Reference no: EM133550979

Toyota was the world's first automobile manufacturer to produce more than 10 million vehicles per year, which it has done since 2012, when it also reported the production of its 200-millionth vehicle. Toyota is the ninth-largest company in the world by revenue in 2021 (Fortune 500 list). Despite the negative impact of COVID-19 on the automotive industry, Toyota managed to maintain its lead making Toyota the top-ranked automaker.

Hiroshi Okuda is not afraid to speak his mind or impose radical change in an organization. And because of these traits, he is memorable at Toyota Motor Corporation, where he is the chairman of the board. Prior to becoming chairperson (1999-2006), Okuda served as Toyota's president (1995-1999)-the first non-family member in over 30 years to head the company. He also is unusual among other Japanese executives because, in Japan, executives are supposed to be unseen. Okuda justifies his outspoken and aggressive style as necessary to change a company that had become lethargic and overly bureaucratic.

Okuda moved ahead at Toyota by taking jobs that other employees did not want. For example, in the early 1980s, the company was trying to build a manufacturing facility in Taiwan, but the Taiwanese government's demands for high local content, technology transfer, and guaranteed exports convinced many at Toyota that the project should be scrapped. Okuda thought differently. He successfully lobbied for the facility in the company, and it is now very profitable for Toyota. As Okuda noted, "Everyone wanted to give up. But I restarted the project and led it to success." His drive and ability to overcome obstacles were central to his rise in the company's hierarchy.

When Okuda ascended to the presidency of Toyota in early 1995, the company was losing market share in Japan to both Mitsubishi and Honda. Okuda attributed this problem to several factors. Toyota had been losing touch with Japanese customers for years. For example, when engineers redesigned the Corolla in 1991, they made it too big and too expensive for Japanese tastes. Then, four years later, in an attempt to lower costs significantly, they stripped out so many features in the car that the Corolla looked too cheap. Competitors, on the other hand, had also done a much better job at identifying the boom in recreational vehicles-especially the sport-utility market. Toyota's burdensome bureaucracy also bothered Okuda. A decision that took only five minutes to filter through at Suzuki Motor Corporation would take upwards of three weeks at Toyota.

In his first 18 months on the job, Okuda implemented some drastic changes. In a country where lifetime employment is consistent with the culture, he replaced nearly one-third of Toyota's highest-ranking executives. He revamped Toyota's long-standing promotion system based on seniority, adding performance as a factor. Some outstanding performers moved up several management levels at one time-something unheard of in the history of the company.

Okuda also worked with the company's vehicle designers to increase the speed at which a vehicle went from concept to market. What once took 27 months was shortened to 18. And now the company is making a custom car within five days of receiving an order.

Finally, Okuda is using the visibility of his job to address larger societal issues facing all Japanese businesses. For instance, he accused Japan's Finance Ministry of trying to destroy the auto industry by driving up the yen's value. And he has been an audible voice in the country, condemning the lax lending practices that forced Japanese banks to write off billions of dollars in bad loans that led, in part, to that country's economic crisis in the late 1990s and early 2000.

Unfortunately, some of Okuda's actions may have backfired. Speculation that he overstepped his boundary at times by his blunt demands for change and his refusal to bail out other members of the Toyota keiretsu may have offended the founding Toyoda family, leading to his removal as president of the company in June 1999. However, even though he was no longer president of the company, his strategic leadership helped him to be appointed to the chairperson's job.

Questions:

1. How would you describe Hiroshi Okuda's leadership style? Cite specific examples from the case supporting your stand. Is Okuda's leadership style culturally consistent with Japanese practices? Why?

2. When a company is in crisis, do you believe that a radical change in leadership style is required to turn the company around? Why?