The Decision Making Framework at Honda: Personality and Value-Based Approach

This report analyses the decision making framework in Honda since its conception by its founder Sochiro Honda in 1940s. The analysis uses personality and value based decision making criteria to determine the implications of Honda’s decision making framework.

Honda is a multi-national motorcycle company which originated from Japan through the concept of Sochiro Honda who was later joined by his partner Takeo Fujisawa. The company later entered the US market and competed with European and American motorcycle companies in early 1960s. The success of this company largely depended on the decisions of Honda and Fujisawa in its early stages and later the decisions of the company’s management personnel. The decisions made by Honda and Fujisawa were based on personality and value. This was later adapted by the management team when the company grew and entered the international market.

The decision making framework at Honda: Personality and Values based perspective

Honda’s decision making framework can be explained from a personality and value based perspective. Form the onset, the company’s decisions were based on the personalities and values of its founder and the sub-sequent managers of the company. Since decision making is an aspect full of uncertainties, decision makers take the risk of making decisions based on their judgments concerning certain situations so as to achieve their goals (Matthews, Deary & Whiteman, 2003). Such decisions tend to reflect the decision maker’s personalities and values more than the prevalent situation that prompted the decision. From personality and values theories, it is often postulated that personalities and personal and cultural values influence behaviors. Behaviors then allude to decision making process and its outcomes.

The success of Honda is largely attributed to Sochiro Honda’s character which Pascale (1996) considers as unusual and a reflection of ego and temperament. From personality theories, personality is a heredity factor exhibiting 50 percent behavioural and 30 percent temperament. These constituents of personality influence decision making. Therefore, Honda’s behavior and temperament which reflect his personality were the driving factors in the decision framework of Honda from the outset. Personality is also influenced by environmental factors through socialization, learning and experience. This aspect can be noted in Honda when Sochio Honda was influenced in decision making through socialization with his partner Fujisawa. Pascale (1996) argues that Fujisawa was not pleased with the pace of their company in its early stage so he influenced Honda to abandon the then noisy two-stroke engine and go for a four-stroke engine. Honda agreed to this, proving the validity of our proposition that personality in form of environmental influence implicates the process of decision making. In fact, Fujisawa’s influence on Honda’s personality challenged him to design a more sophisticated engine that doubled the four-stroke engine.

Personality is also explained through the traits theory which is split into the “Big 5” and Myers Briggs Type Indicator. These personality traits were exercised by Honda in his decision making process during the initial stages of his company. The same traits were also exhibited by sub-sequent managers of Honda in 1960s and 1970s.

The Big 5 Model

The “Big 5” model includes:

(Poropat, 2009).

These features are further classified into high and low scores (Poropat, 2009). Decision making framework within Honda Company exhibits high and/or low scores on the above elements of the “Big 5” Model. The model holds that these five dimensions cover the major variations of human personality which in turn impact on people’s decision making processes. Honda reflected low range or low scores conscientiousness which reflected that he was conscientious, hard-working and dependable.

He also displayed a high range agreeableness. In this regard, we note that he is trusting, lenient, good-natured and empathetic (Poropat, 2009). He displayed trust when he entrusted his partner Fujisawa with some of the undertakings and decisions of the company. For instance, when the two started their partnership, Fujisawa provided finance and material support in the business, to which Honda consent. When Fujisawa suggested the use of a four-stroke engine rather than the previous noisy 2-stroke engine, he agrees to it. This showed that he was empathetic, thus exhibited the agreeableness dimension of the “Big 5” model which influenced his decisions for a better performance in the running of his company.

Another incident of empathy displayed in the decision making of Honda Company was experienced in 1963 when five of Honda’s management executives were divided on whether to adopt an advertising campaign strategy which was designed by an undergraduate advertising student at UCLA. The strategy’s theme was: “You meet the nicest people on Honda” (Pascale, 1996). The chairman and the treasurer dismissed the campaign strategy and supported another proposal from another agency. The director of sales differed with the chairman’s view and argued that the Nicest People Campaign was more appropriate. Finally, the chairman agreed with the director of sales and the Nicest People Campaign was adopted. This showed that the top leaders in the company were empathetic. Therefore, the company embraced personality based perspective in its decision making process as opposed to other decision making frameworks whereby the decision derives from the top management irrespective of what others think.

Pascale (1996) considers Honda as displaying unusual character of temperament and ego. This reflects the Neuroticism high score dimension of the “Big 5” model. He was often temperamental, worried, self-conscious, emotional and anxious. This unusual character made him successful in most of his decision making.

