Kotter’s 8-Step Change Model: Toyota Recalls in North America

Introduction

Businesses are facing competition in several ways, namely through the prices, the quality of products, the market trends, the availability of alternatives and innovation status. Toyota North America is a renowned motor vehicle brand with a leading market share in the region (Nkomo, 2013). Recently, the company has received extensive media publicity due to vehicle recall issues. The reason for the flaw that led to approximately 3.8 million cars being recalled is a deep crisis at the management level. If a company is facing an internal human resource capability problem, the company is probably trailing on bad organizational culture. The last time Toyota as a corporation updated its management structure worldwide was in 2013. Thus, the update is long overdue. The consequences of such delays have already been felt, and the company is struggling for survival.

Even though Toyota is leading with a significant market share in North America, it is currently in dire need for change at the management level. Therefore, there is a need for the company to make various reforms to remain the best entity in the market, as well as retaining the due sales revenue. Whenever a business does not adapt to changes, there is a possibility of experiencing several challenges that affect performance, and the Toyota North America is not an exception. The current problems at the company have registered effect on its profit-making ability, thus affecting the finances of the business. There is a significant problem, which Toyota faced when SUVs were recalled throughout the U.S. Therefore, the primary aim of this paper is to use the Kotter’s 8-step model to assist this company in mitigating the current problems within the market. To be specific, the Kotter’s 8-step change model shall be applied to the target company’s management, which requires immediate change.

Company Overview

Toyota Motor North America inclusive was formed in 1957 in Torrance, California with its current headquarters being Plano, Texas. The company started selling its vehicles in 1958. The first of its cars were 288 modest vehicles – 287 Toyopet Crown sedans in addition to a Land Cruiser. The company designed the first Toyota Corona that had a powerful engine with installed air conditioning and an automatic transmitter specifically for the American drivers (Nkomo, 2013). As a part of the Toyota Motor Corporation, the U.S.A subsidiary deals with design and research of consumer and commercial vehicles for the select U.S. market. The company currently has a workforce of 6,500 people. The main products of the Toyota North America are two branded premium cars, which include Toyota, Scion, and Lexus. The marketing strategy for this company is utilizing local sales agents known as dealers. There are approximately 1,200 Toyota dealers across the U.S. and its regions. The dealers use uniform display and campaign strategies, which is developed from the Toyota Motor Sales, U.S.A., Inc. With the leadership of James Lentz, the available reports show positive performances in sales in 2016. The 2016 sales of 2,118,402 vehicles was a 1.7% increase from the 2015 year sales. In North America, Toyota brand and General Motors had the same market share at 16% by July according to the 2017 Statista data reports (Statista, 2017).

Issues at Toyota North America

Even with a leading market share for five consecutive years, Toyota has had the highest controversy in the history of vehicles within the U.S., the current problem being the engineering failure that led to recalls of millions of cars due to malfunctioning. Several unpublished reports indicate that the management failure may have led to Toyota recall problems in the U.S in recent years. In October 2009, Toyota customers were in a fix since a series of highly publicized Toyota vehicles were being recalled in North America and its regions, (Heller & Darling, 2012). Several issues have been documented about the engineering problems that Toyota vehicles have had. The recent issues were associated with the airbag and poorly placed or incorrect floor mats placed under the driver’s seat leading to an uncontrolled acceleration in a range of models. For example, a dangerous crash was reported in California where the accelerator of Lexus Sedan got stuck and caused the drivers death (Hammond, 2013). This incident triggered a recall of approximately 3.8 million vehicles at a time. The company incurred billions of unnecessary costs because of the shallow way it handled the crisis.

Toyota did not have a plan to handle the reported complaints of the first acceleration. The management confused everybody by the way they reacted to the allegations and this confounded the crisis management experts and marketing. The problem was attributed to different causes, all linked to the manufacturing process. The fact that Toyota grew fast in its quality, according to experts, kept the company high in the average industry level (Cole, 2011). When complaints of self-acceleration appeared, the management was inept at the crisis. Instead of taking a quick approach to solving the problem, their slow action made consumers fear for their safety to the extent of Toyota customers looking for other models in other companies.

Diagnosis

The crisis at Toyota North America is not news to the car industry. This company suffered losses from recalls and lost a significant number of customers. The crisis also points towards a malfunctioning management team that needs change to return to its former quality, gain trust from the customers, increase sales, and achieve the lead in the car industry’s market share (Heller, & Darling, 2012). From the Toyota evaluation crisis mentioned above, the company needs to embrace change at its management level to reverse its negative public reputation.

Toyota has a long-term goal. Its Global Vision 2020 is still a legitimate dream even despite the recent crisis. Out of the six possible management change models, the company chose to use the Kotter’s 8-step model because the problem with the company lies in its management as compared to its products and services. The current need for management change will add value to the company’s needs in creating harmony with customers and stakeholders who are directly concerned about its health (Heller, & Darling, 2012). The people essential within the organization are not living exemplary to the company’s advocacy for “Good corporate citizenship.” Therefore, the need to return the company to winning ways and continuously focusing on gaining the trust and respect from the customer and international stakeholders must be developed with urgency. Also, due to the changing needs of the business environment, there is a need for the company to revisit its visions statement.

