toyota organizational change case study

Organizational Change Process: Toyota Motor Case Study

Introduction.

Currently, the car industry is undergoing a major shift in priorities: if earlier, the main stakeholders of a company were rather concerned with stability and profit, nowadays, predictable earnings growth does not suffice. Car building has grown an overwhelmingly competitive sector where innovation reigns supreme. A Japanese multinational company headquartered in Tokyo, Toyota seems to be excelling in both sales numbers and putting forward innovative ideas and projects. On the one hand, the world’s second-largest car manufacturer has succeeded in striking a balance between meeting customers’ needs and making them interested in purchasing new models.

For instance, Toyota has produced and introduced the world’s first and best-sold hybrid car, Prius, successfully. Furthermore, year after year, the Japanese manufacturer ranks among the most innovative companies for its thoughtful consideration of fuel efficiency and safety standards. On the other hand, some experts are convinced that the company might be on its way to long stagnation due to its rigid bureaucratic structure. This essay will discuss what an organizational change consultant could suggest Toyota do regarding making meaningful changes and reinventing itself.

Planned Change

Lewin’s planned change model.

When a company considers changing its course of action, managers and OD consultants may entertain the idea of applying Lewin’s planned change model. Nothing is as compelling and motivating as soaring sales statistics. In 2018, alongside other large Japanese car manufacturers, Toyota saw a substantial decrease in sales numbers: for instance, there was an 18.6% decline in Camrys sales (Bomey, 2018).

All points are taken into consideration, one may conclude that Toyota cannot and should not rely on its reputation as the main driving force behind sales. Instead, launching a change model might be more preferable, which provides a clear rationale for Lewin’s Planned change model.

Lewin’s planned change model implementation usually takes three steps. At the first stage, a company needs to do a so-called defreezing in which it makes major changes to the prevailing paradigm and vision among all corporate levels (Hussain et al., 2018).

In the case of Toyota, both the managing board and employees should realize that fixing faulty features and avoiding recalls is a short-term solution. Once decision-makers have found a long-term solution, they introduce a change, which constitutes the second stage. Lastly, if the outcome is positive, a company should proceed with refreezing, stabilizing the structure, and making meaningful patterns for future action.

Action Research Model

Akin to the planned change model, the implementation of the action research model consists of three stages. The action research model goes into detail as to how an organizational change consultant should interact with a company that hired him or her to make the collaboration mutually beneficial. The first stage is communication, during which the clients share what they find troublesome about the company at the moment, and the consultant provides feedback (Willis & Edwards, 2014). The end goal of the first stage is to define causal relations between a company’s past decisions and current challenges. For instance, in the case of Toyota, an organization development consultant could examine how new design solutions or lack thereof affected sales numbers.

The next step would be data collection and problem diagnosis by the consultant. The findings of the second stage would determine objectives and, hence, the action plan. An essential subpart of the second stage is defining what action behaviors would be most effective in achieving the set goals (Willis & Edwards, 2014). Lastly, an OD consultant would do further research on the outcomes and gather data to decide whether the right course of action was taken.

It is imperative to maintain continuous two-way communication with the client and react to his or her feedback promptly. If a company and an OD consultant aim at long-term cooperation, the data gathered at all stages will help to make a new plan. Long-term cooperation would be preferable in the case of Toyota since such large companies need more time to make incremental changes.

Collecting Data

If a company wishes to elaborate a workable organizational development plan, it is imperative to gather and evaluate both qualitative and quantitative data for assessment. Furthermore, one needs to outline the advantages and disadvantages of the chosen research methodology. One of the most popular methods to collect data is conducting a survey among employees (Transparency International, 2014).

One of the pressing issues a survey could target could be the turnover rate at Toyota (Glassdoor, 2019). A high turnover rate leads to the necessity to train new employees while those who quit prematurely did not unlock their potential fully (Oladele, 2016). One may contend that Toyota owes its success to inbred leadership, in which managers are promoted within the company.

The data drawn from the first survey could be further processed using statistical methods to put together a clear picture of employees’ satisfaction in the workplace. A cross-sectional survey is a good method of assessing a situation in a given time span. However, it is important to evaluate the findings critically as they might be susceptible to voluntary basis: the most troubled and dissatisfied employees are more likely to come forward. At the same time, since participation would not be mandatory, a 100% outreach would not be possible, and thus, some of the voices would not be heard.

Another essential survey would take place among the top management of Toyota. In alignment with the action research model, an OD consultant would have to draw an extensive body of data from the company’s key figures. The second cross-sectional survey would aim at defining the company’s prevailing paradigm to establish what could be changed to guide Toyota on the way to innovation.

What an OD consultant would seek to attain through the series of such insightful interviews is to define what innovation means in the context of Toyota Company. Analyzing qualitative data of such kind would involve seeking similarities in responses to expose patterns. By doing that, it would be possible to seek customized solutions, which is not readily workable if a company uses a broad nebulous notion.

One of the responsibilities of the OD consultant at this stage would be to develop questions for participants. The first survey conducted by an OD consultant would be on the intention behind the high turnover rate. A study by Cohen, Black, and Goodman (2016) showed that a turnover intention rate is not a good predictor of an actual turnover rate. The questionnaire could contain yes/ no questions or Likert-scale statements in which the respondents would have to reply to what extent they agree with the statements provided.

For instance, “I feel valued and affirmed at work” or “I’m engaged in meaningful work (Society for Human Resource Management, 2016).” Thus, the survey would not include questions as to whether an employee plans to resign but rather whether he or she is satisfied with their work conditions and overall environment.

As for the second survey, an OD consultant could conduct a series of in-depth interviews to gather qualitative data about the managers’ shared and personal views. Based on a report by Coad et al. (2014), an OD consultant could develop an array of open-end questions. For example, “What is innovation?”, “Do you consider Toyota an innovative company?”, or “How do you see the company’s growth and development in the next five years?” What could also be useful is encouraging managers to reflect on the failures of the year 2009 since it had a rather difficult psychological effect on Toyota.

Feeding Back Diagnostic Data

Force-field analysis.

Lewin’s force-field analysis is a simplistic at first glance yet a profound strategy for determining primary contributing factors to the company’s growth or decline. According to Lewin, there are two categories of factors: driving forces and resisting forces (McGrath & Bates, 2017). One of the main difficulties emphasized by McGrath and Bates (2017) is that some factors may be both driving and resisting forces. That is why it is imperative to gather data to put each factor in context. In the case of Toyota, the force field may look as follows (see table 1).

Organizational Culture

Assuming that the company aims at making a major change, the OD consultant should find the most effective ways to present what he or she discovered. Due to the great number of employees – more than 369,000 (Statista, 2018), it is impossible to communicate the highlights of the diagnosis personally. To solve the issue, distribution and communication could be delegated to the managers of each department.

When possible, it would be best to organize discussion groups where information would not be presented in the form of a lecture but a conversation. The ability to contribute encourages people to memorize and take action. As for the main points to be presented, it is crucial that an OD consultant employs objective, numerical data as well as summarizes the managers’ views on innovation.

Organizational Change Interventions

Action plan – short-term.

As for the actions that the company could take on an immediate basis, a short-term plan for Toyota would include practices that would directly address the issues exposed in the survey findings. For instance, once employee engagement and motivation are examined, human resource development specialists could start working on the most pressing problems. Since ethical implications would be taken into consideration, the survey would be fully anonymous.

This means that HRD specialists would not be able to approach specific employees to have a conversation about their challenges and intentions. Instead, the company could address the factors defined in the findings directly. For instance, if it is subpar working conditions in particular quarters that were found to be demotivating, they should be improved. As for further fostering engagement and innovation, HRD specialists could hold brainstorming sessions within general employee meetings, starting shortly after the data has been analyzed. In the meetings, employees could put forward their ideas as to how the company could be changed in a meaningful way (Dawson & Adriopoulous, 2017).

Further, the managers’ views should be consolidated and summarized in the form of a clear mission statement with a short-term and long-term objective. The statement should be published within the company as well as posted online on the official website and other social media resources of the company.

Action Plan – Long-term

The question arises as to what measures the company could take to aid its development in the long perspective. It is obvious that the company needs a continuous assessment of employees’ needs. For this reason, it is only reasonable to conduct subsequent surveys to detect other problems that might be discouraging employees from releasing their full potential. Thus, Toyota would handle the issue of the high turnover rate in several steps.

Overall, it is crucial to foster an atmosphere in which supervisors do not judge new ideas, and constructive criticism is welcome. One of the long-term methods of supporting innovation at the company level could be holding technology startup contests. Since Toyota is a large company, it has enough resources at its disposal to fund the best ideas aimed at sustainability, safety, and fuel efficiency. As for further development of the mission statement, once managers have singled out particular objectives, they need to diagnose each of them.

Toyota is a company with a long, rich history that has been a trailblazer in the car manufacturing industry and set bars for other companies for many years. As of now, despite formal achievements, such as growing yearly revenues, some experts claim that the company is becoming increasingly stagnant. The situation is calling for a thoughtful diagnosis and assessment, which can be conducted by an organizational development consultant.

It is crucial to implement one of the existent strategies such as planned change or action research models. A series of surveys should be carried out and gathered data should help to elaborate an action plan. While choosing the course of action, Toyota should take into account such driving forces as rich resources, loyal customer base, and experience in launching innovative projects. On the other hand, customers reluctant to changes, recent controversies such as massive recalls, and training staff should not be dismissed.

Bomey, N. (2018). Honda, Toyota, Nissan car sales plunge, but SUVs rise U.S. auto sales likely up in August . USA Today. Web.

Coad, A., Cowling, M., Nightingale, P., Pellegrino, G., Savona, M., & Siepel, J. (2014). Innovative firms and growth: UK Innovation Survey . Web.

Cohen, G., Blake, R. S., & Goodman, D. (2016). Does turnover intention matter? Evaluating the usefulness of turnover intention rate as a predictor of actual turnover rate. Review of Public Personnel Administration , 36 (3), 240-263.

Dawson, P., & Andriopoulous, C. (2017). Managing change, creativity, and organisation (3d ed.). New York City, NY: SAGE.

Glassdoor. (2019). Toyota North America. Web.

Hussain, S. T., Lei, S., Akram, T., Haider, M. J., Hussain, S. H., & Ali, M. (2018). Kurt Lewin’s change model: A critical review of the role of leadership and employee involvement in organizational change. Journal of Innovation & Knowledge , 3 (3), 123-127.

McGrath, J., & Bates, B. (2017). The little book of big management theories:… And how to use them. Pearson, UK: Business & Economics.

Oladele, J. A. (2016). Labour turnover: Causes, consequences, and prevention. Fountain University Journal of Management and Social Sciences, 5 (1), 105-112.

Shannon, J. (2019). Toyota recalls 1.7 million more vehicles for risk of shrapnel from exploding airbags . USA Today. Web.

Society for Human Resource Management. (2016). Employee job satisfaction and engagement. Revitalizing a changing workforce . Web.

Statista. (2018). Consolidated number of Toyota Motor Corporation employees from FY 2012 to FY 2018 . Web.

Toyota Global. (2018). Financial highlights . Web.

Transparency International. (2014). Transparency in corporate reporting. Assessing the world’s largest companies. Web.

Willis, J. W., & Edwards, C. (2014). Action research: Models, methods, and examples. Charlotte, NC: Education.

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Resilience Tested: Toyota Crisis Management Case Study

Crisis management is organization’s ability to navigate through challenging times. 

The renowned Japanese automaker Toyota faced such challenge which shook the automotive industry and put a dent in the previously pristine reputation of the brand.

The Toyota crisis, characterized by sudden acceleration issues in some of its vehicles, serves as a compelling case study for examining the importance of effective crisis management. 

Toyota crisis management case study gives background of the crisis, analyze Toyota’s initial response, explore their crisis management strategy, evaluate its effectiveness, and draw valuable lessons from this pivotal event. 

By understanding how Toyota tackled this crisis, we can glean insights that will help organizations better prepare for and respond to similar challenges in the future.

Let’s start reading

Brief history of Toyota as a company

Toyota, one of the world’s largest automobile manufacturers, has a rich history that spans over eight decades. The company was founded by Kiichiro Toyoda in 1937 as a spinoff of his father’s textile machinery business. 

Initially, Toyota focused on producing automatic looms, but Kiichiro had a vision to expand into the automotive industry. Inspired by a trip to the United States and Europe, he saw the potential for automobiles to transform society and decided to steer the company in that direction.

In 1936, Toyota built its first prototype car, the A1, and in 1937, they officially established the Toyota Motor Corporation. The company faced numerous challenges in its early years, including the disruption caused by World War II, which halted production.

However, Toyota persisted and resumed operations after the war, embarking on a journey that would eventually lead to global recognition.

Toyota’s breakthrough came in the 1960s with the introduction of the compact and affordable Toyota Corolla, which quickly gained popularity worldwide. This success laid the foundation for Toyota’s reputation for producing reliable, fuel-efficient, and high-quality vehicles.

Throughout the following decades, Toyota expanded its product lineup, launching models like the Camry, Prius (the world’s first mass-produced hybrid car), and the Land Cruiser, among others.

Toyota’s commitment to continuous improvement and efficiency led to the development and implementation of the Toyota Production System (TPS), often referred to as “lean manufacturing.” TPS revolutionized the automotive industry by minimizing waste, improving productivity, and enhancing quality.

Over the years, Toyota successfully implemented many change initiatives.

By the turn of the 21st century, Toyota had firmly established itself as a global automotive powerhouse, consistently ranking among the top automakers in terms of sales volume.

However, the company would soon face a significant challenge in the form of the sudden acceleration crisis, which tested Toyota’s crisis management capabilities and had far-reaching implications for the brand.

Description of the sudden acceleration crisis

The sudden acceleration crisis was a pivotal event in Toyota’s history, which unfolded in the late 2000s and early 2010s. It involved a series of incidents where Toyota vehicles experienced unintended acceleration, leading to accidents, injuries, and even fatalities. Reports emerged of vehicles accelerating uncontrollably, despite drivers attempting to apply the brakes or shift into neutral.

The crisis gained significant media attention and scrutiny , as it posed serious safety concerns for Toyota customers and raised questions about the company’s manufacturing processes and quality control. The issue affected a wide range of Toyota models, including popular ones such as the Camry, Corolla, and Prius.

Investigations revealed that the unintended acceleration was attributed to various factors. One prominent cause was a design flaw in the accelerator pedal assembly, where the pedals could become trapped or stuck in a partially depressed position. Additionally, electronic throttle control systems were also identified as potential contributors to the issue.

