Organisational Structure and Change in Toyota - Case Study Example

Introduction Toyota today is synonymous with efficiency and corporate ‘magic’. The fabled company has built more than just automobiles – it has builtan abiding corporate philosophy and work culture. What started as a small auto company in the war-torn thirties (1937) is now arguably amongst the world’s most respected companies. Probably, two value systems that every employee in the corporate world has heard and known about are a) the Toyota way in terms of the 14 principles, and b) the HP way in terms of the ‘rules of the garage’. At both companies, the founder(s) and their successors have been larger-than-life visionaries who have helped build the formidable companies they are today. It is logical to think about the relevance of the Toyota way into industries outside the manufacturing sphere as well – Services organizations like Banks and Software companies have tried and assimilated the ‘factory’ model of Toyota as well as the ‘Lean’ manufacturing principles. What follows here, is a critical analysis of the pro’s and con’s of adopting the Toyota operative model into the service industry, particularly banks. The Toyota Way for the Banking industry The Toyota experience spells a success story and a story of survival with sheer grit, persistence and tenacity amidst periods of fluctuating fortunes across the decades. Likewise, fabled banks have their own stories of how they have (and have not) survived to this day. If one were to explore the validity of Toyota’s fundamental principles and their applicability to the Banking industry, the following aspects seem pertinent: a) Governance and Ethics are the pillars of Toyota – needless to assert, these have been the sustainers and destroyers of Banks today, especially in the context of the economic turmoil of the past few months. Banks that were seemingly invincible just a year ago have bitten the dust and sunk without a trace. Hence, Toyota, in stark contrast, demonstrates what strong governance and ethics can do for a company’s survival. b) Back from the brink and flourishing thereafter – Toyota almost collapsed during the Korean War and was saved only because of an order of trucks that came from the US army in 1950 – Toyota has ‘never’ forgotten this bitter lesson and the company thrives to this day on what it proudly calls the value system of ‘presumptions of imperfection’ – others would term it as healthy paranoia.. In direct contrast, Banks have in recent times turned adventurous, invested recklessly, served bad credits, and quite simply, collapsed – Bringing in caution back as a buzzword therefore, is the need of the hour. c) Kaizen – or continuous improvement is now part of the industry lexicon – it is no more ‘owned’ by Toyota but by management Guru’s. Small, incremental steps toward problem solving – this concept is radical and stands against the common belief system of ‘speed’ as the essence of business. Again, a critical oversight of service line workflows and picking out inefficiencies is something that Banks can do during this period of economic bloodbath. Kaizen dictates long-term view even at the cost of short-term business gains – this belief is anathema to most modern-day Wall street giants – the argument for or against Kaizen is difficult – accentuated by the fact that Toyota’s PRESIDENT himself has questioned its relevance in today’s times and advocated ‘Kakushin’ or ‘revolutionary change’ in its place (Evolving Excellence, 2006). He has been accused of ‘crying wolf’, but the fact that Toyota is today in significant trouble with rapidly depleting top and bottom lines is testimony to his foresight. d) The TPS or Toyota Production System stands on the three axes of cost, quality and continuous improvement – most service companies, and banks of course, have come to realize the importance of all three – Established and globally reputed banks such as UBS, have stood by these very same principles – although that hasn’t stopped them from being impacted by the economic turmoil! e) Evangelization and extraordinary methods of communication – Toyota has spent millions on training and aligning its globally diversified workforce on its founding principles – It has also resorted to unique visual and audio methods to get across key messages – even to the extent of aiding workflows through these methods – Banks have adopted these techniques for customer desks and queue management – however, they do not use the same levels of visual and audio techniques within their internal processes – Most Banks do invest heavily in training but they are singular in their lack of abiding principles that are to be held dear to their belief systems – At best, they are bracketed as ‘organizational policies’ – quite inane compared to the fabled Toyota way! f) Zero tolerance to inefficiencies – a loud message to Banks no doubt! – One has to only glance at the complaint portals to gauge the enormity of the problem – Banks are beseeched by complaints from across their customer base regardless of geography – the larger they are, the more seem to be the complaints – hence, a ‘zero’ tolerance approach is not a choice – it is an imperative today! g) Heijunka – or leveling of workload regardless of demand, is again a unique concept wrought to perfection by Toyota – there are of course standards for different types of service – and herein lies the key message for Banks – uniformity of workload and service can be achieved and is even critical for the service industry that has long believed (incorrectly) that services are to personalized and do