Managing through a Crisis The Toyota Way

Toyota Way

A crisis provokes images of leaders taking decisive action, barking orders and making things happen… right now. It may be surprising to know that the CEO of one of the world’s leaders in efficiently and effectively managing change, Akio Toyoda, said just the opposite in a recent stockholder’s meeting. After forecasting an 80 percent drop in profits for 2020 because of Covid-19 (it turned out to be 20 percent), he explained:

The number one thing I have learned and that I am prioritising from my learning is that I am not panicking. I am managing the company very efficiently and stably. In managing the company during these past 10 years, no years were peaceful. Every year, year on year, we have witnessed and experienced a large, drastic change on the scale of a one-in-a-100-year event. So, I think that the calmer I am, the calmer things are within the company.

What planet is he living on? Why isn’t he making the hard decisions, breaking with tradition and throwing out the rule book? Don’t serious leaders respond to a crisis with equally disruptive and bold responses? Time and time again, Toyota, the model for what we call lean management, defies conventional wisdom. Toyota does not suddenly launch a special type of lean program to defeat Covid-19, or to defeat Brexit. Toyota stays true to its core principles regardless of the environment. Often when people hear “lean” they think cheap with minimal resources. In my work on the Toyota Way, I have developed fourteen management principles that go far beyond cost reduction.

The starting point is a Philosophy which began over 100 years ago when Sakichi Toyoda started making looms. I refer to it as “long-term systems thinking.” The core assumption is that the world is a dynamic living system that is unpredictable and constantly throwing obstacles in the way of thoughtful plans. The important thing is to plan as best as possible in the direction of the firm’s long-term purpose and then expect and respond to the inevitable surprises. However, Toyota’s adaptive approach is far more organised than the more common fire fighting when things do not go as planned.

What helps smooth out execution are stable, standardised Processes. The ideal is one-piece flow of value to the customer, which is a goal no company will ever fully achieve because real life is filled with unexpected obstacles. To overcome these obstacles, Toyota depends on People who are creative Problem Solvers. Toyota does not simply hope this happens, but continually trains and coaches people at all levels to become aficionados of problem solving. In this way, management and experts do not need to be the only ones doing the thinking. Even the front-line production worker has a role in the continuous improvement of their processes.

Add this all up and what it means is Akio Toyoda can afford to carefully plan and think through Toyota’s priorities with the confidence that the whole organisation is working in their parts to analyse the situation and take appropriate action, adapting what is already a stable system. By having clear guiding values and well established processes in place, the need to start from scratch is eliminated.

Akio Toyoda explained further, specifically about Covid-19:

As for the immediate crisis, the priorities are the same we always have at Toyota: first safety, second quality, third volume, and fourth profit-making. As times change, these priorities may need to be revisited. But, in the midst of this crisis, our traditional prioritisation has continued to be very important. And based upon these priorities, we will try to develop the Toyota people, and this is also very important.

Toyota’s focus on safety and the well-being of employees help in partnering with local unions. They can honestly say: “we are in this boat together.” Safety extends to psychological well-being of team members. The foundation is job security. Toyota does not promise a job for life, but they do everything possible to work toward long-term employment stability. And “systems thinking” means thinking about the broader impact of decisions—on the community, local businesses, and suppliers of services and parts. An awareness that the company is part of a broader ecosystem not only ensures well-being and stability, but also a boost in overall company adaptability.

Take for example Toyota’s plant in Burnaston (TMUK) where management partners with the union Unite. When Covid-19 shut down production and sales were expected to languish, or when Brexit created uncertainty about volumes and parts supply, management and the union worked together to protect jobs in the short-term and for long-term viability. This does not assume every individual will get 100 percent of what they were earning before the crisis, but because of the value placed on job security the union-management team agreed on provisions to protect most workers. They were partners, not adversaries.

These provisions include the use of a variable workforce from a partnering worker agency that can be released in a crisis, running two shifts with overtime which can be dropped, specifying a certain number of days where workers can stay home with pay and their time banked for a future time when business picks up, and other means. In the worst of the Great Recession in some plants in the United States, it meant “shared pain” where management took a pay cut and workers took every other Friday off without pay.

Toyota treats standardised work almost as part of a religion. Every job is specified down to steps that take seconds, with key points for each step. Workers are rigorously trained in performing the standardised work, but also in modifying the standardised work. Work groups operate quite autonomously so when volume changes they can rebalance jobs: relocating parts and tooling from workstation to workstation and adjusting the standardised work and retraining. TMUK has been practicing this art for decades and can adjust in a short period of time because everyone is involved and much of the detail is handled within the front-line work groups. For example, slowing the line and socially distancing workers, while creating safety protocols, comes quite naturally as changes to the standardised work. And with TMUK’s commitment to safety and job security, team members put in the effort beyond the manual labor to find creative ways to adapt to challenging conditions.

It is ironic that stability at Toyota is the basis for innovation and change. They are two sides of the same coin. This does not mean that Toyota operates as more of a charitable institution than a private business. There are high standards for profitability and TMUK has had to work hard with focus to find creative ways to compete even despite relatively high labor costs and the uncertainty of Brexit. This does not mean that TMUK is guaranteed to stay at full volume forever or to survive severe business challenges if Brexit does not work out as hoped. It does mean that management, the union, and employees at TMUK will fight to be competitive and Toyota will exhaust possibilities before shuttering the plant, laying off employees and damaging the local community. This level of commitment to all sites and workers is something all managers should aspire to reach if they are to develop their own lean culture.

And all this allows Akio Toyoda to sleep at night and remain calm with confidence that the whole enterprise has been prepared to deal with the next crisis. His leadership is still needed and sometimes he has to make painful decisions, but he does not need to send teams in to micromanage parts of the business. Continuous improvement means each part of the organism is in training to adapt and learn… whatever the specific nature of the crisis. And the philosophy is… well it is the philosophy.

Dr. Jeffrey Liker is author of The Toyota Way, second edition and The Toyota Way to Lean Leadership.  He teaches a 5-day Masterclass “Leading the Toyota Way” in collaboration with TMUK and The Leadership Network (TLN).  The Masterclass is run in Virtual Reality and will combine Dr Liker’s knowledge of Lean leadership with immersive VR exercises and presentations from Toyota executives, delivering a highly practical learning experience for executives across the globe. Members who sign up with TLN will be able to access this expertise from the comfort of their homes by simply putting on a VR headset.

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