Implications of Corrective Action Restraint by the Organisations - Case Study Example

Strategic Human Resource Management and Leadership Name: Institution: Date: Table of Contents Table of Contents 2 1.0 Introduction 3 2.0 Causes of Trust Loss 3 2.1 Rapid Response Deficiency 3 2.3 Lack of Transparency 4 3.0 Adopted Strategies Efficiency 5 3.1 Toyota Company 5 3.2 Severn Trent Company 6 4.0 Implications of Corrective Action Restraint by the Organisations 8 4.1 Loose Consumer Loyalty 8 4.2 Reduced Competitive Edge 9 4.3 Employee Value Proposition Decline 9 5.0 Possibility for Rebuilding Organizational Brand 10 5.1 Toyota Company 10 5.2 Severn Trent Company 11 6.0 Conclusion 11 References 13 1.0 Introduction International human resource management and leadership aspects are key among the strategic management aspect in organisations. In this regard, the management of both approaches in the market has emerged as key organizational concerns on the global market serving as alternative market competitive edges. As such, the application of these strategic aspects has over the years facilitated the success of failure of international organisations. This report develops a review on the application of the two concepts in market case studies by the Toyota Company in the automobile industry and the Severn Trent Company I the water and social amenities provision industry. 2.0 Causes of Trust Loss Organizational trust is classified and discussed as the mutual understanding between organizational internal and external stakeholders. On one hand, the internal stakeholders in an organization include the employees, management and the shareholders. On the other hand, as Gerber and Du (2011) discussed, external stakeholders include investors, suppliers, regulators and organizational consumers. In this respect, an organizational trust situation emerges in the case and context in which the various stakeholders have goodwill among themselves. In this regard, the trust component, though a vital and imperative component in organizational market success and reputation can be easily lost. This report evaluates the ways in which the discussed organisations namely Toyota and Trent. 2.1 Rapid Response Deficiency One of the strategic approaches through which an organization can achieve increased and retained trust with its stakeholders is through the development and initiation of rapid response initiative programs. In this regard, the process involves the development and establishment of market alternatives and systems in which an organization can respond to needs as a show of concern and commitment. However, this was not the case with the Toyota Company response. On its part, the organization, despite noting the risk posed by its all weather mat, failed to initiate a recall program for the goods, once the defect was established and noted. In this case, although the floor mat was associated with the San Diego accident, the organization was reluctant to accept the risk and consequently offer a public warning. In addition, the Toyota Company response to the San Diego accident was slow and unreassuringly. In this case, upon the filing of the investigation report by the National Highway and Traffic Safety Administration, the organization recorded a diverging statement arguing that the findings were consistent with its earlier public warnings, an announcement that the authority disputed (Dietz & Gillespie, 2012). In this regard, the Toyota Company management retracted its statement in a bid to regain public trust, a move that came amid too late. Consequently, due to failure to actively and in rapid response own up to the challenges, Toyota as an automobile Company lost its trust in the market. 2.3 Lack of Transparency The concept of industry trust between organizational stakeholders is based on the virtue of honesty and transparency. In this case, in order for the industry third parties to retain and sustain their trust, the respective organisations management should be perceived as transparent and willing to share information as well as respond accountably to any raised issues. In this regard, Trent Company failed to pass the transparency test that led to a failure and loss of trust by its stakeholders. In this regard, despite the whistle blowing initiate by one of the organizational employees, the subsequently established internal control and evaluation inquiry submitted partial and insufficient details to the industry regulator. In this case, although the Company sought to exempt itself inappropriately form the challenge, the eventual release of the details to the media and the realization of the truth by the consumer base implicated on its trust levels in the market (Dietz & Gillespie, 2012). As such, the consumers perceived the organizational management as dishonest and untrustworthy thus reducing on the trust level as exhibited by the consumers in the market. 3.0 Adopted Strategies Efficiency Strategic management principles are based on the principles and virtual of efficiency. In this regard, the principles dictate that through the development and establishment of organizational strategies be executed internally based on contingency and situational aspects n the market. Therefore, the evaluation of the efficiency and success rates of any organizational adopted strategies is based on the existing market situations and needs. As such, this report develops an analysis of the Toyota Company and the Severn Trent Company. 