Change Management of the Ford Motor Company - Case Study Example

Running Head CHANGE MANAGEMENT CHANGE MANAGEMENT Introduction New political and economic forces have arisen on the world scene in recent times.During the 1990s there was a major realigning of global business forces. During that time, global markets and production capabilities opened up, and the concept of national economies began to wane. Strategic change typically starts with redefinition and reframing of the organization's purpose and mission, followed by changes in the three subsystems, and ending with the creation of new alignments within and between these three subsystems. Change is an important part of any organization influenced by internal and external environments. Organizations can be transformed by creating a new system in a new place with new personnel, or by renewing the old system in the same place with the same personnel. Critics admit that when change is conducted by taking the "renewal" alternative, it usually entails the positioning of a new top manager or top managerial team. In business organizations, Ford, like many other firms, created separate plants to develop new technology and new products. In total institutions, the creation of a radical new vision that really rehabilitates is possible by starting out with a new strategy, guards carefully chosen to be rehabilitators, and a new, dedicated staff. Overview of Ford Motor Company Ford is one of the oldest automakers in the world. The history of the company goes back to 1903 when the first converted factory was opened. Today, Ford is the second largest automaker with 17.5% market share. Historically, Ford sought to compete against the industry's leader, General Motors (GM), by increasing its presence in foreign markets. Ford's International Automotive Operations co-ordinates activities in twenty-six countries grouped in three principal regions (Europe, Latin America, and Asia Pacific). In the late 1970s, Ford produced outside the United States half of its worldwide vehicle production - compared with GM's one-fourth. The Ford Motor Co. has also been a leader in introducing or rapidly adopting technological innovations in the industry (Lessons In Change From Ford Motor Company n.d.). Henry Ford, the founder and president of the company, is considered the father of mass production. In the difficult decade of the 1980s, Ford showed its capability to rapidly adopt the Japanese system of production and to move faster than any other auto maker in seeking the integration of its operations on a global basis. The company was also a pioneer in the internationalization of production, as it was the first to open an assembly plant in Canada (1904), in Mexico (1925), and in many other countries. Historically, the company has had a leading role in developing an automotive capability in those countries, and its strategies have been characterized by its responsiveness to local government demands and its relatively high levels of export activity (Lessons In Change From Ford Motor Company n.d.; Ford Home Page 2007). The change process within the company is influenced by the industry requirements and competition. In order to survive and maximize profits, auto makers like Ford must comply with structural rules. Structural rules are derived from production technologies (hard and soft technologies) that are successful in producing cars efficiently. An automobile is a complex product, which consists of over 10,000 parts and requires multiple and complex processes for its manufacture. Mass production proved successful in efficiently producing automobiles, which explains that for almost seven decades, it determined the structural rules for the automobile industry. It is a complex system that needs to be understood in order to comprehend Ford's strategies. Where they existed, differences in strategy or goals between the US Big Three (Ford, GM and Daimler Chrysler) stemmed basically from each firm's ability to conform to the rules of competition and from its relative power position in the industry. During 1990s, Ford had little room for designing strategies that were very different from those dictated by GM. For example, Ford showed lower levels of vertical integration than GM and tried to maintain a leadership in seeking market niches (Ford Home Page 2007) Today, and even if its US operations still represent the bulk of Ford's total operations, its foreign operations continue to contribute to the company's strong performance and leadership in the industry. Historically and compared with its rivals, Ford has tended to locate higher proportions of its production outside of the United States, although foreign production of its vehicles has not increased as a proportion of total worldwide production - except during the most severe years of the 1979-82 recession. Its international operations were a source of strength that allowed Ford to maintain its position as the second largest auto maker in the world and to respond to GM's competitive moves (Ford Home Page 2007). The new rules of production and competition (the system of flexible or lean production) implied improving the quality of products and management relations with suppliers and labor, a significant change from the practices that prevailed under the system of mass production. Ford's long-term strategy, and particularly its emphasis on improving its relations with US labor - required substantial and comprehensive changes in the company's operations that prevented it from relying on the sourcing of parts and vehicles from foreign suppliers to the extent that GM or Chrysler did. Surprisingly, this