The sudden acceleration crisis had severe consequences for Toyota. It tarnished the company’s reputation for reliability and safety, and public trust in the brand was significantly eroded. Toyota faced a wave of lawsuits, regulatory investigations, and recalls, as it scrambled to address the issue and restore consumer confidence.

The crisis prompted Toyota to launch one of the largest recalls in automotive history, affecting millions of vehicles worldwide. The company took steps to redesign and replace the faulty accelerator pedals and improve the electronic throttle control systems to prevent future incidents. Toyota also faced criticism for its initial response, with accusations of a lack of transparency and timely communication with the public.

The sudden acceleration crisis served as a wake-up call for Toyota, highlighting the importance of effective crisis management and the need for proactive measures to address safety concerns promptly.

Toyota crisis management case study helps us to understand how company’s respond to this crisis and set a precedent for handling future challenges in the years to come.

Timeline of events leading up to the crisis

To understand the timeline of events leading up to the sudden acceleration crisis at Toyota, let’s explore the key milestones:

• Early 2000s: Reports of unintended acceleration incidents begin to surface, with some drivers claiming their Toyota vehicles experienced sudden and uncontrolled acceleration. These incidents, although relatively isolated, raised concerns among consumers.
• August 2009: A tragic incident occurs in California when a Lexus ES 350, a Toyota brand, accelerates uncontrollably, resulting in a high-speed crash that claims the lives of four people. The incident receives significant media attention, highlighting the potential dangers of unintended acceleration.
• September 2009: The National Highway Traffic Safety Administration (NHTSA) launches an investigation into the sudden acceleration issue in Toyota vehicles. The probe focuses on floor mat entrapment as a possible cause.
• November 2009: Toyota announces a voluntary recall of approximately 4.2 million vehicles due to the risk of floor mat entrapment causing unintended acceleration. The recall affects several popular models, including the Camry and Prius.
• January 2010: Toyota expands the recall to an additional 2.3 million vehicles, citing concerns over sticking accelerator pedals. This brings the total number of recalled vehicles to nearly 6 million.
• February 2010: In a highly publicized event, Toyota halts sales of eight of its models affected by the accelerator pedal recall, causing a significant disruption to its production and sales.
• February 2010: The U.S. government launches a formal investigation into the safety issues related to unintended acceleration in Toyota vehicles. Congressional hearings are held, during which Toyota executives are questioned about the company’s handling of the crisis.
• April 2010: Toyota faces a $16.4 million fine from the NHTSA for failing to promptly notify the agency about the accelerator pedal defect, violating federal safety regulations.
• Late 2010 and 2011: Toyota faces a wave of lawsuits from affected customers seeking compensation for injuries, deaths, and vehicle damages caused by unintended acceleration incidents.
• 2012 onwards: Toyota continues to address the sudden acceleration crisis by implementing various measures, including improving quality control processes, enhancing communication with regulators and customers, and establishing an independent quality advisory panel. 

Toyota’s initial denial and dismissal of the problem

During the early stages of the sudden acceleration crisis, one notable aspect was Toyota’s initial response, which involved a degree of denial and dismissal of the problem. This response contributed to the escalation of the crisis and further eroded public trust in the company. Let’s delve into Toyota’s initial reaction to the issue:

• Downplaying the Problem: In the initial stages, Toyota downplayed the reports of unintended acceleration incidents, attributing them to driver error or mechanical issues. The company maintained that their vehicles were safe and reliable, asserting that the incidents were isolated and not indicative of a systemic problem.
• Lack of Transparency: Toyota faced criticism for its perceived lack of transparency regarding the issue. The company was accused of withholding information and failing to disclose potential safety risks to the public and regulatory agencies promptly. This lack of transparency fueled suspicions and raised questions about the company’s commitment to addressing the problem.
• Slow Response: Toyota’s response to the growing concerns regarding unintended acceleration was relatively slow, leading to accusations of negligence. Critics argued that the company should have acted more swiftly and decisively to investigate and address the issue before it escalated into a full-blown crisis.
• Reluctance to Acknowledge Defects: Initially, Toyota resisted the notion that there were inherent defects in their vehicles that could lead to unintended acceleration. The company’s reluctance to accept responsibility and acknowledge the problem further strained its relationship with consumers, regulators, and the media.
• Impact on Customer Trust: Toyota’s initial denial and dismissal of the problem had a significant impact on customer trust. As more incidents were reported and investigations progressed, customers began to question the integrity of the brand and its commitment to safety. This led to a decline in sales and a tarnishing of Toyota’s once-sterling reputation for reliability.

Lack of transparency and communication with the public

One critical aspect of Toyota’s initial response to the sudden acceleration crisis was the perceived lack of transparency and ineffective communication with the public. This deficiency in open and timely communication further intensified the crisis and eroded trust in the company. Let’s explore the key issues related to transparency and communication:

• Delayed Public Announcement: Toyota faced criticism for the delay in publicly acknowledging the safety concerns surrounding unintended acceleration. As reports of incidents surfaced and investigations commenced, there was a perception that Toyota withheld information and failed to promptly address the issue. This lack of transparency fueled public skepticism and eroded confidence in the company.
• Insufficient Explanation: When Toyota did address the sudden acceleration issue, their explanations and communications were often vague and lacking in detail. Customers and the public were left with unanswered questions and a sense that the company was not providing comprehensive information about the problem and its resolution.
• Ineffective Recall Communication: Toyota’s communication regarding the recalls linked to unintended acceleration was criticized for its inadequacy. Some customers reported confusion and frustration with the recall process, including unclear instructions and delays in obtaining necessary repairs. This lack of clarity and efficiency in communicating recall information further strained the company’s relationship with its customers.
• Limited Engagement with Stakeholders: Toyota’s engagement with key stakeholders, such as regulatory bodies, industry experts, and affected customers, was perceived as insufficient. The company’s communication efforts were criticized for being reactive rather than proactive, lacking a comprehensive plan to engage stakeholders and address their concerns promptly.
• Perception of Cover-up: The lack of transparency and ineffective communication led to a perception that Toyota was attempting to cover up the severity of the sudden acceleration issue. This perception further damaged the company’s credibility and fueled public skepticism about the company’s commitment to consumer safety.

Impact on the company’s reputation and customer trust

The sudden acceleration crisis had a profound impact on Toyota’s reputation and customer trust, which were previously regarded as key strengths of the company. Let’s explore the repercussions of the crisis on these crucial aspects:

• Reputation Damage: Toyota’s reputation as a manufacturer of reliable and safe vehicles took a significant hit due to the sudden acceleration crisis. The widespread media coverage of incidents and recalls associated with unintended acceleration eroded the perception of Toyota’s quality and reliability. The crisis challenged the long-standing perception of Toyota as a leader in automotive excellence.
• Loss of Customer Trust: The crisis shattered the trust that customers had placed in Toyota. The incidents of unintended acceleration and the subsequent recalls created doubts about the safety of Toyota vehicles. Customers who had been loyal to the brand for years felt betrayed and concerned about the potential risks associated with owning or purchasing a Toyota vehicle.
• Sales Decline: The erosion of customer trust and the negative publicity surrounding the sudden acceleration crisis resulted in a significant decline in sales for Toyota. Consumers were hesitant to buy Toyota vehicles, leading to a loss of market share. Competitors seized the opportunity to capitalize on Toyota’s weakened position and gain a foothold in the market.
• Legal Consequences: Toyota faced a wave of lawsuits from individuals and families affected by incidents related to unintended acceleration. These lawsuits not only had financial implications but also further damaged the company’s reputation as it faced allegations of negligence and failure to ensure the safety of its vehicles.
• Regulatory Scrutiny: The sudden acceleration crisis brought increased regulatory scrutiny upon Toyota. Government agencies, such as the National Highway Traffic Safety Administration (NHTSA), conducted investigations into the issue, which further dented the company’s reputation. Toyota had to cooperate with regulatory bodies and demonstrate its commitment to rectifying the problems to restore trust.
• Long-Term Brand Perception: The sudden acceleration crisis left a lasting impression on how Toyota is perceived by consumers. Despite the company’s efforts to address the issue and improve safety measures, the crisis served as a reminder that even renowned brands can face significant challenges. It highlighted the importance of transparency, accountability, and a proactive approach to crisis management.

Recognition and acceptance of the crisis

In the face of mounting evidence and public scrutiny, Toyota eventually recognized and accepted the severity of the sudden acceleration crisis. The company’s acknowledgment of the crisis marked a significant turning point in their approach to addressing the issue. Let’s explore how Toyota recognized and accepted the crisis:

• Admitting the Problem: As the number of reported incidents increased and investigations progressed, Toyota eventually acknowledged that there was a problem with unintended acceleration in some of their vehicles. This admission was a crucial step towards recognizing the crisis and accepting the need for immediate action.
• Apology and Responsibility: Toyota’s top executives, including the company’s President at the time, issued public apologies for the safety issues and the negative impact on customers. The company took responsibility for the unintended acceleration problem, acknowledging that there were defects in their vehicles and accepting accountability for the consequences.
• Collaboration with Authorities: Toyota actively collaborated with regulatory bodies, such as the NHTSA, and other government agencies involved in investigating the sudden acceleration issue. This collaboration demonstrated a commitment to resolving the crisis and addressing the concerns of the authorities.
• Openness to Independent Investigation: In an effort to ensure transparency and unbiased assessment of the crisis, Toyota welcomed independent investigations into the unintended acceleration incidents. The company engaged external experts and formed advisory panels to evaluate their manufacturing processes, safety systems, and quality control measures.
• Recall and Repair Initiatives: Toyota initiated a massive recall campaign to address the safety issues associated with unintended acceleration. The company implemented comprehensive repair programs aimed at fixing the defects and improving the safety features in affected vehicles. These initiatives were crucial in demonstrating Toyota’s commitment to rectifying the problems and ensuring customer safety.
• Internal Process Evaluation : Toyota conducted internal evaluations and reviews of their manufacturing processes and quality control systems. They identified areas for improvement and implemented changes to prevent similar issues from arising in the future. This internal introspection showed a dedication to learning from the crisis and strengthening their processes.

Appointment of crisis management team

In response to the sudden acceleration crisis, Toyota recognized the need for a dedicated crisis management team to effectively handle the situation. The appointment of such a team was crucial in coordinating the company’s response, managing communications, and implementing appropriate strategies to address the crisis.

Toyota appointed experienced and senior executives to lead the crisis management team. These individuals had a deep understanding of the company’s operations, values, and stakeholder relationships. They were entrusted with making critical decisions and guiding the organization through the crisis.

The crisis management team comprised representatives from various functions and departments within Toyota, ensuring a comprehensive approach to addressing the crisis. Members included executives from engineering, manufacturing, quality control, legal, public relations, and other relevant areas. This cross-functional representation facilitated a holistic understanding of the issues and enabled effective collaboration.

Implementation of recall and repair programs

In response to the sudden acceleration crisis, Toyota implemented extensive recall and repair programs to address the safety concerns associated with unintended acceleration. These programs aimed to rectify the defects, enhance the safety features, and restore customer confidence.

Toyota identified the models and production years that were potentially affected by unintended acceleration issues. This involved a thorough examination of reported incidents, investigations, and collaboration with regulatory agencies. By pinpointing the specific vehicles at risk, Toyota could direct their efforts towards addressing the problem efficiently.

Toyota launched a comprehensive communication campaign to reach out to affected customers. The company sent notifications via mail, email, and other channels to inform them about the recall and repair programs. The communication highlighted the potential risks, steps to take, and the importance of addressing the issue promptly.

Toyota actively engaged its dealership network to support the recall and repair initiatives. Dealerships were provided with detailed information, training, and necessary resources to assist customers in scheduling appointments, conducting inspections, and performing the required repairs. This collaboration between the company and its dealerships aimed to ensure a seamless and efficient recall process.

Toyota developed a structured repair process to address the unintended acceleration issue in the affected vehicles. This involved inspecting and, if necessary, replacing or modifying components such as the accelerator pedals, floor mats, or electronic control systems. The company ensured an adequate supply of replacement parts to minimize delays and facilitate timely repairs.

Collaboration with regulatory bodies and industry experts

During the sudden acceleration crisis, Toyota recognized the importance of collaborating with regulatory bodies and industry experts to address the safety concerns and restore confidence in their vehicles. This collaboration involved working closely with relevant agencies and seeking external expertise to investigate the issue and implement necessary improvements.

Let’s delve into Toyota’s collaboration with regulatory bodies and industry experts:

• Regulatory Engagement: Toyota actively engaged with regulatory bodies, such as the National Highway Traffic Safety Administration (NHTSA) in the United States and other similar agencies globally. The company cooperated with these organizations by providing them with relevant data, participating in investigations, and adhering to their guidelines and recommendations. This collaboration aimed to ensure a thorough and unbiased assessment of the sudden acceleration issue.
• Joint Investigations: Toyota collaborated with regulatory bodies in conducting joint investigations into the unintended acceleration incidents. These investigations involved sharing data, conducting extensive testing, and evaluating potential causes and contributing factors. By working together with the regulatory authorities, Toyota aimed to gain a comprehensive understanding of the problem and find effective solutions.
• Advisory Panels and External Experts: Toyota sought the expertise of external industry experts and formed advisory panels to provide independent assessments of the sudden acceleration issue. These panels consisted of experienced engineers, scientists, and safety specialists who analyzed the data, evaluated the vehicle systems, and offered recommendations for improvement. Their insights and recommendations helped guide Toyota’s response and ensure a thorough and impartial evaluation.
• Safety Standards Compliance: Toyota collaborated with regulatory bodies to ensure compliance with safety standards and regulations. The company actively participated in discussions and consultations to contribute to the development of robust safety standards for the automotive industry. By actively engaging with regulatory bodies, Toyota aimed to demonstrate its commitment to maintaining high safety standards and fostering an environment of continuous improvement.
• Sharing Best Practices: Toyota collaborated with industry peers and participated in industry forums and conferences to share best practices and learn from others’ experiences. By engaging with other automotive manufacturers, Toyota aimed to gain insights into safety practices, quality control measures, and crisis management strategies. This exchange of knowledge and collaboration helped Toyota strengthen their approach to safety and crisis management.

Final Words 

Toyota crisis management case study serves as a valuable reminder to all automobiles companies on managing crisis. The sudden acceleration crisis presented a significant challenge for Toyota, testing the company’s crisis management capabilities and resilience. While Toyota demonstrated strengths in their crisis management strategy, such as a swift response, transparent communication, and a customer-focused approach, they also faced weaknesses and shortcomings. Initial denial, lack of transparency, and communication issues hampered their crisis response.

