Challenges Faced by Toyota in Introducing a Flat Organizational Structure
Discuss about the Organizational Behavior for Journal of Product & Brand Management.
Greg stepped out of his car with the intention to resign from his current position. Before entering the office, he spends a couple of minutes in the car reminiscing his journey of over 17 years at Toyota. Toyota manufactures and sells cars across the globe and is considered to be an excellent recruiter. Greg’s experience with Toyota has not only reaped him substantial financial benefits, but he has also been highly satisfied with the meaningfulness of his job.
Over the last 6 months, Toyota has been facing losses owing to lack of innovation. Competitive brands are introducing new cars with efficient designs that cater to the needs of young drivers. On the other hand, Toyota seems to be failing at addressing new customers. The current customers of the brand are all aged over 38. These customers have been loyal to the brand since a long time but these customers do not change their cars often and hence it is imperative that Toyota reaches out to new customers to ensure long term sustainability.
In order to foster innovation in the business, Toyota decided to introduce a flat organizational structure. A flat organizational structure is known to have fewer or no levels of middle management between the executives and staff (Ashkenas et. al, 2015). The news came via various Emails, team meetings and organizational trainings. Thousands of middle level positions were eliminated and seating structure at the organization was modified to encourage open communication. Privacy settings of various communication channels were changed to include more staff into organizational discussions.
A flat organizational structure creates an enhanced sense of ownership, fosters creativity and improves the decision making process (Lee et. al., 2015). Junior level employees were allowed to offer their opinions of the design and marketing strategies adopted by Toyota. The senior management also adopted the open door policy to encourage free and transparent communication in the organization. Open door policy involves the seniors of the organization leaving their doors open in the office. This is done to encourage open communication and let their employees know that they are available for communication (Docherty, 2015). Toyota also redesigned team meeting structures. Earlier, it was the senior members of the firm that communicated during these meetings. However, now new employees and young employees were encouraged to share their ideas and opinions.
Advantages of a Flat Organizational Structure
The energy in the office premises completely changed. People had no idea that these youngsters were so enthusiastic, full of new ideas and had a massive risk appetite. Within no time, they were introducing new strategies, offering their opinions and thinking entirely out of box. Toyota had never felt so energetic before. Many employees who were constantly warned for reporting late to office were now working overtime and organizing meetings. The organisational culture at Toyota was motivating. There were new teams, new groups and all of them seem equally motivated to get the new cars launched. People created social media communities to help employees communicate better. The number of on the job trainings increased and employees were given the liberty to work with different departments to enhance their learnings.
There were various youngsters who started working with the Marketing and PR department. Their insights helped the firm in adopting digital marketing strategies. Various social media campaigns were launched which helped in creating an improved brand identity and enhance awareness about the brand. These strategies helped the brand in reaching out to the youth. Various youngsters participated in these campaigns and felt more connected with the brand. Social media enhances brand engagement with its customers (Dessart et. al., 2015)
It was during this time that Corolla, Yaris and Prius were launched. In order to target the younger demographic, Toyota had priced the entry models at a lower price and high end models were premium priced. This helped the firm in maintaining their customer base and targeting younger customers. All these models were a major success and celebrated worldwide acceptance.
In the middle of this pomp and show, the HR manager, Diana, released a report to the company executives. The report clearly stated that despite the improving performance and culture of the organization, the attrition rate was rising. This especially included senior employees who have a long term experience with the company. Just as they were discussing the matter, Greg entered the board room with his letter of resignation. This is when the team decided to get to the bottom of it. An exit interview was arranged with Greg and the revelations made by him were surprising.
Greg mentioned that over the last 17 years he gave his heart and soul to Toyota. He worked hard and received a promotion every 4 years on the basis of his performance. The position earned him decision making power, authority and increased responsibility. But now he sees young people in the organization doing the same level of work as him. He felt his experience was not being valued and so did many other senior members of the firm. He also felt that he does not understand the facets of social media and digital marketing and hence he is unable to contribute to the marketing team. All these factors demotivated him and he decided it was time to call it quits.
