The Creation of the Ford Empire - Case Study Example

It is complicated to define what in reality an organization is, and trouble-free to mention the features that it doesn’t possess. Certainly, organization is something lesser than a society. Every organization are within such an enveloped collectivise, although this could be perceive with slight difference as either a society or a nation. Even multi-national organizations do not exist out of the societies within which they operate. Such ambiguities as they could discover through the cultures and restrictions of these societies are violations openly recognizing those effects, not responses as if there were nothing (Eckes, 2001). Organization theory is not quite prepared to confront this. Nevertheless, organizational knowledge, or the knowledge produced by managerial and organizational activities and events, is generated by the accumulation of distinct experiences of members in a particular organization and its environment. This organizational knowledge then made the possibilities for effective organizational structure, corporate culture, and management and leadership strategies (ibid). Therefore, in this paper, two different organizations, namely General Electric and Ford Motor will be compared and contrast using the various organizational theory. An in-depth look at these two organizations’ structure, corporate culture, and management and leadership approaches will also be included. History of General Electric and Ford Motor Nonstop changes have become a normal occurrence for companies and their employees in the contemporary period’s cutthroat, competitive business world. During the recent years, several companies have endeavour into remarkable adjustments such as removing strata of management, streamlining techniques, motivating employees and laying off others, creating self-empowered work teams, and others. In periods as such, companies clearly need competent leadership strategies, yet particularly so at the highest level of the organization. Even though numerous of business adjustments happening nowadays might appear to most employees, a beaming model of the common idea of consistently changing an organization for improvement is the General Electric Corporation (GE), which experienced an extensive restructuring process commencing in the opening of the 1980s under the administration of their Chief Executive Officer (CEO), John F. Welch (Strohmeier, 1998). The most important leadership codes developed by Welch at the time these changes can provide as a framework for other leaders confronting similar predicaments in their workplaces regardless of its size and popularity (ibid). On the other hand, Ford Motor Company was founded by Henry Ford in the city of Detroit, Michigan. Henry Ford was a gifted craft artist, who takes advantage of his talents to design and create an experimental car in 1896. Ford was a successful founder in the industry of automobile, yet business environments changed whereas Ford remained the same. Ford despised experts, “I never employ an expert in full bloom. If ever I wanted to kill opposition [competition] by unfair means I would endow the opposition with experts. They would have so much good advice that I could be sure they would do little work” (Wren & Greenwood, 1998, 78). The factories set up by Ford has no organizational structure or chart, no detailed and clear job descriptions, no layers of authority, and extremely minimal designations of positions; Ford even made his finance chief terrified when Ford suddenly checked in the accounting department and thrashed all of the documents, records and files, remarking furiously on the widespread bureaucracy or red tape. Ford was also unsatisfactory in keeping effective managers, decreasing any opportunity to establish a well-organized and motivated management team (ibid). But, Ford Motor Company was able to pull through successfully in the ever-changing business world and was proclaimed by Fortune 500 as one of the most profitable companies globally, even with the erratic leadership style of its legendary founder, Henry Ford. Organizational Structure/Chart of GE and Ford Motor Organizational Chart of General Electric (http://www.ge.com/investors/personal_investing/ge_organization_chart-1_2.pdf) According to the organizational chart, GE follows an organizational structure which acknowledges senior management which is composed of shareowners, CEO, and board of directors. The various department shares similar importance in the structure which is manifested by the horizontal orientation of the chart whereas at the bottom are the equally important corporate staff. Organizational Chart of Ford Motor Company (http://www.ge.com/investors/personal_investing/ge_organization_chart-1_2.pdf Unlike the organizational chart of GE, the organizational structure of Ford Motor Company obviously demonstrates a global orientation. It is more focused on their assets distributed worldwide and the detailed structure of each region. However, similar to GE, there is a horizontal integration of positions, yet more complex than GE’s. Four Approaches to Organizational Theory Scientific Management The classical scientific approach to management emerged due to the need to boost productivity and competence. The focus was on attempting to discover the paramount solution or means to accomplish most work through examining the processes at work which then should be carried out through monitoring the abilities of the workforce (Geisler, 1999). The management of General Electric and Ford Motor both embody scientific management but with striking similarities and differences. When Jack Welch