The Corporate Structure of a Global Organisation - Essay Example

The Corporate Structure of a Global Organisation Executive Summary The project aims to bring forth analysis of the corporate structure of a global organisation. The organisation chosen for the purpose is Ford Motor Company. The company has retained the topmost position in the field of automobile manufacturing in the world. The project begins by presenting the organisational structure of the company. The company presents a bureaucratic structure where an individual’s job roles and responsibilities are clearly defined and presented. Also, the rules and regulations are formulated by those at the topmost position and incorporated at the lower levels. However, the company has been undertaking rapid decentralisation as it is becoming increasingly global in nature. The Thompson technology has been used for demonstrating the strategy used in Ford. The long linked technology has been prominent in this case because of its use of sequential steps in operating. The next part of the project demonstrates the cultural issues in the organisation and the way in which the company integrates the different cultures of the different organisations across the globe. The company has also been decentralising its power and authority to the business units. This has been especially important to maintain the common culture of the organisation. Allocating greater authority and power to the managers and stakeholders in the business units has been one of its strategies to unite the diverse culture of the units. Also, the company does not encourage the formation of sub-cultures in the organisation. Finally, the company has been emphasising on imparting greater power and authority to the stakeholders to meet their interests. Also the strategies undertaken for the purpose are subjected to audit and frequent monitoring. Introduction The following project presents a report on the organisational analysis of Ford Motor Company. The report is presented using four perspectives, namely Bureaucratic, Contingency, Cultural and Political. The bureaucratic perspective has been explained with the presentation of the organisational chart of the company and mentioning it rules and procedures. The contingency perspective has been demonstrated with the technologies that are used along with the justification of their fitness in the organisational structure. In this regard, the structural problems have also been identified and analysed. The next part of the report demonstrates the cultural aspect of the organisation assessing its goals, norms and rules and how effectively the organisational structure fits into its present culture. Lastly, the report analyses the political perspective in the company while explaining the way in which power is distributed between stakeholders and managers. The project also proposes suitable recommendations based on the analysis of the above four perspectives and identification of the challenges. The Ford Motor Company is one of the largest manufacturers of automobile products in the world. The company had initially started with manufacturing twin cylinder engines which had a potential of 20mph. Later on, the company diversified into developing other models. The Model-T had become particularly popular since 1909 because of its price at $850, engine size, fuel consumption and speed in the range of 40-mph. The company had confronted an economic slowdown during the Second World War, but had gradually regained its potential since then. Even amidst very stiff competition, Ford has retained the topmost position with its constant production of innovative products. The worldwide popularity of the company can be attributed to its low price, innovative styles, enhanced production and customer satisfaction (Bryant University, 2004). Analysis Bureaucratic The Ford Motor Company, which is an America based multinational automaker, is located in Michigan. The company is known for its methods for manufacturing cars and also the management of its huge industrial workforce. The following chart provides the organisational structure of the Ford Motor Company. Figure 1: Organisational structure for Ford Motor Company (Source: Reference for Business, 2011) The company demonstrates a structure which has clearly defined jobs and all the jobs have an allocated and specific amount of authority and responsibility. It lays down the formal, rules, procedures and regulations. The individuals performing the jobs are guided by these rules and regulations. The figure presented above shows how each individual’s activity is divided and defined within the company. The company has created this structure by creating product groups. Each separate division is based on specific models. The management develops the new structures for reducing the costs to respond to the changing needs of the customers, to reset the priorities, for shifting and aligning people according to capabilities and even to shift the perceptions of the services among users (Mills, et al., 2006, p.459). The formalised structure of the organisation gets reflected through its set of laid down procedures and rules. In Ford, these rules and procedures are followed strictly and by all. Because it is a formalised organisation, the structure is prescribed and designed by the management of the enterprise. In this case, the structure clearly represents a hierarchical structure, where each level reports to the level above it. The company has a charter which states its function and place in society. Moreover, it has the rulers of behaviours which are to be enforced by the officers in compliance to the rules (Mills, et al., 2006, p.459). The objective of creating an organisational design is to develop a structure which works towards achieving the company’s strategic goals. In Ford Motor Company, there was compartmentalisation of the international operations. This, however, also led a problem. The managers who were looking after the domestic businesses were not able to pay the required attention to the global operations. This forfeited the potential synergies across different locations and resulted in the duplication of the efforts and resources. This called for integrating the value chain activities. Consequently, the degree of interdependence among the subsidiary unites was raised and thus there was more global