By the late 1980s, TMC was afflicted with the creeping onset of problems typical of large businesses, including bloated organizations and a lack of flexibility. To counter these problems, TMC implemented a number of reforms to its personnel systems and development organizations.

The number of employees at Toyota Motor Co., Ltd. and Toyota Motor Sales Co., Ltd., which had reached a combined total of 51,200 in 1980, increased by 20 percent to 61,700 by the year 1985, three years after the merger. The overall organization became bloated as it was divided into smaller units, and by the second half of the 1980s, it became clear that the company would run out of titled positions such as section managers. The Human Resources Group began studying the possibility of fundamentally reforming the organizational and personnel systems with the involvement of the individual groups throughout the company and in August 1989 introduced a new "organization flattening" flattening in the Administration Group and Engineering Group.

Until that time, TMC had adopted a pyramid-shaped organization based on divisions, sections, and sub-sections. The pyrmamid organization was suitable for preventing mistakes through checking functions and promoting a sense of unity and for nurturing subordinates and served as an important foundation supporting TMC's advances. However, many changes, such as the diversification of customer needs, were taking place in the marketplace, and the numbers of tasks that cut across organizational boundaries and that required creativity were increasing, making it difficult for the pyramid-shaped organization to cope.