The Toyota Motor Corporation Organizational Structure - Case Study Example

ORGANIZATIONS: THE TOYOTA COMPANY Student’s name Course code + name Professor’s name University name City, State Date of submission Table of Contents Introduction 3 The Toyota Motor Corporation Organizational Structure 3 Characterization of Toyota’s Present Structure using Mintzberg’s Theorem 5 The Effectiveness of Machine Bureaucracy in Attaining TPS Goals 7 How Toyota Evaluates its Effectiveness 9 The Balanced Score Card 10 Toyota’s Organizational Issues 11 Conclusion 12 Reference List 14 Introduction The Toyota Company is a Japanese firm founded in 1937. The global corporation engages in the design, assembly, and manufacture of automobiles such as passenger cars, commercial vehicles, mini-vans, as well as vehicle accessories and parts. The company has established its premises primarily in Asia, North America, Europe, and Japan. Currently, the brands of the Toyota Motor Corporation include Toyota, Hino, Lexus, and Daihatsu (Nkomo 2013). Besides appearing on the list of the top ten global brands, Toyota is also a leading manufacturer of automobiles across the globe. The paper consists of five sections. In the first section, the paper classifies the structure of the organization by discussing its pertinent dimensions. In the second section, the paper characterizes the company’s structure using Mintzberg’s theorem. In the next section, the paper addresses the effectiveness of the company’s structure in enabling the firm to achieve its strategic direction. Next, the paper addresses the ways through which the corporation evaluates its effectiveness. Finally, the paper identifies the organizational issues, structural problems, and the contribution of the existing structure towards either helping or hindering the organization from achieving its strategic milestones. The Toyota Motor Corporation Organizational Structure Centralization In the context of an organization structure, centralization refers to the level or extent of concentration of decision-making authority at the top level of the organization (Jones 2013). It is evident that Toyota has a centralized power structure. The 29 executives in the company’s board of directors are Japanese and Toyota insiders. The centralized structure of power indicates a lack of power delegation within the corporation. In fact, the company assigns a Japanese boss to mentor its U.S. executives. A Toyota executive in the U.S. does not have the authority to issue a recall of a specific product that performs outside the range of its anticipated performance. This implies that the flow of information within the company is one-way, back to the board of directors in Japan that are responsible for making decisions about the company. In a decentralized company, employees make decisions at lower levels since they have the closest proximity to the problem in question rather than forwarding the problem to the board of directors at the headquarters where the problem is not evident. Therefore, it is proper to state that Toyota’s utilization of the centralized power structure is responsible for its dwindling performance following the problem of unintended acceleration in 2009 and 2010. Formalization In the context of a corporation, formalization refers to the degree to which an organization writes and explicitly articulates its rules, job descriptions, procedures, and policies (Al-Qatawneh 2014). Formalized structures include many written regulations and rules. The existence of formalized structures in the Toyota Corporation implies that employees at lower levels exhibit little autonomy towards making decisions based on the underlying case or scenario. Even though formalized structures enable the company to predict the behavior of its employees in the event of a particular situation, it is evident that the reduced autonomy produces a lag effect on the decision-making process thereby having adverse effects on the ability of the company to deal with the problem at hand. Complexity The Toyota Motor Company exhibits a complex structure since its structure is in line with several divisional and functional norms. The existence of several product lines has necessitated the use of product departmentalization with the incentives of decreasing response time to crisis and increasing innovation (Toyota 2013). As a result, each department employs dedicated marketing, customer service and manufacturing strategies for the associated products. In response to the diverse product-line, Toyota employs a product-specific or divisional structure to meet the different demands of each product line. The turbulent environment that defines the automobile market explains the force that compelled Toyota to adopt the complex product-line structure. Even though the “just-in-time” production system was capable of identifying problems as soon as they occurred during the assembly process, it was evident that the rapid expansion of the company and the need to conceal information were behind the performance lapse exhibited on its vehicles that necessitated a recall. Characterization of Toyota’s