Control Mechanisms at the Honda

Control Mechanisms at the Honda Motor Cor

The contemporaneous economic and business context is characterized by two features: a previous tremendous growth and today's financial crisis. Each situation has the commonality of increased competition and a need for highly well developed and implemented strategies that ensure the success of a respective organization. The approaches are multifaceted and address various topics, one of the most relevant ones being the control function within an organization. To best understand how the contemporaneous economic agents use control mechanisms, one should take the example of a notable company, such as Japanese automobile manufacturer Honda Motors Corp.

Honda Motor Corp. was established in 1948 in Tokyo and its main operations revolve around the manufacturing of cars, car parts, motorcycles, scooters, trucks, ATVs, personal watercrafts, lawn mowers and a wide variety of other gadgets. The company is the sixth largest automobile producer in the world, the third automobile producer in Japan (after Toyota and Nissan) and the number one motor maker on the globe. They employ an estimated 178,960 individuals and ended fiscal year 2008 with sales revenues of $121,228.6 million. Their stock is being traded on both Tokyo Stock Exchange and New York Stock Exchange and the company is rated number 147 in the Fortune 500 (Hoovers, 2009).

2. Control Mechanisms at Honda Motor Corp.

Honda Motor Corp. has recognized the importance of customer safety and satisfaction to their organizational success. Ergo, they strive to offer high levels of customer satisfaction, generally in response to the growing requirements of customers. In doing so, they have further increased their monitor and control process at all five organizational levels. "Responding to increasing customer demand, Honda will upgrade its quality control through enhancing the functions of and coordination among the development, purchasing, production, sales and service departments" (Honda Motor Corp 2008 Annual Report). This control mechanism is extremely complex and the fact that it operates on five organizational levels increases its chances of success, but makes its implementation rather challenging and its efficiency highly dependent on the managerial skills. At a development level, the Honda managers strive to integrate the latest technological advancements into their products. In terms of purchasing, they want to offer affordable prices for their customers, but they also want to purchase their commodities at competitive costs. Relative to production, they want to increase operational efficiency (larger output with less resource consumption). Relative to sales, Honda implements a wide array of marketing approaches, which focus on attracting the customer through promotional offers, communications, advertisements, and so on. Finally, in terms of services, the Honda managers strive to quickly and positively respond to additional requirements customers might have. These requirements may occur before, during or after the purchase stage.

The mechanism presented above is complex, but it fails to detail on the matter of Honda's human resource. In addressing this issue and increasing the control of the staff members, the Honda managers have developed and implemented the NH circle. The N. stands for now, new or next and the H. stands for Honda. "NH circles allow members to bring up any problem and provide a venue for discussing a wide range of subjects" (Mito, 1990). Otherwise put, it encourages open communication between employees themselves and employees and managers, all with the ultimate purpose of identifying any problems and proposing solutions to the found issues.

The two mechanisms so far presented deal with the internal control at Honda, but its leaders also desire to have some control over the external environment. In this order of ideas, they have set the basis of a strategic partnership with Rover. "The alliance between Rover and Honda has been a very long-lasting one that led to the resurrection pf Rover as a quality-car maker, and the effective entry of Honda into the European market" (Faulkner and de Ron, 2000). The authors of Cooperative Strategy emphasize that without each other, neither party would have been able to achieve what they have achieved together.

Finally, a fourth strategy of control is focused on ensuring that the processes undergone by Honda comply with all existent regulations. In this order of ideas, they request the assistance of specialized auditors, from both within and outside the institution. "To ensure objective control of the Company's management, outside directors and outside corporate auditors are appointed to the Board of Directors and the Board of Corporate Auditors, which are responsible for the supervision and auditing of the company. Honda has also introduced an operating officer system, aimed at strengthening both the execution of business operations at the regional and local levels and the supervision by the Board of Directors" (Honda Motor Corp. 2008 Annual Report).

A more comprehensive take on the four control mechanisms implemented by Honda can be achieved by looking at the following lines. They are a comparative analysis of the strategic approaches to control, revealing both positive and negative impacts of each mechanism, as well as the impacts they are likely to generate upon the four functions of management (planning, organizing, leading and controlling).

1. Quality control at five organizational levels

Positive: its complexity results in increased chances of simultaneous success at various levels

Negative: its complexity also results in a challenging implementation; foremost, its success depends directly on the managerial skills of the Honda leaders

Impact on managerial functions: increases their complexity and difficulty in implementing control in the meaning that all planning, organizing, leading and controlling functions must be simultaneously addressed at all five organizational levels; the chances of success are also increased

2. Employee relations

Positive: encourages fruitful working relations, which further increase the chances of identifying and resolving problems

Negative: its implementation may prove challenging and could even generate a reduction in the operational efficiency; it requires changes in the corporate culture

Impact on managerial functions: the complexity and difficulty of implementing the four functions of management further increase with the need of placing an increased attention on the new feature of employee relations.

3. Strategic partnerships

Positive: similar to the financial theory of portfolio diversification, a combined effort will increase the chances of success while reducing the negative impact of weak elements

Negative: increases the dependency on the strategic partner and ceasing the partnership might generate instability and other undesired effects