When Governments Fail…

This past Monday, Iceland’s coalition government collapsed amid public outcry of the government’s failure to effectively bail out their broken financial system.  Simply put, Iceland did not have deep enough pockets like the US did to provide some sort of recovery program for its banks and other financial institutions.  Although those are some of the more specific reasons as to why this organization failed, upon coming across this story, I was curious to see if I could draw parallels to some of the things we’ve discussed in class…hopefully it’s successful.

Now, I find it very unsettling that while a government fails, organizations (more specifically, corporations), prosper.  This is even more concerning in the case of Iceland, which to date, had the oldest functioning legislature in the world, founded in 930 AD.  So why are large corporations, such as Walmart, seemingly easier to run and maintain than small (democratic) governments? While I acknowledge that these two types of organizations are very different from each other, on the highest level, they share characteristics of functioning rational organizations such as formality and goal specificity.

Right, wrong, or indifferent, maybe there is something that Iceland’s government, (which I’m sure considered itself to be a rational organization with high levels of formality and goal specificity) could learn from the way in which Walmart operates as a rational organization.  I’ll preface this with the fact that I have very little knowledge about Iceland’s former coalition government to begin with, so bear with me.

We learn from Ehrenreich’s Nickel and Dimed that the school of thought that most closely aligns with Walmart’s organizational characteristics is (arguably) that of Taylor’s scientific management.  Although Nickel and Dimed points out that Walmart’s implementation of this system is not without its flaws, it is necessary to point out that during the course of its existence, Walmart has learned how to effectively manage 2,100,000 employees.  To place that number into perspective, the population of Iceland is 304,367…Walmart employs almost SEVEN TIMES the total amount of people who live in Iceland.  Although running an organization successfully under a rational organization system goes far beyond sheer size of the workforce or population, this is an interesting fact to point out.  Maybe, just maybe, Iceland’s new government should try to implement aspects of Taylor’s scientific management, such as closer re-evaluation of the effectiveness of certain institutions and their fiscal feasibility.  Maybe this is just naïveté on my part to think that a government as an organization can implement principles that Taylor intended for industrial improvement, but hey, because their former government failed, maybe they could consider alternative approaches to ensure their government does not collapse again.

Taylor-Mart

Maybe Frederick Taylor’s real last name was Walton. Or perhaps he had a distance cousin names Sam Walton. Either way, Taylor’s ideas on scientific management have truly become part of the American culture: “(Taylor) helped instill in us the fierce, unholy obsession with time, order, productivity, and efficiency that marks our age.” As Barbara Ehrenreich shows in Nickel and Dimed, the old American adage that hard work and sweat will lead anyone to success is, by Taylor’s reasoning, false. Sadly it is not how hard you work. It is rather, Taylor believes, how well you work in the time you have, in the system you are in, with the tools available, and with consideration to those around you and the function(s) they are performing.

Taylor’s practice of absolute efficiency and productiveness is perhaps better represented by Wal-Mart than by any other American retail organization. Indeed, Wal-Mart perhaps the modern day representation of scientific management in practice (at least in the retail industry). Ehrenreich, a one-time Wal-Mart employee herself, offers multiple examples of the rigid importance of time and efficiency in the organization: two 15-minute breaks (but not a minute more!) during the day; organizing shirts by specific labeling codes; assigning each employee to a specific section of the store with specific roles. She does not even mention the tight schedule Wal-Mart holds its suppliers to, or the one-cent margins they squeeze out of the same suppliers. Wal-Mart’s just-in-time (JIT) inventory management system is also a marvel considering it can enforce a 99% service level of on-time order from suppliers (http://www.inventorymanagementreview.org/2006/04/walmart_increas.html).

            In one regard, as an organization that follows a specific and rational approach to organizational management, Wal-Mart must indeed be admired. Its goal as a corporation, maximizing profits and shareholder wealth, is met in an entirely rational fashion. Whether or not the goal of max profits is rational is irrelevant. What is important is that the means of obtaining that goal are rational. Wal-Mart as an organization is incredibly formalized, as Ehrenreich illustrated by explaining the orientation process, and has very specific goals. This allows the company to invent very rational means, such as paying minimum wage and squeezing every possible cent out of suppliers, to accomplish those goals in a very formal, efficient method transferable across geographic regions.

Explaing Our Economy in “-isms” and “-izations”

Thanks to Henry Ford and his meticulous methods to increase the productivity of workers on his assembly line, the economy transformed from one of craft production to one of mass production. In addition to “Fordism,” the past 100 years in the US economy can be explained by using “Levittownization,” “McDonaldization,” and “WalMartization.”

