FORE School of Management, New Delhi

Organizational Design and Change

FORE School of Management, New Delhi

Organizational Design and Change

WMG 21

Toyota Culture

Submitted to

Prof. Neeraj Kumar

Submitted By

Reshmi Raveendran

Roll No. 212027

FORE School of Management, New Delhi

Organizational Design and Change

Toyota Culture 2

Objective:

To Analyze the Culture of Toyota based on core values, terminal values, SOP’s, Norms of

behavior and also the role of People, Structure, Ethics and Property Rights in shaping

the culture.

Toyota Culture 3

Contents

1. Introduction……………………………………………………………………………….….4

2. Toyota’s Culture……………………………………………………………………….……5

3. Core values…………………………………………………………………………………….6

4. Terminal values………………………………………………………………………….…..7

5. SOPs…………………………………………………………………………………………...….8

6. Norms’ of behavior………………………………………………………………….…….9

7. People…………………………………………………………………………………………11

8. Structure………………………………………………………………………………….…12

9. Ethics……………………………………………………………………………………….…14

10. Property Rights……………………………………………………………………..……15

11. Culture’ supports the strategy………………………………………………..……16

12. Learning………………………………………………………………………………………17

References

Toyota Culture 4

Introduction

Company – ToyotaMotor Corporation (Global)

Toyota Motor Corporation (TMC) is a Japanese multinational automaker headquartered

in Toyota, Aichi, Japan.

The company was founded by Kiichiro Toyoda in 1937 as a spinoff from his father's

company Toyota Industries to create automobiles. TMC is part of the Toyota Group, one of the

largest conglomerates in the world.

Toyota first caught the world’s attention in the 1980s, when it became clear that there was

something special about Japanese quality and efficiency. Japanese cars were lasting longer than

American cars and required much less repair. And by the 1990s it became apparent that there

was something even more special about Toyota compared to other automakers in Japan.

It was not eye-popping car designs or performance though the ride was smooth and the designs

often very refined. It was the way Toyota engineered and manufactured the autos that led to

unbelievable consistency in the process and product. Toyota designed autos faster, with more

reliability, yet at a competitive cost, even when paying the relatively high wages of Japanese

workers. Equally impressive was that every time Toyota showed an apparent weakness and

seemed vulnerable to the competition, Toyota miraculously fixed the problem and came back

even stronger.

Today Toyota is the third-largest auto manufacturer in the world, behind General Motors and

Ford, with global vehicle sales of over six million per year in 170 countries and employs around

325,905 people worldwide. Toyota is benchmarked as the best in class by all of its peers and

competitors throughout the world for high quality, high productivity, manufacturing speed, and

flexibility.

The incredible consistency of Toyota’s performance is a direct result of operational excellence,

understanding of people and human motivation. Its success is ultimately based on its ability to

cultivate leadership, teams, and culture, to devise strategy, to build supplier relationships, and to

maintain a learning organization.

Toyota Culture 5

Toyota’s culture

The Toyota Way, along with the Toyota Production System, makes up Toyota’s DNA. This DNA

was born with the founders of the company and continues to be developed and nurtured in the

current and future leaders. Toyota started with the values and ideals of the Toyoda family.

Five Main Principles of Toyoda

• Always be faithful to your duties, thereby contributing to the company and to the overall good.

• Always be studious and creative, striving to stay ahead of the times.

• Always be practical and avoid frivolousness.

• Always strive to build a homelike atmosphere at work that is warm and friendly.

• Always have respect for spiritual matters, and remember to be grateful at all times.

The "Five Main Principles of Toyoda" are a written statement of the teaching of Sakichi Toyoda

the Five Main Principles of Toyoda have been handed down to every Toyota Group Company and

serve as conduct guidelines for all employees.

