Toyota Organizational Culture - Assignment Example

Introduction Organizational culture may be defined as ‘a set of shared mental assumptions that guide action and interpretation in organizations by defining appropriate behavior for various situations’ (Ravasi & Schultz, 2006). It can also be defined as norms and values shared by the employees who are working in an organizations. Organizational culture plays a huge role in strategy implementation and in managing strategic change in the organization. In this paper we will try to analyze organizational culture of Toyota using cultural web as a framework. In the next section an attempt will be made to understand the extent to which culture of an organization can make an important contribution to an organization’s strategic success. Background of the Company Toyota is one of the most well known automobile manufacturers in the world. In 2010 the company was regarded as the largest company by production in the automobile sector (World Ranking of Manufacturers, 2010). The sales of Toyota have grown significantly in the first decade of the 21st century making the company the largest in automobile sector. Toyota offers a wide range of products to customers and this allows the company to cater to the demand of many kinds of consumers. The company employs more than 300,000 employees worldwide (Toyota Global, 2011) and this depicts how large a name Toyota is. Organizational Culture of Toyota Toyota came up with its lean production system that reduces costs and increases production (TPS & Lean Manufacturing, 2011). The culture of the company is of continuous improvement (2011). All processes are designed so that maximum value can be given to the consumers. All processes that do not add value to the consumers are removed so that the company focuses on value creation specifically. The culture of continuous improvement allows employees to focus on core function of the company. The lean production system or commonly known as ‘lean culture’ is focused on quality and reduction of waste (TPS & Lean Manufacturing, 2011). Cultural Web Analysis In this section we will use cultural web as a tool to analyze the culture of Toyota. Cultural web is a useful tool for conducting a cultural audit of an organization (Johnson, 1992). It includes paradigm, power, organization, control systems, rituals and routines, stories, and symbols. All these factors can help us understand the culture of Toyota. Paradigm Paradigm tells the main business of the company and the way with which the company operates. It encompasses all the basic information about the company alongside with vision and focus of the company (Elliot, Herbane, & Swartz, 2009). This factor can play an important role in the success of the company because it explains the whole business of a firm alongside with its strategy (Elliot, Herbane, & Swartz, 2009). The main business of the company is automobile manufacturing and it is catering to a wide range of clientele. The company is also focusing on value creation and value addition so as to increase customer satisfaction. The idea behind continuous improvement (CI) is to deliver maximum value to the consumers and the company is doing that. The factor of Paradigm is closely related to the success of an organization. It informs us about the basic strategy of the company. It tells whether the basic strategy of the company is aligned with its target market and business goal. Strategic success of a firm is largely dependent on its overall strategy of business. This factor of the cultural web tool is useful for organizational strategic success. Power Structures Power structures explain how the power is concentrated within the organization (Elliot, Herbane, & Swartz, 2009). It informs who in the organization makes important decision. It is important for the strategic success of an organization that power lies in the right hand (Elliot, Herbane, & Swartz, 2009). Power is not delegated to employees at all levels in Toyota. The company does not have strict bureaucratic structure, although procedures are standardized to a great extent within the company. An example of standardized process is when a car seat is installed at Toyota, bolts are tightened in a particular order and same time is allocated for turning of bolts, and also the torque to which the bolt should be tightened (Spear & Bowen, 1999).The opinion of line managers and employees is given some consideration at Toyota because they are the people who work at the lowest level but they cannot change design or any other technical procedure without the approval of Japanese executives. Employees at Toyota often come up with new ideas to improve the production process of the company but these ideas are only implemented once approved by the top level executive. Decision making is also delegated to employees of the lowest level to a certain extent. An example of this is that any employee can halt the production process if he or she sees a problem. In this way the employees are constantly looking for problems and therefore quality control takes place at the lowest possible level. Power remains mainly centralized within the company with the board deciding what to do. International operations are carried out by Japanese bosses and they make sure that standard procedures are followed. This sometimes causes problems for the company as information is not disseminated throughout the organization. Power structure explains where the decision making is done in the organization and apt decision making is important for the success of any organization. The power structure of Toyota is complementing its overall business strategy of lean manufacturing. For a company like Toyota highly centralized power structure may have a higher probability of success. The element of power structure is closely related to organization success because decision making is important for every organization. It is therefore important that decisions are made by the right people who have perfect knowledge and only then a company can prosper in the long run. Organizational Structure Organizational