Role of Management at Toyota Unit
Roleof Management at Toyota
Managementis one of the most important if not the most important aspect of anorganization. It directly influences both the short term and longterm direction of the firm and even the strategic decisions that thefirm employs. For many successful firms around the world such asApple, IBM and HP, their success has been linked to the vision,leadership and management skills of their chief executives officers.This does not however, imply that these individuals have solely madethings happen. Although they are at the top and the most visiblepeople of the organization’s leadership and management team, thereare other individuals who contribute immensely to the success ofthese organizations across all levels.
Inthe case of Toyota, the firm has benefitted from a rich familyhistory that has excelled in business leadership. For other familyowned businesses, such success stories are rare (Steen 2010). Theability to move away from the family ownership model to embraceinvestors and experienced leaders also portrays an acute sense ofcorporate direction. The ability to harmonize all resources andmaintain proper functional relations amongst these resources tocreate a dynamic firm that produces unique products that meetcustomer needs is not an easy task. This paper looks at the uniqueexperience of management at Toyota USA from a subjective perspectivewith the support of relevant literature in exploring the conduct ofthe management from the four main roles of management identified asleading, planning organizing and controlling.
Establishedin 1933 by one Kiichiro Toyoda as a family business, Toyota isarguably one of the most recognized automobile brands around theworld. The firm headquartered in Aichi Japan manufactures and marketsa wide range of automobiles from pickup trucks, to sedans and evenhybrid models. Originally named Toyoda after the founder, the firmhad started off as a looms manufacturing cottage industry in theearly 1920’s. Car manufacturing commenced in 1933 with the firstsedan sold in 1936. This model was way cheaper than the existing fordby a whopping 400 yen. This set up Toyota’s key competitive aspectas pricing. Several models such as Toyatapet, Crown, and Corona wereproduced in that period. In 1957, Toyota officially made entry intothe US market by importing from Japan. Tough taxation to protectlocal American players deterred importing and encouraged setting upplants in the US. The same strategy was applied in its future globalexpansion plans.
Today,Toyota is the largest automobile manufacture by volume and is amongtop five Fortune 500 companies worldwide. With a workforce of over300 000 employees globally, the firm ships over nine million unitsannually (2014) with annual revenues of $216 billion in 2012 alone.Although such sales revenue are quite impressive by any industrystandards especially in the automobile manufacturing industry which has faced upheavals in the recent past, it shows that Toyota is aglobal brand and sets a good example in organizational strategy andleadership which can attributed to such results.
Organizationalperformance is one of the most concrete indicators of the firm’smanagement. This is attributable to the fact that the management isreserved the role of making key decisions in response to bothinternal and external business environment changes. These functionsof management are loosely categorized into four key areas, planning,organizing leading and controlling.
Planningis defined as the basic function of forecasting the future course ofaction in an organization informed by previous, present andanticipated changes in the environment with a view to achieve setorganizational goals. Therefore, for planning to take place, anorganization must have a clear set of short term and long term goals.From this, it is therefore clear to see that planning in involved increating a vision and mission statement, strategizing and settinggoals and objectives of the firm. For most global firms operatingthrough subsidiaries, they tend to formulate a larger global planthat encompasses the parent firms but allows a significant level ofindependence to allow subsidiary firms to develop localized plans andstrategies to conquer and operate in their designated markets. Mosthave firms that have tended to adapt blanket planning have learnedthe hard way (Hodgkinson & Healey 2011). From that, there arethree clearly visible levels of planning namely strategic planning,tactical planning and operational planning. At Toyota, the planningfunction is clearly and well executed with a global plan andsubsidiary strategic plans.
