HRM Process in Toyota - Essay Example

? HRM ISSUE OR PROCESS Submitted By 8th December to 12th January With increased trend of globalization of business the environment faced by organizations and managers also changes. Globalization poses many challenges such as significant changes in economic forces, rapid change in technology which revamps the ways people work, global competitive pressures and changing demographics etc. workforce diversity, aging population or lack of skilled workers, legislation regarding human capital and many other human resource management related factors combined together put cost pressures on the organization. The company I have selected is Toyota motors. It is based in Japan but has spread its business to many countries in the wave of globalization. It has strong presence in United States and North America. Sales in these regions provide more than 70% of the profit worldwide. This increasing market share and rapid growth is not without its drawbacks. I have selected Toyota motors because of the recent disaster the company faced. Toyota automobile is famous for its quality but had to recall nine million cars worldwide. In addition to the obvious financial loss there was also huge loss of public image as well. The issue was mismanaged and handled poorly which tarnished the brand reputation in the public eye. It caused the company to touch the lowest ever sales in more than a decade. According to business week estimates because of this recent recall Toyota is facing $ 155 million per week and Toyota has lost almost $30 billion in stocks. In the long run the company can lose hundreds of billions of dollars because of this problem. So who is responsible for such a huge loss? On the outset it seems a great technical fault. Engineers, technicians, quality assurance people seems to be the most obvious people responsible for this disaster. The mechanical issue which affected eight models of Toyota is not the sole responsibility of the people associate with the design department, or technical staff producing faulty pedals and onboard computers. Can only technical staff be blamed for this disaster? Were Toyota leaders unaware of this mechanical fault? If they were unaware shouldn’t they be blamed for their unawareness? However, this is not the scenario. With the much hyped up Toyota production system (TPS) how such negligence is possible. TPS is known all over the world for its quality. Toyota production system (TPS) is also defined as the lean production system which emphasizes on cost cutting. It utilizes half the human capital, investment in machinery, manufacturing space and engineering hours as compared to mass production system. Toyota production system brought the current Japan economic preeminence. This production system developed by Toyota was followed by many other industries and organizations which brought the economic profits for Japan. Just in time (JIT) production was the rationale behind Toyota production system. The major goal of TPS was cost cutting with sub goals like quality control, quality assurance and respect for humanity in terms of utilizing human resource to achieve cost objective. 2(Alavudeen & Venkateshwaran, 2008) With such renowned and successful TPS such mechanical fault was not expected. There is enough evidence that the Toyota leaders were aware of this mechanical fault long before any action was taken. This behavior suggests that the managers were actually trying to hide the issue which resulted in such disaster. With so much emphasis on cost cutting and setting it as the primary objective in TPS was probably the root cause for this disaster. If the root cause of this failure is bad decisions by employees, ignoring a known issue, mishandling it in public then instead of just blaming the technical staff we should try to identify what made them behave like this. And the question arises to justify the rationale behind such decisions. If we make an attempt to understand the behavior then the role of HR becomes prominent. What was lacking or deficient or simply wrong in HR policy or practice which led to such behavior? Was it wrong recruitment? Is it deficiency of training? Wrong Reward and recognition policy which encouraged wrong attitude? Is it organizational culture to be blamed or the performance evaluation technique? I need to gain insight into all these issues before deciding what went wrong with Toyota. In my opinion it is more of an HR issue than a technical problem. 12th Jan11 to 23rd Feb11 Toyota was the most successful automobile company before this catastrophe. Toyota took special pride in its production system and Toyota culture. What is Toyota’s way? It is not Japanese culture or the American culture or the Gary Convis management style it is the fundamental way how Toyota does its business. Toyota’s management system, philosophy and thinking form the Toyota culture which was responsible for its success it was just not the technical details of Toyota production system. Toyota’s production system along with Toyota way was the foundation or the DNA of Toyota success. The two fundamentals of Toyota Culture were continuous improvement and respect for people. Continuous improvement or Kaizen along with the realization that it’s the human that contributes was the culture of Toyota. Before the disaster of 2008 this system was apparently working perfectly. Toyota production system ensuring quality at minimum cost was the prime objective and it was successfully being achieved. Toyota way was based on 14 management principles. They are namely Long term philosophy i.e. basing your decision on long term benefits at the cost of short term financial losses. Continuous process flow to bring problems to surface Avoid overproduction by using pull system Work load evened out Culture of bringing right quality at first time Standardized task for continuous improvement Usage of visual control to identify problems Utilization of only trusted and reliable technology These were the 14 basic management principles being followed there 2(Jeffrey K Liker, 2004). If they have the best culture and management system then what went wrong. What we know from our own experience is that if something is overly emphasized in a company it actually has bad impact on the organization in the long run. It affects employee’s behavior because each and every employee aims only to achieve that target ignoring everything else. Employees perceive that it is the only objective and the only desired behavior. From my own experience at a training centre I realized the existence of this problem among employees. There the criteria of performance were on how many MAN days a trainer has achieved. So trainers also emphasized on quantity rather than quality. Perception of desired behavior shapes employees attitude. So before setting targets or objects for