The crisis had profound financial consequences for Toyota, including costs associated with recalls, repairs, legal settlements, fines, and a decline in market value. Legal settlements were reached to address claims from affected customers, shareholders, and other stakeholders seeking compensation for damages and losses. The crisis also resulted in reputation damage that required significant efforts to rebuild trust and restore the company’s standing.

About The Author

Tahir Abbas

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The Contradictions That Drive Toyota’s Success

• Hirotaka Takeuchi,
• Norihiko Shimizu

Stable and paranoid, systematic and experimental, formal and frank: The success of Toyota, a pathbreaking six-year study reveals, is due as much to its ability to embrace contradictions like these as to its manufacturing prowess.

Reprint: R0806F

Toyota has become one of the world’s greatest companies only because it developed the Toyota Production System, right? Wrong, say Takeuchi, Osono, and Shimizu of Hitotsubashi University in Tokyo. Another factor, overlooked until now, is just as important to the company’s success: Toyota’s culture of contradictions.

TPS is a “hard” innovation that allows the company to continuously improve the way it manufactures vehicles. Toyota has also mastered a “soft” innovation that relates to human resource practices and corporate culture. The company succeeds, say the authors, because it deliberately fosters contradictory viewpoints within the organization and challenges employees to find solutions by transcending differences rather than resorting to compromises. This culture generates innovative ideas that Toyota implements to pull ahead of competitors, both incrementally and radically.

The authors’ research reveals six forces that cause contradictions inside Toyota. Three forces of expansion lead the company to change and improve: impossible goals, local customization, and experimentation. Not surprisingly, these forces make the organization more diverse, complicate decision making, and threaten Toyota’s control systems. To prevent the winds of change from blowing down the organization, the company also harnesses three forces of integration: the founders’ values, “up-and-in” people management, and open communication. These forces stabilize the company, help employees make sense of the environment in which they operate, and perpetuate Toyota’s values and culture.

Emulating Toyota isn’t about copying any one practice; it’s about creating a culture. And because the company’s culture of contradictions is centered on humans, who are imperfect, there will always be room for improvement.

No executive needs convincing that Toyota Motor Corporation has become one of the world’s greatest companies because of the Toyota Production System (TPS). The unorthodox manufacturing system enables the Japanese giant to make the planet’s best automobiles at the lowest cost and to develop new products quickly. Not only have Toyota’s rivals such as Chrysler, Daimler, Ford, Honda, and General Motors developed TPS-like systems, organizations such as hospitals and postal services also have adopted its underlying rules, tools, and conventions to become more efficient. An industry of lean-manufacturing experts have extolled the virtues of TPS so often and with so much conviction that managers believe its role in Toyota’s success to be one of the few enduring truths in an otherwise murky world.

• Hirotaka Takeuchi is a professor in the strategy unit of Harvard Business School.
• EO Emi Osono ( [email protected] ) is an associate professor;
• NS and Norihiko Shimizu ( [email protected] ) is a visiting professor at Hitotsubashi University’s Graduate School of International Corporate Strategy in Tokyo. This article is adapted from their book Extreme Toyota: Radical Contradictions That Drive Success at the World’s Best Manufacturer , forthcoming from John Wiley & Sons.

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7.2 Case in Point: Toyota Struggles With Organizational Structure

The Toad – Labadie Toyota Building – CC BY-NC 2.0.

Toyota Motor Corporation (TYO: 7203) has often been referred to as the gold standard of the automotive industry. In the first quarter of 2007, Toyota (NYSE: TM) overtook General Motors Corporation in sales for the first time as the top automotive manufacturer in the world. Toyota reached success in part because of its exceptional reputation for quality and customer care. Despite the global recession and the tough economic times that American auto companies such as General Motors and Chrysler faced in 2009, Toyota enjoyed profits of $16.7 billion and sales growth of 6% that year. However, late 2009 and early 2010 witnessed Toyota’s recall of 8 million vehicles due to unintended acceleration. How could this happen to a company known for quality and structured to solve problems as soon as they arise? To examine this further, one has to understand about the Toyota Production System (TPS).

TPS is built on the principles of “just-in-time” production. In other words, raw materials and supplies are delivered to the assembly line exactly at the time they are to be used. This system has little room for slack resources, emphasizes the importance of efficiency on the part of employees, and minimizes wasted resources. TPS gives power to the employees on the front lines. Assembly line workers are empowered to pull a cord and stop the manufacturing line when they see a problem.

However, during the 1990s, Toyota began to experience rapid growth and expansion. With this success, the organization became more defensive and protective of information. Expansion strained resources across the organization and slowed response time. Toyota’s CEO, Akio Toyoda, the grandson of its founder, has conceded, “Quite frankly, I fear the pace at which we have grown may have been too quick.”

Vehicle recalls are not new to Toyota; after defects were found in the company’s Lexus model in 1989, Toyota created teams to solve the issues quickly, and in some cases the company went to customers’ homes to collect the cars. The question on many people’s minds is, how could a company whose success was built on its reputation for quality have had such failures? What is all the more puzzling is that brake problems in vehicles became apparent in 2009, but only after being confronted by United States transportation secretary Ray LaHood did Toyota begin issuing recalls in the United States. And during the early months of the crisis, Toyota’s top leaders were all but missing from public sight.

The organizational structure of Toyota may give us some insight into the handling of this crisis and ideas for the most effective way for Toyota to move forward. A conflict such as this has the ability to paralyze productivity but if dealt with constructively and effectively, can present opportunities for learning and improvement. Companies such as Toyota that have a rigid corporate culture and a hierarchy of seniority are at risk of reacting to external threats slowly. It is not uncommon that individuals feel reluctant to pass bad news up the chain within a family company such as Toyota. Toyota’s board of directors is composed of 29 Japanese men, all of whom are Toyota insiders. As a result of its centralized power structure, authority is not generally delegated within the company; all U.S. executives are assigned a Japanese boss to mentor them, and no Toyota executive in the United States is authorized to issue a recall. Most information flow is one-way, back to Japan where decisions are made.

Will Toyota turn its recall into an opportunity for increased participation for its international manufacturers? Will decentralization and increased transparency occur? Only time will tell.

Case written based on information from Accelerating into trouble. (2010, February 11). Economist . Retrieved March 8, 2010, from http://www.economist.com/opinion/displaystory.cfm?story_id=15498249 ; Dickson, D. (2010, February 10). Toyota’s bumps began with race for growth. Washington Times , p. 1; Maynard, M., Tabuchi, H., Bradsher, K., & Parris, M. (2010, February 7). Toyota has pattern of slow response on safety issues. New York Times , p. 1; Simon, B. (2010, February 24). LaHood voices concerns over Toyota culture. Financial Times . Retrieved March 10, 2010, from http://www.ft.com/cms/s/0/11708d7c-20d7-11df-b920-00144feab49a.html ; Werhane, P., & Moriarty, B. (2009). Moral imagination and management decision making. Business Roundtable Institute for Corporate Ethics . Retrieved April 30, 2010, from http://www.corporate-ethics.org/pdf/moral_imagination.pdf ; Atlman, A. (2010, February 24). Congress puts Toyota (and Toyoda) in the hot seat. Time . Retrieved March 11, 2010, from http://www.time.com/time/nation/article/0,8599,1967654,00.html .

Discussion Questions

• What changes in the organizing facet of the P-O-L-C framework might you make at Toyota to prevent future mishaps like the massive recalls related to brake and accelerator failures?
• Do you think Toyota’s organizational structure and norms are explicitly formalized in rules, or do the norms seem to be more inherent in the culture of the organization?
• What are the pros and cons of Toyota’s structure?
• What elements of business would you suggest remain the same and what elements might need revising?
• What are the most important elements of Toyota’s organizational structure?

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Home > Books > Strategic Management - a Dynamic View

Organizational Identity, Corporate Strategy, and Habits of Attention: A Case Study of Toyota

Submitted: 20 April 2018 Reviewed: 24 August 2018 Published: 31 December 2018

DOI: 10.5772/intechopen.81117

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This chapter links organizational identity as a cohesive attribute to corporate strategy and a competitive advantage, using Toyota as a case study. The evolution of Toyota from a domestic producer, and exporter, and now a global firm using a novel form of lean production follows innovative tools of human resources, supply chain collaboration, a network identity to link domestic operations to overseas investments, and unparalleled commercial investments in technologies that make the firm moving from a sustainable competitive position to one of unassailable advantage in the global auto sector. The chapter traces the strategic moves to strength Toyota’s identity at all levels, including in its overseas operations, to build a global ecosystem model of collaboration.

• institutional identity
• lean management
• learning symmetries
• habits of attention

Author Information

Charles mcmillan *.

• Schulich School of Business, York University, Toronto, Canada

*Address all correspondence to: [email protected]

(Article for Lawrence Emeagwali (Ed.), Strategic Management . London, 2018)

October 18, 2018.

“There is no use trying” said Alice, “we cannot believe impossible things.”—Lewis Carroll

1. Introduction

Few organizations combine the institutional benefits of longevity and tradition with the disruptive startup advantages of novelty and suspension of path dependent behavior. This chapter provides a case study of Toyota Corporation, an organization with an explicit philosophy that embodies “…standardized work and kaizen (that) are two sides of the same coin. Standardized work provides a consistent basis for maintaining productivity, quality and safety at high levels. Kaizen furnishes the dynamics of continuing improvement and the very human motivation of encouraging individuals to take part in designing and managing their own jobs” ([ 1 ], p. 38). Toyota’s philosophy, combining a model that is “stable and paranoid, systematic experimental, formal and frank” [ 2 ], often called the Toyota Way, evolved from the founding of Toyoda Automatic Loom Works, founded in 1911, setting up an auto division in 1933, and Toyota Motor Company in 1937 [ 3 ].

What is unique about Toyota and its pioneering lean production, described colloquially as just-in-time (JIT), embraces a deliberative philosophy that establishes a corporate identity for safety, quality, and aspirational performance goals. Going forward, with plants and distribution centers around the world, Toyota cultivates a direct involvement of employees, suppliers, and other organizations, called the Toyota Group, as a network identity that extends boundary members of the firm’s eco-system that also embodies detailed performance measures to strengthen and reinforce identity enhancement. These identity attributes creating novel and seemingly contradictory configurations, both at home and now in global markets. Toyota provides a framework to link identity as a cohesive attribute for problem-solving with explicit, data-driven benchmarks, a DNA that encompasses observation, analysis, hypothesis testing from the shop floor to the executive suite [ 3 , 4 ].

The concept of identity has a long pedigree in the social sciences, dating from classical writers like Adam Smith, Karl Marx, Max Weber, and Emile Durkheim, focusing on individual identities separate and distinct from larger social systems arising from the division of labor. However, identity in organizations is a relatively new construct, based on claims that are “central, distinctive, and enduring” [ 5 ]. Despite the growing literature on organizational identity [ 6 , 7 ], there is less consensus given the multiple disciplinary focus, the levels of analysis, well as minimum empirical work linking organizational identity to corporate strategy. In some cases, identity linkages touch on outcomes like brand equity, reputation, visual media like social networking and the gap between defining what the organization is today and what it wants to become, despite the high failure rate of firms [ 8 ]. Indeed, there is little reason to doubt that “the concept of organizational identity is suffering an identity crisis” ([ 9 ], p. 206).

Despite the growing literature on organization identity, encompassing diverse constructs and methodologies [ 6 , 7 ], often at different organizational levels (individuals, groups and senior management), has limited empirical study linking individual and group identity both to corporate strategy and corporate performance. Various accounts of social experiences, concentrating on a sense of insider and outsider to frame a mutual identity mindset that shapes organizational identity, apply personal histories and narratives, but leave open the distinction between corporate identity and organizational identity [ 10 ]. Identity producing mechanisms flowing from purposeful actions vary by context, such as universities and faith-based organizations to technology and engineering organizations with complicated role activities grounded in socio-technical design [ 11 ]. Compelling cases of identity as a tool for organizational integration, or the impact of cleavage and conflict owing to human diversity policies, personality characteristics of key actors, and sub-unit identity images advance understanding of behavior within organizations, but often ignores how both strategic choice and external forces impact these internal mindsets. Many scholars associate internal identity issues to external stakeholders using sundry communication tools (e.g., [ 12 ]) but the literature has few studies that explain what organizational identity features are truly different and give a competitive advantage in contested markets over time. To advance hypothesis testing and to encourage conceptual development in both theory and practice, there must be a linkage to identity as a construct that provides insights to an organization’s competitive advantage.

This chapter addresses the issues linking strategic choices and capabilities to Toyota’s identity as a case study. Toyota’s strategic positioning and high-performance outcomes amplify identity tools at three levels, its employees (both in Japan and its factories overseas), its suppliers, and its customers. Depicted as a best practice company [ 13 ], Toyota is seen as a model to emulate in sectors as diverse as hospitals and retailing. This chapter has three objectives: first, by examining Toyota’s transformation as a leading domestic producer to a top global company, the firm’s core identity has changed little despite numerous internal and external changes; second, Toyota as a case study illustrates the capacity to have multiple images in different contexts, without sacrificing its core identity; and third, the chapter offers recommendations for empirical studies of organizational identity.

2. Organizational identification and identity

In their seminal article, Stuart and Whetten [ 5 ] put forward the concept of organizational identity constituting a set of “claims” and specified what was central, distinctive and enduring, but recognizing that organizations can have multiple identities and claims that can be contradictory, ambiguous, or even unrelated. While some authors have attempted to provide more clarity, Pratt addresses the construct of identity and its generality, stating it was “often overused and under specified” beyond general statements about “who are we?” and “who do we want to become?”

Historically, identity and identification are described in classical writings focusing on societies, social systems, and their constituent parts. Such examples as Adam Smith in economics on the division of labor, Babbage on the division of work tasks, Marx on division of social class, Max Weber on the division of status and occupation, and Durkheim on differentiated social structures, each contributed to current views of how individuals, groups, and teams become a cohesive collective in a complex organization. More specifically, Durkheim’s [ 14 ] analysis of the division of labor and differentiated social structures with distinct socio-psychological values and impacts required variations in role homogeneity in sub-systems. 1 His views influenced subsequent writers as diverse as Freud in psychiatry and Harold Laswell in political theory, whose study of world politics includes a chapter entitled “Nations and Classes: The Symbols of Identification.”

Simon [ 15 ] introduced identification to organization theory, describing it as follows: “the process of identification permits the broad organizational arrangements to govern the decisions of the persons who participate in the structure” (p. 102). More specifically, “a person identifies himself with a group when, in making a decision, he evaluates the several alternatives of choice in terms of their consequences for the specified group” in contrast to personal motivation, where “his evaluation is based upon an identification with himself or his family” ([ 16 ], p. 206). Both the fault lines of identity, based on status, perverse incentives, class or occupation, as well as group identification [ 17 ] impact organizational performance by variations in shared goals and preferences, as well as forms of interaction and feedback, often enhanced or lessoned by recruitment patterns and work rules and incentives.

