Daft (83) states that organizational dimensions falls into two types: structure and context. Technology as contextual dimensions is important because it describes the organizational setting and influences the structural dimensions. Robbins (89) explains that studies assessing the relationship between technology and structure looked at only manufacturing organizations supported relationship in the work unit level or at the operating core.
Robbins (89), Daft (83) and Hall (83) mention that structural dimension pertain to internal characteristics of organization. From the 18 propositions developed, 15 propositions indicate that the technology dimension may influence the structural dimensions.
The more uncertain (Thompson (67)), nonroutine (Perrow (67)), innovative (Robbins (89)), fast the rates of change of product or market (Cooper (86), Miles & Snow), and high level of technology (Slevin, Covin (87), Keen (81)) are, the lower complexity (Robbins (89), Daft (83)), formalization (Robbins (89), Daft (83)) and centralization (Robbins (89), Daft (83) and Hall (83)) the structural dimension of the organization will be.
The less uncertain, nonroutine, innovative, slow the rates of change of product or market, low level of technology are, the higher complexity, formalization and centralization the structural dimension of the organization will be. The only three propositions, these are the levels of the technology complexity (Woodward (65)) may not correlate linearly with the structural dimension of the organization.
Technology has an important role in the world and is used as an indicator of the level of the development in a country. Kashiwagi (1987) states, that technology is a key of the economic development in Japan in the past and future.
Xinhua states that China is developing high technology for the next 15 year plan in 11 sectors including small energy car, environment, agriculture, robotics, manufacture, cellular phone, electrical power with 30 nuclear power stations in the year 2020; also encouraging private sector by giving tax discount and patent protection in this program.
Burgel, Fier, Licht, and Murray (2001) find that the technological sophistication of products and the experience of entrepreneurs both had a positive impact on growth.
Robbins (89) explains that studies assessing the relationship between technology and structure indicate that nearly 80% of those that looked at only manufacturing organizations or service organizations supported relationship. But when data from manufacturing and service settings were combined, only about 14% achieved supportive results.
This suggests that there may be real differences between the dominant technologies in the two types of organizations. Moreover Robbins (89) states that work unit level studies are looking at technology at the operating core. If there is a technological imperative, this is where it should be most evidence because technology’s impact should be greatest to the core.
Thompson (67) states that clearly, technology is an important variable in understanding the actions of complex organizations. In modern societies the variety of desired outcomes for which specific technologies are available seems infinite. A complete but simple typology of technologies, which has found order in this variety, would be quite helpful.
Keen (81) mentions that nature and complexity of the technology a firm employed can influence organizational structure. The structure must be arranged to enhance the firm’s ability to incorporate or otherwise react to rapid technological change. Unfortunately, structure often lags behind the needs of technology, which generally creates a time lag before technology can be fully exploited.
Daft (83) states that organizational dimensions falls into two types; structure and context. Technology as contextual dimensions is important because it describes the organizational setting and influences the structural dimensions. Robbins (89), Daft (83), Hall (83) state that structural dimension pertain to internal characteristics of organization.
Structural dimension can be clustered into three factors that are
1. Complexity (Robbins (89), Daft (83))
2. Formalization (Robbins (89), Daft (83))
3. Centralization (Robbins (89), Daft (83), Hall (83))
Technology as a contextual dimension that influences of the structural dimension of the organization consists of:
4. Technology Uncertainty (Thompson (67))
5. Knowledge Based Technology (Perrow (67))
6. Technology Complexity (Woodward (65))
7. Innovation (Badiru (87), Robbins (89))
8. Rate of change (Cooper (86), Miles & Snow)
9. Level of technology (Slevin, Covin (87), Keen (81))
II. Structural Dimension of Organization
Burns and Stalkers (61), based on a study of 20 British and Scottish industrial organizations, reported that two distinctly different structures could be identified, mechanistic and organic management system.
Mechanistic structures performed routine tasks, relied heavily on programmed behaviors, and relatively slow in responding to the unfamiliar. Organic structures are relatively flexible and adaptive, with emphasis on lateral rather than on vertical communication, influence based on expertise and knowledge rather than on authority of position, loosely defined responsibilities rather than rigid job definitions, and emphasis on exchanging information rather than on giving directions.
Structural dimensions of organization can be very broad. Robbins (89), Hodge and Anthony (88) classifies into complexity, formalization and centralization.
Complexity refers to the degree of differentiation that exists within an organization. Hall (83) identifies three basic components of complexity, horizontal differentiation, vertical differentiation and spatial dispersion, and they should be considered collectively in order to obtain a true picture of the exact nature of complexity.
