Strategic Management: Formulation and Implementation


The general nature and complexity of technology a firm employs can influence organizational structure. For example, computer technology and automation have affected not only production techniques but also the social condition of work and the structure of organizations. It is argued that computers are affecting organizational structures in two ways:

  1. first, many believe that contemporary information systems are making organization flatter by reducing the number of middle managers, making organization more efficient and productive;
  2. second, some have pointed out that because organizations now have extensive telecommunication facilities, they no longer need employees.

Two critical aspects of technology are technological complexity and technology interdependence.

Technological Complexity

Famous research that highlighted the importance of technology was conducted during 1950s by a team led by British sociologist Joan Woodward. After careful study, Woodward determined three different types of technology were reasonably predictive of the structural practises of the firms in the study:

In unit and smallbatch production
products are customproduced to meet customer specifications, or they are made in small quantities primarily by craft specialist
In largebatch and mass production
products are manufactured in large quantities, frequently on an assembly line.
In continuous process production
products are liquids, solids, or gases that are made through a continuous process.

This technological complexity appeared to help explain the differences in the structural practices used by the firms. For example, Woodeward's results indicated that formalization and centralization both tended to be high in organization engaged in largebatch, and mass production technology, in which the efforts of large numbers of workers need to be standardized.

In contrast, formalization and centralization were low in organizations using unit and smallbatch as well as continuousprocess, technologies, in which appropriate work decisions must be made at the lower levels. The researches found also that increasing complexity was associated with more levels of management (a taller structure), more staff personnel per line worker, and large spans of control at upper management levels.

The most important outcome of Woodward's research was the finding that the more successful firms has structural characteristics that were close to the median for their main technology. Resent study has largely supported the importance of technological complexity in influencing organization structure.