Article Review
Summary of modern organization theory
Modern organization theories are based on the fact that any organization is adaptive and dynamic to changes in the working environment. Customer sentiment, competition, technology, market diversity are some of the issues that coarse change in any organization. These modern theories are adaptive, multi-motivated, multi-disciplinary, dynamic, and descriptive, among other characteristics (FAO Corporate Document Repository 2013). Modern theories include systems approach theory, contingency or situational approach, and socio-technical approach theory.
Systems approach theory
Ludwig von Bertalanffy, William Ross Ashby among others founded the theory from the 1940’s to the 1970’s. it view an organization as system comprised of interconnected and therefore interrelated structures. The systems approach theory pictures an organization as an open and organic system that has several subdivisions that make up the whole structure (FAO Corporate Document Repository 2013). The theory therefore works as if an organization is interconnected and interrelated and is aiming at achieving a common goal. These subdivisions often operate in an interdependent and interactional manner since most departments of an organization are linked to each other through factors like communication and authority.
However, the most important factors that unite subdivisions within an organization are survival, assimilation, progress, and variation with the environment (FAO Corporate Document Repository 2013). These factors rely on three processes that govern a complete systems approach. It includes the components which are individuals, patterns of ideas among others. Secondly, it involves the linking process which is enabled by communication, balance, and decision analysis. Finally, it is recognizing the goals of an organization which add up to growth and stability.
The situational or contingency approach
This theory was founded by Aston Group form the University of Aston after several years of discussion by numerous theorists throughout the world. The situational or contingency theory recognizes that different environments require different methods of conducting business. Through this theory, organizations realize that different situations require different management techniques (FAO Corporate Document Repository 2013).
Using this theory, there is never the right way to manage an organization. In most occasions, an employer engages the employees to determine the best solutions with dealing with a different situation. Instead of using past experiences to resolve disputes, the organizations are expected to use the new challenges to devise new ways of doing things (FAO Corporate Document Repository 2013). This approach promotes innovations and creativity in the workplace.
Socio-technical approach
Rolf Hoyer was the engineer behind the Socio-technical approach in the 1960’s. he realized that the different sub systems in an organization were dependable to each other. The socio-technical approach recognizes that any organization is comprised of a social and technical system, which works together in the working environment. Since these two interact among different levels of productivity, it is very important to maintain a working balance that is relevant to the effective functionality of an organization (FAO Corporate Document Repository 2013). The burst of technology in the past century brought about the relevance of this theory.
The foundation behind the Socio-technical approach is comprised of several strategies. The first is responsible autonomy, which promotes internal supervision depending on the department that one is working in (FAO Corporate Document Repository 2013). Secondly, it embarks on adaptability in the different complex groups to solve their own problems. Specifying the tasks allocated is also a vital part of the approach. Finally, significance in each individual is emphasized to create a holistic and fully functional organization.
In conclusion, these modern organization theories are vital to the running of any successful organization. It gives organization guidelines on dealing with critical problems that they face every day. Managers that use these theories and more while conducting business often realize better results compared to those that do not. However, for managers to effectively use these strategies, they must be properly trained to identify different situations that call for different strategies. Organizations must therefore invest in training their managers on these theories and often engage the lower ranked employees in reaching these decisions in order for every person in the organization to feel as an important entity in their workplace.
Evolution of Ford Motors according to the organization theories
Henry ford is considered a revolutionary within the American automobile industry. Since creating his company in 1903, he amassed a personal fortune of over $600 million before his death. Besides being a genius entrepreneur, he saw the importance of dynamic management theories therefore giving the company an added advantage (Hounshell 1995). The developed management ideas and hired theorists who had progressive management ideas. His most important factor was a large and yielding workforce when he created or even examined management theories. Throughout the years, the company went through different changes, which lead to different growth in the company. With these changes, the company engaged in different modern organization theories.
Right from the start when Henry Ford was still creating the first product for his new company, the investors were pushing him to release a product into the market that was expensive and suited only the rich. However, his visionary contradicted with the investors ideas. He wanted to create a product that would serve the common American who was in the farm and whose only means of transport was the horse carriage. He understood that the only way he could keep his investors happy was to engage in a social game while searching for the perfect technology that would deliver a reliable, fast, and yet affordable car (Henry Ford Biography 2013). He used means like telling the investors that he and his staff were testing different prototypes while he personally created the visionary car that the investors did not expect.
Later the investors realized that Henry Ford’s vision was different from theirs and they pulled the plug on their investment. He was extremely agitated but his social game was still in play when he engaged in the racetrack in 1901 with his hidden side project. After defeating professional racers with his machine on the racetrack, new investors saw his confidence and ingenuity and decided to invest in him. A few months later, he unveiled his new model which was a two-seater model with a reliable eight horse power engine (Henry Ford Biography 2013). The car was not only reliable but also affordable to the people.
Over the years, Henry Ford released new models which though were better than the previous model, they were never good enough. However, in 1908, Ford Motors released the Model T which had an open top and come in two colors, green and black. It had a fours cylinder and twenty-horse power engines with a much better transmission and an ingenious generator that powered ignition and the lights. This model changed the American and worldwide perception of cars. In an industry where the cheapest model was $2000, the Model T was only $800 (Henry Ford Biography 2013). He had used the situational approach whereby he understand what the current environment needed and that was a cheap but reliable model and he produced a cheap and reliable model.
