods and
services and the problems and issues associated with the use of this technology.
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Using the information at your disposal, and drawing inferences about your
company’s technology from the activities that your organization engages in, answer
the following questions.
1. What kinds of goods or services does your organization produce? Are input,
conversion, or output activities the source of greatest uncertainty for your
2. What role does technology in the form of knowledge play in the production
of the organization’s goods or services?
3. What role does materials technology play in the production of the
organization’s goods and services?
4. What is the organization’s level of technical complexity? Does the
organization use a small-batch, mass production, or continuous-process
5. Use the concepts of task variability and task analyzability to describe the
complexity of your organization’s activities. Which of the four types of
technology identified by Perrow does your organization use?
6. What forms of task interdependence between people and between
departments characterize your organization’s work process? Which of the
three types of technology identified by Thompson does your organization
7. The analysis you have done so far might lead you to expect your company
to operate with a particular kind of structure. What kind? To what extent
does your organization’s structure seem to fit with the characteristics of the
organization’s technology? For example, is the structure organic or
8. Do you think your organization is operating its technology effectively? Do
you see any ways in which it could improve its technical efficiency,
innovativeness, or ability to respond to customers?
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Case for Analysis Microsoft Reorganizes to Speed Innovation
Microsoft, like other software makers, has been shocked by the increasing number
of applications available on the Internet and not on the PC, many of which have
been pioneered by Google and Yahoo! These include better and faster versions of
Internet applications such as email, advanced specialized search engines, Internet
phone services, imaging searching, and mapping such as Google’s Earth. Rapid
innovation is taking place in these and other
areas, and the danger for Microsoft is that these online applications will make its
vital Windows PC platform less useful and perhaps obsolete. If, in the future, people
begin to use new kinds of online word processing and storage applications, then the
only important PC software application will become operating system software. This
would cause Microsoft’s revenues and profits to plummet. So a major push is on at
Microsoft to find ways to make its new software offerings work seamlessly with
developing Internet-based service applications and its Windows platform so
customers will remain loyal to its PC software.
To achieve this, Microsoft announced a major redesign of its organizational
structure to focus on three major software and service products areas: Platform
Products and Services, Business, and Entertainment & Services, each of which will
be managed by its own new top management team. In doing this, Microsoft has
created a new level in its hierarchy and has decentralized major decision-making
responsibility to these managers. Inside each division, IT specialists will continue to
work in small project teams.
Microsoft claims that the new structure will not only speed technological innovation
in each division, but it will also create many synergies between the product divisions
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and foster collaboration and so improve product development across the
organization. In essence, Microsoft is trying to make its structure more organic so it
can better compete with nimble rivals like Google. As Microsoft’s CEO Steve
Ballmer commented, “Our goal in making these changes is to enable Microsoft to
achieve greater agility in managing the incredible growth ahead and executing our
software-based services strategy.” Some analysts wonder, however, if adding a
new level to the hierarchy will only create a new layer of bureaucracy that will
further slow down decision making and allow Google to take an even greater lead in
Internet services in the decade ahead.
1. Which of the following technology best characterizes the way Microsoft
operates (a) craftswork, (b) engineering production, or (c) intensive
2. In what ways does Microsoft hope its new way of organizing will help it to
continually improve its competences and technology?
Page 96 of 98
1 “Survey: The Endless Road,” Economist, October 17, 1992, p. 4.
5 R. Edwards, Contested Terrain: The Transformation of the Workplace in the Twentieth
Century (New York: Basic Books, 1979).
3 D. M. Rousseau, “Assessment of Technology in Organizations: Closed Versus Open
Systems Approaches,” Academy of Management Review 4 (1979), 531–542; W. R. Scott,
Organizations: Rational, Natural, and Open Systems (Englewood Cliffs, NJ: Prentice-Hall,
4 H. Ford, “Progressive Manufacturing,” Encyclopedia Britannica, 13th ed. (New York:
Encyclopedia Co., 1926).
2 Edwards, Contested Terrain, p. 119.
6 J. Woodward, Management and Technology (London: Her Majesty’s Stationery Office,
1958), p. 12.
7 Woodward, Management and Technology, p. 11.
8 www.zynga.com, 2011.
10 J. Woodward, Industrial Organization: Theory and Practice (London: Oxford University
11 www.Ikea.com, 2011.
12 Woodward, Industrial Organization.
13 Woodward, Management and Technology.
14 C. Perrow, Normal Accidents: Living with High-Risk Technologies (New York: Basic
15 E. Harvey, “Technology and the Structure of Organizations,” American Sociological
Review 33 (1968), 241–259; W. L. Zwerman, New Perspectives on Organizational
Effectiveness (Westport, CT: Greenwood, 1970).
