Taylorism and Fordism: the Foundation of Organization Theory - Essay Example

Section A: “Taylorism and Fordism are at the foundation of organization theory.” Discuss. In the late 1800s, Frederick Winslow Taylor was a mechanical engineer who developed a system to improve the efficiency of management of an organization. His system is still relevant and influential in today’s management styles. He created the concept of Taylorism also known as The Scientific Management Theory which became the basis of the book which he published entitled, “The Principles in Scientific Management”. It was in this book where he stated that, “the principal object of management should be to secure maximum prosperity for the employer, coupled with the maximum prosperity of the employee” (Taylor, 1911). He implies that there should not only be one beneficiary of an organization saying that both the employer and the employee must gain a certain level of benefits that would be commensurate to the effort that both employee and employer has put in. His main objective was to increase productivity of the workers. He noticed that workers had their own way of doing their work even without any specific instructions on how it should be done. This discovery led to the conclusion that if the employees are left to their devises it made them lose efficiency and that they were not maximizing their abilities. He then introduced a solution of having supervisors to teach and help the workers do their work the right way. He further analyzed the actions and responsibilities that are essential in any job within the organization and developed processes for the jobs could be done in the most efficient ways possible. With the improved processes, the job requirements were coupled with the training of the workers and the support of the supervisors. They come in the type of right direction, assistance and incentives. With this, he included four principles guiding actions. First of the four principles is develop for every job a “science” that includes rules of motion, standardized work implements and proper working conditions. The second principle is to select worker with the right abilities for the job. The third is to carefully train workers to do the job and give them the proper incentives in cooperate with the job “science”. And the last principle is to support workers by carefully planning their work and by smoothing the way as they go about their jobs (Schermerhorn, 2007). The first principle says that any job should have guidelines of how to do implement the job. An example of this is in a fast food establishment, each of their burgers have a different way of cooking but a method was introduced to minimize movement but promote efficiency in preparing the burgers. The second principle of Taylor is to have someone who is able to meet the requirements of the job. For example in an I.T. Company, a system’s manager’s job requirements are different from a programmer’s job requirements. One job requires someone to be able to handle people and while the other solely requires someone to be able to create programs. The third principle advises that the employer should train the employee for the job. An example of this is where establishments have the new hires wherein managers would teach the newly hired employees the “ropes”. The fourth principle is for the employer to accommodate the needs of the employee in their work. An example is giving the technology and tools they need to be able to work efficiently and effectively. Another management style was introduced by Henry Ford. He is the founder of Ford Motor Companies and a sponsor of the improvement of the assembly line method of mass producing. Ford is also credited for Fordism. Fordism is known as Taylorlism plus Assembly line. But another definition given by Miss Victoria De Grazia is “the eponymous manufacturing system designed to spew out standardized, low-cost goods and afford its workers decent enough wages to buy them” (De Grazia, 2005). It is a method where in a company is able to provide a salary that could let their employees also be a customer of the organization. Though its original purpose is to improve productivity in the automobile industry. Fordism’s big success emanated from the three basic principles. The first was the standardization of the product. The second principle is the use of special-purpose tools and/or equipment from the assembly line. The last but not the least is the elimination of skilled labour in direct production, while simultaneously paying the worker higher wages (Tolleday, Steven & Zetlin, Jonathan, 1987). Henry Ford would be forever known because of his contribution in Fordism. Though he did not invent the automobile and the assembly line, he created a process in which the two were able to complement each other to be more efficient and productive. It started with his car model named Model T. He made sure that the car was made affordable to the average consumer or the working middle class of the society during those. With the car’s success it was able to raise the wages of the employees, letting them be customers themselves. The Organization Theory also known as the organizational studies and/or the study of organizational behavior is a subject that tackles the study and the wary implementation of the information gathered about the people that reside inside the organization. “The study of organizations for the benefit of identifying common themes for the purpose of solving problems, maximizing efficiency and productivity, and meeting the needs of stakeholders” (Barzilai). The organization Theory was rumored to start with Plato discussing the essence of Leadership then Niccolo Machiavelli laying down the basis for the modern system of organization politics and power. Adam Smith in 1776 contributed a new organizational structure that was based on the division of labour within the organization. After a century, a sociologist from Germany named Max Weber talked about in his writings the lucid organizations and commenced a discussion about being a charismatic leader in organizations. Years later after Weber’s contribution of charismatic leadership, Frederick Winslow Taylor introduced an effective system that involves setting goals and objectives and initiatives to help stimulate the interest of the employees. The organization theory is a growing field of study today. It tackles how to manage an organization, the theories, methods and implementations that a manager or someone within an organization could use. The processes and theories that it tackles are decision-making that is regularly done by managers and or by any management employee. Another is the structure and dynamics within the organization that should employees should be aware of, to get to