Present Structure using Mintzberg’s Theorem The table below shows Mintzberg’s five organizational structures Structural Configuration Prime Coordinating Mechanism Key Part of the Organization Type of Decentralization Simple Structure Direct Supervision Strategic apex Vertical and horizontal centralization Machine bureaucracy Standard of work processes Technostructure Limited horizontal centralization Professional bureaucracy Standardization of skills Operating core Vertical and horizontal decentralization Divisionalized form Standardization of outputs Middle line Limited vertical decentralization Adhocracy Mutual adjustment Support staff Selective decentralization Table 1: Mintzberg’s Five Organizational Structures (Lunenburg 2012) Machine Bureaucracy Just like the other automobile manufacturers, Toyota exhibits machine bureaucracy as its structural configuration. The key part of machine bureaucracy is technostructure (Lunenberg 2012). According to Mintzberg’s framework, the prime coordinating mechanism of machine bureaucracy is the standardization of work processes. In the case of Toyota, it is evident that the corporation has programmed or specified its work processes associated with the development of the automobile accessories, the assembly of the individual parts and the entire manufacturing process. It is also evident that there is little horizontal decentralization within the corporation. According to Mintzberg’s definition, horizontal decentralization refers to the sharing of authority or power by bon-administrators with administrators. However, the board of directors of the corporation suffices to be the most influential decision makers of the corporation. Rather than implementing authority over emergencies such as system failures witnessed in 2009 and 2010, employees on the ground have to wait for the decision of the board of directors back in Toyota, Japan. Toyota also exhibits high levels of work specialization and formalization. With the centralized structure, it is apparent that the Toyota Corporation employs a centralized decision-making process. As a result, the organization is “tall” with a narrow span of management that primarily comprises the Japanese national’s board of directors. With the machine bureaucracy structural configuration, the corporation requires little lateral or horizontal coordination (Petkova 2014). The corporation also has a large support staff and technostructure. Professional Bureaucracy According to Mintzberg’s definition of professional bureaucracy, the structural configuration utilizes the operating core as its key component. The prime coordinating mechanism of professional bureaucracy is the standardization of skills. Organizations that employ such structures exhibit considerable levels of formalization. However, the need to guarantee the autonomy of professionals necessitates decentralization in such organizations. Under professional bureaucracy, there are high-skilled professionals that provide client services on a non-routine basis. Such organizations exhibit a small technostructure with a small top management and few middle managers (Lunenburg 2012). The need for sufficient maintenance and clerical support necessitates the availability of a large support staff in such structures. The provision of high quality and innovative services suffices to be the primary goals of professional bureaucracies. From the description, it is apparent that the Toyota Corporation’s organizational structure does not fit in Mintzberg’s description of a professional bureaucracy. The company has a centralized decision-making structure and exhibits high levels of formalization; contrary to the description of a professional bureaucracy structural configuration. The Effectiveness of Machine Bureaucracy in Attaining TPS Goals The goals of the Toyota Production System (TPS) are to eliminate waste by improving on productivity, cost, quality, morale, and safety to attain the greater satisfaction of customers, investors, and employees (Art of Lean 2016). Even though continuous improvement and respect for people are the primary driving forces behind Toyota’s ability to attain competitive advantage, it is evident that the machine bureaucracy structural configuration enables the company to optimize quality through the constant improvement of processes and the elimination of unwanted waste in corporate, human and natural resources. From the description of the TPS, it is apparent that the structural configuration is both means-focused and ends-focused. Means Focus The need to eliminate wastes is at the center of the TPS system (Lander & Liker 2007). The machine bureaucracy structural configuration has yielded the standardization of the Toyota Production System that has been detrimental towards the identification and elimination of unnecessary wastes. According to the production system, the corporation regards anything that does not add value to the production process as waste. As a result, Toyota includes things that other companies do not regard as waste such as overproduction, unnecessary improvement, waiting, and processing, the need for rework, and