Toyota Culture 6

Core Values

a) Open and honest communication

b) Customer satisfaction

c) Social responsiveness

d) Quality in everything we do

e) Respect for people and property

f) Recognition and reward for effort

g) Teamwork

h) Fair and equal opportunities

i) Customer first

j) Kaizen

k) Focus on workplace

The Toyota Way is a set of principles and behaviors that underlie the Toyota Motor

Corporation's managerial approach and production system. It can be briefly summarized

through the two pillars that support it: Continuous Improvement and Respect for People.

a) Continuous improvement, often called kaizen, defines Toyota’s basic approach to doing

business. The true value of continuous improvement is in creating an atmosphere of continuous

learning and an environment that not only accepts, but actually embraces change.

b) Respect for people: Kaizen environment can only be created where there is respect for people

hence the second pillar of the Toyota Way. Toyota demonstrates this respect by providing

employment security and seeking to engage team members through active participation in

improving their jobs

Toyota Production System

The practical expression of Toyota's people and customer-oriented philosophy is known as the

Toyota Production System (TPS). It provides members with work satisfaction, job security and

fair treatment.

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Terminal Values

Toyota aims at building a corporate culture where teamwork and individual creativity thrive and

where people approach their work with pride and with passion. Toyota honors the spirit of

diversity in recruiting, training, and promoting capable individuals.

Vision

• Toyota will lead the way to the future of mobility, enriching lives around the world with the

safest and most responsible ways of moving people.

• Through our commitment to quality, constant innovation and respect for the planet, we aim to

exceed expectations and be rewarded with a smile.

• We will meet our challenging goals by engaging the talent and passion of people, who believe

there is always a better way.

Mission

Toyota is dedicated and committed to:

Ensuring that products are of outstanding quality, value for money and instill pride of ownership

Toyota Culture 8

SOP’s

The foundations of TPS are built on standardization to ensure a safe method of operation and a

consistent approach to quality.

a) Kaizen - Continuous Improvement -Kaizen is the heart of the Toyota Production System.

Like all mass-production systems, the Toyota process requires that all tasks, both human and

mechanical, be very precisely defined and standardized to ensure maximum quality, eliminate

waste and improve efficiency. Toyota Members have a responsibility not only to follow closely

these standardized work guidelines but also to seek their continual improvement.

b) Just In Time

The 'just in time' approach to production that has now gained almost universal acceptance in

world manufacturing was actually pioneered by Toyota. It allows the entire production process

to be regulated by the natural laws of supply and demand. The result is that the right parts and

materials are manufactured and provided in the exact amount needed - and when and where

they are needed. Production is 'pulled' by the customer rather than being 'pushed' by the needs

or capabilities of the production system itself.

c) Jidoka

In Japanese 'jidoka' simply means automation. At Toyota it means 'automation with a human

touch'. This principal, jidoka, of designing equipment and processes to stop and call attention to

problems immediately when they sense a problem is a central concept of TPS.

Toyota Culture 9

Norms of Behaviour

In Toyota, norms are not explicitly formalized in rules, but are more inherent in the culture of

the organization

E.g.: TPS gives power to the employees on the front lines to pull a cord and stop the

manufacturing line when they see a problem.

The “Toyota Way” and the “Toyota Code of Conduct” serve as important guiding tools when

Implementing the daily business operations to realize the “Guiding Principles at Toyota”.

“Toyota

Way” describes the values and methods to be shared for the people of the global TOYOTA

organization.

The “Guiding Principles at Toyota” summarize the corporate philosophy and reflects TOYOTA’s

vision of what kind of company TOYOTA would like to be.

Toyota Culture 10

The present “Toyota Code of Conduct” provides a basic code of conduct and serves as a model

and compass. It also provides detailed Explanations and examples of the actions and issues that

all must be aware of when carrying out Actual business activities.

