Theories of Organization Management and decision-making – FORD Motors

Keywords: Organizational Theory — Structure and control of organization, Scientific Management approach, Bureaucratic approach, Administrative theory, Modern theory of organization management, System-based management, Contingency theory, Stakeholder management, Internal and external environment analysis, PESTLE, Resource Based Theory, Symbolic – Interpretive, Uncertainty Theory

Introduction

The purpose of this document is to examine the organization theory and its implication for the organization. Furthermore, we will examine how symbolic interpretation reflects on modern theory along with the postmodern critique of modern organization theory.

According to Clegg (2014), the process of organizational management has evolved over the period of time. From the traditional theory to modern theories of organization has changed management and control practices. Moreover, the face of organization has changed due to globalization. Daft (2015) analyzed that this has impacted the organizational structure, culture and processes significantly.

Nonetheless, modern theory has successfully delivered the result and achieves objectives. This involves planning for resources, conversion of these resources into products or services for the overall achievement of the objectives. The entity is concerned with the economic acquisition of resources, efficient input of these resources as well as effective output (Otley, 2016).

What is Organization?

The traditional view of organization given by Max Weber explains organization as the method of bureaucratic control and authority of operations. In addition, Fredrick Taylor stated it as a measurement of objectives to achieve work efficiency through application of procedures (Hassard, 2015).

Moreover, Mcauley, et al (2013) studied that organization is a structured control and management of the collection of people in coordination to achieve established goals. Additionally, it has been explained as social systems through cooperation and coordination. The organization is made up of different components like culture, social structure and technology.

Organizational Theory — Structure and control of organization

Rao & Narayana (2015) stated that there are numbers of theories which give details the about structure and control of organization. Some traditional theories of organization management are

  • Scientific Management approach

It describes the achievement of result and output through proper planning and procedures.

  • Bureaucratic approach

It defines the organization control through structure, procedure, and rule of law.

  • Administrative theory

It based on the application of the rule of management through the resource planning and organizing as well as training and functional coordination. It highlights the human social behaviour to achieve output as the efficiency of resources (Curtis, et al., 2016).

Modern theory of organization management

According to modern theory, organization is made up of different processes and structure to achieve the objectives for stakeholders. The characteristics of the modern organizational management state that organization is the dynamic and motivated interaction of processes and procedures for defined goals (Akhlaghi, 2014).

Otley (2016) mentioned that modernism theory is the application of universal laws and techniques of control. It employs and favours rules, standards and models to conduct operations of the organization. This is based on the gathering of rational behaviours and philosophy to portray the conclusion.

Modern theory of organization management

Mcauley et al (2015) highlighted that under modernist approach, the organization’s parameters are set, arrangement of resources to produce product or services and highlight constraints. Modernist theory, balance the internal resource with outside environment through providing the information for decision making for wider context of stakeholders. For example, profitability is key measure of success.

  • System-based management

This approach considers whole system is made up of many inter-connected and dependent procedures and sub-systems having inter-linking goals.

  • Contingency theory

This theory explains that organization systems are linked to the internal and external environment. The success of organization is dependent on relationship and management of the external environment (Clegg, 2015).

  • Socio-technical technique

Under the socio-technical theory of organization management, it involves the interaction of social and technical systems with external environment.

Organization Issue and need for management

Mcauley et al (2015) explained that there are numbers factors involved in the management of the organization. If these factors do not interact properly or there is the control problem, then this leads to failure of objective achievement. The environmental uncertainty and diversity have led to the complexity of business management. The globalization has changed organization dimension and changed the processes dimension. The proper management of employee and conflict resolution is fundamental to the successful achievement of objectives.

Organization Issue and need for management

Daft (2014) explained that the effective allocation of resources to deliver efficiency for continues survival of the organization. Globalization has also effected the management of the organization as well as affected the paradigm of organization. The key factors involved in the management of organization are shown in the diagram. The problems in the management different scenarios in the internal and external environment of organization are fundamental in the success of organization. Nevertheless the estimation of resources and controlling the organizational activities is important internal and external organization environment (Rao & Narayana, 2015).

