Economists and philosophers have developed many theories that explain how organizations are managed and how they function. Managers look upon these theories when they are managing the organization. The theories have impacts on the organization in which they are applied. The impacts could either be positive or negative depending on how it is applied and the form and nature of organization in which it is applied. In fact, each theory has its strengths as well as shortcomings. It is, therefore, the duty of the managers to choose the theory that best fits their organization and that which contributes to organizational success (Zuehlke 2006).
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Among the theorists who have contributed to the theories that have had significant impacts on organizations is Henry Ford (Zuehlke 2006). Henry Ford is one of the most celebrated industrialists of all times. He is the one who founded the famous motor company known as Ford Motor Company, named after him. Ford was not the inventor of automobile. However, he developed the first automobile that was affordable to many middle income earners, which was bought by many Americans (Zuehlke 2006). He introduced the Model T automobile which led to a revolution of transportation, as well as the American automobile industry. Ford became famous when he introduced the Fordism theory where by he produced goods in mass, which were being sold at a cheap price that is affordable and at the same time hired employees at relatively high wages. He believed that consumerism would transform the industrial world. His theory to lower production costs led to a series of technical as well as business innovations. Among the innovations that came about, as a result of Fordism, include the franchise system among others (Zuehlke 2006).
The focus of this paper is to give an explanation of Ford’s contribution to industrial processes and a description of both the positive and negative consequences for organizations and their employees.
Fordism is a concept named after Henry Ford that describes today’s’ economic systems as well as a social system that is based on production of goods in large quantities, which are of standard qualities. The concept is mostly applicable in assembly industries. The concept can, however, be applied to other products especially those which can be produced in bulk such as food and fuels, as well as mined products and chemicals. It can further be applied to discrete solid parts for instance fasteners and the assembly of products such as the appliances and automobiles (Selkov and Roe 2004).
The concept of Fordism can be used in several social theories which are concerned with production. It can also be used in other related social economic phenomenon. The meaning of this theory varies depending on the field in which it is applied. However, despite the variation, all the meanings are related to each other. Under the concept, workers are rewarded with high wages for their work. The main aim of this is concept is to ensure that they later buy the products which are being produced in large quantities (Beynon and Nichols 2006).
Ford Motor Company emerged in the early years of the 20th century as a small automobiles manufacturer. After being in the industry for about five years, Ford came up with Model T, a form of automobile that was simple, yet it had the ability to drive on primitive roads (Beynon and Nichols 2006). Model T was being produced in large quantities and, therefore, the unit production cost went down significantly. As a result, the overall price of the final product was affordable to most people including the average consumers. In addition, Ford significantly increased the employees’ wages (Selkov and Roe 2004). The rationale of the increase was to reduce the rate of employee turnover and also absenteeism by employees which was associated with low morale and it had a negative effect on the company’s production. As a result of the wages increment employees had higher disposable incomes and thus became consumers. As a result of the increased employees’ morale, due to these factors among others, the company realized mass production. The production of automobiles as well as sale increased by large digits due to the low price tags on the products (Knights & Willmott 2007).
Fordism brought the concept that production can be done in large quantities, at a low cost and at standard levels. In addition, a company can be in a position to pay competitive wages to its employees. It is a model that expands the economy and also contributes to development in terms of technology. This is because goods are produced in large volumes and special machines are used in mass production. The theory was meant to increase the level of production in the Ford Motor Company. However, it can as well be applied in other industries as well as in any kind of production activities (Selkov and Roe 2004).
Fords contribution to the market was highly significant. He revolutionized the consumption patterns as well as the social relations in production. First, when Ford came up with the model T automobile, he narrowed the choices that the consumers had on the vehicles in the market. It is the nature of a human being to always want a quality product at a low price. Model T had the quality, and it was available at a low cost and, therefore, many consumers were willing to buy it. The model was not available in a wide range of color varieties. In addition, the nature of its low cost would always make consumers buy it and tend to forget or forego the other models (Ritzer 2005).