became GE’s CEO he hurriedly initiated the now-widespread practiced business techniques of consistent restructuring, process streamlining and employee downsizing, establishing him as one of the most respected and feared business leaders in the world. Immediately after his transformation of GE, he became labelled in the media and by the personnel of GE as ‘Neutron Jack’ because when he is over and done with streamlining a business, the establishment remains, but the employees and staff were all banished (Strohmeier, 1998, 16). Resolute to strengthen the collective power of people at GE, open up a liberal flow of knowledge and ideas, and restructure relationships among superiors and subordinates, Welch designed work-out, which is a chain of meetings at town hall carried out by GE management and developed to motivate responses from employees, brainstorming of ideas and empowerment of employees. In the corporate culture of GE established by Welch, conventional hierarchies dividing employees, staff and top management provide strength to ties of cooperation based on interdepartmental approach (ibid). On the other hand, in order to thrive and maximize profits, auto makers must conform to structural principles or also referred to as the ‘who-gets-what’ rules in the industry of automobile. Structural principles are developed from production technologies that are effective in generating cars expertly. An automobile is a difficult and rather complicated product, which is composed of more than 10,000 parts and demands numerous and difficult processes for its production (Studer-Noguez, 2002, 15). Mass production demonstrated effectively in knowledgeably manufacturing automobiles, which illustrates that for nearly seven decades, it established the structural principles for the automobile industry. Yet it is a complicated system that requires to be comprehended so as to understand Ford’s scientific strategies at management (ibid). Unlike GE, Ford Motor Company has an associated component which was vertical integration or an operational system and a hierarchical organization in the manufacturing of parts. Taking into account the several procedures involved in manufacturing a car, vertical integration was a primary aspect in preventing any possible distractions in the supply of parts and fundamental materials, and in attaining well-organized economies of dimension and a quick amortization of investments that are heavily fixed (Studer-Noguez, 2002). To sum it up, GE and Ford Motor Company share similarities in their scientific approach to management as manifested in their compliance to structural principles whereas their difference lies on the nature of hierarchy between superior and subordinates. Human Relations Another thread in the development of modern management was the boost in enthusiasm to the human aspects, which has currently been popularized as the human relations school of management. Specifically, human relations theory put emphasis on the importance, needs and involvement of the employee (Geisler, 1999). One of Jack Welch’s leadership principles is to be truthful to everyone. Welch persevered to generate an environment at GE where people could articulate themselves to somebody in authority who might contribute something about their dilemmas. He consistently discuss with leading employees on the plant floor. He was enthusiastic to hear and be aware of both the good and bad things regarding GE’s performance and fix the defects immediately. Welch strived to create a type of philosophy among the managers and employees at GE which articulates both the good and bad news (Eckes, 2001). Jack Welch does an excellent job of demonstrating the requirement for effective and proactive management and continuous benchmarking. Through the leadership of Welch, the social and political environments at GE were modified remarkably through removing numerous layers of management and motivating employees through involving them in the decision-making process. GE values are so significant to the company, which Welch had employees internalized and handed out to all the people at GE, at all levels of the company. However, before the principles were delivered to the personnel, GE had arrived at an agreement on which centre values it sought to encourage in its employees (ibid). Likewise, Ford Motor Company in the early 1990s embarked on a top quality management trial that may turn out to be the foundation of its product improvement process. In an attempt to generate a car that equalled the quality and engineering of two of the most popular car makers Toyota Camry and Honda Accord, Richard Landgraft and his work team made use of them as benchmarks and redeveloped and redesigned the Ford Taurus (Studer-Noguez, 2002). The members of the team were housed in one building. The common headquarter facilitated designers, engineers, suppliers, and rank-and-file workers to accurately work together on design, manufacture and marketing concerns. Ford Motor Company created an atmosphere in the workplace wherein employees are valued and looked upon based on their contributions to overall production (ibid). Hence, human relations in GE and Ford Motor Company are well-organized systems and structures to employee growth and superior-subordinate relationship improvement. Systems Theory A system is a unit composed of two or more interdependent components that work together to create an operational entity. Despite of the form of system, there are always four elements which are inputs, processes, outputs and employee and customer feedback (Geisler, 1999). The step-by-step mechanism GE and other organizations employed to enhance