3.1 Toyota Company An evaluation of the adopted Toyota Company strategy reveals the organizational recalling exercises adopted in 2005, 2007 and 2010. In this regard, the Company recalled all the vehicles it perceived to have defects ranging from engines to brake overrides. In the short run, being the largest recall consecutively by an organization, the Toyota Company faced a reputation challenge in the market. However, the approach was beneficial and effective in the long run as it insulated and protected the organization form repeat market related accidents such as the infamous Toyota Lexus San Diego accident that tremendously damaged the organizational reputation. In addition, as an additional measure, the Toyota Company initiated a proactive quality development measure. In this case, the organization reduced its overall management boar form the traditional 27 to 11 as well as the reorganization of the Company’s departmental structure in the market. In this regard, the approach was a proactive measure in which the internal consulting, 50 strong global quality task force led by the organizational President, committee developed by the organization on the governance and likely causes of the quality failure recommendations was implemented. In this respect, the proactive approach though not functioning successfully in the short run period, has evidently succeeded in the long run period (Dietz & Gillespie, 2012). In this case, the organizational venture reorganization and the lean management structure have not only increased the ventures responsiveness as well as played a significant role in restoring the organizational consumers and industry stakeholders’ confidence and trust on the organization. Finally, the organization in an approach to mitigate and reduce the damage extent by the San Diego accident through an out of court case settlement with the victims. In this case, the approach to restore the public confidence on the organizational process aborted and failed. In this case, this was perceived as an organizational approach to reduce its public accountability as well as reduce the blame and accident accountability thus leading to increased market distrust between the organization and the consumers. 3.2 Severn Trent Company On its part, the Severn Trent Company developed and initiated a series of processes and instances through which to mitigate the trust and goodwill failure crisis in the market. On one hand, the first strategy by the organizational board upon the whistle blowing incidence on the possible dishonesty in performance accounts analysis was to dismiss the claims and cover up fir the limitations. In this case, besides misinforming the market regulator Ofwat, the venture constituted an internal evaluation team with the organizational auditors, which was a conflict of interest, to develop a report disputing the whistleblower arguments. However, upon the release of the incriminating accounts preparation process dishonesty to the media, the organizational strategy crumbled and failed. As a measure to overcome the established market dis-reputation, the organizational management installed a new leadership structure with the aim of restoring public confidence. Moreover, when concerns were raised on the organizational customer relations department, the organization initiated the investigation process informing the regular as well as working under a simultaneous inquiry team to that of the Ofwat’s team. Indeed, the inquiry developed internal specific weakness analysis, far many discoveries that the external evaluation revealed. Therefore, the successful self evaluation process as well as the willingness by the management to publicize the findings and honor the penalties imposed and a demand by the regulator for the organization to cut its consumer bills by £42 million (Dietz & Gillespie, 2012). In this regard, through the exhibited organizational effort to correct the respective weaknesses and the move to repay back the illegally acquired organizational profits through budget cuts. Therefore, this organizational aspect, the organizational strategy to counter the market distrust and win the consumer base confidence and trust bore market success. 4.0 Implications of Corrective Action Restraint by the Organisations As already discussed in this report, albeit to varying degrees and extents, the discussed organizational responses were successful in curbing the risk of trust loss. However, the opportunity cost of doing nothing for the respective organisations would have been overwhelmingly high. This report section outlines the key likely outcomes that Toyota and Severn Trent Companies would have faced in the event that they failed to action the raised trust issues. 4.1 Loose Consumer Loyalty One of the implications of trust loss in an organization is the eventual fall and decline of its consumer’s confidence in the organizational operations. Bryson (2011) argued that the concept of consumer loyalty is derived from satisfaction that is in turn derived from quality services and products provision. In this regard, it is imperative to understand service quality both in the organisations perception as well as that of the consumers. On one hand, a key service quality gap is the perception gap where the management quality perception is different from that of the consumers. For instance, while as Toyota recalling of the defect cars in 2005 and 2010 could be perceived by the management as a failure in assuring service delivery on their products, it is perceived by the consumers s not only a failure to guarantee service but as an additional measure to admit failure and the willingness to correct it. In this respect, a failure to initiate such a process would have increased the consumers’ displeasure and dissatisfaction in the organization. Similarly, the process of cutting down the water budgets by the Severn Trent Company was perceived as a measure to restore satisfaction and loyalty. In this case, if both of the organisations failed to act and respond as noted above, the overall consumers’ satisfaction would be lost, leading to loyalty los and the risk of a failing market base, for the lack of a stable and committed customer base. 4.2 Reduced Competitive Edge As noted earlier in this report, increasing global market competition has led to the need for organisations to device and develops unique and sustainable market competitive edges. In this regard, most of the organisations have