In case of Ford motors they were earlier implementing the Rational Goal Model that lays immense emphasis of higher level of productivity, efficiency and profit. The decision-making is centralized to the higher-level authority with very less or no participation from the lower level staff in decision-making authority.
But after the major drawback that hit Ford Motors by producing more and more of particular product without customizing the product they change their strategy and become more employee centered. They choose to adopt human relation model to handle their employees in the best possible way so that an organization can get flexible in dealing with change and every give respect to the employees by making them communicate and coordinate their point pf view.
In case of GM, they are following decentralized authority with centralized control. Like Ford, GM had high cost and a bloated organization. They had an internal system that stifled innovation and was slow in reacting to change. Apart from that they are prisoner of their successes and that’s why Ford proved out to be more effective than GM as they change their strategy for the betterment of the organization.
In early 1980s they should used a human relation model to determine whether they are flexible or not and whether are focusing on employees in terms of decision making autonomy or not. If they had recognized the problem that exists with producing small cars just through mare assumption they wouldn’t have committed that mistake. In that case the human relation model would have been a perfect fit as it would have provided the employees with motivation and the flexibility would have enable the organization to adapt to the change.
Contrast Ford and GM’s strategies. How has each affected their organization’s structure?
Ford Motors initially were following the Defender technique, as they are not taking any sort of risk and in seeking out for new opportunities. It’s been said that Henry Ford is a man who feared change and loved control. He even opted for a centralized control and doesn’t want any involvement from the lower level staff in decision-making.
But coming 1980 Ford used more of Prospector technique by changing the corporate strategy to become the styling leader among the US “Big Three”. They introduced a broad based cost cutting effort, initiate a massive program to change Ford’s culture and put emphasis on employees and give respect to them by giving them autonomy and decision making authority.
GM can be categorized as Analyzers as they are low in innovation and were slow to change although they suffer tremendous drawback after their technology structure misfit but even then it takes time for them to bring in change and follow the prescribed path. They were relying too much on their past successes and believed that they can get away with anything they do, like they had in the past.
How did GM’s technology affect its structure?
GM basically had made a big mishap by assuming the changes that will occur in the environment and because of that they suffer big time. They decided to product smaller cars and installed robots, lasers, computed designed and other high tech technologies in order to boost up the pace of the work and improve quality. They just keep on focusing on increasing the market share but failed to respond to the needs of the customers
But the technologies didn’t match the structure of the organization and they found out the hard way that new technology pays off only when combined with changes in the way work is organized on the factory floor.
Assess both companies’ effectiveness in terms of their “environment-structure” fit.
The structure of Ford Motors was very much rigid as they are using the technique of mass production. They span of control is wide with highly centralized authority. The activities being performed by the employees are repetitive and an overall perspective of the organization is bureaucratic and mechanistic
The environment for Ford Motor is not that simple and they cannot survive while continuing with the same techniques so what they decided was customize the product according to the needs of the consumers and cut the layers of management to give employees autonomy in decision making.
Ford in order to create an effective structure-environment mix change its strategy and began to product stylish and customized that are suited to the needs of the customers. Apart from that they introduced a broad based cost cutting system and let the employees to participate and contribute their skills for the betterment of the organization.
GM structure was a bit changed from that of Ford Motors as they are following decentralized authority with centralized control. GM had divisions rather than a strict centralized authority and the divisional head have the authority to take decision for their restricted division, but the headquarters controlled the overall operations.
The environment demands products that are stylish and highly customized and GM is unable to meet the needs of the dynamic environment. They are very much inclined towards increasing the market share rather than customizing their product. As the environment is dynamic so they have to make alteration that can be effective for them.
To maintain a environment-structure fit GM focus more on producing stylish and differentiating cars rather than focusing on increasing the market share. Plans were being made to close at least four of its twenty-six North American auto assemble plants and slosh about 100000 jobs in order to be effective and regain the market.
