Developing Your People and Partners

January 14, 2010 - Tags:

At a very broad level, Toyota believes that continuous improvement and respect for people are at the core of its philosophy. Careful reading of the Toyota Way guidelines reveals what is meant by respect: respect for customers, respect for society, respect for suppliers and dealers, and respect for employees. The Toyota Way document puts it this way: “Our Company owes its existence to the support and satisfaction of customers, stockholders, employees, business partners and host societies who derive benefit from the added value Toyota provides. Our continued success depends on providing ever-greater satisfaction of customers by placing their interest ahead of all others.”

Toyota commits to creating value for everyone. The commitment is genuine, based on numerous anecdotes and historical evidence. These commitments are as follows:

  • Time is to be used effectively. “A person’s life is an accumulation of time— just one hour is equivalent to a person’s life. Employees provide their precious hours of life to the company, so we have to use it effectively; otherwise, we are wasting their life.” (Eiji Toyoda, former chairman of the Toyota Motor Company)
  • The nature of relationships is long term. For example, one of the authors asked why a particular joint venture in India gave only a 10 percent share to its local partner. The answer was that the partner was “terrific.” The senior manager added that the local partner was expected to gradually earn enough to buy a larger share of the venture.
  • There is a commitment to make partnerships work. (See, for example, the discussions in Managing Suppliers.) Among the many courses of action pursued by Toyota is dispatching senior managers for months to improve operations. The key issue is not just respect but also a commitment to create value for everyone.

Whether a relationship is transactional (one-time interaction) or relational (multiple interactions over time) depends to a great extent on respect. But that is not the only determinant; another is improvement, which counterbalances respect. Look at it this way: transactional relationships are like meetings between strangers in New York City who honk at each other from their cars. They exist and create friction. That very friction might make such relationships work well by making people cautious of venturing too close to another car. But when relationships happen over a long time, honking at the other person whom you know well (e.g., a coworker or fellow student) and whom you will meet every day is frowned upon. Relational partnerships cannot tolerate rudeness or disrespect; however, respect must be counterbalanced by demand for improvement and contribution to the joint venture. If it is not, the incentive to stay abreast of the system as well as the changes in the environment will go away.

This focus has yet another implication. Continuous improvement can be viewed as improving a person or an organization. The Toyota Way states: “We believe each individual has the creative power for the independent achievement of his or her personal goals. We respect the values, abilities, and way of thinking and motivation of all team members.” The Father of the Toyota Production System, Taiichi Ohno13 is quoted in the Toyota Way document as saying that “work is a contest of wit and wisdom with subordinates.”

Employees at Toyota are asked to think as if they were two levels higher in the organization. Toyota prefers to give broad targets or vague instructions instead of rules. That approach is used, in our viewpoint, to inculcate the habit of assessing and setting one’s own goals. That practice is fundamental to learning about how the system works. For example, asking a supplier to reduce the number of deliveries of water to an office might not lead to the most creative solution; a better approach would be to ask how to provide drinking water the best way.

Toyota uses five kinds of subjective criteria to evaluate managers. One of them emphasizes how results were obtained; others look at the trust and respect the manager has earned. Takeuchi, Osono, and Shimizu suggest that the desired characteristics include willingness to listen and learn from others, enthusiasm for making continuous improvements, comfort with working in teams, ability to quickly solve a problem, interest in coaching other employees, and modesty. Clearly, these are not only fuzzy criteria but somewhat contradictory because quick solutions to problems do not seem consistent with modesty and a willingness to listen and learn. They provide great scope for developing people.

The system aims to develop exceptional people and teams, who will follow the philosophy and understand the system, by challenging them and helping them improve, both within Toyota and also in the extended network of partners and suppliers. Toyota uses many methods for helping its suppliers understand and adopt the company’s way (see Toyota Managing Suppliers). In two fascinating articles, Ward and others and Tae-Hoon15 describe the different levels of relationships that Toyota has with different suppliers. Those relationships range from suppliers that are given almost complete design freedom to suppliers who are given the entire design by Toyota. No matter which relationship is utilized, once the design is finalized, the production processes always seem to follow the more rigidly crafted Toyota Way principles.

How does one interpret that approach? We can use the framework developed above: different suppliers might have attained different levels of understanding of Toyota’s system. That provides a different way of viewing strategic sourcing. Strategic sourcing (or supplier scorecards) is a term used to signify two aspects of sourcing:

  1. Enormous effort is invested prior to selection of a supplier, but unless the same level of effort (or more) is maintained, the supplier tends to slacken.
  2. It is impossible to maintain the same level of communication and relationship with all suppliers—some might be more important than others, from a strategic consideration viewpoint.

A third consideration based on the Toyota Way might be the degree of familiarity that a supplier has with both the buyer’s and the seller’s organization and organizational processes. Thus, the knowledge and stage of development of the supplier is another consideration, strategic or not.

Womack in his weekly e-mails shares some aspect or other about lean production. His recent e-mail provided the following anecdote: “Many years ago, when I first visited Toyota in Japan, I had dinner with the purchasing director and asked how he could be sure that Toyota was getting good performance from its suppliers when only two suppliers were employed for a given category of need and when Toyota relied on target pricing rather than supplier bids. ‘How,’ I asked, ‘do you know you aren’t getting ripped off?’ After an incredulous look, he answered, ‘Because I know everything—every aspect of every value-creating process—running from raw materials at suppliers through Toyota’s operations. That’s my job.’”