Robbins (89) states that horizontal differentiation refers to the degree of differentiation between units with some characteristics as follow:
- Differentiation between units based on orientation of members, the nature the tasks they perform, and their education and training.
- The larger number of different occupations within organization that require specialized knowledge and skills, the more complex that organizations is.
- An increase of specialization, either functional specialization or social specialization, results in increased complexity within organization. Functional specialization or division of labor is job, which is broken down into simple and repetitive tasks and also creates high substitutability among employees and facilitates their easy replacement by management. Social specialization is achieved by hiring professionals who hold skills that cannot be readily routinized.
Daft (83) proposes in measuring this differentiation by the number of job titles or departments existing horizontally across the organization. Vertical differentiation refers to the depth of the organization. Vertical differentiation is measured by counting the number of hierarchical levels separating the chief executive from the employees working on the organizations.
Hodge and Anthony (88) explain for vertical differentiation that the more levels there are, the more potential there is for coordination and integration problems. Spatial differentiation encompasses the degree in which jobs are dispersed geographically. It is measured by the number of separate locations, the average distance of these sites from headquarters and, the proportion of the organization’s personnel located at these separate units.
Daft (83) defines that formalization pertains to the amount of written documentation in the organization. Documentation includes procedures, job descriptions, regulations, and policy manuals. Formalization is often measured by simply counting the number of pages of documentation within the organization.
Robbins (89) says that if a job is highly formalized, the job incumbent has a minimum amount of discretion over what is to be done, when it is to be done, and how he or she should do it. Employees can be expected to always handle the same input in exactly the same way, resulting in a consistent and uniform output.
There are explicit job descriptions, lots of organizational rules and clearly defined procedures covering work processes in organizations where there is high formalization. Where formalization is low, employees’ behavior would be relatively non-programmed. And formalization refers to the degree to which jobs within the organization are standardized.
Daft (83) defines that standardization is the extent to which similar work activities are performed in a uniform manner. In highly standardized organization, work content is described in detail, so similar work is performed the same way across departments or locations.
Finally, Daft (83) explains that centralization refers to the hierarchical level that has authority to make a decision. When decisions are delegated to lower organizational levels, the organizational is decentralized. When decision-making is kept at the top level, it is centralized.
Robbins (89) defines that centralization can be described in this way:
- Centralization is concerned only with the formal structure, not in the informal organization. It applies only to formal authority.
- Centralization looks at decision discretion. Where decisions are delegated downward but extensive policies exist to constrain the discretion of lower level members, there is increased centralization. Policies can, therefore, act to override decentralization.
- Concentration at a single point can refer to an individual unit or level, but the single point implies concentration at a high level.
- Information processing can improve top management control, but the decision choice is still with the low level member. Thus, an information processing system that closely monitors decentralized decision does not maintain centralized control
- The transference of all information requires interpretation. The filtering that occurs as information passed through vertical levels is a fact of life. The top managers are free to verify the information they receive and to hold subordinates accountable in their choices of what they filter out, but control of information input is a form of de facto centralization. Management decisions are centralized if concentrated at the top, but the more the information input to those decisions is filtered through others, the less concentrated and controlled the decision is.
III. Technological Dimension of The Organization
Schroeder (89) describes that technology is a set of processes, tolls, methods, procedures and equipment used to produce goods or services. Daft (83) states that technology is the organization transformation process and it includes machinery, employee education and skill, and work procedures used in that transformation process. Robbins (89) defines that technology refers to the information, equipment, technique and process required to transform input into outputs in the organizations.
A. Technology Uncertainty
Thompson (67) classifies technology based on the technology uncertainty. Thompson (67) lies in demonstrating that technology determines the selection of a strategy for reducing uncertainty and those specific structural arrangements can facilitate uncertainty reduction.
Thompson (67), analyzing 297 subunits from seventeen business and industrial firms, classifies organization into three groups, namely long linked technology, mediating technology and intensive technology.
Long linked technology is an operation with the sequentially interdependent. This technology is characterized by a fixed sequence of repetitive steps. Mass production assembly line is an example. Because long linked technologies require efficiency and coordination among activities, owing to sequential interdependencies and controlling input and output are the respond of reducing uncertainty.
Secondly, mediating technology links clients on both the input and output side of the organization. Banks, telephone utilities, most large retail stores, computer dating services, and post offices are examples. Reducing uncertainty is done by increasing the population served. The more clients’ one has, the less dependent one is upon any single client.
