The relationship between task typology and organizational slack for an organization
Chen Hsiu-Min
Doctoral Student
College of Management
I-SHOU University
1, SECTION 1, HSUEH-CHENG RD., TA-HSU HSIANG, KAOHSIUNG (840), TAIWAN
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E-mail: cshowme@gmail.com
Short running title: Task typology and organizational slack
The relationship between task typology and organizational slack for an organization
ABSTRACT
“Put money aside for a rainy day”. Many researchers think organizational slack could buffer the
organizational core from uncertain environment and raise competitive advantage for an organization,
but how to manage the organizational slack more efficiently is another worth issue to discuss. There
are different departments with discriminating tasks within an organization. According to the Perrow’s
typology, we could assort the task to four types by variability and analyzability that lead to diverse
uncertainty. The aim is to discuss the relationship between the task typology and organizational slack
as well as provide a reference to decision-making strategies.
KEY WORDS: Organizational slack, Perrow’s task typology, Task typology
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INTRODUCTION
Thinking this story, Jim contemplates his friend, Jack anxiously. It is the third day to lose their way
among the mountain. They have little water but no food anymore, so both they are very famished.
Looking at his fat abdomen which results from lacking activity ordinarily, he appreciates it just now.
Because it can provide energy for his needs, he could take the accident. In contrast, Jack whose career
is a model without excrescent fat looks cream-face, and weak. Jim envies Jack mostly, but it’s adverse
now. Excess fat, which may increase the probability for the certain chronic diseases and reduce the
mobility of the body in peacetime, but it, which may also raise the survival rate when we have to
confront uncertain events abruptly. The ability of organizations to adapt to their environments is a
basic assumption of strategic theory (Barnard, 1983; Drucker, 1954; Pfeffer & Salancik, 1978), like an
organism, and Organizational slack is like the excrescent fat in the body. Because the different
psychological systems, such as the respiratory system, and the digestive system…etc., have owner
specific functions and treat various problems while suffer the same situation, the body knows how to
adjust accurately and allocate the resource to each system insuring to solve detrimental situation and
its life. How does an organization to do?
The business environment changed rapidly and has more and more competition overtime resulting
in confronting a good deal of incertitude. In order to buffer its technical core and survival ceaselessly
from the external environment around it, the managing strategy for an organization must been
considered about organizational slack. Organizational slack can be defined as the excess capacity
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maintained by an organization (March and Sivion, 1958) and slack buffers a firm’s technical core from
environmental turbulence (Cyert and March, 1963; Pfeffer and Salancik, 1978; Thompson, 1967).
Historical anecdotes about the early years of the U.S. space program provide keen insight into the
managerial concerns of operating a business with “just enough” resources to produce a high-quality
product or service. During the 1960s and 1970s the U.S. space program provided many examples of
how organizational slack and redundant systems were directly impacted by the rapid innovation
occurring at the time (Wolfe, 1979).
Does each industry, firm, organization, or department need to retain slack? In the current global era,
in order to raise their competitiveness, all more of them get to tend to downsizing and the ongoing
movement to streamline organizational resources, thus it is critical to understand the overall impact
that reducing surplus resources has on the financial performance of the firm. Even so, Lawson (2001)
re-focused attention on this issue and documented the continued importance of maintaining
organizational slack because, “Those who must weigh the pressures for short-term efficiency against
the demands for long-term effectiveness in confronting strategic resource-allocation and design
decisions should consider the value of slack. Slack is important for organizational adaptation and
innovation—two often cited requirements for organizations of the future.” (p. 125). Therefore, how
firms define excess, or slack, resources and what action is taken to match the necessary level of
resources with the strategic needs of the firm, becomes critical to the long-term success of the firm
(Nohria & Gulati, 1996).
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The necessary of organizational slack is a controversial issue. The common variables that these
researchers interested the relationship with organizational slack were organizational performance and
innovation. Some researchers argued organizational slack would add costs to organizations resulting in
competitive disadvantages and reduced performance (Bourgeosis, 1981; Cyert & March, 1963; Singh,
1986), but others didn’t think so. Additionally, some research pointed the relationships were not
congruous. In other words, it would be changed by different situations. For examples, Perrow’s 1986
discussion of the interaction between slack and environmental adaptation, Nohria and Gulati (1996)
found that slack has an inverted U-shaped effect on innovation, and others suggest an optimal level of
slack exists for any given firm and if organizational slack falls below that level, organization
performance will decline (Sharfman, et al., 1988). Recently, Cheng and Kesner’s (1997) findings
suggest that different types of financial slack play different roles with respect to resource allocation
patterns among airlines studied.
