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Process Improvement Essay

ABSTRACT

This document will be evaluating an existing process within Toyota during the time of their accelerator crisis. A problem statement will be defined around the process of internal communication of concerns and ideas between foreign-based Toyota employees and the authoritative management of Toyota based in Japan.

PROBLEM ANALYSIS OF SELECTED PROCESS

Problem framing is a very important, but easily overlooked, part of decision-making. Framing a problem can have a heavy influence on the decisions that are made. It isn’t enough to frame the problem; it should be framed with the solution in mind. This helps to keep the end goal of the decision-making process in mind so that the correct choices are made. In the case of Toyota, at the highest level, they had a major problem with some of their products involving unintended acceleration and their handling of customer reports of the problem led to a whole mess of other problems.

So from the outside looking in, it seems that many processes internal to Toyota had room for improvement. Although there are many different business sections of Toyota with their own respective problems such as customer service, public relations, manufacturing, the problem I would like analyze and offer improvement on is internal communication process between management and foreign employees and how the breakdown in this process affected some of the business decisions made by Toyota’s upper management.

“As Toyota grew into a global powerhouse in the auto industry, the organizational structure that emerged was a centralized design …”that put key decision-making in the hands of executives in Japan…” Some believed that Toyota’s structure in the U.S. ultimately impaired its ability to prevent the safety problems before they reached the crisis” (Greto, Schotter & Teagarden, 2010, pg. 7-8). A quality tool or method used to help with the identification and prioritization of the potential causes of quality problems in a process is cause-and-effect analysis.

In a way, this is a reverse engineering method used to identify the elements of a specific quality problem and to identify the causes so that it can be corrected. The problem wasn’t the unintended acceleration of certain vehicles; the problem was the internal management decision-making that impacted the engineering of those vehicles which created the engineering problem.

For some background information, the defining and founding philosophy of Toyota, the Toyota Way, has been around for a long time but it wasn’t until the late 1980s in which they began production of their vehicles in the U.S. Specifically the problem of ideas from U.S.-based employees has been largely ignored for almost 20 years when it comes to key engineering or financial-based decisions. “Despite the global sales volume gain, Toyota reported revenues of US $211 billion for 2009, a decrease of 19% for the previous year” (Greto, Schotter & Teagarden, 2010, pg. 2). Even though Toyota has been making large profits throughout the past 20 years, they experienced a decrease in 2009 and part of this was related to the ambitious initiatives and business decisions made by Toyota’s upper management.

“Japan is notoriously consensus oriented, and companies have a strong tendency to mediate differences among individuals rather than accentuate them” (Porter, 1996, pg. 63). Japanese culture and Toyota’s centralized decision-making structure made it difficult for U.S. based employees to offer ideas, suggestions for improvements, or to elevate critical problems to upper management in Japan. Toyota’s upper management, in their minds, let the U.S. employees do what they do best, which is supposedly marketing and selling. The process used by Toyota to communicate foreign employees’ ideas to upper management was heard, but not listened to. Even the process of internal communication between management had its breakdowns because of the perception by family-oriented managers of nonfamily managers in that nonfamily members didn’t have such thoughts as safety and quality in the forefront of their minds. Overall, the communication process seemed to be that ideas were submitted from employees, whether by Japanese or foreign employees, to management and ideas were reviewed and pushed up the management chain when it was appropriate.

However, ideas that might have some bearing on engineering, manufacturing or financing were largely ignored when the source of the ideas were from U.S.-based employees and this violated the Toyota Way. To add to the complexity, the process for communicating ideas became more convoluted depending on the audience, nonfamily or family-based managers. To sum this up into a problem statement: “Toyota has violated their founding philosophy of employee empowerment, especially for non-Japanese employees, and continues to make important business decisions without any regard to concerns or ideas from foreign employees when appropriate. Employees may have ideas that could be used in the decision-making process to achieve better quality solutions. Toyota needs a better mechanism or improvement to this internal communication process to capture the knowledge and ideas of all employees and to share these ideas across the organization. All in all, it’s to improve the internal communication process between employees and management in order to support the idea of continuous improvement and quality.”

CONTEXT OF SELECTED PROCESS FOR IMPROVEMENT

“The _Toyota Way_ mandates planning for the long term; highlighting problems instead of hiding them; encouraging team work with colleagues and suppliers; and, perhaps most importantly, instilling a self-critical culture that fosters continuous and unrelenting improvement” (Greto, Schotter & Teagarden, 2010, pg. 3). Two cores ideas from the statement above are the idea of team work and most importantly employee empowerment. These two values are what made Toyota into a successful global corporation during their fast rise in the 1980s. Employees were encouraged to offer ideas for improvement for any process within the organization and this helped with continuing the idea of continuous improvement. An important part of making business decisions is having real-time and critical information.

The selected process for improvement: improving the communication of ideas and concerns and the sharing of foreign employees’ ideas to Toyota’s Japanese management team needs to be addressed immediately. The process selected for improvement is the process used to capture the ideas of all employees, U.S.-based included, and to have these ideas be properly represented and presented to management for review in real-time. “You know the joke that every bank branch has a president – well, every Toyota facility has a president, and one can’t tell another what to do” (Greto, Schotter & Teagarden, 2010, pg. 8). This statement touches the surface of why the internal management communication process needs improvement at Toyota. The way the process is currently being represented in Toyota’s organization is a complete violation of their founding philosophy.

