For Compliance of Organizational Behavior Assignment

Toyota Motor Corporation

Toyota Way of Life

Written by:

Ahmad Nugraha Bayu Mukti

09/296024/PEK/14630

MASTER OF MANAGEMENT PROGRAM

FACULTY OF ECONOMICS AND BUSINESS

GADJAH MADA UNIVERSITY

YOGYAKARTA

2010
1. Company Profile
a. History
Sakichi Toyoda was born in 1867 at shizuoka, Japan. Toyoda is known as industrialist and
invented a lot of devices. The most famous invention was the automatic power loom which used
Jidoka Principle. Jidoka principle, now used in Toyota Production System (TPS), means the system
stop working when problem occurred. Toyoda developed 5 Why’s concepts, ask why five times
when problems occur then evaluate and put something to prevent the problem recurring. This
concept can improve quality and reduce cost. Sakichi established Toyoda Automatic Loom Work in
1926 as the producer of a series manual and machine-powered looms.
Toyota history began from Kiichiro Toyoda, son of
Toyoda Automatic Loom Work Founder, traveled to
Europe and US in 1929 to investigate automobile
production and began researching gasoline-power
engines in 1930. Kiichiro encouraged Toyoda Automatic
Loom work to develop Automobile production in
Figure 1 Model AA Passenger Car
collaboration with Japan government in order to
compete with China government. In 1933, Toyoda Automatic Loom Work had enter the automobile
industry and the first engine created in 1934, type A, and used in the first model passenger car in
May 1935 and G1 truck in August 1935. The production of type AA began since 1936. This initial
product had resemblance in some point with Dodge Power Wagon and Chevrolet.
After the AA production, Kiichiro established Toyota Motor Co. in 1937 separately from Toyoda
Automatic Loom Work. This company used different name because he want to distinguish between
private life and work life, Toyota itself has better meaning than Toyoda, eight characters needed to
write Toyota in katakana and eight means lucky in Japanese tradition. Toyoda believe that this
name can make Toyota’s future brighter.
The descendants of Toyoda have long dominated in Toyota history, from Sakichi the company
president held by Kiichiro from 1941-1950, Soichiro held this position from 1982 until 1992.
Soichiro’s son, Akio Toyoda, became a chief of contender for the office of president afterward.
Toyoda family always has big power in managerial decision even now the family only have 2% of
stock (Extreme Toyota). Even at present the CEO is not come from Toyoda’s but their beliefs that
the next CEO will come from Toyoda’s. That is why Toyoda’s have big powerful in making important
and strategic decision.
b. Founder Philosophy create Organizational Culture
Organizational culture is a shared values and beliefs that underlie a company’s identity (Robert
Kreitner, Angelo Kinicki). Factors that affect organizational culture can be breakdown into two
categories which are Internal and External Factors. Internal Factors are factors come from the
company itself. These internal factors are Founder’s values and Senior Leaders’ vision and behavior.
Whereas the external factors come from outside the company are Industry and Business
Environment and National Culture. Toyota has deep philosophy formed by its founder and
developed by the leader after.
The founder philosophy is Company culture basis that form attitude of the company in
business. The founder philosophy has function as an unifier and rooted in all over Toyota in the
world, unifying the core value of employees, dealer, and supplier of Toyota. The Philosophies are:
 Tomorrow will be better than today
 Everyone should be a winner
 First is customer, Second is dealer, and the last is the Manufacturer
 Genchi-Genbutsu (Go and see by yourself, directly)
Each of the philosophy has function in unifying the executive, associates, partners, and other
employees. Here are the initiators of Toyota Philosophy:
 Sakichi Toyoda : The founder of Toyota Parent Company; Toyota Automatic Loom Works.
 Kiichiro Toyoda : Son of Sakichi, The founder of Toyota Motor Corporation.
 Taiichi Ohno : The founder of Toyota Production System
 Shotaro Kamiya : The founder of Domestic and Global Trading Network.
 Eiji Toyoda : Kiichiro’s cousin, ex President of Toyota.
 Shoiciro Toyoda : Kiichiro’s son, ex President of Toyota.
 Hiroshi Okuda : Senior Counselor and ex President of Toyota.
 Fujio Cho : Chairman and ex President of Toyota.
The philosophy are generated from one to another and modified to adapt with new condition
and merged with new concept. The belief that tomorrow will be better than today has growing by
experience where Toyota established in 1930s against dominant and strong automobile
manufacture from US and Europe. Everyday get better and now Toyota has the 2 nd biggest market
share in automobile manufacturer worldwide.
The second philosophy, everyone should be a winner, has play its role as an integrative
strength; stirring people to move forward together. For Kiichiro, everyone means society as a whole
and the core of the company mission statement which is “to contribute to society through car
manufacture”. Everyone also means all automobile industry. Everyone also means country outside
Japan. These statements are reflected in Toyota when opened its first Factory and opened the
factory in US.
The words “customer first” is a popular phrase in Japan and Abroad, but Toyota has apply it for
more than 70 years since the master of sales, Shotaro Kamiya, bring the idea. This concept built the
company unique correlation between distributor and dealer, and dealer and costumer in all over
the world. The last philosophy is Genchi-Genbutsu means “Go and see by yourself, directly”. Fujio
Cho said in St. Petersburg Conference that if you have not seen it by yourself then your perspective
is not credible.
Those beliefs formed corporate basis value which
written in The Toyota Way 2001, known in Company as
The Green Book. Two philosophies which are
tomorrow will be better from today and genchi-
genbutsu is the power behind Kaizen. Shortly, Kaizen
means continuous improvement. Two other
philosophies which are everyone should be a winner
and First is customer, Second is dealer, and the last is
the Manufacturer translated into slogan “Respect
Figure 2 Kaizen
People”. Kaizen and “Respect People” are two pillars of
Toyota Way 2001. This document is the first effort to documenting and publishing values that helps
developing Toyota for years, creating attitude for management, employees, and external partners
of Toyota in business ecosystem.
c. Six Contradictive Power
Expansive power lead Toyota to the new challenge as well as bigger diversity and complexity.
Meanwhile the Integrative Power enabled the company interlace and insert experience in this
perspective. Those six powers are divided into two main powers which are:
 Expansive Power; Impossible Objective, Experimentation, Local Adjustment
 Integrative Power; Founder Philosophy, Nerves System, Up-and-In.

