Organisational Performance - Assignment Example

?Running Head: Organisational Performance Organisational Performance [Institute’s Organisational Performance Introduction Thereare only a few corporations in the world that have been able to continuously exceed the expectations, delivery unmatchable quality and stand back up every time they fall down. Toyota Motor Corporation, without any doubts, is one of them and its 75 years history is the testimony. USA Today said about Toyota posted annual revenues of over 235 billion US dollars for the year 2011, which is more than the combined revenues earned by Suzuki, Chrysler and General Motors for that year (Monden, 2012, p. 14). In terms of production, Toyota Motor Corporation is still the largest automobile of the world. It has its manufacturing facilities in more than 28 different sites in the world and the vehicles manufactured by the organisation are present in more than 80 different countries in the world (May and Roberts, 2011, 52-53). Despite being a Japanese automobile producer, the company has been able to expand into the North American market so rapidly in the past few decades that the Big Three, which once dominated the market without any fears, have been marginalized by the Japanese automakers, amongst which Toyota takes the lead (Russell, 2011, pp. 96-97). Competitors, business managers, academicians, researchers and other observers constantly kept on asking the same question that what is the secret being Toyota’s impeccable success? The fact is that consistency and quality in Toyota’s vehicles, which also make it as the most trusted and reliable vehicle all over the world, is a direct result of the operational excellence that the company has achieved in the past few decades. In fact, Toyota has intelligently converted that operational excellence into their strategic weapon to outclass the competitors (Liker and Franz, 2011, p. 510). Partly, this operational excellence is a result of frameworks, tools and approaches that it introduced in the manufacturing world, such as Kaizen, just-in-time manufacturing, once piece flow, Jidoka, Heijunka and others. These techniques also ended up providing Toyota a unique lean manufacturing system, which is discussed latter in the paper. Important here to understand is that mere application of these frameworks and techniques is not what makes Toyota great but it is its continued success at employing these principles is what makes the difference. Toyota has indeed made them a part of its business philosophy, which also places great deal of importance on understanding their workers and their motivational dynamics (Simons, 2011, pp. 390-392). This paper will briefly explore the strategies that Toyota employed to achieve this operational excellence. Many observers have cited this as the “The Toyota Way” or the “Toyota Production System” which would be the focal point of the paper. Discussion Much of the success that Ford and General Motors enjoyed in the US market during the early 1920s until the late 1950s was primarily because of their ability to use mass production system and leverage the economies of scale by producing as much as possible. On the other hand, Toyota emerged in the small Japanese market after the Second World War where it could not employ the small techniques (Magee, 2008, p. 545; Shingo, et al., 1989, pp. 20-21). Instead, in order to satisfy the customer and their demands, the organisation had to be more flexible by creating the different automotives on the same production lines. This is where Toyota learned and made it its core flexibility to keep lead times shorter and be as flexible as possible. Furthermore, by watching the American counterparts and their mass production systems closely, Toyota realized that the system has the inherent disadvantage of providing too much waste, extra inventory and early wear and tear of the machines, all of which lead to greater costs and lesser efficiency (Vidler, 2001, pp. 226-228; May and Roberts, 2011, 52-53). When Toyota started penetrating into the American market, it did not possess the advanced manufacturing technology, especially in terms of complex automation but even then, they won the hearts and minds of the customers because they ensured that they could provide quality to the customers (Shingo, et al., 1989, pp. 20-21). For the same, they instilled quality at every single step of their manufacturing process and more importantly, they did the same with effectiveness and efficiency. Ross Perot, well-known US businessman and 99th richest person in the US for the year 2011, made a comment about the sluggish manufacturing speed in the US automotive industry by saying that “It takes five years to build a new car in this country. Heck, we won the World War II in four years” (Magee, 2008, p. 545). Even today, Ford, Chrysler and GM take around 18-36 months for production of cars when Toyota has been consistently producing cars in almost 12 months, right from the design phase until the actual delivery to the distribution channel members (Liker and Ogden, 2011, 85-86). After looking at the success which Dell achieved with its “build to order” model, many companies tried to follow the lead of Dell. The idea was to manufacture exactly what the customers wanted and when the customers wanted, which they labelled as the perfect lean system (Morgan and Liker, 2006, pp. 41-42). One common mistake that observers do is to label the Toyota’s operations system as a build to order model of production. Toyota has actually moved many steps ahead then this build to order model and create an entirely new type of leanness. This was because of the fact that experts at Toyota soon realised that the build to order model would create waste rather than eliminating waste (Vidler, 2001, pp. 226-228). Customers are more likely to have a seasonal and unpredictable demand pattern which would mean the organisation would be manufacturing huge quantities one week or one month and the other; it would be sitting idle underutilising the equipment (Liker, 2004, pp. 203-204). Besides, during high demand days, weeks and months, it would have to put more stress on the machines, people and equipment, making the machines more vulnerable to wear and tear and paying extra time to people (Smalley and Kato, 2010, p. 367). In addition, since the demand pattern from the