FINAL Individual Reasearch Paper

RUNNING HEAD: INDIVIDUAL RESEARCH PAPER 1
Toyota Recall Research Paper
Richard Jennings
Business 307: Organizational Behavior
November 22, 2015
Dr. Adeogun

Introduction
Recalls, are they accidental or intentional? Are big corporations handled in a clear and
organized manner? Many businesses are in a rush to make new products and quickly put them on
the market. A good business needs proper communication skills and need to be prepared in case
of a product harm crisis.
Toyota Recall Problem
Toyota’s being one of the best car businesses of all time had a big struggle with its
business in late summer of 2009. In Santee, California, a family of three lost their lives as their
vehicle went out of control when it accelerated, hit another car and caught on fire. Toyota said
that the owner’s floor mats were the wrong ones and were placed there accidentally when their
car was being worked at Bob Baker Lexus of San Diego. Evans and MacKenzie (2010) say, “On
the following month, Toyota announced that they were going to recall the floor mates of 4.2
million Toyota and Lexus vehicles” (pg.1). Toyota advised owners to place their floor mats and
place them in the trunk and had the dealers who would use zip ties to secure floor mats so it
would not interfere with the gas pedal. When the National Highway Traffic Safety
Administration examined the car’s it noticed that the gas pedal was mounted to its stalk while
other cars have hinged pedals. In response, Toyota sent a letter to all owners and said that no
defect existed. It was claimed that Toyota ignored over 1,200 complaints for acceleration issues
in their cars over the past eight years. Reports showed that cars were still getting acceleration
issues without having the mats on the floor. So Toyota made the announcement that the software
from the gas pedals will be fixed by 2011. It was a problem for the company because they had to
halt sales from new models and it was estimated that Toyota lost $1.5 million of profit every
week because of it.

What Caused the Recall?
First, there was no leadership in this recall; the business was irresponsible for not looking
into the complaints from the customers. When a mistake is made, regardless whether the
individual did it or did not, if he is a leader in the company, he is fully accountable for any
mistake or problem in the company. Also, the leader needs to make sure the problem is fixed
immediately. Specifically, Toyota did not use servant leadership which is helping stakeholders
fulfilling their needs. Informal communication was another problem in the recall towards both
internally and externally. In the business, the gas pedals were placed in the wrong vehicle; so
employees were not properly trained, and customers sent letters that were again ignored by
executive employees. Culture played a role, for United States owners could not make any
changes for it was up to the headquarters in Japan to change the vehicle due to the recall. This
culture led to a lack of negotiation. Many Toyota businesses wanted to recall the vehicles, but the
executives did not want to negotiate with the other stores, making the whole company look bad.
Quality Management
Most businesses want to get a product out as soon as possible, but what they do not
understand is that it is not all about the quantity but about the quality. Iwaarden and Wiele say
(2012) that quality management is viewed systematically for a product to be given to the
customer, at a reasonable time and with a reasonable cost. This situation will ensure that the
customer sees that the business focuses solely on the customer. The problem is a product may
not be ready when the customer wants it. Businesses want to excite their customers with great
products but some of them do not have the time or resources to fulfill them. According to
Iwaarden and Wiele, “In a situation of short product life cycles and a large product variety, it is
questionable how well quality management systems are able to maintain a focus on each of the

