Technology and the Effects on Organizational Design
Technology impacts organizations at every level. Organizational technology is defined by Jones (2010) as “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” (p. 240). In other words technology determines the level of efficiency of organizations. This paper highlights how technology affects organizational efficiency and provides research to explain this concept. Also, theories by Joan Woodward, Charles Perrow, and James D.
Thompson will be reviewed to explain how technology influences organizational structure. Finally, these concepts will be used to predict the structures of four types of organizations. So how does technology increase organizational efficiency? Basically, technology improves the conversion process from input to output within an organization (Jones, 2010). Technology improves overall efficiency and reduces costs at every level of the conversion process while improving quality and service. This occurs at every stage from input to conversion to output.
At the input stage technological skills, techniques and procedures allow organizations to more effectively, and successfully, handle environmental factors (Jones, 2010). For example, changes in the market can affect pricing from suppliers and the technological skills to find the best pricing for quality materials. During the conversion process the machines, techniques, and procedures established by technology determine the transformation from input to output (Jones, 2010). At this stage improvements in technology means more efficiency and less cost.
When input is converted to output technology allows the best possible and most efficient method to transfer goods and services to external stakeholders (Jones, 2010). For example, improved methods to test products, market products, and sell products, offers efficiency in transferring the finished product to customers. Therefore, increased efficiency determines the ability to meet the needs of external stakeholders while performing organizational processes in a manner that benefits the organization and internal stakeholders at the optimal evel. The next few paragraphs will look at how technology affects the organization by comparing the theories of Joan Woodward, Charles Perrow, and James D. Thompson. Woodward, Perrow, and Thompson challenged earlier beliefs that focused on universal methods for effective organizational structure (Proven Models, 2010). The theories presented by Perrow and Thompson build on the concepts of Woodward. Woodward’s study focused on the relationship between organizational structure and performance (Proven Models, 2010).
This led to the contingency approach describing external conditions as the determinant of effective organizational structure (Proven Models, 2010). However, Woodward’s theories failed to describe all organizations since it focused mainly on small organizations in manufacturing (Proven Models, 2010). Thompson and Perrow attempted to fill the gaps in Woodward’s research. Joan Woodward explained the concept of technical complexity to describe the effect of technology on structure and differentiate technologies.
Technical complexity is the measure of how much production techniques can be programmed to be predictable and controlled (Jones, 2010). Her studies showed a relationship between structure and performance when the type of technology was used as a variable (Proven Models, 2010). High technical complexity means conversion processes are fully understood and predictable, whereas low technical complexity depends more on specific skills of individuals which is less predictable (Jones, 2010) This idea revealed technology as the main determinant of structure.
Therefore, operating with a specific technology requires a certain structure to be most effective. Woodward’s research led to the contingency approach that assumes that the most effective organizational structure depends on external conditions (Proven Models, 2010). James Thompsons’ studies expanded on this theory. James Thompson introduced task interdependence as a model of technology. Task interdependence explains the method of relating tasks together and the effects on organizational structure and technology (Jones, 2010).
Thompson identified three technologies paired with three forms of interdependence. Thompson shows that the type of technology, or knowledge required to fulfill tasks, determines the basic structure of an organization on how tasks are performed. For example, an organization where tasks must be performed separately is referred to as mediating technology by Thompson and requires pooled interdependence to perform tasks where each section of an organization contributes individually to performance (Jones, 2010).
Thompson also explains the degree of coordination required with each type of interdependence, or the amount of managing required to fulfill tasks. As explained mediating technology is based on separate roles and these separate parts of the organization have their specific tasks to complete. Since each part has their own standard operating procedures the amount of coordination required is minimal. Somech, Desivilya, and Lidogoster (2009) describe task interdependence in their research by explaining that the intensity of “coupling different work tasks” determines the kind of coordination required.
The research revealed that when an organization has “high levels of team identity, task interdependence was positively associated with the cooperative style of conflict management, which in turn fostered team performance” (Somech, Desivilya, & Lidogoster, 2009). Therefore, the type of technology fosters the structure required to coordinate and accomplish tasks. Perrow focused his research “more on the non routine aspects of technology than Woodward and Thompson” by studying difficulties that are not easily predictable or require more knowledge (Jones, 2010).
