List of abbreviation There are some common words which often appear in this report will use the abbreviation to reduce the repeating of words through the report. Toyota Motor CompanyTMC Human resource managementHRM Human Resource HR Total Quality Management TQM Toyota Management Principles TMP Financial Year FY Research and Development R&D
The United States U. S Abstract: Toyota Motor Company is the one of world’s leading automotive companies and is a global benchmark for quality and continuous improvement. However, in recent years, they faced a recall crisis unlike any they had seen before. Mr. Akio Toyoda, Toyota’s president and grandson of the founder, was called to testify before the U. S. House of Representatives Committee on Oversight and Government Reform about the company’s response to the recall (Greto et al, 2010).
Many researchers analysed Toyota’ problems and pointed out several causes for this situation such as Toyota production system’s problem, quality management, and human resource management and so on. This report will focus on human resource management problems in this case, based on information from media and theories of human resource management such as human resource strategy, employee development and career management, performance development, and compensation and etc ; the report will then give not only a conclusion but also recommendations with regard to Toyota’s situation. I.
Introduction: I. Toyota’s overview: Kiichiro Toyoda founded Toyota Motor Corporation in 1937 as a spinoff from his father’s company Toyota Industries to create automobiles. Three years earlier, in 1934, while still a department of Toyota Industries. The Type A engine was created in 1936, its first passenger car, the Toyota AA. Toyota Motor Corporation group companies are Toyota (including the Scion brand), Lexus, Daihatsu and Hino Motors, along with several “non-automotive” companies. The numbers of employees worldwide including consolidated and non-consolidated are 386. 841 in 31 March 2011.
The company produced more than 7. 000. 000 vehicles per year both inside and outside Japan from 2009. As of the end of March 2011, Toyota businesses worldwide consist of 50 overseas manufacturing companies in 26 countries and regions. Toyota’s vehicles are sold in more than 170 countries and regions (Toyota Annual Report, 2009) Katsuaki Watanabe, President of Toyota, had famous words: We are doing the same thing we always did; we are consistent. There’s no genius in our company. We just do whatever we believe is right, trying every day to improve every little bit and piece.
But when 70 years of very small improvements accumulate, they become a revolution There are some business results, production and sales results in consolidated basis market Table 1 : Business results (2009_2011) | FY 2009 (April 2008 to March 2009)| FY 2010 (April 2009 to March 2010)| FY 2011 (April 2010 to March 2011)| Sales*1| 20,529. 5| 18,950. 9| 18,993. 6| Operating income*1| -461| 147. 5| 468. 2| Net income*1| -436. 9| 209. 4| 408. 1| Capital Expenditures*1*2| 1302. 5| 579. 0| 642. 3| R;D*1| 904. 0| 725. 3| 730. 3| Number of consolidated subsidiaries| 529| 522| 511| No. of Affil.
Accounted for Under the Equity Method| 56| 56| 56| (unit = 1 billion yen or 1 company) *1 Monetary figures rounded down to the nearest 100 million yen *2 Figures for depreciation expenses and capital expenditures do not include vehicles in operating lease * Table 2 : Production results | FY 2009 (April 2008 to March 2009)| FY 2010 (April 2009 to March 2010)| FY 2011 (April 2010 to March 2011)| Vehicles| Japan| 4,255,000| 3,956,000| 3,721,000| | Overseas| 2,796,000| 2,853,000| 3,448,000| | Total| 7,051,000| 6,809,000| 7,169,000| * Table 3 : Sales results | FY 2009 (April 2008 to March 2009)| FY 2010 April 2009 to March 2010)| FY 2011 (April 2010 to March 2011)| Vehicles| Japan| 1,945,000| 2,163,000| 1,913,000| | Overseas| 5,622,000| 5,074,000| 5,395,000| | Total| 7,567,000| 7,237,000| 7,308,000| Homes| 5,442| 5,281| 5,157| (Source: http://www. toyota-global. com/company/profile/overview/) II. Toyota’s problems in recent years: In late 2009, Toyota became the subject of media and U. S. government scrutiny after multiple deaths and injuries were attributed to accidents resulting from the unintended and uncontrolled acceleration of its cars. According to Smith (2012), despite Toyota’s voluntary recall of 4. million vehicles for floor mats that could jam the accelerator pedal and a later recall to increase the space between the gas pedal and the floor, the company insisted there was no underlying defect and defended itself against media reports and regulatory statements that said otherwise. As the crisis escalated, Toyota was further criticized for its unwillingness to share information from its data recorders about possible problems with electronic throttle controls and sticky accelerator pedals, as well as braking problems with the production system. Cole said that “… y the time Toyota Motor Company president Akio Toyoda apologized in his testimony to the U. S. Congress, Toyota’s stock price had declined, in just over a month, by 20 percent-a $35 billion loss of market value” (2011, p3) Furthermore, Toyota in Australia revealed that it was halving production at its Altona plant in Melbourne, citing components shortages resulting from Japan’s earthquake and tsunami. The company announced that for the next two months, its 3,000 Australian workers would receive only 75 percent of their wages, operating on half shifts, and that it would review its production schedules in June of 2011 (Marshall, 2011)
II. Methodology: The methodology used to make this report is data collection and analysis from two sources including sources of Toyota’s issue from the Internet, Toyota Motor Corporation’s Website, magazines, journal articles and academic materials such as books, lectures and etc. After collecting, those data have analysing about Toyota’s issues. Besides, the data collects the commentary from authors and experts about issues of Toyota and its HRM in order to observe those issues in many sides of views, especially in human resource views.
