Ford Organizational Structure Essay
The ford organizational structure is a popular model for organizations that have a hierarchy. It was developed by ford motors company in the 1920s and has been widely adopted by other companies as well. The ford hierarchical system utilizes both job specialization and management hierarchies to provide excellent performance from its employees.
The managerial and organizational structures of Ford Motor Company are presented in this report. To determine the internal and external factors that affect their company, an analysis of the market environment in which Ford operates will be considered.
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In 1903, the Ford Motor Corporation was founded in Detroit, Michigan by Henry Ford. With initial investment of $28,000, he built up a company that became the world’s largest automobile manufacturer over time (Bak 2003). In its early years of operation, the firm produced a variety of card designs. Production levels increased considerably following World War II. After the death of its founder, Henry Ford went public in 1956 (Ford 2014). Ford is one of the world’s major car producers today. Ford generated $134,252 million in 2012, which was a decrease over the previous year’s income. Despite this, 2011 revenue was lower than in 2010.
The management structure and the organization’s development have taken different paths at Ford Motor Company. Ford was an example of an Old Tail organizational management structure in which the CEO held sway over all levels of the company (Hounshell 1995). In 1946, the firm operated with a decentralized divisional structure (see figure 1, Appendix) (Hounshell 1995).
The organization eventually formed a dual matrix structure, with management organized around function as well as operational division. The structure changed further with globalization, incorporating the company’s regional elements into the structural diagram (Hoffman 2012). As a consequence, this provided a worldwide matrix organizational structure within the firm to address its global expansion. Organisational structure and its fit with the external environment
What is the organisational structure of Ford?
It appears that Ford’s contingency approach is task-oriented leadership rather than relationship-oriented. This is supported by Alan Mullaly, the CEO of Ford: “It’s all about finding a method to ensure that every employee understands the company’s vision, believes in the strategy, and feels supported in their work.” (para 1) Ford has a hybrid structure made up of geographical locations, functional activities, and product divisions. This complexity may cause confusion, which has an impact on their performance as a result of the number of hierarchy levels (see figure 2).
The external environment affecting Ford
To have a deeper knowledge of the automobile sector, it is critical to consider external elements using the TASK environment model. This model incorporates four “sectors that have a direct working connection with the organization, including consumers, competitors, suppliers, and labor markets.” (Kendrick et al., 2010, p. 91)
Ford, for example, can’t simply develop and market its goods without weighing how to allocate particular resources when deciding where a car should go, which regions should the business provide services in, how will product purchases be handled, and so on.
The ability to understand and fulfill the needs of the target audience is critical for building customer loyalty. According to Ford, they are keeping track of their customers’ comments on social media sites like as a way to stay informed about their consumers’ demands and satisfaction (Halliday 2012). This real-time information on customers is provided in the form of a report to departments so that they may function more efficiently (Ford 2012).
Ford’s technological edge is made possible by its innovative and creative talents. It’s critical for businesses to understand what consumers want so that they may incorporate current trends into their products or services to maintain their competitive edge.
How Ford is affected by its competitors?
The organizational structure serves as a cushion to the shifting winds and volatility of the outside world, allowing employees to focus on their tasks instead of reacting. The company may counteract the fluctuating market conditions with contemporary knowledge base and information system technology (Hoffman 2012). A vertically oriented centralized management system (Bonini & Kaas 2010) can be used to implement such a procedure. This method allows the firm to react quickly to market demand while also allowing for improved internal operations through departmentalization of specialized activities. Management structure and its fit with the internal environment.
What is the management structure of Ford?
The management structure of Ford is a two-matrix system that is complex. The systems are decentralized, relying on divisions and geographic location, but they are managed centrally. This duality in the architecture makes things more difficult. The leadership team at Ford is all male. Cumbersome layers in the hierarchy cause difficulties in day-to-day operations. It has a high degree of centralization and authoritarian structure with a strong element of masculinity in its culture (Muller 2014).
The internal environment of Ford
The internal environment of Ford is also influenced by the company’s organizational structure. Because the business has a complicated structure, it’s critical to recognize the challenges in running it (Muller 2014). They have a whole team of executives who are in charge of producing, marketing, and sales for the product across local divisions (Bak 2003). To display greater cohesion, Ford has launched a team one plan program to integrate its varied divisions.