performance appraisal various aspects should be included keeping in view the strategic targets of the company. Organizations should keep an unbiased approach. A similar occurrence took place at Toyota. Cost reduction became the only desired behavior which was also being rewarded. The major goal of TPS was cost cutting with sub goals like quality control, quality assurance and respect for humanity in terms of utilizing human resource to achieve cost objective. This philosophy became the root cause of the Toyota disaster. Managers tried their utmost to achieve cost reduction objective ignoring quality and quality assurance. These problems can be avoided through using a balanced approach. The proponents of balanced score card approach argues that in addition to financial perspective three more perspectives should be included in a business balanced score card for strategic health of the organization. A balanced business scorecard takes into account company’s vision, strategic objectives and hence basing on this, device strategies and set targets for each department and segment of the organization and identifies initiatives to achieve those targets. It includes financial measures, customer attitude, internal operations such as productivity and efficiency, and learning and growth. Learning and growth perspective deals with employee capability and employee empowerment, motivation and alignment with organizational goals. 3(leading experts from Baker & McKenzie lawyers and the Macquarie Graduate School of Management, 2009) The root cause of the failure of Toyota brand is the reward issue. As has already been discussed cost containment was the primary objective at the cost of sustaining product quality. This approach created incentive for everyone involved to ignore the existence of any problem and denied its existence although most of the managers were aware of the problem. If HR has maintained a balanced reward and performance appraisal system along with proper training of staff this situation might not have arrived. It was basically the wrong HR policy which resulted in error in the behavior of the employee. The Hr process which are suspected to be responsible for such behavior are 5(Dr, John Sullivan, 2010) Rewards and recognition Training Recruitment and selection Performance management process The corporate culture Risk assessment The purpose of reward system is to strengthen or reinforce the expected behavior. It includes all tangible and intangible awards. It is also used to discourage negative behavior. It is also a helpful tool in gathering information about problem and rewarding employees who bring negative information to managers so that immediate action can be taken.4 (Wilson, 2004) This aspect of reward system was totally ignored at Toyota. The overemphasis on lean and cost cutting led to no error report being highly rewarded and obvious errors were ignored at the cost of safety. The basic purpose of training is to enable employees to handle all situations. Toyota is famous for its 4 step cycle i.e. plan, do, check, and act. But sadly there wasn’t much emphasis on check and act which resulted in non realization of the importance of reporting negative information as well for the sake of safety. The first two steps were emphasized. Recruitment and selection is responsible for the human capital available to the organization. It should hire individuals who have the desired technical skills and personal capabilities so that they are capable of taking challenges learn from training and have the required constructive confrontation techniques. Employees of Toyota lacked the strength to discuss the shortcomings with superior managers. The purpose of performance management system is to evaluate individual as well as group performance so that problems can be identified and rectified at initial stages. The performance management process at Toyota failed to identify groupthink error. Toyota is famous for its trust on employees and employee empowerment but it went too far beyond reasonable matrices of checks and balances. It dint ring any alarm bell before situation got out of control. The role of corporate culture is to drive and ensure that employee behavior is in alignment with organization core value. The much hyped Toyota Way was very biased towards positive information that professional responsibility of safety was ignored. Most of the HR departments don’t have a team to identify and calculate risk associated with weak employees. Hr should work in collaboration with corporate risk management so that employees are capable of calculating and measuring the long term risk associated with their mistakes. Toyota employees certainly were not aware of the risk involved with hiding the facts about errors. 23rd Feb to 16th March The problem of Toyota cannot be attributed to one single incident or fault. It was eventually the engineering and the supply chain process that failed Toyota but HR policies and practices contributed significantly in this failure. It was actually a series of mistakes all interrelated with each other which included corporate functions, customer service, govt. relations, PR, and vendor management is responsible for systematic management failure of Toyota. A deep analysis of the situation revealed that what apparently seemed a technical fault is actually very deep rooted and was a result of many consistent failures and wrong policies and practices. It was not an accidental incident but the eventual outcome of the many persistent drawbacks and deficiencies in the corporate culture, company’s strategic goal and alignment with policies and practices, HR policies and practices in strengthening and emphasizing the right attitude and behavior required for long term sustainable growth. All the HR tools were directed towards strengthening and emphasizing the lean culture and cost reduction hence compromised on quality and quality assurance which became only secondary objective. In this highly competitive age and world no company can survive and achieve strategic growth by compromising on quality. All the activities of HR along with all the other departments should be directed and be aligned with company’s core value to achieve long term strategic objectives. 1(Alavudeen & Venkateshwaran, 2008, Computer Integrated Manufacturing, New Delhi, Prentice Hall) 2(Jeffrey K Liker, 2004, The Toyota way: 14 management principles from the world’s greatest manufacturers, USA, McGraw Hill) 3(leading experts from Baker & McKenzie lawyers and the Macquarie Graduate School of Management, 2009, Australian master human resource guide 2009, CCH Australia) 4(Wilson, 2004, innovative Reward Systems for the changing workplace, New York, Tata McGraw Hill) 5(Dr, John Sullivan, 2010, A Think Piece: How HR Caused Toyota to Crash, Available from www.ere.net. [Accessed 21st march 2011] Read More