According to above empirical studies, we make sense that, despite its costs, slack could be regarded
as a “cushion” between a firm’s technical core and external turbulence. People acknowledge that the
resource is limited, but the needs are never end, which points out the importance of resource allocation
for an organization. Even if in the same organization, each department has itself unique core
technology (task). In accordance with Perrow’s typology (1967) which focused on the task level
analysis. He began by defining the variability and analyzability of tasks and then created measures that
assessed these two dimensions, a two-by two matrix, which gave Perrow four technology types that he
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named: routine, craft, engineering, and nonroutine. We believe the four types of the tasks force
different degree of the uncertainty that is the major existent cause of organizational slack; therefore the
managers would design organizational slack from zero to ample corresponded with the various
uncertainties.
In this research we attempt to discuss the relationship between organizational slack and the Perrow’s
task types that is to say the allocation of organizational slack is moderated by the different task
typology.
LITERATURE REVIEW
Organizational slack
Slack can be said to exist when resources are ordinarily not being completely utilized, employees
are being paid more than the amount required to retain them within the organization, and the firm is
charging less for its products than it would be possible to charge without losing its customers etc
(Cyert and March, 1963). Why does an organization have to consider slack? The conceptual
discussion of organizational slack can be traced to organizational theorists Barnard (1938) who had
discussed the role of slack in his early work, but the specific label of “slack” had not been coined unit
March and Simon published their seminal book in 1958. Thompson (1967) argued that protecting the
core of the organization from rapid changes in the firm’s external environment through the use of
slack resources was an important role for managers. That is, maintaining slack resources was
considered a method to buffer the core of the firm from environmental variation thereby reducing the
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need to make substantial changes to the operating core of the firm (Pfeffer & Salancik, 1978). This can
be created by an organization consciously as well as unconsciously. Accordingly, organizational slack
is defined by Bourgeosis (1981:30) as:
A cushion of actual or potential resources which allow an organization to adapt successfully to
internal pressures for adjustment or to external pressures for change in policy, as well as to initiate
changes in strategy with respect to the external environment.
In general, we adopt this definition in this paper. Organizational slack usually addressed to have
following functions for a firm in organization theory.
a) Slack acts as an inducement, which represents ‘payments to members of the coalition in excess of
what is required to maintain the organization’ (Cyert & March, 1963:36).
b) Slack can become a resource for conflict resolution. The upshot is that, with sufficient slack, there
many can be a solution for every problem.
c) Slack may be employed as a buffer, which insulates the technical core of the organization from
environmental turbulence. (Thompson, 1967)
d) Slack can be a facilitator of strategic behavior, which allow the firm to experiment with new
strategies such as introducing new products and entering new markets (Thompson, 1967).
In contrast, some research on organizational slack has suggested slack resources in the form of
excess workers, unused productive capacity, and unnecessary capital expenditures add costs to
organizations resulting in competitive disadvantages and reduced performance (Bourgeois, 1981;
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Cyert & March, 1963; Singh, 1986). Agency theorists often acknowledge that slack is a source of
agency problems, which breeds inefficiency, inhibits risk-taking, and hurts performance (Fama, 1980;
Jensen and Meckling, 1976).
To be sure, organization theorists approve that ‘slack resources are an additional cost to the
organization’ and that an excessive level of slack in untenable (Galbraith, 1973:15), nonetheless they
generally believe that, given the complex trade-offs, the benefits of slack outweigh its costs, and that a
zero-slack organization is not realistic. Therefore, how to use organizational slack more appropriately
is a considerable issue.
Perrow’s task typology
The first question must been explained is that why to choose the Perrow’s task typology. Several
conceptual schemes initially appeared in the literature (Hickson, Pugh, & Pheysey, 1969; Perrow, 1967;
Thompson, 1967; Woodward, 1965). This study chose Perrow’s typology based on three major reasons:
first, Perrow's conception was sufficiently broad to permit the technologies of many different types of
tasks to be studied and compared. Second, the appropriate measurement dimensions that we could
connect with degree of uncertainty. Additionally, although Perrow created his measures of task
variability and task analyzability for organizational units, the same measurement technique can be
used to create an aggregated score for a whole organization or department that correspond with our
analyzed level. Third, the measurement scale had been developed by some studies that had been
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published on top journals (Lynch, 1974; Withey, Daft, & Cooper, 1983).
Perrow theorized the technology of an organization is a major determinant of its structure and other
organizational characteristics (Perrow, 1967), has influenced many of the investigations in complex
organization (Hage and Auken, 1969; Grimes, Klein, & Shull, 1972). He proposed technology by
focusing on the task level of analysis (Perrow, 1967, 1986) by asking many individuals in the
organization about their work and aggregating the responses to get an organizational score. By
identifying materials, operations, and knowledge as aspects of technology, Perrow extended the
boundaries of organizational technology beyond the confines of production systems. He thus provided
the framework for subsequent investigators who wished to compare the technologies of the various
industrial or nonindustrial organizations. He identified two dimensions along which the transformation
processes could be described. The first dimension is number of exceptions. This refers to task variety,
which is the frequency of unexcepted and novel events that occur in transformation process. When
task variety is high, participants typically cannot predict problems in advance and many tasks are
unique. Conversely, tasks have little novelty and are repetition. We could inference that higher task
variety has higher uncertainty.