many customers and provide them with the right product at the right time” (p. 472). Months
after the Xbox 360 was released back in 2006, consumers suffered a recall that was called the red
ring of death, which was a type of hardware error. The main cause was the company Microsoft
promised a release date for the product that was not ready for release; Microsoft did not test their
product long enough for its longevity.
There are two types of learning when it comes to business recalls, voluntary and
involuntary. Haunschild and Rhee (2004) says, “Voluntary recalls will be better for learning than
involuntary ones. A nuclear power plant study found that when solutions to problems were
internally developed and voluntarily adopted, the plant was better able to develop competencies
related to improved safety” (p. 1547). It is important to motivate employees; this is key for a
successful business and to avoid recalls. Haunschild and Rhee (2004) also mention, “Involuntary
recalls may produce better learning responses than voluntary, because involuntary recalls are
more likely to draw organizational attention to a problem” (p.1547). With involuntary most of
the situations are new, like new procedures; so a lot of involuntary recalls are learned quickly.
Many food recalls occur because of the lack of FDA powers. In the House Committee
there are many members that indicate strong FDA powers. In an incident with children’s cold
medicine, there were many questions that arose whether the FDA had the authority it needed to
regulate drug and biotech manufacturers. One of the biggest incidents due to poor quality
management was in 2009, during a big recall of peanut butter which was one of the most costly
food recalls in history. Roman and Moore (2012) says, because the Peanut Corporation of
America, a smaller company, did not check their products for salmonella their peanut butter
products led to nine deaths, over 700 illnesses and a list of recalled products from peanut butter
to candy to even dog food. Immediately after the recall, PCA filed for bankruptcy protection and

fired their employees. Unfortunately the incident led to PCA gone bankrupt and all corporate
operations were ceased. The company is currently awaiting criminal and civil court proceedings.
Importance of Contracts
Fremlin says (2008), that in order for a product to have quality standards, a good contract
needs to be in order as well as a legal recourse that the buyer has against the supplier in case of a
breach. So a contract will set two or more businesses straight so there are no grey areas as far as
a product. It is important because if there is a recall of a product, the buyer is not taking blame
for a bad product by a manufacturer. At the same time, a manufacture is safe if the buyer is not
using the product properly. A supplier needs to have worldwide coverage on the agreed amount
to the product liability. According to Fremlin (2008), “Also in the contract provision it should
also state that the supplier is responsible for any deficiencies or gaps in coverage or deviations
from the specified insurance terms” (p.35). Any buyer needs to make sure that the product is
properly insured for the safety of the company and for the consumer. In any case of a recall the
buyer should not have to suffer from selling a product that he did not know was improperly
designed.
If a recall does occur it is important that the buyer does not have to suffer from any
financial loses. Fremlin (2008) says, with product liability lacking on the supplier,
reimbursement must be imposed by the buyer for product liability, safety recall costs and
liability through contract provision that state obligations by the supplier (p.37). A safety recall is
pretty much part of the contract for the supplier to reimburse the buyer for any kind of cost to the
recall. Fremlin (2008) also implies, “If the contract does not explicitly or adequately address
reimbursement from the supplier for costs of the recall, an innocent buyer, even a vigilant one

with stringent safety standards, will have little or no chance of recovering recall costs from the
supplier” (p.37). This would not be good for a business because not only would they lose money
from the product, they would also lose business from the customer. It is scary enough for a
customer to second guess whether or not they need that product; it is even scarier for them to
have to fear of a recall and not get money back.
Communication Skills
If the business cannot communicate with its customers and be honest then it runs the risk
of losing customers. Goldberg says (2012) that a big reputation risk is in communications, public
perception, brand protection and “taking responsibility for what is happening and taking
responsibility for protecting your customers” (pg. 20). He says, “The message your company
delivers and the tone you set as an organization either builds the trust of your customers and
supply chain partners, or diminishes trust”(p.20). Lancendorfer says that a problem that
corporate executives make is refusing to respond in an incident of crisis, causing a loss of control
in their company. To make sure this does not happen, these business leaders need to present the
honest truth in the story to prevent damage to their company’s reputation and profitability (p.96).
It is understandable that an executive would be frightened to lose customers to a recall and
chances are they might lose a few; nevertheless, it is important for executives to be honest with
their customers and to ensure them that whatever the problem may be, the company is doing
their best to fix the problem. A lot of loyal customers will understand and move forward. With
that being said, a lot of less loyal or ignorant customers might turn away from the company. It is
also important to make sure that an employer communicates with their upper level management
to avoid any future issues. Jusko (2015) says, “There are substantial monetary-multimillion
dollar monetary-penalties that can be sought if a company fails to report a safety issue they