16 D. J. Hickson, D. S. Pugh, and D. C. Pheysey, “Operations Technology and Organizational
Structure: An Empirical Reappraisal,” Administrative Science Quarterly 14 (1969), 378–397; D.
S. Pugh, “The Aston Program of Research: Retrospect and Prospect,” in A. H. Van de Ven and
W. F. Joyce, eds., Perspectives on Organizational Design and Behavior (New York: Wiley,
1981), pp. 135–166; H. E. Aldrich, “Technology and Organizational Structure: A Reexamination
of the Findings of the Aston Group,” Administrative Science Quarterly 17 (1972), pp. 26–43.
17 J. Child and R. Mansfield, “Technology, Size and Organization Structure,” Sociology 6
18 Hickson et al., “Operations Technology and Organizational Structure.”
Page 97 of 98
19 C. Perrow, Organizational Analysis: A Sociological View (Belmont, CA: Wadsworth,
21 Ibid., p. 21.
23 This section draws heavily on C. Perrow, “A Framework for the Comparative Analysis of
Organizations,” American Sociological Review 32 (1967), 194–208.
24 Perrow, Organizational Analysis; C. Gresov, “Exploring Fit and Misfit with Multiple
Contingencies,” Administrative Science Quarterly 34 (1989), 431–453.
25 Edwards, Contested Terrain.
26 www.honda,com, 2011.
27 www.apple.com, 2011.
28 www.foxconn.com, 2011.
29 M. Williams, “Back to the Past,” Wall Street Journal, October 24, 1994, p. A1.
30 S. N. Mehta, “Cell Manufacturing Gains Acceptance at Smaller Plants,” Wall Street
Journal, September 15, 1994, p. B2.
31 J. Beyer and H. Trice, “A Re-Examination of the Relations Between Size and Various
Components of Organizational Complexity,” Administrative Science Quarterly 30 (1985), 462
32 L. Argote, “Input Uncertainty and Organizational Coordination of Subunits,”
Administrative Science Quarterly 27 (1982), 420–434.
33 R. T. Keller, “Technology-Information Processing Fit and the Performance of R&D
Project Groups: A Test of Contingency Theory,” Academy of Management Review 37 (1994),
34 C. Perrow, “Hospitals: Technology, Structure, and Goals,” in J. March, ed., The
Handbook of Organizations (Chicago: Rand McNally, 1965), pp. 910–971.
35 D. E. Comstock and W. R. Scott, “Technology and the Structure of Subunits,”
Administrative Science Quarterly 22 (1977), 177–202; A. H. Van de Ven and A. L. Delbecq, “A
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Task Contingent Model of Work Unit Structure,” Administrative Science Quarterly 19 (1974), 183–
36 J. D. Thompson, Organizations in Action (New York: McGraw-Hill, 1967).
37 W. G. Ouchi, “The Relationship Between Organizational Structure and Organizational
Control,” Administrative Science Quarterly 22 (1977), 95–113.
38 Thompson, Organizations in Action.
39 Ibid., p. 17.
40 T. Davenport and L. Prusak, Information Ecology. (London: Oxford University Press,
41 www.accenture.com, 2011.
42 www.ibm.com, 2011.
43 Thompson, Organizations in Action; G. R. Jones, “Organization–Client Transactions
and Organizational Governance Structures,” Academy of Management Journal 30 (1987), 197
44 C. Edquist and S. Jacobson, Flexible Automation: The Global Diffusion of New
Technology in the Engineering Industry (London: Basil Blackwell, 1988).
46 M. Jelinek and J. D. Goldhar, “The Strategic Implications of the Factory of the Future,”
Sloan Management Review, 25 (1984), 29–37; G. I. Susman and J. W. Dean, “Strategic Use
of Computer Integrated Manufacturing in the Emerging Competitive Environment,” Computer
Integrated Manufacturing Systems 2 (1989), 133–138.
47 C. A. Voss, Managing Advanced Manufacturing Technology (Bedford, England: IFS
[Publications] Ltd., 1986).
48 Krafcik, “Triumph of the Lean Production System.”
49 Ibid.; M. T. Sweeney, “Flexible Manufacturing Systems—Managing Their Integration,” in
Voss, Managing Advanced Manufacturing Technology, pp. 69–81.
50 D. E. Whitney, “Manufacturing by Design,” Harvard Business Review (July–August
51 “Microtechnology, Dropping Out,” The Economist, January 9, 1993, p. 75.