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Chapter8.ManufacturingandServiceTechnologies.pptx

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Chapter 8 Designs for Manufacturing and Service Technologies

Organization Theory and Design

Thirteenth Edition

Richard L. Daft

Chapter

Learning Objectives (slide 1 of 2)

Define an organization’s core technology and its influence on organization design.

Explain Woodward’s model of technical complexity, structure, and performance.

Apply the distinctive qualities of organization design that enable organizations to operate exceptionally complex technologies with few breakdowns and extremely rare catastrophes.

Learning Objectives (slide 2 of 2)

Compare service technology and manufacturing technology in terms of their impact on organization design.

Define departmental technology and its relationship to department design.

Identify three types of interdependence and their respective structural priority.

Understanding Technology

Technology refers to the work processes, techniques, machines, and actions used to transform input into outputs

Technology influences organizational structure

Understanding technology helps dictate how organizations can be designed for efficiency

Core technology is the work process that is directly related to the organization’s mission

Non-core technology is not directly related to the organization’s primary miss

Core Transformation Process for a Manufacturing Company

Pressures Affecting Organization Design

Core Manufacturing Technology

Manufacturing technologies include traditional manufacturing processes and contemporary applications

Technical complexity defines the extent of mechanization of the manufacturing process

Manufacturing Firms

Three basic technology groups defined by Woodward:

Group I: Small-batch and unit production

Group II: Large-batch and mass production

Group III: Continuous process production

Woodward’s Classification Based on System of Production

Relationship between Technical Complexity and Structural Characteristics

		Technology
Structural Characteristic	Unit Production	Mass Production	Continuous Process
Number of management levels	3	4	6
Supervisor span of control	23	48	15
Direct/indirect labor ratio	9:1	4:1	1:1
Manager/total personnel ratio	Low	Medium	High
Workers’ skill level	High	Low	High
Formalized procedures	Low	High	Low
Centralization	Low	High	Low
Amount of verbal communication	High	Low	High
Amount of written communication	Low	High	Low
Overall structure	Organic	Mechanistic	Organic

Strategy, Technology, and Performance

Strategy, structure, and technology need to be aligned

Successful firms have complementary structures and technologies

Failing to adopt a new technology to support strategy or failing to realign strategy after adopting a new technology can lead to poor performance

The Smart Factory

New manufacturing technologies include advanced robotics, radio-frequency identification (RFID), wireless technology, artificial intelligence (AI), and engineering analysis

In a smart factory, computer-guided machines handle many of the routine tasks, and factory plants, suppliers, and customers are digitally connected to one another

Smart Factory subcomponents

Computer-aided Design (CAD)

Computer-aided Manufacturing (CAM)

Robots

3-D Printing (Additive Manufacturing)

Smart Manufacturing Technology vs. Traditional Technologies

Mass Customization

Smart factories paved the way for mass customization (using mass-production technology to quickly and cost-effectively assemble individualized goods for customers)

Products of different sizes, types, and customer requirements freely intermingle on the assembly line

Smart factories allow plants to increase both batch size and product flexibility at the same time

High-level use of smart systems is referred to as computer-aided craftsmanship

Performance and Structural Implications

Studies suggest that in smart factories, there is:

More efficient machine utilization

Increased labor productivity

Decreased scrap rates

Increased product variety

Increased customer satisfaction

Comparison of Organizational Characteristics (slide 1 of 2)

Characteristic	Mass Production	Smart Factory
Structure
Span of control	Wide	Narrow
Hierarchical levels	Many	Few
Tasks	Routine, repetitive	Adaptive, craftlike
Specialization	High	Low
Decision making	Centralized	Decentralized
Overall	Bureaucratic, mechanistic	Self-regulating, organic

Comparison of Organizational Characteristics (slide 2 of 2)

Characteristic	Mass Production	Smart Factory
Human Resources
Interactions	Stand-alone	Teamwork
Training	Narrow, one time	Broad, frequent
Expertise	Manual, technical	Cognitive, social; solve problems
Interorganizational
Customer demand	Stable	Changing
Suppliers	Many, arm’s length	Few, close relationships

Surviving Extremely Complex Technologies

Complex systems can overwhelm a company’s ability to effectively and safely manage them