The sources of case study also comes from magazines and news from quality source such as the New York Times, Human Resource Management Magazine, Harvard Business Publishing, Human Capital Online Magazine, and other HR magazines in order to guarantees the quality of the data. Finally, both HR theories and practice were compared in order to give recommendations and conclusions in this issue. III. Analysis about Human Resource Management of Toyota 1. Toyota human resource management views and practice:
Toyota is known for many world class products and quality initiatives that include the famous Toyota production system that later became popular as JIT (just-in-time inventory). Toyota maintains a high profile in its HRM policies and practices too (Smith, 2008). The global vision in human resource management in Toyota Motor Company (TMC) is create working environments for various employees to work proudly and with loyalty and confidence in fulfilling their potential, which realize their self- growth (Akio, 2005).
The company focus on relationship with their employees based on basic principles of human resource management including creating a workplace environment where employees can work with their trust in the company; creating a mechanism for promoting constant and voluntary initiatives in continuous improvements; fully committed and thorough human resources development; and promoting teamwork aimed at pursuit of individual roles and optimization of the entire team (Toyota ‘s sustainability report, 1998).
According to Ian Winfied, Professor of university of Derby in UK, said that human resource practices of Toyota’s company can serve as a model, particularly in manufacturing and production oriented organizations. Toyota’s HRM framework broadly comprises of four goals including four goal follow: a) The goal of organizational integration: The integration of employees at individual and collective level with organization is seen as the primary goal of Toyota HRM strategy. This goal has been achieved through extensive use of teams that are subordinate to organizational goals.
Welfare of employees also received wide attention as a part of this goal (Toyota global overview, 1998) b) The goal of commitment. In order to achieve this goal, a two-pronged strategy was followed. Firstly, Toyota preferred a semi-rural workforce for induction in their plants. They believe that people who are not contaminated by industrial culture and influences tend to retain with them a kind of feudal value of loyalty, which can be converted into organizational commitment.
Secondly, measures such as suggestion schemes, quality circles and employee involvement methods are used to gain commitment. (Toyota global overview, 1998) c) The goal of flexibility and adaptability. Team authority in place of single individual holding all the powers has paved the way for realizing flexibility in the organization. These teams are task-based and can be dismantled or restructured, depending upon the situation. The adaptability trait is institutionalized through the approach of multi-skilling and job rotations. Toyota global overview, 1998) d) The goal of quality. Self, peer and teams surveillance techniques are used to ensure quality of products. Further, a series of measures employed, such as time and motion study, benchmarking, continuous process improvement and employee involvement contributed in the achievement of this goal (Toyota global overview, 1998) In addition, Toyota has recomposed the aforementioned four HRM goals into 17 specific practices.
These 17 practices are classified into production practices and employment practices. The production practices are: JIT, Kanban, Line stop, Level scheduling, Continuous flow and Processing. The employment practices are: Continuous improvement, Single status facilities, Performance appraisal, Daily team briefings, Temporary contracts, Performance related pay, Company council, Cross training and group decision-making (Toyota annual report, 1998) Moreover, Toyota seeks to develop human resources through the activity of making things.
Honorary Advisor Eiji Toyoda said that “…. Because people make our automobiles, nothing gets started until we train and educate our people”. As seen in these words, which were expressed by president of the company, Toyota believes that the development of human resources requires the handing down of values and perspectives. In conjunction with the geographic expansion of business and the growth of business areas, undertaking global actions for the development of human resources has become a priority issue.