should have reported” (pg. 13). Even a minor accident, needs to be reported because a minor
issue can lead to a bigger problem later on down the road. If a company owns a machine that is
having minor difficulties, it needs to be reported to a manager who then tells their other
employers so they know to not use the machine.
Product Harm Crisis
If an individual gets involved with a product-harm crisis, chances are the product will
lead to a recall by the seller and the manufacturer. Anwar says, “Two areas that influence these
issues are short term impacts and long term impacts” (pg.193). The short term impacts are
usually the consumer complaints, fines, penalties, and protests. The long term impacts could be
the business’ loss of loyalty, negative publicity, and possible lawsuits from the government and
the consumers.
Good examples of a product-harm crisis that can cause these impacts are toy companies;
toy companies are affected the worst when it comes to recalls because children are the biggest
consumer of toys. When a child chokes on a piece of a toy or gets sick from a type of chemical
they placed in the toy, most parents will not think twice on exchanging a product. When a food
product contains a harmful ingredient, the situation can become a lot worse than just a product
malfunction. Gendel, Khan and Yajnik (2012) reminds us that the U.S. Food and Drug
Administration supports the consumers and makes sure that these companies are labeling their
products correctly by containing complete and accurate information about the presence of food
allergens (pg. 302). They also state that a manufacturer can prevent mislabeling through an
allergen control plan, which ensures that all food allergens are labeled correctly.

Differentiation
Differentiation is an issue that is unsolvable and is only an obstacle in life that a manager
has to cope with for a company to be successful. If a job has both younger and older employees
working together, the employees will have some sort of conflict. The younger group might be
less productive than the older group or the older group might be slower with technology, having
the younger group pick up the slack. The best way of solving a differentiation is by reducing the
differentiation within the organization. One good way for reducing differentiation is having
employees from different departments working together with other departments to help fulfill a
task. Another way is to move managers into different departments in the organization so that
way, these managers become more experienced in different departments, making the
organization run smoother. The final way is to build an organizational structure, which will help
employees feel comfortable in their organization. It is important that business owners do not let a
culture form in a business. Culture needs to be developed when the business is being developed.
Co-workers are going to have different personalities and cultures, so it is important for a business
to have opportunities to communicate and understand each other. According to McShane, “In the
Johari Window process, individuals disclose more about themselves so others have a better
understanding of the underlying causes of their behavior; a variation of Window occurs in “lunch
and learn” sessions, where the employees in one functional area describe work and its challenges
to co-workers in other areas” (pg.198). Window’s idea broadens an employee’s perspective and
outlook of the company when the employer is informed about how the company runs in different
departments.

Operations in Toyota
The way Toyota operates is through the use of coordination and cooperation. Gieszl
enforces, “The centerpiece of the new organization is a consolidation of the operating divisions
reporting directly to Executive Vice President Yale Gieszl. In this regard, the number of separate
operating divisions has been reduced from ten to the following six major groups: planning and
development, automotive operations, customer services division, legal and risk management,
industrial equipment, and external affairs” (p.1). Toyota follows a matrix organizational
structure, which provides authority for the lower level of authority for the employees to get a
bigger part in participation and make suggestions for Toyota. Toyota also brings teams together
to come up with one product line, whereas divisional structures will have teams work on separate
product, and these divisional structures do not have lower level authority. The matrix structure is
designed to have better flexibility, communication, and innovation within Toyota. A few
problems with businesses that use matrix structures are the conflicts among shared powers of
managers and having two bosses weakens the accountability in the business. Toyota’s board of
directors consists of twenty-nine Japanese men with seniority to the company; since it is a
centralized power structure the company’s authority is usually not assigned. It is mentioned
before. Toyota has a lot of flexibility and will let employees work on their own as long as the
employees use proper communication. The executives in the United States are mentored by the
Japanese executives and are not allowed to issue a recall; decisions are made back in Japan.
Task Relationships
Since Toyota is a matrix structure, all employees are involved in the business. With this
being the case, a lot of conflict can arise within the organization. Not everyone is the same, thus

