Essay: Organisational behaviour research project – Toyota and Volkswagen

SUMMARY
This is a research project which focuses on two companies, namely, Toyota and Volkswagen. In an industry as vast as that of automobiles, two companies from that market can be vastly different, when compared in the context of their organizational culture, leadership styles, organizational structures, motivational tools utilized, and in general, the organization of two automobile giants.
Through our research, we found out that the structure of these two organizations are vastly different. When going through news on these, we also came across various discrepancies and controversies that both have had, both on leadership and ethics. They also set examples of how these can be overcome and what steps are to be taken to tackle problems in the human resources field. When it comes to organizational culture, Toyota has had a cleaner, and better handling than Volkswagen. Volkswagen has had a controversial and messy past of having a primarily centralized organization.
Both have had good motivational techniques for their employees, though very different. While Toyota focused more on human resources and enhancing the quality of lives and work environment, Volkswagen has had a more monetary based incentive system. Therefore, both have had a very polar approach to motivating their employees.
Toyota has a more spread out and delegated decision making system, geographically and product based. While they do have global hierarchy, Volkswagen has a more centralized decision making when compared. Their products are segregated into many sub-categories, making it well categorized according to production. When compared financially, the turnover of Toyota is more than Volkswagen.
With a more monetary based and firm culture, Volkswagen has a more centralized organization. With a more human resources enhancement and organizational citizenship culture, Toyota has a decentralized structure when compared to Volkswagen.
INTRODUCTION
Toyota is a Japanese company. It was founded by Kiichiro Toyoda in 1937, as a spinoff from his father’s company Toyota Industries to create automobiles. Three years earlier, in 1934, while still a department of Toyota Industries, it created its first product, the Type A engine, and its first passenger car in 1936, the Toyota AA. Toyota Motor Corporation produces vehicles under five brands, including the Toyota brand, Hino, Lexus, Ranz, and Daihatsu.
Volkswagen was originally established in 1932 by the German Labour Front in Berlin. In the early 1930s, the German auto industry was still largely composed of luxury models, and the average German could rarely afford anything more than a motorcycle. In 1934, with many of the above projects still in development or early stages of production, Adolf Hitler became involved, ordering the production of a basic vehicle capable of transporting two adults and three children at 100 km/h (62 mph). He wanted all German citizens to have access to cars.
ORGANIZATIONAL CULTURE
TOYOTA
Toyota Motor Corporation’s organizational culture defines the responses of employees to challenges the company faces in the market. As a global leader in the automobile industry, Toyota uses its organizational culture to maximize human resource capabilities in innovation. The company also benefits from its organizational culture in terms of support for problem solving. The different features or characteristics of Toyota’s organizational culture indicate a careful approach in facilitating organizational learning. The firm undergoes considerable change once in a while, as reflected in the change in its organizational structure in 2013. Toyota’s organizational culture highlights the importance of developing an appropriate culture to support global business success.
Toyota’s organizational culture effectively supports the company’s endeavors in innovation and continuous improvement. An understanding of this corporate culture is beneficial for identifying beliefs and principles that contribute to the strength of the firm’s business and brands.
Features of Toyota’s Organizational Culture:
Following its reorganization implemented in 2013, Toyota’s organizational culture underwent corresponding change. Prior to 2013, its organizational culture emphasized a sense of hierarchy and secrecy, which translated to employees’ perception that all decisions must come from the headquarters in Japan. However, after 2013, the characteristics of Toyota’s organizational culture are as follows, arranged according to significance:

• Teamwork
• Continuous improvement through learning
• Quality
• Secrecy
• Teamwork: Toyota uses teams in most of its business areas. One of the company’s principles is that the synergy of teamwork leads to greater capabilities and success. This part of the organizational culture emphasizes the involvement of employees in their respective teams. To ensure that teamwork is properly integrated in the organizational culture, every Toyota employee goes through a teambuilding training program.
• Continuous Improvement through Learning: Toyota’s organizational culture facilitates the development of the firm as a learning organization. A learning organization utilizes information gained through the activities of individual workers to develop policies and programs for better results. Toyota’s organizational culture highlights learning as a way of developing solutions to problems. In this way, the company is able to continuously improve processes and output with the support of its organizational culture.
• Quality: Quality is at the heart of Toyota’s organizational culture. The success of the company is typically attributed to its ability to provide high quality automobiles. To effectively integrate quality in its organizational culture, the firm uses Principle #5 of The Toyota Way, which says, “build a culture of stopping to fix problems, to get quality right the first time.” The Toyota Way is a set of principles that defines the business approaches used in the company.