The structure of an organization has a significant influence on its operations. The structure is crucial for efficient supply chains and customer support. Because of Ford’s susceptibility to external shocks, the firm has been almost bankrupt, necessitating organizational change. The new plan would most likely result in the company’s growth.
It’s the responsibility of everyone in any company, big or little, to follow certain policies and procedures. Responsibilities of staff are typically defined by their assignments, immediate supervisors, and managers. These definitions are usually assigned to job titles within the company but not necessarily to particular persons.
The most effective structure for an organization is determined by a variety of criteria, including the position, size in terms of the required manpower, revenue, geographic reach, and variety of its operations. Organizations that are project-driven such as construction, engineering, and technological startups are examples of businesses that would benefit from this kind of organizational structure (Moynihan & Titley 2000). The organizational structure of Ford Motors Company is a matrix structure (Moynihan & Titley 2000). The paper attempts to explain how Ford Motors’ matrix structure aids it in achieving its strategic goals.
Organization Structure of Ford Motors Company
The organizational structure of Starburst is a blend of two or more distinct structures. Functional departmentalization is often incorporated with products groups on a project basis in this structure. For example, if a product group wants to create a new product, it will obtain personnel from functional departments such as research, engineering, production, and marketing. However, these employees only work for the product group’s manager while the project lasts.
The project manager typically reports to the vice president and general manager. Given that each project has the potential to benefit the company, the project manager is granted power by the overall boss. The Chairman at Ford Motor Company (Bill Ford) ranks highest, followed by President-cum-CEO-cum-Director (Alan Mulally), then Executive Vice President (Lewis Booth).
In one of the first instances of a top-down organization, Ford Motors’ executive vice president has control over many functional heads (all titled Vice Presidents) who report to him directly. VP, Product Development, VP, Purchasing, and so on are among them (Ford Motorsn 2011 , p.4). In organizations using the third model of matrix management, secondment as outlined by Ken Knight is common.
In this system, employees cycle between functional teams and project teams, implying that they are simultaneously members of both departments. The project’s success is entirely under the control and accountability of the project manager, who is comparable to a vice president. Functional department heads, on the other hand, are responsible for the technical success of the project. If synergy is to be achieved, it is critical that information sharing be an important feature of matrix structure.
The matrix organizational structure employed by Ford Motors has a lot of complexity stems from clear role definition. Role definition is frequently unclear, leaving employees without a clear manager, as there is continual staff movement. The command at Ford Motors is often formal and rather centralized as one rises through the hierarchy.
Although the company’s dependence on new motor technologies makes top management organ to cede some power to the project manager in order to make important judgments, it also necessitates that the project manager retain a portion of decision-making authority. The corporate form, nevertheless, is maintained by keeping the project manager under the executive vice president (Knight, 1977, p. 143). Because Ford Motors is an engineering firm, it is compatible with a matrix organizational structure.
Mintzberg’s Theorem and Ford Motor’s Organizational Structure
“Every organized human activity — from pottery manufacture to man’s landing on the moon — generates two basic and opposing needs: the division of labor into numerous activities and the coordination of those activities to achieve the task,” according to management theorist Harry Mintzberg (1980, p. 68).
Organizations, in accordance with their primary organizational attributes, are generally structured around five basic forms: organization chart, functional structure of the leadership team, principle objectives and responsibilities of operational staff, administrative bodies that implement policies and provide tools for operation management.
He categorized organizations into seven basic organizational forms, including the machine, entrepreneurial, diversified, professional, missionary, political, and inventive. He also added that configuration is critical for businesses to achieve stability within their own ranks by fostering synergy in the work process while still matching with the external environment (Mintzberg 1980; p.50). The machine organization and the professional organization structures are relevant when applying Mintzberg’s theorem to Ford Motor Company. The products ( automobiles) production is highly standardized in Ford Motors Company, with many routines and processes.
