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.
The systems approach theory pictures an organization as an open and organic system that has several subdivisions that make up the whole structure. The theory therefore works as if an organization is interconnected and interrelated and aimed 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).
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.
Finally, 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.
Evolution of Ford Motors
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.
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 poor management skills in the company during the leadership of Henry Ford’s grandson. However in the early 1950’s, 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.
Over the years, the Cleveland and Buffalo idea became an engineering wonder since they saved the company’s millions of dollars and gave them the market share while still adhering to the Ford way of doing things. Although, in the 1950’s and the 1960’s the company’s sales come down, it was not because of decentralization and organization purposes rather than other problems beyond this topic. Undoubtedly, the notable decentralization plans left a fundamental mark to the organizational culture of Ford that cannot be compared to any other company.
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.