• Secrecy: Toyota’s organizational culture has a considerable degree of secrecy. However, the level of secrecy has declined in recent years following the reorganization of the company in 2013. Before 2013, information about problems encountered in the workplace must go through the firm’s headquarters in Toyota City, Japan. However, following the reorganization, the company’s organizational culture now does not emphasize secrecy as much. For example, problems encountered in US plants are now disseminated, analyzed, and solved within the North American business unit of Toyota.Implications of Toyota’s Organizational Culture:The characteristics of Toyota’s organizational culture enable the company to continue growing. Innovation is based on continuous improvement through learning. Quality improvement and problem solving are achieved through the activities of work teams. However, the secrecy feature of Toyota’s organizational culture presents possible drawbacks because it reduces organizational flexibility in rapid problem solving.
  VOLKWAGEN
  It took a long time for the Volkswagen’s Organizational Culture to straighten out, as major problems in products were arising due to management problems. Wrong decisions with a very profit-oriented air made it impossible for a healthy environment for an employee.
  A lot has been written about Volkswagen since the news broke that it engineered its diesel cars to cheat on emissions tests. The German auto giant has been criticized for losing its image of “hippie culture” and turning into “just another ‘soulless’ organization,” making decisions not based upon what’s good for the customer but what it determined was best for profits.
  The scandal itself has been bad for VW and its customers, many of which feel let down by a company they trusted. VW’s CEO, Martin Winterkorn, was forced to resign over the deception, and as many as 11 million cars now need to be brought up to standard. It’s difficult to recover trust when you actively work at deceiving your customers, but this story has revealed a deeper-seated flaw for Volkswagen: a seemingly closed-off culture where all decision-making was reportedly handled by a core group of senior executives. And it’s this culture that will need to change for VW to rebuild the trust that has been pared away.
  VW had a siloed, “top down” corporate structure where decision-making “relied on a strong leader and a small group of key advisers.” This type of structure not only makes the organization slow to respond to changes in the marketplace, it leaves the organization with glaring blind spots; a less command-and-control structure could allow voices outside of the C-suite to be heard. These voices, many of which likely have direct exposure to the product and potential customers, can often fill in the gaps the C-suite doesn’t know to exist.
  This approach to corporate culture is dated and ineffective as it leaves the vast majority of employees feeling “out of the loop,” devalued and not trusted. When employees don’t feel like they have autonomy, their engagement drops. And as opposed to employees who work in a more fluid structure, they’re likely not comfortable bringing their concerns, or even bad news, to their supervisors and are not motivated to put the company’s well-being first.
  The linchpin to having a thriving, engaged workforce is creating a sense of ownership among that workforce. As author Jeff Haden says in Inc., “I care when I’m in charge and feel empowered to do what’s right.” And it’s that sense of empowerment that allows employees to feel they can give bad news to a superior. Without it, what’s “right” becomes less about what’s right for the company (mitigating fallout) than what’s right for the employee (protecting their position). Had VW had a structure where alternate voices could be heard and, more importantly, respected, perhaps this event may never have occurred, or at least been lessened.
  Now, those problems have been identified. To rectify problems in an organization, it is crucial to understand what the problem is. Therefore, when evaluated, the management found problems in the work ethics of their employees. As said by the CEO of the company, it took a lot longer and hard work than they had anticipated for the rectifying of the situation. Now that they have rectified it, the organizational culture of Volkswagen stands for the following:
• Togetherness
• Customer oriented
• Courage
• Efficient
• Genuine
• MindfulAs 100% subsidiary company, Volkswagen Automatic Transmission has set the goal to adhere to the values and standards of Volkswagen Group and Volkswagen Group China and to include these in its own company profile.Therefore, high quality and strong performance as well as transparency and customer proximity are particularly in the foreground for Volkswagen Automatic Transmission Tianjin. This is not only outwardly visible but also within the company. It is reflected in every area including processes and in contact with employees. From the very first day, the employees will be informed of the company values, which will be strictly obeyed. Particularly important are compliance requirements and prevention of conflict of interest and corruption. It will also be ensured permanently, that all the employees will be informed of all the company-relevant topics from different media.
  Volkswagen Automatic Transmission also attaches importance to the personal development of every single employee. Communications and a diverse repertoire of trainings and development opportunities are a prerequisite.
  COMPARISON
  As it can be inferred from the two, Toyota has a more hands on approach, as the leaders interact with their employees regularly to ensure better working of their company. Volkswagen has attempted to do so, but still has a few shortcomings, which will most probably be diminished in the coming years.
