Learning from the Toyota Debacle: The Need for Transparency

Toyota, one of the most revered brands in the world, has crashed to earth in the last few weeks due to its slow and weak response to a variety of gas pedal and braking system product defects. Most news sources state that the company has already spent $2 Billion to respond and the company’s sales dropped precipitously in the last month. The ultimate cost of the company’s behavior is likely to be much higher.

One can ask many questions about why this has occurred. Does Toyota in fact have quality problems in engineering and manufacturing? Has the company become complacent due to its growth and market success? Or is there a cultural problem of facing up to reality and transparently sharing information rapidly?

All evidence points to the latter. Over the last 40 years Toyota has developed an iconic process for product engineering and manufacturing quality. The company’s products have out-performed its peers year after year. Yet Toyota people, like all of us, are not perfect. Mistakes occur and problems arise. The organizational challenge is not how to prevent all problems from occurring, but rather design systems and a culture that enables problems to be recognized rapidly, transparently discussed, and then resolved.

Much of the whole concept behind the Toyota Production System is the theory that people, not machines, make the manufacturing process work.

We have studied this process (it is now widely adopted in the trend toward “Lean Process” consulting) and underneath much of Toyota’s success has been a focus on giving individuals the power to stop a process, identify a problem, and fix it.  One of the biggest reasons Toyota was able to rapidly outperform the US automobile industry in the 1980s and 1990s was this fact: Toyota learned that the production engineers and manufacturing operators should have the power and control to improve the process. US manufacturers treated labor as a replacable part, and as a result ended up with poor labor relations and billions of dollars of union costs to hold them back.

What We have Learned about Transparency

We study talent management – and in fact we are in the middle of finalizing a comprehensive research report on organizational learning culture.  What we have found, after interviewing hundreds of companies, is that high performing companies have a variety of cultural processes for “sharing bad news.”  At Intel it is called “constructive confrontation.”  At the Federal Reserve they call it a “culture of sharing.”  In other companies it is called a “feedback-rich culture.”  Today’s modern word for this is “transparency” – making information available, freely distributed, and encouraging feedback.

The Japanese culture is well known for its tendency to “save face” – that is, try to avoid disclosing embarrassing information because it may harm one’s position or reputation.  Transparency teaches us the opposite.  Only by creating a culture where direct feedback and open disclosure is valued can an organization learn rapidly and continue to improve.

Our most recent research shows that today, as the global economy starts to recover, organizations are starting to focus their attention very heavily on new product and service programs and rebuilding their culture of innovation.  (Surprisingly, 44% of companies now cite “driving innovation” as one of their top priorities for this year, almost triple the percentage from a year ago.)  This is a natural response to slowly growing markets and new business opportunities.

We can learn from Toyota that such success is dependent on transparency.  Only when people feel free to disclose customer feedback, talk about problems in an open way, deal with issues quickly, and share best-practices, can an organization truly respond and innovate with world-class speed.

I have much faith in Toyota.  This is an enduring organization which will bounce back.  Our dealings with the company have shown an ultra-keen focus for customer needs and quality – perhaps this latest issue is simply a wake-up call to focus on internal transparency in a new way.

Watch for more on this critical topic – I will be introducing our new learning culture research at IMPACT 2010:  The Business of Talent®.  Come join us.