The third is intensive technology that represents a customized response to a diverse set of contingencies. The exact response depends on the nature of the problem and the variety of problems. This includes hospitals, universities, research labs, full service management consulting firms, or military combats teams.
Flexibility is a way to handle uncertainty. Robbins (89) suggests the structural dimension of the Thomson’s technology as follow: mediating technology has low complexity and high formalization, long linked technology has moderate complexity and formalization, intensive technology has high complexity and low formalization.
The more uncertain the technology is the lower complexity the structural dimension will be, the more certain the technology is, the higher complexity the structural dimension of the organization will be.
The more uncertain the technology is the lower formalization the structural dimension will be, the more certain the technology is, the higher formalization the structural dimension of the organization will be.
The more uncertain the technology is the lower centralization the structural dimension will be, the more certain the technology is, the higher centralization the structural dimension of the organization will be.
B. Knowledge Based Technology
Charles Perrow (67) explains that two aspects of technology have a bearing on structural dimension of organization. These are the number of exceptions or task variability encountered in performing the work and the type of search or problem analyzability required when an exceptions does occur.
The greater the number of exceptions are, the greater the task variability for those who seek to bring about change in the object and the more difficult to develop standards and routine procedures for performing the task. On the search side, on the simplest level, the search can be logical systematic, and analytical.
Combination of exceptions and search are resulting four types of organizations that are routine, engineering, craft, and non-routine technologies.
Routine technologies have few exceptions and easy to analyze problems. Examples are mass production processes used to make steel or automobiles or to refine petroleum and bank teller’s job.
Engineering technologies have a large number of exceptions, but they can be handled in a rational and systematic manner. The construction of office buildings and tax accountants are examples.
Craft technologies deal with relatively difficult problems but with a limited set of exceptions. This includes shoemaking, furniture restoring or the work of performing artists.
Finally, non-routine technologies are characterized by many exceptions and difficult to analyze problems. The examples are strategic planning and basic research activities.
Robbins (89) predicts the Perrow’s Technology structure as follow: routine technology has high formalization, high centralization and wide span of control, engineering technology has low formalization has low formalization, high centralization an moderate span of control, craft technology has moderate formalization, low centralization and moderate wide span of control, more over nonroutine technology has low formalization, low centralization and moderate lo span of control.: Robbins (89) concludes that the routine and engineering technology has the routine technology and craft and non-routine technology has a non-routine technology.
The more non-routine the technology is the lower complexity the structural dimension will be, the more routine the technology is, the higher complexity the structural dimension of the organization will be.
The more non-routine the technology is the lower formalization the structural dimension will be, the more routine the technology is, the higher formalization the structural dimension of the organization will be.
The more non-routine the technology is the lower centralization the structural dimension will be, the more routine the technology is, the higher centralization the structural dimension of the organization will be.
C. Technology Complexity
Technology complexity is different with complexity of the structural dimension of organization. Woodward (65) classifies the technology based on the technological complexity. Joan Woodward (65) conducted a research, which focused on production technology, was the first major attempt to view structural dimension of organization from a technology perspective.
Woodward (65) and her associates studied the operations of 100 manufacturing firms clustered in the South Essex region of England. The organizations ranged in size from just over 100 to more than 8000 employees and involved a variety of overall technologies.
Woodward (65) categorized the firms into one of three types of technologies: unit or small batch, large batch or mass production and continuous process production. Woodward (65) treated these categories as a scale of technological complexity, with unit being the least complex and process the most complex.
Unit producers would manufacture custom made product such as tailor-made suits, turbines for hydroelectric dams, or Avanti cars. Mass producers would make large batch or mass production products such as refrigerators or Ford automobiles. The third category, process production, included heavily automated process producers and standardized activities, such as oil and chemical refiners.
Mintzberg (79) analyzes the Woodward (65)’s findings that with most of the coordination in the unit production firms being ad hoc in nature, handled by mutual adjustment among the operators or direct supervision by the first line managers, there was little need for an elaborate managerial hierarchy above them or a technostructure beside them.
Whereas, mass production led to formalize behavior, that led to all the characteristics of the classic bureaucracy. Operating work is routine, unskilled and highly formalized.
Finally, in process production, automation brings a replacement in the operating core of unskilled workers directly tied up to the technical system by skilled workers to maintain it and in the middle levels of the structure a replacement of managers and technocratic staff who control the work of others by a support staff of professional designers who control their own work.