  When we compare and evaluate the organizational cultures of Toyota and Volkswagen, two competitors with similar level of technical expertise, the difference comes in the environment created. Toyota strives on quality and technical expertise. The Japanese culture is obviously imbued into the organization. While VW too strives for technical excellence and employee training, it is differentiated by its use of fear. Team building is not seen as way to develop employees but a way to guarantee the end product quality. Increased levels of strictness combined with more stringent rules in an environment that is more intimidating, has led to the slump in VW as an organization. This is highlighted in the aforementioned emission test scandal. The culture of Toyota is such that, the company may make more affordable cars, but it does not come at the price of quality or by bending the rules. The Chinese association with VW has definitely led to the organization as a whole becoming more profit oriented and left its top management searching for ways to cut costs without changing the product.
  ORGANIZATIONAL STRUCTURE
  TOYOTA
  Toyota Motor Corporation’s organizational structure is based on the varied business operations of the company around the world. As one of the world’s leading automobile manufacturers, Toyota employs its organizational structure to support business goals and strategic direction. This structure is also linked to the traditional organizational structures used in Japanese businesses. The effectiveness of Toyota in maintaining a strong global presence shows its ability to use its organizational structure to maximize efficiency and capacity utilization. In essence, this organizational structure is a contributor to Toyota’s success in the global market
  Features of Toyota’s Organizational Structure –
  Toyota has a divisional organizational structure. This structure underwent significant changes in 2013. This was seen as a response to the safety issues and corresponding product recalls that started in 2009. In the old organizational structure, Toyota had a strong centralized global hierarchy that was more like a spoke-and-wheel structure. The company’s headquarters in Japan made all the major decisions. Individual business units did not communicate with each other, and all communications had to go through the headquarters. However, this organizational structure was widely criticized for slow response times to address safety issues. After the reorganization that was implemented in 2013,
  Toyota’s new organizational structure now has the following main characteristics:
  ¥ Global hierarchy
  ¥ Geographic divisions
  ¥ Product-based divisions
• Global Hierarchy: Toyota still maintains its global hierarchy despite its reorganization in 2013. However, in the current organizational structure, the company has increased the decision-making power of regional heads and business unit heads. In essence, Toyota’s decision-making processes became less centralized. Nonetheless, all business unit heads report to the firm’s global headquarters in Japan.
• Geographic Divisions – Toyota’s new organizational structure has eight regional divisions (Japan, North America, Europe, East Asia and Oceania, China, Asia and Middle East, Africa, and Latin America and Caribbean). Each regional head reports to the company’s headquarters. Through these regional divisions, the organizational structure enables Toyota to improve products and services according to regional market conditions.
• Product-based Divisions – Another feature of Toyota’s organizational structure is the set of product-based divisions. The company has four of these divisions: (a) Lexus International  (b) Toyota No. 1 for operations in North America, Europe and Japan (c) Toyota No. 2 for operations in all other regions  (d) Unit Center, which is responsible for engine, transmission and other related operations. This feature of Toyota’s organizational structure supports development of brands and product lines.Implications of Toyota’s Organizational StructureToyota’s new organizational structure provides a greater degree of flexibility compared to the old centralized hierarchical organizational structure. With this new structure, the company is now more capable of responding to regional market conditions. This flexibility empowers Toyota to speedily respond to issues and to provide higher quality products. However, the increased decision-making power of regional heads has reduced headquarters’ control over the global organization. Still, this organizational structure facilitates business resilience and continued growth.
  VOLKSWAGEN
  The Volkswagen Group is one of the leading multi brand groups in the automotive industry. The Company’s business activities comprise the Automotive and Financial Services divisions. All brands within the Automotive Division – with the exception of the Volkswagen Passenger Cars and Volkswagen Commercial Vehicles brands – are independent legal entities.
• The Automotive Division – Comprises the Passenger Cars, Commercial Vehicles and Power Engineering business areas. The Passenger Cars Business Area essentially consolidates the Volkswagen Group’s passenger car brands. Activities focus on the development of vehicles and engines, the production and sale of passenger cars, and the genuine parts business. The product portfolio ranges from fuel-efficient compact cars to luxury vehicles and also includes motorcycles, and will gradually be supplemented by mobility solutions.
• The Commercial Vehicles Business Area – Primarily comprises the development, production and sale of light commercial vehicles, trucks and buses from the Volkswagen Commercial Vehicles, Scania and MAN brands, the corresponding genuine parts business and related services. The collaboration between the MAN and Scania commercial vehicle brands is managed and coordinated under the umbrella of Volkswagen Truck & Bus GmbH. The commercial vehicles portfolio ranges from pickups to heavy trucks and buses.
• The Power Engineering Business Area – Combines the large-bore diesel engines, turbo machinery, special gear units, propulsion components and testing systems businesses.
