Marquis Research

Toyota Human Resources Issues

Introduction

Human Resources management is very important to the success of a corporation. Breakdowns in human resources management has led to crises in a number of companies. One such company is Toyota Motor Company. One of the human resources issues that presents itself at Toyota Motor Corporation which led to the significant number of recent recalls is the rewards system which is in place for managers of at the corporation; this rewards system rewards these managers for cost containment instead of sustaining product quality. Another issues was that Toyota’s overall corporate culture was flawed resulting in lower level managers’ concerns being ignored by upper management. In addition, Toyota failed to perform and implement proper workforce planning to ensure the right number and type of personnel were in the right positions with the corporation. Moreover, Toyota’s human resources department filed to perform proper risk management assessments and implement solutions. Throughout this paper, I will discuss the human resources failures that have led to problems within Toyota Motor Corporation as well as the current human resources issues that are affecting Toyota. Furthermore, I will give recommendations on how to implement solutions to these human resources issues for the betterment of the corporation.

Background

Toyota Motor Corporation was founded in 1937 by Kiichiro Toyoda. It is an automotive manufacturing company whose headquarters is located in Toyota, Aichi, Japan. It has branches located in a significant number of countries worldwide. It employees more than 338,000 workers worldwide and has produced more than 200 million vehicles. The Toyota Motor Corporation produces vehicles under five recognizable brands which are: Lexus, Hino, Ranz, Scion, and Toyota. Today, Toyota Motor Corporation is one of the largest companies in the world, surpassed only by eleven other companies worldwide in terms of overall revenue. And it is the first automobile manufacturer to produce more than 10 million units in a year.

Critical Analysis of HR Issues

There was a time when the quality of Toyota vehicles set the standard for the automobile manufacturing industry as well as other large corporations worldwide. When the recalls involving Toyota vehicles started, man y were left wondering how this could happen to a company which was so known for its quality. And these recalls have not stopped yet. With three waves of recalls in recent years due to manufacturing defects on Toyota vehicles, manufacturing executives are no longer striving to emulate Toyota quality. But what could have happened in a corporation such as Toyota to cause these types of manufacturing defects that led to the recalls and the damages to Toyota’s reputation for quality. One answer is that human resource management failures led to the problems which manifested themselves in manufacturing defects. One of the human resources issues which led to this problem is the rewards system that is present at Toyota Motor Corporation. Another human resources issue that is present at Toyota that has led to its current problems is the failure to conduct proper risk management within the company; this is due to the lack of people assigned to this process.

Management Bonus Structure

According to “A Think Piece: How HR Caused Toyota to Crash” one of the primary reasons for the failures of Toyota and other companies like it that have experienced similar failures is the weak management of its people. One reason that the article sites for placing blame on human resources management for these types of failures is the fact that the mechanical defects that caused the recalls to occur were known to exist by Toyota’s leaders for a substantial period of time before they took action to correct the problem. In fact, instead of trying to hide the problem, a number of sources claim that the company management tried to cover the problem with the mechanics of their vehicles up. The main reason why these managers would take such action is the rewards system set up at the Toyota which rewards managers for cost containment. Instead of rewarding managers for ensuring that the quality of the vehicle is sustained, Toyota Motor Corporation choose and continues to choose to reward managers based on their ability to contain costs within the corporation. According to Sullivan, “the purpose of any corporate reward process is to encourage and incent the right behaviors and to discourage the negative ones. It’s important for the rewards process to incent the gathering of information about problems. It’s equally important to reward employees who are successful in getting executives to take immediate action on negative information”.

Overall Corporate Culture at Toyota

Another problem that occurred at Toyota on which the recalls and manufacturing defects can be blamed is the overall corporate culture within the corporation. This is because lower level managers and personnel had been complaining about the deteriorating quality of the Toyota product for a while before the recalls were necessary to no avail. Upper level management saw no reason to take the complaints of their lower level advisors seriously. This is a dangerous corporate culture where upper management can ignore the concerns of lower management which is closer to the production floor. In addition, these lower level managers are less likely to receive bonuses for their hitting of cost cutting targets as upper level management; this would help them to be more concerned with manufacturing and safety issues.

Training and Supervision of Personnel

An additional human resources issue that presented itself at Toyota Motor Corporation and has led to the ongoing series of massive recalls is the proper training of personnel. The corporation experienced rapid growth in recent years and was not able to keep up with employee training to ensure that those working for the corporation had the proper knowledge and skill to perform their job functions at optimum levels. The human resources failure at issue is that of workforce planning.

In addition to not being able to train personnel proper as a result of rapid growth, Toyota Motor Corporation also found it difficult to properly supervise those in their employ because of this growth. It is the job of human resources to ensure that the right number of people are employed in the right positions with the right level of skill to supervise those who work for the corporation. The growth that took place at Toyota caused human resources to fail to have the right people in the position to perform this function.

Risk Management

The failure to properly assess the risks and implement risk management processes is another human resources problem which led to the recent failures at Toyota. According to “What Really Happened at Toyota?” an article appearing in MIT Sloan Management Review, one of the main purposes of risk management is to catch problems early and eliminate them before they snowball into significant issues in the way that they have at Toyota. The series of recalls that followed demonstrated that it made little sense for the corporation to believe that it could maintain quality in the competitive world of automobiles, with high executive salaries, and lucrative bonuses for keeping costs down, without a quality control department.

