Henry Ford’s Business Model & Organizational Structure Insights

Posted on May 8, 2025 in Business Administration and Management (BAM)

Ford’s Innovations & Business Impact

In 1903, Henry Ford founded the Ford Motor Company. A significant milestone was the 1908 launch of the Ford Model T, renowned for being easy to drive, repair, and affordably buy. Key innovations and strategies included:

  • Wage Motivation (1914 onwards): Ford doubled the daily wage offered to his workers and reduced the working day, implementing a 40-hour work week. This improved the standard of living for workers, reduced turnover, and fostered loyalty. This policy attracted the best mechanics, including those from Cadillac, leading to reduced investment in training and increased productivity. Ford was strongly against unions.
  • Vertical Integration: He invented and implemented “Vertical Integration,” building a large factory for integrated production where raw materials entered and finished automobiles exited.
  • Assembly Line Production: Ford popularized Taylorism’s concept of chain production, enabled by worker specialization.
  • Distribution Innovation: He innovated in distribution by creating a network of independent dealerships to reach more customers.
  • Advertising: Ford invested heavily in advertising.

Designing Organizational Structure

When designing the structure of any organization, consider the following:

  1. The company’s structure must be suited to achieve its objectives.
  2. What needs to be done? This relates to the essential functions within the company.
  3. How should it be done? This pertains to the processes necessary for its activity.
  4. Who is in charge of doing what? This refers to the people who directly intervene in the company’s operations.

Key Organizational Forms

The Simple Structure

The Simple Structure is a minimally elaborated organizational design where primarily two parts are active: the Strategic Summit and the Operational Core. In a way, it can be considered a “no structure” because it avoids using formal structural devices and minimizes dependence on functional specialists, who are generally external.

Characteristics of Simple Structure:

  • Minimally elaborated.
  • Little or no Technostructure.
  • Little Support Staff.
  • Simple division of labor.
  • Lack of significant differentiation between internal units.
  • Small managerial hierarchy.
  • Based on minimally standardized behavior and minimal planning.

General Aspects of Simple Structure:

Key aspects include coordination, work units, communication, workflow, decision-making, strategy elaboration, environment, and others.

Advantages of Simple Structure:

  • Centralization ensures speedy decision-making.
  • The sense of mission is clear.
  • Its structure adapts well to simple and dynamic environments.
  • Facilitates rapid short-term growth of the organization.
  • Favors identification with the company in low-skilled workers.
  • Very productive if management possesses leadership values.

Disadvantages of Simple Structure:

  • Centralization can lead management to confuse strategic and operational issues.
  • The growth and development of the company are limited.
  • It loses effectiveness when faced with complex environments.
  • It is demotivating for workers of medium-high qualification.
  • The lack of competing powers can lead management to abuse authority.
  • It will be unproductive if management confuses power with authority.

The Mechanical Bureaucracy

Mechanical Bureaucracy is the type of structure typically found in large organizations that have been operational for an extended period. These organizations strive for perfect functionality. To achieve this, they design their processes so that the response to each situation is predetermined. An example includes airlines.

Characteristics of Mechanical Bureaucracy:

  • Operational work is repetitive and often simple.
  • Work processes are highly standardized.
  • Unlike the Simple Structure, this structure utilizes the Middle Line, Support Staff, and Technostructure.

Considerations on the Operational Core:

  1. Operational tasks are simple and repetitive.
  2. Requires workers with minimal skills and little training.
  3. There is a clear division of labor with clearly defined roles, both vertical and horizontal.
  4. Work processes are highly standardized and easily coordinated.
  5. Workers have little decision-making power and minimal opportunity for mutual adjustment.
  6. This makes it possible to design very large work units in the operating core.

The Middle Line in Mechanical Bureaucracy:

Formal authority rests with Middle-Line Managers, who assume key importance. This leads to the creation of a highly developed administrative structure. The Technostructure primarily makes recommendations, especially on how to standardize work, thereby assuming a role of informal authority.

Three Main Tasks of the Middle Line:

  1. Manage possible conflicts.
  2. Act as a liaison with the Technostructure to incorporate work standardization in operational units.
  3. Convey vertical information to Strategic Summits and elaborate action plans according to received guidelines.