Human Resource Management at Work - Toyota and the Automotive Industry - Essay Example

Human resource management at work: Toyota and the automotive industry Introduction Organisations and businesses of the present time of intense globalisation are very much affected by internal and external factors. How they can deal with these factors determine their survival in the rapid changing world. They have to go global and operate internationally. This is the demand of the times. There are two approaches in the present observation of human resource management (HRM), and these are the traditional and the contemporary approaches. The traditional one focuses on the organisation and environmental factors, wherein activities and events are geared towards the advancement of the organisation. In this approach, there is not much focus on the human resource. The contemporary approach focuses on competencies and the employees’ commitment to the organisation. The principle behind the contemporary approach is that if the employees are happy, the organisation progresses too. Talents and capabilities of the employees are maximized, and are linked to the goals of the organisation. The contemporary approach is based on the principle that the people are the organisation’s greatest asset (Armstrong, 2006, p. 3). HRM provides effective management of the staff, retention, and turnover processes, and selection of employees that fit with both the organisational strategy and culture, and the cost effective utilisation of employees through investment in identified human capital. The first part of this paper focuses on theories and concepts, while the second part is concentrated on a particularly industry, the automotive industry, with Toyota as the particular organization battling the forces of organisational and external environment. The last part is a reflective diary which details this author’s personal experiences in the conduct of the research. 2. Theories and concepts of HRM On theories and concepts, we go to paradigms. There are two paradigms focusing on human resource management: the ‘universalist’ and the ‘contextual’ paradigms. The ‘universalist’ paradigm states that the purpose of the study of HRM is to improve the way that human resources are managed strategically within organisations. The aim is to improve organisational performance, as judged by its impact on the organisation’s corporate strategy (Tichy, Fombrun and Devanna, 1982; Huselid 1995, cited in Harris et al., 2003). Good HRM focuses on careful recruitment and selection methods, coupled with an effective training and development. Other contributing factors are a good communication process within the organisation, a well-defined job design, performance appraisal, and the motivation system for employees, which include performance standards, appraisal, etc. (Harris et al., 2003) The contextual paradigm searches unique methods in the management of human resource. The contextual paradigm is not helpful in regions like Europe, where significant HR legislation and policy is enacted at European Union level (e.g. freedom of movement, employment and remuneration, equal treatment) as well as those of particular countries or sectors (Sparrow and Hilltrop; Brewster et al, 1996, cited in Harris et al, 2003). Theories in HRM have been explained to us by a number of scholars. Theories on work include McGregor’s Theory X and Theory Y which explained the organisational change in the context of workers’ behavior in the workplace. Theory X assumes workers’ dislike for job or work: workers regard job as distasteful. Managers in companies that accept Theory X build a top-heavy organization with many levels of managers who are planning, deciding, and policing what everyone is doing (Fournies, 1999, p. 33); work was regarded as an obligation, or a punishment (Firth, 2002, p. 16). Employees would work for the monetary reward and the higher the better. With the way people felt about work, the workplace was somewhat not conducive for creativity and advancement. On the other hand, Theory Y assumes that when people are motivated, they accomplish goals. Workers become productive when they are motivated: to be a part of the team, to be a part-owner of the organization, and to be creative in their work. Theory Y is treating employees as if they make a difference to the company because they will really make a difference to that company. 2.1 Organisational knowledge In the present age of globalisation, an organisation can have competitive advantage through its people having more knowledge, or what is known as ‘people-embodied knowhow’ (Rodriguez and de Pablos, 2002, p. 174). Simply said, it is intellectual capital. Tangible assets no longer provide concrete competitive advantage. Firms focus on what people know and invest much on intellectual capital. One theory of organisational knowledge is known as the resource-based view (RBV). It examines the manner in which ‘organisational resources are applied, the causes which determine the attainment of a sustainable competitive advantage, and the nature of rents generated by organisational resources’ (Rodriguez and de Pablos, 2002, p. 174). Based on this theory, the firm is viewed as the accumulation of unique and diverse resources. From experience and constant contact with customers, employees, and competitors, the organisation forms a new database of information, data and knowledge. The resource-based view states that each organisation is a collection of unique resources and capabilities. Another theory is the industrial organisation (I/O) model of strategy, or model of above-average returns, which states that the firm should focus on the external environment in order to gain competitive advantage. This theory, which became popular during the 1960s through the 1980s, states that organisations must focus on the external environment to minimise pressure and avoid problems. (Hitt et al., 2009, p. 13) The I/O and RBV models were first formulated by University of London Professor of Economics Edith Penrose. Penrose states that firms are heterogeneous and there is money to be made from exploiting the differences. RBV assumes that each organisation forms each own data base, a collection of unique resources and capabilities from customers, employees, and competitors. This uniqueness is the basis for a firm’s strategy. Resources of an organisation should have value, rare, cannot just be substituted or should not just be an imitation of other organisation’s resources. 