structure gives information about hierarchies whether they exist in the organization or not (Elliot, Herbane, & Swartz, 2009). Some firms have flat structures and some have tall structures. Organizational success is largely dependent upon the right flow of information in the company. There is not one organizational structure of the company. At some levels team based structures are seen in the company and at other levels centralized decision making is observed. It is important to understand how the company works if we want to understand its structure. The main decisions are taken by the top level management and without their green signal no local managers can recall vehicles or make changes technical changes on a mass level (Vartabedian & Bensinger, 2010). But when faced with a problem teams are made and they are given tasks to solve problems. Teams operate regularly in Toyota to solve problems facing the company and these teams are relatively autonomous. But changes cannot be made in the design or specification of cars. Other functions like advertisement and services are delegated to local managers and they are autonomous in doing what they want (Vartabedian & Bensinger, 2010). This makes Toyota operate with different organizational structure. Major decisions are taken at the highest levels while relatively small decisions are delegated to local managers. Organizational structure of Toyota is tall to a certain extent. This contributes to the success of organization because it has automated systems and manufacturing lines that aim to reduce inventory and defects. Such precise quality control is relatively difficult to achieve with flatter structures and therefore tall structures have a higher chance of succeeding when it comes to quality control. There this factor aligns with the organization’s strategic success. Control Systems Control systems tell about the extent to which operations are controlled in an organization (Elliot, Herbane, & Swartz, 2009). Control systems can be weak or strong depending on the organization. They can play an important role in cutting the costs down and are therefore related the success of an organization. Control systems of Toyota are very strong and they are focused to remove faults or defects. The manufacturing system of Toyota is commonly known as Toyota Production System (TPS) and it is based on continuous improvement (TPS & Lean Manufacturing, 2011). This is why the aim is to reduce the number of defects to lowest possible levels so that costs can be reduced and efficiency can be increased throughout the organization (TPS & Lean Manufacturing, 2011). Toyota implements control systems at all levels in the organization. Budget is designed at the top level management and all international operations have to abide by those budgets. Some people even argue that such centralized control was the reason behind the brake problem and massive recall of Toyota vehicles in 2009 and 2010 (Vartabedian & Bensinger, 2010). But this allows the company to stay on track and similar policy is followed throughout the company regardless of the domestic market. This ensures similar quality and lower costs of production for the company. It is difficult to follow different systems at different places and therefore centralization saves money. In Toyota control systems are overall tough and high degree of quality is maintained. This element indeed aligns with the organizational success of Toyota because there are standardized procedures and for them to work high degree of control is required. Toyota’s success is dependent upon how much time and cost it can save in its production. Rituals and Routines Rituals and routines explain the daily life in an organization. It entails the usual practices of the employees of the firm (Elliot, Herbane, & Swartz, 2009). This factor is related to the organizational success because daily routines tell a lot about a company. In Toyota value creation is considered routine. It is common for employees to come up with ideas to reduce costs of production and increase efficiency. It also usual for the company to standardized production processes (TPS & Lean Manufacturing, 2011). One production method is followed in all factories of Toyota all over the world and this is how quality is maintained in the company. All employees are committed to the cause of lowering defects and increasing efficiency. Production process is immediately stopped if any error is identified and all employees are on a look for defects. This reduces defects, saves time, and money which is the main reason behind the success of the company. The production system of Toyota has been designed after much hard work therefore the focus of employees is to follow the production system by the book. No time is wasted on activities that do not add value to the consumers. This may be one of the reasons why lean manufacturing system of Toyota has been successful. In Toyota rituals and routines are perfectly aligned with the success of the company. The daily routines are in line with the strategy of high quality at lower costs. This is why employees focus on quality control on a regular basis. Stories Stories indicate the verdict of important stakeholders about the organization (Elliot, Herbane, & Swartz, 2009). The overall reputation of the organization is included in this element. It relates to success because stories tell a lot about the culture of a company. Toyota values its customers at all costs. The company has built its value system around its customers and this is why when safety concerns came up Toyota was quick to recall its 8 million vehicles which took a great financial tool on the company (Maynard, 2010). But still the company did so because the company values its customers. This story has become famous and it has allows Toyota to save its face. The company now shows signs of revival as it reported profit in the third quarter of 2011 (Toyota Global, 2011). The company is famous for its production system and it is said that its production system has not yet been successfully implemented by any organization (Ede, 2010). This has now become somewhat a differentiating factor for the company. Engineers have tried to understand the system of Toyota but have failed. It is said commonly that only Toyota knows how to make its system work (Ede, 2010). Stories of Toyota explain why the company is successful. People have trust in Toyota cars and this is why the company has grown substantially in the last decade. This particular element is aligned with the image of Toyota as well which is producing high quality cars. Symbols Symbols are the items or images that are perceived as a part of the organization (Elliot, Herbane, & Swartz, 2009). Like the sign of McDonald, a symbol is something that speaks to customers about the company. The element is just another way organizations interact with customers. The company’s logo is famous world wide as it is one of the largest automobile manufacturers in the world. The logo is so famous that it is now easily related to the company. The logo of Toyota speaks to the customers as it is associated with trust and quality (Toyota Global, 2011). The company provides high quality cars at lower costs and this is why it has been able to capture a great market. All these positive things are associated with the logo of Toyota. The logo of the company also speaks of simplicity of the company and its innovation (Logo Blog, 2011). The famous ‘T’ of Toyota is made to look as the company is looking for global growth in the industry. Toyota also symbolizes its employees and considers them worthy of respect. This is widely propagated in literature by Toyota. Conclusion Cultural web is an important tool because it explains a great deal about the culture of a company and the way with which it operates its business. All the factors of the model can tell how much successful an organization is. The tool can be used to have a general idea about the culture of the company and how much it has succeeded to win the hearts and minds of people. All the elements of the model also explain the strategic position of a firm and then success (or failure) of the company can be inferred. Overall cultural web analysis is an extremely helpful tool to measure organizational performance. Contribution of Culture in an Organization’s Success Organizational culture is plays a vital role in the success of an organization (Barney, 1986). Culture guides employees about how to behave in specific situations and therefore impacts employee productivity and behavior. For example in an innovative organization employees are expected to come up with new ideas and can also take decisions on their own. This is how culture impacts the behavior of employees. Organizational culture also influences the overall business of the company. The way of doing business and dealing with customers is defined by the culture of the organization (Barney, 1986). Employees working in an organization develop a sense of attachment with that organization (Schein, 1990). They define themselves through their organization. In today’s industrialized world most of the people are working for companies and it has become a part of a person’s identity. Human beings have a tendency to develop emotional bonds and association with people with whom they spend time with. This tendency plays a vital role in shaping organizational culture of a firm. When employees spend 8 to 10 hours daily together they develop a sense of relationship and that relationship is based on certain principles. Employees also have certain expectations and all this constitute culture of an organization. The point here is that some sort of a culture or shared norms or value system is inevitable when employees are spending this much of a time together with each other. This value system can play a role in the overall success of an organization because it guides the actions of employees in specific situations. For example when facing a problem employees react in accordance to the culture of the organization. If it is a norm in the firm to wait until a supervisor arrives before making a decision then employees will be reluctant to act. If, on the contrary, everyone expects leadership and initiative in a firm then employees will be willing to solve the problem themselves. Research suggests that organizational culture can have a measurable impact on the success of an organization. Four traits were identified namely involvement, consistency, adaptability, and mission that can bolster performance and improve financials of a firm (Denison & Mishra, 1995). This shows that impact of culture is something that is measurable and quantifiable. Hofstede’s Organizational Cultural Dimensions An alternative to cultural web analysis can be Hofstede’s organizational cultural dimensions. This model is also a good way to analyze culture of an organization and how it relates to organizational success. There are six dimensions of Hofstede’s model and they will be discussed below. First dimension is known as process or result orientation. It explains the overall focus of the organization. This dimension tells whether organization is focused upon how things are done or focused on results only. This explains the overall business strategy of the company. The second dimension is related to employee and jobs. It categorizes firm’s interest; whether firm focuses on its employees or is only interested in the work that employee produce. It explains the internal strategy of the firm vis-à-vis its employees. Third dimension is called parochial or professional. This dimension explains how employees identify themselves whether as a professional or as a part of the organization. This tells the how closely employees identify with the firm. The fourth dimension is open system and closed system. Open system organizations are those that can welcome any kind of employees but closed system firms take only certain kind of people that can fit in. Fifth dimension is loose control and tight control. As the name suggests it categorizes organization according to the level of control system they implement. The sixth dimension is called normative or