During the 2000s, Toyota pushed for a lot of initiatives that in hindsight were either short-term profit driven or too ambitious. For example, “despite the savings of more than US $10 billion over the six years since CC21’s inception, Watanabe set out to achieve even more cost savings through the new “VI” (Value Innovation) strategy” (Greto, Schotter & Teagarden, 2010, pg. 5). This was a business decision made to further drive up profits despite the respectable amount of savings already made financially.

If the knowledge, ideas and concerns of employees were properly captured and communicated to management, it could have prevented some of the poor business decision-making made and the impact of these decisions on engineering and manufacturing. Two impacts of the poor decision-making was the decision to become leaner with the manufacturing process and overstretching existing resources in trying to supplant GM as number on in the automobile industry. Toyota’s has employees in many different markets who most likely had concerns regarding these decisions or ideas on how to improve the ideas and _communicated_ these ideas but these ideas weren’t being heard in time or heard at all by management.

To put this all into context, the process for communicating ideas and concerns internally is impacted by the culture and internal structure of Toyota. These are both tough things to change but the process used to capture and represent ideas to management is something easy to improve.

IMPLICATIONS OF THE PROCESS

If the current internal communication process continues as is, there will continue to be a breakdown in the communication of potentially important ideas and concerns from employees to management. If employees feel as if their input isn’t listened to or even heard, they will become apathetic or not even bother trying to communicate important ideas or concerns. As a result, this can lead to the cycle of poor business decisions being made resulting in more damage to the company. Even worse, this will continue to cause Toyota to stray away from the core values of the Toyota Way that made them a successful global corporation.

Already what has happened as a result of the ignoring of ideas and making business decisions with only the goal of short-term profits in mind is that Toyota during the oil sludge crisis had to pay millions of dollars as a result of class action lawsuits and took a hit to their business image. Fast forward to the accelerator crisis, Toyota experienced losing $2 billion dollars during the recall, had to pay a $16.4 million dollar civil penalty under U.S. law, experienced a customer relations nightmare and even had some of their car models dropped from Consumer Reports. The dollar amount lost due to the alienation of customers, lack of accountability at first by Toyota, and corporate reputation and image hit is immeasurable.

Implementing some mechanism to improve the communication process between employees and management and even management can be improved with the use of something such as a knowledge management system. “Effective knowledge management tools can help firms reduce internal costs of maintaining electronic filing systems and reduce the administrative expense of locating documents.

Second, just as efficiency can improve profitability, leverage can have the same effect where knowledge transfer enhances the quality of work performance, and therefore, its value. In this context, leverage is the ability to delegate work to the most cost-effective resource. The transfer of knowledge is, in fact, the essence of knowledge management” (Martin, 2002, pg. 1). Although it is a large internal expense, the benefits of a KM system would have a great effect on the general business results and business relationships of Toyota with its employees, management and even their supply chain.

POTENTIAL OUTCOMES OF IMPROVING THE PROCESS

Improving the current internal communication process of ideas and concern helps to improve employee relations between management and their reports. It helps to re-establish a culture of knowledge sharing and representing that captured knowledge in such a way that it can help to improve the business decision-making by upper management. Any important business decisions made by upper management have a direct impact on the shareholders. So any improvement in the process that results in better business decisions being made will have a direct positive impact for the shareholders.

The current decision-making and straying away from the founding principles of the Toyota Way has damaged the company and continuing down this path will only make the future worse for Toyota. So having an internal mechanism to capture ideas and improve communication such as a KM system can only improve the situation. Employees would feel like their ideas are being heard and will continue to offer suggestions for continual improvement.

An improvement in communication can help to break down the false perceptions that family-oriented managers have of nonfamily managers. For example, a family-based manager might come across an idea from an unexpected source, a nonfamily manager, and come to respect that person for their knowledge. In a way, this could help to improve the Japanese culture way of making decisions internally.

Toyota is almost in the top of their market, so they are their own worst enemy when it comes to being competitive. So an improvement in their internal decision-making around all important financial, engineering and manufacturing decisions will only help to sustain and further their current competitive edge. Sometimes an organization has to make a large internal expense in order to position themselves differently from their competitors. “Strategic positioning means performing _different_ activities from rivals’ or performing similar activities in _different_ ways” (Porter, 1996, pg. 62). So collecting ideas internally and using them to make better business decisions will help Toyota to strategically position themselves even further away from their competition.

SUMMARY

Overall, Toyota is its own worst enemy with the current decision-making process they have in place internally. Even though the centralized decision-making structure is what Toyota currently has in place, the decision-making needs to take into account employee input, whether foreign or not. Employee input has been a cornerstone of the Toyota Way and Toyota has strayed from this founding principle. The implications of continuing down this path will result in more crises which in turn results in loss business, damaged business reputation, lawsuits and losing the competitive edge. Improving this process will result in better employee relations; establish a knowledge sharing culture which is needed for an environment that is striving for continual improvement and better business decisions being made.

REFERENCES

Greto, M., Schotter, A., & Teagarden, M. (2010). Toyota: The accelerator crisis. Thunderbird School of Global Management.

Martin, K. (2002). Features – “Show Me the Money” – Measuring the Return on Knowledge Management. LLRX. Retrieved from http://www.llrx.com/features/kmroi.htm

Porter, M. E. (1996). What is strategy? _Harvard Business Review, 74_(6), 61-78.

Russell, R.S., & Taylor, B.W. (2011). _Operations management: Creating value along the supply chain_ (7th ed.)_._ Hoboken, NJ: John Wiley & Sons. ISBN: 9780470525906


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