Ford Motor Company’s Organizational Change in 2007

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Organizational Change

Organizations are at times faced with the decision of making changes to its structures. Such a need is necessitated by the dynamic nature of the business environment in which most businesses operate as well as the need for the business to grow, improve its performance and maintain its competitive advantage within the industry in which it operates. Organizational change refers to those changes or transformations that an organization or a company makes that affect the whole organization as opposed to changes that affect only a small section of an organization. This means that the change affects the processes and procedures that the company normally uses to carry out its operations, the structure of the organization and the people within the organization (Nadler & Tushman 195) In order to accomplish such changes, the organization in question in most cases has to invest largely so as to ensure the success of the intended change. All employees of the organization also have to be brought in on the change in order to minimize instances of resistance.

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In order to successfully implement organizational change, many employers come up with change implementation plans that will see them through the process. Once the employer recognizes the need for change, a detailed analysis is carried out to come up with an implementation structure complete with a transition plan that will see employees through the change period and mitigate the problems caused by the implementation of the changes. Different methods have been outlined as to how to carry out change in an organization. According to Cummings and Worley, (163) a successful structure includes the following activities:

Motivating Change: Here the employer creates readiness for change within the staff in order to minimize instances of resistance. The reasons for change are made clear to the employees and they are also made aware of the situation that is currently prevailing in comparison with what should be the desirable position as at that time (Cummings and Worley 165)

Vision: The employer comes up with a vision for the changes and outlines their effect on the employees and the company as a whole. The vision is based on the intended goals and objectives of the company as well as the present vision of the company.

Developing Support for the Change: This involves identifying those who will have the most influence on the change process and thereby influencing them in such a way that they support the changes.

Transition Management: Here the employer outlines the activities that are going to be undertaken and the sequence these activities will follow and how the management structure will be affected and how this will be handled. Commitment to the change at this point is very important and it should be portrayed to the employees. It is important to note that most change effects are not experienced immediately and therefore the transition period should be handled very carefully as it is the period which marks the movement of the company from the current state to its desired future state.

Sustaining the Momentum of the Change: The employer provides the necessary resources as required to make the change successful, ensures that everything is running according to schedule and carries out the plans that are intended to bring about the change (Cummings and Worley 176) It is important to note that most change effects are not experienced immediately

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Ford Motor Company

Ford is a multinational motor company with its headquarters in Dearborn Michigan. The company was founded by Henry Ford and incorporated in 1903. Lincoln, Mercury and Ford are the company’s main vehicle brands but it owns stakes in other vehicle producing companies with brands such as the Volvo, Mazda and Aston Martin. At present it is the world’s fourth largest vehicle manufacturing company with a fairly large customer base and employee work force in its various branches world wide. The company has received several awards for the high quality of its brands which reinforces its continued growth, performance and presence in the automotive industry.

Ford experienced tremendous growth over the years but following the global economic crisis it has been experiencing problems just like other companies in the automotive industry. This is due to the increased fuel costs that are used in the automotive industry, increased in raw material prices as well as the decrease in demand for vehicles. Ford and other major players in the industry like General Motors had concentrated on manufacturing less fuel efficient vehicles due to the large margin profits that they brought in through major sales but when the energy crisis struck, the demand for these vehicles reduced putting the companies under strain since they had few fuel efficient vehicles to offer their customers.

Ford’s 2006 Way Forward Plan

Due to these and other financial problems that have been facing the company for the better part of this decade, Ford came up with a business plan which it submitted to the congress containing more measures that the company intended to take so as to counter the problems occasioned to the company by the 2008 economic crisis coupled with the credit crunch that resulted from it. Earlier in the year 2006, the company’s Vice President Mark Fields, in an interview conducted by PBS News Hour’s Ray Swarez, expressed the fact that Ford needed to adopt a new business model since the one that they had been using all along was no longer effective (Suarez para. 2).

The plan that was put in place was meant to take effect immediately and end around the year 2008 or 2009 but following the economic woes experienced in the past two to three years, the plan has had to take in more strategic activities. It was commonly referred to as the Way Forward Plan and was presented to the company’s employees via the FCN broadcast network as well as through Web Cast from the Dearborn Product Development Centre in the presence of industry analysts and the media (Bresnihan para. 4) the motivation behind the plan was the realization that the company needed to focus on long term goals like brand building, customer satisfaction, strong product delivery, innovation, cost cutting and profitability.