2.2 Tacit and explicit knowledge Knowledge is usually understood as theoretical knowledge, practical knowledge, experience, and skills. Tacit knowledge is a kind of knowledge in which an individual may not be aware of, or something which is difficult to explain in writing (Nelson and Winter 1982, cited in Fong et al., 2007, p. 40). But there is also explicit knowledge which is tangible and explainable orally or in writing. Knowledge management in the context of the physical place of an organisation draws one’s attention to the philosophy of ba, a concept originally proposed by the Japanese philosopher Kitaro Nishida (cited in Nonaka and Konno, 2008, p. 40). Knowledge is embedded in ba, which is acquired through experience. When knowledge is separated from ba, it becomes information. Organisations are involved in the accumulation of knowledge, data and information, which form part of their unique resources that can be used for their survival. 2.3 Needs assessment Needs assessment plays a major role in HRM functions and its outcomes help shape the success of the organisation’s objectives. A well-motivated HRM conducts regular and highly-motivated needs assessment that collects information, evaluates employees and management, and the entire organisation can look forward to a bright and safe future. Needs assessment covers these important functions of HRM: 1.) Knowing the problems of the employees, the work area, and the changes going on. Knowing the problems is first preceded with determining if there is really a problem. There might be changes in the daily operations being detected by field people. 2.) Seeking and studying possible remedies for the problems and ongoing changes in the organisation. The changes occur as a result of various factors such as technology, new products, and competition in the market. 3.) Collecting data for the improvement of human resource management. These are being carried on and accomplished by field personnel, and the data have to be assessed or evaluated by HRM people, the result of which should be reported to the managers or higher echelons of the organisation for recommendation and action. 4.) Surveying the needs and wants of employees, the rank and file of the organization, and asking for suggestions for improvement and even prevention of possible problems in the organisation. When a manager sees that the people and the system they work with are no longer answering to the needs of the new demands of the time, he can start for a reassessment of the situation and call for training of his/her people. Needs Assessment activity gathers information, and subsequently assess, calculate, and inform or report all the data gathered so that the manager can arrive at a right decision and make the necessary changes for employees to follow and adjust. (Beaumont, 1993, p. 74) 2.4 Performance Appraisal Appraising individual employees is one aspect of needs assessment. Beaumont (1993, p. 74) argued that ‘the grounds (i.e. criteria) on which an employee is appraised should reflect the larger competitive strategy of the organization’. One of the primary objectives of employee appraisal is to improve the performance of the employee. Some other benefits include: 1.) Generation of information for human resource planning, and 1.) Communication and understanding between employees and supervision. (Beaumont, 1993, p. 75) 2.5 Performance Standards Performance standards may be in line with employee appraisal but this is more on determining the results of the many programs of the organisation. Performance standards are used ‘to describe the results that the organization expects employees to produce for each function included in a job description’ (Bogardus, 2004, p. 197). Job descriptions are vital in determining the functions of employees. They point to each and every job in the organisation. In line with performance, there are job objectives which use job description as the preferred method of communicating job duties and responsibilities to employees. Companies use job descriptions to tell their employees what they expect of them in their assigned jobs. However, job descriptions place limitations on the ability of organisations to respond rapidly to changing business conditions. 3. Focus on the automotive industry The sector that this paper wants to focus on is the automotive sector. The automotive industry has been tremendously affected by the recent worldwide economic meltdown that some companies have no recourse but to close down, while others, particularly those based in the United States, have asked government support or bailout. Toyota is the automotive industry’s leading automaker. It has passed the test of time – recessions, controversies, economic difficulties, etc. Toyota has been the subject of public scrutiny and controversy lately because of one of its hybrid cars, the Toyota Prius, which has been the subject of millions of recall due to complaints from drivers and valued customers regarding brake failure and sudden acceleration of the car, which has resulted into accidents and even deaths. Toyota management and HRM are unique in the sense that it has a different style of recruitment, selection, and management. It started from its humble beginnings in Japan. In its beginnings, Toyota introduced kaizen and independence to its employees and managers. It has allowed its workforce to be independent with less guidance from supervisors who act not as bosses but as mentors. Toyota integrates the process design and business functions effectively. Supervisors are chosen from among the employees. The chief engineer or leader has broad expertise over a particular department. Employees are better trained inside the company and do not get much training or expertise from outside source. They train their own employees, and do not get trainees from the university. (Grubb and Lamb, 2000, p. 58) The Japanese way of