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Organisation Design and change: Toyota Culture

Organisation Design and change: Toyota Culture

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  • 1. FORE School of Management, New Delhi Organizational Design and Change WMG 21 Toyota Culture Submitted to Prof. Neeraj Kumar Submitted By Reshmi Raveendran Roll No. 212027
  • 2. Objective: To Analyze the Culture of Toyota based on core values, terminal values, SOP’s, Norms of behavior and also the role of People, Structure, Ethics and Property Rights in shaping the culture. Toyota Culture 2
  • 3. Contents 1. Introduction……………………………………………………………………………….….4 2. Toyota’s Culture……………………………………………………………………….……5 3. Core values…………………………………………………………………………………….6 4. Terminal values………………………………………………………………………….…..7 5. SOPs…………………………………………………………………………………………...….8 6. Norms’ of behavior………………………………………………………………….…….9 7. People…………………………………………………………………………………………11 8. Structure………………………………………………………………………………….…12 9. Ethics……………………………………………………………………………………….…14 10. Property Rights……………………………………………………………………..……15 11. Culture’ supports the strategy………………………………………………..……16 12. Learning………………………………………………………………………………………17 References Toyota Culture 3
  • 4. Introduction Company – ToyotaMotor Corporation (Global) Toyota Motor Corporation (TMC) is a Japanese multinational automaker headquartered in Toyota, Aichi, Japan. The company was founded by Kiichiro Toyoda in 1937 as a spinoff from his father's company Toyota Industries to create automobiles. TMC is part of the Toyota Group, one of the largest conglomerates in the world. Toyota first caught the world’s attention in the 1980s, when it became clear that there was something special about Japanese quality and efficiency. Japanese cars were lasting longer than American cars and required much less repair. And by the 1990s it became apparent that there was something even more special about Toyota compared to other automakers in Japan. It was not eye-popping car designs or performance though the ride was smooth and the designs often very refined. It was the way Toyota engineered and manufactured the autos that led to unbelievable consistency in the process and product. Toyota designed autos faster, with more reliability, yet at a competitive cost, even when paying the relatively high wages of Japanese workers. Equally impressive was that every time Toyota showed an apparent weakness and seemed vulnerable to the competition, Toyota miraculously fixed the problem and came back even stronger. Today Toyota is the third-largest auto manufacturer in the world, behind General Motors and Ford, with global vehicle sales of over six million per year in 170 countries and employs around 325,905 people worldwide. Toyota is benchmarked as the best in class by all of its peers and competitors throughout the world for high quality, high productivity, manufacturing speed, and flexibility. The incredible consistency of Toyota’s performance is a direct result of operational excellence, understanding of people and human motivation. Its success is ultimately based on its ability to cultivate leadership, teams, and culture, to devise strategy, to build supplier relationships, and to maintain a learning organization. Toyota Culture 4
  • 5. Toyota’s culture The Toyota Way, along with the Toyota Production System, makes up Toyota’s DNA. This DNA was born with the founders of the company and continues to be developed and nurtured in the current and future leaders. Toyota started with the values and ideals of the Toyoda family. Five Main Principles of Toyoda • Always be faithful to your duties, thereby contributing to the company and to the overall good. • Always be studious and creative, striving to stay ahead of the times. • Always be practical and avoid frivolousness. • Always strive to build a homelike atmosphere at work that is warm and friendly. • Always have respect for spiritual matters, and remember to be grateful at all times. The "Five Main Principles of Toyoda" are a written statement of the teaching of Sakichi Toyoda the Five Main Principles of Toyoda have been handed down to every Toyota Group Company and serve as conduct guidelines for all employees. Toyota Culture 5
  • 6. Core Values a) Open and honest communication b) Customer satisfaction c) Social responsiveness d) Quality in everything we do e) Respect for people and property f) Recognition and reward for effort g) Teamwork h) Fair and equal opportunities i) Customer first j) Kaizen k) Focus on workplace The Toyota Way is a set of principles and behaviors that underlie the Toyota Motor Corporation's managerial approach and production system. It can be briefly summarized through the two pillars that support it: Continuous Improvement and Respect for People. a) Continuous improvement, often called kaizen, defines Toyota’s basic approach to doing business. The true value of continuous improvement is in creating an atmosphere of continuous learning and an environment that not only accepts, but actually embraces change. b) Respect for people: Kaizen environment can only be created where there is respect for people hence the second pillar of the Toyota Way. Toyota demonstrates this respect by providing employment security and seeking to engage team members through active participation in improving their jobs Toyota Production System The practical expression of Toyota's people and customer-oriented philosophy is known as the Toyota Production System (TPS). It provides members with work satisfaction, job security and fair treatment. Toyota Culture 6
