CHAPTER FIVE:

MANUFACTURING AND SERVICE TECHNOLOGIES

Purpose of This Chapter
This chapter discusses core and non-core work processes and their relationship to designing
organization structure for efficiency and effectiveness. The optimum organization design is based on a
variety of elements, both outside and inside the organization. Therefore, this chapter also presents
some possible external and internal forces affecting organization design. Design decisions consider
pressures from the bottom upfrom the work processes that produce products or services.
Operational work processes influence structural design. Important themes in this chapter includes the
exploration of both service and manufacturing core technologies, and how these core technologies
influence organizational structure. Understanding core technology provides insight into
how an organization can be structured for efficient performance. The key question of this chapter is:
How should organization structure be designed to facilitate the production process?
Some definitions: Technology refers to the work processes, techniques, machines and actions used to
transform organizational inputs into outputs. Technology is an organizations production process and
includes work procedures as well as machinery. An organizations core technology is the work process
that is directly related to the organizations mission such as manufacturing at Continental. A non-core
technology is a work process that is important to the organization but is not directly related to its
primary mission.
Core Organization Manufacturing Technology
Manufacturing technologies include traditional manufacturing processes and contemporary applications,
such as flexible manufacturing and lean manufacturing.
Manufacturing Firms
Joan Woodward's classic study of manufacturing technology classified manufacturing firms into three basic
technology groups according to technical complexity of the manufacturing process.
Technical complexity refers to the extent of mechanization of the manufacturing process. High technical
complexity means most of the work if performed by machine and low technical complexity
means works play a larger role in the production process.
Group 1: Small-batch and unit production. These firms rely
heavily on the human operator; it is thus not highly mechanized.
Group 2: Large-batch and mass production. It is a manufacturing
process characterized by long production runs of standardized
parts. Examples would include most assembly lines.
Group 3: Continuous-process production. In this production, the
entire process is mechanized. This represents mechanization and
standardization one stop beyond those in an assembly line.
Examples would include oil refineries and brewing plants. According to Woodwards work, mass
production firms were formalized, centralized, mechanistic, had larger span of control and
less-educated workers than small batch or continuous process technologies. Successful firms had
complimentary structures and technologies. Successful small-batch and continuous process
organizations had organic structures. Successful mass production organizations had mechanistic
structures.
Strategy, Technology, and Performance
Another portion of Woodward study examined the success of the firms along dimensions such as
profitability, market share, stock price and reputation. Firms were ranked on a scale of commercial
success according to whether they displayed above average, average or below average performance on
strategic objectives. Woodward discovered that successful firms tended to be those that
had typical configurations of structure and technology. In addition, she concludes that structural
characteristics could be interpreted as clustering into organic and mechanistic management systems.
Successful small-batch and continuous process organizations tended to have more organic structures, and
successful massproduction organizations had comparatively mechanistic structures.
Increased global competition means volatile markets, shorter product lifecycles, and knowledgeable
consumers. Greater structural flexibility and agility to meet these new demands has
become a strategic imperative for many companies.
Contemporary Applications
New developments have occurred in manufacturing technology since Woodwards research in 1950s.
Computerization has had a massive impact upon continuous production processes as well as mass
production manufacturing. Two significant contemporary applications of manufacturing technology are
flexible manufacturing systems and lean manufacturing.
Flexible Manufacturing Systems
The flexible manufacturing system is also called Computer-Integrated Manufacturing, smart factories and
agile manufacturing, and so forth. Flexible manufacturing is the result of three
subcomponents:

 Computer-aided design (CAD). Computers are used to assist in the drafting, design, and engineering of

