Honda Company Organisational Structure - Case Study Example

Name Course name Professor Date Contents Organization structure 3 Introduction 3 Organization of Honda Company 4 Classification of Honda Company’s structure 5 Complexity 5 Formalization 6 Decentralization 6 Mintzberg Theorem about Honda Company 6 Simple structure 7 Machine bureaucracy 8 Professional bureaucracy 8 Divisionalized form 8 Adhocracy 8 Organizational effectiveness 9 Evaluation of effectiveness 9 The goal-attainment approach 9 The system approach 9 Strategic constituencies approach 10 The balanced scorecard approach 10 Problem with existing structure 10 Conclusion 10 References 11 Organization structure Introduction According to Daft, an organization is a goal oriented social entity with links to the external environment[Daf101]. An organization gets designed by people who structure and manage so that it can achieve set goals and objectives. An organization does not just rely on its building and its policies but also on the people within it, and how they relate to each other to come up with strategies that make the organization grow. All organizations have structural management that delegates roles and tasks to its members. It is also the job of the management to determine the relationship between organization members and the activities that the organization performs. This definition works for all organizations operating in different industries. For this assignment, Honda Company has been selected for analysis.Honda Company Limited is a multinational corporationthat manufactures automobiles, motorcycles, and power equipment. It headquarters are in Manito, Tokyo in Japan.In October 1946, Honda Technical ResearchInstitute in Hamamatsu, Japan was established bySoichiro Honda. The primary aim was to develop and produce small 2-cycle motorbike engines. In 1948, Honda Motor Company was established. In 1959, the company opened its first storefront in Los Angeles. At the time, the company had only six industrious workers. The Company has 204,730 consolidated employees and 22,954 non-consolidated employees. As of March 31, 2015, the company had capital valued at 86 billion Yen[Hon15]. The company’s philosophy is to provide joys to the world through overcoming new challenges and realizing its dreams. These joys are: firstly, the joy of buying that is achieved by providing products and services that are above the expectations of consumers. Secondly, thejoy of selling, it is made when those engaged in selling develop a relationship based on mutual understanding with its customers. Through this relationship, they experience joy and pride in thesatisfying buyer. Lastly, thejoy of creating which occurs when the quality of the products exceeds expectations of consumers[Hon151].Honda Company has more than 500 subsidiaries and affiliatesworldwide. Organization of Honda Company Figure 1. Honda Company integrated organization structure Organization structure refers to the in which an organization’s management distributes power and roles within an organization. These helps the business to utilize efficiently the resources available so that it can attain competitive advantage. Hendricks defines organization structure as the extent in which an organization achieves complexity, centralization, and formalization[Hen121]. Honda Companyemployeda multinational strategy and decentralized organizational structure. The head of the company is an executive council suited in Japan. It has divided its operations across six regions. The company has opened more than 500 subsidiaries and affiliates all over the world[Hon09]. Using its decentralized organizational structure, Honda Company allows its lower-level organizations to make decisions that affect the operation of the company at their level[Wil08].The company has a simple structure thatgets shownin figure 1.the company can organize its worldwide operations more efficiently. The company has many operations thatrequireexceptional levels of decentralization. At the apex, the hierarchy lies the president the company who is the overall executive. The company has ten divisionsthat are headed by General Managers. The company has a board of directors whose function is to bring expertise and experience. It also has departments within the divisions, and managers head them. Even though each unit performs adifferent activity, they all aim at achieving the set goals and objectives of the company. Classification of Honda Company’s structure Organization structure gets classified in four different categories: functional, divisional, network and matrix[Kup031]. Looking at the company’s organizational chart, it is clear that it employs divisional approach. Hoffman defines divisional structure as an organizational structure where an organization establishes various divisions that operate distinctively but under the same corporate framework. This kind of structure is useful when employed by large multinational companies such as Honda. This type of structure is beneficial to organizations with various different products and business operations. Towards the end, Honda’s organizational structure is characterized by formalization, decentralization, and complexity. These structuresget explained below. Complexity Complexity structure can be defined as the extent at which a company differentiates its products and operations[Hen121]. There are three elements that affect an organization's complexity. They are spatial dispersion, horizontal and vertical differentiation. Spatial dispersion