This is how an organization’s management philosophy affects its culture, in accordance with Mintzberg’s theorem in business. Furthermore, decision-making is centralized, albeit with limited autonomy granted to the project manager; and activities are frequently grouped together by functional heads in collaboration with the project manager. For the top three offices at Ford, Chairman, President, and Executive Vice President, there is a vertical organizational structure.
The executives (functional heads) have equal authority and are directly under the supervision of the executive vice president. As a result, efficiency and scale is achieved by using machine bureaucracy. Given that professionals make up the majority of its workforce, Ford Motor Company is also a professional organization. Because of their high level of professionalism, decision-making is relatively decentralized, and there’s a lot of division between departments.
Professional bureaucracy, according to Mintzberg, is complicated and has a plethora of rules and procedures that aid in efficiency (Mintzberg 1980, p.44). Ford Motors’ organizational structure incorporates machine and professional bureaucracies to reap the benefits of both configurations. The structural design is matrix, although it incorporates many aspects of the other two configurations that help it run very efficiently.
Ford’s Structure and the Achievement of Its Goals
The matrix organizational system employed by Ford Motors has helped the firm to meet its strategic goals. Given that the matrix structure is effective both in an external and internal setting, the company’s Customer Service Division has grown a global business by recruiting 12,000 people to work for 15,000 dealers. Ford wanted to be the world’s number one automobile business in the 21st century, and it had started the “Ford 2,000” effort at the start of 1995. To that end, top management was concerned with consumer complaints regarding product and service delivery.
As a result, it was decided that the functional heads’ horizontal alignment (vice presidents) provided the greatest opportunity to deliver superior customer service via a multi-skilled team that focused on fundamental processes. Horizontally aligned departments were thus formed by multi-skilled teams with a concentration on core procedures. The supporting processes for this initiative were: vehicle inspection and repair (where defective automobiles are identified and repaired), product research, purchasing decisions, installation support, customer service, program administration.
Furthermore, each team has its process owner who is responsible for seeing that the group’s overall goals are met. Not surprisingly, the Customer Service Division of a company maintains a working structure for the strategy, communication, finance, and personnel departments. The matrix model of Ford Motor has allowed it to link its strategic goals such as global market growth by using effective management as a tool for concentration. The horizontal approach enhances flexibility and rapid reaction to meet changing demands of clients.
The structure’s second goal is to educate each worker of the production and value delivery to clients. By emphasizing collaboration, the organization frees employees to take responsibility for their actions and responsibilities, making decisions, and being held accountable for outcomes. The sum of these operations is, therefore, end concentration.
The Merits of the Four Approaches to Organizational Effectiveness
The goal attainment approach, the internal process (balance scorecard) approach, the systems resource approach, and the strategic constituencies approach are four methods for assessing organizational performance. The end-based method is used in goal attainment, but not means.
The major target when employing this method should be operational goals. The primary goal of the Ford Motors Company has been to satisfy the demands of its customers. The company’s core procedures have been designed to meet the needs of consumers and provide value for their money. By religiously adhering to the “Ford 200” Initiative, Ford was able to achieve these objectives.
The goal achievement approach enhances cooperation since there must be agreement on objectives to utilize it. It also makes management by objective (MBO) easy, which is a good method of managing divisions at Ford Motors (Slack & Parent 2005, p. 42). The systems resource output used in evaluating organizational effectiveness focuses primarily on a company’s input, implying that it uses open systems theory. It maintains that businesses do not operate in isolation; rather, they engage in exchange and sometimes-mutual interaction with the environment within which they operate.
A firm’s effectiveness depends on its capacity to utilize the resources in its environment for its own benefit and the benefit of the environment. In fact, successful corporations are those that can extract more raw materials from their environments. Ford Motors is one such firm that has expanded its operations and has been taking advantage of the global labor pool, raw materials for its goods, and other resources. It’s an indication that Ford was correctly exploiting the resources available to it.
When the approach is applied to an organization, it has three key advantages. The first is that by treating the company as its frame of reference, we may compare organizations with varying goals (Slack & Parent 2005, p. 43). The internal process approach assesses the effectiveness of organizations by looking for internal strains, members’ integration into the system, smooth internal functioning as characterized by trust and goodwill towards individual workers, and information flow, among other factors. As a result, the method focuses on business’s productivity rates.
