The Toyota Organizational Resource Performance - Example

The Toyota Way: An Evaluation Introduction In the age of intense globalisation, organisations are continuously experiencing phenomenal changes and innovations. The world of business is constantly facing new challenges, innovations and applications, thus organisations have to cope with constant change. Managing change is one of the priorities of the new global organisation because change is an opportunity for improvement. Organisations have to adopt, continuously train, improve and innovate because of these changes. 1. The Organisation A global organization, Toyota is now the world’s leading car manufacturer and has led the industry through effective strategies, programs of actions, success training and development for employees, and business plans as robust as when it was a small shop in Japan in the early 1900s. Sakichi Toyoda first obtained a patent for an automatic loom and revolutionized the weaving industry. The looming shop evolved into a car manufacturer. Toyota has a long tradition of management, popularly known as the Japanese production system, from its original founder down to a long line of car builders and business innovators. (Saruta 2006) Toyota’s strength is drawn from the people behind the system as the workforce is composed of well-trained engineers and technicians who are trained inside the company, not in another training center or university. Generally, the company does not believe in firing employees; they hold them until retirement age. And they have a unique rewards and salary system based on performance. American car manufacturers have come to realize the success of Japanese manufacturers that they try to examine and study the production and manufacturing terms of the Japanese methods, for example, kanban, kaizen, and the principles of Just-in-Time (JIT) and total quality control (TQC) (Coleman & Vaghefi 1994, p. 31). 1.1 Recruitment Recruitment is determined by forecasting the number of employees required and allowing leeway for labour turnover rates in the future. Recruitment is a way of closing supply and demand gaps and enhancing human resource development, providing promotion and rewards, and solving manpower problems. In determining recruitment needs, human resource management should be able to categorise recruits, forecast labour turnover for short- and long-term goals. (Compton, Morrissey, & Nankervis 2009, p. 9) Toyota has always introduced innovations in management and operations. In 1997, the company recognized that there was lack of young people entering their work force. By this, it created the Virtual Venture Company (VVC), with 35 personnel centering on interests of the young for different functions within and outside the company. Then President Okuda suggested that they would have to spend at least three months working and focusing on the interests of the young. Internal recruitment was centered on 35 young personnel. This group was segregated from the business department of the organization. They had in-house presentations, featuring hip-hop music and wearing of Aloha shirts. This development team was to compete with ad agencies. With this innovation, the company was able to reduce the development time of new cars to only 12 months. VVC encouraged ‘youth-oriented user research’ (Kodama 2010, p. 135). Toyota has an effective and unique workforce planning and employee development. Workforce planning is the initial stage of training and development and is an important aspect of human resource management. Knowledge sharing within the organization is part of training and development to improve workforce competence. This was part of in-house training. A function of HRM is human resource planning which is concerned with identifying resources to the business needs of the organisation (Gold, 1999, p. 165). It meets human resource requirements by answering the questions: how many are needed in the organisation, and what particular skills and capabilities should the people possess? (Armstrong 2006, p. 363) The manager also determines the number and type of employees needed in the team and where the labor supply should come from. Recruitment, training and development, and assignment of people are all in accordance with the organisation’s objectives. Existing employees can be trained, developed, redeployed, transferred or promoted for future skill needs. New recruits should be carefully selected to ensure suitability for future positions. (Cray and Mallory 1998, p. 7) The organisation’s objectives play a critical role in the staffing process. At Toyota, management ensures that applicants meet the qualification standards of the organisation. Specification of the qualifications, identification of persons possessing those skills, and moving people into the job should be emphasized in the organisation’s staffing strategy (Miller 1984, p. 58). 1.2 Training Training and development is applied in a systematic way. The organisation is viewed as a system, and training as a subsystem. Training and development therefore should be an integral part of the system. (Kubr et al., 1989, p. 68) The objective of training and development focuses on the design and implementation of training systems to successfully impact organisational performance. (Smith & Mazin, 2004, p. 65) Training and development is one way of shaping the workforce. This varies from organisation to organisation and is aimed at new personnel while those who have been in the company for quite some time need continuous learning and improvement or enhancement of skills and capabilities. Workforce planning is important to the organisation’s achieving its strategic goals. Planning precedes recruitment and training, and an analysis of organisational objectives, strategies and policies to make sure that the right manpower is recruited for organisational needs. (Armstrong, 2006, p. 363) 1.3 Learning Learning is imparted for students who are enrolled in a corporate high school. The student version of the ‘Toyota Way’ is provided at the ‘Toyota Technical Skills Academy’ which states that: ‘The Toyota Way 2001’ is an expression of the values and conduct guidelines that all employees should embrace – this is the basic philosophy for working at Toyota’ (Toyota Labour Union, 2001 as cited in Saruta, 2006, p. 490). While this is part of continuous learning for employees, learning is closely watched and monitored by top management. 