Understanding the Concept of Organizational Management - Ford Motors - Essay Example

?Understanding the concept of Organizational Management – Ford Motors Organizational Management today can be defined as a mix of art and science which enables a manager to get the things done and managing the people to do their work competently. It is mainly a planning and directing effort which helps in organizing and employing resources to produce an optimal output which has been predetermined. Decisions may be big or small which are needed to be taken in daily basis. These decisions are very significant for an organization which should be effective and it enables the managers to constantly resolve problems and make decisions which will be benefiting the organization. The functioning of organizational management is like a cyclical process. It consists of planning, decision making, organizing, staffing, directing or actuating and controlling functions to achieve an objective. (Today’s Concept of Organizational Management) Here in this paper the case study of Ford during the year of 2006-2010 is taken to understand the finer nuances organizational management and how it helps in organizational transformation. Another vital element of organizational management is leadership. The truth is there is no such concept of right or wrong leadership nor there is a specific style which is best for all situations. So, flexibility of thought is a key characteristic of a leader which enables him to develop strategies according to situational needs. Organizational or management structure also act as an important factor which helps to link and interact with people from different regions, divisions and departments as well as establishes a hierarchical level. This also helps to establish the communication channel with an organization which enables to make speedy and accurate decision. This communication channel pattern mostly depends on the size of the organization as well as on the accuracy and speed of making the decision. It also helps to reduce and eliminate barriers within an organization during exchange of valuable information. Implementation of these elements like leadership style, management structure, communication pattern and other core functions of marketing are reviewed regularly to ensure all the subsystems of the organization are working effectively. This evaluation is done on the basis of performance like quantity, quality, cost or timeliness and known as performance management. If the performance level is not satisfactory the management decides for down-sizing, right-sizing, new product development or change in processes. (Today’s Concept of Organizational Management, 57) Lewin’s Change Model in Organizational translation Lewin considered change process as consisting of three major steps. These are as follows: Unfreezing It involves reducing the forces that resist an organization, department or individual from change. It can be done by giving information that shows inconsistency between the behaviors desired by the organization and those showed by its members. Moving It involves shift of attitude and behavior to the new desired level. This is done by changes in organization structure and processes. Refreezing It involves reinforcing the change process. “Organization culture, rewards and structures” are used to stabilize the organization in the new state. (Cummings & Worley, 24) (Cummings & Worley, 4; Spector) In this paper will attempt to analyze the organizational change in Ford Motor Company during the year of 2006-2010 when Alan Mulally became the CEO and we will try to relate the changes with Lewin’s Change Model. The case of American Automobile Czar Ford Business failure occurs for numerous reasons, but especially two reasons which affect business the most are rapid change in condition of market and finance. Performing business in this epoch is full of risk as the market is very volatile and competitive. Challenges of diversified sort brew up both from external as well as internal environment. The year 2008 and 2009 were the most chaotic for US and Canadian automobile industry. The fall of global credit market led to economic downturn which affected the sales of automobiles and recorded the lowest sales. (Seikh, 6) This storm impacted Ford and GM severely and made them financially impoverished. Along with this economic downturn there were some management glitches which also contributed in their downfall. The over-confident leadership attitude of both the companies tried to perform business with their traditional and tested strategies which acted as an inhibitor and caused their downfall. As, both of these companies mostly relied on their trucks for their profit generation. The matter of fact is the prime automobile manufacturer of Detroit origin failed to master the small car production due to the barriers present in their organization. These barriers hindered the process of sharing the small car strategies between them which led to non implementation of the strategies in North America and this ultimately led to underperformance in the small car segment. Both these car giants failed to minimize their operational cost and the overcapacity of their plants which led to substantial expenses to generate higher sales. This also affected both the companies dearly. Another reason of their downfall was Ford and GM both failed to respond to the need of the customers like fuel efficiency in their small cars and light trucks. They also did not respond to the mandates of CAFE and EPA standards. According to Miller “Ford and GM became aimless bureaucratic drifters, whose sales fetishes obscured design issues, producing stale and disjoint products.” (Seikh, 7) This shows both these auto czars of American automobile industry failed to react quickly with change in external environment. During the rough patches of 2006 Ford Motors hired Alan Mulally as CEO and he observed that there were some flaws in the daily operations of the organization. He started to gather information and found some regional fiefdoms existing within the organization. Alan felt these centre of powers have to be eliminated by any means for a sustainable future of the organization. In addition he also found that all the divisions within the organization were uncomfortable about reporting of the issues and failures to the leadership of the organization. Then Mulally initiated a plan and termed it as “One Ford” to enable this global organization to work as a team and to encourage the divisions to talk openly and honestly about the problem issues or failures they are facing. Mulally also conducted a gap analysis of Ford by the critics of the industry with respect to the market leaders like Honda, Volkswagen and Toyota. After the collection of the information about the gap with the auto industry leaders Alan understood what to do for eliminating the gap. Alan focused on “One Ford” strategy and to generate funding for it he leveraged the domestic assets of the company along with the intellectual property rights for convincing bankers to lend them funds. Ford sold their rights of Jaguar and Land Rover cars to Tata Motors (India). They also sold Volvo to a Chinese company named Geely Motors and stopped manufacturing its Mercury brand. The fund collected was utilized for securing the restructure plan and from the affects of unforeseen events like economic downturn, depression etc. (Seikh, 6-7, 13-14) Under the “One Ford” plan the organization gone through major down-sizing of workforce as well as many of their plants