constraint also became the source of Ford's success in the market place; and labor peace at Ford translated into an enhanced competitive position for the company and the maximization of profits. That progress represented a change of degree rather than of direction, because its regional integration strategies had been in place since the 1980s (Ford Home Page 2007). Change Factors and Diagnosis of the Situation The necessity for change was caused by out-of-date technologies and inadequate structure of the organization, ineffective management styles and coaching. "The remarkable difference at Ford was its effort to reshape the company while the financial fruits of an earlier revamp were still pouring in. Ford was earning twice the profit of GM or Toyota" (Heller 2004). Ford decided to centralize its operations around the world. If the meaning of a global integration strategy is the geographic dispersion of each activity in the value-chain of production, Ford does not have one in place. But if it means the dispersion of some activities in the value-chain of production, the results are mixed. Through collaborative agreements with other companies (most notably Mazda, but also other Asina, European and even some US auto makers), Ford did disperse some activities, such as R&D, design and engineering. Strategic alliances represented a marked change from previous practices that maintained full ownership of their operations, so as to protect know-how and other ownership advantages, and from the US anti-trust laws that prohibited large firms from entering into such associations (Ford Home Page 2007) The problem with morale, communication and management styles were caused by the integration of its subsidiaries into Ford's North American system of production. Ford also achieved some inter-regional co-ordination, although this was limited to a few activities, such as R&D, design and engineering between the parent company and one subsidiary for the development of different vehicles, and then among different assembly plants for the production of global cars. Some factors that prevented Ford from introducing major changes in its production operations can be explained by the high risk and costly nature of automotive production. Like other auto makers, Ford tended historically to open only a limited number of production operations in foreign countries, normally in those that had reached some level of industrialization and thus offered relatively large markets for vehicles. Sovereign risks there were not high (Ford Home Page 2007; Lessons In Change From Ford Motor Company, n.d.). Their investments to produce in less-developed countries, particularly in the 1960s, were defensive strategies aimed at either gaining first-mover advantages or protecting potential growth markets from increased competition in the industry worldwide. Low culture, poor communication and ineffective leadership style were the other factors of change. Quality work of the employees depends a lot on good communicational skills of the managers. "The trouble is that managements are apt to defend and exalt their prevailing single-theme wisdom, often heavily influenced by the prevailing wisdom of others, at the expense of any alternative view" (Heller 2004). Performance managers are charged with controlling the employees' work (performance) and have to be effective communicators and thus to be able to establish working relations with the employees, supply the employees with information and feedback, involve employees in planning and development activities, and above all, recognize and praise the most productive workers. Lack of communication and interaction led to low morale and low performance of the staff. What is the important component of the communication is the feedback - the reaction of the audience to the information received. The sender has to be very attentive controlling this reaction to be able to conclude if the audience has understood the message correctly. Another area of concern is conflict management (Stickland, 1998). And communication skills are as well important here as if the conflict cannot be resolved it can be managed and diminished if not brought to naught. The change proves was aimed to improve communication and morale, establish positive culture, regular training and new effective leadership style of management. Maintaining self-control is crucial in attempt to manage the conflict. It is known that what is important in perceiving the stressful situation or the problem is the emotional state of the person that is experiencing this situation. Thus, the manager is to try and restore the employee's peace of mind. On the other hand, the manager is supposed to control oneself even more than the employee (Stickland, 1998). Recommendations for Change Aspects of the internal organizational situation that allow transformation to occur are the following: the gathering of some surplus resources for managing change, these additional resources may be managerial time and energy, or financial resources; readiness and willingness of at least the dominant coalition to change, External contextual factors are taken to include: changes in competitors' strategies; level of international competition; government legislation; changing social expectations; technological innovations; and changes in the level of business activity. Theories of Change and their Application Pfeffer and Salancik (1978) argue that there are two basic ways in which organizations develop a change: "The organization can adapt and change to fit environmental requirements, or the organization can attempt to alter the