Toyota is building both tangible (a new learning facility) and intangible (course content) structures relating to team member development that ensures a secure and steady flow of qualified human resources to conduct Toyota’s global business in the 21st century (Toyota global overview, 2000) * Fully Committed and Thorough Human Resources Development: Toyota conducts systematic company-wide and divisional training and assignments for training purposes with an emphasis on on-the-job training (OJT) to ensure that associates can fully utilize their abilities.
Toyota has defined the required qualifications of “professional staff”1 for office and engineering positions, and “T shaped human resources’ who are able to perform day-to-day activities and expand their skills in technical positions. Company-wide training is conducted based on employee qualifications, as well as specialized training for individual divisions, language training, and special knowledge and skill training (Toyota’s sustainability Report, 2005)
The basis for human resource development is putting the Toyota Way into practice. Toyota is working to develop human resources by seizing times of adversity as opportunities to learn, planning greater enhancement and reinforcement of educational programs based on the five Toyota Way keywords, and on-the-job training (OJT) essential to the progress and succession of building excellent products. (Source: http://www. toyota-global. com/company/profile/overview/) Toyota Management Principles (TMP): Continuous Improvement * Challenge: The company form a long-term vision, meeting challenges with courage and creativity to realize our dreams * Kaizen: “Continuous Improvement”: They improve their business operations continuously, always driving for innovation and evolution. * Genchi Genbutsu: “Go and see for yourself” They go to the source to find the facts to make correct decisions, build consensus, and achieve their goals. * The Toyota Production System (TPS): + Jidoka: quality at the source + Kaizen: continuous improvement Heijunka: even flow + Kanban: pull system + Just-in-Time: minimal inventories + Work teams + Total Quality Management + Supplier Partnerships * Total Quality Management (TQM): Implementation of TQM has been promoted based on the philosophies of “Customer First,” “Continuous Kaizen” and “Total Participation. ” In order to raise the awareness of TQM, several measures are taken to promote resolution, provide every employee working in Toyota’s global organization with ideas for action to improve product and service quality, motivate people and revitalize the corporate structure. Source: http://www. toyota-global. com/company/profile/overview/) * Employees Training Procedure: The purpose of training is to make sure that employees have the right skills and capabilities to identify and handle all situations they may encounter. Toyota is famous for its four-step cycle — plan/do/check/act. Company-Wide Training to Key principles of the Toyota Way support Professional Staff (Source: http://www. toyota-global. com/company/profile/overview/) Outline of Training Programs (Source: http://www. oyota-global. com/company/profile/overview/) * Rewards and recognition The purpose of any corporate reward process is to encourage and promote the right behaviours and to discourage the negative ones. It’s important for the reward process to involve the gathering of information about problems. It’s equally important to reward employees who are successful in getting executives to take immediate action on negative information (Toyota annual report, 2000) ( Source: http://www. toyota-global. com/company/profile/overview/) 2.
Toyota’s human resource management problems: In the late of 2009, by the first of a series of highly publicized recalls of Toyota vehicles in the United States, Cole (2011) cited Toyota announced that it was recalling 3. 8 million U. S. vehicles as potential problem in which poorly placed or incorrect floor mats under the driver’s seat could lead to uncontrolled acceleration in a range of models. For manufacturing executives who have strived for decades to emulate Toyota, the mere suggestion that it had not only quality issues but also was a serious matter.
Furthermore, Toyota said that it will close its New United Motor Manufacturing Incorporated (NUMMI) plant in Fremont, California. NUMMI, opened in 1984 as a joint venture by Toyota and General Motors, currently employs about 5,400 workers all over the world (Kearney, 2009). Similarly, Byrne and O’Connor (2011) showed that Toyota Australia has threatened to end its manufacturing of cars in Australia, after workers went on strike against the company’s wage-cutting drive.
Strikes were held on September 2, and September 15 and 16 in 2011, involving more than 3,000 workers at Toyota’s main plant at Altona, in Melbourne’s west, and hundreds more workers at its parts centres in Melbourne and Sydney. The Altona plant produces around 560 cars per day, with 70 percent of them exported, mainly to the Middle East. Toyota is demanding that workers accept a new enterprise agreement that entrenches real wage cuts over the next three years, with nominal wage increases of 1-2 percent now, 2. percent in April 2012, 3 percent in 2013 and 3. 5 percent in 2014. The official annual cost of living is currently 4. 5 percent (Petter, 2011) Moreover, Business Week Magazine pointed out that employee errors were the root cause of Toyota issues and estimated that Toyota is losing $155 million per week as a result of their recent recall. Toyota had lost nearly $30 billion in stock valuation. The long-term impacts of the root causes that led to Toyota’s current situation could cost the company hundreds of billions of dollars.
