Executive Summary
Toyota firm has overtaken the general motor cooperation in sales, and it has become the first automotive manufacturer globally. The firm has managed to expand its operation due to its customer care and quality. However, it faced a challenge in 2007 due to its organizational management structure. The firm uses a centralized system that has various issues, such as inflexibility in decision-making, limited communication, bureaucratic leadership, lack of employee loyalty and stifled creativity. The report uses previous sources to find supportive data for the topic of study. In order to address identified issues, the review recommends the firm obtain a decentralized managerial system. The report includes a description of project objectives, change objectives and principles, as well as final recommendations. Toyota had many issues due to the centralized systems; hence, switching to a decentralized system is recommended. A decentralized system is a type of organizational structure that delegates its decision-making to low-level employees and managers. It provides more authority and power to lower-level staff to make decisions. To achieve that, Toyota is recommended to follow an innovation strategy and will have to lose structures of hierarchy management, policy, and formalization. Additionally, the company needs to relieve the senior management from its responsibility of decision-making for all the subsidiaries. These changes in the management structure will allow the company to create a more flexible decision-making system. It is also important that this shift will help in overcoming the existing bureaucratic obstacles within the company. A decentralized management system also provides better communication, which increases the efficiency of decision-making and implementation. Finally, decentralized management allows a balance of control within the organization and innovative behavior.
Introduction
The purpose of the report is to investigate structural issues that Toyota company has and create a change plan on their basis. In particular, within the framework of this report, the issues existing in the company and their impact on the company’s operations are considered, as well as measures to improve efficiency through a change in the structure are proposed. The report includes a description of project objectives, change objectives and principles, as well as final recommendations.
Project Objectives
The project objective is to investigate the impact of the centralized system in Toyota. Toyota’s organizational structure makes the management large and complex, making it a challenge for easily flow information. For instance, the Asia branch is responsible for engineering and manufacturing and possesses the core operations functions; if there is an issue, the manager must undergo the hierarchy system (Gentile, Torres, and Paul, 2020, p. 1090). The use report collects and analyzes data from available secondary sources as an approach to investigating the problem and identifying final recommendations.
Change Objectives and Principles
The change process will achieve better information sharing, more efficient decision-making, as well as better stakeholder engagement. The core principles that underpin the change plan include timeliness and inclusiveness. It is necessary to consider such an ethical issue as a conflict of interest; the change plan will address it through a balanced collection and analysis of information.
Model of Strategic Change
The change model that is being adopted is the change of management structure. Toyota uses a centralized system in its organizational structure, leading to operational and management issues. In 2008. The firm chose 30 directors to work as the board of directors, including senior managing directors and the management board (Chikudate and Alpaslan, 2018, p. 34). They were perceived as the highest authority and were responsible for supervision and communication with the staff members that were under them to facilitate the day-to-day activities. The arrangement was that the senior managers could connect the operational and management unit in achieving and solving departmental issues. The organizational structure also included an international advisory board that comprised overseeing advisors who aimed to advise the management from a global perceptive (Choi and Lee, 2018, p. 9). They were responsible for approximately 238 subsidiaries in the automotive segment, all viewed as a single business entity.
The influence of this is that no subsidiary is viewed as a separate management division, whether the subsidiary is domestic or global. However, Toyota has set its regional headquarters in Asia, Europe, and North America, which are responsible for the business entity. Toyota’s management system facilitates the managing officers to monitor and supervise the operations which they report to the senior managing directors, who are then to review and provide feedback (Sun and Shi, 2019, p. 14). Due to such issues of the centralized system, Toyota failed to have the ability to respond to the crisis when it is first brought up.
Change Plan Elements
Toyota’s centralized organizational structure delays time to respond to fuelling criticism that Toyota is unresponsive to its customers. The global hierarchy of Toyota has its main headquarters in Japan, which is concerned with undertaking major decisions (Monden & Talbot, 2019, p. 8). The individual subsidiaries have no authority to communicate with each other as the structure discourages indirect horizontal communication. Indirect horizontal communication is communication between levels of the department. Toyota’s centralized system is set in a way that Subsidiary A has no communication with Subsidiary B.