Toyota North America’s vision statement review seems necessary at the moment. It is important because there is need to reconsider the human factor within the company that holds the critical information in the form of tribal knowledge, which is critical to product quality and product engineering. It is possible that Toyota North America is doing everything fine, but has taken time away from its employees in general (Heller, & Darling, 2012). There are four components of change that Toyota North America needs to achieve within the shortest time possible. These elements associated with strategic crisis solving include developing a long-term root management and decision-making process, improving problem-solving strategies, developing a solution, which will add value to both internal and external stakeholders and to realize ways to solve root problems with an organizational learning strategy.

Applying Kotter’s 8-Step Change Model

The use of Kotter’s 8-step change model to realize the change objectives in Toyota North America’s management staff include the need to increase a sense of urgency, coming up with a powerful coalition of guidance, and putting up a vision and strategy. Furthermore, having a way to share its vision, removing the obstacles, empower the employees for action, and developing short-term wins that bring together gains and strengthening change by anchoring change in the culture. The process of change at Toyota that will utilize the Kotter’s 8-step change management model with a promise of quick and valuable results is as follows:

1. Creating Urgency

The Toyota business needs to find and highlight the potential threats that might emerge shortly within its product and its management, and the repercussions that might come up in the future. Since the company is now facing a significant issue with the quality of the vehicles it manufactures, the need to improve it and look for new avenues, which can provide them new opportunities are required in urgency. For example, the company can develop a repair strategy for all the line of vehicles in question (Appelbaum, Habashy, Malo, & Shafiq, 2012). The company’s management and the problem-solving team should be in a position to listen to the issues raised by their clients and make the corrections that are satisfying.  In addition, they should have collaboration with other stakeholders including the customers, since they are the primary consumers of their motor vehicles. The problems Toyota is facing that are traced back to the management level suggest that the company’s organizational culture is ailing. If so, the defective culture should be neutralized before changing other aspects of the management including restructuring and employee’s performance reviews.

2. Devising Powerful Guiding Coalitions

For Toyota Company to have a strong coalition for change, it should come up with effective leaders who can transform the current needs of the company. Change leaders are people who have excellent leadership skills and who can innovatively transform the needs of the business (Appelbaum et al., 2012). When the company has a powerful team who reason together, it will be able to make a drastic change especially when there is a high commitment towards the entire improvement process. When they realize that there is a weakness, they should make the corrections as soon as there is enough information about the problem. Toyota North America is the leader in the motor vehicle industry. For the company to maintain its high profile, its people element must be part of the human resources capabilities, which should deliver innovative and error-free products and services.

3. Determining a Vision and a Strategy

When the firm has all the stakeholders on board, they need to have clear goals. For instance they should think of how to improve the quality of their vehicles, either through the enhanced technology of manufacturing or by using raw materials of high quality. Change is the guiding principle for business improvement (Appelbaum et al., 2012). They should put in place a sound strategy of remaining on top of the competition, either by advertising their products through the website or social media. This will ensure that people are not left out and will be able to follow them when dissatisfaction arises. Even Toyota has a working vision; it is time to review this vision. The review may hold a solution to solving the current problem.

4. Conveying the Vision

Toyota Company should communicate the changes in their vision. The need to talk to performance reviews so that they may know if they are making the right choice or they need to improve (Appelbaum et al., 2012). The company should develop and incorporate training for its human resource on how they will get to their vision, and they should handle issues and concerns raised by the public with honesty.

5. Removing Obstacles

Obstacles for change may come from the employees, especially those who might have contributed to the Toyota crisis. After setting the goal and vision for current change, Toyota Company needs to revisit the organizational structure to find out if it is in alignment with institutional structure. Inefficiencies in the corporate culture hold the key to the company’s problem hence these inefficiencies must be phased out (Appelbaum et al., 2012). Doing so will allow Toyota to move forward with the right objective.

6. Creating Short-Term Wins

Creating a short-term win strategy will allow the company to have an early victory. For example, they need to increase the capacity to produce more than four million automobiles to meet the customer demands. High volume manufacturing will help in reducing the cost of production, but the production should not have problems with the quality of the product. The company should consider providing an incentive to the employees who have adequate performance. In other words, Toyota should consider being close to its employees and monitoring their performances as well employee concerns.

7. Consolidating Gains

The company needs to have a continuous success analysis (Appelbaum et al., 2012). There should check whatever goal they set in the beginning is not accomplished. The company should also consider individual experiences since this will be useful for improving the forecasted change.

8. Anchoring Change in the Corporate Culture

When Toyota Company gets an opportunity, it should be able to discuss its success stories that are about the realized change achievements. They should make sure that the change they initiated forms the integral part of the organization culture (Appelbaum et al., 2012). The company should also ensure that it supports the current company leaders as well as the new leaders and this will lead to improved support for the changes within the firm.

Conclusion

Having gone through the Kotter’s 8-steps as the change model that was utilized for analysis of Toyota North America management, there is need for the company to review its human resource capabilities. Doing so will require using a corporate model that provides a step in enabling the company to remain the best-selling automobile manufacturer in the region. Provided that they are in a position to embrace change, the management is going to correct its wrongdoings to meet market demands as well as produce the quality automobiles as it has been doing throughout the company’s history. Even though Toyota had a management crisis, this crisis has created damage that affects the company’s long-term strategy. Therefore, changes may require a quick action to return the organization to its favored status. Part of the management change is considering an update on the organization’s culture. Modern organizational culture must accommodate quick conflict resolution strategy as compared to solving problems when they have gone out of hand. Additionally, success in change must reflect an accommodation of teamwork, quality management, service, and product, continuous active and passive organizational learning.

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