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Tuesday, May 31, 2011

Positive Leadership: Upside Down Management

Toyota Motors is the largest automobile manufacturer in the world. What is the reason behind Toyota’s traditonal success? Is it technology?
It has little to do with technology and everything to do with management DNA. Toyota reinvented the way management process works. The top-down management style is the relic of the past when it was effective in producing standardised products. The management structure today must allow more autonomy on the frontline enabling companies to respond more nimbly to shifting markets and customer preferences. Rather than telling the employees what to do, today’s management must learn how to lead, organise, educate and allocate resources utilising inputs from the front-line employees.

Given core business strategy and model, wealth creation today comes from companies that make innovation everybody’s job everyday and do not squander the creative imaginations of employees. A company can demand obedience and diligence, but can’t command creativity, initiative and passion.

The new management paradigm requires inverting the leadership model. Leadership is less and less about meeting company’s goals and more and more about meeting employees’ goals.

In the upside-down pyramid system, the CEO is at the very bottom of the organisation. Given core business strategy and model, the CEO’s job is to support the key employees by removing roadblocks in satisfying customers’ needs. Top managers’ responsibility is to support their direct reports so that they can do a better job and so on.

Toyota's success comes from its superior quality reputation. Its vehicles work right the first time and keep on working while other cars may work well when they are new, but spend a lot of time in the garage later on. The incredible performance of Toyota cars is the direct result of its operational excellence. Toyota’s continued success stems from a deep business philosophy based on the understanding of people and human motivation. The success has been based on its ability to cultivate leadership, teams and culture.

The former CEO of Toyota, Fujio Cho, said, “there are many things the management does not understand. Therefore we ask employees to go ahead and take action. You (the management) realise how little you know and you face your own failures.” He continued, “ By constant improvements based on action (by employees), one can rise to the higher level of practice and knowledge.”

But see now - http://www.ft.com/cms/s/0/076f7700-167a-11df-bf44-00144feab49a.html ('How Toyota Engineered its Own Downfall')

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