not necessarily become susceptible to uniform work methods. Evangelizing the Toyota Way Toyota has long outgrown being just a ‘Japanese’ outfit to become the established global leader of the automobile industry. Consequently, the original founding principles – the 14 principles of management – need both re-assertion as well as allow critical questioning and validation – no less than the PRESIDENT himself has blown the winds of change on this count. Key aspects needing consideration in spreading awareness across Toyota’s global workforce include: i. Language barriers need to be removed – far easier said than done when most of the top management includes Japanese nationals – A seamless program cutting across languages covering all geographies needs to be established – and Toyota has made admirable progress on this front with heavy investment on training material – written and audio-visual modes, as well as in-person coaching. ii. Some beliefs emanating from the 14 ways are very ‘Japanese’ in their tenor and value systems – for instance, Kaizen or incremental approach goes culturally against the ingrained ‘revolutionary’ or ‘quantum’ approach adopted and liked by Western minds – this classic ‘clash’ of cultures poses a significant roadblock in rapid dissemination! iii. An open and healthy debate on the relevance of the principles to today’s circumstances needs to be encouraged – The ultra-conservative style of management may or may not allow critical debate – yet, respect to every individual employee remains an abiding value – thus, one can expect evolutionary if not revolutionary changes in management style. This is part of the learning process. iv. Emphasis on long-term vision even at the cost of short-term gains – this again is anathema to the Western mind – Westerners are bred on the principle of ‘here and now’ – A healthy blend of both beliefs may eventually emerge – that might even prod management into changing styles of administration eventually. v. Be it Toyota or any other organization within the service industry, emphasis on efficiency is a top priority today – Teaching the benefits of efficiency is therefore no longer a challenge – The recognition of a ‘top down’ mandate for this critical factor will go a long way in establishing sound business propositions. vi. ‘Kanban’ or the card system of ensuring inventory follows demand and not the other way around is again a thought process going against the grain of modern thinking – Non-oriental cultures across the globe have learnt to thrive on ‘excess inventory’ and ‘generating demand to meet inventory’ – the benefits offered by Kanban are only being recognized now during difficult economic times! vii. Multi-skilling every employee has been a hoary tradition within Toyota – Training all employees to be multi-skilled is at once both exciting as well as challenging. Again, many cultures stress the value of ‘perfecting one skill’ than attempting many – teaching the benefits and winning people’s minds on this critical activity has been a challenge within diverse geographies. viii. Being agile and hyper-sensitive to changing market conditions – This is probably the easiest value to be taught in today’s difficult times! – this is the most significant contributor to Toyota’s survival and growth – and it will not let go of this philosophy with changing seasons! ix. Workshops – Toyota has perfected the technique of developing value stream maps at Kaizen workshops – this is a solid, established training and development practice – and one that can be replicated, with effort, within the service industry – the constant refrain within the service industry has been that it is people-centric and therefore not susceptible to uniform workflow deployments – this has been proven to be an illusion after several globally reputed service companies have adopted, albeit with effort, this unique belief system. Today, advanced business mapping tools have made the task easier and the development of workflows is no longer a formidable challenge. The Toyota Way and Organizational Change A belief or value system, when practiced for long and becomes firmly entrenched, leads to a certain ‘stagnation of thought against the flow’. Likewise, the Toyota way has become synonymous with the company and looks inseparable from the company’s history and future. Katsuaki Watanabe, the President of Toyota, exemplifies the concept of challenging ‘established mindsets’. Toyota, like all major companies across the globe, is facing negative growth in today’s unforgiving economic scenario. The President himself has actively canvassed for radical change – even questioning the validity of Kaizen (incremental change) as opposed to Kakushin (revolutionary change). The need for change is being acutely felt yet the strings of the past are difficult to dismantle. If Toyota were to embark upon a program of radical organizational change, it would probably face some if not all of the following challenges: 1) Any deviation from the 14 principles that have been abiding since inception of the company will be met with strong resistance from the ‘old guard’ – entrenched management beliefs within workers and executive board members serving long tenures within the organization would need a strong story to be convinced of the need for such a radical change. 2) Dissemination of change would have to be performed at a well-moderated pace – the company is highly conservative in its approach and any change has to necessarily be cascaded with immense caution – caution of course, does not translate as ‘slow’ or ‘evolutionary’ – rather, the contrary viz. ‘speedy change’ with due caution. 