Benefits to the organization
The Fordism principle was as a result of cost driven market. Capitalism was the main motive behind the development of the concept. The principle is advantageous to both the organization and employees. The principle is aimed at increasing the performance of the organization. This is achieved through cost minimization. The company will be getting its raw materials at a constant price. In production, there are both variable and fixed costs that a company has to incur. The variable costs vary with the number of units produced. However, the fixed costs are constant. Therefore, as a company produces more goods, the fixed cost per unit will be less since it will be shared among the number of units produced. This results into overall low cost of production and hence increased profitability. This was the principle behind increased level of production by Ford (Clarke 1990).
It is critical to note that when the cost of production is low, the company can afford to sell the products at a price that is relatively low, compared to that of the competitors. This results into increased sales. The company will be able to attain a competitive advantage over competitors. Generally, the advantage of the Fordism theory to the organization is that it lowers the costs through mass production. It also benefits the company through economies of scales. The economies of scales are achieved through production of goods in large quantities (Clarke 1990).
For any organization to survive in the current business environment, it has to be innovative. Innovativeness in an organization is enhanced when employees are empowered. Fordism gives employees employment. It encourages them to be more innovative. This is enhanced by the fact that they are well paid hence they are highly motivated. Once employees are motivated they will be innovative, and they can be able to produce high quality goods. The main benefit accrued by the organization is it enhanced ability to compete favorably that in the market. It will be able to make more sales since they can deriver in both quality and quantity. In the case of Fordism, the sales will even be more since the price of products is low (Ritzer 2005).
Fordism helps in reduction of employees’ turnover as well as too much absenteeism as well as loss of morale (Clarke 1990). Too much employee turnover and absenteeism will compromise the organizational production. In addition, it will be difficult to produce quality products if employees’ turnover is high since the skilled employees will keep on moving out of the organization. Additionally, the organization will be spending too much time recruiting new employees. Absenteeism will mean that there will be less production since the human resource is not fully utilized. Too much time will be wasted due to idle resources and machines due to employee absenteeism. Therefore, embracing Fordism in an organization will reduce employee turnover and absenteeism. This will also motivate employees and they will perform at their best hence improving the performance of the organization (Clarke 1990).
Fordism encourages the use of technology in production. The concept is driven by mass production. The company will be aiming to produce a large volume of quality products to reduce the unit production cost. Therefore, the organization will have to find ways to increase its production. Technology helps an organization increase its production due to use of machinery in production. Also, use of technology will be vital in the production of quality goods. It will also lower the cost of production as well as production time. The cost of labor is also reduced hence the organization will increase its production (Clarke 1990). According to Clarke (1990, 27), “Fordism revolution involved not only a technical revolution but also a revolution in the social relations of the immediate process of production”.
Benefits to the employee
Fordism has benefits to both the organization and employees. The major benefit to employees is the increase in wages. Fordism aims at paying high wages to the employees. By increasing the employees pay, Ford was targeting to make employees become consumers of the same products they produce. When employees are well paid, they will have a high purchasing power and, therefore, will be involved in consumerism. In addition, better pay will improve the lifestyle of employees. They will be satisfied in their workplaces and hence have better social relations (Knights & Willmott 2007).
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Fordism concept gives the organizational employees a chance to specialize in a given line of production which best fits their skills and expertise (Knights & Willmott 2007). Therefore, workers are able to concentrate on a given task which will be simpler as a result of specialization. This will also improve their skills and knowledge on their area of specialization. The assembly industry is one of the industries which are labor intensive and demanding, especially in the early 20th century when modern capital intensive machines were not invented. This result into exhaustion of employees, hence lower productivity due to fatigue. Fordism offers the employees the benefits of being employed full time and job security as well as other benefits. It also gives room for employees’ labor unions, which plays an important role in presenting the grievances and taking care of the employees’ welfares (Spies-Butcher et al. 2012).