  • 7. Terminal Values Toyota aims at building a corporate culture where teamwork and individual creativity thrive and where people approach their work with pride and with passion. Toyota honors the spirit of diversity in recruiting, training, and promoting capable individuals. Vision • Toyota will lead the way to the future of mobility, enriching lives around the world with the safest and most responsible ways of moving people. • Through our commitment to quality, constant innovation and respect for the planet, we aim to exceed expectations and be rewarded with a smile. • We will meet our challenging goals by engaging the talent and passion of people, who believe there is always a better way. Mission Toyota is dedicated and committed to: Ensuring that products are of outstanding quality, value for money and instill pride of ownership Toyota Culture 7
  • 8. SOP’s The foundations of TPS are built on standardization to ensure a safe method of operation and a consistent approach to quality. a) Kaizen - Continuous Improvement -Kaizen is the heart of the Toyota Production System. Like all mass-production systems, the Toyota process requires that all tasks, both human and mechanical, be very precisely defined and standardized to ensure maximum quality, eliminate waste and improve efficiency. Toyota Members have a responsibility not only to follow closely these standardized work guidelines but also to seek their continual improvement. b) Just In Time The 'just in time' approach to production that has now gained almost universal acceptance in world manufacturing was actually pioneered by Toyota. It allows the entire production process to be regulated by the natural laws of supply and demand. The result is that the right parts and materials are manufactured and provided in the exact amount needed - and when and where they are needed. Production is 'pulled' by the customer rather than being 'pushed' by the needs or capabilities of the production system itself. c) Jidoka In Japanese 'jidoka' simply means automation. At Toyota it means 'automation with a human touch'. This principal, jidoka, of designing equipment and processes to stop and call attention to problems immediately when they sense a problem is a central concept of TPS. Toyota Culture 8
  • 9. Norms of Behaviour In Toyota, norms are not explicitly formalized in rules, but are more inherent in the culture of the organization E.g.: TPS gives power to the employees on the front lines to pull a cord and stop the manufacturing line when they see a problem. The “Toyota Way” and the “Toyota Code of Conduct” serve as important guiding tools when Implementing the daily business operations to realize the “Guiding Principles at Toyota”. “Toyota Way” describes the values and methods to be shared for the people of the global TOYOTA organization. The “Guiding Principles at Toyota” summarize the corporate philosophy and reflects TOYOTA’s vision of what kind of company TOYOTA would like to be. Toyota Culture 9
  • 10. The present “Toyota Code of Conduct” provides a basic code of conduct and serves as a model and compass. It also provides detailed Explanations and examples of the actions and issues that all must be aware of when carrying out Actual business activities. Code of Conduct involves: • Compliance with Laws and Regulations - With sound social norms in mind • Use and Management of Assets and Confidential Matters- Ensuring asset maintenance and confidentiality management - • Insider Trading - Act as an investor with sound common sense • Activities Promoting Safety - Enhancing vehicle safety • Environmental Preservation Activities- Building environmentally and people friendly vehicles • Research and Development Activities - Developing vehicles from the standpoint of our customers • Procurement Activities- Reasonable and sincere transactions • Production and Distribution Activities - Building vehicles that win customer trust and faith • Sales Activities - Winning the trust of customers and dealers • Overseas Business Activities- To become a global company trusted worldwide • Profitability Enhancement Activities- Building a stronger profit foundation - Toyota Culture 10