Ways to Retain Experienced Employees
Similar views had been shared by more experienced employees of the firm. Diana expressed that even though the involvement of younger employees is increasing, it can pose a major risk to the brand if experienced employees do not feel valued. People also complained that decisions which Greg used to make earlier, were now made jointly by the entire team and hence took a much longer time. Toyota is a renowned brand that well-known for valuing its employees. Increased attrition rate can adversely impact the brand’s image. The executive members decided to hold a meeting to address the issue. All of them are happy with the new culture, increased innovation and creativity but none of want their experienced employees to leave. What is remaining are a few sessions of brainstorming about how they can deal with the issue at hand.
Recommend a few ways that can be adopted by Toyota to retain experienced employees.
Employee retention is critical to the success of any business (Anitha & Begum, 2016). This is important to make sure that experienced employees in the organization can share their experience and guide new employees. The following steps are recommended to Toyota to retain their experienced employees:
- Encouraging an atmosphere of respect towards senior employees. The younger employees must be taught the importance of experience and seeking help with the senior employees of the organization.
- Before finalizing any decision, their opinions must specifically be asked. Their grievances must be addressed.
- Increased responsibility also helps in motivating employees (Lazaroiu, 2015). Therefore these members must be given additional responsibility in order to retain them.
- Employees must be encouraged to take initiative and participate. Senior employees must themselves be motivated enough to take lead meetings and take additional responsibilities.
- 360 degree feedback system must be adopted. This system aims to seek feedback of an employee from their seniors, juniors and peers (Karkoulian et. al., 2016).
What are the disadvantages of a flat organizational structure?
A flat organizational structure creates open flow of communication and enhances employee participation. This structure also fosters creativity. However, there are several disadvantages of a flat organizational structure. These include:
- Slowed decision making: when a group of people try to settle on a particular decision, then the entire process take a much longer time. This may delay results and adversely impact overall performance.
- Senior employees may resist to a flat structure because of divided responsibility and authority.
- Limited leadership may reduce the level of training and mentoring received by an employee. This may impact employee performance (Josefy et. al., 2015).
- Reduced middle management levels also signifies reduced mobility of an employee in the upward direction. Promotions will take longer and employees may relocate to different firms in search for better opportunities for growth.
- Power struggle in another disadvantage posed by a flat organizational structure. In the same team, the power struggle may create ego clashes and conflicts. This may make the organizational culture negative and demotivated.
References
Anitha, J. and Begum, F.N., 2016. Role of organisational culture and employee commitment in employee retention. ASBM Journal of Management, 9(1), p.17.
Ashkenas, R., Ulrich, D., Jick, T. and Kerr, S., 2015. The boundaryless organization: Breaking the chains of organizational structure. John Wiley & Sons.
Dessart, L., Veloutsou, C. and Morgan-Thomas, A., 2015. Consumer engagement in online brand communities: a social media perspective. Journal of Product & Brand Management, 24(1), pp.28-42.
Docherty, T., 2015. Open-door policy?. Index on Censorship, 44(2), pp.34-39.
Josefy, M., Kuban, S., Ireland, R.D. and Hitt, M.A., 2015. All things great and small: Organizational size, boundaries of the firm, and a changing environment. The Academy of Management Annals, 9(1), pp.715-802.
Karkoulian, S., Assaker, G. and Hallak, R., 2016. An empirical study of 360-degree feedback, organizational justice, and firm sustainability. Journal of Business Research, 69(5), pp.1862-1867.
Lazaroiu, G., 2015. Employee motivation and job performance. Linguistic and Philosophical Investigations, 14, p.97.
Lee, J.Y., Kozlenkova, I.V. and Palmatier, R.W., 2015. Structural marketing: Using organizational structure to achieve marketing objectives. Journal of the Academy of Marketing Science, 43(1), pp.73-99.
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