The Model T was a great success, which meant that the company had to produce more and more cars every single day. Due to necessity, he devised a method called the assembly line method. This method broke down individual tasks into a conveyor. Production time of car was reduced from over twelve hours to only one hour and thirty-three minutes. Using this strategy, he exercised the Taylor’s scientific management approach to increase productivity through proper management of his employees.
This brought the company new problems since the work became tiresome and monotonous causing the layover to increase every single day. The cost of rehiring and training new personal even though it was not technical at all was becoming too much and this made Henry Ford devise a new strategy which was to pay workers five dollars a day. Such pay was unheard of in the American industries and this gave the worker incentive to stay even with the monotonous and tedious work. Once again, he had employed the situational approach to deal with the imminent problem (Henry Ford Biography 2013). In addition, this strategy also employed the classical organization theory when he trusted his workers to be highly productive if he significantly improved their wages.
In the early years of his company, Ford embarked on creating attractive prices for their customers but with little or no choice in model and functionality. On the other hand, general motors diversified in make, type, and alternative design models in order to attract a diversified customer share. Consequently, the company went on a long steady decline in the U.S automobile market share from the 1920’s to the 1940’s (Hounshell 1995). This was due to the fact that Henry Ford did not want to produce a different model since he thought that the Model T was just perfect for the whole of America. However, his son Edsel realized that the market share was steadily declining since General Motors who had different models that could satisfy the different needs of different customers were slowly claiming the American market. However, when Model A was released in 1927, sales were high and their fortunes were recovered (Henry Ford Biography 2013). Ford began producing cars with new technology impressing the American people who welcomed them back into the market with rocketing sales numbers. The profits plummeted and everyone in the automotive industry talked about their new technology.
In the early years, Ford did not have a decentralized system of division in the company. Though Henry Ford II had theoretically created divisions in the company through the Lincoln- Mercury Division, it did not exist in reality. However, the new managers recruited from GM had a different idea for the company, which included creating divisions that met different needs of different customers. They included luxury cars, light-fuel efficient cars, a normal Ford, and a more expensive car for the Ford division (Hounshell 1995). Despite the brilliant idea, creating a new line of cars was an expensive and new idea to the company, which was only known for creating the T model. Controversy and politics arose since it meant demotion for the vice president of manufacturing to the hierarchy of division.
Even though the company managers could not accomplish the initial plan, they embarked on creating a new part plant out of Detroit in order to initialize the plan of decentralization. This was to protect them from labor actions and interdependence from the Rouge. The plans become effective in 1949. This step initiated other more steps to decentralize the company production parts to different location since there had been a sense of overcrowding in the main factory called the Motor Building. However, due to this added complication, the company executives decided to move the company’s engine plant to Ohio, which could produce nearly twice as much engine as the proposed two plants, put together which was over 4000 engines every day (Hounshell 1995). Consequently, decentralization in the Ford company become production oriented rather than product oriented.
The lower managers at the Ford Company saw the decisions to build different production plants in different parts of the country as an effort to ease congestion at the Rouge rather than to decentralize the company’s management since there was not any significant structural change. Top officials argued that their decision to decentralize production rather than product led to the increment of profits and it kept Ford motors in their authentic way of doing things rather than replicating the General Motors method (Hounshell 1995). In the real sense, this type of decentralization created a path for Ford Motors to engage in the process of automation. The Buffalo and Cleveland plants engaged in highly mechanical processes and were easily automated therefore reducing costs of labor significantly without facing labor action.
Today Ford Motors has continued to embrace organization theories. For example, Ford Motors has acknowledged itself worldwide as a business empire that understands the social and technological system of its organization. Its new portal that it recently published is a website that enables workers and customers post their experiences while using the Ford product. This may seem to be only an arena that gives forum to bloggers but the truth is it advertises its product through the social network therefore influencing the market. Henry Ford also recognized the power of the social network during his period and often produced movies about his family and inventions and using it as a forum to advertise himself and his company.
Though the Ford company never reclaimed its spot at the top of the automobile industry after the Model T, it has always been at the top three. Over the years, the company has continued to engage the modern organization theories like it did in the earlier years. This has helped in their sales and in maintaining it as relevant company through out history. Even though Henry Ford was never accepting of change, when he died, the American people did not mourn and remember him as the uneducated lad from the country with a big ego, but as a man who revolutionized the automobile industry and took the country to heights that it had never imagined.
References
FAO Corporate Document Repository. (2013) Session 1: Organization Theories. Retrieved from: http://www.fao.org/docrep/w7503e/w7503e03.htm
Hounshell, D. (1995). Ford Automates: Technology and Organization in Theory and Practice: Business and Economic History, 24 (1) 59-71.
Henry Ford Biography. (2013). PBS American Experience. Retrieved January 5, 2014, from: http://www.pbs.org/wgbh/americanexperience/films/henryford/