And these changes dissolve many of the conflicts of the mass production firms; therefore, the process producers’ structures were generally organic in nature.
More over Robbins (89) figures the Woodward (65)’s technology as follow: unit production has low formalization, low centrality and low complexity; mass production has high formalization, high centralization and high complexity and finally the process production has low formalization, low centralization and low complexity. The Woodward (65) concept is curvilinear.
The level of technology complexity may not correlate linearly with complexity of the organization.
The level of technology complexity may not correlate linearly with formalization of the organization.
The level of technology complexity may not correlate linearly with centralization of the organization.
Invention and innovation in the technology process are usually used in discovering or applying new thing. Rogers defines that invention is a process by which a new idea is discovered or created.
Tansik and Wolf (86) state that an invention is simply the new idea and it is application of this new idea that leads to an innovation. Furthermore, Mansfield makes the point that an invention, when applied for the first time, is called an innovation.
Koch states similar that an innovation is knowledge that has been applied for the first time, in the form of a productive process or product. Martin makes a similar statement that an invention only becomes to innovation when it is transformed into a socially usable product.
Jewkes, Sawers and Stillerman (80) state that invention is best defined as the first confidence that something should work and the first rough test that it will, in fact, work. Schmookler (80) defines that innovation is the first commercial application of an invention.
In the development, innovation is not only related to the product that has not been in the market, but also for product that has already been in the market that is called as product improvement.
There are two types of product improvement. First is breakthrough concept. Hodge and Anthony (88) describe that innovation is the development and implementation of new process or procedures that are substantially different from existing ones. Innovation implies a breakthrough in technological development or application.
Second is small improvement. Imai (86) explains that the key to Japan’s competitive success is small step continuous improvement process, or Kaizen in Japanese. Imai (86) describes two kinds of change, gradual and abrupt. Gradual change results from small improvements to status quo through continuous efforts that involve every one. Abrupt change comes from innovation, a drastic improvement in the status quo.
According to Moen, Nolan, Provost, there are four important activities to improve quality, design of a new product, and redesign of an existing product, design of a new process and redesign of an existing process.
Robbins (89) explains that a low product innovation rate allows for greater standardization and formalization, for instance, metals and mining, appliance manufacturers, retail, building material’s sales and bicycle manufacturers.
On the contrary, high product innovation rates will be less formalization and more decentralization, for example, aerospace, large main frame computer manufacturers, computer software and magazine publishers.
The higher the product innovation rates is, the lower complexity the structural dimension of the organization will be, the lower the product innovation rate is, the higher complexity the structural dimension of the organization will be.
The higher the product innovation rates is, the lower formalization the structural dimension of the organization will be, the lower the product innovation rate is, the higher formalization the structural dimension of the organization will be.
The higher the product innovation rates is, the lower centralization the structural dimension of the organization will be, the lower the product innovation rate is, the higher centralization the structural dimension of the organization will be.
E. Rate of Change
Perrow (67) defines technology as actions that an individual performs upon an object, with or without the aid of tools or mechanical devices, in order to make some change in the object. Kotler states that some products catch on immediately (e.g. roller blades), whereas other takes a long time to gain acceptance (e.g. diesel-engine autos).
Five characteristics influence the rate of adoption of an innovation are relative advantage, compatibility, complexity, divisibility, and communicability. Rogers (83) sees five adopter groups as differing in their value orientations.
Innovators are venture some; they are willing to try new ideas. Early adopters are guided by respect; they are opinion leaders in their community and adopt new ideas early but carefully.
The early majority is deliberate; they adopt new ideas before the average person, although they rarely are leaders. The late majority is skeptical; they adopt an innovation only after a majority of people has tried it.
Finally, laggards are tradition bound; they are suspicious of change, mix with other tradition bound people and adopt the innovation only when it takes on a measure of tradition it self.
Miles and Snow classify organizations based on the rate at which they change their products or markets into one of four strategic types: defenders, prospectors, analyzers and reactors. The demands a high degree of flexibility, which can best be achieved through low complexity, low formalization and decentralized decision-making. Robbins (89) analyzes the Miles and Snow’s strategy into structural dimension of organization as follow:
Defender seeks stability by producing only a limited set of products directed at a narrow segment of the total potential market. There is little or no scanning of the environment to find new areas of opportunity but there is intensive planning oriented toward cost and other efficiency issues.
The result is a structure made up of high horizontal differentiation, centralized control, and an elaborate formal hierarchy for communications. Prospectors are almost the opposite of defenders. Their strength is finding and exploiting new product and market opportunities.