new parts.
Computer-aided manufacturing (CAM) increases the speed of manufacturing and changing production
setups by computercontrolled machines.
Integrated information network links all aspects of the firm with a common data base. Some factories
have moved to product lifecycle management (PLM) which manages a product from idea through
development, manufacturing, testing, and maintenance. The combination of CAD, CAM and integrated
information systems means that a new product can be designed on the computer and it becomes possible
to switch quickly from one product to another.
Lean Manufacturing
Lean manufacturing uses highly trained employees at every stage of the production process, which take a
painstaking approach to details and problem solving to cut waste and improve quality. Lean
manufacturing requires changes in organizational systems, such as decision-making, processes and
management processes, as well as an organizational culture that supports active employee
participation. Employees are trained to attack waste and strive for continuous improvement in all areas.
Lean and flexible manufacturing systems have led to mass customization, the use of mass-production
technology to quickly and cost-effectively assemble goods that are designed to fit the demands of
individual customers. Furthermore, mass customization has taken hold across the global economy. As
Prahalad suggests that the direction of mass customization towards a co-creation in
which customers are integrated organically in the design process, rather than merely being consulted
through focus groups or similar information gathering.
Performance and Structural Implications
One key advantage of flexible manufacturing is that products of different sizes, types and customer
requirements freely intermingle on the assembly line. A manufacturer can turn out an infinite variety of
products in unlimited batch sizes. Studies suggest that with flexible manufacturing system, machine
utilization is more efficient, labour productivity increases, scrap rates decrease and product variety and
customer satisfaction increase. Compared with traditional massproduction technologies, flexible
manufacturing system has a narrow span of control, few hierarchical levels, adaptive tasks, low
specialization, and decentralization, and the overall environment is organic.
Core Organization Service Technology
In addition to the new development occurring in manufacturing technology, another big change occurring
in the technology of organizations is the growing service sector. The percentage of the workforce
employed in manufacturing continues to decline throughout the developed countries, while the service
sector has rapidly increased in size. For example, more than twothird of the European Union workforce is
employed in services. Because service technologies differ from manufacturing technologies, they required
a specific organization structure.
Service Firms
It should be noted that it is difficult to find organizations that reflect 100 per cent service or manufacturing
characteristics in reality. Some service firms take on characteristics of manufacturers, and vice versa. The
vast majority of organizations involve some combination of products and services. Furthermore, the trend
toward mass customization that is revolutionizing manufacturing has had a significant impact on the
service sector as well. Customer expectations of what constitutes good service are rising and such
expectations is also pushing service firms to learn from the manufacturing sector.
Designing the Service Organization
The impact of customer contact on organization structure is reflected in the use of boundary roles and
structural disaggregation. 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. Service technology
influences internal characteristics that direct and control the organization. The skills of technical core
employees must be higher because they need enough knowledge and awareness to handle customer
problems. Employees need social and interpersonal skills. As a result, decision making is decentralized in
service firms, and formalization is low.
Noncore Departmental Technology
Variety
The first dimension of technology concerns the variety of departmental activities. Variety refers to the
number of exceptions, problems or novel events that occur in the department's work. Variety ranges from
repeating a single act as on a traditional assembly line, to working on unrelated problems as in a hospital
emergency room.
Analyzability
The second dimension of technology concerns the analyzability of work activities. Analyzability refers to
the extent to which the work is mechanical, clear cut, and follows an objective, computational procedure.
Work that requires intuition and judgment is not analyzable.
Framework
The dimension of variety and analyzability form the basis for four major categories of technology: routine,
craft, engineering and nonroutine.

 Routine technologies are characterized by little task variety and the use of objective computational

procedures. The tasks are formalized and standardized.

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 intuition and experience.
Engineering technologies are high in variety but analyzable. Employees normally refer to a welldeveloped body of knowledge to handle problems.
Nonroutine technologies are not analyzable and high in variety. In nonroutine technology, a great deal
of effort is devoted to analyzing problems and activities.
Variety and analyzability can be combined into a single dimension of technology. This dimension is called
routine versus nonroutine technology.
Department Design
Department technology is associated with a cluster of departmental characteristics, such as the skill level
of employees, formalization, and methods of communication. Patterns exist in the relationship between
work unit technology and structural characteristics, which are associated with departmental performance.
The structure of a department is organic or mechanistic. Routine technologies have a mechanistic
structure, with formal rules and rigid management processes. Nonroutine technologies have an organic
structure, and management is flexible and free-flowing. The differences can be set out in relation to five
dimensions: formalization, decentralization, worker skill level, span of control, and communication
and coordination.
Differences between departments can be clarified by reference to their workflow technology.
Structural and management processes differ based on departmental technology.
Managers should design their departments so that requirements based on
technology can be met.
Workflow Interdependence among Departments
Furthermore, interdependence is another characteristic of technology that influences structure.
Interdependence refers to the extent to which departments depend on each other for resources or
materials to accomplish their tasks. Low interdependence means that departments work independently
and have little need for interaction, consultation, or exchange of materials. High interdependence means
departments must constantly exchange resources.
Types
Thompson defined three types of technology interdependence that influence structure.
Pooled interdependence is the most basic form of interdependence among departments. In this form,
work does not flow between units. All departments contribute to the organization but do not interact directly
with each other. Pooled interdependence is associated with mediating technology, that which mediates or
links clients from the external environment (banks, real estate offices).
Sequential interdependence means that the outputs of one department become the inputs to the next
department. It is a higher level of interdependence than pooled interdependence, because departments
exchange resources and depend on others to undertake their tasks. Sequential interdependence is
associated with long-linked technology in which each stage of production is dependent
on the previous stage (assembly lines).
Reciprocal interdependence is the highest level of interdependence. It means that departments
exchange resources and information simultaneously in both directions. Reciprocal interdependence is
found with intensive technology in which the client becomes the object of the conversion process or
receives a combination of services (hospitals, universities).
Structural Priority
Reciprocal interdependence should receive first priority in organization structure because decision making,
communication, and coordination problems are the greatest. If reciprocally interdependent units are not
located close together, the organization should design mechanisms for coordination, such as daily
meetings between departments or an intranet to facilitate communication. The next priority is given to
sequential interdependencies, and finally to pooled interdependencies.
Structural Implications
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. In response to this pattern
of interdependence, a horizontal structure or cross-functional teams could be used to handle the back-andforth flow of information and resources. Once a product is designed, its actual manufacture is sequential
interdependence, with a flow of goods from one department to another. The actual ordering and delivery of
products is pooled interdependence, with warehouses working independently.
Impact of Technology on Job Design
The concepts of job design and sociotechnical systems most directly illuminate the impact of technology
on employees.
Job Design
Job design includes the assignment of goals and tasks to be accomplished. Managers may consciously
change job design to improve productivity, product or service quality or worker motivation. Job rotation
involves moving employees from job to job for variety. Job simplification means that the variety and