In addition, poor handling of the issue in the public eye has damaged the automaker’s brand reputation and caused sales to decline to their lowest point in more than a decade (Hunter, 2010) Furthermore, According to Dr John Sullivan, who is a well-known thought leader in human resource a and professor of management at San Francisco State University, with case study “How Human resource caused Toyota crash” said that Toyota’s current predicament is a result of poorly designed practices and weak execution on the part of the human resource department (2010).
This opinion was supported and confirmed by Hunter (2010) “…Toyota’s current predicament is a result of poorly designed practices and weak execution on the part of the human resource department”. IV. Discussions Although, Toyota is famous with the production system but when they apply this system in global, it is not mean that this system can work effectively in the same way (Sullivan, 2010).
For instance, Toyota concentrates exclusively on the hard administration of a production system that produced vehicles to the customer’s order in Japan instead of the Western method of producing as many cars as possible as fast as possible, then trying to sell those cars to the customer (Smith et al, 2011).
For instance, in response to the growth, Toyota had to delegate more design work to outside contract engineers with more than 1000 new engineers around the globe and take one new suppliers because the internal engineering resources and existing suppliers base could not keep up with the demands (Cole, 2011) It is obviously that the most important in Toyota problems is that the Toyota philosophy is so radical and requires such a change of management strategy that the change in the production process itself overshadows some even more fundamental differences between the drivers of performance in the Orient and in the West.
For this reason when Toyota went into production in the West the emphasis was on the detail of the process, not on the people who carried out that process. According to Bob Nelson, the author of “Keeping Up In A Down Economy” told that: The average number of suggestions given by an American worker to improve the performance of Toyota company is 1. 1 per year. The same figure for a Japanese worker is 167 suggestions per year.
This seems to indicate that there is a significant difference between the way that the Japanese worker feels about what he does and the way that the North American workers feel about what they do. In addition, when the new Toyota plants in the West or other countries were built they slavishly tried to copy the detail of the Toyota production system without understanding the difference between the ways that the workers in the East, compared to the West, felt about what they did.
Today that difference is called engagement (Hunter, 2010). Employers in the West are becoming aware of the huge value that is realised when a workforce is engaged but, other than running surveys to find out how engaged, or not, their workforce is, very few understand that it is possible to create engagement in an otherwise unengaged workforce, and fewer know how to do it.
The cars that Toyota recalled were all built in the West. Is it possible that the faults that caused the recalls did not occur in vehicles produced in the East because they were spotted and rectified by an “engaged” workforce, while in the West the “disengaged” workforce knew of the problems but never reported them to Toyota because Western managers do not know how to engage their workforces (Cole, 2011).
According Sullivan (2010), in any situation where employees fail to perform as expected, investigators must determine if the human error could have been caused by factors beyond the employee’s control. Such external factors might include actions by senior management, lack of adequate information or job training, faulty inputs to the process, or rewards those intent actions not in line with documented goals.
Therefore, if managers believe in accountability, they have to accept that human errors that lead to corporate catastrophes could be the result of faulty HR processes, most notably those related to acquiring, developing, motivating, and managing labour (Hunter, 2010) Furthermore, the mechanical failures were known to Toyota leaders long before corrective action was taken, and many close to the issue are indicating that the company took decisive action to hide the facts and distort the scope of the problem (Greto et el, 2010). When the organization disproportionately rewarded managers for ost-containment versus sustaining product quality, it created the incentive for everyone involved to ignore the facts and to deny that a problem existed. Employees who are well-trained and subject to balanced rewards and performance monitoring systems would not have allowed the situation to grow as it did. If the root cause of the problems Toyota is facing are failure by employees to make good decisions, confront negative news, and make a convincing business case for immediate action, then the HR processes that may have influenced those decisions must be examined.
The HR processes that must at least be considered as suspect include rewards processes, training processes, performance management processes, and the hiring process (Sullivan, 2011) V. Recommendations: Toyota traditionally has ranked best in its relationship compared with other automakers. However, its ranking has fallen steadily from 2007 through 2010. The roof of Toyota’s recent quality problems, any thorough analysis would also need to acknowledge the role of the company’s centralized management structure (Cole, 2011).