manufacturing cars at Toyota has been an effective way, ahead of the European and American concepts of production. Toyota has been doing this for the past several decades. Toyota is one of the pioneers in using the concept of kaizen and kanban, Japanese terms which have become common terms in the world of change management and improvement in the workplace. The concept has become a byword in innovation and modification and has been introduced in educational and learning institutions because of its effectiveness in countering the forces of modernisation. Kaizen is not only used in car manufacturing; it is applied in other industries because of its effectiveness in continual improvement. Improvement that is continuous and gradually introduced would mean kaizen. Kanban also would mean the traditional way of introducing the processes in the production wherein some steps are changed or modified to provide more meaningful steps, and avoid unnecessary functions in the production process. (Lynch, 2008, p. 773) Toyota has a unique brand of management and leadership that started with a root, a seed, which was passed on to descendants and followers. It started with a vision of one man, Mr. Kiichiro Toyoda, a mechanic who ‘made’ small cars. In the early 1950s, Toyota was no ordinary car company, manufacturing vehicles with an average of 18,000 vehicles per annum. Toyota introduced the Toyota Production System which ‘originated as a means of achieving mass production efficiencies with small production volumes’ (Toyota Annual Report and Accounts 1998, quoted in Lynch 2008, p. 772). Toyota expanded to become export-oriented and began to open manufacturing plants in many countries including the United States, operating in the same strategy. Toyota employed a strategy by operating a marketing company to sell Toyota products. Another strategy was the setting up of dealer networks, cheap financing for customers, and a strong dedicated salesforce. Export of Toyota cars and products was begun and by the 1970s 40% of all production was being sold outside Japan, especially in the US. (Lynch 2008, p. 772) Toyota’s HRM strategy allowed its workforce to work independently. One of the innovations that made the company unique from the rest of Japanese companies is that it allowed its employees and effective salesforce to work almost independently, but with the guidance of their supervisors who served not as bosses but as supervisors and mentors. The opportunity was tapped right at the very beginning when an effective manager and a loyal salesforce pushed through the market. Above all else, stakeholders’ expectations are met by Toyota’s continued progress and increased profit. 4. Reflective diary The personal lessons I learned from going and carrying this task have been varied though it seemed how simple the tasks might be. I just thought it was that simple. Researching for me takes a few extra efforts of my time since I just go to the library, scan on some books and journals, or I just browse over the internet and read whatever is there that could add to my study. However, this one is different. Human resource management is not as simple as it is; it is a broad subject that covers the entire spectrum of management in organisations. Organisations now are global businesses operating internationally. They have no recourse but to go on internationally because that is how to compete successfully in this present age. Since this is a broad subject, my time was not limited to scanning a few pages. There came a time that I was challenged – to go on or not to go on; meaning I came into a point that I had to take a few notes and had to stop, simply because once I touched a simple theory or idea, another topic had to be dealt with or researched anew that I had no recourse but to go on. That would take more time to my other subjects. Challenges, however, are part of my studies. They are my motivating factors that have made me go on as a student in the global environment. The subject of automotive industry is another challenging part. I love cars and I’ve always loved the way Toyota has penetrated the export market. Toyota is an exceptional company because of the way they deal with problems and controversies. One of these is the Prius problem. It really tested the top management of Toyota when the president went as far as the U.S. congress to testify and to assure the American public that the company was trying its best to correct the faults of their product. The way the Toyota management handled the problem is a challenge on my part, someday when I would be able to manage a big a company as big as Toyota. References Armstrong, M., 2006. A handbook of human resource management practice. London: Kogan Page Limited. p. 3. Beaumont, P., 1993. Human Resource Management: Key Concepts and Skills, SAGE, ISBN 080398815X, 9780803988156. pp. 74-5. Bogardus, A., 2004. Human Resources Jumpstart. USA: John Wiley and Sons. p. 197. Firth, D., 2002. Life and Work Express. United Kingdom: Capstone Publishing. p. 16. Fong, P. et al., 2007. Dynamic knowledge creation through value management teams. Journal of Management in Engineering, Vol. 23, No. 1, January 1, 2007. DOI: 10.1061/(ASCE)0742-597X(2007)23:1(40). Fournies, F., 1999. Coaching for Improved Work Performance. New York: McGraw-Hill. p. 33. Harris, H., Brewster, C., and Sparrow, P., 2003. International Human Resource Management. London: Chartered Institute of Personnel and Development. Hitt, M., Ireland, R., and Hoskisson, R., 2009. Strategic management: Concepts and cases. OH, USA: South-Western Cengage Learning. p. 13. Lynch, R., 2008. Global Automotive Vehicle - Strategy in a Mature Market and Toyota: What is its Strategy for World Leadership. In Strategic Management, 5th edition (Financial Times/ Prentice Hall), pp. 772-3. Nonaka, I. and Noboru Konno, 2008. The concept of “ba”: building a foundation for knowledge creation. California Management Review, Vo. 40, No. 3, Spring 2008. p. 40. Rodriguez, J. and Ordonez de Pablos, P., 2002. Strategic human resource management: an organisational learning perspective. International Journal of Human Resources Development and Management, Vol. 2, Numbers 3-4/2002, p. 174. Read More