coordination. But in order to achieve this, the company had to incorporate the integrating mechanisms. Thus, the use of mechanisms likes transfer pricing and internal bank became inevitable in its integration procedure (Shenkar & Luo, 2008, p.291). In 1990, the company decided to reorganise the senior management of the company. This was done by shifting the authority to the regional operations. In other words, Ford Motor went for decentralisation of its operations. Under the new structure, the decision making authority was spread across the organisation instead of remaining confined to the top level management. Under the system, greater authority was given to the brand executives and regional executives of the company on matters such as the kind of trucks and cars that would be manufactured and the way they would be marketed. In the decentralised framework, the managers belonging to various levels in the organisation are considered to be the key decision makers. This is with regard to the operations relating to the particular area of responsibility that they undertake. These segments may be branches, departments, divisions or even the individual products. Any business activity in which there is a requirement of costs, revenues and profits data is referred to as a segment. 'Segment reporting' provides the financial data and other status of the company to the various segments (Jackson, Sawyers & Jenkins, 2007, p.410). Ford Motor Company essentially has an organic structure. It is a large organisation with numerous numbers of employees and thus, the organic structure is most suitable for a large sized organisation. The company is said to use an assembly line process for making its products. It is characterised as being low in terms of complexity, centralization and formalisation. It is an organisation which is informally coordinated, flexible and allows its managers to participate in the process of decision making. In Ford, there is both horizontal (across different departments) as well as vertical communication (up and down the hierarchy), according to the proper place of the information. This is unlike the bureaucratic structure which is characterised as being highly rigid and where communication primarily flows from the top to the bottom (Mills, et al., 2006, p.463). Contingency The Thompson technology has been used to demonstrate the selection of a strategy in Ford Motor Company. In contrast to the Perrow and Woodward technology, Thompson Technology demonstrates a selection of a strategy with the objective of reducing uncertainties and provides that structural arrangement which facilitates uncertainty reduction. Following is the figure of the Thomson Model to elaborate the above concept. Figure 2: Thomson’s Technology Classification (Source: Robbins, 2009, p.189) Since Ford Motor is an auto manufacturer, the production process has to go through several steps before accomplishing a complete task. This is the reason why this technology would prove to be suitable for the company according to its organisational setting. Thomson has defined the technology as ‘long linked’ in which the operations and tasks remain sequentially interdependent. It has got a number of fixed and repetitive steps. What follows is that activity B cannot occur before the occurrence of activity A. Similarly, activity B cannot occur before activity C and so on. The sequence would be perfectly aligned with the kind of activities that take place in Ford Motor. In any manufacturing unit, it is crucial that the sub components are developed and assembled on time, otherwise the final product cannot be generated. This helps to understand why the Thomson Technology would be the best fit for the structure of Ford Motor Company (Robbins, 2009, p.188). The long linked technology is also suitable for Ford because it includes mass production assembly lines. However, this technology has a major drawback. It requires utmost efficiency and coordination between the activities because of sequential interdependence. This leaves the management with uncertainties regarding the inputs and the outputs of the organisation. Major concerns arise in areas of acquisition of raw material and disposition of finished products. This requires the management to intervene in areas of controlling the inputs and the outputs. This is done by integrating them vertically forward, backward and both. Thomson has also presented an intensive technology which “represents a customised response to a diverse set of contingencies” (Robbins, 2009, p.190). The use of intensive technology is recommended for Ford Motor because it can achieve maximum coordination through the process of mutual adjustment. An organization’s environment may be composed of forces or institutions which affects the performance of the organisation. This can include suppliers, competitors, customers, public pressure groups and even government regulatory agencies. Thus, the structure of the company might get affected by changes in these factors. Similar is the case with Ford Motor. A technology driven organisation like Ford remains especially vulnerable to the changing forces of the environment. This may occur in terms of entry of new competitors in the industry or even new technology breakthroughs. Other companies might create a new and advanced technology which might eat away its present customers and take away major share of the company’s market (Robbins, 2009, p.243). Also a major portion of the firm’s operations are based on digital technology through which it conducts transactions with the suppliers and partners. It also undertakes business-to-business commerce using digital technology. The firm’s dependence on digital technology makes it flexible and allows it to decentralise operations. Also, the firm’s horizontal collaboration and communication remains high as the company remains involved in the virtual network arrangements. Any disturbance that the company might feel in terms of changing the bargaining power of customers or suppliers can be stabilised and controlled to a significant extent through the digital technology used by the firm. In fact, it is increasingly being used to bring together the customers, partners and suppliers. People may even use the electronic connections for linking themselves into teams. For example, it is possible for an employee to connect with people within