• The activities of the Financial Services Division comprise dealer and customer financing, vehicle leasing, banking and insurance activities, as well as fleet management and mobility offerings.
• With its brands, the Volkswagen Group is present in all relevant markets around the world. The Group’s key sales markets currently include Western Europe, China, the USA, Brazil and Mexico. Volkswagen AG and the Volkswagen Group are managed by the Volkswagen AG’s Board of Management in accordance with the Volkswagen AG Articles of Association and the rules of procedure for Volkswagen AG’s Board of Management issued by the Supervisory Board.Each brand in the Volkswagen Group is managed by a board of management, which ensures its independent and self-contained development and business operations. The Group targets and requirements laid down by the Board of Management of Volkswagen AG must be complied with to the extent permitted by law. This allows Group-wide interests to be pursued, while at the same time safeguarding and reinforcing each brand’s specific characteristics. Matters that are of importance to the Group as a whole are submitted to the Group Board of Management in order to reach agreement between the parties involved, to the extent permitted by law. The rights and obligations of the statutory bodies of the relevant brand company remain unaffected.
  The companies of the Volkswagen Group are managed separately by their respective managements. In addition to the interests of their own companies, the management of each individual company takes into account the interests of the Group and of the individual brands in accordance with the framework laid down by law.
  At Group level, committees also address key strategic issues, for example relating to product planning, investments and management issues.
  To continue to enhance the Group’s leadership and management model, we redesigned the portfolio of these committees and the regulation landscape at Group level in the reporting period. Among other things, a Committee for Digital Transformation was created and the Committee for Liquidity and Foreign Currency was replaced by the Group Board of Management Committee for Risk Management. These changes have reduced complexity and reinforced governance within the Group. In addition, the Group functions have continued to focus on leveraging substantial synergies across all brands and business fields, pooling competencies and making these available to the brands.
  Operational fine-tuning at Group level has also been reduced further and, at the same time, greater entrepreneurial responsibility assigned to the brands and regions, making the Group more agile and speeding up decision-making processes. The Group Board of Management can concentrate more on strategy and the management of major areas in which synergies can be created, for example joint creation of a digitalization architecture, brand positioning, product strategy, development and use of platforms and modules, procurement and plant capacity utilization.
  With our future program TOGETHER – Strategy 2025, the Organization 4.0 Group initiative also supports the Company’s transformation and is making the Group’s organization fit for the future. The aim of this initiative is to connect activities across divisions, initiate new organizational approaches and anchor these in the Group for the long term. This will not only enable but will actively create holistic stimulus for innovations, entrepreneurship and change, ensuring that the Group remains agile and competitive in future.
  MOTIVATIONAL TECHNIQUES
  TOYOTA
  To hire a competent employee is not a simple task but after that, how to make your employees work efficiently, happily and being enthusiastic in contributing to Organizational goals are even more challenging. This article will try to analyze and explain what methods are practiced in Toyota to motivate its employees by using motivation theory models such as Maslow’s hierarchy of needs & Goal setting theory
  Maslow’s Hierarchy of Needs
  Basically, Maslow’s Hierarchy of needs is pyramid of different levels of needs. The base at the lowest is Physiological needs, the next is Safety needs, Love & Belonging, then Esteem and the highest level is Self-Actualization (Please refer to Figure 1 for more details). Only when lower levels of needs such as physiological and safety are satisfied, then employees can achieve higher levels such as esteem and self-actualization, which make them work more efficiently, with more drive and more innovative ideas.
• For Physiological & Safety needs:According to Liker (2004, p.210), all employees of Toyota are satisfied in lower level needs, they are well paid, their jobs are secured and the working environment is safe and organized. Besser (1995, p.390) also stated that Toyota provided child care and recreational facilities available on site for employees. All these benefits were provided to ensure their employees are safe and secured to work for a higher level of needs, which brings more results.
• For the needs of belonging:Besser (1995, p. 390) described the way Toyota promoted a strong team spirit and sense of belonging is by showing no discrimination between team members; or between managers and employees. In particular, “There are no private parking facilities, private cafeterias for managers, private offices, or private secretaries. All staff are encouraged to wear the company uniform and are called by their first name” (Besser, 1995, p.390). This practice makes employees really feel that they are a part of a community and creates a strong bond between employees and the company.
• For esteem & self-actualization:Toyota also encourages its employees to try to solve challenging problems to build up their confidence so that they can satisfy their higher needs in esteem and self-actualization.Also, by using a ratio of team leader to team members of 1 to 4, or 5; comparing to 1 to 20 or 30 in the industry, Toyota created 4 to 5 times the promotion opportunities for employees (Besser, 1995, p. 393). Ambitious workers are also promised that their assembly line jobs are temporary and after being promoted to team leader, they would receive a lot of training and job rotation opportunities.