refers to the degree at which company geographically disperses its activities, personnel, and facilities. Honda Motors is extremely scattered. It has over 500 subsidiaries all over the world. Horizontal differentiation can be defined as the way in which a company differentiates its units based on the education of employees, thenature of operations, personnel’s skills, inclination, and employee’s training. Honda Company has a lot of divisions, and each division requires its unique set of specialization and abilities for it to perform efficiently. On the other hand, vertical differentiation refers to some levels that are there between the top executives and the organization’s operatives. It is evident that Honda’s organization structure is complex. This is because it has the president and general managers in charge of its ten divisions. The general managers also have other managers who are beneath them. Formalization Formalization structure refers to the degree at which jobs and procedures within a business are standardized[Oli121]. Honda Company has an effective Human Resource and Public Relation Departments, which have standardized its entire operations. The department prevents redundancies and duplication of roles by posting all job descriptions. This aids in enhancing the quality of the organization’s activities. Decentralization Decentralization refers to the degree at which an organization’s decision making get distributed among all levels of management within a company[Hen121]. The president, theboard of directors, and general managers handles making major decisions at Honda Company. However, since the divisions at Honda Company operate distinctively, general managers have the authority to make decisions concerning their units operations when required. This shows decentralization since subordinates get involved in thedecision-making process. This enhances the process by avoiding bureaucracy. Mintzberg Theorem about Honda Company Henry Mintzberg pointed out that organizations operations can get differentiated into three dimensions[Min091]. Firstly, an organization has its main part that determines whether the company will succeed or fail. Secondly, the primary coordinating mechanism that refers to the method that the business uses in coordinating its operations. Lastly, the level of decentralization employed by an organization[Nel111]. It refers to the degree at which an organization involves its employees in thedecision-making process. The strategy that an organization may choose to employ and the level at which it uses it leads to five structural configurations. They include adhocracy, simple structure, machine bureaucracy, divisionalized form, and professional bureaucracy[Mil111]. The main reason for Honda’s existence is to achieve its set goals and objectives. These goalsget categorized into tasks on thebasis of jobs. The jobs get grouped into particular departments. At each department, there is more distinction based on the tasks that each person performs. These units then get linked to organizations structure. Organizations structure critical parts are shown in figure 2. Figure 2. Organization’s structure key parts The strategic apex is made up of the top management[Min091]. At Honda Company, it includes the president, board of directors and the general managers. Secondly, at the operative core are the workers whose job is to perform the company’s set tasks. At Honda, these are the workers found in each department. Thirdly, the middle line is made up of the low-level and middle managers. At Honda Company, they are then managers in charge of particular departments. Fourthly, the technostructure is made up of analysts. At Honda, these critics include researchers, personal managers, and engineers who work at production firms. Lastly, the support staff consists of workers who give indirect services to an organization. Evaluating the effectiveness of each configuration structure to the organizational structure of Honda Company Simple structure In this structure, the strategic apex is the main part because it makes all the decisions that affect the operation of a company[Min091]. It comprises of both horizontal and vertical centralization. Honda Company is a multinational corporation with many divisions. A simple structure cannot work for the company since it is highly decentralized. It involves all the workers in thedecision-making process. Machine bureaucracy In this structure, technostructure forms the central part of a company. It adopts limited horizontal decentralization and uses standardization of work[Min091]. Its characteristics are as follows: Firstly, it values formalization and specialization. Secondly, it uses centralized decision-making strategy. Thirdly, its chain of command has many levels. Lastly, it requires little horizontal coordination. Honda Company is not machined bureaucratic because it uses decentralization in decision-making. Professional bureaucracy In this structure, the operating core is the central part. It uses standardization of work as its primary coordinating mechanism[Min091]. In thedecision-making process, it employs vertical and horizontal decentralization. In this structure, the company is relatively formalized. This kind of structure has few middle managers and a small technostructure. Its primary objective is to provide quality services. Honda Company is a professional bureaucracy because of it decentralization strategy in decision making. Another reason is that its employees are highly skilled and