From previous parts of this report, there are some recommendations for this issue. The first recommendation is that Toyota should focus on training employees system because the purpose of training is to make sure that employees have the right skills and capabilities to identify and handle all situations they may encounter. Toyota is famous for its four-step cycle — plan/do/check/act, but with Toyota plants clearly the training among managers now needs to focus more on new engineers and general staffs.
In addition, in an environment where safety is paramount, everyone should have been trained on the symptoms of “groupthink” and how to avoid the excess discounting or ignoring of negative external safety information (Cole, 2011). The Toyota managers should encourage employees to detect errors and propose solutions. The second recommendation is recruiting process. According to Kramar et al (2011), the purpose of great hiring is to bring on board top-performing individuals with the high level of skills and capabilities that are required to handle the most complex problems.
Poorly designed recruiting and assessment elements can result in the hiring of individuals who sweep problems under the rug and who are not willing to stand up to management. Therefore, Toyota should do not for the purpose of rapid development that ignores the evaluation stage of the recruitment processes otherwise Toyota should maintain the hiring procedures which ensure quality for human resource management.
The company can adopt external or internal recruitment in order to looking for high quality employees (Robin et al, 2011) Another recommendation is performance management process. According to Sullivan (2010), the purpose of a performance management process is to periodically monitor or appraise performance, in order to identify problem behaviours before they get out of hand. Hence, The Toyota should check and ensure that the performance measurement system included performance factors to measure responsiveness to negative information.
Furthermore, the Toyota’s Human Resource Department also need check or audit the performance appraisal , Performance planning and evaluation (PPE) systems, performance feedback, and performance monitoring process effectively in order to help employees identify, report and alerts errors to warn senior managers before minor problems got out of control (Krmar et al , 2011, p 475). For example, the company should base on performance appraisal to make administrative decisions such as salary administration (pay rises or bonuses), promotion, retention and termination, retrenchment and recognition of an individual’s performance.
Finally yet importantly, the recommendation is psychological contract. According to Rousseau (1989), the psychological contract is defined as an individual’s beliefs about the terms and conditions of a reciprocal exchange agreement between that person and another party. In other word, a psychological contract emerges when one party believes that a promise of future return has been made, a contribution has been given and thus, an obligation has been created to provide future benefits.
Many researchers illustrated that psychological contract has a huge impact to the performance of employees. As the results, Toyota should consider and ensure the conditions of wages, bonuses, compensation, and welfare as well as avoid violating the psychological contract with employees to create healthy environment workplace. Thus, the company can motivate their staffs make contributions to the success of the company. VI. Conclusion: Human resource management refer to the policies, practices, and systems that influence employees’ behaviour, attitudes and performance.
Krmar et al, 2011 said that Human resource impacting the bottom line and customer’s satisfaction, diversity management, and the health and well- being of employees. Therefore, human resource managements is not only about the achievement organization’s goals but also employees health and well –being. It is important for any budding manager to remember that a happy employee is often a productive employee. Furthermore, according to Sullivan (2010), Toyota’s problems are not the result of a single individual making an isolated mistake, but rather due to a companywide series of mistakes that are all related to each other.
So many corporate functions were involved, including human resource management, customer service, government relations, vendor management and public relationship, that one cannot help but attribute the crash of Toyota to systemic management failure. As discussed above, employee errors in recruitment, selection, performance management, compensation and benefits, international human resource management and so on were the root cause of several mechanical and financial failures in Toyota automobiles (Cole, 2011).
Therefore, to restore credibility, quality and brand, Toyota should not only focus on overcoming the technical problems but also need to review, correct remedy all the processes related to the creation of products that the most important factors is human resources management. To sum up, the key lesson is that others should learn from Toyota’s mistakes is that HRM system needs to periodically test or audit each of the processes with considering all factors and fix problems as soon as possible otherwise it could allow this type of billion-dollar error to occur.
References lists: 1/ The sources of Toyota issues: Byrne, P & O’Connor, P 2011, Toyota Australia executives threaten shutdown after strike, Word Socialist Web Site, http://www. wsws. org/articles/2011/sep2011/toyo-s20. shtml. Cole, R E, 2011, What really happend to Toyota, 01 June, http://hbr. org/product/what-really-happened-to-toyota/an/SMR395-PDF-ENG. Hunter, P 2010, Root cause of Toyota failure: Emplyee Engagement, Human