Decision: Ford Australia decides to close its Geelong car manufacturing plant by October 2016 with around 500 jobs to be lost.

Ford Australia is a major contributor to the local community of Geelong. However, a recent announcement by the company to close its Geelong plant has affect number of stakeholders as well the company itself. The main reason behind the closure is declining sale of its cars especially ‘Sedan’ and ‘SUV’.

The figures published by the company relating to its sales stated that it car numbers have dropped almost by 40%. The most significant element behind this closure is ‘loss of $141 million has caused this action. This will result in job loss of 1600 by the end of 2016 (Hassard, 2016).

Modern Theory and FORD

The Ford is successful multinational which have its presence all over the world. The company has succeeded for the number of years and satisfies the customers successfully. The company has successfully managed its resources and achieves the objectives of different stakeholders. The company has very much defined mission statement and value chain for efficient and effective management and control. Company has interconnected systems in place and the objectives of various stakeholders are considered (Akhlaghi, 2014).

Otley (2015) mentioned that the input of resources and achieving the desired output are line with modern theory. Nevertheless, the company has all the policies and producers in place for efficient management of the resources. The company has competences and skills for effective management and has been competing in the industry for long period of time. However, the closure of plant has the different impact on different stakeholders. Moreover, we consider the policies and producers adopted by Ford and their implications.

Stakeholder objectives

According to Curtis, et al (2015), stakeholders are individual or group of individuals who have interest in the strategy of the organization. The power and interest of stakeholders vary and organization prioritizes the objectives according. The stakeholders are usually classified into three groups which are internal, connected as well as external stakeholders. The diagram below shows the different categories of stakeholders as well the how stakeholders can be managed according to Mendelow’s matrix.

stakeholder management and analysis

FORD Decision

The ford has successfully achieved the objectives of many stakeholders; however, through closure it will not provide the jobs to employees. However, if business continues then it will fail the most fundament objective of maximization of shareholder’s wealth. Therefore, in the light of modern theory it about addressing the objectives of key stakeholder and arrange the resource for effective output (Rao & Narayana, 2012).

Mcauley et al (2013) stated that there is conflict of interest between profit maximization and shareholder’s wealth maximization. The modern theory states resources should be arranged in a way that resources are effectively utilize and stakeholders objectives achieved.

Organizational environment

  • Internal environment

This involves the activities and policies of the organization as well as the behaviour and attitude of employees. This made up the internal environment of the organization which includes organization mission and vision, the management and leadership policies and style as well as the organizational culture. The internal environment is the structure and mission statement of the organization stating that what organization wants to achieve and they objectives will be delivered (Daft, 2015).

It highlights how the control will be maintained in the organization and the culture for the accomplishment of the objectives. It involves the selection of resources, structure and hierarchy of the organization, code of conducts and regulation of labour and governance of the organization. The attainment of objectives through different management styles as well as ethical consideration. Some of the fundamental models for business internal analysis are porter value-chain and SWOT analysis (Otley, 2016).

FORD decision and internal environment

The company has strong process and producer in place and company have achieved success over the number of years. The organizational structure and culture are well defined with the global code of conducts in place. They have efficient value chain as well vision and strategy for the future. However, the decision to close the plant have major factor attached to cost of input of raw materials. The rising cost of inputs have impact the profitability (Thomas, 2014).

  • External environment

David (2014) studied that the conditions and factors which are in the external business environment of an organization. This involves analysis the external environment as well as supply chain management. This involve broader business context like political, social, economic as well technological analysis. This is using conduct through PESTEL model which is classified as

  1. Political factors and Legal

This examines the regulation and legal requirement due to the political condition. Usually, it has seen countries with better political stability have long-term and effective policies. Especially, recent political unrest in different countries has attracted the attention of MNC towards political conditions before making any foreign direct investment (FDI) (Akhlaghi, 2015).

