Reference no: EM133221943

Case: Toyota's Unorthodox CEO

Hiroshi Okuda isn't 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 was the chairman of the board. Prior to becoming chairman, Okuda served as Toyota's president-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 is credited with seeing the need for hybrid cars early and pushing Toyota towards quickly bringing them to market.

Okuda moved ahead at Toyota by taking jobs that other employees didn't 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's 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. Under his leadership Toyota was 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 chairman's job.

Question 1 How would you describe Hiroshi Okuda's personality and leadership style?

Question 2 When a company is in crisis, do you believe that a change in leadership style is required to turn the company around? Discuss by focusing on Kurt Lewin's three-step change model.