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Don't Gloat Too Quickly - If This Could Happen to Toyota, It Could Happen to You ...

John Shook
2/12/2010
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Okay, so how do you respond to a "crisis"?

My recent encouragement to Toyota President Akio Toyoda that "It isn't the crisis, it's how you respond to it' was misunderstood by some.

Many prominent public relations pundits have been chiding Akio and Toyota for their ham-fisted handling of their current crisis. But, there is a vast difference between my suggestion and the suggestions of the PR Pundits. My intent was to admonish the company to respond to the crisis by addressing any problems and making itself a better company. I was not simply looking for a better public relations campaign.

I worked for Toyota in various capacities in the 80s and early 90s and have been somewhat critical of the company in recent years. Even prior to "recent years," I have always been quick to point out that Toyota is not perfect. In spite of the praise and study and mimicking by countless individuals and companies, Toyota was never perfect, never will be.

Yes, Toyota's public handling of the case has been bungling. But, Toyota the parent company in Japan has always been a tongue-tied country bumpkin. While that characteristic has hurt them - deeply - in this instance, is that weakness the fault that we want the company to address today? Surely not. The lessons to be learned here extend far beyond yet another study of poor handling of a PR crisis, petty assertions by PR consultants and professors to the contrary.

The opportunity here is deep and profound. This is the firm that led the way to a new paradigm in industrial organization! The most studied industrial company in recent history is struggling mightily and struggling in ways that seem on the surface to be in direct contradiction to everything that was thought about the company. Has something gone wrong, seriously wrong, to the degree that the company could even fail?

Were decades of observations by thousands of researchers and others - possibly the most studied company of our time - simply wrong, or did something happen to change this exemplary organization almost overnight? Or, are reports of Toyota’s fall from grace grossly overstated?

Beyond Tainted Tylenol - Why This Crisis Has Been So Hard For Toyota
Remember, on the surface, this is all about accelerator pedals and floor mats. If so, then how could it have gotten so out of hand and hard for the company to respond? Some subject matter experts like Diane Sawyer and Yale Professor Jeff Sonnenfeld are comparing this crisis to that of Johnson & Johnson's Tylenol disaster (implying that Toyota should just take a page from their playbook) - yet the similarities are few and superficial. In the case of Tylenol, the cause was clear, had nothing to do with the company's own processes (so there was nothing to "fix"), and with the obvious danger to the public, the right course of action was clear. Heck, they could tell customers to throw away their old bottles of Tylenol. A car is a vastly different matter.

It is possible, of course, that Toyota is simply lying, as some critics are asserting. There are those who fear that there is a willful mass cover-up going on inside Toyota. It is possible - it happened at Mitsubishi - but I would be surprised. But we really don't have to guess. We will discover the truth of those assertions as the facts emerge. And they will emerge.

I do have a fear here, though it is not that dramatic. My fear is that Toyota may have succumbed to the pressure to declare a definitive fix by presenting one prematurely. The pressure to be decisive, to place the blame, to declare the problem and simple solution has been extraordinary, as it often is in American business culture. Remember Toyota is a vast organization, scattered geographically and organizationally around the globe. To piece together everything that has gone on here is a non-trivial matter.

Credibility Versus Spin
I am not defending any reluctance on the company's part to disclose critical facts. For the record, I should say that I have not spoken with anyone at Toyota about the specific problems that precipitated the current crisis. Given that, my guess (and it’s only a guess) is that the company may not exactly know all the facts yet. It may take some time to sort through the myriad actions, communications, assumptions, mistakes, and intentions that comprise this fiasco. It's my guess that, as a company, Toyota doesn't yet really know what went wrong, from either a purely engineering standpoint, or organizational decision-making or certainly a communications (internal and external) standpoints.

Some charges being made are serious and deserve to be treated as such, unlike the petty, easy pot-shots being taken by the PR Pundit crowd. I want to encourage us (all of us - accusers, Toyota, TPS practitioners, lean production researchers) to look at the facts as they emerge and try to understand dispassionately how the world's most passionate problem-solving company could find itself in this position. Toyota clearly has to take the lead here, beginning with making all the facts known. My suspicion is that the company may not yet have a full handle on all the facts. And before we jump on them for that, I would bet your pay check against mine that Toyota has a better handle on its facts than your company does on its own. I suspect that Toyota may not yet know exactly what has gone wrong. I'm referring to full understanding of the problem at all levels, the pedal and floor mat problem (which, they tell us they now understand) all the way to the broader question of how they got themselves into this mess.