Code of Conduct involves:

• Compliance with Laws and Regulations - With sound social norms in mind

• Use and Management of Assets and Confidential Matters- Ensuring asset maintenance and

confidentiality management -

• Insider Trading - Act as an investor with sound common sense

• Activities Promoting Safety - Enhancing vehicle safety

• Environmental Preservation Activities- Building environmentally and people friendly vehicles

• Research and Development Activities - Developing vehicles from the standpoint of our

customers

• Procurement Activities- Reasonable and sincere transactions

• Production and Distribution Activities - Building vehicles that win customer trust and faith

• Sales Activities - Winning the trust of customers and dealers

• Overseas Business Activities- To become a global company trusted worldwide

• Profitability Enhancement Activities- Building a stronger profit foundation -

Toyota Culture 11

Influence of People in shaping the culture

Toyota doesn't just produce cars; it produces talented people. Toyota's remarkable success is

through a 4P model for excellence- Philosophy, People, Problem Solving, and Process

Toyota and other such learning organizations believe that people are the organization’s most

Significant asset so they invest in the skills and knowledge of people.

Toyota workers share a common goal: continuous improvement. Their shared vision motivates

them to make improvements beyond merely meeting their customers’ needs.

Respect for people: The employees respect each other, make every effort to understand other,

take responsibility, and do their best to build mutual trust. They believe in communicating

sincerely to achieve this.

Teamwork: Toyota also stimulates personal and professional growth, shares the opportunities

of development, and maximize individual and team performance through:

• Commitment to education and development

• Respect for the individual.

• Realizing consolidated power as a team.

The company's four-stage process for building and keeping quality people is:

Attract, Develop, Engage, and Inspire.

In order to build a culture of continuous improvement, Toyota makes the following efforts:

• Encouraging problem solving at all levels of your organization

• Making management accountable to employees

• Inspiring the people to be committed to the company, family, and community

• Turning the HR department into the arbitrators of fair and consistent daily practices

• Using a top-down and bottom-up planning process to involve everyone in achieving

breakthrough goals

Toyota Culture 12

Structure

As Company grows ���� Structure expands���� Response time slow

E.g.: Toyota recalled 242000 Prius and Lexus hybrid cars made between March and October

2009 because of a braking problem.

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. 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.

Toyota had a pattern of slow response on safety issues because of its organizational structure.

In order to overcome this problem, Toyota decided to Establish a structure for the swift

realization of the Toyota Global Vision too swiftly communicate the voices of the customers and

information from frontline operation level of each region, to the Executive Levels.

Thus it is observed, that Toyota has a Geographic Structure because:

• Geographic structure allows Toyota to adjust its structure to align its core competences with the

needs of customers in different geographic regions

• Geographic structure allows some functions to be centralized and others decentralized

• Central Support Function: responsible for overseeing the activities of the managers heading each

Region

• Within each region, it is observed that Toyota has a highly vertical structure with minimum 7

levels

Toyota Culture 13

Toyota Manufacturing- UK organizational structure

Toyota is a modular organization as all nonessential functions are outsourced. The idea

Behind this format is to retain only the value-generating and strategic functions in-house, while

the rest of the operations are outsourced to many suppliers. By managing relationships with

hundreds of suppliers, Toyota achieves efficiency and quality in its operations.

Toyota Culture 14

Ethics

• Toyota promotes its business activities from “both a global and local” standpoint so as to

contribute to the development of local economies and society.

• Toyota’s ability to recover from disaster: When Toyota vehicles were recalled, Toyota’s gold

standard of quality fell like a house of cards. The reason was aggressive growth that created

an unmanageable risk. Toyota was expanding too much and too quickly started surfacing its

car-quality ratings. However Toyota Accepted Responsibility and recovered from the crisis

and was able to maintain its reputation.

• Toyota’s Human System Model: Toyota used Lean projects as a vehicle for developing people

and culture.

• Toyotas organizational structure is such that the employees collaborate and work in teams.

From there it moves to safe workplaces.

• Organizational supporting processes -Toyota still want people to have a job for life, even

though this is not common outside Japan. Toyota has fair HR policies and rewarding policies

• Toyota’s management has Created a Harmonious and Lively Work Environment

• Sustainability Initiatives

a) Activities Promoting Safety- Enhancing vehicle safety -

b) Environmental Preservation Activities-Building environmentally and people friendly

vehicles.