resulted to the use of organizational intangible assets as a key market competitive edge that is hard for market peers to emulate as well as sustainable, among them consumer satisfaction and loyalty. For instance, growing market saturation in the automobile industry between global organisations such as BMW, Ford and Toyota among others has increased the overall industry consumers bargaining power due to the low brand switching costs in the market (Maguire, 2007). Therefore, in order for organisations to retain consumes in such a volatile market, establishing trust, satisfaction and subsequently loyalty as key competitive edges. Therefore, in the event that Toyota failed to act on the raised issues as it merged in the infamous Sand Diego Toyota Lexus accident, then its competitive edge in the market for retaining a quality and market goodwill would have been lost. 4.3 Employee Value Proposition Decline Finally, both Toyota and Severn Trent Company would have lost their attraction and credibility as preferred market employers for qualified and experienced employees. In this respect, it is imperative to evaluate the road show strategy adopted by the Severn Trent Company C.E.O. In this case, the strategy was adopted as an avenue through which to restore employees’ confidence and pride as part of the organization despite the challenge. As such, the development and establishment of such an employee pride increased the employee value proposition offered by the organization allowing it to regain the market prestige for recruiting and retaining qualified and relevant workforce. On the contrary, if the organization failed to execute the employee confidence and motivation enhancement program, it risked a market failure for losing out its qualified and credible workforce as well as failing to attract an equally qualified and befitting labor force into the future. 5.0 Possibility for Rebuilding Organizational Brand Despite all the setbacks and struggles adopted by the two organisations to retain their market goodwill and credibility, the possibility of their achieving the desired long term trust remains unclear. This report, based on a review and evaluation of the discussed strategy areas, offers the researchers evaluation and informed opinion on the respective organizational success possibility. 5.1 Toyota Company The Company has faced numerous hurdles in its endeavor to re-establish an overall market reputation and consumer credibility. However, the process, unlike that adopted by the Severn Trent Company has been especially reactive and littered with confusion. In this regard, the over 3 million vehicle recalls between 2005 to 2010 for diverse defects damaged the consumers trust on the organizational products tremendously. Therefore, the process of regaining the lost trust and market goodwill by the venture, against the high competition from quality reliant organisations such as BMW will remain a tool order. However, due to its brand variety and an already established market base, the Toyota Company has the opportunity to regain the lost market trust. Nevertheless, in order to achieve this strategic goal, the organization must expand its quality control. In this case, it should employ the total quality management proactive approach that focuses on eliminating defects in the production process rather than detecting them on already manufactured and produced goods. 5.2 Severn Trent Company On its part, the Severn Trent Company success and possibility for achieving and regaining the lost market credibility seems eminent and guaranteed with the current management and market influence trends. In this respect, as noted in the 2009 annual meeting where the C.E.O noted on the challenge likely end, the proactive management approach adopted by the organization earned it an increased trust consumer base. In this case the initiative to correct the earlier mistakes approach adopted by the management through a self evaluation process that revealed much of the system challenges than established by the market regulator and the subsequent decision to make the findings public increased trust with the consumers. Further, the organization lacks an increased market competition due to the monopolistic nature of the industry as well as the basic essence of the supplied products. Therefore, although the consumers could be reluctant to accept the organization and regard it as in the pre-crisis period, they are faced with a declining alternatives list as the market has a monopolistic approach. As such, as long as the venture insulates its operations against a similar crisis recurrence, the market will eventually accept and regain trust in its operations. 6.0 Conclusion In summary, this report develops an evaluation of organizational market challenge and the adopted practical and ideal response mechanisms. In this case, the report adopts two case studies namely the Toyota brand mechanical defect crisis and the Severn Trent Company management and accounting dishonesty and fraud crisis. In its review, the report establishes that lack of proper communication, accountability and transparency by the organizational managements was the root cause of market distrust. Moreover, the evaluation establishes that both organizations adopted strategies with Toyota recalling its defective vehicles and the Severn Trent Company instituting governance changes were effective and offers them a future opportunity to regain the lost market trust and confidence. References Bryson, J. (2011). Managing information services: A sustainable approach. Farnham: Ashgate Publishers Dietz, G., & Gillespie, N., (2012). The Recovery of Trust: Case studies of organizational failures and trust repair, UK: Institute of Business Studies. Gerber, K., & Du, P. N. (2011). Marketing communication. Cape Town: Pearson Education South Africa. Maguire, M. (2007). Managing organizational change for BMW in the emerging Chinese market. München: GRIN Verlag GmbH Read More