According to above statement, we proposed this hypothesis:
z
Hypothesis 1. The correlation between task variety and organizational slack is positive. The
needs of organizational slack would increase as the higher degree of task variety.
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The second dimension is task analyzability which measured as the extent to which, when an
exception is encountered, there are known analytical methods for dealing with it. In other words, when
the task is analyzable, the work often can be reduced to mechanical steps, and participants can follow
an objects, computational procedure to solve the exception. When task is unanalyzable, participants
have to spend time thinking how to solve problem, and they may actively search beyond readily
available procedures. Judgments relied on intuition and work experience. We could inference that
higher task analyzability has higher uncertainty.
According to above statement, we proposed the hypothesis 2 and 3:
z
Hypothesis 2. The correlation between task analyzability and organizational slack is negative.
The needs of organizational slack would decrease as the higher degree of task analyzability.
z
Hypothesis 3. The correlation between task analyzability and organizational slack could be
moderated by participants’ work experience. The relationship would be diluted as the
participants have more work experience.
The two dimensions of technology form the basis for four categories of technology, and Perrow also
proposed the existence of the routine-nonroutine diagonal which contains elements of both exceptions
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and analyzability, as illustrated in Figure 1 (p.18).
Routine technologies are characterized by low task variability and high task analyzability. The
traditional automobile assembly line is also an example. Clerical work is another example. They
encounter few exceptions to their standard work practices to their standard work practices and when
they do there is almost always a known method of resolution, such as hierarchical referral (Hatch,
1997).
Craft technology describes conditions of low task variability and low task analyzability.
Construction work is a craft technology. The construction workers encounters few exceptions to
standard procedures but when exceptions are encountered, such as mistakes in planning or unavailable
materials, a way of dealing with them must be invented (Hatch, 1997).
Engineering technologies occur where high task variability combines with high task analyzability.
The technologies of laboratory technicians, executive secretaries, accountants and, of course, most
engineers fit the engineering category. In engineering technology many exceptions to standard
practices arise but employees possess the knowledge needs to solve these problems. Often the
knowledge required by engineering technologies comes from advanced and highly specialized training,
thus the presence of a great deal of traditional managerial and other professional work usually
indicates an engineering technology is in use (Hatch, 1997).
Nonroutine technology was the label Perrow attached to technologies characterized by high task
variability and low task analyzability. These technologies occur, for instance, in research and
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development departments, and prototype laboratories. The high number of problems encountered in
nonroutine technologies, and the lack of known methods for solving them, place employees in a more
or less constant state of uncertainty (Hatch, 1997).
Perrow also suggested that although conceptually distinct, the two dimensions may be statistically
correlated in organizations because, when problems are frequent and unexpected, they also are less
analyzable. We could inference that task variety is more important cause than task analyzability for
uncertainty.
According to above statement, we proposed the hypothesis 4:
z
Hypothesis 4. The ordinal amount of organizational slack of four task categories is
Engineering, Non-routine, Craft, and Routine. .
As above, this ordinal would be affected by participants’ work experience, so we proposed
hypothesis 5:
z
Hypothesis 5. Hypothesis 5 would be adjusted by the participants’ work experience.
In fact, Perrow’s two-by-two matrix is often collapsed onto a one-dimensional scale.
Mathematically this involves projecting points in Perrow’s two-dimensional space onto line formed by
the diagonal that runs through the routine and nonroutine quadrants (see Figure 1). The points,
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representing technologies located within the quadrants, are plotted on this line according to their level
of routineness such as that crafe and engineering technologies will generally fall between the two
extremes of routine and nonroutine work.
As above, this ordinal would be affected by participants’ work experience, so we proposed
hypothesis 6:
z
Hypothesis 6: The task with more routineness, the lower needs for organizational slack.
To take a notice that Perrow’s analyzed level is macro by an aggregated score for whole
organization, but in this study is meso that we focus on the scores from different departments in a
same organization. In other words, we would discuss the typology of the task with the various
departments by Perrow’s method, and relate them with the allocation of organizational slack among an
organization.
Even if the analyzed level of Sharfman’s research (1988) was macro, he advanced that a model that
describes the antecedents of organizational slack is still to give us a key notion. This model contains
three sets of predictors: environmental contingencies, organizational characteristics, and the values and
beliefs of dominant coalition that determined the total level of slack. While we pay attention to
organizational characteristics in lower level, we could expect the task nature would effect the
allocation of organizational slack when the managers make decision about it, which is the aim we want
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to explore in this study.
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Figure 1 Two-by-two matrix showing Perrow’s typology of technologies (Perrow, 1967)
Task variability
Task
High
Low
High
Routine
Engineering
Craft
Non-routine
analyzability
Low
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