Internal Threat to the Toyota Production System Due to New Hiring Practices

Toyota with its Toyota Production System is the archetype of lean manufacturing, which also makes it to one of the most successful companies on earth. This success is due to outstanding cooperative management at Toyota; however, recent changes in hiring practices threaten the Toyota Production System.

Toyota – Mutual Respect for Anybody

One of the key factors in the success of Toyota is the ability of their managers to extend mutual respect to everybody. They listen not only to their bosses and customers but also to their shop floor workers and suppliers. Objections originating from the shop floor are heard and valued, and taken seriously during decision making. There is a strong sense of cooperation.

Okay, this now sounds like a marketing blurb from any generic Western company. But at Toyota, this was true! In Western companies, instructions and orders flow down in hierarchy, and information flows up (sometimes sparingly and filtered at every level). At Toyota, however, workers and suppliers have a strong say in management decisions.

As a result, workers and suppliers usually value their work with Toyota. In surveys of automotive suppliers, Toyota is usually considered the best customer, with this being attributed to their “hard but fair” attitude. Other automotive makers usually receive damming criticism, because everything is about money.

Example: The Aisin Fire Case

There are countless hard-to-specify but valuable benefits. For example, in 1997, one  Aisin Seiki Co. factory burned down. This factory was the main source for a brake valve for Toyota, providing 99% of all such valves. Due to the low stocks at Toyota, within a short time all twenty auto plants in Japan stopped working. Outside experts estimated a stoppage for weeks, with costs and losses piling up quickly. It was estimated that each day would cost Japan 0.1% of its industrial output.

Even so, five days later the Toyota factories were up and running again. While the fire was still burning, Aisin and Toyota set up a crisis team, sent 400 engineers to Aisin, and alerted their network of suppliers to the problem. Within hours, other suppliers started to evaluate the possibility of making these complex valves, stopping other orders to make tools, set up machines, and work around the clock to produce these valves. Soon, factories that usually made sewing machines or other parts produced these valves. Toyota was able to start production again a mere five days after the fire, losing only two full days of production. All plants were back on full schedule within a week.

The kicker: The question of money or payment was never asked by the suppliers. They trusted the people at Toyota. And Toyota was worth their trust. Besides paying all expenses, Toyota added a bonus of about $100 million for their efforts.

(Just for a second, imagine managers at Volkswagen or GM paying $100 million voluntarily on top. In my opinion, probably unlikely.)

 Japanese Values in International Business

This Toyota management style of trust and respect works very well in Japan and – I believe – also abroad. However, the Japanese way of listening and cooperation often makes them feel weak when dealing with non-Japanese. In particular fast-talking American businesspeople sometimes make it sometimes difficult for the Japanese to be on an even footing.

In business meetings, fast-talking Americans often dominate the discussion, with Japanese participants mostly listening. It’s easy to say who will get the better end of the deal. Overall, many Japanese businesspeople worry that they are too nice or soft during international negotiations.

Changes in Hiring Practice

Possibly as an attempt to counteract this perceived weakness, Toyota has recently changed its hiring practice. Toyota is one of the top companies in Japan, and this allows it to pick the very best from the supply of new workers. Recently, they started to focus on hiring less cooperative and more pushy people. Rather than selecting cooperative recruits, they pick the egoistic ones – those who have to be right and want to push their agenda through.

This may be good for international negotiations, but it will be less beneficial for the very social basis of the Toyota production system. Mutual respect and cooperation is reduced, and  the new way will be “my way.” Already, changes can be seen at Toyota. While before it was absolutely valid to object upward in hierarchy, this is no longer so. If a manager objects, then there is nothing the subordinate can do – except wait until a new manager comes in a few years.

I see this as a very troubling development, one that can threaten the Toyota Production System and, by proxy, the entire success of Toyota.

Denso – The New Toyota?

There is one company in the Toyota group that manages to stick to the old ways. While most companies in the Toyota group have gone the way of Toyota Motor (or worse), Denso Corporation still maintains its culture of trust and respect. At Denso, workers on every level have the ability to change the mind of their supervisors and managers without fear of a management backlash. The underlying culture of the Toyota Production System is still intact at Denso.

Even more, Denso tries to protect its culture from the new breed of managers at Toyota Motor. Most companies within the Toyota group have a very active exchange of workers and managers. Transfers between Toyota group companies are as frequent as transfers between divisions in Western companies.  Denso, however, no longer sends its managers to Toyota Motor, instead trying to protect the values that permeate the entire Toyota Production System – or shall I now say the Denso Production System?

Primary Sources for the Aisin example:
Valerie Reitman, "Toyota Motor shows its mettle after fire destroys parts plant," Wall Street Journal, May 8th 1997
Toshihiro Nishiguchi and Alexandre Beaudet, "The Toyota Group and the Aisin Fire," MIT Sloan Management Review, Fall 1998