Saturday April 10, 2010
How Toyota stopped listening and lost its way
Comment by DR A. ARULESWARAN
I have a vision! All the hardship that these employees endure only to make good linen for us to wear - there has to be a better way forward.
That was the basic desire that drove a young Japanese man called Sakichi Toyoda to develop a leadership principle for the manufacturing business that was later used in the service industry.
The maxim: genchi genbutsu, which means "go and see for yourself."
Sakichi Toyoda spent several years of his youth observing workers in the textile industry and studying the way they wove cloth using looming tools and equipment.
The physical pain that the workers endured with the loom weaving tools drove him to re-engineer it. He wanted to simplify the workers' efforts in order to produce a good piece of cloth. That was the start of the business principles and philosophies of working we all know today as the Toyota Way.
These principles pushed the Nagoya-based loom maker to ultimately become the world's largest automaker, Toyota, until the dawn of the year 2010.
The headlines in many business news today somewhat read: "The carmaker's president, Akio Toyoda, is set to testify before the US Congress."
This is perhaps a welcome report for the folks in Detroit who saw the American automotive carmakers battered to the point of extinction by a once unknown Japanese automaker whose basic skills were making looms.
The Toyota way
Kiichiro Toyoda, the founder and grandfather of Akio Toyoda, worked tirelessly to develop people and managerial values, which were the very foundation of the Toyota Way.
Behind it was the principle of genchi genbutsu, a method of observation and identification: mudamuri (unreasonable work) and mura (unbalanced work) and subsequently, ensuring that a state of continuous improvement and elimination of waste was achieved. (non value-added work),
These factors served as the basis to support the existence of the Toyota Way with other principles that were centred on people and their ability to work and produce quality products.
The Toyota Way has been evangelised by various management gurus and consultants and inspired dozens of books that spoke of it as the secret weapon of corporate success.
It sparked off a cottage industry called Lean Management and Just-In-Time Production.
The concept of continuous improvement or kaizen has been so widely used that it is an accepted terminology in business management.
The Toyota Production System is a carefully studied business method by companies with ambitions of overtaking larger rivals in the global market, a method that Toyota successfully applied to overtake the Big Three of Detroit.
In the Toyota Production System, the sought-after solutions in many of these continuous improvement efforts are typically methods and engineered techniques on how to make a task simple, through which perfection can be achieved.
In many ways, the Toyota Production System is a success comparable to the success of Six Sigma, which focused on improving quality and popularised by General Electric under the helm of Jack Welch.
The leaders in these organisations ensured that such business principles and management philosophies were applied throughout the organisation, from the assembly lines to the boardroom.
Losing its way
What led Toyota to lose its way? Perhaps it was the comfort of having reached the pinnacle of the automotive industry or the challenge of staying at the top.
"Pursued growth over the speed at which we were able to develop our people." Consider this recent quote by the current Toyota president as a reflection of the catalyst for the problems faced by Toyota.
An organisation built on leadership qualities that encouraged open communication and dialogue between its people about problems, quality and expectations, had stopped listening. It even stopped responding quickly enough to the voices of industries, customers and employees.
The components synonymous to the Toyota principle are long-term management decisions, highlighting of problems, teamwork and most importantly, a system of self inspection (a self-critical technique of mistake-proofing tasks and activities). These components effectively paved the way to form a culture that fosters continuous improvement through organisational learning.
When Toyoda developed its business principles, it was based on the activities that people were involved in when producing a product or service.
People were the foundation and those familiar with the Toyota Way will know that many of these principles developed humility and that it is this humility factor that enabled it to succeed, a quality that is probably lost in the current organisation.
Has Toyota, in its quest to become the world's top automotive manufacturer, ended up embracing the philosophies that its rivals thrived on? Did Toyota lose sight of its goals when it decided to become the world's largest automaker, overtaking General Motors, Ford and Chrysler?
Critics are speculating that Toyota, in its strive for perfection in speed, quality and cost, has replaced its core principles with the drive and hunger for profits, growth and status – goals aimed only by business stakeholders with capitalistic principles.
Perhaps the tampering of management principles as the organisation reached its pinnacle led Toyota to wander away from its ability to listen to its people and customers.
It turned away from its founding principle.
The result: It lost its way and ended as an organisation with perhaps the largest and most expensive manufacturing recalls.
It is evident that Toyota had failed to comply with the principle that it had previously practised for decades.
The lesson to be learnt: Ignoring the foundation that a business is built on can be a perilous journey.
Rediscovering Toyoda
When Toyoda christened Toyota in 1937, a set of principles that guided how the business would operate was established.
It was built on the foundation of people and its leaders with "respect for people" and "continuous improvement" being its twin pillars.
These pillars also summarise the company's values and conduct.
The inability to develop people within the organisation to match the speed of its growth is quite likely the reason Toyota lost its way.
In order to ensure that the crisis it found itself in is not wasted, it is likely that Akio Toyoda and the organisation will return to the steadfast principles the company was founded on.
The Toyota Way, as applied in many of the carmaker's assembly plants, is to press the reset button when a defect is identified.
The company's culture of humble leadership will steer the organisation back to its foundation – its people and its practices. In this way, Toyota will pick itself up and regain its global standing. It will be a process of rediscovery for the automaker.
Dr Arul is CEO of LSS Academy, an organisation specialising in process excellence. There will be an upcoming Leaderonomics Show featuring key global leaders. Log in to
www.youtube.com/leaderonomicsmedia to access interviews with great leaders across the world.
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