Toyota must implement continuous improvement

March 12, 2010

Toyota must implement continuous improvement



Don Esmond, one of Toyota Motor Corp.’s top sales execs in the United States, sounds like a man who’s just got religion.

Toyota dealers have repaired more than 1 million recalled cars and trucks. Authority to issue recalls will reside more squarely in the automaker’s U.S. operations. Incentives to woo new customers unsettled by reports of sudden unintended acceleration, dodgy brakes, even scary accidents, appear to be gaining traction.

"We had to take responsibility for what happened and apologize," Esmond, senior vice president for automotive operations of Toyota Motor Sales USA., said in an interview Thursday. "There is a fine line between taking responsibility and getting on with business."

Yes, there is. There’s also a fine line between saying the right things amid a crisis — we’re sorry, we’ll fix things, we’ll change, we’ll delegate more decision-making to operating regions from headquarters in Japan — and actually doing it.

Toyota’s reputation for quality, reliability and tending to customers is built around a simple core principle — namely, continuous improvement. Acknowledge mistakes, learn from them, implement the changes that will improve efficiency, reduce costs, satisfy customers and, by the way, bury competitors who can’t match them.

It mostly worked. Rivals and some outside the auto industry bench-marked Toyota’s production system, adopting even pieces of the Japanese nomenclature. They studied (and chased) Toyota’s quality metrics. They envied their cost structure and, especially, the ability to generate cash and maintain the kind of credit ratings that Detroit hasn’t seen in years.

The result was — is — an impressive juggernaut, aptly named, however many Toyota insiders detest the label. But the success, as so often happens, also obscured tangled corporate structures that compartmentalized decision-making, impeded critical corporate communication and ensured headquarters in Japan controlled information.

Time to pull the imaginary corporate andon cord, folks — that critical line running above Toyota assembly lines enabling employees to stop production when something goes wrong and get it fixed. Is continuous improvement mostly confined to engineering and the factory floor, or does it extend to the way Toyota communicates and manages its own culture?

What Toyota does — not what it says — over the next few months to streamline and open its tightly controlled corporate culture will provide crucial information to answer that question.

To hear longtime Toyota hands describe the automaker’s intricate (and redundant) reporting lines and bureaucratic silos is to be reminded of the old General Motors Corp., circa 1994 or so. Three different headquarters in the United States — sales in California, manufacturing in Kentucky, corporate affairs in New York — each reported separately to Japan, a structure only recently modified.

Decisions on whether to recall troubled vehicles came from Japan, with scant input from the States or any other market. Toyota’s operations here received their first complaints about "sticky" accelerator pedals last October — roughly a year after similar complaints had been fielded in Europe.

"Toyota didn’t connect the dots," Esmond said, rightly. "We’ve just got to take it a step at a time. From where we are now, we’re going to be quick to issue recalls."

Pressured by fallout from its global recall scandal, Toyota is moving to partially dismantle some silos. A global quality council is being formed; a quality czar in the States will have authority to issue recalls; reporting lines from the bellwether U.S. market back to Japan are being simplified, if slightly and slowly.

Enough? Probably not. Because the company that sets the standard for efficiency risks clinging to a structure proven to be an operational liability when critical, financially material, problems are compartmentalized and allowed to fester.

If that’s a not a candidate for pulling the andon cord and injecting a large dose of continuous improvement, what is?

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