Are there any structural factors that can help to explain why Ford made more money than GM in the late 1980s?
In terms of structural factors, Ford and General Motor differ significantly from each other. Ford on one side had a rigid structure in the beginning of their venture as the decision-making is centralized and there is more or less no involvement from the lower level staff or the subordinates in the decision-making authority.
But once they notice that their precedents are not paying off and are not doing them any favor they change their structure that is more suited for the employees. They primarily affect their structure by cutting layers of management and getting more employees involved in the production process and give respect and autonomy to employees.
Now the structure is not adhering to strict centralized control and it’s more focused towards the participation of the employees in decision-making and brings about a change in organization through creativity and flexibility. This was the reason that made they change from mass production format to customization.
Whereas on the other hand GM although have divisional format that enable the divisional manager to take charge of their division but they are restricted to their prescribed domain, that means decentralized authority with centralized control. Other than that resulted in heavy losses for GM was heavy vertical integration at GM whereby company subsidiaries produced two-thirds of the part that went into its cars, meant that GM couldn’t take advantage of competition among outside suppliers. Those factors lead GM to a 30%.
Contrast these two organizations’ approaches to managing change.
In case of Ford Motors, they were following the mass production technique for producing cars in a single color. They were basically a larger batch and mass production firm that tends to produce more and more without any sort of customization. But once they realize that this sort of strategy is not paying off and their cars are considered as of low quality and nondescript, they decided to change for good.
They used the broad based cost cutting effort in order to change the Ford’s culture and put immense emphasis on listening to employees by minimizing the layers in management and getting employees involved in major aspects of the organization. They basically changed the corporate strategy to become the styling leader among the U. S.’s “Big Three”.
In case of GM, they made a huge blunder earlier by assuming that the oil prices will rise in the near future and because of that they decided smaller cars that will be cost effective. They even used their financial resources to purchase high tech technology to step up efficiency and boost quality.
But unfortunately the prices went down and so with that, the demand for smaller cars and even the new high tech factory doesn’t proved efficient as compare to the old methodology. GM pursued this strategy but couldn’t get along with the flow of the environment and the in 1987 they finally decided to change their tactics in order to bring about a change.
So, no longer they are pursuing the strategy of expanding market share but are more focused towards product stylish and differentiated cars, and beginning to restructure the company so as to be able to produce fewer cars more efficiently. Contrast GM and Ford’s cultures in 1978 and 1988. What might GM has done in 1980 to reshape its culture and make it better fit its environment?
In 1978 Ford Motor had a clearly defined hierarchy with the decision making authority was pretty much with the upper level management and with almost zero participation from the lower level management in decision making. Henry Form at that point of time believed in mass production of a similar product without customizing it as he feared innovation and loved control.
As compare to 1978 culture, 1988 culture was relatively different as it was more of employee-centered culture. During that phase employees were given respect and formal authority of decision-making. Innovation was preferred and management took active action in increasing the commitment and participation of the employees.
In 1979 Ford Motors would have cut down the layers in management and increased horizontal coordinating between employees to get the best result. They should have given employees the discretion to some extent in order to bring creativity and suitable change in the organization.
GM’s Culture: It was more or like the same in the initial stages but a bit more flexible than Ford Motors. They have traditional bound culture that stifled innovation and were very slow to change. They were basically prisoners of past successes. They were following decentralized authority with centralized control. The culture being followed at GM resisted any change and give the indication that, we had problem in past and we overcome those and we will do the same if we encounter any sort of problem in the future.
In 1988 GM much like Ford even they began to innovate and choose the right mix for their organization. They were not carrying the precedents any more and were changing according to the requirement of the environment. Now the culture is much more flexible as they are not rigid anymore and were customizing according to the need of the need of the customers rather then focusing on raising the market share.
In 1980 they would have done proper analysis before opting for producing small car assuming that fuel price would increase in the coming future. Apart from that they should have opted for such technology that would have best suited to the structure of the organization.