1.4 Training and development The Toyota Way is ‘producing’ people, an educational system for professional development, more than a mere HRM but a perfect labour-management relation. It makes the employees aware of Toyota’s values and ideals. A worker should have a high degree of understanding of the Toyota Way to gain merit as employee. Toyota management has also applied labour flexibility, which is characteristic of the conventional Japanese style of management or Japanese personnel management. Flexibility means job rotation, allocation, job enlargement or job enrichment. Toyota has introduced a behavioural science-based personnel management system. Training programs are conducted in-house and employees are allowed and encouraged to acquire specialist skills or job enlargement, which is one way of motivating employees by way of promotion, progression and pay increases. Toyota conducts special training for core-skilled workers ‘at the lowest level of office organisation’ and available for group leaders. The Guidelines provide inspiration but also motivational factors. The contents include: ‘individual learning (self-development); study groups (mutual enlightenment); practical application in the workplace (gaining mastery through experience); and heeding the viewpoints of one’s superiors (enjoying extensive coaching). (Saruta 2006, p. 496) The Guidelines also include ‘role recognition’ which is about recognising the role of the group leader. Next is ‘skill improvement,’ or mastering all the tasks, which must be taken seriously by the group leader so that he can fulfill a relief function. In other words, a group leader must be able to replace anyone who is missing or absent. The group leader must also have the ability to provide immediate solutions to problems in the workplace and quality control techniques. Trainees are told that the purpose of their training is for them to become group leaders. Then the trainees will work with partners in ‘independent study group meetings’ which is a break in the tight schedule and may last for more than an hour. A senior member of the workforce acts as the instructor. The instructor talks on various issues in the workplace and teaches the trainees on how to provide a written report. The training becomes stressful as the trainees have to get the approval of the instructor on all of the teaching issues. After the independent study, they have to make a report to the team or supply chief. This method is a way of enhancing relations between leaders and subordinates who will soon become leaders. (Saruta 2006, p. 497) A manager’s knowledge of HRM is significant to the attainment of the organisation’s goals and objectives. The manager has to maintain a good and effective rapport with his employees. The employees too have to establish a good communication with the customers. Meeting the needs and wants of customers is the job of both the manager and employees. The manager has to focus his knowledge and capabilities with identifying and selecting employees capable of implementing the organisation’s plans. Motivation is a part of a manager’s job and this is a very significant part of HRM. Without motivation employees do not function well. (Harris et al., 2003, p. 56) Effective management focuses on people. The manager and the workforce must work as a team and as a cohesive force, and should be flexible in satisfying the customers’ needs and wants. (Gulati & Oldroyd 2005, p. 92) 1.5 Strategies within the organisation Toyota and other Japanese firms practice the ‘participatory, bottom-up style of decision making’ within the organisation. In this type, managers or teams submit their proposals or suggestions to the management, which in turn validates and approves those proposals. In the Toyota management system, teams are provided complete leeway in their changes and innovations. (Dedoussis, 1994, p. 200) Toyota would like to instill on every individual worker the ‘Toyota Way’ as it relates with the Toyota Production System (TPS) and lean management. From the beginning, Toyota has applied a different kind of management philosophy and value systems, including strategies of business management and the execution of business practices, which have been handed down from generation to generation. Liker (2004 as cited in Saruta, 2006) indicated that managers should know the ‘Toyota Way’, and introduce it to workers so that they can reach the level of lean companies. The organisation’s tacit knowledge is instilled in the workforce from Toyota’s ‘managerial convictions and value systems,’ arranged and assembled as the ‘Toyota Way’ and available to everyone and ‘the sharing of managerial convictions and value systems is essential to ensure Toyota’s identity as a global player’ (Saruta 2006, p. 490). The Code of Conduct is also a part of this activity. One of the terms applied in the Toyota Production System is the ‘heijunka’ which is a concept of the Just-in-Time (JIT) production. Heijunka is ‘distributing the production of different (body types) evenly over the course of a day, a week, and a month’ (Coleman & Vaghefi 1994, p. 31). Heijunka is the endeavor to compare the daily production sequence to the actual mixed-model demand experienced by dealers and retailers. This is a mixed production system wherein various methods are used on the same assembly line, which is the same as the concept of production that conforms to orders from customers in order to minimize inventory or too much stock in the warehouse. Toyota is against speculative production and msny inventories (Coleman & Vaghefi 1994, p. 31). Toyota also uses leveling and line leveling, a term used to describe ‘the effort to balance the work load to be performed to the capacity or capability of the process (machines and operators) to complete that work’ (Coleman & Vaghefi 1994, p. 31). Heijunka integrates the principles of line balancing by balancing workloads (production rates) at each process to each other. In other words, heijunka aims to reduce inventories due to very small batch, mixed production, and to associate ability to equate workloads in each production process to each other. 