Toyota recasts hierarchy model for greater efficiencies

Toyota Motor Corporation is clearly moving towards a flatter setup going by its proposed change in organisational structure from January 2019.

This will see a reduction in the number of structural layers and, to quote Akio Toyoda, President, will help the company “reach conclusions more swiftly, make prompt decisions, and take immediate action faster than ever”.

The executives are intended to “create visions of the future society of mobility” and then decide the direction. The aim is for them to go straight to where the action takes place and to make their visions a reality.

What is the most interesting part about this recast is the obvious focus on competence irrespective of age. Typically, organisations like Toyota have had older people in senior positions, which is true for many other institutions across the world.

This will no longer be the case as its President has reiterated. “…I believe that nothing is more important than creating a corporate climate in which professionals who excel at what they do can freely play a role in responding to management issues as they arise, regardless of age or educational background.”

Fresh leadership

India will also see a new man at the top who will take over as MD in the third week of January. Masakazu Yoshimura is not too old and has had experience in many other countries. This is the second time India has had a young face at the helm in Toyota after Naomi Ishii who played a big role in rebooting the operations.

During his ‘farewell interview’ with this writer in 2016, Ishii said he was reasonably confident that a day would come when customers will “automatically come” to Toyota.

“We have to analyse the car models they want and the levels of service expected. We can then give them the best which will help us focus more sharply. So long as you enjoy customers’ trust, they will stay loyal,” he said.

Three-step exercise

This exercise involves three key steps: the first is to be reactive where the company responds to complaints and apologises to its buyers. It then gets into proactive mode when it steps into the picture on its own to remedy a situation. Finally, it turns predictive when it anticipates an issue and provides added value that exceeds customer expectations.

“Once a predictive relationship is established, you can practically eliminate costs because you know what buyers want and sustainability goes up as a result,” Ishii had said. The numbers would then follow as a matter of course.

“Instead of just increasing the number of cars, we have to focus on a qualitative objective which means launching new technologies and catching up with global standards,” reiterated the outgoing MD.

Today, with the Toyota-Suzuki alliance set to take off in a big way in India, there could be some interesting dynamics at play. Here, again, Akio Toyoda has been the face of this change along with his counterpart, Osamu Suzuki.

With India tipped to become the world’s third largest automobile market during the course of the following decade, Toyota’s new organisation structure will come into play in a big way here. It is very likely that Japan will opt for young and competent CEOs who can cope with the challenges of this landscape while navigating the Suzuki alliance successfully.

The Toyota announcement on recasting hierarchy also comes at a time when another Japanese auto-maker, Nissan, has been in the news for ousting its larger-than-life figure, Carlos Ghosn, as Chairman. The man who played a big role in literally saving the auto-maker two decades earlier now stands convicted for financial irregularities.

There are fears now that the alliance with Renault, which owns 43 per cent in Nissan, could come under pressure following the arrest of Ghosn. Ironically, amid this French-Japanese tension, Toyota recently announced the next chapter of its partnership with Groupe PSA of France.

The PSA partnership

As part of this agreement, PSA will supply Toyota Motor Europe (TME) a C-Van from its Vigo plant (Spain). PSA and TME started their collaboration on mid-size light-commercial vehicles in 2012, with the Toyota PROACE produced at Groupe PSA’s Hordain plant, France.

The partnership strives to use each company’s strengths to offer both compact and mid-size light commercial vehicles in Europe. From January 2021, Toyota will take ownership of the Czech plant, which began as a joint venture with PSA way back in 2002. It will, however, continue to produce the current generation compact A-segment models for the two companies.

Toyota is clearly in reboot mode, be it in terms of product or people. Akio Toyoda is only too aware of the mobility challenges ahead and why it is so important for his company to be ahead of the curve. No wonder then that he has been constantly pushing the envelope aggressively.

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