f27b36a9-ba6c-452b-adcc-4eabb834f051.doc 1 Industrial organization: theory and practice (1965) by Joan Woodward Summary by Wan Wong, October 6 2002 Brief introduction: This book is considered a major contribution to the development of contingency theory and our understanding of the relationship between technology and organizational structure. It uses an approach based on detailed empirical research combined with an analytical framework. The main questions it tries to address are: how and why do industrial organizations vary in structure and why do some structures appear to be associated with greater success for the organization than others? PART ONE: THE SURVEY This part of the book deals with the method of collection and analysis of the data. Aims And Methods Look at manufacturing firms in a „catchment area‟ (South Essex) employing more than 100 people – 110 firms identified. 100 of these agreed to take part in survey (91% response rate). Information collected in survey: 1. History, background and objectives. 2. Description of manufacturing processes and methods. e.g. density of production, flexibility of production facilities, diversity of products, time span of operations, way in which production programs were initiated and controlled, recent technological developments, esp. automation, analysis of cost structures, analysis of labor structure (including labor ratios). 3. Forms and routines through which firm was organized and operated. i.e. organizational charts and interviews where no charts available. 4. Facts and figures to make an assessment of commercial success. Started off by collecting detailed info e.g. state of industry in which firms operated, their position in their respective industries, annual reports, financial accounts, etc., but later turned into subjective classification of each firm into one of 3 categories of success: „average‟, „above average‟ and „below average‟. f27b36a9-ba6c-452b-adcc-4eabb834f051.doc 2 Analysis Of Organization Researchers classified the 100 firms into types of organization as follows: Predominantly line organization 35 Functional (in Taylorian sense*) 2 Line-staff organization 59 Unclassifiable 4 ─── 100 ═══ (* means that specialist staff were jointly responsible for end results) Little correlation found between type or form of organization and success rating. Analysis Of Technical Variables So the researchers turned to the analysis of technical variables. They devised a categorization scheme consisting of 3 main types of production systems corresponding to increasing levels of technical complexity: 1) unit and small batch production, 2) large batch and mass production, 3) continuous process production (these 3 main categories themselves being further sub-divided into a total of 11 sub-categories). Unit and small batch production 24 Large batch and mass production 31 Continuous process production 25 Combined systems 12 Unclassifiable 8 ─── 100 ═══ Technology And Organization Patterns emerged: 1. The following characteristics of organization showed a direct relationship with technical variables: length of line of command, span of control of chief executive, percentage of total turnover allocated to labor, various labor ratios. 2. Similarities at extremes of technical scale: a. Unit production and process production firms are similar in terms of: Small span of control of first line supervisors High skilled to unskilled labor ratios Tendency for organic management systems (permissive and participative management). f27b36a9-ba6c-452b-adcc-4eabb834f051.doc 3 b. Line-staff organization more highly developed in middle range of scale, i.e. the large batch and mass production firms. c. More “bureaucratic” in middle range – elaborate production control procedures, more paper communication. Technology, Organization And Success Researchers revisited the „above average‟ and „below average‟ firms (in terms of success as earlier described) and found the following: Organizational characteristics of successful firms in each production category tended to cluster round the medians of the category. Within a limited range of technology (in middle range), classical management theory appeared to be appropriate to allow the firm to achieve success. Firms modified their organization structure in reaction to technical change, generally these changes in structure were not planned in advance but adaptations took place gradually. Researchers ask unanswered question about technology and social structure: “How far does technology influence the formulation of social structure inside an industrial setting?” PART TWO: THE CASE STUDIES The Case Study Approach Chose 20 out of 58 firms with more than 250 employees for more studies (by going back to the firms and collecting more data). For intensive studies, chose 3 firms, all in the 2,001 – 4,000 employees size group: A – large batch production of components that were subsequent diversely assembled (electrical and electronic components) B – process production and large batch and mass production (chemicals and pharmaceuticals) C – process production (oil refinery) f27b36a9-ba6c-452b-adcc-4eabb834f051.doc 4 ANALYSIS OF RESULTS The Anatomy Of Organization Classification of the 23 firms into types of organization: Line specialization 10 - differentiates between the basic task functions only – those directed towards end results, namely finance, R&D, production and sales Line-staff organization 11 - line managers held accountable for end results, staff managers formally responsible for giving advice and guidance to line managers (Noticed organizational problems of line-staff firms: a. Trend towards divisionalization b. Confusion between task functions and element functions c. Personnel management - difficult to fit into organizational structure.) Functional (in Taylorian sense) 2 - specialist staff jointly responsible for end results (Both were process production firms.) ─── 23 ═══ Reached two additional conclusions as a result of the more detailed case studies: 1. Functions of organization are also linked to technology (and not just type of organization). Functions of organization are: (1) technical (produce a mechanism for co-ordination of work), and (2) social (establish a network of relationships to enable people to work together) 2. Classical school of thought on organization appears to be inadequate not only because it fails to provide a direct and simple basis for relating organizational structure and business success, but also because its concepts and abstractions do not facilitate the work of those who plan organizational structure. Development, Production And Marketing Here the researchers examine the relationship between the task functions and the people responsible for carrying them out. They focus on the three main manufacturing tasks: development, production and marketing (only 15 of the 23 firms lent themselves to this analysis) f27b36a9-ba6c-452b-adcc-4eabb834f051.doc 5 Characteristics of the three main production categories: Relationship between task Production system Manufacturing cycle functions Unit and small Day-to-day operational Marketing → Development → Production batch relationship (pick up phone) Large batch and Normally exchange of Development → Production → Marketing mass information only (in/out tray) Normally exchange of Process Development → Marketing → Production information only (in/out tray) The Planning And Control Of Production Researchers now turn to more detailed examination of production operations. The production task is broken down into 3 elements: planning, execution and control. The researchers first wanted to see how the firms studied varied in extent to which they differentiated between these 3 elements, the relationships between them and their relative importance. Then they would see how these variations related to differences in technology. Findings: a link between production organization and technology was not always apparent. In unit production and process production firms (i.e. those at the ends of the scale), results were consistent with earlier conclusions, i.e. structure was linked to technology. But in the middle range, there was greater variation in the way production operations were planned and controlled. Researchers thought a partial explanation was that the scale they used to measure technology level of complexity was inadequate. Another explanation was that situational demands impose themselves more rigidly and obviously at the extremes than in the middle of the scale (in a special order (or unit production) firm, organization fulfils mainly its first function, i.e. co-ordination of work; in a process firm, organization serves primarily its second function, i.e. social ends). They suggest that in batch production (the middle of the scale), organization was not so much a function of technology as a function of the control system, the latter depending partly on technology and partly on social and economic factors. They propose that more detailed study of control systems as components in their own right might shed light on the relationships between the element functions associated with the production task (i.e. planning, execution and control). PART THREE: THE FOLLOW-UP INVESTIGATIONS This part of the research was continued on a limited scale by Woodward at Imperial College after the original team at the South East Essex College of Technology disintegrated and funding from the original sources dried up. Returned to 7 firms in which technical changes were taking place. Aim was to study the longer-term effects of technical change on organizational structure. f27b36a9-ba6c-452b-adcc-4eabb834f051.doc 6 The 7 firms were chosen from firms the researchers already knew a good deal about (so that they had information about both the before and after situation). Methods of social anthropology were used; researchers were able to spend long periods of time in both workshops and offices without becoming directly involved in what was going on, and without conducting a formal interview. 4 were chosen where changes involving a movement into the batch production area from either unit or process production. 3 were chosen where technical changes were taking them out of batch production. The picture emerging from the earlier background survey was not always in accord with that emerging from the more detailed case studies carried out later. The new approach led to a greater appreciation of the functions of formal and informal organization as parts of a whole, and of the complexity of the relationship between them. Towards An Organization Theory, 1953-63 The last chapter of the book is an overview of the efforts made in the 10-year period to formulate a general theory of organization. It also describes the problems of analysis and integration with particular reference to the South Essex studies. f27b36a9-ba6c-452b-adcc-4eabb834f051.doc 7 Industrial organization: theory and practice (1965) by Joan Woodward Summary by Wan Wong, October 6 2002 ANSWERS TO QUESTIONS: Key Phenomenon Beginning of thoughts on contingency theory, linking in particular organizational structure, production technology and commercial success, i.e. highlights technology as an important contingency that would determine the appropriate organizational structure. Key finding was that industrial organizations that design their formal organizational structures to fit the type of production technology they employ are likely to be commercially successful. Key Concepts 11-point scale to classify production systems ranging from unit production of customized articles (less technologically complex) through an intermediate stage of the mass production of standardized goods, to the most technically complex stage which is the continuous flow process production of dimensional products (i.e. those measured by weight, capacity or volume). Task functions (directed towards end results) vs. element functions (providing support and service to the line, such as personnel, planning, control, inspection, maintenance). Line specialization (differentiating between basic task functions only, namely financing, research and development, production and sales) vs. line-staff organization (line managers held accountable for end results while staff managers formally responsible for giving advice and guidance to line managers). Methodology and Data Collection Project started off as a test of current theories of organization (namely, the scientific management and human relations schools of thought) by studying organization structure, with special reference to line and staff relationships. Initially looked for a single general pattern of organization (in vain), then proceeded to analyze technical variables. Two stages: first stage was a broad survey of industrial plants located in South East Essex (and thus easily available to the researchers from their base at the local College of Technology); second stage consisted of detailed case studies of 23 firms by means of additional visits to collect more data. For 3 of these 23 cases, intensive studies were undertaken using social anthropology methods, i.e. direct and prolonged observation until patterns of interaction were discernible. Limited amount of follow-up work subsequently performed that was also regarded as pilot research for new studies into management control – revisit 7 firms where technical changes were taking place and study long-term organizational effects of the changes observed. f27b36a9-ba6c-452b-adcc-4eabb834f051.doc 8 Major Contributions Stimulated further research in organization theory Demonstrated the importance of systematic comparative empirical studies as a basis for management thinking Intellectual Heritage Scientific management principles (Fayol, Urwick, Follett, Taylor) Mayo and Human Relations school Contemporary writers (Burns, Trist, Dubin, Scott et alia, etc) Sociotechnical concepts Relevance to Practice of Management Still very relevant today. Provides guidelines on the successful management of change in organizations (especially parts 2 and 3 where she does case studies in detail). Weaknesses Findings could be interpreted as „technology determines structure‟ which is somewhat simplistic. Does not develop general techniques for the definition and measurement of technology. Does not situate the importance of technology relative to other contingencies such as size of the firm. Assumptions of the model themselves appear mechanistic. Does not look at process over time (c.f. Chandler).
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