Assignment: The Cultural Roots of Toyota's
Quality Crisis
Worldwide, the Toyota brand name has been a symbol of quality. Toyota's focus on Kaizen (the Japanese term meaning "continuous improvement") helped Toyota become the number one seller of automobiles in the world, but from the negative side the continuous pressure over the employee to introduce improvements ( Big part of their objectives and base of employees' appraisal) increase employee' burnout which in turn raise the turnover rate to exceed 25% in the year 2014.
In light of Toyota's commitment to quality, it was shocking when Toyota announced a massive recall of many of its vehicles in early 2010. On January 21, 2010, Toyota stated that it would recall approximately 2.3 million vehicles to correct sticking accelerator pedals, and, on top of that, approximately 4.2 million vehicles would have an ongoing recall for a floor mat pedal entrapment issue. By late February 2010, Toyota had recalled "about 8.5 million vehicles for problems related to gas pedals and brakes," according to CNN. Jeff Kingston of Temple University Japan estimated that the recall cost Toyota $2 billion. Moreover, the way Toyota managed the crisis was even worse than the financial consequences. The president of the company, Akio Toyoda, the grandson of Toyota's founder, did not appear publicly for two weeks after the recall announcement. When he did appear, Toyoda took the path of minimizing the problem, citing a software issue, rather than a defect, as the source of the pedal problems. Some uncertainty remains as to whether the problems originated in Toyota plants in America or whether the problem can be traced to designers in Japan. Kingston asserted that Toyota's failure to be forthcoming on critical safety issues has put "the trust of its customers worldwide" in jeopardy. Where did Toyota go wrong? How did the symbol of quality become tarnished? Some contend that cultural factors contributed to Toyota's current crisis.
How Japanese Culture Influenced Toyota
In his Wall Street Journal article, Kingston explained the cultural roots of Toyota's woes. He indicated that "a culture of deference" in Japanese firms "makes it hard for those lower in the hierarchy to question their superiors or inform them about problems." In addition, the Japanese tend to focus on the consensus, which can make it difficult "to challenge what has been decided or designed." In Japan, Kingston noted that "employees' identities are closely tied to their company's image and loyalty to the firm overrides concerns about consumers." One can deduce how Toyota's problems arose in this cultural environment. If subordinates noticed a problem in vehicular accelerators, they would likely be hesitant to
1. Report the problem to their superiors (culture of deference)
2. Criticize their team members who designed the accelerators (focus on consensus)
3. Request the firm spend extra money to redesign the accelerators for greater consumer safety (loyalty to the firm over concern for consumers)
Moreover, Kingston noted that Japanese corporations have a poor record when responding to consumer safety issues. He described the typical Japanese corporation's response in the following way:
1. Minimization of the problem
2. Reluctance to recall the product
3. Poor communication with the public about the problem
4. Too little compassion and concern for customers adversely affected by the product
Why do Japanese firms usually respond this way to consumer safety issues? Kingston gave three reasons.
• First, "compensation for product liability claims is mostly derisory or nonexistent" in Japan. In other words, Japanese corporations have little to lose by their minimal response.
• Second, Kingston describes Japan as "a nation obsessed with craftsmanship and quality." In such an environment, there is significant "shame and embarrassment of owning up to product defects." Corporations may seek to deny their products have safety concerns in order to "save face," i.e., to protect their companies' reputations.
• Third, Kingston told CNN that "Japanese companies are oddly disconnected with their consumers."
Toyota's Global Strategy Challenge
In contrast to the cultural explanation of Toyota's issues, Bill Fischer on Management Issues.com offered a different perspective, suggesting that Toyota's obsession with growth was the cause of the problems. In his view, companies "can expand by either opening new markets or offering new competencies, but not by doing both at the same time!" Fischer emphasized that companies lack a "head-start" based on using their existing "know-how" by "moving into new product areas, in new geographic markets with new factory settings." Transmitting "knowhow" requires personal interaction which is difficult over long distances. Fischer concluded that "successful globalization is much too difficult a journey without the assurance of having some knowledge that gives your organization a basis for advantage.
To do otherwise is to risk following on the wrong Toyota path to success." In other words, Toyota made a strategic error in its global expansion.
Johnson, Lim, and Padmanabhan offered further explanation on this idea: "When Toyota focused on the Kaizen culture, it was able to maintain closer links with its suppliers, and ensure the quality of its components primarily because they were located in close proximity to Toyota's plants. However, when their expansion and growth strategies required them to build production facilities overseas, and given intense competition in the auto industry, Toyota had to resort to a strategy where they forced suppliers to compete on price. Since it is difficult to pursue Kaizen because of geographic distance, Toyota may have inadvertently sacrificed quality for cost considerations. Mr. Toyoda admitted as much himself when he recently told Congress that his company's focus on growth replaced its traditional priorities of improvements in safety and quality."
Task
Toyota decided that it is the time to have an organizational change towards more customer responsive organization and to retrieve the high-quality image of the organization and this change will never happen unless the company change its leadership styles, behaviors and attitudes, with your understanding of Toyota's crisis, answer the following questions:
i. Identify the main causes of Toyota quality' crisis?
ii. Explain what Types of Leadership Behaviors required in order to achieve the required change and what benefits achieved from applying such leadership behaviors?
iii. Discuss the steps required in creating the mentioned change in Toyota?
iv. What proactive tactics need to be used in order to influence the change, and how leaders can use them in this particular case?
v. If you are a decision maker what type of leadership you are going to choose as the new CEO for Toyota charismatic or transformational leadership, justify your selection with at least 5 reasons?