It is my hope that Toyota will share with us the reflection and problem-solving that will take place in the deepest and broadest levels of the organization. What happened and why? If we lost our way, how? What lessons are there not just for Toyota but for all of us?

(Silly aside: There was – maybe still is – a bizarre practice in Japan known as "minoue soudan." In a TV show, individuals would spill their guts on TV to the great relish of the viewing public. It was more than entertainment. National viewers seemed to see themselves as vicarious participants in a national cleansing of shameful acts. Toyota could conduct the first open, corporate minoue soudan - just joking, of course, but I do hope Toyota shares as much with the public as possible.)

To that end, I hope Toyota IGNORES the petty admonitions of the public relations consultants - such as Professor Sonnenfeld - to do a better job of applying public relations Band-Aids: "In a crisis, follow these five rules, starting with getting out in front of the issue with an aggressive information campaign led by your well-coached CEO...” Understanding the deeper crisis as it plays out at Toyota will benefit us all. Better PR might get the public and government and media off Toyota's backs but will also rob us of an incredible opportunity to learn.

Akio Steps Forward
Pundits railed at Toyota president Akio Toyoda for not appearing immediately and throughout the company's sudden acceleration crisis. Caught by surprise by a reporter who tracked him down in Europe, Akio issued an impromptu apology for letting his customers down. For what seemed an eternity (but wasn't), the mess was handled by others, led in Japan by head of quality Shinichi Sasaki and in the U.S. by head of sales Jim Lentz.

Akio made his belated appearance, a hastily called press conference in Tokyo. As expected, the first headline was an apology. Not unexpected, the second headline was that his performance was deemed to be too little and too late. That was followed by an op-ed that hit the right notes in The Washington Post.

There is a long tradition in Japan of the heads of companies taking responsibility and resigning for crises of various sorts. When Japanese organizations go over a cliff it is expected that the company president or chairman issue a public apology, take responsibility for what has transpired, and resign. The leader takes the blame which constitutes a cleansing that is supposed to clear the way for others to start over with a clean slate.

I do not expect Akio to resign (by the way, the reason it is often the president who resigns rather than the chairman is due to the respective roles of the offices: the chairman deals with the outside world, often consisting of more ceremonial duties, leaving the running of the company in the hands of the president). It would be wrong for Akio to follow that path for two reasons. First it would be silly in this case since the mistakes that are coming to light were committed well before his watch (though the messy handling of the mess is a different matter). Secondly, what is the point? The point is less him taking the blame than him speaking and taking action to reassure the public. For that, he could take some lessons from his counterpart in Dearborn, Bill Ford.

Bill Ford is the great grandson of company founder Henry. Akio is the grandson of Toyota Motor founder Kiichiro Toyoda, and great grandson of the founder of the entire Toyota group of enterprises, Sakichi. Bill took over Ford Motor Company in 1999, to rescue it from floundering at the hands of executives who had headed the company in the wrong direction. His early stewardship of the company was defined by the Explorer rollover and Bridgestone-Firestone tire crisis.

In Akio's case, less than one year has passed since assuming the senior operating role - an eerily similar scenario to Bill's.

Bill Ford took on a very public role during his company's Explorer rollover crisis. But, unlike the ritualistic acceptance of blame followed by resignation (to take the shame away with him) that is common in such times in Japan, Bill Ford reassured the public, not in order to accept blame for the past, but to accept responsibility for the future. His role was to reassure, not to take the blame.

And, for the most part, it worked. He was reassuring. The work to unravel what had gone on in the past went on behind him, but he was clearly focused on the present and future.

I don't expect Akio to take such traditional Japanese action as to resign to accept responsibility for faulty accelerator pedals. But, he could certainly learn from Bill Ford's example of publically accepting responsibility to set the company right. Responsibility not for the past but for the future. I think his op-ed sets the foundation for that. More importantly, his broad experience should have him prepared for the real work of taking the company forward.

But, the point is not Akio versus Bill. The issue is not about heroic leadership, focused on the charismatic CEO who steps in and appears to take decisive control, as the PR Pundits advise. This is about nurturing a culture in which all levels of leadership embody the right thinking in their actions.