customers is unpredictable, the company would have to pile up huge amounts of inventory in order to cope with the uncertainty. Towards the end of day, this results in chaos, high costs and lower quality. In addition, many build to order models take several weeks before they could make the delivery to the end users thus nullifying the entire philosophy (Liker and Ogden, 2011, 85-86). According to the Toyota Way, the best approach is to pile up orders and then level out the production schedules by allocating equal resources to the processes for each day or week. This way efficiency can be achieved since workers know the workload and the exact performance requirements and the company can also present shorter lead times to the customers and more importantly, meet those quotes (Liker and Franz, 2011, p. 510). Toyota focuses on eliminating three Ms which are Muda, Muda and Muri. These are Japanese terms which mean waste, unevenness and overburden. Toyota believes that by levelling out the production schedule it can eliminate all three and create just the right quality for their customers (Barnes, 2008, p. 208). Another reason behind the success of Toyota’s principles and its operational excellence is the fact that it has created a system where its people and employees are considered as the focal point of the system. The Toyota philosophy strongly believes in motivating employees in order to enhance their productivity. Motivation here includes both internal and external motivation factors (Liker and Franz, 2011, p. 510). Consider the fact that in case of all other companies in the automotive especially, US automotive industry, companies have failed to groom their top leaders from within, Bill Ford being an exception. Time and time again, they have looked for CEOs, COOs and Presidents from outside and when someone takes the charge; he or she takes the company into a radically new direction (Morgan and Liker, 2006, pp. 41-42). This is one reason why these organisations have failed to deliver consistently because they have always been on a rollercoaster ride. In contrast, Toyota always believes in grooming its own leaders, right from the very first day and from the very basic level. In the few exceptional cases, when it has imported top level leaders from the outside, they have not changed the basic production principles and ideologies of the organisation. Fuiji Cho, the current Chairman of the organisation joined the company in 1960 and spent nearly four decades in the organisation before he was promoted to the level of CEO. Therefore, when a CEO and Chairman takes over at Toyota, he or she does not have to radically change the system or learn about the same but their job is to ensure proper and better implementation of the system (Monden, 2012, p. 114; Hino, 2006, pp. 254-256). The focus on people and human resource does not remain limited to the top leaders but it extends to almost all the employees working with the organisation. Employees at Toyota work within teams and the culture of the company is such that it allows mutual respect and trust to foster within the team members. This does not mean that Toyota has lost sight of individual work and individual effort but it has created just the perfect balance between teamwork and individual effectiveness (Smalley and Kato, 2010, p. 367). Team members help each other, through suggestions, sharing knowledge, insights and also through peer pressure. Toyota also ensures that it selects individuals which have the ability to indulge in teamwork. Furthermore, during the year 2010, the manufacturing plant of Toyota received over 80000 suggestions from its employees and surprisingly enough, it implemented almost 99 percent of them (Liker and Convis, 2011, pp. 10-12). Critics and observers agree that Toyota along with other Japanese automakers present just the perfect model for supply chain management. Over the years many surveys and researches have indicated that suppliers rate Toyota as their best and toughest customer and place the Big Three at somewhere far down in that list. Important here to note is that “tough” here does not mean unreasonable, nonnegotiable or difficult but it means that Toyota sets very high standards for itself and its suppliers and ensures that it suppliers grow, excel and learn along with the company(Morgan and Liker, 2006, pp. 41-42). Toyota started as a very small company and during its early days, it had a very tough time finding suppliers that would provide them with high quality parts in small volumes and according to their demand (Stevenson, 2011, pp. 620-622; Liker and Franz, 2011, p. 510). Therefore, Toyota decided to build strategic partnerships with its suppliers putting forward the proposition of working and growing together. Even when Toyota emerged as the market leader, it maintained many of these partnerships. Even today, the organisation cautiously selects new suppliers by starting from giving them small orders and only making them the part of the system when they fulfil the quality requirements. Once a supplier shows commitment and dedication, then the people at Toyota would spend the rest of the time teaching them the lean production techniques and the Toyota Way (Liker and Ogden, 2011, 85-86). One of the best examples of the impeccable supplier partnerships were demonstrated by the company in the spring of 1997 when the factory of Aisin Seiki, the prime supplier of brake fluid proportioning valves (p-valves), caught fire and the damage was so huge that it had to shut down production facilities for the next few weeks. Since p-valves were an integral part of cars and Aisin was the major suppliers of Toyota in this regard, the company expected serious decline in output. Due to the just in time manufacturing system, Toyota only had the inventory for the next two days which meant a potential disaster was knocking at the door. It was estimated that for every day when Toyota’s production would remained shut down, the overall industrial output of Japan would decrease by almost 0.1 percent (May and Roberts, 2011, 52-53). Toyota quickly asked its suppliers to help them in this regard and within a short while, more than 200 suppliers and subcontractors of Toyota, including a sewing machines manufacturer, started their activities to create machines for the production of p-valves. Toyota had all the