Identity and identification as reference points in organizations also flow from the configuration of roles, role structures, and “clusters of activities” where “a person has an occupational self-identity and is motivated to behave in ways which affirm and enhance the value attributes of that identity” ([ 18 ], p. 179). Theories of social identity assume individual identity is partitioned into ingroups and outgroups is social situations and organizational life, often with an implicit cost–benefit calculation, but acts of altruistic behavior, where behavioral norms benefit the welfare of others, often seen in “collectivist societies,” strengthens organizational identity [ 19 ]. Other approaches take a social constructionist approach, emphasizing social and cultural perspectives [ 20 ], where sense-making comes from stories and narratives of everyday experience [ 21 ], thereby, “…in linking identity and narrative in an individual, we link an individual [career] story to a particular cultural and historical narrative of a group” [ 22 ]. Going further, Dutton et al. [ 23 ] speculate that organizational identification is a process of self-categorization cultivated by distinctive, central, and enduring attributes that get reflected in corporate image, reputation, or strategic vision. Alvesson [ 24 ] describes the need for identity alignment: “…by strengthening the organization’s identity—its experienced distinctiveness, consistency, and stability—it can be assumed that individual identities and identification will be strengthen with what they are supposed to be doing at their work place.”

While some studies [ 25 ] purport to focus on managerial strategies that project images as a tool to shape distinctive identities with stakeholders, the reality is that organizational identities without corresponding integration of individual, sub-unit, or group identification may lead to behavioral frictions, and detachment via lower compliance and cues of detachment. Conflict and cleavages affect group-binding identification, often persisting as conformity of opinion, forms of social interaction, and group loyalties, as well as enhancing internal legitimacy for desired outcomes. While both individuals and groups may have multiple and loosely connected identities, there remains lingering organizations dysfunctions that exacerbate cleavage and conflict, such as hypocrisy, selective amnesia, or disloyalty [ 18 ]. Psychological exit comes from unsatisfactory outcomes, a form of weakening organizational identity and strengthening group identity to give voice for remedial actions [ 26 ]. In the extreme, such sub-identities found in groups and sub-units compete with other forms of identification and may lead to organizational dysfunctions [ 17 ].

Akerlof and Kranton [ 27 ] view organizational identity, with emphasis on why firms must transform workers from outsiders to insiders, as a form of motivational capital. In short, a distinctive identity is a distinctive competence. To quote Likert [ 28 ]. “the favorable attitudes towards the organization and the work are not those of easy complacency but are the attitudes of identification with the organization and its objectives and a high sense of involvement in achieving them” (p. 98). Other theorists suggest variations in organizational identity impact sense-making and interpretative processes [ 29 ], internalization of learning [ 10 ] and processes linking shared values and modes of performance [ 30 ].

Identity and identification cues, viewed as the mental perceptions of individual self-awareness, social interactions and experiences, and self-esteem have many antecedents, such as social class [ 31 ], demographic factors like age, race, religion, or sex [ 32 ], and national culture and identity [ 33 ]. Studies emphasizing social construction perspectives stem from individual accounts, often defined in social narratives, histories, and biographies rooted in time and place [ 34 ]. As Hammack [ 22 ] emphasizes, “…in linking identity and narrative in an individual, we link an individual story to a particular cultural and historical narrative of a group” (p. 230). At a general level, organizational culture depicts the set of norms and values that are widely shared and strongly held throughout the organization [ 35 ], and refers to the “unspoken code of communication among members of an organization” [ 36 ] and aids and supplements task coordination and group identity. In this way, individual employees better understand the premises of decision choices in problem solving at the organizational level. In complex organizations, identity is linked to the strategic capacity of choice opportunities and implementation dynamics of priorities and preferences. As Thoenig and Paradieise [ 37 ] emphasize, “strategic capacity lies to a great extent in how much its internal subunits … shape its identity, define its priorities approve its positions, prepare the way for general agreement to be adopted on its roadmap and provide a framework for the decisions and acts of all its components” (p. 299).

Such diverse views leave open how organizational identity, or shared central vision, confers competitive advantage in contested spaces. As a starting hypothesis, a shared identity strengthens coordination across diverse groups applying common norms, codes and protocols, hence improving shared learning skills. In a similar vein, individual cleavages and loyalties are lessoned by shared interactions and information sharing that mobilize learning tools. Further, organizational identity strengthens individual identities via performance success that promotes a shared set of preferences, expectation, and habits of rule setting.

3. Organizational performance at Toyota

By any standards—shareholder value, product innovation, employee satisfaction measured by low turnover and lack of strike action, market capitalization—Toyota has been astonishingly successful, both against rival incumbents in the auto sector, but as a organizational pioneer in transportation with just-in-time thinking. Against existing rivals at home, or in an industry with firms pursuing growth by alliances and acquisition (Renault-Nissan-Mitsubishi, VW-Porsche), facing receivership and saved by public funding (GM and Chrysler), exiting as a going concern (British Leyland) or new startups (Tesla). Toyota’s performance is unrivaled. Toyota remains a firm committed to organic development, steady and consistent market share in all key international markets, and cultivating a shared identity within its eco-system around measurable outcomes of product safety, quality, and consumer value.

As shown in Figure 1 , despite many forms of competitive advantages, such as size, high domestic market share, being part of a larger group, or diversification, there are many times when the side expected to win actually is less profitable and may actually lose. Toyota’s growth and expansion, despite the turbulent 2009 recall and temporary retreats [ 38 , 39 ], comes with consistent profitability and market share growth. In this organizational transformation, Toyota has replicated its identity of “safety, quality, and value” outside its home market, often depicted by foreigners as “inscrutable,” closed, and Japan Inc. [ 40 ]. Strategically, this organizational identity framework is multipurpose, allowing shared alignment of identities with domestic employees, suppliers and supervisors, but also incorporating these identity attributes first to foreign operations in North America and subsequently to Europe and Asia. Toyota management considers the firm as a learning organization, where learning symmetries take place at all levels, vertically and horizontally.

Operating Profits versus Firm Revenues in the Auto Sector.

Unlike many corporate design models of multinationals, where foreign subsidiaries passively replicate the production systems of the home market (a miniature replica effect) or seek out decision-attention from head-quarters [ 41 ] Toyota is evolving as a global enterprise. In this model, Toyota’s foreign subsidies and trade blocks (e.g., NAFTA and Europe), solve key problems and translate the protocols for headquarters and its global network of factories, distribution outlets, and service and maintenance dealerships. In this way, Toyota’s training protocols, network learning systems, and using foreign subsidies to develop new technologies (e.g., Toyota Canada pioneering cold weather technologies for ignitions engineering), i.e., a learning chain that mobilizes employee identity to network identity, including its global supply chain collaboration [ 42 , 43 , 44 , 45 ].

To illustrate the complexity of contemporary auto production and the need to evolve both organizational design around supply chains, and the nature of complementarities in production, firms like Toyota must realign engineering and technological systems to novel role configurations for a diverse workforce. A car (or truck) has over 5000 parts, components, and sub-assemblies, where factories are linked to diverse supply chains with tightly-knit communications and transport linkages, often across national boundaries, to produce a factory production cycle of 1 minute per vehicle, or even less. Parts or components like steel, for instance, are not commodities, undifferentiated only by price, and Japanese steel producers produced the high carbon steel that was more resistant to water, hence rust. This production cycle demands very high quality and safety of each part and component, plus the precision engineering processes to assemble them. This alignment determines not only the standards of quality and safety of the finished vehicle but the image and reputation of the company, plus an indispensable need to retain price value of the brand in the aftermarket sales cycle.

To this contemporary production system, reshaped and refined since Toyota first introduced in 1956 what Womack et al. [ 46 ] termed “the machine that changed the world,” auto production now faces a steady, relentless, and inexorable technology disruption. This shift in engines and fuel consumption technologies, away from diesel and gasoline-powered vehicles, to new dominant technologies, such as electric vehicles, fuel-cells, battery, hydrogen, or hybrid, each requiring massive changes to traditional parts and components suppliers, and the layout of factory assembly. Successful firms thus require forward-looking strategic intent and novel organizational configurations both to exploit existing systems based on gasoline vehicles, or novel organizational systems to explore new technologies and processes. Strategies differ widely. Tesla as a new startup has dedicated factories and labs using lithium battery technology. To gain equivalent scale of Toyota, GM, and Volkswagen, i.e., over 10 million vehicles per year, Nissan and Renault joined with Mitsubishi as a new alliances and equity investment partner.

By contrast, both Ford and GM are retreating from large markets like Europe, Japan, or India with direct-foreign investment strategies. Even more intrusive to existing production programs and protocols are new demands for data analytics, artificial intelligence, robotic and associated Internet and social media technologies. Both incumbent firms, new startups, and suppliers are developing futuristic technologies in drivers’ facial recognition, driving habits, and consumer disabilities, from wheel chairs to hearing that impact cars of the future, and impose threats to existing distinctive competences and corporate identity. Not all firms can manage simultaneously the processes of exploitation of existing organizational programs, and the exploration of product innovation and assembly [ 47 ]. Toyota is an exception.

The Toyota production system is transformational, an organizational philosophy around two core ideas, kaizen or principles of continuous improvement, and nemawashi , or consensus decision-making that allow network effects across its global factories, research labs, its supplier organizations, and related parts of the global eco-system, from universities to global shipping firms. In the firm’s century-old evolution, starting as a leading textile firm that still exists but migrating to auto manufacturing as only the second largest by unit sales (behind Nissan), Toyota has emerged as the top producer both at home and globally, measured by market share, and a leading player in markets like North America, Europe, Latin America, India and China, where many rivals have a low market share presence (e.g., Europe firms in the US, American firms in Europe).

Strategies of corporate retreat in key markets (GM in Europe, GM and Ford in India, Ford in Japan), suggest home market advantages are the new testing ground for first-mover disadvantage [ 48 ] when firms face massive technology disruption. To cite an example, during the 1990s, four major automakers, Toyota, GM, Honda, and Ford, took the lead in the development of hybrid technologies, with GM the leader with 23 patents in hybrid vehicles (vs. 17 for Toyota, 16 for Ford, and 8 for Honda). By 2000, however, Honda and Toyota were the clear leaders, with Honda had filed 170 patents, and Toyota with 166 in hybrid drivetrain technology, far ahead pf Ford with 85 and GM at 56. Today, Fords’ hybrid is a license from Toyota.

4. Toyota identity as a social construct

The auto sector symbolizes the development of post-war multinationals largely based on firm-specific capabilities and proprietary advantages. This organizational evolution includes changing work mechanisms characterized as machine theory by management [ 49 ], a catch-all phrase to describe scientific management techniques espoused by Frederick Taylor from his 1911 book with that title. He first learned time management at Philips Executer Academy and became an early practitioner of what became known as kaizen, continuous improvement, working with Henry Gantt [ 50 ], studying all aspects of work, tools, machine speeds, workflow design, the conversion of raw materials into finished products, and payment systems. The Taylor studies, later dubbed Fordism [ 51 ], was an approach to eliminate waste and unnecessary movements, or “soldiering”—a deliberate restriction of worker output.

Taylor’s disciples in the engineering profession spread his message beyond America, to Europe, as well as to Japan and Russia, where even Lenin and Trotsky developed an interest after the Revolution of 1917. In appearances before Congressional committees, and in other forums, Taylor’s theories faced withering criticisms and great resistance by American union movement a “dehumanizing of the worker” and a tool for profits at the expense of the worker. [ 50 , 52 ]. In Japan, however, Taylorism and scientific management had wide acceptance, starting with Yukinori Hoshino’s translation of Principles of Scientific Management with the title, The Secret of Saving Lost Motion, which sold 2 million copies. Several firms adopted scientific management practices, including standard motions, worker bonuses, and Japanese authors published best sellers on similar notions of work practices, including one entitled Secrets for Eliminating Futile Work and Increasing Production [ 3 ].

After 1945 in Japan, given the wartime devastation of Japan’s industrial capacity, resource scarcity—food, building supplies, raw materials of all sorts, electric power—had a profound and lasting impact on Japanese society, even more so when the American military supervised the Occupation and displayed abundance of everyday goods—big cars, no shortage of food, long leisure hours, and consumer spending using American dollars. As Japanese firms slowly rebuilt, the corporate ethos promoted efficient use of everything, and waste became a watchword for inefficiency. Japanese executives visited US factories, the Japanese media documented US success stories. American management practices were widely emulated, and US consultants—notably Peter Drucker, W. Juran, and W. Edwards Deming—had an immense following and their books, papers and personal appearances were publicized, translated and widely-read, even by high school students. While American firms emphasized a marketing philosophy where the customer is king, Japanese firms remained committed to production, helped in part by trading firms, led by the nine giant Soga Sosha , to distribute and sell both at home and abroad. US human resource practices also showed a stark contrast with Japanese practices. In the US, the rise of the trade union movement and national legislation from Roosevelt’s New Deal, meant that management-worker relations for firms and factories were contractual, setting out legal norms, and negotiated commitments for pay, seniority, promotion, job rotation and skills differentials, so that worker identity was less towards the firm, more to the trade union, and what incentives and compensation union leadership could deliver [ 53 ].

Japan industrial firms, by contrast, cultivated three features of management-worker relations. The first was life time employment—once hired, the employee stayed in the firm until retirement. Second, wages and compensation were determined by seniority—young workers received lower wages and bonus compensation, just as older workers were paid more relative to their actual productivity. And third, firms had enterprise unions, as distinct from industry unions in the US and Europe (e.g., unions autoworkers, coal workers or shipbuilders). All three characteristics greatly extended the psychological linkages between employee identity and the firm’s identity, and the employee’s career success was directly tied to the firm’s success. In Japan, with very low turnover, but high screening processes, firms hired the best graduates, and training was on-going and formed part of the job description, with little layoffs, firing, or absenteeism. Additionally, there was little employee fear of adopting new technologies. Abegglen and Stalk [ 54 ] describe the implication of technological diffusion as follows: “…it is the relatively close identification of the interests of kaisha and their employees that have made this rate of technological change possible and the patterns of union relations implicit in that degree of identification” (p. 133). Indeed, some writers go further, citing how the human resource system was imposed on a Confucian society, with an ethos to govern individual and group interactions for reciprocal benefits, in a market system of winners and losers. As Morishima [ 55 ] puts it, Korea and China chose Confucianism with the market, Japan chose the market with Confucianism, while North America and Europe were characterized by Protestant-driven market behavior of winners and losers. For Toyota, a family enterprise with links to many sectors like steel, textiles, aviation and machinery, the post-war environment brought inevitable contracts with American automotive practices.

