Technology and Organizational Structure: Theories & Impact

Posted on Aug 15, 2025 in Business Administration and Management (BAM)

Technology in Organizations: Definition & Levels

Technology refers to the set of skills, knowledge, machinery, tools, and equipment that people use to change or transform raw materials into valuable products or services.

Within an organization, technology operates at three distinct levels:

  • Individual: The knowledge and skills possessed by individual people.
  • Functional or Departmental: The procedures and techniques developed by specific work groups.
  • Organizational: The way the entire organization transforms inputs into final products.

Approaches to Organizational Effectiveness

There are three main approaches to increasing organizational effectiveness:

  • External Resource-Based Approach: Uses technology to enhance the ability to manage and control external stakeholders.
  • External Systems-Based Approach: Applied to improve outcomes in innovation efforts and the development of new products or processes.
  • Technical Approach: Focuses on increasing efficiency, reducing costs, and improving quality.

Woodward’s Technology-Structure Contingency Theory

Joan Woodward analyzed over 100 industrial companies in the UK and classified their production technologies by complexity. She found a strong relationship between the type of technology used and the most effective organizational structure.

Woodward’s Production Technology Classifications

  • Unit or Small-Batch Production Technology:
    • Custom or small-quantity products.
    • High flexibility, skilled craftsmanship.
    • Structure: organic, flexible, few hierarchical levels.
    • Example: Custom furniture manufacturing.
  • Mass Production Technology:
    • High-volume, standardized production.
    • High efficiency, repetitive tasks.
    • Structure: mechanistic, hierarchical, standardized procedures.
    • Example: Automobile factories.
  • Continuous-Process Production Technology:
    • Automated, uninterrupted production.
    • Requires high technical specialization.
    • Structure: mixed, with strong technical coordination.
    • Examples: Oil refineries, chemical plants.

Woodward’s Key Conclusion on Organizational Fit

Woodward concluded that:

  • There is no single best way to organize a company.
  • The most effective organizational structure depends on the type of technology used.
  • Organizations whose structure aligns with their technology tend to perform better.

Charles Perrow’s Routine & Non-Routine Task Theory

Charles Perrow developed a typology of technologies based on two main dimensions:

Perrow’s Two Dimensions of Technology

  1. Task Variety: The number of different situations encountered during work.
    • High variety = many new and unexpected situations.
    • Low variety = repetitive, predictable tasks.
  2. Problem Analyzability: How easily problems can be defined and solved using known procedures.
    • High analyzability = clear solutions and standard procedures.
    • Low analyzability = problems are unclear or require improvisation.

Perrow’s Technology Typology Examples

  1. Routine: Low variety, high analyzability. Example: Assembly line production.
  2. Craft (Artisanal): High variety, high analyzability. Example: Musical instrument repair.
  3. Non-Routine: High variety, low analyzability. Example: Cutting-edge scientific research.
  4. Engineering-like: Low variety, low analyzability. Example: Solving unique technical issues.

Perrow’s Conclusion: Structure & Task Alignment

Perrow’s theory suggests:

  • Routine tasks are predictable and best handled through mechanistic structures.
  • Non-routine tasks require flexible structures with open communication and adaptability.
  • Ultimately, technology shapes the optimal organizational structure.