High reliability organizations (HROs) have developed techniques to manage highly complex and potentially hazardous technologies in a safe and reliable manner

Five qualities characterize a high reliability organization:

Preoccupation with failure

Reluctance to simplify observations

Sensitivity to operations

Deference to expertise

Commitment to resilience

Five Characteristics of the High Reliability Organization

Core Service Technology

Service technologies are different from manufacturing technologies and require different organizational design

Characteristics of service firms include:

Intangible output

Simultaneous production and consumption

Labor and knowledge intensive

High direct interaction between customer and employee

Core Organization Service Technology

Trend Toward Customized Services

Service firms have always tended toward providing customized output

Customer expectations of what constitutes good service are rising

These expectations have required service firms to become more efficient and to cut costs without sacrificing quality

Designing the Service Organization

Boundary roles are used less in service firms than in manufacturing firms

A service firm’s greatest economies are achieved through disaggregation into small units that are located close to customers

Skills of technical core employees typically need to be higher

Employees need knowledge, awareness, social and interpersonal skills

Decision making is often decentralized

Structural Characteristics of Service Organizations versus Product Organizations

	Service	Product
Structural Characteristic
1. Separate boundary roles	Few	Many
2. Geographical dispersion	Much	Little
3. Decision making	Decentralized	Centralized
4. Formalization	Lower	Higher
Structural Characteristic
1. Employee skill level	Higher	Lower
2. Skill emphasis	Interpersonal	Technical

Non-Core Departmental Technology

The two dimensions of departmental technology are variety and analyzability

These dimensions form the basis for four departmental technology categories:

Routine technologies

Craft technologies

Engineering technologies

Nonroutine technologies

Variety and analyzability can be also combined into a single dimension called routine versus nonroutine technology

Framework for Department Technologies

Department Design

Overall department design is either organic or mechanistic

Departmental technology is associated with a cluster of characteristics:

Formalization

Decentralization

Employee skill level

Span of control

Communication and coordination

Specific design characteristics vary, depending on work unit technology

Relationship of Department Technology to Structural and Management Characteristics

Workflow Interdependence Among Departments

Interdependence is the extent to which departments depend on each other for resources or materials:

Pooled interdependence: Low level of interdependence (departments work independently)

Sequential interdependence: High level of interdependence (department A must perform correctly so that department B performs correctly)

Reciprocal interdependence: Highest level of interdependence (department A’s output is the input to department B, and department B’s output is the input back again to department A)

Classification of Interdependence and Management Implications

Interdependence of Departments Involved in the Flight Departure Process

Structural Priority and Implications

Reciprocal interdependence should receive first priority

Reciprocal activities should be grouped together

Poor coordination will cause poor performance for the organization

Most organizations experience various levels of interdependence, and their structures can be designed to address these needs

Primary Means to Achieve Coordination for Different Levels of Task Interdependence

Relationships Among Interdependence and Other Characteristics of Team Play

	Baseball	Football	Basketball
Interdependence	Pooled	Sequential	Reciprocal
Physical dispersion of players	High	Medium	Low
Coordination	Rules that govern the sport	Game plan and position roles	Mutual adjustment and shared responsibility
Key management job	Select players and develop their skills	Prepare and execute game	Influence flow of game

Organizational Design Essentials (slide 1 of 2)

Organizations are adopting smart factories and mass customization, which has caused organization design to shift toward more organic designs both on the shop floor and in the management hierarchy.

These technologies replace routine jobs, give employees more autonomy, produce more challenging jobs, encourage teamwork, and let the organization be more flexible and responsive.

Extremely complex systems bring about many benefits, but these systems can strain the human ability to effectively and safely manage them.

Organizational Design Essentials (slide 2 of 2)

Most organizations involve a combination of products and services and can be classified along a continuum that includes both manufacturing and service characteristics.

Routine technologies are associated with a mechanistic design, with formal rules and rigid management processes.

Nonroutine technologies are associated with an organic design, and department management is more flexible.

Three types of interdependence are pooled, sequential, and reciprocal. To be effective, organization design must allow for the correct amount of communication and coordination to handle interdependence across departments.