  1. Economic factors

John and John (2015) analyzed that the economic situation plays an important role in the decision making of an organization. It provides the information on disposal income, GDP growth and many other economic policies like monetary and fiscal policy. It shows the cost of resources as well the purchasing power of people.

  • Technology and Environment Factors

According to Hill and Adam (2014), technology plays an important for any organization. In the 21th century, safety and security are fundamental to every organization. Therefore, technology advancement and keeping the production technology up to date is important as well as the customers want safe and straight of art products or services speed.

The environment consideration also plays an important role as there is the huge debate going at the global level. Therefore, the organization has to consider the environmental impact they are making and remedies they can offer. This also encloses the corporate social responsibility (Otley, 2014).

Resource Based Theory

According to Rao & Narayana (2014), resource-based view highlights the competitive advantage approach for business to external environment against its competitors. It is based on the inside out view of the business where firms own resources and competence which are considered unique transfer to the external environment.

The resources and competencies are considered unique and competitors can copy or replicate these core competence. The resources can be intangible as well as intangible and the rivals cannot copy the resources. Therefore, these resources and competencies are different and no others competitors cannot gain them and this mobilization of these resources are difficult (Richard, 2014).

FORD decision and external environment

The PEST factors have important implication for business. The official data released by the automobile industry has highlighted that Ford car sales have declined and they are almost half then their competitors. Nevertheless, politically Australia have the very stable situation. However, the declining in sales and increase in the cost of inputs have prompted significant questions for the company.

The company should have recognized whether this decline is because of change in social preference or the technology used by the company. When benchmarked against it competitor e.g. has Toyota has an almost double volume of sales. Therefore, it raises question whether company fails to evaluate the external environment (Daft, 2015).

Symbolic – Interpretive

Hassard (2014) evaluated that this is a way to illustrate that how people express their experiences and emotions in an explicit manner through symbols and procedures. It explains the interaction between the people and social world. It is based on the human relationship viewed from the community perspective. It highlights economic and technical demands required by the organization to produce products to fulfil needs of the customers. This is the process of group dynamic work environment and how the interaction of people can achieve the desired results.

Many researchers have indicated that people working in the groups usually bring positive impact on the business. This resulted in the increased efficiency as well as employee satisfaction. An employee working in the groups has witnessed increase efficiency as well as effective output for the company. This theory claims when managers setting out the objectives the leave out many and demolished many objectives. The networks in the organization are influenced by society, organization structure as well as technology (Rao & Narayana, 2016).

According to symbolic interpretation that if an employee has performed a task to achieve certain objective but no is around to recognize and observe the task, then how the performance will be valued (John and David, 2014).

Comparison of Modernism vs. Symbolic interpretive

 FactorsModernismSymbolic Interpretive (SI)
1Knowledge and competenceThere is repetition of activities through SOP’s and knowledge and skills is gained five core sensesThe knowledge gained same as modernization, however, the emotions and experience of people also effect organization
2StructureWell defined and designed structures to achieve efficiency. The systems are properly organized and managed.The organization structure is based on social interaction and connection and symbolic presentation. It is based on the human relationship viewed from community viewpoint.
3Organization theoryOrganization is a structured control and management of the collection of people in coordination to achieve established goals with set rules and regulations.Group or people dynamic work environment and how the interaction of people, emotions and social connection can achieve the desire results. i.e. participation and involvement

The criteria set under the modernism and symbolic to measure the performance of individual or group are different. For example, according to modern theory, the performance can only be benchmarked when the actual output from the employee is measured and determined. On the other hand, under symbolic interpretation performance can only be measured when someone is observing the performance of employee. It explains the experience as reality through the emotion and sense towards certain event and scenario (Mcauley, et al., 2015).

FORD Decision and Symbolic interpretation

When compared to modern theory, the FORD is not much affected by symbolic interpretation. Nonetheless, the symbolic theory offers flexibility as well as the response to uncertainty in the business environment. When compared to the modern theory which does well only in the stable business environment. FORD does not have any internal or group issues and the most of the problems we discussed earlier are either based on external environment factors (Daft, 2015).