1.6 Strategies implemented for positive employee relations The ‘Toyota Way’ has two known pillars, ‘wisdom and kaizen (continuous improvement) and ‘respect for human nature’. Wisdom and kaizen are activated through: challenge, i.e. following a dream, upholding a vision, challenging with courage and creativity; improvement, which is the continual application of evolution and innovation, and a strong will for improvement; and genchi gembutsu, which is ‘to thoroughly understand a situation, go and see for yourself’; take hold of essentials, provide swift agreement, ‘make a decision and pursue implementation wholeheartedly’ (Saruta 2006, p. 490). Toyota has introduced a sense of belongingness to its employees through a system like the ‘seniority-based wage’ or ‘lifetime employment’. The seniority and merit-based salary system focused on promotion, progression and competitive pay increases which have motivated workers to continue working for the company. Another TPS application that motivates workers is known as the ‘flexible manpower line,’ a system that encourages suggestions or quality-control small work-groups. This encourages the workers and provides management to achieve the just-in-time (JIT) and ‘jidouka’ (automation) management styles. It uses teams to deliberately create an atmosphere of activity, where one refuses to be absent and exert everything for the success of the team. This is motivation in the truest sense of the word. With flexibility, the focus is shifted to human resource. Effective management looks at managing people in many angles by answering questions like: How do employees work effectively? How can they be motivated? How can they work as a team? This first objective is on managers so that they can deliver the necessary management techniques to the employees. The next line of concentration is on the people or employees. Both managers and employees have to be prepared, and their preparation stems from the basic knowledge of their job and the organisation’s objectives. 1.7 Performance and rewards Performance is something that an employee contributes to the organisation according to his/her own capabilities and talents (Mead, 2005). Performance management is an HRM function that focuses on improving the performance of employees. It aims to emphasise their capabilities and individual talents that must contribute to the entire performance of the organisation. Performance management also aims to provide the means through which the staff can provide better results in such a way that the customers will be benefitted in the end (Armstrong, 2000, p. 1). Incentive management at Toyota is comprised of three points. Incentive by economic stimulus is a motivational factor introduced to obtain employee performance. Wage is regarded as the most important criterion. The system encourages hard work that leads to a more secure economic livelihood, ‘even at the expense of family life’ (Saruta 2006, p. 491). An ingenious system of managing promotion, progression and remuneration is a factor for career development. Sometimes, the promotion management system is transformed; sometimes, the system of progression is also changed while remuneration also receives remuneration. The system can also be changed at times. This is one weakness in the Toyota Way. One system is changed and the other systems are affected which results into confusion among the employees. Most workers do not understand how their wage is decided and they just know the final results upon receipt of their salary. (Saruta 2007, p. 493) But even with this continual change in promotion, progression and pay increase, Toyota has not provoked a major discontent among workers. The wage for skilled labour is based on employees’ general ability. The ability allowance basis is raised while the age-related payment erased. The office work/technical work and skilled labour are separated into different wage systems. This has led to the ability- and performance-based approaches for office work/technical work. Toyota has introduced the ‘expert path’ and role-based wage’ in place of ‘age-related payment’ scheme for skilled labour, thereby emphasising the ability-based approach a lot in the remuneration of skilled of labour. Next, lump-sum payments were based on ability and performance. Composites of the ability- and performance-based approaches were parts of the retirement bonus system, wherein wage related to age and length of service were parts of it. In this case, the wage systems reforms gave a disadvantage to older workers and those have stayed with the company for years. But in these system reforms that have been in place for a period of fifteen years, regular employees have improved economically within the company and as members of society. In Japan, the tendency of wage levels is going down but not so at Toyota which has maintained a relatively high wage (Saruta 2006, p. 494). And with the introduction of the fixed-term contract or dispatched workers, the Toyota employee has risen in rank in the company, providing a psychological stimulus for the Toyota man. There has been a sharp increase in the new type of workers contributing to reduced labour costs, low wages and lower corporate costs for employees. Conventional methods of personnel management and behavioural science techniques are Toyota’s ways of motivating employees to have interest in their work. This way motivates the workers from within, allowing them to love and enjoy their job. On-the-job training and employment flexibility are endemic and integrated into the Toyota