know the organization better. Another one mentioned are the theories regarding personality traits of employees and managers within the company. Another example is the control and stress modeling that discusses the satisfaction and the productivity of the employees. And the last one is the motivation within the organizations. Though the roots of Organization Theory could be traced back to the time of Plato for some the start of the organization theory started with Frederick Taylor’s development of the Scientific Management or the Taylorism. It is discussed that if organizations are able to give clear sets of instructions and the organization is well observed and managed they will be able to increase their productivity. Along with these, Taylor also gave initiative methods that could be used in the organization. Organization Theory is used in business courses in universities all over the world. It is highly advised by professors that students with business administration as a major to study the organization theory since it would help them understand the mechanism that prods movement within the organization. Taylorism could be considered as a foundation of the organization theory since the study of the organization started with Taylor’s study of the organization but fordism cannot. It could only be considered as a topic/subject matter that could be studied within the theory of organization. With this, the writer could only agree with that Taylorism is a foundation but disagree that fordism is not a foundation. Taylorism as discussed above developed systems that increase productivity of both the organization and the people that worked within the organization. The topics it tackles are how to motivate managers, supervisors and regular employees and how to improve the processes within the organization. While fordism tackles a topic that would greatly affect the company’s stand in the market, the topic only sees one aspect of the organization. The subject matter that it undertakes is the production cost and the customers of the organization. It only suggests that the organization should limit the production cost for the price to not limit its customers to the upper class. They suggested that they should be able to stretch the market of the organization to the lower middle working class of society. Due to fordism’s limited range of topics, it cannot be considered as a topic within the theory and unlike a foundation of organization theory like Taylorism is. Section B: Why do some organizations integrate vertically whereas others do not? Vertical Integration is a kind of control over management that focuses on the growth of the organization. This kind of control of management is usually used in supply chain organizations since it deals with the supplies for the parts or ingredients of the product of the organization or the distributors responsible of selling the product of the organization. The use of such strategy is because of an organization’s desire to further expand their current size and operations. Vertical Integration as defined by investopedia.com is “when a company expands its business into areas that are at different points of the same production path” (Investopedia). It says that when an organization uses its own different parts and/or ingredients as an individual product for a broader market. An example of this is when an organization, for example, Starbucks. Starbucks sells ready-made coffee and they also sell coffee that could be at the consumer’s own houses. They vertically integrated their products to make it available for their consumers. Vertical Integration is only one of the few strategies organizations use for expansion. Some of them involve concentration in some areas and some involve buying and selling assets. But Vertical Integration is a strategy that affects the economic state of the company. There are three kinds of Vertical Integration. These are the backward vertical integration wherein an organization gets suppliers, the forward vertical integration where the organization gets it distributors and balanced vertical integration wherein an organization gets both of the suppliers and distributors. The Backward Integration is a kind of vertical integration wherein the organization becomes its own supplier hoping to minimize the cost and control of other powers in the supply chain (Backward integration, 2010). Minimizing the cost would benefit the organization since it would be able to reduce the price of its product. In some specific organizations like in organizations that produce software and hardware, backward integration also means that the new technology that the organization is new and updated but it could still be able to open and function with the older version of the technology. For example, in car companies like Ferrari, they make their own materials for their cars to ensure the quality of the cars they make. Having a backward integration kind of strategy also assures the quality of the product being produced by the organization. Microsoft Office that is created by Microsoft is an example of software that uses backward vertical integration as a strategy. It releases new and updated versions of the Microsoft Office but the software is still able to open and function properly if the user chooses a file extension that was created in the earlier version of the technology. For a more elaborate example, when a user uses Microsoft Word 2003 and tries to open it on Microsoft Word 2007, MS Word 2007 is able to open it through the use the Compatibility mode. An organization that is advised to use backward vertical integration strategy is an organization that caters to the basic needs of the consumers that would always sought out to. The examples of basic needs are food, clothing and shelter. The Forward Integration as defined by BusinessDictionary.com is a “Type of vertical integration where a manufacturer acquires the channels of distribution of its outputs to achieve greater economies of scale or higher market share” (Business Dictionary, 2010). It says that the organization has its own outlets wherein they could sell their products. The investment for the distribution would be reduced to a minimum. Another definition is that the parts used in the previous products are still usable in the current technology. An example is an organization that uses forward integration is the poultry business. Farmers sell their chickens and/or eggs directly eliminating the role of the distributor. Another example is the car manufacturers that make their own parts and materials for their cars. The materials used in the older version of a car are still usable and functional for the current version available in the market. Balanced Integration is a kind of vertical integration that