generally provides a good way of solving tasks. A workplace needs to have different opinions to
expand on a task and get different sides. In organizational conflict there are three different types:
task, relationship and process. Task conflict is a conflict that is the most beneficial to a company,
for it is conflict on the task at hand, nothing personal between the employees. Process conflict is
a conflict that shows how a task should be done. It can be judged by large groups. Task and
process conflicts are both considered functional conflicts which are positive in a company. One
dysfunctional conflict is relationship conflict, which is generally an outside problem that affects
the business from within. Big examples are couples in the workforce, who might bring problems
from home to work. Resource scarcity is a shortage of resources needed in a company, and it can
be another source of conflict. Most problems happen when a manager does not clarify rules and
procedures to their employees, causing conflict between their co-workers and the managers.
In order for a company to fix conflicts within its workforce, the company needs to reduce
its interdependence. Co-workers tend to be dependent on each other, so if there is a dysfunctional
conflict between co-workers, chances are the co-workers have a high mutual dependence.
Creating buffers is one way to reduce interdependence for it is a mechanism that loosens the
coupling between two or more people or work units. Integration is another strategy which
coordinates work activities toward the completion of a common task; integration will reduce
interaction between the employees and rarely has authority over the departments so it relies on
referent power and persuasion to manage the conflict. The final way of reducing interdependence
is combining jobs; that way it is less stress on individuals doing the same task. For Toyota, one
could put on the tires and the other could put the body of the car.

Recommendations
Lives were lost because of this recall; it takes humanity to realize that there was a
problem. Every business has made a mistake at some point in its life cycle, so if a manager can
realize anything in a management career is that mistakes are going to be made. Mistakes are
unavoidable, it may not be anything the manager did wrong, and it could be another employee.
The problem Toyota made was keeping it a secret and even worse just ignoring the problem. In
order to keep customers, the business has to be honest with the customers; being honest is the
ethical way to run a business.
It is clear that Toyota was not careful when placing its vehicles on the market. Test
driving a vehicle a few extra times in different situations should be an option when selling a car;
driving a car can be a dangerous situation if the car has a manufacturing problem. Doing more
test drives may cost more, but it would not be as bad as losing billions of dollars in profit. It
seems Toyota needs to work on communication between employees. This is a bigger problem
when the headquarters of the company is in a different country. Toyota might want to consider
giving the United States a little control in the decision if there was another recall. All
stakeholders need to cooperate at the global level to create a consumer friendly environment by
making sure they bring out the best product in the safest way possible. Contracts can be another
way of preventing the whole business itself from being completely liable to a product. A
company needs to be sure that their company has recall insurance for risks of recalls on the
product.

Conclusions
In conclusion, recalls can be avoided if the company uses proper protocol. A lot of recalls
occur due to pure laziness, and as long as jobs are properly done, the companies should not have
to face the consequences of a recall. Quality management is getting a product to a customer at an
efficient time without rushing the product out. A company also needs a strong contract that is
heavily detailed to make sure the company does not get penalized for something that a
manufacturer has done wrong. In addition the company needs to communicate well, not only
within the company but with other companies that are affected by the business. If the company
does experience a recall, then it might experience a product harm crisis, which could harm both
the company and the manufacturer.
The best way of solving a differentiation is by reducing the differentiation within the
organization. One good way for reducing differentiation is having employees from different
departments working together with other departments to help fulfill a task. Toyota follows a
matrix organizational structure, which provides authority for the lower level of authority for the
employees to get a bigger part in participation and make suggestions for Toyota. The matrix
structure is designed to have better flexibility, communication, and innovation within Toyota.
The executives in the United States are mentored by the Japanese executives and are not allowed
to issue a recall; decisions are made back in Japan. A workplace needs to have different opinions
to expand on a task and get different sides. In organizational conflict there are three different
types: task, relationship and process.

Reference
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Most Profitable Automaker Drove into a PR Disaster. Retrieved August 27, 2015.
Fremlin, G. (2008). A contract with watertight insurance provisions can save retailers,
distributors, and importers expenses that result from recalls of defective Chinese products.
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Gendal, S., Khan, N., & Yajnik, M. (2012). A survey of food allergen control practices in the
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McShane, S. (2014). Organizational Behavior. 3rd edition. Mc Graw-Hill.
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