Honda management also embraces creativity, appreciation of change, originality, curiosity and sensitivity. These are all attributes of decision makers who exhibit high range ‘open to experience’ dimension of the “Big 5” model of the personality trait theory (Poropat, 2009). When the company first entered the USA market in late 1959, there was a general impression in the US that everyone used an auto-mobile and it was difficult to stage motorcycles into the market. The originality, creativity and sensitivity of Honda executives played a role in the decision making regarding to this situation. The president of Honda, Kihachiro Kawashima stated, “We had no other strategy but the idea of selling something in the US” (Pascale, 1996). This indicated the curiosity, originality and creativity in the company’s decision making process.

Honda also displayed originality, creativity and sensitivity in decision making during his initial steps of forming a company. Honda was driven by the enthusiasm of racing his own motorcycle in competitions to win. Fujisawa persuaded him to abandon his ambitions and start running an enterprise. The idea of designing motorcycles to race and win was an original idea from Honda’s enthusiasm which prompted his decisions to bear fruits.

Honda also displayed high range extroversion. He was very impulsive and risk taker (Matthews, Deary & Whiteman, 2003). Despite the fact that the government of Japan feared that Honda might fail in the US market like Toyota in previous years, Honda Company management was optimistic that they would be successful. They were given a small currency allocation of $250,000 to invest in the US market. The situation in the US was difficult because they entered there in a low season. They had to make rational decisions or fail. They went on with their risky venture until they finally succeeded. This illustrates that risk taking perspective of decision making displayed by Honda Company made them successful.

Myer Briggs Type Indicator Model

Honda Company also focused on future goals instead of emphasizing the past. This is evident from the manager’s dedication to claim 10% market share of the US market without being discouraged by the humble past of the company which seems to have been less prominent compared to other companies operating in the motorcycle industry in the US. This showed that the company management embraced the Myer Briggs Type indicator model of personality traits.

Honda and Fujisawa tried to achieve more and more in less time, against the competition presented by European and US companies thus exhibiting Type A personality as provided by the personality trait theory. The company’s executives also operated under high stress and showed rapid action and impatience. This resulted in an effective decision making which led the company to succeed in the US market. This is evidenced by the company’s executives who initialized the company’s entry into the US market. At some point, they had two of the executives had to share a room due to lack of funds to rent two rooms. They did so as a reflection of their personality of operating under high stress just for as long as they can achieve their goals. This kind of personalities led to decisions that helped the company to succeed in the US market.

Role of Values in Decision Making

Values also influence individuals’ decision making, nonetheless Honda’s managers. Values are a set of stable evaluative beliefs of what is true or wrong in pursuit of a person’s preferences for an alternative course of action over other alternatives (Krishnan, 2001). The implication of values on decision making can be illustrated by the Schwartz’s Values Circumplex – Bipolar Dimensions. From the diagram below, Openness to change illustrates motivation to pursue innovative means (Krishnan, 2001). This was practiced by Honda in its decision making. Their motorcycle design changed over time to reflect new innovative ways motivated by the desire to meet customer’s needs in the US and increase its import value in the US. Honda was also driven by the desire for self-enhancement motivated by self-interest. This is made clear by his ambition to design a motorcycle that he would use to race and win.

(Krishnan, 2001)

Conclusion

This paper has critically analyzed the decision making process of Honda as presented by Pascale (1996). Pascale used the personality and values based perspectives to analyze the decisions made by Honda’s co-founders and managers. It was found out that the company indeed carries out its decision making process in consistency with the personality and values based perspectives of decision making in its decision making framework.

Personality theories such as the personality trait theory are seen to be playing a pivotal role in Honda’s decision making framework. Values models were also considered in this analysis and it was clear that individual values were part of Honda’s decision making process, especially on the individual part of Honda himself in 1950s and 1960s. His values were seen to exhibit self-motivation and this influenced the way in which he made decisions regarding his own company.

Recommendations

This analysis recommends that personality and value based perspectives of decision making should be used by companies to influence their decision making process. This is because personalities and values display our originalities and creativity. From this analysis, it has been noted that Honda succeeded through decision making processes that involved personality and value based perspectives of decision making (Krishnan, 2001). Engaging in decision making from such a perspective gives individuals and organizations the opportunity to use their own intuitions and views to overcome problems and challenges that affect them in decision making.

However, it is prudent for companies like Honda to approach personality and value based perspective of decision making in a more advanced way than Honda Company did. This is because Honda relied more on the unusual character of Honda himself who was original in decision making from the start. Honda pursued his ambitions regardless of the situation. This almost made the company to fail in early 1960s when they ventured into the US market during a low season for Motorcycle industry in the US. Instead of relying too much on personality and values, the company should have also planned well for their venture into the US in advance. This should be considered by Honda and other companies in the future.

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