Some of the actions that Ford Planned to take included the closure of some of its factories in cities like Kansas, Norfolk, Chicago, Minneapolis, Ontario and Dearborn Michigan, making a total of sixteen by the year 2008, laying off some of its workers in stages over the period between 2006 to 2008. This was to be done under a buy out plan in which the company’s workers would volunteer to take up an option that would seem more appealing to them in terms of its payment. The plan was agreed upon by the company upon negotiations with the UAW (United Auto Workers) union for workers in the automotive industry. This plan was elicited by declining sales for the company’s trucks and sporty vehicles which were not fuel efficient as people opted for fuel efficient vehicles which the company had ignored for the major fuel consumption vehicles as they brought in more profits.

Another of the company’s plans involved cutting down the level of production of some of its vehicle brands such as the fuel guzzling F-series trucks and SUVs as a way of cutting down production costs, though it was noted that this move would not elicit any significant progress in the short run since workers affected by the move would have to be paid (Isidore para 1-2) In order to save its image, the company had plans to come up with newer more efficient models such as high breed vehicles as well as adopting newer technologies to save on fuel. Competition from other motor vehicle companies such as General Motors and Toyota who brought new vehicle brands into the market did also not work well for Ford as their brands were fuel efficient and at a time when the gasoline and other fuel prices were up, it was only logical for people to opt for these new models as opposed to those floated by Ford.

Ford Motor Company followed some of the above mentioned change procedures and some are still on going. For example the company’s CEO at the time, Bill Ford, communicated the intended changes to the employee, informed them of the company’s current position in terms of profitability and where the company was hoping to be after the implementation of the said changes, how they would be affected and also gave them the time line in which the intended changes would be accomplished which was between 2006 and 2008. He also explained that even though the changes would cause the employees to loose their jobs and other benefits, the implementation of the changes would achieve the company’s long term goals as well as improve the future relationship of the company and its employees in terms of sustainability as by taking the company back to profitability, it would be able to better serve its employees.

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Ford’s Progress Following the Implementation of the 2006 Way Forward Plan

The gradual implementation of the changes in Ford’s Way Forward plan in 2006 saw the improvement of the company’s performance as was evidenced by the company’s 2007 annual report presented in 2008 which outlined its progress and priorities. According to the company CEO, the company had shown financial improvement by only making a 2.7 billion Dollar loss as opposed to the close to the ten thousand billion dollars in losses that the company had made during the previous year (Ford Motor Company 5) The company had managed to make several personnel reductions in North America by offering them a choice between early retirement packages and separation packages and still hoped to make more reductions in a bid to cut down on its operational costs (Ford motor Company 12) This was made possible by the agreement between UAW and Ford. Some of the plants due for closure had already been closed such as the Norfolk, St. Louis, Windsor, Wixom, Atlanta, Essex and Maumee Plants. The Company also managed to realign and reduce its production and assembly capacity to fit with the changing demands and preferences of its customers (Ford Motor company 13) This improvement continued and the company even reported profitability in the first quarter of 2008 but the success was cut short by the 2008 credit crunch and economic crisis following which the company came up with another business plan as a continuation of the previous one which it presented to the Senate Banking Committee asking them to provide them with the access to temporary loans which they were to use should the need have arose as they continued with their restructuring process (Ford Motor Company Business Plan 2)

Ford Motor Company Business Plan 2008 as Submitted to the Senate Banking Committee

In this plan, the company proposed its plans for the North American market which it included; Its restructuring plan that would enable it to operate profitably in line with the prevailing market demand and proposed product mix for its different vehicle brand models. According to the company’s congressional submission the new product mix would be forty percent for trucks, vans and SUVs and sixty percent for cars and crossover where eighteen percent of its investment would go to the trucks, vans and SUVs and the remaining eighty two percent to cars and crossover (Congressional Submission app. 3)ю

The company also proposed an accelerated plan on the development of new products created with the wants of their customers in mind as well as within their value range. This would mean that they would produce smaller and more fuel efficient vehicles but it would not mean that they would completely abandon other models like the SUVs, trucks and vans (Ford Motor Company Business Plan 12-13) The company’s sustainability and electrification strategy together with the innovative product approach would enable it to come up with new hybrid and all-electric vehicles that would enable their customers save on fuel costs. The 2008 plan would also enable them to improve their balance sheet and in effect the company’s financial stability (Ford Motor Company Business Plan 28)

Impact of Ford’s Business Plans (Way Forward 2006 and the Congressional Plan 2008)

These plans would have an impact on different areas of the company and also the company’s employees. From the employees’ point of view, the impact would be as follows based on the outlined variables:

Employee Absenteeism

Employee absenteeism would reduce by a great margin as they seek to protect their jobs. This might be caused by the fear that a high rate of absence would be interpreted as a lack of commitment on their part for the company’s operations and it would result into their being laid off.