difficulty of tasks performed by a single individual are reduced, with a consequent increase in boredom and
potential demotivation. Job enrichment uses technology to increase responsibility, recognition, and
opportunities for achievement. New computer-based manufacturing systems provide many opportunities
for job enrichment, or jobs with higher level mental and social skills requirements. Job enlargement is an
expansion of the number of different tasks performed by an employee, made possible by technology that
demands fewer workers on a given task.
Sociotechnical Systems
The sociotechnical systems approach recognizes the interaction of technical and human elements in
effective job design. Three primary components of the sociotechnical systems model include:
1) the social system which includes all human elements such as individual and team behavior that can
influence the performance of work; 2) the technical system refers to the type of production technology, the
level of interdependence, the complexity of taks and so forth; and 3) the goal of this approach is to design
the technology so that the needs of people and efficiency fit one another for joint optimization. Scholars
today are arguing for an expansion of the sociotechnical approach to capture the chaotic environment and
the shift from routine to nonroutine jobs brought about by advances in information technology.
Summary and Interpretation
This chapter reviewed several frameworks and key research findings on the topic of technology.
Five ideas in the technology literature stand out. The first is Woodwards research into manufacturing
technology collected data on technology characteristics, organization structure, and management systems.
She found clear relationships between technology and structure in highperforming organizations.
The second important idea is that service technologies differ from manufacturing technologies. Service
technologies have intangible outcomes and direct client involvement in the production process.
The third significant idea is Perrows framework applied to department technologies. Understanding a
technology explains the management style, structure, and process that characterize that department.
The fourth important idea is interdependence among departments. Greater interdependence tends to
increase the demands on the organization for coordination increase. Organization design must allow for
the correct amount of communication and coordination to handle interdependence across departments.
The fifth idea is that new flexible manufacturing systems and lean manufacturing are being adopted by
organizations and impacting organization design.
Sociotechnical systems theory attempts to design the technical and human aspects of an organization to
fit one another as advances in technology alter the nature of jobs and social interaction in todays
companies.

DISCUSSION QUESTIONS
1. Where would your university or college department be located on Perrow's technology framework?
Would a department devoted exclusively to teaching be put in a different quadrant from a department
devoted exclusively to research?
2. Explain Thompson's levels of interdependence. What is the level of interdependence among
departments (finance, marketing) in a business school? What kinds of coordination mechanisms might be
used to handle that interdependence?
3. Describe Woodwards classification of organizational technologies. Explain why each of the three
technology groups is related differently to organization structure and management processes.
4. What relationships did Woodward discover between supervisor span of control and technological
complexity?
5. How do flexible manufacturing and lean manufacturing differ from other manufacturing technologies?
Why are these new approaches needed in todays environment?
6. What is a service technology? Are different types of service technologies likely to be associated with
different structures? Explain.
7. Mass customization of products has become a common approach in manufacturing organizations.
Discuss ways in which mass customization can be applied to service firms as well.
8. In what primary ways does the design of service firms typically differ from that of product firms? Why?
9. A top executive claimed that top-level management is a craft technology because the work contains
intangibles, such as handling personnel, interpreting the environment, and coping with unusual situations
that have to be learned through experience. If this is true, is it appropriate to teach management in a

business school? Does teaching management from a textbook assume that the manager's job is
analyzable, and hence that formal training rather than experience is most important?
10. In which quadrant of Perrows framework would a mass-production technology be placed? Where
would small-batch and continuous process technologies be placed? Why? Would Perrows framework lead
to the same recommendation about organic versus mechanistic structures that Woodward made?
11. To what extent does the development of new technologies simplify and routinize the job of employees?
Can you give an example? How can new technology lead to job enlargement? Discuss.
12. Describe the sociotechnical systems model. Why might some managers oppose a sociotechnical
systems approach?