  • 11. Influence of People in shaping the culture Toyota doesn't just produce cars; it produces talented people. Toyota's remarkable success is through a 4P model for excellence- Philosophy, People, Problem Solving, and Process Toyota and other such learning organizations believe that people are the organization’s most Significant asset so they invest in the skills and knowledge of people. Toyota workers share a common goal: continuous improvement. Their shared vision motivates them to make improvements beyond merely meeting their customers’ needs. Respect for people: The employees respect each other, make every effort to understand other, take responsibility, and do their best to build mutual trust. They believe in communicating sincerely to achieve this. Teamwork: Toyota also stimulates personal and professional growth, shares the opportunities of development, and maximize individual and team performance through: • Commitment to education and development • Respect for the individual. • Realizing consolidated power as a team. The company's four-stage process for building and keeping quality people is: Attract, Develop, Engage, and Inspire. In order to build a culture of continuous improvement, Toyota makes the following efforts: • Encouraging problem solving at all levels of your organization • Making management accountable to employees • Inspiring the people to be committed to the company, family, and community • Turning the HR department into the arbitrators of fair and consistent daily practices • Using a top-down and bottom-up planning process to involve everyone in achieving breakthrough goals Toyota Culture 11
  • 12. Structure As Company grows Structure expands Response time slow E.g.: Toyota recalled 242000 Prius and Lexus hybrid cars made between March and October 2009 because of a braking problem. The organizational structure of Toyota may give us some insight into the handling of this crisis and ideas for the most effective way for Toyota to move forward. Companies such as Toyota that have a rigid corporate culture and a hierarchy of seniority are at risk of reacting to external threats slowly. It is not uncommon that individuals feel reluctant to pass bad news up the chain within a family company such as Toyota. Toyota’s board of directors is composed of 29 Japanese men, all of whom are Toyota insiders. As a result of its centralized power structure, authority is not generally delegated within the company; all U.S. executives are assigned a Japanese boss to mentor them, and no Toyota executive in the United States is authorized to issue a recall. Most information flow is one-way, back to Japan where decisions are made. Toyota had a pattern of slow response on safety issues because of its organizational structure. In order to overcome this problem, Toyota decided to Establish a structure for the swift realization of the Toyota Global Vision too swiftly communicate the voices of the customers and information from frontline operation level of each region, to the Executive Levels. Thus it is observed, that Toyota has a Geographic Structure because: • Geographic structure allows Toyota to adjust its structure to align its core competences with the needs of customers in different geographic regions • Geographic structure allows some functions to be centralized and others decentralized • Central Support Function: responsible for overseeing the activities of the managers heading each Region • Within each region, it is observed that Toyota has a highly vertical structure with minimum 7 levels Toyota Culture 12
  • 13. Toyota Manufacturing- UK organizational structure Toyota is a modular organization as all nonessential functions are outsourced. The idea Behind this format is to retain only the value-generating and strategic functions in-house, while the rest of the operations are outsourced to many suppliers. By managing relationships with hundreds of suppliers, Toyota achieves efficiency and quality in its operations. Toyota Culture 13
  • 14. Ethics Toyota promotes its business activities from “both a global and local” standpoint so as to • contribute to the development of local economies and society. Toyota’s ability to recover from disaster: When Toyota vehicles were recalled, Toyota’s gold • standard of quality fell like a house of cards. The reason was aggressive growth that created an unmanageable risk. Toyota was expanding too much and too quickly started surfacing its car-quality ratings. However Toyota Accepted Responsibility and recovered from the crisis and was able to maintain its reputation. Toyota’s Human System Model: Toyota used Lean projects as a vehicle for developing people • and culture. Toyotas organizational structure is such that the employees collaborate and work in teams. • From there it moves to safe workplaces. Organizational supporting processes -Toyota still want people to have a job for life, even • though this is not common outside Japan. Toyota has fair HR policies and rewarding policies • Toyota’s management has Created a Harmonious and Lively Work Environment • Sustainability Initiatives a) Activities Promoting Safety- Enhancing vehicle safety b) Environmental Preservation Activities-Building environmentally and people friendly vehicles. • Procurement Activities- Reasonable and sincere transactions • Toyota’s Corporate Social Responsibility: Toyota contributes to society by operating its business in an open and fair manner. Through active public relations activities, investor relations and philanthropy, TOYOTA aims to be a “good corporate citizen” that is trusted by the international community. Toyota Culture 14