environment so that it fits the organization's capabilities" (p. 106 cited Stickland, 1998, p. 43). Ford can adapt its environments to new conditions by such tactics as merging with other organizations, diversifying, co-opting important others through an interlocking directorate, and engaging in political activities to influence matters such as regulation. Kirton (1980 cited Stickland, 1998, p. 44) has developed a theory of change and innovation. He argues that individuals have characteristically different styles of creativity, problem solving, and decision making. Ford, as an adapter can operate cognitively within the confines of the appropriate, conceptually accepted paradigm within which a problem is generally initially perceived. Presumably, the proportion of innovators will affect whether and how quickly organizations can change their paradigm. Innovation can be applied to HRM and new labor relations, training initiatives and knowledge management. Hage (1980 cited Lothans, 2006) makes a distinction between output innovations, which are the new products and services that a specific organization produces within a year relative to its size, and process innovations, which are new throughput technologies, processes, and procedures. He defines change as radical innovation in input-output and technology. He reviews the recent studies on this issue and summarizes the findings in propositions such as "Centralized organizations can introduce highly radical innovations if the dominant coalition has positive attitudes towards change and indeed pursues a pro- change policy" (p. 93 cited Lothans 2006, p. 34) and "The more committed the dominant coalition is to the introduction of change and the greater the concentration of specialists, the more likely there is to be a radical innovation" (p. 194 cited Lothans 2006, p. 34). For Ford, creativity and innovation are important driving forces in the change process. They are characteristics of human behavior in organizational settings. The main focus of these studies is on intra-organizational processes, and their effect on the environment and society. Like the previous perspective, this one takes a voluntaristic standpoint, seeing change as dependent mainly on the behavior of the organization's leadership and members. Transformational leadership can be an important part of the change process. This leadership is capable of providing new vision, aligning members with this vision, and mobilizing energy and commitment to the realization of this vision (Robbins 2002). Organizational change is a learning process affected by the organizational and environmental conditions and by theories of action held by the organization's members. For should create conditions that may significantly influence what individuals frame as the problem, design as a solution, and produce as action to solve the problem. Following Heller (2004) Fusion Management is about blending; about combining short-term, medium-term and long-term; discipline and freedom; commercialism with humanity; globalism with local, national and regional marketing; giving the customers what they want while leading them to want it; strengthening the old while nourishing the new". Employees may also bring to the learning situation biases, beliefs, and theories that are relatively independent of the organization's requirements. Implementation Plan Stage 1. Development and Change Organizations are constantly fluctuating, making internal adjustments, incremental changes, and improvements. They constantly seek better ways to adapt to changes in their environment. At this stage, problems faced by Ford are solved within the current situation. Improvements do not change the purpose of the organization. Interventions are aimed at facilitating changes and solutions to problems. it is important to inform employees and management about coming changes and their purpose (Chang, 1994). Stage 2. Creating Awareness Under circumstances of rapid and drastic environmental changes and changes in members' needs, changes cannot provide satisfactory solutions to problems and adaptation to the new environment. Employees tend to ignore the need for drastic changes or to postpone them. The results are sometimes "muddling through," vicious circles, and crises. To help Ford employees accept the need for a change, interventions to raise awareness are needed. One way is to increase employees' awareness of symptoms, attempted solutions, problems, and behaviors "here and now" (Beeson and Davis, 2000). A second way is to increase their awareness of the existence and impact of the current paradigm. A third way is to increase their awareness of the existence of purpose and mission, and the impact of these on procedures and behaviors (Chang, 1994). Stage 3. The New Fluctuations reach a critical point, and the organization may be trapped in a vicious circle and deep crisis. Ford may reach a critical point beyond which it could face demise or new possibilities, a new state of being. At this stage new ideas emerge at the periphery. There is still strong resistance to change, and acceptance of the belief that what worked in the past will also work in the future. Becoming more aware may lead to the acceptance of the need to change. In the third stage the main task is to encourage the search for, and discovery or creation of, new possibilities, new ideas, and new choices based on a higher-level paradigm. Each of the four approaches provides a variety of technologies for the search and the discovery of new directions (Chang, 1994). Changes in communication, morale and organizational values can be introduced by the