The Toyota Way 2001: organizational culture transformation and competitive advantage

Toyota Organizational Behavior

Exploring the Toyota Culture and Dynamics of Organizational Behavior

The transformation of the Toyota culture and its impact on the organizations' behavior is to a large extent responsible for the company's success globally. In the U.S. alone Toyota is challenging General Motors for market share leadership, and is also the dominant provider of hybrid vehicles. These global successes requires a highly synchronized level of performance across manufacturing, supply chain, procurement, pricing, marketing and service, all integrated together through an innovative Human Resources initiative titled the Toyota Way 2001, launched in April, 2001. The Toyota Way 2001 was specifically created to serve as a foundation for the significant change from a human resources standpoint the company realized they would need to make in order to remain competitive in markets they were already successful in, and rely on human resources as the catalyst and foundation for penetration into new markets. The Toyota Way 2001 is shown from a conceptual perspective in Figure 1.

Figure 1: The Toyota Way 2001

Source: (Environmental and Social Report, 2005)

Toyota Works to Turn Corporate Culture Into a Competitive Advantage

Throughout the 1990s and the first years of the 21st century, Toyota had a very strong focus on how to create lean production facilities globally. Lean manufacturing, lean procurement and the Toyota brand nearly became synonymous with one another throughout the last fifteen years of the company's life according to Masaki (2006). The development of the Toyota Production System TPS), a series of best practices for bringing new suppliers onboard to supply Toyota's production centers provided the impetus for how Toyota would in turn revolutionize their human resources processes. The TPS had actually become a learning system, not merely a supply chain management and optimization approach. Toyota senior management reasoned that if outside suppliers could be coordinated through the TPS, that internal employees could be organized to create an even stronger learning and agile organization that could be highly competitive in responding to market needs. As a result of this insight from the success of the TPS, the Toyota Way 2001 (as shown in Figure 1) began to completely change the culture of what had been a highly hierarchical, formal, and often emotionless type of corporate culture. The transformation that began with organization units becoming more distributed away from their centralized legacy structure also opened up the perspective of Toyota from being solely interested corporate-wide consensus and placed more value on a diversified perspective. These two foundational elements of the change in organizational structure turned out to be well-timed for the company's global launch into the hybrid vehicles market, and the significant new product introductions required to grow market share in the U.S. And Europe, the shift in culture and structure were critical for the continued growth of the company.

As Toyota has always been a highly analytical company, the shift in cultural values also included placing more emphasis on creative thought and learning by doing. Most importantly, all these structural changes began to change the corporate culture to stress more local action over adhering to theoretical and often conceptual strategic concepts. After all these changes in corporate structure were completed, the managerial strategy became highly participative, rewarding efforts towards team objectives, and the development of a flat organizational structure. The cumulative effects of the change in structure drive a major change in the entire organizational structure globally and as a result, Toyota is much more agile, focused on local action and strategies based on participative decision making sessions. The role of corporate headquarters in the past had been to ensure adherence to a very high level of conformity with strategic direction and concepts across all areas of the company, yet today the headquarters acts as more as a learning clearinghouse of best practices and less of the authoritarian role of managing each tactic or strategy globally.

As a result of the Toyota Way 2001 being very successful re-orienting the corporate structure and culture to higher levels of agility, greater support for creativity, and a more attuned focus to being locally strong competitively over being analytically in tune with headquarters, Toyota has launched their Global Vision 2010, a leadership initiative seen as critical to their long-term organizational strategies. Figure 2, Guiding Principles at Toyota, shows the conceptual model of this initiative in the context of Toyota's strategic human resources plan.

Figure 2: The Toyota Way 2001

Source: (Toyota Code of Conduct, 2007)

Conclusion

Toyota's transformation from being highly hierarchical to embracing creativity, stressing localized action, and completely redefining the culture of the company has had a corresponding effect on the structure of the company. Today Toyota is completing in more global markets, with greater agility and localized focus as a result of the many modifications made to their organizational values and culture through Toyota Way 2001. The future direction of Toyota is to stress the role of Toyota Way 2010 as a strategy to provide even greater levels of process integration across the company while at the same time focusing on turning the entire organization into a learning eco-system. Toyota's senior management sees the dominance the TPS has provided, especially in hybrid auto components and products, and looks to capitalize on this with its global workforce as the company moves into other geographic and consumer markets.