Okika [ 56 ] describes the implications of the evolving Japanese model of labor-management relations in the firm:

Japanese enterprises made their decisions by gaining an overall consensus through repeated discussions starting from the bottom and working up … making it easier for workers to accept technical innovation flexibly. For a start, that sense of identity with the firm is strong and they are aware that the firm’s development is to their own advantage, so they tend to improve the efficiency of its production system and strengthens its competitiveness (p. 22).

Across Japan, industrial firms, from Sony to Canon, recruited workers from rural areas, executives read US textbooks, and many visited US factories to study management practices. The production focus of Japanese firms, in a competitive environment of limited slack, hence the need for managerial improvisation and what the French call bricolage , i.e., making do with what is available [ 57 ]. In operational terms, this meant long production runs, division of labor taken to the extreme is monotonous assembly work tasks, product output determined by managerial estimates of demand, and wide use of buffer stocks to absorb varying time cycles of different sub-assembly needs. Buffer stocks also allowed conflicting management department goals to get sorted out with little time constraints, and less need to focus on quality issues based on bad product design, resource waste (e.g., steel), or timing processes that lead to product defects. Organizational reforms widely adopted across US industry, such as product divisions for large enterprises, largely left the product system intact, allowing middle management to focus on coordination between operational benchmarks at the factory level and financial benchmarks imposed by top management [ 58 ]. GM was seen in Japan as the prototype models to emulate.

5. Challenges to orthodox industrial production

The advance of industrialization involved new methods of energy, raw materials, dominant technologies, and organizational configurations [ 58 ] but relatively little to consideration actual production systems, especially after Henry Ford introduced mass production using interchangeable parts. As foreign executives visited Ford’s assembly lines, there were dissenting opinions, such as Czech entrepreneur Thomas Bata and S. Toyoda who worked a year in Detroit. How could three core concepts be integrated—craft skills of custom-made products like a kimono or a house, the volume-cost advantages of mass production, and the nigh utilization capacity of process production in beer or chemicals?

Toyota’s introduction of the lean production system has been widely studied, 2 including its the origins in the 1950s by Ohno [ 62 ], when visiting America and adopting ideas from super market chains, and had strong views on scientific management’s focus on the total production system, and Japanese concepts of jishu kanri (voluntary work groups). Japanese managers had both knowledge and experience with traditional crafts sectors like woodblock prints and silk designs in textiles or the long training needed for Japan’s culinary arts. How could three core concepts be integrated—craft skills of custom-made products like a kimono or a house, the volume-cost advantages of mass production, and the nigh utilization capacity of process production in beer or chemicals?

Core concepts of lean production is the desire to maximize capacity utilization, by reducing production variability and minimize excess inventories with a view to eradicating waste [ 54 ]. But other factors are critical, such as supplying high quality workmanship of craft production, reducing per unit costs via mass production using interchangeable parts, and high capacity utilization of continuous flow production, typically seen as three distinct systems. The ingrained ethos of resource scarcity in Japanese society, demonstrating that low slack in organizations encourage search behavior [ 63 ], and these requirements required pooling of efforts as an organizational philosophy ( Figure 2 ).

Contrasts Between Traditional Technical Design and Toyota’s Model.

To perfect the system over time, starting in the 1960s, Toyota accelerated the adoption of high work commitment by organizing workers in teams, reducing the number of job classifications, seeking suggestions from employees, and investing in training of new workers, 47–48 days per worker, compared to less than 5–6 days for US plants, 21–22 days for European plants [ 3 ]. The focus on production as an integrated system, using hardware ideas like quick die change equipment, robots, and advanced computer-aided design, also meant removing traditional tasks that are noisy, hard on the eyes, or dangerous to allow employees to concentrate on tasks like quality assessment, and allowing a worker to stop the entire production line, known as andon, in the case of equipment problems, shortage of parts, and discovery of defects, i.e., transferring certain responsibilities from managers and supervisors to workers [ 60 ]. Paradoxically, Toyota and other Japanese auto plants were far less automated than their foreign-owned rivals, not just for assembly line work but other tasks like welding and painting.

Einstein once said, “Make everything as simple as possible, but no simpler.” Simplicity became a watchword in the evolution of Toyota’s lean production system, a contrast to the complicated vertical integration model adopted in Detroit. Toyota adopted a highly focused structural design, becoming a systems assembler and sourcing from dedicated suppliers, each with core competences in specialized domains and technologies. Production engineering—e.g., craft, mass assembly or process systems—became central features as organizational configuration, choosing from the strengths of each but discarding the perceived weaknesses. Stress was place on the worker, avoiding the monotonous routines of a moving assembly line, by including job rotation and special training to apply quality management circles within a group structure. The advantages of process manufacturing as high capacity utilization came from high initial overhead of equipment and overhead, including IT investments, but allowing flexibility in machine set up, such as quick die change that reduced the need to stop the line for product variability from 3 months, to 3 weeks, to 3 minutes, to less than 3 seconds. The internal factory layout, an S shape configuration, changed the sequencing of tasks, the forms of supervisor-employee interactions, and the speed and timing of interdependencies between the production operations and external suppliers of parts, delivering “just in time.”

In some cases, the interactions involve the core production system and independent suppliers serving as complementarities 3 where the competitive advantage of one is augmented by the presence of the other [ 45 ]. Early examples included Ford’s cooperation with Firestone to produce tires, or Renault’s links to Michelin to produce radial tires. Complementarities allow synergistic advantages, a contrast to additive, discrete features [ 64 ], and allow two immediate effects: knowledge spillovers at differing stages of production, including process learning impacts, and complimentary and coordinated changes in activities and programs across the value chain, such as process benchmarks for product design, scheduling, inspection, and time cycles of production. Toyota cultivates complementarity attributes but instituted a revised activity sequence, discarding production based on estimated demand forecasts, and turning finished production of cars and trucks to car lots for ultimate sale. The pull system starts with customer demands, allowing novel design using the advantages of the need for high capacity utilization of smaller actual output demands, to manufacture outputs with shorter time for product delivery.

6. JIT and Toyota’s deep supplier collaboration systems

Toyota’s lean production both reconfigures the boundaries of the firm by incorporating the supply chain as an integrated, cooperative network with collective competences and capabilities across the network value chain and incorporates decision processes for learning and knowledge sharing that shifts subunit identities to a collective identity. Lean production requires these system-wide processes to address inoperability issues like buffer stocks, time delays, peak demand, or product defects. Deep collaboration across sub-units needs robust methods to design, evaluate, and verify data gathering and data feedback. Unlike economic models of transaction costs, or contractual relations, lean production emphasizes symmetrical collaboration to optimize outcome effectiveness for the total eco-system organization, not sub-optimize for only certain members, sub-units, or component firms. Toyota’s collective identity is a notable corporate example that combines both superb operational performance but also long-term, forward looking innovation through its complex ecosystem of Tier I and Tier II supplier system. As depicted in Figure 3 , Toyota aligns its supply system both domestically and overseas with knowledge systems, including standards of precision and quality, including using internal staffing and consultants to assure optimum outcomes against agreed benchmarks.

Figure 3.

Toyota’s Knowledge Diffusion and Sharing Approaches.

By replacing asymmetric contractual relations based on cost, Toyota shifts the locus of corporate risk to the total eco-system, involving Toyota at the center, the Tier I and Tier II suppliers, and their Tier I and Tier II suppliers. The lean “pull” of production control is a connectivity to calibrate inventory at each stage, starting with the final assembly and preceding to each preceding stage without delay. Unlike the push model, where the early steps of sub-assembly is sequential to subsequent stages and require buffer inventory to lesson delays, Toyota’s lean system of ‘pulling’ requires training and upgrading skills employed at different work stations, and close communications across the total supply chain system. To make this system work, economic transaction costs are discarded, and replaced by a currency of cooperation using preventive tools and benchmarks to meet high standards of reliability where Tier II firms meet rigorous standards of price, quality, and delivery. Suppliers are battle-tested, i.e., they must conform to agreed specifications and their products are accepted only after years of testing. Tier I suppliers, on the other hand, meet the exacting standards of Tier II suppliers but they form part of the design, research, and testing of new products, markets, and technological innovations. Tier II suppliers can “graduate” to being Tier I suppliers if they meet benchmark performance over time, thus demanding intense deep collaboration at Level 4 ( Figure 4 ).

Levels of Value Chain Collaboration: Toyota as Level 4.

Less coordinated systems of structure, processes, and executive decision-making inhibit eco-system operability. Three integrating systems are vital: (1) technical systems, including IT, software, and data; (2) organizational tools of coordination, like dedication teams supported by specialists and intense data sharing; and (3) collaborative executive decision processes that champion novelty, innovation, and feedback [ 65 , 66 ]. Inoperability can come from seemingly mundane tasks, like loading supplies on a truck with different invoices, manifest requirements, and delivery times. Separate and differing organizational processes inhibit deep collaboration. Inoperability arises from silo information flows and compartmentalization. Even with aspirational targets of decision-making, organizations acting alone fail to develop and improve competencies and capabilities to manage this integrated system via experiential learning, feedback, and criticism [ 67 , 68 , 69 ].

Deep collaboration needs robust methods to design, evaluate, and verify data gathering and data feedback to optimize effectiveness for the total eco-system organization, not sub-optimize for only certain members, sub-parts, or component firms [ 70 ]. Toyota’s lean production now has both a language and a vocabulary to remove task ambiguities and increase identity among workers, sub-units, and factories in the global network, but requiring a learning process to perfect clear meanings and defined protocols. Words like kanban, andon, jioda, yo-i-dan, and kijosei have precise meanings and routines, and such terms as reverse engineering, early detection, and ringi seido or consensus decision-making, simplify and codify precise protocols for shared communication. Benchmark techniques are widely used but less to evaluate past performance against competitors, but more to evaluate current performance against higher targets and aspirational stretch goals [ 71 ]. Indeed, deep collaboration at each stage requires a judicious combination of sharing ideas, new targets, real time feedback, and potential revisions. Where ambiguous signals, informal targets and past measures become explicit, and shared across the system.

Training programs—internships, formal courses, apprenticeships—build organizational capabilities and mitigates risks from operating with incomplete knowledge, inexperience, understanding operating rules and procedures. Deep collaboration illustrates the need for similar training approaches to know, understand, and apply knowledge across the entire system. Toyota gains three network advantages: positional, where individual managers and subsidiaries access tools and protocols for high performance processes and benchmarks that create learning; structural, where communication connections strengthen the effectiveness and acuity of information flows to attend to emerging problems; agility, by strengthening interactions between individuals and teams, and embedding the new benchmarks across the entire network of factories, sales offices, and supplier organizations.

7. Split identities at Toyota

By the early 1980s, Toyota, like many leading Japanese corporations such as Sony, Komatsu, Canon, Matsushita, and Hitachi, were making deep inroads in the American market via exports. The auto sector was singled out, as 500,000 American autoworkers were laid off, a new President, Ronald Reagan faced pressure from Congress to take legislative action, and firms like Ford applied to the American International Trade Commission for temporary relief, following similar action by the powerful auto union, the UAW. Further, Japan’s emphasis on direct export sales stood in contrast to American strategies of direct investment in foreign markets, often by acquisition of local companies [ 8 , 45 , 72 ] . 4 For firms like Toyota, growing high dependence on exports meant that larger total volumes (domestic + exports) strengthened their product capacity and cost position at home, including that of their supplier base. Japan’s auto exports to the US reached 6.6 million vehicles in 1981, up from a million units 10 years earlier, 566,042, accounted for almost 20% of total Japanese auto exports.

The imposition of Japan’s export restraints, formalized in June 1981, coincided a $1.5b loan guarantee to Chrysler, indefinite layoffs of over 30,000 auto workers, and sectors like steel facing declining market share. Pressed by firms like Ford for Congressional actions, MITI imposed export quotas on each Japanese company, a form of “administrative guidance” designed to accommodate political goals in each country but was in fact a “cartel” solution aimed to appease the US government [ 3 , 74 ]. The percentage breakdown for each of the five biggest exporters, calculated mainly by US exports in the previous 2 years, was as follows: Toyota (30.75), Nissan (27.15), Honda (20.75), Mazda (9.48), and Mitsubishi (6.7). The impact for each company in the brutally competitive Japanese market varied: Honda was the first to begin direct investment, opening its first plant in Ohio and then Ontario; while Toyota kept to its quota by exports but strengthened domestic operations to build up a commanding market share lead, over 50%. For the Japanese auto sector, as Summerville notes [ 74 ], “investment in local production was also a crucial way to insulate oneself from further export cutbacks, and of course to get away from the thumb of the Japanese state” (p. 395). Toyota illustrates the complexity to manage very fast growth in foreign markets, while transferring its corporate identity to a network identity of safety, quality, and value [ 43 ], even though the knowledge sharing processes that are now taken for granted at home, including quality standards of suppliers, may not exist in foreign countries [ 75 , 76 , 77 , 78 ].

The massive recall in 1999, where Toyota accepted responsibility to service over 8.5 million vehicles, the President appearing before Congress, and sundry lawsuits launched in a litigious environment against a foreign-owned firm, have been analyzed and studied 5 in the media, the automotive press, and by academic studies, with mixed conclusions. The reality, despite paying fines, accepting responsibility, apologizing to the American public, and accepting the huge financial costs of the recall, Toyota refused to play the blame game, or take easy solutions, like importing more parts from Canada or Japan, or shifting American production to Canada or Mexico. Toyota took the difficult decision, true to its identity, of fixing the core problem, raising the quality standards of its American-own parts supplier, devoting more resources to training, and accepting short-term risks to financial performance, particularly when leading automakers from Europe, Korea, and Japan were investing in the US market. The Detroit Big 3 received temporary relief, a massive bailout after bankruptcy from the US and Canadian government, and a 25% tariff on imported trucks, one of the most profitable segments for American producers. Toyota quietly responded about building a truck factory in Texas.

8. Discussion and conclusions

In a world of disruptive corporate strategy and identity offer a refined tool for alignment of stakeholders to create competitive advantage. Corporate culture focuses on the behavioral assumptions to perceive, think, and feel in problem-solving [ 81 ] within the organization, while organizational identity is a projection of that culture to external stakeholders to align both cognitive and behavioral tools for growth and innovation. Individual and sub-unit identities can lead to cleavage and discord, especially where environmental forces make knowledge and information asymmetric, so special attention and sense-making requires an adaptive alignment to improve performance ( Figure 5 ).

Organizational Strategy and Identity Linkages.