uses both the Backward and forward integration. It minimizes the costs the organizations go through in suppliers and distributors. It minimizes the cost because of the elimination of the supplier and the distributor meaning that the price of the product would be lower and a possibility of more consumers buying the product. An example of an organization that uses this kind of integration is the American Apparel. It creates its own materials for their T-shirts and handles every process that the T-Shirts undergo through until distribution. For the company, it’s easier since it’s more convenient for them because they are able to design, cut and sell the T-Shirts to their liking. Vertical Integration could also be beneficial for the organization. Vertical integration could reduce the cost for transportation since the supplies are also within the company, it could possibly be in a close location to the factory/manufacturing area. An example of this is a car manufacturing organization. When the organization creates a car, the materials used are in the warehouse or is within the vicinity of the warehouse for easy access. Another advantage is that assurance of the quality would be the best. The coordination within the supply chain improves. It means that the information that the supply chain uses flows more efficiently and clearly that would create less trouble and problems later on. An example is that if a problem occurs in the design area of a T-Shirt company then the problem would be quickly resolved since they are in the same company. The company is able to modify its product to satisfy consumers since they are able to communicate with them. Another advantage is that an organization could be able to invest in technologies or materials that competitors are not willing to take a chance on. It gives the organization an edge over other organizations that are in the same market as them. For example in computer companies, a new technology is introduced. Organizations are reluctant to invest since the technology is new and is not well developed yet. But one organization chooses invest in it and eventually the organization is able to develop the technology into its potential. The organization is now offering a technology that other organizations are still trying to develop for their own goods. But with some advantages, Vertical Integration also comes with a number of disadvantages. One of the most problematic disadvantages of the Vertical Integration is the high monetary and organizational cost. It is expensive to maintain warehouses and other facilities needed in manufacturing/producing a product since the facilities are required to be in tip-top shape when it is used. Another disadvantage is that organizations are limited if they choose to manufacture one product. They could only venture on products that are somewhat the same with the current products that the organization offers. If they choose to venture on other products that are significantly different from the current products they offer then it would require large modifications in the supply chain thus making it more expensive. Also a disadvantage is that they should be able to meet the demand of the consumers of their product no matter what the situation is. They should be flexible in the market since they are able to produce their goods at any given time. Balancing issues could also be disadvantageous to the organization. In manufacturing the balancing issue that the organization may face is that it may require them to build excess upstream capacity to assure that their downstream operations are able to meet demands at any given time. Another disadvantage is that some supplies are priced higher since there is no supplier competition. The organization is not given the option to bargain to be able to minimize the cost of the supplies since the materials are from their own supply. But there are a lot more strategies that are possible in organizations today. An example of these strategies is the concentration strategy wherein organizations choose to expand in same business areas along with other organizations. Another is the diversification wherein the organization invests or acquires different or the same areas. A number of supply chain organizations choose to integrate vertically since they see it as to be more practical and more efficient for their needs. They are able maximize their market potential using the three different kinds of vertical integration in their own organizations. Another reason why organizations choose to integrate vertically is because they are able to communicate with the different parts of the supply chain thus making it easier for people within to work efficiently and productively. Due to the disadvantages mentioned above, some organizations choose not to integrate vertically. They choose not to integrate vertically to be able to maximize the market potential of their organizations or simply put the strategy of vertical integration is not fit or is not the right strategy for the organization. But another reason that organizations choose not to integrate vertically is because they believe that the technology being used within the company needs to be constantly updated for it to be able to have high efficiency and productivity. References: Backward integration. (2010). Retrieved December 18, 2010, from investorwords.com: http://www.investorwords.com/383/backward_integration.html Barzilai, K. (n.d.). Organizational Theory. Retrieved 18 December, 2010, from CWRU: http://www.cwru.edu/med/epidbio/mphp439/Organizational_Theory.htm Business Dictionary. (2010). Forward-Integration. Retrieved December 18, 2010, from Business Dictionary.com: http://www.businessdictionary.com/definition/forward-integration.html De Grazia, V. (2005). Irresistible Empire: Americas Advance Through 20th-Centruty Europe. Cambridge: Belknap Press of Harvaard University Press. Frederick Winslow Taylor. (n.d.). Frederick Winslow Taylor. (n.d.). Retrieved December 19, 2010, from iiiehyd.org: http://iiiehyd.org/Frederick%20Winslow%20Taylor.pdf Greenberg, D. (2004, May 31). BNET. Retrieved December 18, 2010, from http://web.archive.org/web/20080401023818/http://findarticles.com/p/articles/mi_m5072/is_22_26/ai_118184828 Investopedia. (n.d.). Retrieved December 18, 2010, from http://www.investopedia.com/terms/v/verticalintegration.asp Schermerhorn, J. (2007). Management 9th Edition. John Wiley and Sons, Inc. Taylor, F. (1911). The Principles in Scientific Management. Harper & Row. Tolleday, Steven & Zetlin, Jonathan. (1987). The Automobile Industry and its Workers: Between Fordism and Flexibility. New York: St. Martin Press. Vertical Integration. (n.d.). Retrieved 18 December, 2010, from http://www.quickmba.com/strategy/vertical-integration/ Read More