Ford perfectly implemented Taylor’s ideals of rational organizations in order to provide cars to the masses. Taylor’s scientific management proposed that scientifically determined procedures would allow employees to work at peak efficiency, in return for top wages. In addition to standardized labor, Ford added specialized machines, interchangeable parts, and conveyor belts. In 1914, after the assembly line had brought Ford much success he came up with a new idea in order to cut down on the wear and tear of workers; he began paying employees $5.00 a day (more than doubling the average worker’s pay) and cut the workday down from nine hours to eight. By standardizing the product, Ford was able to cut costs substantially (from $780 in 1910 to $360 in 1914) giving the common man the opportunity to buy a car.

As Ford had minimized the per unit cost of a car in the early 1900’s, William Levitt did so with the price of houses in the 1950’s. Levitt’s vision of suburbia transformed America to how we know it as of today. Before WWII home building was a part of the dying art of craft production, each home having a unique design. As soldiers returned from war, families dreamed to own their own homes away from the congested cities. Levitt made these American Dreams happen by standardizing home building. In Levittown, there were two styles of homes offered and could be built at a rate of 18 in the morning and 18 at night. For $100 down, a family could have a house outfitted with heat, a garage, a washer, and a stove.

In the 1950’s the common man could already own a car and a house affordably, and soon he would also be able to go out to eat, all on a tight budget. Ray Kroc founded McDonalds in 1955 and it spread like wild fire across the United States. McDonalds did for the food industry what Ford and Levit had done for the automobile and housing industries, and what Sam Walton would shortly do for retail.

WalMart is the most recent company to revolutionize the United States’ economy. The company is able to offer affordable retail products and groceries to many Americans.

Wal-Mart’s prices are about 14 percent lower than other groceries’ because the company is aggressive about squeezing costs, including labor costs. Its workers earn a third less than unionized grocery workers, and pay for much of their health insurance.

Each employee executes a specific task that allows the company to run efficiently. Competitors often have a tough time matching the prices of WalMart because it is difficult to keep their costs down.

Ford’s model gave rise to giant organizations built upon functional specialization and minute divisions of labor. These companies are each rational organizations as Weber has defined. Each has a clear hierarchy with defined goals, and workers have specialized tasks. But how “rational” (using the layman’s definition of the term) are the employees? Barbara Ehrenreich describes how difficult it is to work for such a company in Nickle and Dimed. Every day performing a monotonous specialized task all for a mere minimum wage. Is there really nothing else? What will it take for these workers to break the cycle? And, are companies like WalMart and McDonald’s just making it harder for minimum wage workers to get out?

WalMart – Industrial Peace?

In true Borat fasion –

WalMart employees are clearly the happiness employees on the planet……NOT!!!!!!!!!!!!!!!!!!!!!!!!

It is more than clear through the picture painted by Barbara Ehrenreich that WalMart employees probably don’t top the charts in employee satisfaction.  They seemed miserable with their wages, mindless tasks, and especially their incompetent managers, like our friend Howard.  If you think that you were surprised at the unhappiness of the WalMart workers in “Nickel and Dimed”, imagine the shock that Frederick Taylor would have felt.

Frederick W. Taylor is the father  of scientific management.  Taylor insisted that you could scientifically analyze all tasks being done in an organization and figure out better or different ways to accomplish those tasks in an effort to realize maximum efficiency.  You could also analyse the skills and talents of an organization’s employees and assign them each to specific tasks according to those talents – again in an effort to maximize efficiency.  Once workeres were all working at maximum efficiency, an era of industrial peace would come over the organization as workers working at maximum efficiency and producing maximum profits would ‘surely’ be paid top wages by their employers.  Now, while WalMart may not be the ‘perfect’ example of this theory, as they surely don’t scientifically analyze their employees talents and assign them to jobs according, but they have certainly simplified job functions enough to allow employees to specialize at a very specific job, that they would then be able to complete extremely efficiently.

Yet, something seems to have gone seriously wrong.  It’s true that the more Barbara worked the more efficiently and quickly she could put away clothes, but as time went on she seemed to become more and more dissatisfied with her job.  Much of Barbara’s, and her fellow employee’s, dissastisfaction seemed to have come from extremely low wages they were getting paid.  If you buy into Taylor’s theory, then the WalMart employees who are certainly working efficiently on their mindless tasks should be making a hefty sum of money in reward for their expertise.  That is absolutely not the case.

Just to put things in perspective…..For the sake of this example let’s say you are a single mother with one child working 40 hours/week at WalMart making minimum wage ($7.25 in PA as of July 2009).  According to the living wage calculator (Living Wage Calculator) in Union County, Pennsylvania (the country Lewisburg is in if you didn’t know) a living wage for one adult and one child is $13.87 – significantly higher than minimum wage.

Now, it’s clear that Taylor’s theory sure isn’t holding true – but why?  My answer – good business sense.  If WalMart can be one of the most profitable and largest corporations in the United States without paying their employees a living wage AND maintaining the amount of employees they need to operate, why on Earth would they pay them any more?  True these workers are working at maximum efficiency and helping to bring in profits for mother WalMart, but WalMart really has n0 incentive to raise salaries.  What can be done about this? You tell me…..