information, blue prints and plans to get the work started and with the expertise of so many engineers, who worked over time, the production started in two days and Toyota was delivered first usable p-valves by February 5. Courtesy to the great relationships with the suppliers, what could have been a disaster and what could have halted the production for weeks, was only able to free up the Toyota workers for less than 24 hours (Simons, 2011, pp. 390-392). However, lately, Toyota and its “ways” have come under great deal of criticism and scrutiny from many different sources. During the fall of 2009 and first quarter of 2010, the company had to recall over 8 million vehicles from all over the world. The reasons for the same were problems in accelerator, braking, gas pedals, floor mats and other problems. Even worse, there are reports claiming that Toyota knew about these problems and was still late in reacting. The organisation suffered loss of over 1.83 billion US dollars during the year 2010 due to these recalls. In the meanwhile, the company had to face congressional hearings, class action lawsuits, media trails and others, which have tarnished the company’s reputation as the market leader in terms of its unchallengeable quality (Liker and Convis, 2011, pp. 10-12). Critics that are blaming the lean production techniques and Toyota Way for these problems are mistaken at a very basic level and that is the fact that leanness in the organisation has been employed for the past many decades and these problems have just surfaced which means that they have to do something with the recent turn of events (Simons, 2011, pp. 390-392). A possible explanation for these events would be the fact that Toyota has been growing too fast for the past few years. Most of this growth has been unplanned and uncontrolled and when organisations grow too big in not much time, it is highly likely that the new and existing people would confuse their priorities. Too much focus on growth diluted the voice of the customers, which was at the heart of the Toyota Way (Stevenson, 2011, pp. 620-622). Another surprising news regarding Toyota emerged in spring of 2011 when various workers in France announced to go on strikes because of their issues with management over pay. Strikes and pay negotiations are not surprising for any corporation in any part of the world but it is unusual for Toyota because as mentioned earlier, the organisation has always focused too much on their workers as the most powerful and flexible resource. Employee empowerment is an important cornerstone of the Toyota Way (Liker and Franz, 2011, p. 510; Liker, 2004, pp. 203-204). In fact, the Toyota way believes allowing employees to experiment in order to learn and set new precedent. The managers are supposed to work closely with employees and listen to their needs because without the support of the employees, there is no possible way that any organisation could incorporate the voice of the customer in operational processes. Therefore, this strike is yet another indication that the organisation is losing sight of its own management principles (Russell, 2011, pp. 96-97; Stevenson, 2011, pp. 620-622). Conclusion The recent crisis in the organisation is both a threat and opportunity for the organisation and it would be the response of Toyota’s management, which would decide that whether or not the organisation will show resilience or would prolong the crisis. As mentioned earlier that Toyota has suffered with many crises in the past and every time it has emerged stronger than ever, all due to its dedication and commitment to its philosophy of operations management. It appears that Toyota’s recent problems do not require rational changes but the solution for these problems lies in the Toyota Way, something that the company has seem to be forgotten in the near past due to the immense growth that it achieved during this period. Toyota needs to ensure that it gets the basic right (Liker, 2004, pp. 203-204). It is one of the basics of Toyota’s philosophy to stop the entire process in order to fix any problems and get the quality right. Russ Scaffede worked with GM for decades looking after their manufacturing process, joined Toyota as Vice President of Toyota’s plant in Georgetown, Kentucky. Scaffede worked day in and day out in order to impress the President of Toyota Motor Corporation in Kentucky, Fujio Cho. Scaffede was well aware of the fact that at GM, Ford and many other American automotive companies, managers were judged by their ability to deliver numbers and volumes. Shutting down the assembly line was a sin and whoever would commit that sin, for a little while longer, would have his or her job at stake (Barnes, 2008, p. 208). Towards the end of the first month, when Cho was evaluating Scaffede’s performance, he remarked that Scaffede had not shut down the production line not even once in the entire month. Considering this as a compliment or praise, Scaffede replied with a broad chest that, he would continue to do the same for the next months as well. Cho then explained him Toyota’s philosophy, which believes that every assembly line or production line has problems and the best way to deal with them is to stop the assembly the line and fix them before any more of them surface (May and Roberts, 2011, 52-53). Toyota places safety at first, quality at second and volume at the third spot in the list of its priorities. Researchers agree that amongst all the players in the automobile industry, Toyota is the one that has shown a long term vision over the years and has pursued that vision, even at the expense of short term financial goals. Therefore, the point here is that if Toyota could once again adhere to these principles, it is highly unlikely that it would not be able to achieve the same reputation and quality levels within a short period (Russell, 2011, pp. 96-97; Hino, 2006, pp. 254-256). References Barnes, D. 2008. Operations management: an international perspective. Cengage Learning EMEA. Hino, S. 2006. Inside the mind of Toyota: management principles for enduring growth. Productivity Press. Liker, J. K. 2004. The Toyota Way. Tata McGraw-Hill Education. Liker, J. K., and Convis, G. L. 2011. The Toyota Way to Lean Leadership. McGraw-Hill Professional. Liker, J., and Franz, J. K. 2011. 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