  All employees are also encouraged to solve daily work problems innovatively, they would receive gift certificates for their ideas contribution.
  Next we will examine how Toyota applied Goal-setting in their work environment.
  Goal-Setting Theory
  According to Williams and McWilliams (2010, p. 272), Goal-setting theory proposed that “people will be motivated to the extent to which they accept specific, challenging goals and receive feedback that indicates their progress towards goal achievement.”
  From this definition, we can decompose it into 4 components, which are:
• Goal specificity: i.e. goals should be clear, detailed and not vague. According to Obara and Wilburn (2012, p. 167), Toyota required goals must be clear and defined for example “total lead-time must be less than customer-order-to-delivery lead-time expectations”.
• Goal difficulty: i.e. challenging goals are more motivated than easy goals. According to Bodek (2008, p.40), one of the challenging goal he found in Toyota is that managers even challenged workers to find solution to make things one Yen cheaper, and one Yen is  even less than one US penny. Bodek (2008, p.41) pointed out that we even may not pick up one penny on the floor, not to mention trying to solve problems that save one penny.
• Goal acceptance: employees should comprehend and support the goals. At Toyota, a “community of fate” ideology was developed, it means that employees are feeling that they and the organization share the same fate; that they would succeed or fail together. (Besser, 1995, p.383). This helps the personal goals align with organizational goals.
• Performance feedback: i.e. progress indication towards a goal. If performance feedback is clear, employees are more motivated. For Toyota, it uses visual management systems such as Jidoka to communicate problems from a specific production line so that every employees can track their progress, this provides direction for them to move toward goals.

VOLKSWAGEN
Recognizing Performance and Sharing Profits
The systematic fostering and recognition of good performance is a vital element in our personnel management strategy, along with redesigning our pay system to ensure that employees have a sustainable share in the success and profits of the Company. Since 2010, Volkswagen AG has had detailed standard criteria for skills development and performance assessment. These criteria cover the entire workforce, from apprentices to top managers, and are underpinned by concrete incentive systems within a three-tier pay system:

• Basic pay in the form of a competitive monthly salary
• A performance-related component, which rewards individual performance
• An entitlement to profit-sharing, which is laid down by collective agreement

This three-tier remuneration system is increasingly being rolled out across the Group. It gives us transparent criteria for recognizing good performance on the part of our employees and enables them to participate appropriately in the Company’s success. In 2014, employees at more than 30 Group locations benefited from profit-sharing, including those in China, Mexico, Poland, Russia and Spain.
Annual Appraisal
As part of the introduction of a performance-related pay component, it was agreed that each employee of Volkswagen AG, Volkswagen Financial Services AG and Volkswagen Immobilien Service GmbH should have an annual appraisal with his or her line manager. This appraisal has two components, performance assessment and development planning. Recognizing and valuing good performance is just as important in this context as identifying individual potential or specific further training needs. Since 2013, all temporary external personnel employed at Volkswagen AG have also benefited from a performance-related pay component from their second year with Volkswagen.
Long-Term Incentive for Management
The pay for management employees across the Group includes three variable components:

• The personal performance bonus,
• The Company bonus and
• The Long Term Incentive (LTI), introduced in 2010.

The LTI is calculated over a four-year period, making it the component that reflects sustainable development by the Company.
Ideas Management
Under the Ideas Management program our employees use their creativity, knowledge and initiative to improve both processes and products. Ideas management is a vital management and motivational tool and has been an integral part of Volkswagen’s culture of improvement for the past 65 years. The ideas management process also helps to make working at Volkswagen both safer and healthier.
Company Benefits
Employees of Group companies around the world also enjoy further company benefits: these may include subsidized transport and meals, low-cost accommodation, monthly childcare allowances, and discounts on selected leisure activities. Additional health care benefits round off the range of company benefits. The Company also has a collective accident insurance policy that covers all employees against accidents resulting in death or invalidity. In exceptional cases of economic hardship, Volkswagen AG grants employees a short-term loan.
CONCLUSION
When both the companies are critically examined for comparison, it can be seen that both the companies have very different structures. Toyota has a decentralized system, which is a fit for its environment. The employees are motivated with enrichment of life. Volkswagen has a centralized system, which is a fit for their profit-oriented environment. Monetary incentives motivate employees. In the 21st century, where a lot of attention is given to human resources, Toyota’s structure is more desirable, which Volkswagen is striving to achieve.