Does 'The Toyota Way' Really Work Outside Japan?

Submitted by Dmitri Davydov on Thu, 2007-02-15 08:38.
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TOYOTA CITY, Japan — It does not occupy much space on the office wall, but Latondra Newton calls it the hardest thing for Toyota’s new American employees to accept: those colored bar charts against a white bulletin board, in plain view for all to see.

No, they are not representing the company’s progress toward goals. Rather, they are the work targets of individual workers, visibly charting their successes or failures to meet those targets.

This is part of the Toyota Way. The idea is not to humiliate, but to alert co-workers and enlist their help in finding solutions. It took a while for Ms. Newton, a general manager at Toyota’s North American manufacturing subsidiary, to take this fully to heart. But now she is a convert.

“For Americans and anyone, it can be a shock to the system to be actually expected to make problems visible,” said Ms. Newton, a 38-year-old Indiana native who joined Toyota after college 15 years ago and now works at the North American headquarters in Erlanger, Ky. “Other corporate environments tend to hide problems from bosses.”

Toyota’s corporate culture has transformed it from a small manufacturer into a market-gobbling giant famous for quality circles and giving workers control over production lines. For years, aspiring factory leaders have come here to attend Toyota’s select technical high school, the Toyota Technical Skills Academy in Toyota City.

But Toyota — on course to become the world’s largest automaker — needs to sharpen its game to meet even larger challenges, including raising quality in the face of rapid overseas expansion and its largest recalls in history.

The nerve center for that task is a nondescript cluster of buildings in the lakeside town of Mikkabi, an hour away from the humble-looking headquarters of Toyota, in Toyota City.

It is the Toyota Institute, charged with preparing executives to enter the leadership class at Toyota by inculcating in them some of the most prized management secrets in corporate Japan. The institute sends off its executives to offices around the world as missionaries of sorts for the Toyota Way. The institute does not quite aspire to be Japan’s answer to General Electric’s famed Crotonville training center in Ossining, N.Y., which spawned a generation of top executives across American industry. But it is Toyota’s best effort to avoid corporate short-sightedness and to keep the company true to its original mission of winning customers with quality cars, even as it comes under intensifying scrutiny.

“There is a sense of danger,” said Koki Konishi, a Toyota general manager who heads the institute. “We must prevent the Toyota Way from getting more and more diluted as Toyota grows overseas.”

It used to be enough for the culture to be transmitted by word of mouth among Toyota’s Japanese employees, on factory floors and around cafeteria tables. But Toyota outgrew these informal teaching methods and created the institute, which is so secretive the company would not allow a reporter to visit it, let alone sit in on any classes. Mr. Konishi said Toyota was building similar centers in the United States, in Kentucky, and in Thailand.

“Before, when everyone was Japanese, we didn’t have to make these things explicit,” Mr. Konishi said. “Now we have to set the Toyota Way down on paper and teach it.”

“Mutual ownership of problems,” is one slogan. Other tenets include “genchi genbutsu,” or solving problems at the source instead of behind desks, and the “kaizen mind,” an unending sense of crisis behind the company’s constant drive to improve.

The whole company prizes visibility. To nurture a sense of shared purpose, Toyota has open offices — often without even cubicle partitions between desks.

Dissemination of the Toyota Way overseas, however, can be spotty, executives and analysts warn. Toyota prides itself on pampering customers, but analysts are reporting weak or uneven service at Toyota sales subsidiaries, particularly in emerging markets like China and India.

Worse, some executives like Mr. Konishi complain of managers at Toyota factories who have not adhered to some of the company’s most basic creeds, like allowing workers to stop factory lines when they spot defects. Empowering factory workers has long been central to Toyota’s quality control.

And analysts say Toyota’s recent and embarrassing surge in vehicle recalls was partly a failure by Toyota to spread its obsession for craftsmanship among its growing ranks of overseas factory workers and managers.

“If Toyota can’t infuse its philosophy into its workers, these quality problems will keep happening,” said Hirofumi Yokoi, a former Toyota accountant who is now an auto analyst at CSM Worldwide in Tokyo. “The institute was founded because Toyota is afraid of growing too fast and losing control. It’s still too early to know if it will work.”

For Toyota’s 26 board members — all Japanese salarymen raised on the founder’s ways and with an average age of 62 — the adjustment to its recent emergence as a global leader will not be easy. It was not until 2001 that the company first set the Toyota Way down in writing, at the orders of Fujio Cho, the president at the time who helped orchestrate Toyota’s rapid overseas growth. The company established the institute a year later.

In the last decade, as Toyota has expanded into a vast international group, it has often exported its manufacturing and management methods to 200,000 workers at 27 plants overseas without always taking the time to explain the ideas behind them, analysts and executives say.

So now, with only a third of its total workers employed at its 18 plants in Japan, much of Toyota’s sprawling global empire does not always march to the same tune, these executives and analysts warn.

“Toyota is growing more quickly than the company’s ability to transplant its culture to foreign markets,” said Takaki Nakanishi, an auto analyst at JPMorgan Securities in Tokyo. “This is a huge issue for Toyota, one of the biggest it will face in coming years.”

Ms. Newton, a general manager in charge of training and employee development in North America, can testify to that. She said that while new American hires often had difficulty at first with some tenets of the Toyota Way, they quickly caught on.

Ms. Newton includes herself in that group. At first, she confessed, she did not embrace some of these practices, especially the white bulletin board, which she said she overlooked at first as “wallpaper” because she did not look at it closely. But Ms. Newton said the institute — which has already trained about 700 foreign executives — changed her. There, she says, Toyota tackles the problem of cultural education with the same intensity that it applies to building drive trains and transmissions.

After arriving at Mikkabi last September, she and her 40 classmates from the United States, New Zealand, Singapore and Japan were immediately plunged into a week of 12- to 14-hour days, starting with lectures about the Toyota Way from the company’s president, Katsuaki Watanabe; Mr. Cho; and other Japanese executives. Each day was focused on a specific core concept, with students discussing the meanings in their own words.

Ms. Newton says the students often worked late into the night on group presentations summarizing the Toyota Way and how to apply it to actual problems back at their home offices. One tenet that she studied was “drive and dedication,” a practice of always seeking out problems and then solving them by breaking them into smaller, more manageable pieces. The class also discussed other slogans, like “effective consensus building” and “respect for people.”

After an additional week at the Wharton School of the University of Pennsylania, she spent five months in Kentucky on an independent project about teaching Toyota culture to generations that would enter the company around 2020. She says she flew to Japan in December to give a 10-minute presentation to Toyota’s president, Mr. Watanabe.

Toyota’s culture, she said, is still grounded in a Japanese-oriented brand of group-think. But in some cases, Toyota has also adapted it to fit American culture, she said, dropping group calisthenics at American factories, for example, although that is still common at Japanese plants.

She said she understood the Toyota Way better after learning from people who had lived it their entire professional lives. She now uses the wall chart as a critical motivating tool for managing her employees.

“When I saw folks in high ranks, like Mr. Watanabe, and how consistent and dedicated they were, I knew they were true believers” in the Toyota Way, Ms. Newton said. “Now, I’m a true believer, too.”


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