The organizational structure is set in a strict hierarchical principle that promotes secrecy in which only the people at the top know what goes on. Toyota practices bureaucracy as the authority delegates tasks according to the regulations and rules (Liker, 2019, p. 373). The senior managers hold the authority to make policies that bind every subsidiary. The structure gives little power to the subordinate managers in exercising any decision-making power, as the concept of legitimacy lies within the senior managers. Firstly, it does not allow additional competency within the subsidiaries (Liker, 2019, p. 374). When customers complain about the various issues, the subordinate managers have no authority in rectifying the issue until they are instructed by the top management. Secondly, bureaucracy does not improve productivity. It creates many regulations and policies that the workers need to follow, limiting the potentiality of employees.
Thus, the main elements in the change plan are changes affecting the management structure. In particular, this applies to such elements as positions, communication, rules and regulations, people, and processes. Changes in these elements will allow you to build more effective horizontal and vertical communication. Expanding the decision-making power of subordinates, as well as simplifying rules and processes, will allow the company to streamline all operations.
Rationale for the Change
The centralized system in Toyota has led to an imbalance and shift of great authority and control. Toyota centralized its operation in Japan to maximize its results and decision-making structure in marketing, communication, design, and development. However, the system lacks output and behavior control. The bureaucratic control of decision-making authority delegated to the employees limits their actions of operation through the set rules, records, and procedures. In addition, Toyota’s organizational structure discourages subsidiary managers from knowing how other departments are operating, and they only had to take their grievances to the senior managers. The delayed time to respond can be based on the challenges of the remote control, where the senior management is under tremendous pressure to formulate decisions for the crisis. The risks for the change process are related to the lack of the capacity to oversee the implementation due to the company’s extensive management structure (Chikudate and Alpaslan, 2018). Limitations in decision-making authority, complex bureaucracy, and inefficient communication can be barriers to change.
Appropriate measures to monitor progress
To monitor the change, the firm will use management by objective indicator. It is a model that aims to improve the firm’s performance by clearly defining its objectives that are agreed by the employees and management. The model facilitates goal settings and action plans and encourages commitment and participation among the employees. It will monitor progress by comparing the actual performance and achievements defined by the objective. In our case, our objectives are to ensure a less bureaucratic leadership, a balance and shift of great authority and control, and consumer satisfaction.
Final Recommendations
For Toyota to avoid such a crisis, it is recommended that the firm adopt a decentralized management approach. An organizational structure known as a decentralized system assigns decision-making authority to managers and lower-level staff. It increases the authority and decision-making power of lower-level employees (Ma et al., 2019, P. 5836). Because employees respond more quickly to solve problems and make decisions in order to keep the situation under control, there is more control and a lot of bottom flow of ideas, decisions, and opinions regarding the firm’s operations in this structure. To adopt this, Toyota will be required to follow an innovation strategy and will have to lose structures of hierarchy management, policy, and formalization.
From a management perceptive, decentralized management will require relieving the senior management from its responsibility of decision-making for all the subsidiaries. As a result, it will expand its decision-making to employees and subordinate members, which will facilitate growth, a high level of decisions, better control of operations, flexibility, ease of expansion, work specialization, and human resource development. This is because decentralization management takes some of the responsibilities from the senior management and transfers them to the lower levels of the organization.
When managers allow others to decide the firm’s daily operations, it allows the superior management to spend resources and time on more serious issues such as focusing on operational strategies, making high-level decisions, meeting important consumers, and planning for developing the firm. For this reason, an employee can make a decision and react quickly to a situation that requires quick actions and decisions, making a difference in customer service. For instance, in the Toyota crisis, the employees and subordinate managers did not have the authority to deal with the situation as they had to wait for the senior manager’s decisions (Choi and Lee, 2018, p. 11). The customers felt neglected as the firm took time to handle the situation. The decentralized management eliminates this as it allows employees to perform their duties under maximum potential, which also promotes the sense of competition, enabling growth.
By Toyota adopting the decentralized organizational structure, there will be flexibility within the management enabling quick decision making (Sun and Shi, 2019, p. 15). For instance, if the North American subsidiary had an issue, it should be able to handle its own crisis as it is in a better situation of identifying the relative solutions. For this reason, Toyota should consider appointing chief executives who are responsible for the regional functionality organization. However, since this might be a dramatic move, the firm can take advantage of the already existing system where the subordinate managers have the authority to make decisions, but they will be required to report to the senior managers (Thummalapalli, 2019, p. 22). Toyota will be creating a flexible environment for lower-level employees and managers to interpret different conditions as it will allow them to make timely and suitable decisions that build competitive strategies.