processes is summed up by the acronym DMAIC which means (Eckes 2001, 10): “Define. Defining the team to work on improvement, defining the customers of the process, their needs and requirements, and creating a map of the process to be improved. Measure. Identifying key measures of effectiveness and efficiency and translating them into the concept of Sigma. Analyze. Through analysis, the team can determine the causes of the problem that needs improvement. Improve. The sum of activities that relate to generating, selecting and implementing solutions. Control. Ensuring that improvement sustains over time” (Eckes 2001, 10). These processes or systems has been flourishing at GE since it has flat-out, unrepressed maintenance from the top level of management, and the strategies were analyzed across the organization. Definitely a small number of people debated the idea that going for perfection in the novel generation of a product makes brilliant logic; doing it appropriately at first significantly reduce costs than repairing it eventually and paying for the damage and other incurred costs of defects (Eckes 2001). Ford Motor Company on the other hand developed a technique in its system which is a strengthened organizational competence for managing various levels of the manufacturing process that occurs within and outside the company. The difficulty involved in generating a car demands the expert engineering of plants, the improving of manufacturing networks, involving a rigid and organized linkage of specialized equipment and various production procedures, in addition to the storing of weighty inventories. The use of specialized machines in itself did not ascertain a decrease in the total time of car assembly, because a shortcoming in the supply of any part, at the appropriate place, at the perfect time, and in the accurate amounts, could result in disaster (Bak, 2003). An effective automaker, such as Ford Motor Company, had to be proficient of successfully bringing together, establishing and storing numerous of interdependent component that had to be provided to the assembly line in a continuous, systematic and exact manner (ibid). Contingency Theory Due to the complexity of contemporary organizations, no single strategy for management is accurate and applicable for all circumstances. The approach that defines the relevance of this perspective in managerial practice is referred to as contingency theory. It relies on knowledge of and investigation into organizations as systems, and put emphasis on the requirement for managerial strategies grounded on all applicable knowledge (Geisler, 1999). Apparently, GE and Ford Motor Company followed different managerial strategies. For Jack Welch, leading is more important than managing. Welch derided the conventional function of management, which is an organizational arrangement founded on dictatorship or control. Welch, on the contrary strongly believes that managers should be leaders. Rather than bossing around workers, leaders should motivate and liberate them. Jack Welch employed communal values and employee motivation as the guiding premises of the GE organization. The soon as Welch became CEO, every GE business possess nine to eleven layers of organization; after a decade was reduced to four then to six (Strohmeier, 1998). Welch has stated that GE is performing excellently and is positioned to perform better in the coming years not for the reason that they “are managing better because we are managing less- and that is better” (ibid, 17). On the contrary, pertaining to available information on adjustments and changes in management and organization, Ford Motor appeared to be strongly positioned to put up an international and adaptable structure that facilitated for an improved strategic response to varying circumstances throughout the globe. Among several considerations, and weighed up with other makers of automobile, Ford’s management possess substantial experiences dealing with overseas subsidiaries. Nevertheless, Ford’s attempts to progress toward a management mechanism that is globalized, as articulated in Ford 2000, confronted considerable hindrances to the point that the organization overturned centralization attempts (Studer-Noguez, 2002). More up-to-date management adjustments indicate toward higher decentralization of management, a more rigid organization among subsidiaries in every region, and inter-regional or international organization, yet only restricted quantity of activities. Ford’s limited advance to global assimilation is a practical move that acknowledges both the gains of integration and the various authentic and possible hindrances that national restrictions show to such a move (ibid). References Bak, R. (2003). Henry and Edsel: The Creation of the Ford Empire. Hoboken, NJ: John Wiley & Sons. Eckes, G., (2001), The Six Sigma Revolution: How General Electric and Others Turned Process into Profits, New York: Wiley. Geisler, E. (1999). Methodology, Theory and Knowledge in the Managerial and Organizational Sciences: Actions and Consequences. Westport, CT: Quorum Books. Strohmeier, B. (1998). The Leadership Principles Used by Jack Welch as He Re-energized, Revolutionized and Reshaped General Electric. Journal of Leadership Studies , 16. Studer-Noguez, I. (2002). Ford and the Global Strategies of Multinationals: The North American Auto Industry. London: Routledge. Wren, D. A. & Greenwood, R. (1998). Business Leaders: A Historical Sketch of Henry Ford . Journal of Leadership Studies , 72. Websites: http://www.ge.com/investors/personal_investing/ge_organization_chart-1_2.pdf http://www.cogmap.com/chart/ford-motor-company Read More