Doing the right thing
In his book The Toyota Way, Jeff Liker does a great job of spotlighting Toyota's admonition to managers to "do the right thing." Sometimes the "right thing" isn't the best thing from the standpoint of immediate or apparent business expediency. Jeff's accounting of his discussion with Jim Press is especially impressive:

"Can a modern corporation thrive in a capitalistic world and be profitable while doing the right thing? I believe that Toyota's biggest contribution to the corporate world is that of providing a real life example that this is possible. Throughout my visits to Toyota in Japan and the United States, in engineering, purchasing, and manufacturing, one theme stands out. Every person I have talked to has a sense of purpose greater than earning a paycheck. They feel a greater sense of mission for the company and can distinguish right from wrong with regard to that mission. They have learned from their Japanese sensei (mentors) and the message is consistent: Do the right thing for the company and for society as a whole. As Jim Press, President of Toyota Motor Sales in North America explained:

"The purpose of the money we make is not for us as a company to gain, and it’s not for us as associates to see our stock portfolio grow or anything like that. The purpose is so we can reinvest in the future, so we can continue to do this. That’s the purpose of our investment. And to help society and to help the community, and to contribute back to the community that we're fortunate enough to do business in. I've got a trillion examples of that."

Credibility, Not PR Style Points
THAT is the kind of "crisis management" I would love to see from Toyota - deepening even further the development of people and a culture in which everyone is focused on doing the right thing. Not PR style-points.

As I mentioned earlier, I used to work for Toyota, and 20 years ago even did a stint in their public affairs organization. But, honestly, in spite of my previous connections with the company, I was secretly somewhat pleased when the bad news began hitting the past few years and intensifying the past few weeks, not because I wanted to see the company hurt, per se, but I wanted the company to wake up, to recapture what I feared it was losing. As Taiichi Ohno said, you need a crisis.

So, my hope is that the company will overcome its current crisis, not just because I want the company to "do well." I want them to overcome this crisis because of the lessons that accomplishment would afford for us all, to demonstrate again the heights to which an organization can aim and attain. If the company is not up to that, so be it. Anyway, the great thing about this is, Laboratory Toyota continues to be there for us to observe and learn.

john

John Shook
Senior Advisor, Lean Enterprise Institute


Additional Reading:

"Toyota's plan to repair its public image," Washington Post, February 9, 2010. Akio Toyoda’s statement on the crisis. "The past few weeks, however, have made clear that Toyota has not lived up to the high standards we set for ourselves. More important, we have not lived up to the high standards you have come to expect from us. I am deeply disappointed by that and apologize." http://www.washingtonpost.com/wp-dyn/content/article/2010/02/08/AR2010020803078.html

"Inside Toyota's Epic Breakdown" by Nathan Layne, Taiga Uranaka and Kevin Krolicki, Reuters, February 9, 2010. One of the most detailed, factual accounts of the crisis, one which takes Toyota principles and history into account without giving the company a free pass. "The company's dictum holds that all workers have to ask why ("naze" in Japanese) at least five times to get to the bottom of a problem. It is not yet clear how many "nazes" have been asked by management." http://www.reuters.com/article/idUSTRE61851220100209

"What Should Toyota Do Now?" Business Week, February 9, 2010. Jeff Liker's follow-up column, offering personal hansei to the situation, and describing how the Toyota Way is the way that Toyota must approach its fundamental problems. "The point is that I do now know which of these problems is real, or where and why they occurred. (I would venture that journalist do not, either.) Toyota needs to use its own Toyota Business Practices, or TBP, to identify and solve its real problems."
http://www.businessweek.com/bwdaily/dnflash/content/feb2010/db2010029_723140.htm


"Why Toyota Won and How Toyota Can Lose," Jim Womack 2007 e-letter. "Toyota can fail and if it does the root cause will be a failure to propagate its management system"
https://www.lean.org/common/display/?o=750


"It's not the crisis it's How You Respond to It," previous Shook column. "Things can and do go wrong for any company. Yet Toyota has a special relationship with problems. The company has thrived for years by developing an obsessive focus on continuous improvement and problem solving. In Japan, they call Toyota people "problem-solving junkies." If any company can get to the bottom of an issue like this, a problem like this, it's Toyota."
https://www.lean.org/shook/2010/02/its-not-crisis-its-how-you-respond-to.html