Innovation may be more important than high profitability. The prospector’s success depends on developing and maintaining the capacity to survey a wide range of environmental conditions, trends and events. Therefore, prospectors invest heavily in personnel who scan the environment for potential opportunities.
Since flexibility is critical to prospectors, the structure will also be flexible. It will rely on multiple technologies that have a low degree of routinization and mechanization. There will be numerous decentralized units. The structure will be low in formalization; have decentralized control, with lateral as well as vertical communications.
Analyzers try to capitalize on the best of both the preceding types. They seek to minimize risk and maximize opportunity for profit. Their strategy is to move into new products or new markets only after viability has been proved by prospectors.
Analyzers live by imitation. Analyzers seek both flexibility and stability. They respond to these goals by developing a structure made up of dual components. Parts of these organizations have high levels of standardization, routinization and mechanization for efficiency. Other parts are adaptive, to enhance flexibility. In this way, they seek structures that can accommodate both stable and dynamic areas of operation. The examples are IBM and Caterpillar.
Reactors represent a residual strategy. The label is meant to describe the inconsistent and unstable patterns that arise when one of the other three strategies is pursued improperly. Organizations following a reactor strategy respond to change reluctantly. Management perceives some change and uncertainty, but they are not likely to make any substantial adjustments until forced to by environmental pressures. So this structure is likely to look very much like the one described for defenders.
The faster the rate of change of the organization is, the lower complexity of the structural dimension of organization will be. The slower the rate of change of the organization is, the higher complexity the structural dimension of the organization will be.
The faster the rate of change of the organization is, the lower formalization of the structural dimension of organization will be. The slower the rate of change of the organization is, the higher formalization the structural dimension of the organization will be.
The faster the rate of change of the organization is, the lower centralization of the structural dimension of organization will be. The slower the rate of change of the organization is, the higher centralization the structural dimension of the organization will be.
G. Level of Technology
Cooper and Bruno (77) state that high technology venture emphasizes R&D and focus on the development and utilization of new technology. Slevin and Covin (87) define that certain industries are commonly regarded as high technology industries (e.g. advanced electronics industries), while others are typically considered as low technology industries (e.g. construction, agriculture).
Cooper mentions that high technology firms might be defined in different ways, but presumably they are characterized by substantial emphasis upon researches that have focused such products as electronic components, computers and pharmaceuticals.
Related to the high technology, Badiru (87) defines high technology as the concept of utilizing new developments in electronics, data processing and physical materials innovatively to generate products or services.
Advancing The Business of Technology (AeA) in US defines high-tech manufacturing in the area of Computers and Office Equipment; Consumer Electronics; Communications Equipment; Electronic Components and Accessories; Semiconductors; Industrial Electronics; Photonics; Defense Electronics; Electromedical Equipment.
Keen (81) mentions that nature and complexity of the technology a firm employed can influence organizational structure. Firms that focus on high technology, for example, often have narrow spans of control. The structure must be arranged to enhance the firm’s ability to incorporate or otherwise react to rapid technological change. Unfortunately, structure often lags behind the needs of technology, which generally creates a time lag before technology can be fully exploited.
The higher the level of the technology is, the lower complexity of the structural dimension of organization will be. The lower the level of the technology is, the higher complexity the structural dimension of the organization will be.
The higher the level of the technology is, the lower formalization of the structural dimension of organization will be. The lower the level of the technology is, the higher formalization the structural dimension of the organization will be.
The higher the level of the technology is, the lower centralization of the structural dimension of organization will be. The lower the level of the technology is, the higher centralization the structural dimension of the organization will be.
From the 18 propositions developed, 15 propositions indicate that the technology dimension may influence the structural dimensions. The more uncertain, nonroutine, innovative, fast the rates of change of product or market and high level of the technology are, the lower complexity, formalization and centralization the structural dimension of the organization will be, the less uncertain, nonroutine, innovative, slow the rates of change of product or market and low level of the technology are, the higher complexity, formalization and centralization the structural dimension of the organization will be. The only three propositions may not correlate linearly between levels of the technology with the structural dimension of the organization.
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*Presented in 1st International Conference on Business and Management Research ,“Facing 21st Century Challenges” August 23-24, 2006, University of Indonesia, Sanur Paradise Hotel, Bali – Indonesia.
Yanto Sidik Pratiknyo,Institute for Management Education and Development PPM, Jakarta Indonesia
Founding Member of International CEFE Association for Entrepreneurship, Frankfurt Germany