Increasing, all organizations face four separate but related challenges that impact overall performance but also survival as independent entities. Clearly, technological change imposes new challenges for internal organizational competences and capabilities, as firms scramble for mergers, takeovers, and new alliances to meet the test of size and foreign market penetration, or a retreat approach or even drift. Decision uncertainty influences the nature of internal competencies, learning barriers, and the sustainable position of existing firms. The third challenge with disruption is the growing complexity of the firm’s ecosystem, and what is the optimal scale of a firm’s future business case, based on potential changes to customer markets across multiple countries?

The fourth challenge relates to the first three but is subtler. That challenge concerns what might be called the Galapagos trap, namely designing an ecosystem that is suitable for one market that is unsuitable for global markets and allows little transfer of knowledge or engineering knowhow to other markets with a separate eco-system, including the supplier system. Recent examples include Japan’s unique wireless standards that did not apply in foreign markets systems, or American big car gas guzzlers with limited fuel mileage that did not meet foreign market regulations. Toyota’s development of hydrogen fuel powered vehicles, based on new chemical technologies, is a case in point, where existing infrastructure lacks the necessary technical requirements for even limited mass appeal. In all four of these development challenges, the competitive race is to avoid the lessons of the computer industry, where new smart phone technologies displaced existing incumbents, lowered entry barriers for new startups, and shifted the main suppliers and their location.

Such fundamental changes pose difficult questions for firms’ missions, corporate identity, and framing long term employee loyalty. As Simon [ 76 ] warned decades ago, “organizational identification…implies absorption of strategic plans into the minds of organizational members where they can have direct effect upon the entire decision-process, starting with the identification of problems…” (p. 141).

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• For background, see Andrews et al. [79], Camuffo and Wilhelm [39], and Cole [80].

© 2018 The Author(s). Licensee IntechOpen. This chapter is distributed under the terms of the Creative Commons Attribution 3.0 License , which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

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A business change management and culture transformation story.

Turning toyota motor north america into ‘one toyota’.

When Jim Lentz was named CEO of Toyota North America back in 2013, one of his first priorities was to consolidate the three different headquarters under his purview into a single unified team—one that was better poised to compete in a crowded marketplace. At the heart of that ambitious undertaking was a brand new campus based in Plano, Texas, that would bring all North American operations under one roof.

But in order to get to the new initiative up and running, Lentz and his senior leadership team first had to inform all 32,000 U.S.-based employees of the move and get them ready for it, and that meant—first things first—communicating the news in a way that got everyone excited.

They are strategic, responsive, and create communication initiatives that the organization can learn from, adapt as their own and turn into lasting processes. Along with their communications expertise, ROI has significant change management experience. They are great partners.

– Julie Hamp, CCO, Toyota Motor North America

What was needed

In order to make the new “One Toyota” a success, Lentz and his team knew that it was essential that employees and their families understood the rationale for the move and the company’s vision for the future. To do that, the team felt it was imperative that every single employee heard the announcement on the same day and time, which meant coordinating the message in a very careful and thoughtful way—no different than if it was a product launch.

Toyota also needed to quickly establish several new communication channels, such as websites and video tutorials, so that when the announcement was made, employees and their managers would have ample resources to go to for information. It was a lot to do, even for a change management and culture transformation project, and there wasn’t a whole lot of time to do it. So naturally ROI stepped in to help.

Services provided

Change management and culture transformation

Communication strategy

Senior leader meetings (design, facilitate)

Executive and leadership communication

Training (executive, manager, employee)

HR programs (design, execute)

Communication toolkits and resources

Event design and support (in person, live-streaming)

Employee relocation and onboarding

Project management

Visual identity development

Intranet and external websites

Video creation

Move announcement

What we did

From the outset, ROI came in to help with the initial announcement, developing emails from CEO Lentz, as well as a whole host of leader communications to not only explain the move but also get employees excited. From there we then assisted with every aspect of One Toyota, helping to coordinate timelines, managing communication plans, designing informational mailers sent to employee homes, writing the copy on flyers left on employees’ desks, and even personally helping answer more than sixteen hundred email questions.

It was a big, comprehensive, multi-year project that began with Toyota operating in several major markets in California, Kentucky, and New York and ended with one unified organization—Toyota Motor North America—based in Plano.

Relocation campaign support

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Immediately following the initial announcement, 83% of employees said they understood the reasons for the move and unifying the company’s headquarters. More than 96% of managers felt the communications provided to them were helpful, and employee use of the relocation website and “ask a question” mailbox remained consistently high throughout the project.

The company completed the move to Plano in 2017.

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Catherine Forman

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Executive Vice President

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Vice President, Strategist

Marta Karpinska-Dean

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Senior Consultant

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Bobbi Padilla

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13.14.1: Organizational Structure- The Case of Toyota

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Toyota Motor Corporation (TYO: 7203) has often been referred to as the gold standard of the automotive industry. In the first quarter of 2007, Toyota (NYSE: TM) overtook General Motors Corporation in sales for the first time as the top automotive manufacturer in the world. Toyota reached success in part because of its exceptional reputation for quality and customer care. Despite the global recession and the tough economic times that American auto companies such as General Motors and Chrysler faced in 2009, Toyota enjoyed profits of $16.7 billion and sales growth of 6% that year. However, late 2009 and early 2010 witnessed Toyota’s recall of 8 million vehicles due to unintended acceleration. How could this happen to a company known for quality and structured to solve problems as soon as they arise? To examine this further, one has to understand about the Toyota Production System (TPS).

TPS is built on the principles of “just-in-time” production. In other words, raw materials and supplies are delivered to the assembly line exactly at the time they are to be used. This system has little room for slack resources, emphasizes the importance of efficiency on the part of employees, and minimizes wasted resources. TPS gives power to the employees on the front lines. Assembly line workers are empowered to pull a cord and stop the manufacturing line when they see a problem.

However, during the 1990s, Toyota began to experience rapid growth and expansion. With this success, the organization became more defensive and protective of information. Expansion strained resources across the organization and slowed response time. Toyota’s CEO, Akio Toyoda, the grandson of its founder, has conceded, “Quite frankly, I fear the pace at which we have grown may have been too quick.”

Vehicle recalls are not new to Toyota; after defects were found in the company’s Lexus model in 1989, Toyota created teams to solve the issues quickly, and in some cases the company went to customers’ homes to collect the cars. The question on many people’s minds is, how could a company whose success was built on its reputation for quality have had such failures? What is all the more puzzling is that brake problems in vehicles became apparent in 2009, but only after being confronted by United States transportation secretary Ray LaHood did Toyota begin issuing recalls in the United States. And during the early months of the crisis, Toyota’s top leaders were all but missing from public sight.

The organizational structure of Toyota may give us some insight into the handling of this crisis and ideas for the most effective way for Toyota to move forward. A conflict such as this has the ability to paralyze productivity but if dealt with constructively and effectively, can present opportunities for learning and improvement. Companies such as Toyota that have a rigid corporate culture and a hierarchy of seniority are at risk of reacting to external threats slowly. It is not uncommon that individuals feel reluctant to pass bad news up the chain within a family company such as Toyota. Toyota’s board of directors is composed of 29 Japanese men, all of whom are Toyota insiders. As a result of its centralized power structure, authority is not generally delegated within the company; all U.S. executives are assigned a Japanese boss to mentor them, and no Toyota executive in the United States is authorized to issue a recall. Most information flow is one-way, back to Japan where decisions are made.

Will Toyota turn its recall into an opportunity for increased participation for its international manufacturers? Will decentralization and increased transparency occur? Only time will tell.

Based on information from Accelerating into trouble. (2010, February 11). Economist . Retrieved March 8, 2010, from http://www.economist.com/opinion/displaystory.cfm?story_id=15498249 ; Dickson, D. (2010, February 10). Toyota’s bumps began with race for growth. Washington Times , p. 1; Maynard, M., Tabuchi, H., Bradsher, K., & Parris, M. (2010, February 7). Toyota has a pattern of slow response on safety issues. New York Times , p. 1; Simon, B. (2010, February 24). LaHood voices concerns over Toyota culture. Financial Times . Retrieved March 10, 2010, from http://www.ft.com/cms/s/0/11708d7c-20d7-11df-b920-00144feab49a.html ; Werhane, P., & Moriarty, B. (2009). Moral imagination and management decision making. Business Roundtable Institute for Corporate Ethics . Retrieved April 30, 2010, from www.corporate-ethics.org/pdf/...magination.pdf; Atlman, A. (2010, February 24). Congress puts Toyota (and Toyoda) in the hot seat. Time . Retrieved March 11, 2010, from www.time.com/time/nation/arti...967654,00.html.

Discussion Questions

• Do you think Toyota’s organizational structure and norms are explicitly formalized in rules, or do the norms seem to be more inherent in the culture of the organization?
• What are the pros and cons of Toyota’s structure?
• What elements of business would you suggest remain the same and what elements might need revising?
• What are the most important elements of Toyota’s organizational structure?

Complementarities and organizational (Mis)fit: a retrospective analysis of the Toyota recall crisis

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• Published: 12 July 2016
• Volume 5 , article number  4 , ( 2016 )

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• Arnaldo Camuffo 1 , 2 &
• Miriam Wilhelm 1  

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During the past six decades, the Toyota Motor Company established a ‘lean’ production and management system (the Toyota Way), which has become an iconic template for a high performing and learning organization. The massive recall crisis of 2009/2010 distorted Toyota’s image of a role model for a lean organization heavily. This case study analyzes retrospectively how the carmaker deviated from their original organizational configuration that was distinctive for its lean management system. We illustrate how managerial decisions geared towards extensive growth and globalization distorted complementarities among central elements of the Toyota Way , and ultimately caused organizational misfit. Whereas most of the literature on complementarities and organizational fit has emphasized processes of adaptation and evolution toward internal fit or misfit that are triggered by exogenous environmental changes, our case study of Toyota shows that external misfit can also be the unintended consequence of deliberate changes in the firm’s system of interdependent choices.

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In 2009 Toyota found itself in the deepest and most dramatic crisis of its history that culminated in a recall of over 9 million cars worldwide, including 5,3 million cars in its most important North American market, due to burgeoning quality problems that involved most if its product line-up. Before the crisis, Toyota has been the unchallended leader of international automobile quality rankings for decades. The outstanding reputation for quality was grounded in the Japanese carmaker’s renowned production and management system, also known as the Toyota Way and became world famous as lean production . This system was extensively studied, documented through various academic and management publications and copied within and beyond the automobile industry. The dramatic recall wave of 2009–2010, however, shed a new light on Toyota’s evolution: What went wrong? What were the root causes of those recalls? Could they be anticipated?

This study sets out to investigate the root causes of the Toyota crisis starting from the conceptualization of the Toyota Way as a system of interconnected organizational choices, and analyze complementarities between those choices. Following Siggelkow’s complementarities framework (Siggelkow 2001 ; Siggelkow 2002 ; Siggelkow 2011 ), that sees the firm as a system of interconnected choices, we build on two fundamental assumptions: organizational performance derives from a) tight organizational complementarities between a firm’s activity choices that reinforce mutually in a positive way (internal fit), and b) the appropriateness of a firm’s system of activities with the environmental conditions that it is facing (external fit). We use this lens to interpret the incremental deviation of Toyota from the lean system it pioneered and perfected over its company’s history. We show how a number of managerial decisions at Toyota loosened system-internal complementarities that led to the detrimental deviation from the original lean system. Our analysis will focus on the most central principles of lean production, i.e., built in quality, and trace internal complementarities among organizational design choices made in manufacturing, supplier management, and human resources.

Besides depicting the development of the Japanese carmaker prior to the crisis, we illustrate that organizational mis-fit is not solely determined by exogenous environmental changes with senior management failing to respond to such changes because of inertia or overconfidence, but the unintended consequence of deliberate changes in the firm’s configuration of interdependent choices.

Complementarities and fit in the Toyota way

Taiichi Ohno ( 1988 ) – who is often referred to as the grandfather of the Toyota Way –was the first to stress the system character of lean production. Ohno emphasizes that what makes Toyota stand out is not any of the individual elements, but having all the elements together as a system and practice them every day in a very consistent manner, not in spurts. In fact, most of the “lean” literature and many of the studies of the Toyota production and management system have adopted (explicitly or implicitly) a configurational approach. Womack et al. ( 1990 ) were the first to conceive lean production as a configuration and have summarized it as a universally applicable system. Since then, the original conceptualization has evolved as a result of theory refinements and empirical studies. Lean production is a system that ought to be distinguished from the lean characterizing elements and manifestations that Sugimori et al. ( 1977 ) originally described. Some of the literature emphasizes the philosophy of lean and its underlying principles (Womack and Jones 1996 ; Spear and Bowen 1999 ); some other underline the practical and observable aspects of the related practices, tools, processes (Shah and Ward 2003 ). Empirical evidence for a configuration approach to lean production was first given by MacDuffie ( 1995 ) who demonstrated that the superior performance of lean production systems can be linked back both to the interrelatedness of several HR practices in an “internally consistent HR bundle” as well as the integration of that bundle with lean manufacturing policies. Shah and Ward ( 2007 ) study offers a definition of lean production as an integrated socio-technical system whose main objective is to eliminate waste by concurrently reducing or minimizing supplier, customer and internal variability. More recently, De Menezes et al. ( 2010 ) study demonstrates how the integrated application of lean practices supports the achievement of multiple goals and results in superior performance. These studies largely converge on the organizational attributes that distinguish the “lean configuration” which usually includes just-in-time production, supermarkets and kanban, quality systems, work teams, workers’ multiskilling, people internal development and careers, collaborative supplier management, set-based product engineering, and organization-wide continuous improvement. We use the construct of configuration in a formative sense (Fiss 2009 ), referring to the “actual” configuration or activity system of Toyota, observing the empirical manifestations of the construct and highlighting the deviations of it from the idealtype. More specifically, our case study focuses on the dynamics of such deviation.

We complement the idea of lean production as an organizational configuration drawing upon the stream of strategy research that studies the relationship between sustainable competitive advantages and the existence of complementarities within activity systems (Porter and Siggelkow 2008 ). This stream of research uses two related notions: “complementarities” and “performance landscape”. Milgrom and Roberts ( 1990 ) define complementarities as the relationship between two or more activities implying that “doing more of any one of them increases the returns to doing more of the others”. Overall, complementarity theory suggests that high performing firms are likely to combine a consistent set of activities and that the returns to such full configuration of activities are greater than the sum of the individual returns (Whittington et al. 1999 ). The notion of performance landscape, originally developed in evolutionary biology, was refined and formalized by Kauffman ( 1993 ). In our simplified analysis, the performance landscape is a multidimensional space in which one or more organizational outcomes (for example, business growth, market share, stock market performance and/or profitability), are causally mapped onto a set of organizational characteristics (Fiss 2007 ). If the set attributes are N, the performance landscape maps each set of N attributes onto performance. The appropriateness of a set of choices given environmental conditions (i.e. external fit) is represented by the height of a particular point on the landscape. If choices are complementary (i.e. internal fit), or consistent, their combination corresponds to a performance peak in the landscape. The stronger these complementarities are, the steeper is the associated peak. High internal fit results in sustained competitive advantages, as competitors will find it hard to imitate entire systems rather than individual activities (Rivkin 2000 ). Alternatively, a set of choices is defined to be consistent if changing any single choice, ceteris paribus, implies a performance decline.