were closed. The statistical records show Ford retrenched their workforce by 12000 salaried staffs and 44000 hourly employees. They also stopped operating in 17 of their plants. They also tried to lower the operational cost and production capacity by reducing 13% of their US production in 2008. In this way, Ford reduced their operating cost by more than $5 billion dollar and increased the utilization capacity to 85%. (Seikh, 18) Ford’s main competitors were GM and Chrysler but with the new “One Ford” strategy the competitive horizon of Ford broadened. As, Ford started to position themselves as a brand which produce classy products with best design, technology, fuel economy and offer value to buyers; to come out from their image of producing mediocre products in each auto segment they competed. The top management formulated the strategy to compete in the market by continuing production of classy trucks and SUV’s but they would also focus on cars. They also decided to focus on the crossover’s with leading design, quality, reliability, fuel efficiency and functionality. Ford was renowned for production of small cars and CUV’s in Europe and they tried to develop a strategy how they can globalize them. Ford also developed new market in countries like Brazil, China and India. (Seikh, 16) Ultimately, this “One Ford” strategy helped the organization to overcome its deficiencies and enabled them to perform better. (Seikh, 14) Analysis on Ford Motors – Application of Lewin’s Change Model From the findings of Ford Motor Company during the phase of 2006-2010 if we observe the minute details it can be stated that there had been change in every aspect of the organizational management to achieve better performance. At first we must discuss about the change in leadership. As in this case it acted as the core and most vital element for the transition of the organization. The leadership of Ford before Alan Mulally was more traditional and they only focused on a specific segment of their product line i.e. the classy trucks. This enabled Ford to plough in the major part of the profit but during the economic downturn the sales got effected and they incurred huge losses as they had no other product which will compete in the market with the market leaders. This shows the poor insight, market orientation and most importantly a poor leadership skill. After incorporation of Alan Mulally as CEO in the organization things started to change he notice some anomalies in the daily operation of the organization which indicated fiefdom or major center of powers or domination in the organization which was creating gap within the communication channels of the organizational structure. This proves a communication gap within the organization which is hindering the flow of important information about the performance management and the failures during different functioning or activities. Here we can observe the applicability of Lewin’s Change Model during initiation of the “One Ford” strategy. He decided to sustain business this power centers within the organizational leadership should be eliminated and a proper communication channel should be established within the organization; the unfreezing part. Then he asked the employees of all the divisions to report him openly and honestly so the failures and problem issues could be resolved; the moving part. Alan’s brilliant leadership qualities came to forefront, when he formulated the strategy of “One Ford” and took the first step to bring a global organization within one structure; the refreezing part. In this way the change model can be applied in this case of Ford Motors (Cummings & Worley, 24-25). During this organization transformation the whole organizational management process got reviewed. Ford also performed a gap analysis by critics of the automobile industry to find out the gaps of Ford Motors with respect to other companies like Toyota, Honda and Volkswagen. After evaluating their weaknesses Ford started to mobilize funds from bankers by leveraging their domestic assets including their intellectual properties. It was a risky proposition but Alan was determined and he also started to sell the brands like Jaguar, Land Rover and Volvo to Indian and Chinese automobile manufacturers for fund mobilization. By this step he strengthened the financial condition of the organization and made investment with this fund on “One Ford” plan as well as this fund helped in the restructure plan from the unforeseen economic effects. During that period Ford Motors also observed high degree of retrenchment which was nearly 12000 salaried employees and 44000 employee hours. Along with this Alan decided to stop production in 17 plants of Ford Motors and reduced the US production level by 13% in 2008. In this way he reduced the operating costs and overcapacity of the production plants. It helped to lower down the operating cost of the organization to $5 billion and capacity utilization also increased. Along with it a transformation also occurred in Ford Motors in the market orientation aspect. They started to position themselves as a classy automobile manufacturer with world class products comprised of best design, fuel efficiency, better technology and better value proposition to the customers. This new positioning made their competition horizon broader and they formulated the strategy to compete in the market by continuing production of classy trucks and SUV’s. (Seikh, 18) Ford was renowned for production of small cars and CUV’s in Europe and they tried to develop a strategy how they can globalize them. Furthermore, Ford was interested to manufacture small cars and they decided to focus on the crossover’s with leading design, quality, reliability, fuel efficiency and functionality. So, it is evident that Ford focused on new product development as well as new market development in the countries like India, Brazil and China. This “One Ford” strategy of Alan Mulally is still incomplete and in the process. Conclusion From this paper and the case study of Ford Motors it is clear that organizational management is a cyclic process which is related with planning and directing of effort and employing the scarce resources in right way to produce an optimal output which has been predetermined. But due to numerous challenges generated from internal or external environment can result in business failure. These failures can be pinpointed by conducting performance evaluation and different analysis to find out the causes of the failures. After pinpointing the causes, this situation can be resolved by good leadership qualities and the other elements of organizational management i.e. planning, organizing, motivating and controlling. Through this organizational transformation also takes place by down-sizing, new product development, new market development, gaining competitive edge, reducing operating cost by retrenchment and reducing the production capacity, etc. References Cummings, Thomas & Worley, Christopher, Organisation Development & Change, Mason : Cengage Learning, 2008 Seikh, Akbar, Steering the organization back into the black: A study of organizational change at Ford Motor Company and General Motors (2006 – 2010), (2011), Aug 4, 2011 from: http://library.athabascau.ca/drr/download.php?filename=mba-11/AU/SheikhAProject.pdf Spector, Bert, Implementing Organizational Change: Theory Into Practice (2nd Edition), Prentice Hall, 2009 Today’s Concept of Organizational Management, (n.d.), Aug 4, 2011 from: http://www.jblearning.com/samples/0763746177/46177_CH03.pdf Read More