Technology refers to the work processes, techniques, machines, and actions used to transform
organizational inputs (materials, information, ideas) into outputs (products and services).
An organization’s core technology is the work process that is directly related to the organization’s
mission.
In an organization Technical complexity represents the extent of mechanization of the manufacturing
process. High technical complexity means most of the work is performed by machines. Low technical
complexity means workers play a larger role in the production process.
How technology affects Organization design?
For example: Small unit production
They rely heavily on human operator, although computerized machinery Is still used for some part of
production process, final assembly requires highly skilled human operators to ensure reliability of
products. There are 3 managerial levels, bottom level is moderate ( supervisor span of control is 23)
Direct labor costs are expenses that tie directly to production of specific finished goods units. Indirect
labor refers to production support labor costs not easily linked to specific units. The ratio of direct
labour to indirect labour is 9:1. The manager to total personnel ratio in small unit production is low. The
extent to which work roles are structured in an organization is known as formalization and is lower in
small unit production.
. Production of single pieces to customer orders
. Production of technically complex units one by one
. Fabrication of large equipment in stages
. Production of pieces in small batches
Large batch production
Production of components in large batches subsequently assembled diversely. Production of large
batches, assembly line type. Continuous process production combined with the preparation of a product
for sale by large-batch or mass production methods. There are 4 managerial levels, bottom level is huge
(supervisor span of control is 48). The ratio of direct labour to indirect labour is 4:1. The manager to
total personnel ratio in large unit production is medium. The formalization structure is higher in large
unit production.
Continuous production
Continuous process production combined with the preparation of a product for sale by large-batch or
mass production methods Continuous process production of chemicals in batches Continuous flow
production of liquids, gases, and solid shapes. There are 6 managerial levels, bottom level is least
( supervisor span of control is 15) The ratio of direct labour to indirect labour is 9:1. The manager to
total personnel ratio in continuous unit production is high. The formalization structure is lower in
continuous unit production.
The number of management levels and the manager-to-total personnel ratio, for example, show definite
increases as technical complexity increases from unit production to continuous process.
Service or product organization.
Service organizations accomplish their primary purpose through the production and provision of
services.
1. Intangible output
2. Production and consumption take place simultaneously
3. Labor- and knowledge-intensive
4. Customer interaction generally high
5. Human element very important
6. Quality is perceived and difficult to measure
7. Rapid response time is usually necessary
8. Site of facility is extremely important
Another characteristic of service technology is that site selection is often much more important than
with manufacturing. Because services are intangible, they have to be located where the customer wants
to be served. Services are dispersed and located geographically close to customers. For example, fast-
food franchises usually disperse their facilities into local stores. Most towns of even moderate size today
have two or more McDonald’s restaurants rather than one large one, for example, in order to provide
service where customers want and need it.
Characteristics of service or product organization
Boundary roles are used extensively in manufacturing firms to handle customers and to reduce
disruptions for the technical core. They are used less in service firms because a service is intangible and
cannot be passed along by boundary spanners, so service customers must interact directly with
technical employees, such as doctors or brokers.
A service firm deals in information and does not need to be large. Its greatest economies are achieved
through disaggregation into small units that can be located close to customers.
A large manufacturing firm can take advantage of economies derived from expensive machinery and
long production runs. Service technology also influences internal organization characteristics used to
direct and control the organization.
For one thing, the skills of technical core employees typically need to be higher. Employees need social
and interpersonal skills as well as technical skills. Because of higher skills and structural dispersion,
decision making often tends to be decentralized in service firms, and formalization tends to be low.
Service employees need good interpersonal skills and a degree of autonomy to be able to satisfy each
customer’s specific needs. Although many service organizations have some standard procedures for
serving customers, service firms are typically low on both centralization and formalization. Abundant
rules can take away both personal autonomy and the personal touch.
Categories of Technology.
Routine technologies are characterized by little task variety and the use of objective, computational
procedures. The tasks are formalized and standardized. Examples include an automobile assembly line
and a bank teller department.
Craft technologies are characterized by a fairly stable stream of activities, but the conversion process is
not analyzable or well understood. Tasks require extensive training and experience because employees
respond to intangible factors on the basis of wisdom, intuition, and experience. Although advances in
machine technologies
Engineering technologies tend to be complex because there is substantial variety in the tasks
performed. However, the various activities are usually handled on the basis of established formulas,
procedures, and techniques. Employees normally refer to a well-developed body of knowledge to
handle problems.
Non routine technologies have high task variety, and the conversion process is not analyzable or well
understood.. Basic research, strategic planning, and other work that involves new projects and
unexpected problems are non routine. The biotechnology industry also represents a non routine
technology.
The overall structure of departments may be characterized as either organic or mechanistic. Routine
technologies are associated with a mechanistic structure and processes, with formal rules and rigid
management processes. Non routine technologies are associated with an organic structure, and
department management is more flexible and free-flowing. The specific design characteristics of
formalization, centralization, worker skill level, span of control, and communication and coordination
vary, depending on work unit technology.
Challenges for service managers
Low interaction and customization leads to marketing standard services, manages the mechanistic
structure and also formalizes and standardize the procedures
High interaction and customization increases limit cost, maintains efficient quality, develops skills and
also responds to customer interventions.
Interdependence and Co-ordination Mechanisms
Most organizations experience various levels of interdependence, and structure can be designed to fit
these needs. In a manufacturing firm, new product development entails reciprocal interdependence
among the design, engineering, purchasing, manufacturing, and sales departments. Cross-functional
teams could be used to handle the back and-forth flow of information and resources. Once a product is
designed, its actual manufacture would be sequential interdependence, with a flow of goods from one
department to another, such as among purchasing, inventory, production control, manufacturing, and
assembly
LECTURE 4- EXTERNAL ENVIRONMENT
The external environment is likely to influence the ways in which any company, as a whole, is
designed as well as the ways in which individual departments/divisions within it are designed.
Differences between different departments
The differences that evolved among departments within the organizations are
To work effectively with the scientific sub environment, R&D had a goal of quality work, a long
time horizon (up to five years), an informal structure, and task-oriented employees.
Sales was at the opposite extreme. It had a goal of customer satisfaction, was oriented toward
the short term (two weeks or so), had a very formal structure, and was socially oriented. One
outcome of high differentiation is that coordination among departments becomes difficult.
More time and resources must be devoted to achieving coordination when attitudes, goals, and
work orientation differ so widely.
R&D department prioritizes on new products quality, time horizon taken is long, the
interpersonal orientation of employees is a task and structure formality is low.
Manufacturing department prioritizes efficiency, time horizon taken is short, the interpersonal
orientation of employees is a task and structure formality is high.
FINANCE
Financial
Short
Task
High
