Toyota Organization and Culture

Chart-1:Toyota Motor Corporation Organization Chart*

(Before Crisis)

*Base on Toyota News Release 23 June 2006, Toyota announces Board of Directors and Organizational change.(Toyota Motor Corporation, 1995-2011)(1)

Toyota Organizational Structure

In Toyota, the importance decisions have to come from Toyota Motor Corporation in Japan. From Chart-1 we can see that TMC has a three-tier executive system with executive vice president, chief officer (senior managing director) and managing officers responsible for group of affair(2) It's a design that put key decision making in the hands of executive in Japan and ultimately impaired its ability to prevent the now-burgeoning safety problems before they reached the crisis state(3)

We can explain Toyota Organization as follow;

1) Centralization is a degree to which decision makings take place at upper levels of the organization. In Toyota, the executives at the top of the hierarchy retain the authority to make importance decision

2) Departmentalization Toyota uses many kind of departmentalization to group the job tasks. There are

- Functional Departmentalization Grouping activities by functions performed such as in the TMC Structure, there are accounting, purchasing, corporate planning and quality department, etc.

- Product Departmentalization Focuses attention on major product areas in the corporation. In TMC Structure, there are the Motor Sports Department, Lexus and Scion.

- Geographic Departmentalization Grouping activities on the basis of geography or territory. Such as Japan Sales department and overseas department in Toyota.

- Cross-functional teams are the team made up of various departments and that cross traditional department line. Such as module development team in Toyota that bring together product and production engineer.

3) Hierarchy Level Toyota has a tall structure level which means it has several layers of management between frontline employee and the top level. And it has a narrow span of control. There's 49 managing director to take care every department.

4) Mechanistic Organization Toyota is high a mechanistic organization because it has rigid hierarchical relationship, fixed duty, Formalized communication level, Centralized decision authority and taller structure.

5) Matrix Organization crosses a traditional function structure with a product structure. In Toyota, each employee has to report to not only the functional manager that they are working with, they have to report to the chief engineer who represent the interest of the customer too.

6) Boundaryless Organization is an organization whose design is not defined by, or limited to, boundaries imposed by a predefined structure. Toyota managed to create strategic alliances that eliminate some boundaries that exist between the typical manufacturers and suppliers. The level of cooperation Toyota has with its suppliers blur the lines between organization and move them one step closer to becoming a boundaryless organization.(3)(4)

From the studying of Toyota Organization Structure we can see that Toyota has facing the crisis because of its centralized power structure, authority is not generally delegate within company; all U.S. executives are assigned a Japanese boss to mentor them, and no Toyota executive in the United State is authorized to issue a recall. Most information flow is one-way, back to Japan where decision made.(6)

Picture 1 – Toyota Decision-making maze Retrieved from www.mcclatchydc.com on 13/05/2011(7)

On 9 March 2011, TMC announces that it will modify its management structures and implement executive, organizational and personal change in conjunction with the structural modifications. This modification is the effect from the crisis. The objectives are

1. Convey customer opinions and on-site information to management in timely manner.

2. Make a prompt management decisions base on on-site information

3. Make constant checks as to whether management decisions are acceptable to society.

From this change we can tell that Toyota has aware that its decision making is come too late. The change is included.

1. Streamlining of Board of Director: Reduce the number from 27 to 11

2. Scaling down of executive decision-making system: from three-tier