Impossible
Objective

Experimen
Up-and-In
tation

Toyot
a
Nerves Local
System Adjustment

Founder
Philosophy

Figure 3 Six Contradictive Powers

Expansive Power: The impossible objective is self-made objectives that for some party are
impossible to reach. Toyota knows well that the objective seems impossible because the method to
obtain the objective has not found yet but there must be a way. Toyota support high level
experimentation and learning from experience. Product and operational adjustment in align with
technology development and diversity of local market worldwide.
Integrative Power: Founder Philosophy created from historical statement represented core
values, shares and practices by all people, and became the foundation of corporate culture of
Toyota. Communication networks layered and complicated pushed cross knowledge; make sure
that everyone knows everything. Up-and-In is Human Resources Management style that ensures
the work is secure while emphasizing continuous development through learning and evaluating.
This approach against the conventional management style, Up-and-Out, which they who are failed
will be fired.
d. Basis of Resource
Toyota approaches the continuous successful by accumulating and allocating capital and
human resources as an automobile manufacturer. This approach has three aspects which are 1.
Invest in efficiency to increase profit; 2. Reinvest profit to develop organization ability and
personnel needed for improvement; 3. Make long term commitment with personnel and
strengthen their potential to obtain efficient result. Toyota build, allocate, and increase its
resources based on this approach to ensure the positive result from the interaction of 6 powers.
Invest in efficiency; In age of industry, the main factor to success is the highest efficiency
compare to the competitor. It means minimum production waste, manufacture flexibility, cost and
quality leadership, product reliability, and faster respond for market change. In this position, the
focus put into building system that lead to operation point. Toyota has its own Operation System
called Toyota Production System. Strict approaches for efficiency come from 2 aspects; running
efficient production system and invest to manufacture capacity and development.
Develop organization ability and personnel needed for improvement. When efficiency of
manufacture increase, the number of employees needed is reduce and with the same number of
employees can give more result. In the environment based on efficiency, the excess of employees
affect to reduce the number of employees. But in Toyota, in 1980-2006, when the efficiency
increase and production capacity jump up three times than before, employee growth exceeds
production capacity. This is contrary with conventional perspective. One become the trigger of the
employee growth is Toyota expansion outside Japan and enter the new market at this period.
Toyota build a better dealer and brand to strengthen its expansion.