the holding of significant levels of inventory among wastes. As a result, the firm employs the Just-in-time production system to meet the fluctuating demands of its products. In order to attain the objective, Toyota uses Takt time as its production heartbeat. Takt refers to the rate at which customers demand its products. As a result, it refers to the work-cycle required to meet the demands of customers in the market. In the quest to avoid overproduction or underproduction, Toyota synchronizes the work-cycle with the existing market demand of its products. Ends Focused It is also evident that the machine bureaucracy structural configuration employed by the Toyota Corporation has enabled it to standardize its work processes to ensure the development of automobiles that not only meet the existing demand but also have the desirable attributes. In order to minimize errors at the workstations in the development of vehicle accessories and parts, the company utilizes devices that minimize the likelihood of making typical errors at the workstations. The poka-yoke is one of such devices. Toyota uses the poka-yoke principle as a reliable and creative way of minimizing errors in order to maintain the desired levels of quality. The company also labels reusable items to enable other users to fix them appropriately without making errors. Finally, Toyota regards improvement as a continuous rather than a fixed process. Continuous improvement has turned out to be at the center of the company’s success in developing high quality automobiles and automobile components. Toyota implements the Kaizen philosophy that requires all team members to identify ways of improving its operations (Toyota 2016). How Toyota Evaluates its Effectiveness Approaches to Organizational Effectiveness The Goal Attainment Approach In the approach, the firm identifies its goals and uses the goals to measure its performance (Eydi 2015). According to the approach, the extent to which a firm has achieved its objectives or goals provides a measure of its effectiveness. This suffices to be the most logical approach since it enables the firm to measure its effectiveness by determining the extent to which it has attained its goals. The System Resource Approach The approach measures the relative or absolute ability of the firm to acquire valued and scarce resources by exploiting its environment (Eydi 2015). However, the firm should maintain a harmonious relationship with the environment while attracting the necessary resources. This provides an easy measure to the effectiveness of the firm by equating the resources amassed by the organization to its ability to attain its goals and objectives. The Internal Process Approach The approach measures the effectiveness of an organization by determining its ability to offer an efficient and harmonious internal environment (Eydi 2015). The advantage of the approach reclines on the fact that it utilizes factors such as the smooth functioning of operations, integrated systems, and trust in measuring organizational effectiveness. The Strategic Constituencies Approach The approach measures effectiveness in relation to the ability of the organization to satisfy the needs of all its strategic constituencies including the human resource aspect (Eydi 2015). The advantage of the merit lies on the fact that it uses several effectiveness statements on the focal organization as the reference point in measuring the effectiveness of the organization. The Balanced Score Card Even though Toyota appears to focus on the goal attainment approach, using the balanced scorecard enables the firm implies the use of the strategic constituencies approach in measuring the effectiveness of its structural configuration. The BSC provides a multi-perspective evaluation of the corporation’s strategies as a measure of its effectiveness (Elg & Langstrand 2010). In using the Balanced Score Card (BSC) to measure its effectiveness, Toyota identifies five strategic perspectives. On the part of Toyota, the firm delves into determining the relationship that exists between the perspectives. The perspectives are customer, financial, mission and vision strategy, internal business processes, and learning and growth (Hopf et al. 2001; Small et al. 2015). In order to evaluate the effectiveness of its financial and customer perspectives, Toyota endeavors to determine the perspective held by its customers towards the company. The corporation also identifies specific aspects that it needs to excel at in measuring the effectiveness of the relationship that exists between its customer and internal businesses processes perspectives. Toyota also measures the effectiveness of the relationship between its internal business processes and learning and growth to determine whether it should continue to create value and improve. Finally, the company measures the effectiveness of its financial and learning and growth perspectives by identifying the means of getting the best deal from the Government. Rather than using the BSC framework to measure the effectiveness of its individual strategic perspectives, Toyota also measures