  • 15. Property rights • Use and Management of Assets and Confidential Matters- Ensuring asset maintenance and confidentiality management Toyota endeavors to manage and protect confidential information (e.g., its trade secrets) and to use such information in an appropriate manner. • Intellectual Property -Toyota carefully analyzes patents and the need for patents in each area of research to formulate more effective R&D strategies E.g.: Policy is the licensing to other companies of patents in the area of hybrid • Human Relations Activities -At Toyota, human relations activities are constituted by a range of voluntary activities aimed at improving the quality of teamwork and human relationships between employees. These activities are held both within and outside the workplace, and helps employees to create fulfilling lives and widen the circle of human interaction. • Toyota has been maintaining a people-centric culture that sustains consistent growth, innovation, profitability, and excellence. • Encouraging problem solving at all levels of your organization • Making management accountable to employees • Turning HR department into the arbitrators of fair and consistent daily practices • They promote a policy of equal payment for each job and pay their employees well. • Using a top-down and bottom-up planning process to involve everyone in achieving breakthrough goals. • The employees of Toyota realized that if they want to protect their property rights such as keeping their jobs and benefits, they must internalize values and norms. Toyota Culture 15
  • 16. Does the ‘culture’ support the strategy? Lean is not sustainable without the culture to support it The key for the Toyota Production System was the "Respect for Humanity" system. Operational Excellence achieved through understanding people The incredible consistency of Toyota s performance is a direct result of operational excellence. Toyota has turned operational excellence into a strategic weapon. Toyota’s continued success stems from a deeper business philosophy based on its understanding of people and human motivation. Its success is ultimately based on its ability to cultivate leadership, teams, and culture, to devise strategy, to build supplier relationships, and to maintain a learning organization. The Toyota Way - Sharing the Toyota Way Values The Toyota Way, along with the Toyota Production System, makes up Toyota s DNA. This DNA was born with the founders of our company and continues to be developed and nurtured in our current and future leaders. The Toyota Way has two pillars that support it: Continuous Improvement and Respect for People. Management Role: The management has taken effort in defining and explaining what the goal is, sharing a path to achieving it, motivating people to take the journey and assisting them by removing obstacles. They have engaged the minds of people to support and contribute their ideas to the organization. Toyota Culture 16
  • 17. Learning • Build quality into workplace systems • Eliminating huge costs of hidden waste • Turn every employee into a quality control inspector • Accept responsibility • Companies generally can’t predict when crises might occur. However, good internal risk assessment programs can help identify those areas of the business where management should be on the alert. • Robust risk management programs help a company address problems as they pop up on the internal corporate radar screen – and before they explode in public. Toyota Culture 17
  • 18. References Books • The Toyota Way: 14 Management Principles from the World's Greatest Manufacturer Hardcover by Jeffrey Liker • Toyota Culture – The heart and soul of Toyota way by Jeffrey Liker • Case: Toyota Struggles With Organizational Structure , Case written by Berrin Erdogan, Carlene Reynolds, and Talya Bauer to accompany Carpenter, M., Bauer, T., & Erdogan, B. (2009) in Principles of management • Organization Theory, Design and Change by Gareth R Jones, Mathew(sixth edition) Case study : How Toyota manages its environment (pg 93) Case study: Toyota’s Paranoid Culture (Pg 207) Case study: Toyota a learning organization (Pg 357) Website • • http://www.toyota-global.com/ The recovery of trust: case studies of organizational failures and trust repair (Toyota) www.ibe.org.uk First published in February 2012. • Toyota Recall: Five Critical Lessons Posted by Michael Connor, January 31, 2010 in the magazine – Business Ethics (The Magazine of Corporate Responsibility) Toyota Culture 18