educational structure. Motivation theories such as those of Maslow’s ‘hierarchy of needs’ are parts of inspirational manuals for Toyota-affiliated companies. Maslow’s theory explains the way human behavior reacts and the theory helps us understand what strategies to use to motivate people. The theory classifies the different needs, arranged in a ladder or pyramid, wherein the needs situated in the bottom of the pyramid have to be met first before the upper needs in the next steps of the pyramid can be met. Self-actualization is encouraged as a ‘growth need’ while McGregor’s ‘Theory X and Theory’ model is also explained as important motivational theory. Management by objectives is introduced to white-collar workers. Frederick Herzberg believed that anyone can improve in the job performance but that the employees’ relation to work and attitude can determine success or failure in the job. Herzberg conducted investigation on workers’ attitudes to their job, or what people wanted of their job. The focus of his investigation was on employees’ description of their situations wherein they felt ‘exceptionally good or bad about their jobs’ (Robbins 2001, p. 158). The results of this investigation were tabulated and categorized. From the categorized responses, Herzberg came to the conclusion that the situations wherein employees felt good about their jobs were different from those when they felt bad about their jobs. Some characteristics were related to job satisfaction while others to job dissatisfaction. According to Herzberg’s investigation, intrinsic factors were related to job satisfaction and this included work, responsibility, and achievement. On the other hand, job dissatisfaction was related to extrinsic factors, like ‘supervision, pay, company policies, and working conditions’ (Robbins 2001, p. 158). In the workplace, workers can be very productive when they feel they are a part of a team, or part-owner of business. They feel this sense of belongingness and so they strive for the company’s success. This is one of the many kinds of motivation that affect individual behaviour in the workplace. People always connect work with life’s fulfillment, and connect their satisfaction at work with their feelings and satisfaction of life and happiness with their family. Work and life balance suggests a balance for life and what people do. 1.8 Human resource performance monitoring techniques used Toyota uses plant operational boards to monitor performance. The contents of the boards are also called key performance indicator (KPI) boards which provide information about the operations and available for those who need it. The unit’s information and kaisen implemented can be tracked through the boards. Other contents of the board are integrated with programs of ‘safety, quality, productivity, cost, delivery, and human resource development’. 1.9 Recommendations for the organization to enhance the efficiency and effectiveness of the above operations Toyota has unique way of paying for employees’ general ability and this must be carried out according to the employees’ skills and talents. The company’s ways of motivating employees encourage them to be creative. The question here is that what about the other companies associated with Toyota, which are situated in other countries? Do they have the same management capabilities as Toyota? These companies found in the United States and other countries throughout the world might have the same policies when it comes to training and development and company strategies but they have different cultures than the Japanese Toyota. The point is that their methods of training and development and HRM functions are different from the Toyota context. References Armstrong, M 2006, Strategic human resource management: a guide to action (2nd ed), Kogan Page, London. Coleman, J & Vaghefi, M 1994, ‘Heijunka (?): a key to the Toyota production system’, Production and Inventory Management Journal, vol. 35, no. 4, pp. 31-35, viewed 7 April 2014, via ABI/INFORM Complete database. Compton, R, Morrissey, W, & Nankervis, A, Effective recruitment and selection practices, 5th edn, CCH Australia, Australia. Cray, D & Mallory, G 1998, Making sense of managing culture, International London Business Press Inc., London. Dedoussis, V 1994, ‘The core workforce – peripheral workforce dichotomy and the transfer of Japanese management practices’, in N Campbell & F Burton (eds), Japanese multinationals: strategies and management in the global kaisha, Routledge, Oxon, pp. 186-217. Gold, J 1999, ‘Human resource planning’, in J Bratton & J Gold, Human resource management: theory and practice, MacMillian Press Ltd., London, p. 165-175. Gulati, R and Oldroyd, J 2005, ‘The quest for customer focus’, Harvard Business Review, viewed 7 April 2014, via ABI/INFORM Complete database. Harris, H, Brewster, C, & Sparrow, P 2003, International human resource management, Chartered Institute of Personnel and Development, London. Kodama, N 2010, Boundary management: developing business architectures for innovation, Springer, London. Kubr, M, Prokopenko, J & International Labour Office 1989, Diagnosing management training and development needs: concepts and techniques, International Labour Organization. Mead, R, 2005, International management: cross-cultural dimensions, Blackwell Publishing, Oxford, UK. Miller, E 1984, ‘Strategic staffing’, in C Fombrun, N Tichy, & M Devanna (eds), Strategic human resource management, John Wiley & Sons, USA, pp. 57-75. Robbins, S 2001, Organizational behavior, 9th edn, Prentice Hall International, Inc., New Jersey, USA. Saruta, M 2006, ‘Toyota production systems: the ‘Toyota Way’ and labour-management relations’, Asian Business & Management, vol. 5, no. 4, pp. 487-506, viewed 7 April 2014, via ABI/INFORM Complete database. DOI: http://dx.doi.org.proxymu.wrlc.org/10.1057/palgrave.abm.9200198. Smith, S & Mazin, R 2004, The HR answer book: an indispensable guide for managers and human resources professionals, AMACOM Div. American Management Association, New York. Read More