Curtis et al (2016) explored that the company employee internal business environment has very stable and employees have delivered performance to certain standards. The economic and technical demands required by the organization to produce products to fulfil needs of the customers. These are processes of group dynamic work environment and deliver effective output..

The symbolic integration defines the social interaction and impact of learning in the organization. There has been no evidence that there has been any problem in ford internal processes and systems. The closure of the plant will result in lots of the number of jobs and the group emotion and impact the whole company (Mcauley, et al., 2015).

Postmodern Critique

Rao and David (2014) evaluated that this method ignores the organizational framework to minimize the managerial beliefs and confront the modern theory of control and management. This favours the minimization of the rules and procedures and more about experiences of human in the social environment. The later development of the organizational theories has significantly revolutionized.

Hassard (2015) added that the supply and demand of products and services for the open market has brought a new face and practices of the organization. This model based on the finding the true facts and figures to make relevant decisions. This is based on the performing the variance analyses to feed ward the result for increased efficiency and output.

Uncertainty Theory

The uncertainty in the business environment has changed the way business is conducted as well as the practices of business. The pace of modern business environment has evolved from a traditional theory of bureaucratic control. Nonetheless, certainty is speculative risk faced by the business. However, it has created an environment of constant change for the business environment (Clegg, 2014).

Richard (2015) explained that it is classified as the unpredictable situation faced by the business because of numerous internal and external business environments. It is defined as the amount of time taken to react to business challenges. Companies have addressed the different factors through proper risk management as well change management.

Feedback, input, process, output

The most highlighted theories and model for postmodern theories are;

  1. Business process reengineering
  2. Total Quality Management
  3. Machesney 7’s model
  4. Quality circles and team building

However, recent action has prompted a debate whether the inside out approach is reliable in the modern business environment. With globalization, the face of the modern business environment has changed over the years (Daft, 2016).

FORD decision and postmodern technique

Clegg (2016) explained that it has been evident that modern theory has failed to respond to the modern business environment in uncertain conditions. Therefore, the concept of link structure and performance has evolved over the period of time. In order to respond to changing business environment, it is important that organization should adopt its self to changing business environment.

The postmodern believe that organization has no boundaries, and all the individuals have equal rights. The post modernization leads to heterogeneity of the system and process but tied together through a business process (Otley, 2014).

To address the problem of uncertainly, the pre-establish ways of business boundaries fail to highlight the problems exist in business environment and therefore, makes it difficult for the business. For example, if we consider resource based view, then FORD has the skills and competence to address the problems faced though competitive advantage.

However, this has failed to address the problem of decline sales and increasing the cost of inputs which has resulted in the declining of the profitability. Recent factors of globalization can manage through planning for uncertainty, as business does not have the constant business environment (Daft, 2015).

Globalization has changed the dynamic and dimension of the business environment. The recent shift in the cost and production capacity along with technology needs to be considered. FORD should adopt the flexible business to address the changing social trends and provide according to the need of the customers, rather focusing on the inside out approach. Technology and social taste and preference have changed over the period of time and have created ‘uncertain and turbulent’ business environment (Akhlaghi, 2015).

The postmodern theory application will help FORD to think beyond their current boundaries and parameter to deliver innovation and response to changing business environment. The critics of postmodern argue that removing the boundaries and structure has created number of problems. Because the leadership is always needed to deliver the output and address the leadership crisis because all resources need to stay closed for effective execution (Rao & Narayana, 2015).

Conclusion

The modern has provided the modern and rigid framework for business practice. The effective evolution of the earlier process this has delivered optimum result during the stable business environment.

However, recent changes in the modern business environment where products have shorter products, global marketplace and complex cost structure have called for the dynamic business model.

The external business environment needs a constant analysis in order to adapt to changes in the business environment. The modern theory address the structure and culture but the global marketplace has called for rapid and constant change to product and business model.

 

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