organizational design, structure

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Chapter Seven
Manufacturing and Service
Technologies

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Core Transformation Process for a
Manufacturing Company
ENVIRONMENT
Organization
Raw Material
Inputs
Product or Service
Outputs
Core
Work Processes
Materials
Handling
Milling Inspection
Assembly

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Woodward’s Classification Based on
System of Production
 Group I
 Small-batch and unit production
 Group II
 Large-batch and mass production
 Group III
 Continuous process production

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Flexible Manufacturing Systems
 Computer-aided design
 (CAD)
 Computer-aided manufacturing
 (CAM)
 Integrated Information Network

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NEW CHOICES
TRADITIONAL
CHOICES
Mass
Production
Small batch
Flexible
Manufacturing
Mass
Customization
Continuous
Process
Relationship of Flexible Manufacturing
Technology to Traditional Technologies
BATCH SIZESmall Unlimited
Customized
Standardized
PRODUCTFLEXIBILITY
Source: Based on Jack Meredith, “The Strategic Advantages of New
Manufacturing Technologies For Small Firms.” Strategic Management
Journal 8 (1987): 249-58; Paul Adler, “Managing Flexible Automation,”
California Management Review (Spring 1988): 34-56; and
Otis Port, “Custom-made Direct from the Plant.”
Business Week/21st
Century Capitalism, 18 November 1994, 158-59.

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Comparison of Organizational Characteristics Associated
with Mass Production and
Flexible Manufacturing Systems
Characteristic Mass Production FMS
Structure:
Span of Control Wide Narrow
Hierarchical levels Many Few
Tasks Routine, repetitive Adaptive, craft-like
Specialization High Low
Decision making Centralized Decentralized
Overall Bureaucratic,
mechanistic
Self-regulating,
organic
Source: Based on Patricia L. Nemetz and Louis W. Fry, “Flexible
Manufacturing Organizations: Implications for Strategy Formulation
and Organization Design.” Academy of Management Review 13
(1988); 627-38; Paul S. Adler, “Managing Flexible Automation,”
California Management Review (Spring 1988); 34-56; Jeremy Main,
“Manufacturing the Right Way,” Fortune, 21 May 1990, 54-64.

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Comparison of Organizational Characteristics Associated
with Mass Production and
Flexible Manufacturing Systems (cont.)
Characteristic Mass Production FMS
Human Resources:
Interactions Standalone Teamwork
Training Narrow, one time Broad, frequent
Expertise Manual, technical Cognitive, social
Solve problems
Source: Based on Patricia L. Nemetz and Louis W. Fry, “Flexible
Manufacturing Organizations: Implications for Strategy Formulation
and Organization Design.” Academy of Management Review 13
(1988); 627-38; Paul S. Adler, “Managing Flexible Automation,”
California Management Review (Spring 1988); 34-56; Jeremy Main,
“Manufacturing the Right Way,” Fortune, 21 May 1990, 54-64.

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Comparison of Organizational Characteristics Associated
with Mass Production and
Flexible Manufacturing Systems (cont.)
Characteristic Mass Production FMS
Interorganizational:
Customer Demand Stable Changing
Suppliers Many,
arm’s length
Few, close
relations
Source: Based on Patricia L. Nemetz and Louis W. Fry, “Flexible
Manufacturing Organizations: Implications for Strategy Formulation
and Organization Design.” Academy of Management Review 13
(1988); 627-38; Paul S. Adler, “Managing Flexible Automation,”
California Management Review (Spring 1988); 34-56; Jeremy Main,
“Manufacturing the Right Way,” Fortune, 21 May 1990, 54-64.

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© 2004 7-9
Differences Between Manufacturing and
Service Technologies
Manufacturing Technology
1. Tangible product
2. Products can be inventoried for later
consumption
3. Capital asset intensive
4. Little direct customer interaction
5. Human element may be less
important
6. Quality is directly measured
7. Longer response time is acceptable
8. Site of facility is moderately
important
Service Technology
1. Intangible product
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
Service:
Airlines, Hotels,Consultants,
Healthcare, Law firms
Product and Service:
Fast-food outlets, Cosmetics,
Real estate, Stockbrokers,
Retail stores
Product:
Soft drink companies,
Steel companies,
Auto manufacturers,
Food processing plantsSources: Based on F. F. Reichheld and W. E. Sasser, Jr.,
“Zero Defections: Quality Comes to Services,” Harvard Business
Review 68 (September-October 1990): 105-11; and David E.
Bowen, Caren Siehl, and Benjamin Schneider, “A Framework
for Analyzing Customer Service Orientations in Manufacturing,”
Academy of Management Review 14 (1989): 75-95.