Productivity

Employee productivity would go up as a way of showing their commitment to the company and its operations the area of operation not withstanding. This would translate into improved productivity for the company.

Job Satisfaction

Job satisfaction describes how content employees are with their jobs and the general work place environment. If they are happy with the conditions, then this would translate to them being satisfied with their job. This kind of satisfaction does not only emanate from monetary benefits accrued by the employees but also from the non monetary gain such as how they are treated by the management, the organization culture and how it favors them, the level of their involvement in the company say in decision making as well as the level of empowerment they receive at the work place. With the current lay offs that are continuing at Ford and loss of benefits such as health benefits it would be fair to say that most of the employees are probably not satisfied with their jobs.

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Staff Turnover

This refers to the rate at which employers loose or gain employees as a result of employees changing jobs. It can be high or low depending on the duration of time which elapses between when an employee joins or leaves the company. This rate is normally computed based on aggregate figures. With the ongoing restructuring plan at Ford, I would tend to think that the rate of staff turnover is high as employees seek more permanent employment elsewhere in search of job security.

Employee Motivation

Employee motivation is very important for any company as when employees are positively motivated, they work better and produce better results which is reflected on the overall performance of the company. Managers and employers in general need to ensure that their employees are motivated at all times and these can be done through their recognition when they do a good job, offering them rewards say bonuses , offering them job security as this will ensure that all their attention is focused on doing the job and not worrying about being laid off. At Ford, job security is no longer guaranteed unless the company makes tremendous improvement and since this will not happen overnight, it is not easy to maintain employee motivation at high levels.

Conclusion

Ford Motor Company has faced its fair share of woes in this pasta decade, from their financial problems in 2006, the energy crisis that followed coupled together with the credit crunch and global financial crisis in 2008. This has seen it come up with several restructuring and recovery strategies in a bid to change the direction of the company so that it can return back to profitability as was the case before the troubles began and they seem to be working in their favor as the company reported profits for the financial year ended 2009 and predicted the trend would continue in 2010 (Collins, Heck & Dickenson 1)

This shows a case where organizational changes has worked for a company though the path to achieving this change has not been an easy one as it saw the company lay off a large number of its workers and close some of its plants in a bid to cut costs. Apart from returning the company to profitability, the restructuring plan has seen Ford becoming more customers oriented by providing them with car brands that are more fuel efficient thereby helping them save on fuel costs and plans to improve these brands even further in the coming years. For other companies in the automotive industry experiencing similar problems, Ford will act as an example of how coming up with viable strategies and having to make tough decisions such as changing a company’s business model in order to save a company are at times necessary for the future of the company and the industry at large.

Works Cited

Bresnihan, Terry. “Ford Business Plan Vows to Return to Profitability”. Ford FCN. 2006. Web.

Collins, Bill., Heck, Larry. and Dickenson, Dave. “Ford Posts Full Year Report Profit for 2009; Fourth Quarter 2009 Net Income of $868 Million; Plans to be Profitable in 2010+”. Ford Motor Company. 2009. Web.

Cummings, Thomas. and Worley, Christopher. Organization Development and Change. Ohio: South Western Cengage, 2008. Print.

Ford Motor Company/2007 Annual Report. “Progress and Priorities”. Ford Motor Company. 2008. Web.

Ford Motor Company Business Plan. “Ford Motor Company Business Plan as Submitted to the Senate Banking Committee”. Ford Motor Company. 2008. Web.

Ford Motor Company. “Congressional Submission Appendix”. Ford Motor Company. 2008. Web.

Isidore, Chris. “Ford Slashes Production”. Aug. 2006. CNNMoney.com. Web.

Nadler, David. and Tushman, Michael. Organisational Frame Bending: Principles for Managing Reorientation. England: Academy of Management Executive, 1989. Print.

Suarez, Ray. “Ford Cuts 1000 Workers, Closes Two Factories”. PBS NEWSHOUR. 2006. Web.

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