It is important for the company to implement a proper human resources risk management strategy. According to “HR’s Role in Effective Enterprise Risk Management,” there are four pillars of human capital risk management. These four pillars are: strategic risk, operational risk, financial risk, and compliance risk. Human resources obviously failed in two of the four categories for the events to take place which led the massive recalls to ensue at the company. Strategic risk, or the risks posed by the company culture, ethics, and overall human capital strategy failed the corporation as notifications of defects went ignored because these notifications were from lower level managers instead of upper level managers. Operational risk management, on the other hand, includes making decisions concerning whether the organization is recruiting fast enough to meet its current needs. The human resources department has the duty to access whether the hiring and recruitment practices of the corporation are suitable to meet the corporation’s current and future needs. Toyota’s human resources department failed to make the proper assessment of the risks that were posed by not having enough employees with the right training ion the right positions so that the work of the corporation could be performed correctly.

Recommendations

One recommendation that I would make to improve the problems that are present at Toyota Motor Corporation from a human resources standpoint is to set quality as a defined objective for the corporation to achieve.

The next recommendation that I would make for the improvement of the human resources management issues which have led to the deterioration of the quality of Toyota vehicles, is to rethink the management bonus and reward structure. In fact, Toyota Motor Corporation has demonstrated that the compensation of managers for cost cutting measures and keeping costs low can have dire consequences; these consequences to consumers, which can include the loss of life, are so bad that corporations should be very leery of compensating managers in this way, especially in corporations where the safety of the product can be an issue.

It is the job of human resources to ensure that there are the right amount of employees within a corporation to perform the right tasks. According to the University of California, Riverside, it is the job of human resources to assess the hiring needs of the corporation. Hiring and retentions is a duty the clearly falls into the category of human resources. One of the main reasons that some are claiming the recalls that took place at Toyota took place is because the hiring of employees did not match the growth rate. Therefore, lower level engineers were fulfilling the roles of upper level engineers. These engineers did not have the knowledge and skill to identify and solve problems that would have prevented the manufacturing issues that arose in the company. In addition, there were not enough employees with the appropriate level of skill in supervisory positions within Toyota. Therefore, I would recommend that the human resources department develop a recruitment plan that would ensure that they have the appropriate number of employees. In addition, it is the job of human resources to identify key job functions and skill sets needed and recruit employees with this skill set. Therefore, I would recommend that human resources evaluates the skills set that were lacking for the problems to occur and set forth a firing plan to hire people with these skill sets to fill the vital positions. Moreover, human resources is responsible for the training a development of employees once they are in the employment of the corporation. Therefore, I would recommend that the human resources department at Toyota set up training and development seminars and sessions for employees at regular intervals to ensure that all employees have the knowledge and skill to perform their jobs effectively.

In addition, I would recommend that Toyota concentrate on formulating an effective risk management plan that includes all four areas of risk management. These four areas are strategic risk management, operational risk, financial risk, and compliance risk. A corporation with the resources that Toyota has should never be short staffed. In addition, the overall corporate culture of Toyota should neither deter lower ranking managers from bring up safety and manufacturing issues nor should it allow them to be ignored. To ensure that this situation never presents itself again, human resources needs to conduct proper risk assessments in the four pillar areas.

Conclusion

Toyota Motor Corporation’s problems with manufacturing that resulted in a number of recalls in recent years helps to demonstrate how human resources failures can lead to failures of the corporation overall. For years, the Toyota Motor Corporation was a model of excellence in the quality department and other corporations strived to emulate the quality standard that Toyota set forth. In recent year, however, top managers who received rewards and bonuses for keeping costs down at the corporation ignored warnings from lower level managers about the risk of manufacturing defects until the problem had snowball to the level where massive recalls were required. In addition, the corporation disbanded a task force that was put together to assess risks within the corporation of defects occurring because the corporation claimed that they believed quality was embedded in their corporate culture; therefore, there was no need for a separate department in charge of quality. With this move, the Toyota Motor Corporation failed to preform needed risk management function and assign the necessary people to perform this function; there result of this move was that the vehicles that were produced during this time were full of flaws and defects resulting in massive recalls as well as seemingly irreparable damage to the Toyota reputation. An additional human resources issue that led to the fall from grace that Toyota experienced in terms of quality was the problem of their overall corporate culture. Complaints of lower level managers concerning quality were often ignored. The corporation failed to properly address these concerns until they had snowballed into significant safety and manufacturing problems which resulted in recalls.

To remedy the human resources problems that occurred at Toyota, it is recommended that the company do away with a rewards structure that rewards management executives for cost containment. Bonuses and rewards should be set for hitting quality and safety targets instead of cost cutting targets. In addition, a risk management department should be established and in continued operation at the corporation to ensure that all risks of manufacturing and safety problems within the corporation are identified and addressed. The appropriate number of people should be assigned to that department to ensure the department operates at optimum performance levels. Lastly, the corporate structure of Toyota Motor Corporation should be examined and revamped so that the concerns of lower level managers concerning quality are never again ignored by the upper management.

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