The balanced scorecard is sometimes compared to this method because it gives feedback on the company’s internal operations as well as external consequences in order to improve strategic performance. It also provides a precise objective for a firm to pursue in order to balance its books.
This method has been used by Ford Motors in the evaluation of its efficacy. Because the technique is holistic and shows to provide accurate results, it is being utilized by Ford Motors in this area. The balanced scorecard approach, in fact, looks at a company from four viewpoints: learning and development, customer service, business process improvement, and financial performance (Slack & Parent 2005 p. 44).
The strategic constituencies approach is similar to the systems resource approach, but it emphasizes on the actions of the stakeholders in acquiring resources from the environment. It recognizes that CEOs must pursue several objectives at once. Managers attempt to satisfy the demands of many stakeholders who influence a company’s ability to fulfill its objectives.
The goal(s) must be carefully chosen to facilitate the organization’s objectives, which are intended to favor one stakeholder group over another. As a result, organizations are political and must respond to the varied interests of their members (Slack & Parent 2005). The benefits of this method are that it recognizes effectiveness as a multidimensional phenomenon that considers both internal and external elements of an organization. The social corporate activities of Ford Motors are another benefit of the strategy. The firm, in so doing, demonstrates its social and ethical responsibility to the community in which it does business.
Limitations of Matrix Organizational Structure in Ford Motors
The disadvantage of matrix structure is that it is expensive, given the complexity of reporting demands. The Ford Motors Company has remained with the design for a long time since the days of Henry Ford, the company’s founder, although many changes have been made to limit maintenance costs.
Workers who didn’t have a clear understanding of the hierarchy in the structure, which resulted in information flow being sometimes difficult, had to pay for these mistakes. For example, a functional head may instruct an employee beneath him/her to carry out a specific task, but the project manager instructs them something different. The problem of staff dissatisfaction was only partially resolved by the firm.
The company’s current problem, while still significant, is on a lesser scale than it was prior to decentralization of authority to the project manager. Furthermore, because the firm used a horizontal structure at departmental levels, employees were able to collaborate in teams and require information sharing. To tackle the issue of role ambiguity and an unclear chain of command, Ford Motors frequently combines management structure with other parts of its bigger strategy. When a new product is to be launched, for example, the project management office is assigned the task of selecting staff from other departments to work under the project leader until the project is completed.
The Ford Motor Company employs a matrix organizational structure that helps it to quickly manage and execute its wide operations. The firm has a vertical hierarchy, with the chairperson, president, and executive vice president at the top followed by a horizontal structure made up of vice presidents in departments.
A project manager who is essential for the creation of new goods has a great deal of power over staff from other departments, thanks to the executive vice president’s authority over all employees. Given that it is engineers and technicians who run Ford Motors, Mintzberg’s theorem is applied in professional bureaucracy at Ford Motors.
The company’s product is also a part of the structure, which implies that the machine bureaucracy is included. Last but not least, the organization’s success is measured using a variety of methods, including goal accomplishment, balanced scorecard assessment, system resources, and strategic constituencies.
Ford Motor Company’s management structure is designed to meet the demands of numerous markets across the world. The components and their interaction system arrangement in an organization are defined by the business model. In Ford’s case, a company structure reflects a company’s standing in the global auto industry. To avoid competition, Ford opted against and instead relied on important structural components for market risk assessment.
In this regard, as America’s second-largest automaker, Ford is demonstrating the efficacy of its corporate structure in order to support continuous business growth and high performance. Enterprise level – Ford has a traditional corporate hierarchy with executives reporting directly to the CEO. Executive vice President reports to the CEO, for example. Executive vice Presidents are responsible for middle managers.
To enable this function, Ford’s managerial structure was modified to allow top-down control of the conventional business management. The Ford corporate architecture has several regional divisions. In general, each continent or its subsidiary operations across multiple regions of the subcontinent.
Ford, on the other hand, has three divisions: North America, South America, and Europe. Although this reflects Ford’s organizational structure around the world, it is divided into just two regions: North America and South America. The potential impact’s organizational design is rather straightforward to integrate business operations.