Startingfrom the vision, the intended path into the future of Toyota isclear. The vision states that “Toyota will lead the way to thefuture of mobility, enriching lives around the world with the safestand most responsible ways of moving people” (Toyota Global 2015).The vision into the future of mobility has seen the firm develop moreinnovative products for the market to meet new and changing consumerdemands. The shift to more environmentally friendly automobiles hasbeen a response to the need and desire to increase environmentalsafety and preserve the environment. Toyota is thus assistingindividuals to reduce their carbon footprints by developing greenvehicles and increasing fuel efficiency. Models such as the hybridToyota Prius have become beacons of the strategic plan by Toyota tobe a green company and enable consumers to be green. In the samemanner, one of the logistics managers at Toyota Texas introduced apolicy that would reward a green bonus to people who would travel towork by the company bus consistently. This was in line with reducingpeople and the firm’s carbon footprint. The decision to reward themove was well received people and helped the employees understandbetter the issue of carbon footprint and taking own initiative andhighlights the aspect tactful planning.
Interms of market dynamics, the firm has shown a knack in excellentstrategic plans in the market. In 1989, Toyota introduced a newluxury brand in the market, Lexus, to compete better with establishedluxury brands. This was because Toyota as a brand was recognized forits low priced products could and hence not compete effectively inthe premium market. Today Lexus is a world beater in the premiumluxury market. More recently, the firm launched a new strategic plannamed Toyota New Global Architecture, (TNGA) which was a response toa periods stuttering growth following the 2008 global recession andthe 2011 earthquake in Japan. The new approach by Toyota aspires tobreak the 10 million units annual sales ceiling. To achieve this, thefirm has introduced a new $500 rebate program targeting Americaveterans and servicemen. This is a definitely an incentive that willgrow sales in the short term (Toyota 2014).
Organizingrefers to bringing together all organizational resources to form aproductive relationship that will enable the firm to meet the setgoals or keep to the planned path. Organizing generally comprises ofthree core elements namely organizational design, culture and socialnetworks. An organizational design, commonly presented in a graphicalor chart format portrays the flow of chain of command. The process ofcreating this structure is called organizational design whichidentifies business activities, classification of activities,creating responsibilities, authority relationship and delegating ofduties. Therefore, the organizing process must be done in manner thatsuits prevailing conditions both in the internal and externalbusiness environment. All these relationship in the organizationcreate a unique culture both formal and informal and social networkscritical in getting the job done.
AtToyota, the organizing aspect is one of the most complex given thesheer size of the firm. The firm employs over 330 000 people globallyand has over 30 000 employees in the US alone employed directly.Toyota, Scion and Lexus dealerships spread out all over the US employover 125 000 people. Organizing such a huge workforce around a commongoal is no easy feat. To maintain a clear focus on the common goal,Toyota ensures that most manufacturing is centralized to maintainuniformity and parts are transported to assemblies and subsidiariesaround the world. Some plants are specialized in given products. Forinstance the Texas plant only specializes in the Tundra full-sizepickup truck and the Tacoma mid-size pickup truck.
Figure1 Toyota`s Organizational structure
Oneof the best contributing factors to this strong sense of purpose andtogetherness at Toyota is its family link to the Toyoda family. Thefamily still retains a small percentage of ownership but controls thefirm’s central authority. By maintaining a centralized power unitheaded by family members, the firm does not generally delegate powerin the firm as most family businesses (Wang 2011). The current CEO ifthe firm, Akio Toyoda, is a grandson to the firm’s founder KiichiroToyoda. Again, the board of directors is comprised of 29 Japanese menwho have a long history in the firm or linked to the family. They arethe ultimate authority in the firm. For instance, Toyota-US has nopower to order a recall in any situation as that decision has to bemade in Japan by the top leadership. The firm has also stronglylinked its organization and work ethics to Japanese culture. In fact,the world acclaimed Toyota Way has its origins in Japanese culture.In Toyota Texas plant, there are several Japanese managers. One ofthem Mr. Aichiro working in the Human services department is servedwith training employees on the Toyota way and the need for continuouspersonal improvement. For many employees, he serves as ‘therapist’and trainer to them assessing their satisfaction in the workplace andlife outside the workplace (Hodgkinson & Healey 2011). This isrecognition of the desires of a human being and not just a worker.