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Configuration and Structural Characteristics of
Service Organizations vs. Product Organizations
Service Product
Structure:
Separate boundary roles Few Many
Geographical dispersion Much Little
Decision making Decentralized Centralized
Formalization Lower Higher
Human Resources:
Employee skill level Higher Lower
Skill emphasis Interpersonal Technical

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Departmental Technologies
 CRAFT
 Low analyzability
 Low variety
 Examples:

Performing arts

Trades

Fine goods
manufacturing
 ROUTINE
 High analyzability
 Low variety
 Examples:

Sales

Clerical

Drafting

Auditing

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 ENGINEERING
 High analyzability
 High variety
 Examples:

Legal

Engineering

Tax accounting

General accounting
 NONROUTINE
 Low analyzability
 High variety
 Examples:

Strategic planning

Social science
research

Applied research
Departmental Technologies

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Relationship of Department Technology
to Structural and Management
Characteristics
Mechanistic Structure
1. High formalization
2. High centralization
3. Little training or experience
4. Wide span
5. Vertical, written
communications
ROUTINE
Mostly Mechanistic Structure
1. Moderate formalization
2. Moderate centralization
3. Formal training
4. Moderate span
5. Written and verbal
communications
ENGINEERING
Mostly Organic Structure
1. Moderate formalization
2. Moderate centralization
3. Work experience
4. Moderate to wide span
5. Horizontal, verbal
communications
CRAFT
Organic Structure
1. Low formalization
2. Low centralization
3. Training plus experience
4. Moderate to narrow span
5. Horizontal communications
meetings
NONROUTINE

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Thompson’s Classification of
Interdependence and Management
Implications
Form of
Interdependence
Demands on
Horizontal
Communications,
Decision Making
Type of
Coordination
Required
Priority for
Locating Units
Close Together
Pooled (bank)
Low
communication
Standardization, rules,
procedures
Divisional Structure
Low
Sequential
(assembly line) Medium
communication
Plans, schedules,
feedback
Task Forces
Medium
Reciprocal (hospital)
High
communication
Mutual adjustment, cross-
departmental meetings,
teamwork
Horizontal Structure
High
Client
Client
Client

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Primary Means to Achieve Coordination for
Different Levels of Task Interdependence in a
Manufacturing Firm
Reciprocal
(new product development)
Sequential
(product manufacture)
Pooled
(product delivery)
COORDINATIONINTERDEPENDENCE
High
Low
Horizontal structure,
cross-functional teams
Face-to-face communication,
Unscheduled meetings,
Full-time integrators
Scheduled meetings, task forces
Vertical communication
Plans
Rules
Mutual
Adjustment
Planning
Standardization
Source: Adapted from Andrew H. Van de Ven, Andre Delbecq, and
Richard Koenig, “Determinants of Communication Modes Within
Organizations,” American Sociological Review 41 (1976): 330.

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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
Source: Based on William Passmore, Carol E. Francis, and Jeffrey
Halderman, “Sociotechnical Systems: A North American Reflection
On the Empirical Studies of the 70’s,” Human Relations 35 (1982):
1179-1204.

17. Thomson Learning
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Design for
Joint Optimization
Work roles, tasks,
workflow
Goals and values
Skills and abilities
Design for
Joint Optimization
Work roles, tasks,
workflow
Goals and values
Skills and abilities
Sociotechnical Systems Model
The Social System
Individual and team
behaviors
Organizational/team
culture
Management practices
Leadership style
Degree of communication
and openness
Individual needs and
desires
The Social System
Individual and team
behaviors
Organizational/team
culture
Management practices
Leadership style
Degree of communication
and openness
Individual needs and
desires
The Technical System
Type of production
technology (small batch,
mass production, FMS, etc.)
Level of interdependence
(pooled, sequential,
reciprocal)
Physical work setting
Complexity of production
process (variety and
analyzability)
Nature of raw materials
Time pressure
The Technical System
Type of production
technology (small batch,
mass production, FMS, etc.)
Level of interdependence
(pooled, sequential,
reciprocal)
Physical work setting
Complexity of production
process (variety and
analyzability)
Nature of raw materials
Time pressure
Sources: Based on T. Cummings, “Self-Regulating Work Groups: A Socio-Technical
Synthesis,” Academy of Management Review 3 (1978): 625-34; Don Hellriegel, John W.
Slocum, and Richard W. Woodman, Organizational Behavior, 8th
ed. (Cincinnati, Ohio:
South-Western College Publishing, 1998), 492; and Gregory B. Northcraft and Margaret
A. Neale, Organizational Behavior: A Management Challenge, 2nd
ed. (Fort Worth, Tex.:
The Dryden Press, 1994), 551.

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Technology Comparison
Workbook
Activity
McDonald’s Subway
Family
Restaurant
Organization Goals
Authority Structure
Woodward’s Technology Type
Mechanistic vs. Organic
Teamwork vs. Individual
Interdependence
Routine vs. Nonroutine tasks
Task Specialization
Task Standardization
Technical vs. Social Expertise
Centralized vs. Decentralized