In addition, Toyota adopting the decentralized management system enables the firm to eliminate related bureaucratic issues. In the decentralized structure, employees have the freedom to work and take actions based on their decisions in which they are held responsible for the actions within the firm, allowing them to be more cautious (Thummalapalli, 2019, p. 24). The disadvantage of bureaucracy is that only the top management knew what was going on within the firm. However, this is changed on the decentralized structure acting as a motiving factor. Every employee within the structure, from the top management to employees, shares the decision-making process making free flow for information and empowering the employees (Thummalapalli, 2019, p. 25). However, it still upholds different levels of autonomy and delegations that allow proper team working among the employees. For instance, there are decisions that the employees can not undertake as it is above their scope; this condition allows the managers and employees to work together towards achieving the firms’ goals.
In addition, the decentralized organization structure will eliminate bureaucratic management through the delegation and supervisor supporting system. In a decentralized system, the senior management monitors the subordinate manager and employee performance of the delegated task and responsibilities. The senior management provides a supportive relationship under this structure by sharing information and showing tangible cooperation and assistance. It allows creation a safe working environment as they are closer to the actual operations and can easily identify and solve employees’ security and safety concerns. According to Situmorang, Mukhtar and Yasin (2020, p. 14), in a decentralized system, the employees are 50% more efficient in terms of job satisfaction and 20% in job performance. It is a result of the manager and employee’s close relationship, which motivates the employees to be creative and demonstrate high performance. The structure empowers employees through developing initiative among the subordinates, which allows them to develop managerial talent facilitates effective marketing and quick decision making.
A decentralized system improves the skills of the employees by providing them with different tasks to perform independently. It also empowers them by allowing them to undertake independent and fast decisions, which is suitable as the subordinate managers are constantly in touch with the operations within the branches and are in direct contact with the customers. If the subordinate managers had the authority to deal with customers, they would feel empowered enhancing self-reliance and confidence among the employees.
Moreover, the decentralized organizational structure strengthens communication. The Toyota crisis was mainly a result of a lack of communication within the firm due to the centralized system. The broader scope of decentralized management is that the hierarchy is minimal, which increases the effectiveness of communication as there is a close relationship between the senior and subordinate management (Suh, 2019, p. 35). For instance, a decentralized system implies that there is a delegation of lower and middle subordinated in the decision making in everyday operations. The wide span of the management under this organizational structure enables the communication system to be more efficient as there is an intimate relationship between the subordinate and superior. It will also allow strengthening the communication channels within the global scope. For instance, in a decentralized system, during the reporting of safety issues, the senior management will not oversee the safety issues in all the regions. The new decentralized structure allows delegation of the task where the managers of the branches are in charge of their own reports. As a result, managers within the global regions will each have its report improving the channels of communication between regional operations.
Furthermore, decentralized management allows a balance of control within the organization and innovative behaviour. A decentralized system provides an opportunity for the employees at each level to develop their expertise and skills while the senior managers are aware of the capacity and actual potential, enabling them to have control over the operations. It also allows a balance of control as power, fiscal resources, and responsibilities are redistributed between the different organizational levels and the different regions. For instance, the senior managers can decide to transfer functionality to the front managers partially. By doing this, they can focus on other issues and functionality.
The decentralization structure can also balance control through horizontal diffusion. Horizontal diffusion is a movement of authority from the senior managers who are the central management to the supervision sector. Considering that Toyota has 238 branches with only 30 senior managers, it can be overwhelming for the senior managers to move their authority through the hierarchy (Chikudate and Alpaslan, 2018, p. 36). Horizontal decentralization is recommendable to Toyota management as it does not allow the senior managers to delegate some designs to the subordinate managers as they have a better understanding of the operations undergoing in the respective branches by doing so, considers the senior and subordinate managers as equal players and the operating system divide work and align strategies that overarch decisions among themselves enhancing a balance of control in the organization structure.
The centralized organizational structure resulted in the Toyota crisis. The centralized structure hindered informational sharing which contributed to miscommunication. The structure also delayed time to respond to fuelling criticism that Toyota was unresponsive to customers and encouraged bureaucracy. The bureaucracy caused employees’ incompetency and led to an imbalance and shift of great authority and control. Toyota should adopt a decentralized management structure. Managers and lower-level staff are given decision-making authority by the hierarchy. It gives lower-level employees additional decision-making authority and power. In this structure, there is more control and a lot of bottom flow of ideas, decisions, and comments. The structure will eliminate bureaucracy as it allows a balance of control as there is a redistribution of power, fiscal resources, and responsibilities. It will also facilitate flexibility within the management enabling quick decision making and open communication. Hence, Toyota should adopt a decentralized system to avoid another crisis.
References
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