Leadershipin any organization pertains to directing management’s functions indeveloping suitable working methods to meet organizational goals.There are four main components of leadership in an organizationnamely: decision making, communications, groups/teams and motivation.For a successful organization, decisions must be made that correspondwith the organizations capability, resources, skills, knowledge andinformation. The decisions must be made in a timely manner for theorganization to benefit optimally from such decisions.
Incommunications, information regarding the implementation of decisionsmust flow easily from the top authority down. Additionally, the lowerranks must also be given a channel to voice their concerns to thehigher levels (Steen 2010). This is important in creating anenvironment or culture that allows people to work together as part ofa team with common goals. Employees must also be motivated by theleadership by inspiring them to follow their path into realizing theorganization goals and vision. As a firm that embraces diversity thefirms constantly has a translator working at the firm usually workingfor the Japanese senior executives who visit the Texas plant. Thisensures that communications between the plant executives and theparent firm executives is clear and nothing is lost in translations.
Workingin teams is encouraged and well nurtured at the firm. This has inturn nurtured creativity especially in the research and developmentarea where this team has produced numerous vehicle designs (Alexievet al., 2011). To ensure departments and the entire firm works aslarge team, numerous meetings are held weekly by the top managementand even the plant workers. In these meetings, employees are offeredthe chance by their supervisors to raise any issues and complaints(Alexiev 2011). The same employees are required to suggestedsolutions which are vetted by other employees.
Alsoincorporated into the leadership is the training for its leaders onvarious levels as part of continuous improvement in skills andrespect for individuals as recommended by the Toyota Way. As such,the firm views its employees as important business partners and hasinvested heavily in leadership and empowerment training for itsemployees. As the firm grows, the firm’s leadership has challengedits employees and other stakeholders to also grow with the firm. Thisview has been important in deconstructing the image of the firm as afamily business eager to just grow the family. From a theoreticalviewpoint, most scholars have opposed family business leadershipowing to conflict of interest in some cases (Pache & Santos2010). For instance, an employee maybe given a senior position in thefirm not out of merit but his position in the family.
Thismanagement function pertains to ensuring that the firm’sperformance and direction keeps to the set path and meets setstandards and achieves industry benchmarks. Performance must becontinually compared to the set standards and corrective measures toachieve set standards put in place where necessary. For most firms,controls standard are set up in terms of costs, product recalls,units shipped/produced, defective products, customer service ratingamong others. An effective control system should be able to detectany possible deviation from the standard to preempt the problemrather than react to problems. The leadership is served with thistask of establishing internal checks (Wang 2011). As such, effectiveorganization should be able to develop internal controls tools thatinform them when the firm’s performance is out of track in a givenarea.
Toyotahas embraced matters of organizational control very seriously. Thefirm has an entire department called enterprise risk management (ERM)whose sole purpose is to assess strategy execution, assessreliability of financial reporting, assess internal reporting systemsand oversee internal audits. For instance, in 2012, the departmentmade 18 reports in Toyotas overseas operations including the US onfiscal compliance. Such cases were handled internally and they go along way in averting costs and punitive measures that may be taken bylegal authorities and governments such as IRS in the US.
Fromthe discussion, it is clear that the larger the organization, themore complex its management functions. Toyota has numerous levels ofmanagement with some appearing to be replicated at its parent companylevel and subsidiary level. However, each level has its unique rolecut out in the organization. As a firm that has supported leanmanagement, the firm believes in empowering employees in order toremove unnecessary layers of authority and management that may stiflecreativity and innovation. On the other hand, the sheer size of thefirm requires a centralized source of authority to ensure operationsare streamlined always. From the discussion above, it is clear thatToyota has adhered well to the core functions of management bymeeting the recommended standards in planning, controlling,leadership and organizing. I therefore belief that the firm, thoughit has ample room for improvement has a lot of lessons to offer toother firms in term of proper management that produces results.
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