Perrow used task variability and task analyzability to show how tasks can be more difficult than others and how this affects structure (Jones, 2010). He produced a classification system using these concepts assuming that the kind of technology being used establishes an organization’s effective and efficient structure (Proven Models, 2010). Task variability is the number of unexpected occurences that a worker encounters in a day and task analyzability describes the amount of information required to solve a problem (Jones, 2010).
Most organizations “have multiple technologies that operate interdependently”, and Perrow concluded that technology is a determinant of “uncertainty in organizations” (Proven Models, 2010). The three models described although based on the same principle have many differences in theory. Thompson’s studies included manufacturing and service-oriented organizations assuming that the type of technology determined the most effective structure (Proven Models, 2010). Thompson showed the importance of the environment in organizational design by adding input variables to the study, which Woodward’s studies failed to accomplish.
This gave a more thorough result showing the importance of external factors to effective organizational structure. Perrow determined the importance of knowledge to operate technology, especially the “non-routine” technologies that are harder to understand and control (Proven Models, 2010). More than Thompson, Perrow argued for analyzing technologies at the organizational unit. However, research has shown that increased coordination is greater for changes in task interdependence than for changes in task analyzability (Nunez, Giachetti, ; Boria, 2009).
Therefore, looking at the type of technology and interdependence required for the technology might be more effective to increase coordination. Collectively; Woodward, Thompson, and Perrow based their research on the contingency approach. Using these models let us analyze four differing organizations to determine what type of structure is required. Looking at the operations of a large life insurance company using the concepts discussed earlier show the likelihood of high technical complexity, high variability, high analyzability, and pooled interdependencies.
The operations for this type of organization will have strict guidelines that determine how each job function is performed. Although each case can bring unexpected differences (high variability) the procedures to perform tasks require little research (high analyzability) causing the job to be more programmed and routine (high technical complexity). Based on these concepts a large life insurance company will benefit from a product division structure where multiple divisions are supported by a centralized support function (Jones, 2010).
These divisions offer the same product maintaining differentiation therefore needing only specific guidelines controlled by a centralized source. In the same manner a drive-through coffee house follows specific guidelines on operations, but differs in the size of the organization and amount of product compared to the example above. Using the models again this organization will have high technical complexity, low variability, high analyzability, and sequential interdependence. Based on these aspects this organization will work more efficiently with a mechanistic and functional structure.
Mechanistic structures are effective for small organizations where work process is predictable, employee roles are clearly defined, and authority is centralized (Jones, 2010). As a functional unit the organization offers minimal product and people working together have the same expertise (Jones, 2010). Primarily the hierarchal structure is more vertical with authority at the top making decisions. Another company to discuss is a videogame production company. This company has low technical complexity, high variability, low analyzability, and sequential interdependence.
According to these factors this company would benefit from a product team structure. This structure allows groups of the organization working on tasks towards the videogame production to work towards a common goal and vision. A product team structure allows specialists in each division or group to work together in a product development team to organize functions of the groups into a cohesive unit (Jones, 2010). When developing a videogame processes need occur in specific orders before a final product is made, this sequential interdependence needs to be organized so functions are coordinated properly.
Finally we will look at a solar technology company. This type of company requires specialized training and knowledge for tasks that are not routine. Using the models by Woodward, Thompson, and Perrow we can predict this company to have low technical complexity, high variability, low analyzability, and reciprocal interdependence. A structure for this company needs to allow individuals to adapt to non routine tasks. Organizations dealing with “uncertain” technologies require an organic structure (Proven Models, 2010). Organic structures allow employees to work together accomplishing tasks collectively as part of a team (Jones, 2010).
Since work processes are unpredictable authority needs to decentralized so tasks can be mediated accordingly. This company might also benefit from a hybrid structure where multiple structures are utilized to accomplish goals. This structure allows divisions to work more independently but when new technologies are founded, a more centralized structure is required to make decisions on utilizing technologies. Organizational technology is defined by many aspects of organizations. This paper explained the effects of organizational technology on organizational structure and design.
The theories of Joan Woodward, James D. Thompson, and Charles Perrow were discussed to illustrate the concepts of technical complexity, task variability, task analyzability, and task interdependence as determinants of effective structure. Using these concepts to analyze an organization can assist a company to formulate an organizational design tailored for the specific technology of the organization. Incorporating the best organizational structure based on organizational technology allows the organization to convert input into output more efficiently, and more effectively.