and also outside the organisation and develop a virtual team. This team can then address a particular query or a problem and provide a solution (Daft, 2007, “Digital Technology”). One kind of stability that Ford might be facing is that the manufacturing technologies might be structured loosely. This is because, in case of the manufacturing firms, small batches and continuous processes, the technologies might become structurally loose. However, in the case of vertical integrated structures, this might not be the case. This is primarily true for the firms which are geographically located at great distances from the parent firm and the customers. This is also true for the highly decentralised firms like the Ford Motor Company (Daft, 2007, “Digital Technology”). Cultural Culture is a complex issue which includes an entire group’s shared values, beliefs, attitudes and assumptions. An organisation culture is a broad term and includes all aspects of an organisation’s internal and external environment. The attitude of the individuals in the organisation is driven by this culture. The Ford Motor Company is characterised with a hierarchical culture consisting of as many as seventeen layers in the management (Tharp, 2009, p.3). The decisions are made by the top management and are implemented at the lower levels. However, the company has been demonstrating change in its corporate culture. There has been widespread decentralisation of power and greater power and authority has been allocated to the managers at different geographic locations. This has enhanced geographical integration and collaboration of the company activities and processes. Recently, the company has demonstrated its responsibility towards the society and has tried to reduce accidents and illness rates. The human factor has gained prominence and importance in the company and special attention is being taken with regard to health and safety issues. The company has been trying to incorporate the safety culture in the production plant by identifying priorities and action plans for addressing the safety and health perceptions, issues and concerns (Health & Safety Laboratory, 2008, p.1). The company has undertaken a number of steps to transmit the culture to the employees in the organisation. In order to bring about the change, the company had developed a ‘safety climate’ tool in the organisation to create a tailored questionnaire for the employees. The data collected in this way was analysed to design and develop the focus groups. The next step included facilitation of the focus groups in order to encourage and provide opportunities to the employees to address the safety concerns. The underlying factors requiring attention were identified from the results that followed. Based on the results, action plans were developed for addressing the safety concerns of the employees (Health & Safety Laboratory, 2008, p.2). The company has undertaken active strides to bring about cultural changes in the organisation. However, the key issue lies in the communication of the values through the company’s actions and policies. Some authors have pointed out there can be no substitute for face to face communication. Ford may undertake large meetings to communicate the changed initiatives in the organisation. Subjects may be left to the employees for their suggestions and views. This would be one way of including them in the initiatives to incorporate the changes. Authors have identified that in order to bring about a change, the management should target the frontline supervisors. This is because they are the ones who remain mostly in contact with the employees. They are also aware of the regular problems and issues that the company might be facing. Moreover, employees are most likely to collect all kinds of information from their immediate supervisors instead of approaching the management. The frontline supervisors are the best persons to communicate any kind of change to the employees. There can be two ways of including employees in the change initiatives. Firstly, the senior management can explain the task to the supervisors and then ask for their opinion. The manager takes the recommendations and then incorporates them. Based on the recommendations, the manager communicates the changes to the employees. One reason why cultural changes fail in Ford Motor is the lack of substitutes for actions. The hierarchical structure remains rigid and cannot accept changes easily. As the organisation is global in nature, it has been striving to achieve a single ‘one company’ culture. The objective is to keep the entire business consisting of different cultures across the various diverse business units united under a single and common brand. This has been done to increase collaboration and enhance knowledge sharing and also harness cross selling opportunities. Thus, it is important that Ford creates and sustains a “one-company” family culture (Melcrum, 2006, p.8). The company does not exhibit or encourage creation of subcultures to increase or enhance performance. However, the main focus is to create a performance driven corporate culture. One problem that arises in the company is integrating the diverse cultures existing in the various business units across the globe to create a single corporate culture. It is crucial to create a common human resource strategy for achieving the same. Also, incorporating change management becomes critical for a company which has business units across different geographic locations. In order to incorporate the change management strategies and integrate the supply chain strategies, the company had to undertake extensive reengineering efforts and coordinate with its suppliers, distributors, manufacturers, customers and retailers (Eduworkers, 2010, p.10). Political The company has faced accusations of subordinating the interests of the stakeholders. The focus was to reduce the price in favour of the customers at the cost of meeting the interest of the stakeholders. However, this has undergone a change in the recent years. There has been a rapid shift and distribution of power in the organisation. There was a clash between the manufacturing people and the finance people in the company. With the increase in the government regulations, the company faced increased pressure on its business operations and its costs of production. Decisions