efficient production Better Dealer Global and Local Training

Efficiency Organizational Long term

Figure 4 Resource Basis

In automobile industry, long term project is riskier than short term project. That’s why Toyota
keeps invest to strengthen organization ability to build human capital ready for the risk ahead.
Company vision is investing in industry with high growth, not mature industry that has different
attitude in managing risk. The investment Toyota gave such as global and local training, establish
Toyota Institute, Global Knowledge Center, Global Production Center, and University of Toyota.
2. Human Resource Management
a. Up-and-In Human Resource
The integrative power that unifies growing global company is Up-and-In Human resource
management. Up-and-In means Toyota rarely push employee to resign, Toyota focus into
improvement of employee ability through various training and evaluating scheme. Five key aspects
in Up-and-In Human Resource Management are:
 Long term and stable employment
 Emphasize to training, training, and more training
 Team work Strength
 Action oriented
 Evaluation based on learning
Long term collective commitment between company and employees in terms of long
employment and stable is an important aspect in Up-and-In HRM. Long term employment gives the
employees time to learn from experience and grow, and freedom to face the problem. This is also
gives Toyota make commitment needed to educate employees about Toyota Way. Crisis in 1950 is
a learning experience to Toyota; the company learns how to operate with very small number in
factory i.e. with spread employees to master various kinds of skill needed.
To form multi skill labor force, Toyota made a legal some of its training program, internal and
external, which taught about solving-problem skill. For the first ten years they experience in
company, employees were train in fundamental how to fix the problem. Another in principle in
their training was every employees has a freedom to make decision based on his judgment.
Toyota’s training known with longer time and more variance. There are five training category in
Company: Training based on qualification, supervision oriented, based on improvement,
management training, and training based on knowledge or skill.
When Toyota went abroad, the chance for non-Japan to join with training was also open.
Toyota President, Ken Watanabe, called it as Dojo. The most fear when the Company growth and
spread to many countries is they will lose its main spirit which is continuous improvement or
Kaizen.
Individual Self Actualization is emphasized in Toyota as a team work function. Model employee
play a role as teacher and mentor not looked as a great person separated from group but as
representative of group with dispersed leader. A car made through a lot of people effort and skill.
This mindset is center of Up-and-In HRM and based on founder philosophy, everyone should be a
winner if their contribution is strengthening the whole team. The biggest emphasizing is to a whole
team, individual achievement is important but team achievement is the most important.
Preferences based on action constitute core values of Toyota. Genchi-Genbutsu as we discuss
before represent this part. Toyota do not play wasting time never-end discuss about possibility,
Toyota take an stable and measured action into decision making which result just-in-time action
without unnecessary haste risk. Toyota develops an unique criteria to evaluate manager. Five
categories that evaluate are:
 Solving Problem Creativity
 Decision Making
 Organization Management Skill
 HRM Utilization
 Self Attractive Power
What makes it interesting is its blurring. The last category about Self Attractive Power (Jinbo)
has purpose to measure how much trust and recognition got by someone from others. There’s
always two side of story contradictory one to another. In this situation we argued without taking
any compulsion to compromise for its responsibilities. Hereby, intentionally we always bring the
contradiction in certain level.

b. Workforce Diversity
The problem Toyota has when dealing in global market is diversity. Its tendency to choose
employee with same character—hard worker, motivated by environment based on learning,
interested in untied corporate culture, and mostly is Japanese generation. Half of the high
management position abroad is transferred from Japan. The new competition such as China, India,
will be great challenge to Homogenous Toyota Operation. Toyota knows that diversity can bring
positive or negative effect because value and employee needs from various backgrounds
sometimes impinge with corporate culture, directing to unapproved and conflict.
Ex Senior Director Zenji Yasuda agree to make employee more diverse. When Toyota goes to
US, substitution of managers in madya level ranged from 5% to 10% from 2005 until 2006. Sadly, its
substitution means Toyota gain loss in training investment. Turnover ratio was increase, even below
average industry 16% but every resign represent the loss of corporate collective memory. To
maintain its employees, Toyota changes the status of 1200 half time worker into full time worker.
c. Contradiction, Conflict, and Paradox
From conventional practical business, Toyota succeeds by itself with contrary to conventional
principle business. The fact is that the paradox is the key of Toyota successful. This is the
organization build by Contradiction, Conflict, and Paradox. Six contradiction tendency in Toyota:
 Moved slowly but doing big jump
 Developing simplicity but expense a lot of funds
 Efficient operation but excessive
 Developing stability and paranoid way of thinking
 Respect to bureaucracy hierarchy and allow freedom to have a notion
 Keep simple and complex communication
Toyota lives with it. From outside, Toyota movement seen like turtle in daily operations.
Toyota moved step by step, through experiment, finishing one thing before moved to another.
Lexus KLS400 passed 8 testing design and 50 wing tunnel before the first model agree to launch.
The operation is economical but for human development investment Toyota spent a lot of fund.
Toyota believes that stagnancy is bad for the company, so paranoia kept exist by the management.
Watanabe said that he wants a car that can clean air when started; will not hurt other driver; and
never have an accident; car that can make its driver healthier each time he drive; efficient car that
can run from one beach to another only use one tank of gasoline.
3. Conclusion: What Can We Learn From Toyota
Six powers and Resource of basis contains one or two paradox. Totally, we can list ten new
contradictions which are:
 Impossible objectives; know where the reality is to determine impossible objectives.
 Experimentation; do little experiment a while for making a big jump.
 Local Adjustment; Be Local To Be Global
 Founder Philosophy; Respect For Founder Philosophy to Create Future Leader
 Founder Philosophy; Still Not Yet Completed to Develop
 Nerve System; Creating Connecting World Through Analog Network In Digital Era
 Nerve System; Bad News First to be A Good Corporate
 HRM Up-and-In; To maximize productivity, Do Not Let People Go
 HRM Up-and-In; Sympathetic With Human Will To Increase Industry Production
 Resource Basis; Say No To The Shortcuts For A Long Term Result
4. Reference
Osono, E. Shimizu, N. Takeuchi, H. Dorton, J.K., Extreme Toyota: Kontradiksi Radikal yang Memotori
Kesuksesan di Pabrikan Terbaik Dunia. PT BHUANA ILMU POPULER. 2008