pragmatic. Organizations with normative orientation are driven by their ideology. Organizations with pragmatic orientation focus on customers only and they are mainly driven by market demand. This model is similar to cultural web analysis in many respects as it informs greatly about the culture of organization. This model also relates to the success of organization because there are dimensions of model that can be used to evaluate the relative success of a firm. Hofstede’s model of organizational culture can help organizations achieve strategic success as it gives alternatives to the managers as to how to proceed (strategy wise) in their business. It tells them how to shape organizational strategy and culture by providing alternatives. For example a company can choose customer oriented or market oriented strategy to move forward. The model entails successful characteristics of organizational culture that can contribute to the strategic success of the organization. Deal and Kennedy Model The model by Deal & Kennedy (1982) explains four types of organizational cultures. The work-hard, play-hard culture entails more quantity of work and rapid feedback. The tough-guy macho culture has rapid reward and feedback system but also has uncertainty. The process culture is slower when it comes to feedback and rewards and this reduces stress level in the organization. The focus in process culture is on future performance (1982). The bet the company culture involves slow feedback and reward, and high risk. In this type of culture firms pursue long term strategy. This model has provided firms with some alternatives regarding organizational culture. It may contribute to the strategic success of the company by determining which culture to follow. The best thing about this model is that it allows firms to choose organizational culture that is linked to the overall business strategy of the firm. Organizational culture can also become a source of sustained competitive advantage for firms (Barney, 1986). Management experts have spent great time in studying firms that have shown consistent performance for many decades now. Experts attempt to learn how such organizations can maintain such a growth rate and they found that organizational culture had a major role to play in the success of the firms. No firm can replicate organizational culture of a firm completely (Barney, 1986) and this is why culture can become a source of competitive advantage. This is because of many reasons. A firm’s culture is developed by the founders of the company but it develops with the experiences of employees of the company. Also there are so many factors influencing an organization at one point that it is not possible to replicate the whole culture in a different setting. An example would be that of Toyota’s production system and its lean management style. Many firms have tried to replicate it but have failed because managers have Toyota have spent many years to develop their system. They have come up with solutions through trial and test methods. Also their solutions will only work for their organization and not for other companies. This means that culture of Toyota is a source of competitive advantage. Change Management and Organizational Culture Studies have found that cultures that are ‘open’ can facilitate the change management process of an organization (Jones, Jimmeison, & Griffiths, 2005). Open cultures are those where information is flows throughout the organization and all employees interact with each other irrespective of job positions. In such organizations change can easily be brought about because employees in such firms have a readiness to change and adapt (Jones, Jimmeison, & Griffiths, 2005). This again strengthens our argument that organizational culture can influence the success of an organization to a great degree. Organizational Culture and Communication Organizational culture also communicates to the customers of an organization (Harrison, 2011). Culture talks to the customers as well as it guides the actions of employees and their interaction with customers. When employees are dealing with customers they react according to the culture of their organization. Right sort of communication to customer via culture can make an organization successful (Harrison, 2011). Organizational Culture and Employees Employees are the most valuable asset of any firms as they can make or break the organization (Coff, 1997). Management experts often argue that employees should be treated in a good way because their performance can bring business to the firm (Cascio, 2003). Organizational culture is just another way to motivate employees and to keep them on track (Egan. Et al. 2004). The identity given by organizational culture to the employees serves as a motivation and this in turn translates in the performance of the company. Organizational success is therefore closely linked to the culture of an organization (Barney, 1986). Conclusion Organizational culture is a collection of unwritten norms of an organization. It guides employees in their daily business related activities. There is no doubt that culture of an organization has a huge impact on the success (or failure) of that organization. The model of Hofstede’s is another model that explains the importance of organizational culture and explains how culture relates to organizational success. Culture of an organization also fulfils the need of employees because it provides them identity. Also it is a tool with which managers can use to manage employees effectively. Culture serves as a guideline for employees of the organization and this makes organizational culture greatly important. Bibliography Barney, J. 1986. Organizational Culture: Can It Be a Source of Sustained Competitive Advantage? The Academy of Management Review, vol. 1, no. 3, pp. 656-665 Cartwright, S. & Cooper, C. 1993. The Role of Culture Compatibility in Successful Organizational Marriage. The Academy of Management Executive (1993-2005), vol. 7, no. 2, pp. 57-70 Deal T. E. & Kennedy, A. A. 1982. 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