were crucial because miscalculations and misjudgements resulted in enormous losses. In order to compensate for the losses, it was important to involve the educated people, especially from the finance background to reduce operations costs and increase net profits. However, the programs were required to be incorporated by the manufacturing people. This increased the burden on them. But they found themselves to be in lower positions than the finance people (Lee, et al, 2005, p.3). Thus, it is clear that although the company is successful, there is a lot of unequal distribution of power which requires attention. In Ford, the managers are given the authority to lay down the corporate performance framework. Using this framework, the unit progresses to the second component, i.e. the sustainability actions that they want to explore. From the sustainability actions, a direct link is to be derived to align with the sustainability performance, stakeholders’ reactions and corporate profitability. The component of financial performance is then linked to the corporate strategies in order to improve as well as to challenge the assumptions and strategies (Epstein & Roy, 2001, p.3). Considering the corporate governance of the company, the management is placed in such a position where the company’s assets can be wasted in disguise of good corporate citizenship. That is why the actions towards clients, customers and workers must be kept under control and also must be exercised considering the long term benefits of the company. This must be in accordance to that which has been stated in the incorporation chart by the shareholders. The corporations’ investments and expenses must be made a crucial part of the governance strategy. It must also be placed under scrutiny by the Audit Committee. The company’s accounts and the governance reports must reflect the exact expenses incurred along with the explanation of the aims and the strategic approaches to achieve them. Also, the promotion of the stakeholder’s interest must be subjected to uniform and standard reporting models. However, this has not yet been implemented so far. Conclusion- Different perspectives, challenges and recommended changes It is seen that the company has a proper hierarchical structure in which each ones’ roles and responsibilities are clear and well defined. The rules and regulations are designed by the top management and implemented at the ground level. However, this often becomes difficult for the global organisation to incorporate. Ford is a global organisation where the business units are located at different geographic locations. This is the reason why the company has been decentralising at rapid rate. It is recommended that there should be greater decentralisation efforts from the top management. It is not easy to control the entire business from one place. Each business unit must have a specific implementation and management control. The rules and regulations must also be controlled and implemented from the individual places. Another problem that Ford faces is the implementation of structural changes in the organisation. Even though the organisation is organic in nature, it tends to be mechanistic. Individuals are not willing to take up additional responsibilities. Also, the fact that individuals do not accept others’ authority easily and comfortably, demonstrates a mechanistic nature in the organisation. It is important that the management works towards making the organisation more organic in nature. This would make the work processes more flexible. Employees would also be more willing to undertake responsibities. This would also allow the management to easily incorporate any change management strategies efficiently. It is also important to align the behaviour of employees to the objective of the organisation. The company faces problems integrating the different cultures across the different global units. As the company has globalised, the bureaucratic structure has become increasingly obsolete. In order to create a single corporate culture, it is crucial for the top management to allocate power and authority to the individual managers. They should be accountable for implementing the culture, norms and regulations in the individual business units. Maintaining a single culture from a single location would be impossible. This is where the bureaucratic structure fails. Greater decentralisation and allocation of power and authority would be the most effective method of integrating the diverse culture of the global organisation and focussing one single and common norm. The corporate strategies of the company are also seen to be extremely customer oriented. Less emphasis is given to the corporate responsibility. There is also evidence of the company trying to suppress the interest of the shareholders and trying to compensate it by reducing the price paid by buyers. It is crucial that the company undertakes greater corporate responsibilities. This would not only enhance its global corporate image but would also enable it to gain goodwill from the customers. The company should try and implement a common strategy in which the decision making power of the stakeholders and managers are properly utilised and implemented. The rules and norms implemented should also be subjected to audit and control. It must be ensured that any action undertaken by the company must be in alignment with the rules stated in the incorporation chart by the shareholders. The strategies must also be aligned with the company's aims and objectives. Reference Bryant University. 2004. History of Ford Motor Company. [Online]. Available at: http://web.bryant.edu/~ehu/h364proj/fall_97/lushing/Ford.html. [Accessed on March 23, 2011]. Carrillo, E. F. 2007. Corporate governance: shareholders’ interests’ and other stakeholders’ interests. [Pdf]. Available at: http://www.virtusinterpress.org/additional_files/journ_coc/full-text-papers-open-access/Paper006.pdf. [Accessed on March 28, 2011]. Daft, R. L. 2007. Management. Cengage Learning. Eduworkers. 2010. Comparative analysis report. [Pdf]. Available at: http://www.eduworkers.co.uk/Sample/Coursework/BPR%20Report.pdf. [Accessed on March 28, 2011]. Epstein, M. J. & Roy, M. J. 2001. Sustainability in Action: Identifying and Measuring the Key Performance Drivers. [Pdf]. 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