3) Employee empowerment is significant ‘within’ the current management value system – however, whether employees would be actively encouraged to question even the basic 14 principles remains to be seen – change need not be ‘top down’ – rather, as is the case in most global companies, change is being wrought through an empowered workforce that finds value in independent thinking. 4) A deep commitment to ‘customer-centric’ approach of management might serve as both a catalyst at times and a hindrance during other circumstances – For instance, Toyota is highly focused on uncompromising customer service – any change however miniscule, will impact the quality of customer service and the company will have to be willing to undergo the ‘labor pains’ of change. 5) A multi-cultural, multi-racial and multi-national workforce engenders unique challenges, especially during troubling times such as the present. The company has embarked upon an ambitious, ground-breaking initiative known as ‘Emergency Profit Improvement’ under the tutelage of its president (Miller, 2008). This has been sowing the seeds of radical change and assimilation within different geographies will be skewed unless immense care is taken to address culture-specific and country-specific concerns. 6) Toyota is further attempting to reinvent the entire car – half the number of parts is to remain while the rest change – this is being driven as part of the VI or ‘Value Innovation’ program (Evolving Excellence, 2006). The ‘revolutionary’ approach is somewhat alien to Toyota’s ways but nevertheless signifies the continuing habit of ‘staying ahead of the market’. If Toyota pulls this off, it will be yet another story for business books! 7) Cost control is the foremost topic in the minds of corporate leaders today – be ‘lean and mean’ is the order of the day. At Toyota, cost consciousness has always been a top priority and this is reaffirmed by its CCC21 (Construction of Cost Competitiveness for the 21st Century) program (Evolving Excellence, 2006). Removing cost inefficiencies will continue at a merciless pace and this is bound to have ripple effects across the stakeholder community. For instance, suppliers may face (and resist) vigorous price-crunch demands from Toyota thereby reflecting back upon Toyota’s cost alternatives. 8) The focus on ‘multi-skilling’ employees is only going to get stronger in the coming months and years – while this is at the heart of the organization’s value system, carrying employees from diverse cultures along on this path might prove difficult. Employees from modern business culture would prefer honing one skill to perfection as against mastering multiple skills – Toyota will have to use all its training acumen to cross this hurdle. In conclusion Today’s economic realities do not allow the luxury of comfort within established business norms. Every norm can and will be challenged if not by employees and management, by investor and customer communities. Toyota, by virtue of its pre-eminent position in the industry, is uniquely placed in responding to the call of history and is bound to make significant changes in its business approach in the coming years. This will be a story worth watching and following, as every change sowed by this great organization is likely to have cascading impact across the entire industry. On the other hand, organizations such as Ford and General Motors within America are almost on the verge of being branded ‘failed companies’ by an unforgiving market. They are facing unbelievable pressure to change, and change within weeks – not months or years! Toyota, though with depleted toplines and bottomlines, is still proving to be sturdier than the rest of the breed. The foremost demand of markets, governments and regulators alike today is ‘fail-proof corporate governance’ – and here, Toyota remains leagues ahead of the competition. Strong governance and intense corporate social responsibility remain hallmarks of this great company. Books shall be written again in the coming years narrating corporate anecdotes concerning Toyota and other similar companies on how they (hopefully) survived the worst downturn after the great depression. Three key areas are bound to resonate when people speak of this company then – survival lessons, sustenance lessons and growth lessons – and yes, every employee across all its global units will most certainly continue to be empowered to stop the entire assembly line should she encounter a quality defect! Thank You. ■ References The Toyota Way (n.d.) Wikipedia. [Online] Available from: http://en.wikipedia.org/wiki/The_Toyota_Way [Accessed 19th April 2009] Liker, Jeffrey (2004) The Toyota Way. [e-book] Mc-Graw Hill Companies. Available from: http://books.google.co.in/books?id=9v_sxqERqvMC&pg=PA270&lpg=PA270&dq=toyota+way+in+the+service+industry&source=bl&ots=g6OQ9EsOKA&sig=_n_P4oiAoD7U-GRVzVrV3heDf5E&hl=en&ei=O97tSabEGJCKtAPY-t3uAQ&sa=X&oi=book_result&ct=result&resnum=2 [Accessed 21st April 2009] Toyota questions Kaizen (2006) Evolving Excellence. Weblog. [Online] Available from: http://www.evolvingexcellence.com/blog/2006/12/toyota_question.html [Accessed 20th April 2009] Miller, Jon (2008) The Future of Kaizen is Epic. The Manufacturer. [Online] Available from: http://www.themanufacturer.com/uk/content/8728/The_Future_of_Kaizen_at_Toyota_is_Epic [Accessed 21st April 2009] Rufo, Allen (2008) Strategic Service Management Asia 2009. Worldwide Business Research. [Online] Available from: http://www.wbresearch.com/fieldserviceasia/agenda_main.asp ===~~~~~~~~~~=== Read More