Anatomy of Toyota’s Success

Uncovering its hidden sides

No doubt Toyota Motor Corporation is one of the most successful automobile companies today and its success has been attributed to the Toyota Production System it has developed. Although the hard aspects of its system such as lean production and Just-in-time production have been analysed and followed by many companies, little has been said about the soft aspects of its management practices. Therefore, I wish to list several key features of Toyota’s management which have helped the company to gain world-class status in the following.

Kaizen as DNA of Toyota

Eiji Toyoda, former chairman, once said “At Toyota, Kaizen is in the air.” He meant that you will breathe kaizen in Toyota’s plants, because you can see everybody is working to improve. I believe that Toyota’s DNA is Kaizen. Kaizen is a Japanese word which means continual improvement. But at Toyota, Kaizen means everyday improvement in ‘gemba’ or the shop floor.

Toyota’s strength is that its management keeps challenging its employees by setting challenging goals and employees respond to such challenges wholeheartedly. Such a discipline is imprinted in everybody’s mind. The challenge comes from a strong dissatisfaction with the status quo and a burning desire to improve. It starts at the top management and goes down to lower management till it reaches rank and file employees. When Toyota restarted its production in 1945, president Kiichiro Toyoda said: “We must catch up with the US within three years. Otherwise, we will not survive.” Taiichi Ohno, who developed Toyota Production system, was awed by his subordinates for challenging them and was nicknamed “Mr. Oh, No!”

One senior Toyota manager recently wrote that a manager should not be afraid of being disliked by subordinates for challenging them. I am afraid that many latter day managers have forgotten to challenge. Instead, they would rather stay lenient, sympathise, and be a nice guy with their subordinates. Toyota’s approach for daily improvements is in sharp contrast to the behaviour of western automobile makers who go through major improvements only at the time of development of new models.

Learning and self-improving organisation

Sakichi Toyoda, the founder of Toyota, was an inventor of automatic looms and his never-ending pursuit of learning and improvement has been transcended to generations of Toyota management. In the early days of its history, Toyota Motor almost went bankrupt and had to fire many employees because of the big inventories it had built.

This caused Toyota management to go through soul searching efforts for building a new production system under the guidance of Taiichi Ohno. There were no text books and no experts who could help but only a burning desire to find a new way by themselves. As there was no precedence, it was a process of learning by doing, involving everybody in the company. Ever since, learning by doing and seeking a never ending self-improvement has become a way of life at Toyota.

Respect for people

Taiichi Ohno had a deep trust on employees’ problem-solving capabilities if challenged. Employees were regarded as an asset, not as a cost. Respect for people also meant that people’s time must be utilised to the fullest extent, as is evidenced in maximising the value adding time of employees on the shop floor by eliminating all types of muda (waste). Toyota’s chairman once said: “In the west, blue collars and white collars are treated separately and do not communicate. At Toyota, blue collars are regarded as most precious resources and management makes every effort to listen to them.” Respect for people also meant to shun easy hiring and firing of employees as practised by many companies in the west.

Education and training

Providing education and training is another manifestation of Toyota’s respect for people. In Toyota’s definition, education is to provide new knowledge and training is to provide learning opportunities for employees to practice their jobs in the right way.

Toyota regards on-the-job training as more important than providing knowledge and trains employees until they can follow the right procedures of their work not only mentally but also physically. Supervisors on the shop floors are requested to perform their three roles:

• Maintain standards and take corrective actions whenever abnormality occurs,
• Engage in kaizen for the prevention of recurrence and
• Provide education and training to subordinates and help them to develop self-discipline.

Team work

Toyota is one of the first Japanese companies that have introduced the concept of cross-functional management. Within most companies high walls often exist between different functions, each function pursuing its own goals. Often, quality is regarded as the quality manager’s job and efficiency as the industrial engineer’s job and whenever a serious quality problem occurs, the quality manager is the first to go. Toyota has regarded quality, cost and delivery as cross-functional in nature which requires cooperation among different functions. It is assumed that production line management is responsible for realising quality, cost and delivery and that the role of staff departments is to help production management.

Shop floor improvements are daily conducted as a result of team work of the line management, staff and operators. At the end of every month, managers of each unit get together and report the per capita productivity improvement during the month. The ten best units which registered highest productivity improvement over the previous month are selected and the monthly income of the operators of these units is upgraded. Since the assessment of the productivity improvement is made against the previous month, the same formula can be applied regardless of the types of operations. In gemba, various employee involvement programs such as suggestion schemes and Quality Control circles are positively carried out.

Quality first

Shoichiro Toyoda, Sakichi’s grand son, once said as president of Toyota that quality is the back bone of Toyota and that quality gets the first priority above any other considerations. Although the merit of Toyota Production system in minimizing production cost is widely known, it should be noted that its production system does not allow any abnormalities in quality or machines. Its assembly line is stopped every time abnormalities occur so that no abnormalities are passed onto the next process.

The same discipline is strictly adhered to at every process from upstream management of R&D, product development, production preparations, to downstream management of production, dealer relations and after-sales services.

Long-term perspective Toyota’s management has built its strategy based on the long-term perspective. Ever since it started to build a new production system in the 1940s, it has pursued its goal even to this day and its top management has consistently supported it.

This is in sharp contrast to the behaviour of many western top management which places utmost priority on the quarterly bottom line. As a result, it has failed to establish and implement a strategy of embracing lean production system which takes many years and even many decades before gaining its full benefits.

Gemba-centered approach

Sakichi Toyoda dedicated his life for improving his original inventions of automatic looms. He built a textile plant to test his inventions and his house was built within the plant’s premises. His son, Kiichiro recalled that he was brought up while playing hide and seek around the textile machines. In other words, they both lived in gemba. Ever since the days of Sakichi and Kiichiro, Toyota management has placed special attentions on gemba. Many of its senior managers have been brought up from gemba and are very familiar with what is going on there. Fujio Cho, the current chairman, for instance, was one of the disciples of Taiichi Ohno.

“Go to gemba” and “gemba–gembutsu” are common sayings in Toyota. Gembutsu means tangible items in gemba. The axioms request managers to go to gemba whenever abnormality occurs and check with gembutsu (a malfunctioning machine or object) to identify the root causes of abnormalities and solve them right on the spot. Taiichi Ohno used to urge his managers to ask five whys to identify the root cause of the problem in gemba, instead of going to the meeting room. This is again in sharp contrast to the problem-solving approach employed by many managers who prefer to use sophisticated problem-solving tools in the conference room and not in gemba.

Toyota production system has been built on the gemba-centered approach and not from the application of some sophisticated and academic exercises.

Keywords: Toyota Production System, Kaizen, Gemba, Gembutsu