consultant at this stage; the "changing mission" strategy offers technologies such as visioning, strategic planning (Chase and Podlesnik 2006). Stage 4. Creating an Open Space When new ideas are diffused, they become subject to political campaign and conflicts. Conflicts can be a paralyzing force, and may deepen the crisis unless communication channels are open and democratic processes take place. For Ford management, the main task at this stage is to encourage the formal system and leadership to attend to these new ideas, to examine their utility for the organization, and to set the stage for democratic processes. The main suggestion here is that facilitating change involves issues such as power struggles, conflicts, interest groups, and political campaigns, processes most practitioners tend to ignore. Democratization implies setting the stage or creating an open space for new ideas to be heard, examined, and accepted or rejected (Chang, 1994; Bielski, 2005). Stage 5. Facilitating Transition to the New State The process of searching for, creating, discovering, and accepting new ideas has been termed "transformation." Translating these ideas into actual programs and implementing the change has been termed "transition". For transition to be facilitated, many complex actions are involved, such as establishing task forces, translating ideas into programs, analyzing the impact of the future state on the present state, developing training programs, training, budgeting, restructuring, and reorganizing (Haak and Pudelko, 2005). Like the transformation phase, the transition phase may be divided into developmental stages such as planning, implementing, institutionalizing, and tuning up, as suggested in the model presented previously (Clark, 1995). Stage 6. Resistance to and Persistence of the Change Changes involve strong resistance. The first is within the organization; the second is without. When the change is too radical and the system is vastly different from its domain, it threatens its environment and generates strong resistance. Ford should foresee resistance to change and resistance to new values and communication, training and morale. Thus, the studies point out that it is probably easier to transform organizations by creating a new system or a new unit for which new personnel are recruited and trained, than to renew existing systems (Jansen, 2000. Thus, it is easier to create a new, innovative, open, alternative approach than it is to renew one. Change efforts must be measured by the persistence of the change, not by institutionalization. Whenever an organizational error, deviation, or problem is detected and corrected, or solved without questioning or altering the underlying values or assumptions of the system, the learning is "single loop." (Bate, 1994). Conclusion For Ford, transformation and changes propose great opportunities to innovate and meet new environment. Each change makes the next structure more complex or coherent, requiring a greater flow of energy for maintenance and exhibiting still less stability. Fluctuations increase through positive feedback loops until they exceed a critical point or threshold beyond which a new and more complex order will emerge. Changing the organizational structure and morale will necessarily entail changes in the organizational mission and purpose, culture, and functional processes. Change in Ford's culture will entail changes in the organization's functional processes, but not necessarily in its mission and goals. A special attention should be given to management and how organizations interface with environments, specifically, on how managers, in their interactions with their environments, make choices about their interactions. These choices, not the environment itself, are the most important explanation for change. Change gives Ford better control over its environment, prevents radical changes, and enables incremental adjustments. References 1. Bate, P. (1994) Strategies for Cultural Change. Oxford: Butterworth Heinemann. 2. Beeson, I., Davis, Ch. (2000). "Emergence and accomplishment in organizational change", Journal of Organizational Change Management 13 (2), 178-189. 3. Bielski, L. (2005). What Makes a Good Leader the Go-To "Guy" with Vision and Passion Will Top the Org Chart-And Lead Change Management. ABA Banking Journal 97 (12), 21. 4. Chase, Ph. N., Podlesnik, Ch. A. (2006). Sensitivity and Strength: Effects of Instructions on Resistance to Change. The Psychological Record, 56 (2), 303. 5. Chang, R. Y. (1994). Mastering Change Management: A Practical Guide for Turning Obstacles into Opportunities. Irvine, CA: R. Chang Associates Publication Division. 6. Clark, J. (1995). Managing Innovation and Change: People, Technology and Strategy. London and Thousand Oaks, CA: Sage Publications. 7. Ford Home Page. Retrieved 21 October 2007, from www.ford.com 8. Haak, R., Pudelko, M. (2005). Japanese Management: The Search for a New Balance between Continuity and Change. Hampshire. 9. Heller, R. Fusion Management. Retrieved 21 October 2007, from http://www.thinkingmanagers.com/management/fusion-management.php 10. Jansen, K.J. (2000). The Emerging Dynamics of Change: Resistance, Readiness, and Momentum. Human Resource Planning 23 (2), 53. 11. Lessons In Change From Ford Motor Company (n.d.). Retrieved 21 October 2007, from http://maisonbisson.com/blog/post/11927/lessons-in-change-from-ford-motor-company 12. Lothans, F. 2006, Organizational Behavior. McGraw Hill Higher Education 13. Robbins, S. Organizational Behavior. Pearson Higher, 2002. 14. Stickland, F. 1998, The Dynamics of Change. London: Routledge. Read More