a number of aspects under the perspectives. Under the customer perspective, Toyota measures the percentage of customers that exhibit satisfaction with its timeliness. The company also determines the percentage of customers that exhibit satisfaction with the quality of its products. Under effective service partnership, the corporation calculates the percentage of customers that exhibit satisfaction with the communication, cooperation, and responsiveness skills of the acquisition office. Under the learning and growth perspective, the company determines the percentage of employees that attain the mandatory standards of qualification. The corporation also determines the percentage of employees that exhibit satisfaction with the current work environment. Finally, the firm determines the percentage of employees that exhibit satisfaction with its culture, empowerment, values, and professionalism (Hopf et al. 2001). Toyota’s Organizational Issues and the Influence of the Existing Structure on the Issues The machine bureaucracy structural configuration employed by the Toyota Corporation presents both its advantages and disadvantages. The unintended acceleration failure witnessed in 2009 and 2010 and the subsequent response measures employed by the company to deal with the failure indicated a lapse in the centralized organization structure of the company (Evans & MacKenzie 2010). The mechanical failure compelled the company to recall 8 million automobiles during the crisis and incur $1.2B in settlement bills (Ross et al. 2014). It was evident that the use of machine bureaucracy by the company in the TPS and the “Just-in-time” production of automobiles played a pivotal role in giving rise to the failure of unintended acceleration. According to the production system, frontline employees have power to make decisions and intervene whenever they detected a lapse in the development or assembly process. However, the need to conceal and protect information at a time where the company strived to meet the high demand of its products amidst strained resources resulted in the assembly of faulty vehicles. It is clear that the organizational structure of the company played a massive role in addressing the crisis. In the event that the company utilized a decentralized decision-making structure, it is evident that the firm could have resolved the issue on the assembly line. However, the need to follow the one-way flow of information from the production line to the board of directors in Japan before the implementation of the recommended decisions resulted in the assembly of faulty vehicles. In essence, there is need for the company to replace the seniority hierarchy and the rigid corporate culture with a decentralized structure that allows line managers to make timely strategic decisions on the ground to prevent the exposure of the corporation to slow reaction to external threats. Conclusion The Toyota Corporation employs a centralized structure in its decision-making process. Under the approach, making decisions is the sole responsibility of board members located at the company’s headquarters in Japan. It is also evident that the corporation exhibits a high degree of formalization because of the existence of many written regulations and rules that specify its operations. The establishment of product-line departments and managers and the need to synchronize the management of the corporation to the headquarters indicates the complexity of the organizational structure. Toyota also employs the machine bureaucracy as its structural configuration as evidenced by the standard work processes and the use of technostructure as the key component of the firm. The corporation exhibits limited horizontal centralization under the machine bureaucracy structural configuration. Toyota’s organizational structure is both ends focused and means focused as evidenced by the need for employing the “Just-in-time” production system that minimizes waste, the use of equipment to detect flaws in the production process and the need to develop products in accordance with customer’s demand and anticipations. Toyota utilizes the balanced score card to evaluate its effectiveness by measuring customer, financial, mission and vision strategy, internal business processes, and learning and growth strategic perspectives. Reference List Al-Qatawneh, M.I., 2014. The Impact of Organizational Structure on Organizational Commitment: A Comparison between Public and Private Sector Firms in Jordan. Art of Lean., 2016. Toyota Production System Basic Handbook. Elg, M. and Langstrand, J., 2010. Balanced Scorecard as Organizational Practice: A multi-perspective analysis. Evans, S., and MacKenzie, A., 2010. The Toyota Recall Crisis-A Chronology of How the World’s Largest and Most Profitable Automaker Drove into a PR Disaster. MotorTrend. Available at: http://www.motortrend.com/news/toyota-recall-crisis/ Eydi, H., 2015. Organizational Effectiveness Models: Review and Apply in Non-Profit Sporting Organizations. American Journal of Economics, Finance and ManagementVol, 1, pp.460-467. 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