specialized. Divisionalized form In this structure, the middle line is the major part of an organization. It main coordinating mechanism is standardization of output[Min091]. It employs limited vertical decentralization. Since division is centralized, separate units have limited coordination. Its technostructure is placed at the corporate headquarters so that it can give services to all other unitsof the organization. Honda Company cannot use this structure because it is highly decentralized. Adhocracy In adhocracy, support staff is the main part. Itadopts mutual adjustment and employs selective patterns of decentralization as its primary form of coordination[Min091]. Quick adaptation to changing environment and innovation are the primary goals of this structure. In this structure, theresourceis efficiently utilized. Honda can apply this structure at some levels since it allows some decentralization. Organizational effectiveness This refers to extend at which an organization achieves it's short-term and long-term goals[Daf101]. Here short-term goals are ends focus while long-term goals are means focus. Honda Company already made its short-term goals and is now focusing on achieving its long-term goals. The company’s long-term goals are: to become the fastest at providing the customers with pleasing products by the year 2020. To adhere to all environmental regulations by 2020[Hon09]. The structure that Honda uses has been of great assistance in achieving set objectives. Decentralization of decision-making process and distribution of tasks to different divisions has enhanced its success. All the goals by each division conform to the company’s overall objectives. Evaluation of effectiveness The goal-attainment approach This approach seeks to know whether an organization has achieved its goals[Daf101]. It focuses in situations where an organization has attained its short term goals and is now working to achieve its long-term goals. Honda Company has already accomplished its short-term goals and is now focusing its long-term goals. This shows that its organization structure is efficient. The system approach In this method, theeffectiveness of an organization is measured by its abilityto attain inputs, process them, produce output, and ensuring balance and stability[Daf101]. Honda Company requires raw materials such as iron to manufacture its products. It acquires them from different locations worldwide. The company the uses these raw materials to produce products such as motorcycles and automobiles. These products then get distributed to the market. The primary focus of this approach is stability and long-term goals of an organization. Honda Company focuses on producing quality products so that it can increase its market share.This will enable it remain stable and be able to attain its long-term goals. Strategic constituencies approach In this approach, organizations effectiveness is measured by its ability to satisfy the demands of the people within its environment[Daf101]. These means that stakeholders have to be pleasedwith an organization can be said to be successful. Honda company stakeholders include suppliers, customers, and the community. The company has directed particular decisions towards meeting the needs of each particular group of stakeholders. The balanced scorecard approach In this approach, the company strives to balance various demands with its ability to satisfy them. It has four perspectives[Daf101]. They are customer, financial, internal, and innovation and learning. Financial perspective deals with the capabilities which the organization has for it to make profits. Honda Company makes enormous revenues. Customer perspective looks at the level of satisfaction that a client has. The internalview looks at resources available that will lead to customer satisfaction. Lastly, innovation and learning are concerned with the organization’s improvement. Since Honda has a lot of distinct operations which makes it complicated, it should apply this approach. Problem with existing structure The company has many subsidiaries thatmakedecision-making process slow despite its decentralization approach. In most cases, general managers make decisions that affect their divisions and not those that will affect the whole organization.It has only one president who is supposed to make crucial decisions with the help of the board of directors.This makes the process slow in case their many decisions to get made and requires an instant response[Hon15]. Conclusion Honda Company has a complex structure because of its high number of subsidiaries, thenumber of divisions, thenumber of employees, its distinct products and operations, diversity of skills, and some executives. Honda Company is highly formalized because it HR department ensures standardization of procedures, jobs and rules in all divisions. It also decentralized since it involves its workers in thedecision-making process. According to Mintzberg’s theorem, it is evident that the company is professional bureaucracy because of its complexity and decentralization of decision making. Since the business is aware of the four perspectives, the most visible approach is balanced scorecard. References Daf101: , (Daft, 2010), Hon15: , (Honda Motor Co., 2015), Hon151: , (Honda Motor Co., 2015), Hen121: , (Hendricks, 2012), Hon09: , (Honda Motor Co., 2009), Wil08: , (Wild, 2008), Kup031: , (Kuprenas, 2003), Oli121: , (Oliveira, 2012), Min091: , (Mintzberg, 2009), Nel111: , (Nelson, 2011), Mil111: , (Miles, 2011), Read More