• Procurement Activities- Reasonable and sincere transactions

• Toyota’s Corporate Social Responsibility: Toyota contributes to society by operating its

business in an open and fair manner. Through active public relations activities, investor

relations and philanthropy, TOYOTA aims to be a “good corporate citizen” that is trusted by

the international community.

Toyota Culture 15

Property rights

• Use and Management of Assets and Confidential Matters- Ensuring asset maintenance and

confidentiality management -

Toyota endeavors to manage and protect confidential information (e.g., its trade secrets) and to

use such information in an appropriate manner.

• Intellectual Property -Toyota carefully analyzes patents and the need for patents in each area of

research to formulate more effective R&D strategies

E.g.: Policy is the licensing to other companies of patents in the area of hybrid

• Human Relations Activities -At Toyota, human relations activities are constituted by a range of

voluntary activities aimed at improving the quality of teamwork and human relationships

between employees. These activities are held both within and outside the workplace, and helps

employees to create fulfilling lives and widen the circle of human interaction.

• Toyota has been maintaining a people-centric culture that sustains consistent growth,

innovation, profitability, and excellence.

• Encouraging problem solving at all levels of your organization

• Making management accountable to employees

• Turning HR department into the arbitrators of fair and consistent daily practices

• They promote a policy of equal payment for each job and pay their employees well.

• Using a top-down and bottom-up planning process to involve everyone in achieving

breakthrough goals.

• The employees of Toyota realized that if they want to protect their property rights such as

keeping their jobs and benefits, they must internalize values and norms.

Toyota Culture 16

Does the ‘culture’ support the strategy?

Lean is not sustainable without the culture to support it

The key for the Toyota Production System was the "Respect for Humanity" system.

Operational Excellence achieved through understanding people

The incredible consistency of Toyota s performance is a direct result of operational excellence.

Toyota has turned operational excellence into a strategic weapon. Toyota’s continued success

stems from a deeper business philosophy based on its understanding of people and human

motivation. Its success is ultimately based on its ability to cultivate leadership, teams, and

culture, to devise strategy, to build supplier relationships, and to maintain a learning

organization.

The Toyota Way - Sharing the Toyota Way Values

The Toyota Way has two pillars that support it:

Continuous Improvement and Respect for People.

Management Role: The management has taken effort in defining and explaining what the goal

is, sharing a path to achieving it, motivating people to take the journey and assisting them by

removing obstacles. They have engaged the minds of people to support and contribute their

ideas to the organization.

The Toyota Way, along with the Toyota

Production System, makes up Toyota s DNA. This

DNA was born with the founders of our company

and continues to be developed and nurtured in

our current and future leaders.

Toyota Culture 17

Learning

• Build quality into workplace systems

• Eliminating huge costs of hidden waste

• Turn every employee into a quality control inspector

• Accept responsibility

• Companies generally can’t predict when crises might occur. However, good internal risk

assessment programs can help identify those areas of the business where management should

be on the alert.

• Robust risk management programs help a company address problems as they pop up on the

internal corporate radar screen – and before they explode in public.

Toyota Culture 18

References

Books

• The Toyota Way: 14 Management Principles from the World's Greatest Manufacturer Hardcover

by Jeffrey Liker

• Toyota Culture – The heart and soul of Toyota way by Jeffrey Liker

• Case: Toyota Struggles With Organizational Structure , Case written by Berrin Erdogan, Carlene

Reynolds, and Talya Bauer to accompany Carpenter, M., Bauer, T., & Erdogan, B. (2009) in

Principles of management

• Organization Theory, Design and Change by Gareth R Jones, Mathew(sixth edition)

Case study : How Toyota manages its environment (pg 93)

Case study: Toyota’s Paranoid Culture (Pg 207)

Case study: Toyota a learning organization (Pg 357)

Website

• http://www.toyota-global.com/

• The recovery of trust: case studies of organizational failures and trust repair (Toyota)

www.ibe.org.uk First published in February 2012.

• Toyota Recall: Five Critical Lessons Posted by Michael Connor, January 31, 2010 in the magazine

– Business Ethics (The Magazine of Corporate Responsibility)