We thus assume that the “lean production system” is an organizational configuration causally linked to high performance. The recall crisis of 2009/2010 revealed an external misfit of Toyota’s lean configuration and we use the crisis as a starting point to explore the interplay and dynamics of external and internal misfit, i.e. the process of how organizations may deliberately or unintentionally deviate from a given configuration. In the next section, we will trace Toyota’s organizational design choices in the 2000’s based on the wealth of published material in the academic and business press on Toyota (please see Appendix ) before we analyze the managerial changes that were being made that led to the distortion of internal, and ultimately, also external fit.

Case presentation

Organizational fit: toyota’s ‘lean’ configuration in the early 2000’s.

At the end of the 1990’s, Toyota’s organizational system had been studied and analyzed to the point of becoming the living example for lean production. This system has allowed Toyota to efficiently engineer and build high quality cars and has granted Toyota the status of being the best car manufacturer in the world.

While this section is by no means an exhaustive representation of all existing complementarities within lean production, the focus of our analysis will be on one of the most central principles in lean production – built-in-quality –and trace internal complementarities with other organizational design choices made in manufacturing, supplier management and human resources.

Built in quality and ‘Andon’

A central aim of lean production is to achieve built in quality and avoid costly repairs after end assembly. One central operational practice in the Toyota Way to ensure this aim was pulling the Andon cord. Andon is a fixed-position line stop system (Liker 2004 ) that connects a cord located above the assembly line with Andons (visual boards, or panels or simple lights). When a line worker noticed an abnormality (e.g. quality defect) in a workstation he or she pulled the cord, the Andon would light up in yellow, but the line will continue moving. Until the time the vehicle moved into the next workstation, the team leader had to respond before the andon turns red and the line segment automatically stops. This was likely to be a matter of 15–30 s on an assembly line building cars at a 60” cycle time. During this time, the team leader might have immediately fixed the problem or noted how it can be fixed while the car was moving into other workstations. In this case, the team leader would pull the cord again to cancel the line stoppage. Only if the problem could not be fixed immediately, would the team leader decide to stop the line. It is important to note that Andon was more than a mere technical device but a micro-element that supported the central principle of the Toyota Way , i.e., built in quality (Spear and Bowen 1999 ). This required, however, that Andon was complemented through other organizational design choices.

Choices in manufacturing

On a more operational level Andon was supported by decentralization, i.e., the allocation of decision rights to workers and team leaders who were entitled to pull the Andon cord (and, possibly, stop the line). This had positive effects on performance because it potentially reduced quality problems. The second design choice was the standardized sequence of behaviors, coupled with artifacts (the Andon cord) that the actors involved performed. This set of routines helped prevent quality problems by avoiding the passing of defects downstream in the assembly process, without stopping production. Due to the standardization of behavioral routines actual line stoppages were reduced to a necessary minimum. This did not only affect productivity positively but also had second order effects on quality (stoppages increases frequency of errors due to workers’ cognitive distraction). The third design choice was the availability of team leaders by having a small ratio of team leaders to workers (approximately 1:5). This improved the line productivity per se, for example, by covering absences or assisting workers in various ways. In fact, this operational availability was an important indicator of a shop floor’s capability of keeping its production line flowing.

Choices in HRM

Additional complementarities existed between Andon and organizational design choices in HRM, which has often been considered the most central part of the Toyota system (Liker and Meier 2007 ; Liker 2004 ; Liker and Hoseus 2008 ). Andon required that team leaders were carefully trained in standardized procedures on how to respond to Andon calls. Furthermore, workers needed to develop a conceptual grasp of the production process to identify problems as they appeared on the line, and the analytical skills to identify the root causes of the problems. Job-rotation helped to create a holistic understanding of the overall production process (Adler et al. 1999 ). The conceptual grasp of the overall production process was also a prerequisite for worker’s error detection capabilities, and complementarities existed between job rotation and decentralized decision rights. Moreover, job rotation was complementary with off-the-job problem-solving activities that further helped to develop analytical skills. Distinctive of the Toyota Way was that workers learned to solve problems when they were actually solving problems on-the-job (Spear and Bowen 1999 ; Spear 2004 ). For example, when a worker pulled the Andon cord, the supervisor would not only repair the defect, but provided guidance to the worker on how to detect the root cause of the problem. This again created complementarities with the aforementioned operational availability of the team leader. Further, complementarities with Andon and the overarching principle of built in quality are created through other design choice in HRM, i.e., life-time employment and internal career paths that were linked to continous skill formation for team leaders and workers. Toyota recruited workers (typically highschool graduates) on the basis of fit with the Toyota culture rather than formal qualifications. Internal career paths ensured loyalty towards the company and created sustainable incentives for life-long learning (Liker and Meier 2007 ).

Quality problems, as detected with the practice of Andon, however, can also derive from supplier components. Thus, there is a close relation with the issue of supplier management.

Choices in supplier management

From the beginning of Toyota’s company history, suppliers took over a large part of Toyota’s value creation and the quality of the end product was, thus, highly dependent also on their capabilities (Fruin and Nishiguchi 1993 ). Toyota made relation-specific investments by offering various forms of assistance to its suppliers to help them achieve quality and efficiency targets. Lean production experts from Toyota’s Operations Management Consulting Division (OMCD) frequently visited suppliers’ plants to help implement lean principles (Dyer and Nobeoka 2000 ). Even in the US, where Toyota purchased a smaller amount of parts compared to US OEMs, Toyota sent its senior engineers to help an average of 13 days per visit, compared to only six by US OEMs (Dyer and Hatch 2006 ). Furthermore, Toyota also coordinated and facilitated suppliers’ study groups (Jishuken). These were groups of suppliers that engaged on a yearly basis in the study and improvement of specific production related themes of mutual interest. The two modes of supplier development, supplier study groups and individual supplier assistance from the OMCD, can be considered complementary, as “the former gives suppliers the space to experiment and explore on their own while the latter provides a top-down quick solution by Toyota experts, which on its own may discourage learning” (Sako 2004 : p. 291). The organizational design choice to separate supplier development activities of the purchasing planning division from those of the operations management consulting division (OMCD) created further complementarities as it maintained incentives for suppliers to enhance their evolutionary capabilities for the long-term, as they can be assured that their customer will not use the deep process insights they gain for commercial advantages (Dyer and Nobeoka 2000 ). At the same time, supplier development activities also had the benefit of developing Toyota’s own personnel in teaching tacit skills to suppliers.

Internal and external fit

Figure  1 illustrates these complementarities for the elements outlined above, resulting in high internal fit. Andon ensured built in quality and was complementary with other organizational design choices such as the decentralization of decision rights, worker’s training and career systems, and supplier development activities. A major trade-off that evolved around theses choices was, however, that life-long training of workers and the establishment of supplier relations was time consuming. For example, it took about 9–10 years to develop a worker to a team leader, and another 4–5 years to reach the next higher supervisory position of a group leader. Moreover, it took about five years for a supplier to be appointed for a vehicle project and another five years until the supplier had proven himself to gain a more substantial order volume (Görtz 2006 ).

Complementarities and fit between organizational choices in the Toyota Way (bold lines indicate strong complementarities between organizational choices)

These obvious time disadvantages were, however, alleviated through Toyota’s growth and sales strategy up to the year 2000, which made the external fit of Toyota’s lean configuration apparent: In the initial phase of its global expansion, marked by Toyota’s first plant openings in the US in the 1980s, Toyota relied heavily on its domestic plants to satisfy the continous growth in global consumer demand with an export rate of over 60 %. This allowed Toyota to make full use of its sophisticated but highly contextual HRM system and secure investments in internal career and training systems.

Initially, foreign sales took place mostly in the US and Toyota invested in local facilities to replicate its lean configuration system. The successful transfer of the Toyota system of supplier management and HRM in the 1990s in the US has been well researched and documented (e.g. Dyer and Hatch 2006 ; Dyer and Nobeoka 2000 ). At the same time, Toyota still manufactured around half of its global demand domestically and made use of “bridge production”, i.e. exports to fill in excess U.S. demands (Chappell 2012 ). Thus, Toyota’s sales activities were concentrated on two main regions and demand was relatively stable. Stable production levels with little fluctuations were an important prerequisite for the smooth functioning of the Toyota system with just-in-time delivery, standardized work procedures and continous improvement activities. Another factor that accounted for high external fit was relatively weak foreign competition in terms of quality, as revealed by major benchmarking studies in the automobile industry. Strong domestic competition, on the other hand, and with Nissan in particular, was often said to be an additional driving force behind the Toyota Way (Kawahara 1998 ).

The distortion of complementarities and organizational misfit between 2000 and 2010

At the end of 2009, when almost every other global carmaker was enjoying profit gains, Toyota found itself in the most dramatic crisis of its history due to burgeoning quality problems and product recalls. Searching for the causes of declining product quality, Akio Toyoda, the grandson of Toyota’s founder and Toyota’s current president, publicly declared that since 2003 Toyota’s rapid expansion led to a state where sales grew faster than the company could manage (Shirouzu 2010 ). The strategic change towards faster growth was initiated in 1995 with the appointment of Hiroshi Okuda as the company’s new president who oversaw the shift from conservative corporate style to aggressive management and was the driving force behind Toyota’s global ascendance (Sato 2006 ). He was the designer of a global growth strategy, the “2005 vision”, characterized by the ambition to rapidly increase Toyota’s global market share from 7.3 % in 1995 to 15 % in 2010 (Cole 2011 ).

As a result, internationalization speed increased dramatically: In a 7-year period between 2000 and 2007 Toyota opened 18 new plants all around the world, profoundly changing the company in terms of size and geographical dispersion. Due to this extensive internationalization, Toyota became the largest car manufacturer in the world in 2008 with over 8.3 million sold vehicles. In retrospect, Toyota’s rapid growth might have come at the expense of harming some of the basic principles of Toyota’s management model that once were the prerequisite of the company’s impressive performance.

Although Toyota initially tried to build on its principles of lifelong employment, internal career paths and continuous training also for its overseas operations, it was facing high turnover among its experienced members in its U.S. operations. An amalgation of nearly a dozen subsidiaries, including manufacturing organizations for its plants that were located at geographical distance to each other, created a high travel burden for managers: in 2005 Toyota lost ten percent and in 2006 five percent of its experienced staff (Chappell 2007 ). The geographic dispersion of its operations also made it hard for Toyota to ensure high quality of trainings and Steve St. Angelo, the former North America Manufacturing Chief, noted in 2010 that there are so many Toyota Way rules that American workers “just don’t understand”. The Toyota Way is highly tacit and, thus, relies heavily on on-the-job training. Even worse, a lot of the existing written guidelines date back from the decade when TMC was founded (Greimel 2010 ). Equally problematic was the fact that some of Toyota’s global factories did not adhere to the company’s basic creeds, like allowing workers to stop factory lines when they spot defects and, thus, make full use of the Andon cord, as one Toyota executive diagnosed (Fackler 2007 ).

Toyota’s expansion strategy also affected the company’s global employee headcount that shot up from 183,000 to 321,000 within a decade (Greimel 2010 ). This massive increase did, however, create a number of problems and it became increasingly difficult for Toyota to satisfy the need for internally developed managers, technicians, supervisors and operators fully consistent with Toyota’s philosophy and corporate culture. For its San Antonio plant, for example, Toyota admitted to have a tougher time than expected to find skilled manufacturing staff as it was facing the challenge of bringing in not just 2000 employees for its own production, but another 1000 employees to the various supplier lines next door (Chappell 2005 ). Toyota tried to react to this challenge by massively hiring temporary workers in production. The extensive use of temporary workers turned out to be highly problematic as they were not integrated in Toyota’s internal career and training system and, thus, tend to be less experienced and qualified than regular workers. The lower degree of qualification harmed the execution of decentralized decision rights as temporary workers were not sufficiently trained to detect irregularities in the work process and pull the Andon Cord.

The severe consequences of the high ratio of temporary workers was illustrated in the case of Toyota Motor in the United Kingdom (TMUK) where 50 % of the experienced workforce left in the period between 1997 and 2000 as a result of excessive overtime (Pardi 2005 ; 2007 ). Filling in these vacancies with temporary workers led to a rising pressure on the remaining workforce to fulfill the ambitious productivity targets. Consequently, the level of stress in production rose and absenteeism rates climbed to a record-high of 3,11 % in 2000, exceeding the threshold of 2 % that is considered the structural limit for stable lean operations by Toyota (Pardi 2007 ). In order to avoid further overtime through any delay in the daily production targets, team members hesitated more and more to pull the andon cord to keep the line running. This had detrimental effects for product quality – for the Avensis, the number of defaults per vehicle doubled between 1999 and 2000 from 0.5 to 1 and for the Corolla, it rose four-fold from 0.4 to 1.6 (ibid.). Most of these defects were related to elements that were not supposed to be checked by quality teams but normally belong to the direct responsibility of team members. It became clear that the extensive use of temporary workers distorted complementarities between the organizational design choices of Andon, decentralized decision rights (due to their lower qualification and motivation to detect irregularities), and standardized work procedures (due to disruptions in the work process caused by temporary workers).

Suppliers were facing similar challenges, as most of them had to import foreign workers on temporary work visas due to the labor shortage in the Aichi prefecture. Based on his interactions during a plant tour at the Kamigo engine plant Smalley (n.d.) cited a Toyota senior manager who admitted that the labour structure has changed entirely in Japan and instead of veteran employees with 15–20 years of experience, there were around 40 % temporary employees on six-months contracts. The cited manager considered this a real challenge in terms of turn over in the work force, which has “put a real strain on Toyota and even more on the supply base” (ibid).