"What’s Your Challenge?" Shook management column. "Toyota can’t exist - Toyota can't be Toyota - with a challenge." This really is an important column to highlight! "But, the bigger and somewhat ironic problem for Toyota is that the need and opportunity to respond to these immediate problems will come as a welcome distraction from having to face its true, deeper, crisis. That crisis is no less profound than facing fundamental questions such as who are we? What are we here for? What is our purpose? In short, identity crises that will manifest itself in practical matters such as how do we develop our people, maintain our principles, and/or adapt them going forward?"
https://www.lean.org/shook/2008/12/whats-your-challenge.html

"Survive to make money - or make money to survive" Shook column exploring purpose and long-term strategy. "If you aim for survival, your modus operandi becomes adaptability. How has Toyota pursued or demonstrated adaptability? When I first got a handle on how Toyota built flexibility into its operating (production) system design, I didn't realize how unique it was, but could immediately recognize its elegance, whole-ness, and power."
https://www.lean.org/shook/2008/12/with-gms-demise-becoming-more-real.html

5 Comments | Post a Comment
Liz Guthridge, The Lean Communicator February 16, 2010
Great insights, John. Thanks for the thoughtful analysis.

As a communication professional who has experience with crisis communications, I'm troubled by how so many want to jump to conclusions immediately without knowing all of the facts, especially when they're on the outside.

I too hope that Toyota shares its reflections and problem-solving with us because that will belp us understand and learn more from this crisis.

I agree with Ian Mitroff, who's considered the father of crisis management that we can emerge stronger from a crisis--especially those that are self-induced. To do do so, we must immerse ourselves in the details, analyze carefully and think creatively.
Jamie February 17, 2010
A great reminder. This could happen to any company, and the bigger you are, the bigger you, uh, fall. There is no question that people and the media like to take on the big guys. And often the big guys deserve a little smacking around to keep them honest.

Everyone falls. It's not even IF you get back up. It's HOW you get back up. Toyota certainly has failed in the PR challenge, but they were never any good at that anyway. But can they respond with product, customer engagement, and quality? Only time will tell. I'm not willing to judge yet.

I have been resisting writing about the Toyota case because so little is actually know about the defect itself, and cause and effect isn't clear. But I have been getting enough questions about it. I don't think this changes anything about Toyota's success. They still have dramatically fewer recalls than others. And of course no one that knows lean would say they were anything close to perfect.

I did write up some of my thoughts and lessons in observing the story on my blog here: http://jamieflinchbaugh.com/2010/02/the-fall-of-the-mighty-toyota/

Jamie Flinchbaugh
John Shook's Lean Management Column February 19, 2010
Thanks much, Liz. I appreciate your accentuation of the need to know and examine the facts. As you would know better than me, a company shouldn't seek to merely communicate its way out of a mess like this. But at the same time it is true that poor communication has much to do with Toyota worsening the mess it is in and excellent communication is going to be essential to make things better. I've never read Ian Mitroff but will now! - john
John Shook's Lean Management Column February 20, 2010
Thanks, Jamie. Amazing how lack of knowledge of the facts hasn't slowed pundits in prescribing their pet fix. You mention the lower number of recalls that Toyota has experienced historically; they've also had fewer overall safety complaints registered with NHSTA, albeit a higher percentage of those concerned the dreaded SUA problem. At any rate, no doubt this will continue to be fascinating (i.e. full of learning) to watch. - john
Anonymous March 31, 2010
It appears that the root cause is unknown for this sudden acceleration problem. I recently talked with a lady who experienced the sudden acceleration problem in a Dodge Stratus more than 5 years ago on a Hawaii freeway. She also experienced a sudden acceleration problem in a Honda Element a few years ago, again, on a Hawaii freeway. She said the fix for the Honda was a 28 cents piece (what, where under the hood, etc. I'm not sure). I have experienced the opposite when my 1996 Suzuki Esteem Station Wagon would die (2 times) at a particular intersection on my way to work where there were high voltage underground lines (I know because they dug them up at one point). I would just pull over and then restart my car just before I left the intersection. Needless to say, I avoided that intersection to get to work. If Toyota ever gets to the root cause, I hope they share it with all manufacturers. That's why the NASA inquiry didn't surprise me. The freeways in Hawaii have high voltage transmission lines over them. I can't remember when the high voltage transmission lines were beefed up but it was a while ago. Hopefully the fix could be as simple as a shield of some sort, protecting the acceleration sensor from the NASA electrical effects and/or the high voltage line electrical effects.