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Ebay's approach towards organisational learning

How Ebay has adopted principles of the learning organisation

Essay 2010 10 Pages

Business economics - Business Management, Corporate Governance

Excerpt

This paper deals with organizational learning in the digital business world, where rapid changes are having a serious effect on organizations and where success primarily depends upon the people involved. The first part of the paper gives a brief overview of the prevailing management principles which were advocated by well-known theorists and have been adopted by many organizations to date. As the paper progresses, it broadly deals with the purpose of organizational learning and its principles. To provide an example of how a learning organization operates in practice, the approach of the e-commerce company eBay will be analysed in order to draw attention to the contribution of learning disciplines to organizational success. Finally, contemporary issues which seem to negatively affect eBay and its corporate culture will be discussed.

In the century that followed the upswing of the industrial age, management theorists such as Henri Fayol, F. W. Mooney or Lyndall Urwick were the first proponents of what is known as the “classical management theory”, which could be described as “ a pattern of precisely defined jobs organized in a hierarchical manner through precisely defined lines of command and communication ” (Morgan, 2006, p. 18).

Another theorist who made noteworthy contribution to managerial thinking is Frederic Taylor with his so-called “scientific management theory”, which provided “ the cornerstone for work design throughout the first half of the twentieth century, and in many situations prevail right up to the present day ” (Morgan, 2006, p. 23). Taylor contended that organizations have to place all the responsibilities from the worker on the manager if they are to operate effectively.

Nowadays, however, it might be argued that the management principles advocated by the great theorists of the last century were utterly wrong, because in most cases they made an organization working like a machine and inhibited creativity and innovation. Indeed, the ever increasing globalisation and the improvement of new technology significantly influence the perception and behaviour of individuals and organizations alike. These new circumstances require managerial rethinking as “ difference today lies in the rapidity of change and the increasingly unpredictable nature of the environment ” (Pearn, 1995, p. 35).

In fact, it is the learning organization which has the necessary capabilities to effectively adapt to environment change, which was described by Peter Senge in his book “The Fifth Discipline”. But what distinguishes a learning organization from its peers? Essentially the learning organization looks into the future and considers long-term strategies, rather than focus on the present and the short-term. It attempts to figure out the underlying causes of events to solve problems effectively and learn from mistakes, rather than just relieve symptoms. Moreover, and probably most important, a learning organization emphasises and recognizes that employees are its most valuable asset to ensure sustainable development and innovation (Senge, 2006).

As Gary Hamel put it:

“ For the first time since the dawning of the industrial age, the only way to build a company that ’ s fit for future is to build one that ’ s fit for human beings ” (The Economist, 2009, p. 84).

As such, there is no learning organization in the business world that can praise itself to be best. But one that seems to have adopted many organizational learning principles is the world’s leading e-commerce company eBay. Indeed, the dependence on technology is the reason why eBay can only thrive when it constantly learns, since the online market is hotly contested and well established companies like Amazon try to achieve supremacy.

In 1995 eBay was founded from scratch as “Auction Web”. In the early stages of the company the CEO and founder Pierre Omidyar set the cornerstone to become the world’s biggest e-commerce company and, of course, a learning organization. One key aspect that made a significant contribution to eBay’s rapid growth was “ Omidyar ’ s visionary idealism and the fact he talked about bringing people together, rather than business models or cash ” (Lewis, 2008, p. 30). From the very beginning he used to pursue “ aims that inspire and that every employee can understand and relate to their jobs ” (Finlay, 2000).

In the year 1997 Auction Web significantly increased the number of online auctions and was about to spin out of control. It was in this year when it became a real company and changed its name into eBay. However, due to this fast growth the company needed a chief executive who was capable of leading the company effectively and developing it further to become a real big player in its industry. Meg Whitman, a senior marketing executive at Hasbro, was eventually selected CEO for eBay; which, looking back, turned out to be the right decision.

In fact, this was the first major change the company experienced and it was Omidyar who again took the right decision. As such, eBay was still a start-up where employees used to talk to each other if they had any ideas or problems. Hence Omidyar convinced them that they will benefit from the change and that the company needs an experienced CEO to grow it further. From this time on Meg Whitman had the full responsibility of the whole company and began to apply her customer marketing expertise and leadership competences to ensure organizational growth and create an outstanding corporate culture.

Until 2008, when Meg Whitman resigned, eBay grew from 35 to a total of 15,000 employees worldwide and by the end of the year the number of active users mushroomed to more than 250 million (Lewis, 2008). But what has been eBay’s formula for success?

One of the major obstacles and limits to growth eBay encountered in its early years was fierce competitive rivalry. Even though eBay had the advantage of the first-mover, there was the threat of competitors adopting the successful business model. Just one mistake could trigger a reinforcing process, such as the defection of customers to competitors due to poor performance, slow development and lack of trustworthiness. This as such is a vicious circle which seriously threatens the organization as a whole. “ That ’ s why environmental dangers are so worrisome, especially those that follow reinforcing pattern. By the time the problem is noticed, it may be too late ” (Senge, 2006, p. 83).

Since eBay was a small company compared with the big players at that time, which were AOL and Yahoo, it could not rest on its laurels and vaunt its pioneering idea. It was just a matter of time till competitors try to adopt the business model and trounce eBay. To overcome this threat Omidyar introduced a feedback system where buyers and sellers could increase their reputation by posting honest comments about each other. This, in fact, paved eBay’s way to effectively defend and extend its strategic position, because sellers relied on positive feedback to persuade buyers to buy their products in particular, without being worried about falling victim to fraud. If sellers had defected to a competitor an important part of the community would have gone and buyers would have gone to the place where the majority of sellers moved to. This example clearly shows that “ seeing the major interrelationships underlying a problem leads to new insight into what might be done ” (Senge, 2006, p. 72). In the case of eBay, the new feedback system successfully tied the customers to the company and provided the crucial competitive advantage (Lewis, 2008).

But as the company started to grow so rapidly it was Meg Whitman who made a key contribution to eBay’s success, doubtlessly owing to her exceptional leadership competences. She is, in particular, “ known for listening carefully to her employees and expects her managers to do the same ” (Johnson, et al, 2008, p. 129). Whitman always stressed the role of employees as the most important asset every company has and that it is essential to uncover the full potential of employees to run a successful business.

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Details

Pages
10
Year
2010
ISBN (eBook)
9783640847723
ISBN (Book)
9783640843954
File size
395 KB
Language
English
Catalog Number
v167842
Institution / College
Prifysgol Cymru University of Wales
Grade
A
Tags
ebay learning organisation; organisational learning; innovation; creativity; ebay success; approach; management; principles; team work; corporate culture; organisational culture;

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Title: Ebay's approach towards organisational learning