Critiques of Fordism / negatives
When it was introduced, Fordism performed extremely well in the world that was dominated by large scale production as well as industries that were labor intensive. However, the concept of Fordism attracted criticized from a number of industrialists and economics in 1980s. It has been argued that Fordism does not address the challenges in the modern workplaces hence a hindrance to economic growth. Fordism was said to be too rigid such it did not accommodate the changing business environment and economic growth. Among the people who challenged the concept were Michael Piore and Charles Sabel a critique which they presented in their book titled The Second Industrial Divide in the year 1984 (Ritzer 2005). In this book, the author introduced a theory that emphasized on the concept of flexible specialization. The theory addressed the changing social environment in which modern organizations are operating. It is essential to note that today’s economy is capital intensive, rather than labor intensive. This has resulted into massive changed in economic activities. For example, operations that were done by specialized employees in the 1930s and 1940s are today being done by machines. The tastes and preferences of consumers are also changing which has resulted into massive segmentation of the markets. However, Fordism theory did not allow for these changes. It was rigid. It did not offer consumers the different tastes that they needed. As a result, Fordism has become obsolete in the modern business environment (Ritzer 2005).
Another critique of the Fordism theory was David Harvey in his book titled The Condition of Postmodernity in the year 1990. He argued that the workers under Fordism did not have the flexibility in that they could not be engaged in part time jobs while working in the industry. However, Harvey was not optimistic about the critique since he also argued that the flexibility would lead to job instability and deny workers most of the benefits associated with a permanent job. In addition, David criticized Fordism since it led to high level of structural unemployment. Employees are employed permanently and, therefore, it takes long for vacancies to be available for other people who are jobless (Ritzer 2005). According to Knights and Willmott (2007), Fordism was characterized by a system whereby the hierarchical command was too rigid. The control structures were also inflexible. In addition, the management structures were based on principles of scientific management, which were inflexible and unreliable.
The Scientific management
This management concept is also referred to as Taylorism. It is a management theory that was developed by Frederick Winslow Taylor in the year 1911. It was aimed at improving the efficiency of the economy through labor productivity. The theory attempted to incorporate science in management as well as in the engineering processes. In this theory, Taylor argued that the employer should realize maximum success as well as the employees. He argued that maximum success can only be achieved through maximum production. Further, maximum production will be possible with proper training and development. It differs from Fordism since it does not offer high wages to employees rather it focuses on training them. In addition, scientific management does not emphasize on mass consumption as is the case with Fordism (Taylor 2010).
Summary and Conclusion
Fordism is a management theory that was developed by Henry Ford, and revolutionized the production industries. The theory focuses on mass production and mass consumption. Therefore, managers who apply this concept in management offer high wages to their employees with the aim that the employees will also consume the organizations products. In addition, the organization will be aiming to produce quality goods at a lower cost of production as compared to its competitors. This will help it sell the goods to consumers at a low price and hence a competitive advantage. The theory is actually capitalism driven since the organization will be aiming to spend little in production and make high sales, which will maximize its profitability. The theory is also beneficial to employees since it offers high wages, which will better their lifestyles. They are also offered permanent jobs and other benefits related to their employment. The employees are well motivated, and they can produce at a high level.
List of References
Beynon, H & Nichols, T 2006, Patterns of work in the post-Fordist era: Fordism and post-Fordism, Edward Elgar Pub, Northampton, Mass.
Clarke, S 1990, what in the F—’s name is Fordism. Web.
Knights, D & Willmott, H 2007, Introducing organizational behavior and management, Thomson, London.
Ritzer, G 2005, Encyclopedia of social theory. Sage, Thousand Oaks, CA.
Selkov, E & Roe, M 2004, Globalisation, policy and shipping: Fordism, post-Fordism and the European Union maritime sector, Elgar, Northhampton, MA.
Spies-Butcher, B, Paton, J, & Cahill, D. 2012. Market society: Theory, history, practice, Cambridge University Press, Cambridge.
Taylor, F 2010, The principles of scientific management, Lightning Source, Milton Keynes.
Zuehlke, J 2006, Henry Ford, Lerner Publications Co, Minneapolis.