The distorted complementarities with the Andon system and the overarching principle of built in quality was further exacerbated by the elimination of the team leader position in the late 1990s (Shimizu 2004 ). This step was internally motivated by several reasons. Partly, it was to economize on organizational structure and cost, and partly, because it became increasingly complex and costly to develop team leaders at a pace compatible with new plants’ set-ups. Although the team leader position was re-introduced in 2008, there was a general tendency in overseas plants to shorten career paths for supervisory positions. Whereas it takes about 10 years in Japan to become appointed as team leader, the case of Toyoto in France (TMMF) showed that due to the high employee fluctuation, team members were often promoted to team leaders during their first three years (Pardi 2007 ). Once team leaders became unavailable or were at least less experienced to perform their task, this had a compounded effect on quality performance because the other elements (e.g., the decentralization of decision rights, the routine application of standardized work procedures etc.) lost their beneficial effects. Moreover, workers had fewer reasons to pull the cord (as they cannot be sure that the teamleader will come for help), or, if they did, it was more likely that the line will either stop or that the unsolved problem will pass downstream the assembly process. The need to speed up temporary workers’ training process further added to the detrimental effects on quality and efficiency. This domino effect is a symptom of distorted complementarities (see also Fig.  2 ).

Distorted complementarities and internal misfit (dotted lines indicate distorted complementarities between organizational choices)

Toyota’s rapid internationalization also affected complementarities among organizational choices in supplier management. Possibly triggered by the aggressive cost cutting efforts of Carlos Ghosn at Nissan, Katsuaki Watanabe, former head of purchasing and known to be a “ruthless cost cutter” (Treece 2004 ) announced Toyota’s efficiency program CCC21 (Construction of Cost Competitiveness for the 21st Century) in 2000 that targeted an unprecedented cost reduction of 30 % of Toyota’s parts prices over a five-year period. The program symbolized a radical shift from the original kaizen approach of gradual cost reduction that used internal parts costs of the previous model as a reference. By contrast, CCC21 was more strongly geared towards market competition by identifying about 180 key parts that were benchmarked with parts prices for the world's most competitive suppliers of those parts – which for the first time also included suppliers in India and China (Chappell 2008 ). If the keiretsu suppliers did not learn how to meet the benchmark they risked losing business. The program was considered a huge success and led to savings of $10 billion in a five-year period. CCC21, thus, clearly marked a turn from Toyota’s traditional principle of network-internal competition (Wilhelm 2011 ) towards more traditional market competition.

The item-based approach of CCC21 was further extended from 2005 to 2009 by a system-based approach under the “Value Innovation”-program. The program aimed at an additional cost reduction of 30%, mainly by cutting the number of automobile components by 50% and integrating them into more encompassing modules (Toyota Motor Corporation 2006 ). However, this increasingly put Toyota’s network suppliers under pressure as they did not – unlike their independent Western competitors – have the integrative capabilities to develop whole modules and systems (Okamura 2005 ). Traditionally, Toyota has been taking the lead in its network to coordinate and integrate parts within an architectural system. For the first time, Toyota group suppliers were facing serious competition with foreign global suppliers (Okamura 2005 ). More work being contracted to new overseas suppliers meant “working with a lot of unfamiliar suppliers who didn’t have a deep understanding of Toyota culture” (Womack cited in Greimel 2010 ). Sourcing from new suppliers who are less experienced with Toyota’s processes became particularly problematic in combination with the internal shortage of senior engineers who could properly supervise these new suppliers according to Toyota standards (Andrews et al. 2011 ). More specifically, Toyota was not able to grant sufficient manufacturing assistance as there were internal capacity problems of OMCD consultants whose expertise was heavily needed in Toyota’s own overses plant. As a result, suppliers felt overwhelmed with the responsibility of securing quality and reducing cost without receiving much assistance from their customer (ibid.).

In our retrospective analysis of Toyota’s development from 2000 to 2010 we mapped out how the once strong complementarities between Toyota’s organizational choices that were distinctive for the original lean configuration became distorted over time. We emphasized that this distortion of complementarities was not primarily caused by exogenous environmental changes such as an unfavorable market situation that subsequently led to external misfit, but corporate strategic choices made by Toyota’s top management. Lured by market opportunities and the possibility to crown the dream to become the world’s largest auto producer, Toyota’s decision makers experimented with strategic changes regarding organizational growth and globalization. This resulted in a sequence of changes of organizational choices such as training and HR development systems, management selection and promotion criteria, elimination of team leader position in production, and ruthless supplier cost-cutting programs. Changing these organizational choices mis-matched the other attributes of Toyota’s existing lean configuration, and specifically the operational choice of Andon, leading to the worsening of built in quality and manufacturing performance.

Our case illustrates why firms evolve through punctuated equilibrium with phases of upheaval, misfit and crisis (Siggelkow and Rivkin 2009 ). We provide more fine-grained insights into this process by distinguishing between managers’ search for a set of consistent organizational choices that determine firm performance. We argue that a mismatch between organizational choices – as observed in the case of Toyota – may not simply be the result of the inability to adapt to environmental changes, but are unintended consequences of deliberate changes in the internal configuration of organizational choices, that – at least - co-determine external misfit.

Once the causes of organizational misfit are recognized and understood by managers, however, it is possible to amend complementatiries. Akio Toyoda publicly admitted in 2010 that the key reason for Toyota Motor Corp.’s quality problems was an excessive focus on market share and profits that warped the “order of Toyota’s traditional priorities” (Shirouzu 2010 ). The company responded to the crisis by returning to its basic principle of genchi genbutsu which suggests that one needs to go to the genba or, the ‘real place’ where work is being done in order to truly understand a situation. In 2011 Akio Toyoda announced a new Global Vision that defines what kind of company Toyota aspires to be, highlighting sustainable business with fuel-efficient, environmentally friendly vehicles and stable relations with customers, suppliers, and communities. Signs of financial recovery are already visible and indicate that Toyota is on its way to define a new organizational configuration that promises a better fit with a globalized business environment.

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About the research

As lean production has been theorized over the last three decades by international researchers studying Toyota’s activities, we drew on the rich secondary material on Toyota and its internationalization history. In particular, we systematically analyzed press material on Toyota published from 2000–2010 in major business and industry journals. In addition, we intensively studied Toyota’s annual reports of that period as well as major academic publications on the Toyota Way (e.g. Cusumano 1985 ; Cole 2011 ; Liker 2004 ; Monden 2012 ; Fujimoto 1999 ). In addition, we monitored the media, both online and print, on the Toyota recall crisis, and screened academic articles that provided an analysis of the crisis (e.g. Cole 2011 ; Andrews et al. 2011 ; Kumar and Schmitz 2011 ). Both authors also possess extensive experience of researching Toyota and its lean production system, involving field visits to the headquarters in Toyota-City, the Toyota Global Production Center in Motomachi and selected plants in Japan, North America, and Europe, which also contributed to the necessary background knowledge of this case study.

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Camuffo, A., Wilhelm, M. Complementarities and organizational (Mis)fit: a retrospective analysis of the Toyota recall crisis. J Org Design 5 , 4 (2016). https://doi.org/10.1186/s41469-016-0006-6

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Toyota’s Organizational Culture: An Analysis

Toyota Motor Corporation’s organizational culture defines the responses of employees to challenges that the company faces in the market. As a global leader in the automobile market, Toyota uses its work culture to maximize human resource capabilities in innovation. The company benefits from its organizational culture in terms of motivating workers to adopt effective problem-solving behaviors. The characteristics of the organizational culture indicate a careful approach in facilitating organizational learning in the automotive business. As Toyota’s organizational structure (company structure) evolves, so does its business culture. The automaker’s company culture highlights the importance of developing an appropriate workplace culture to support global business success.

Toyota’s culture effectively supports endeavors in innovation and continuous improvement. An understanding of this business culture is beneficial to identifying beliefs and principles that contribute to the strength of the company and its brands against competitors, like Tesla , Ford , Nissan, BMW , and General Motors . Despite the tough rivalry noted in the Five Forces analysis of Toyota , the company maintains competitive human resources with the help of its organizational culture.

Features of Toyota’s Organizational Culture

Toyota’s organizational culture adapts to international business needs, such as legal requirements and emerging concerns in the market. In the past, the automaker’s business culture emphasized a sense of hierarchy and secrecy, which translated to employees’ perception that all decisions must come from the headquarters in Japan. Today, the characteristics of Toyota’s organizational culture are as follows, arranged according to significance:

• Continuous improvement through learning

Teamwork . Toyota uses teams in most of its business areas. One of the company’s principles is that the constructive collaboration of teamwork leads to greater capabilities and success in the automotive industry. This part of the work culture emphasizes the involvement of employees in their respective teams. To ensure that teamwork is properly integrated in the organizational culture, every Toyota employee goes through a teambuilding training program. Through this emphasis on teamwork, the company culture aligns with job design and human resource development in Toyota’s operations management .

Continuous Improvement through Learning . Toyota’s organizational culture facilitates the development of the firm as a learning organization. A learning organization utilizes information gained through the activities of individual workers to develop policies and programs for better results. The company’s business culture highlights learning as a way of developing solutions to problems, such as problems in vehicle manufacturing, people’s mobility, and the transportation sector. In this way, improvements in business processes and outputs fulfill Toyota’s vision statement and mission statement with the support of this organizational culture.

Quality . Quality is at the heart of Toyota’s organizational culture. The success of the company is typically attributed to its ability to provide high-quality automobiles. To effectively integrate quality in its work culture, the firm uses the principles of The Toyota Way, which emphasizes quality in solving problems. These principles define the business management approaches used in the automotive company. This quality factor in the business culture translates to quality in human resource management, worker behaviors, and organizational outputs, such as cars. Thus, the competitive advantages noted in the SWOT analysis of Toyota are partly dependent on this quality-focused characteristic of the corporate culture.

Secrecy . Toyota’s organizational culture has a considerable degree of secrecy. However, the level of secrecy has declined through the years, especially after the automaker’s reorganization in 2013. In the old company culture, information about problems encountered in the workplace must go through the firm’s headquarters in Japan. Today, the company’s organizational culture does not emphasize secrecy as much. For example, many of the problems encountered in manufacturing plants in the U.S. are now disseminated, analyzed, and solved within the North America business unit of Toyota.

Key Points on Toyota’s Culture

The characteristics of Toyota’s organizational culture enable the business to continue growing. The company’s innovation capabilities are based on continuous improvement through learning. Quality improvement and problem-solving effectiveness in the automotive business are achieved through the activities of work teams and individual employees. These cultural traits ensure human resource support for strategies addressing external factors linked to the opportunities and threats described in the PESTLE/PESTEL analysis of Toyota . However, secrecy in Toyota’s business culture presents drawbacks because it reduces organizational flexibility in rapid problem-solving endeavors.

• Kaila, H. L. (2023). Linking safety culture to company values and legacy. Journal of Psychosocial Research, 18 (1).
• Toyota Code of Conduct .
• Toyota Motor Corporation – Form 20-F .
• Toyota Motor Corporation – Philosophy .
• U.S. Department of Commerce – International Trade Administration – Automotive Industry .
• Zhang, W., Zeng, X., Liang, H., Xue, Y., & Cao, X. (2023). Understanding how organizational culture affects innovation performance: A management context perspective. Sustainability, 15 (8), 6644.
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Apr. 28, 2021

TMC Announces Changes to Organizational Structure and Executive and Senior Professional/Senior Management

Toyota City, Japan, April 28, 2021―Toyota Motor Corporation (TMC) announced today that it intends to implement changes to its organizational structure and senior professional/senior management employees as described below effective June 1, 2021 and member of the board of directors and operating officer changes effective on the date of the Ordinary General Shareholders' Meeting in June.

Organizational changes and Senior Professional/Senior Management Employee Changes Effective June 1

In 2018, Toyota announced its intention to transform from an automotive company into a mobility company. Under the common understanding that everyone lives on the same planet, Toyota takes action from the perspective of "home planet," above and beyond the concepts of "hometown" and "home country" that the automotive industry has long continued its business in. The current working generation is responsible for bequeathing this beautiful home to the next generation, as a place where people can live with peace of mind. Under this perspective, Toyota has the "human-centered" philosophy that technology should contribute to people's happiness and health. By utilizing the strength it has cultivated through " monozukuri (manufacturing)", and by incorporating further technological innovations that expand the possibilities of mobility as it responds to CASE, Toyota seeks to provide services that make freedom of mobility available to all people. The company also aims through its businesses to contribute to the realization of SDGs; among the 17 SDGs, reducing CO 2 emissions is a global issue and, in order to achieve this, it is vital that electrification―the "E" of "CASE"―is implemented on a global scale.

Countries around the world are issuing declarations stating their aim to be carbon neutral by 2050. To make carbon neutrality a reality in the automobile industry, it is essential that energy policies that incorporate renewable energy and charging infrastructure be integrated with industrial policies that include purchase subsidies, supplier support, and battery recycling systems. Coordinated efforts by various stakeholders, such as governments and industry groups, are also necessary. In the global expansion of its business, TMC, while consulting with the governments of various countries on how to improve environments for promoting electrification, plans to advance an electrification strategy that contributes to the reduction of CO 2 throughout the entire lifecycle of its vehicles. Also, to gain the understanding of more of its stakeholders, TMC intends to enhance its information disclosure, by conducting a review and information release within this year concerning whether its external affairs activities are consistent with the long-term goals of the Paris Agreement.

Toward achieving carbon neutrality, TMC is strengthening company-wide efforts to further accelerate its reduction of CO 2 emissions. As part of this effort, the company intends to consolidate the resources of environmental technology development that is being carried out in various areas, including workplaces that are responsible for advanced development, and establish the CN Advanced Engineering Development Center. The CN Advanced Engineering Development Center is to be responsible for, among others, technological development related to innovative improvement of electrified vehicle efficiency, advancement of new battery development, promotion of the utilization of renewable energy such as sunlight, and facilitation of various methods to utilize carbon-neutral fuels.

By further deepening coordination within the Toyota Group and cooperation among members of industry, academia, and government in Japan and overseas, TMC intends to press forward in accelerating its engagement in challenges to achieve carbon neutrality.

Organizational changes

Personnel changes due to the above organizational changes Senior professionals/senior management (Senior General Manager level and above)

Other senior professional/senior management employee changes effective june 1, senior professionals/senior management (senior general manager level and above), member of the board of directors and operating officer changes effective on the date of the ordinary general shareholders' meeting in june, new operating officer, member of the board of directors and operating officers' areas of responsibility.

Toyota Motor Corporation works to develop and manufacture innovative, safe and high-quality products and services that create happiness by providing mobility for all. We believe that true achievement comes from supporting our customers, partners, employees, and the communities in which we operate. Since our founding over 80 years ago in 1937, we have applied our Guiding Principles in pursuit of a safer, greener and more inclusive society. Today, as we transform into a mobility company developing connected, automated, shared and electrified technologies, we also remain true to our Guiding Principles and many of the United Nations' Sustainable Development Goals to help realize an ever-better world, where everyone is free to move.

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