Has Toyota Lost Its Continuous Improvement Mojo?

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Image of Toyota City by Patrick Ragnarsson/Flickr

Exactly one year ago yesterday (on 2/24/10), Akio Toyoda, CEO and grandson of Toyota’s founder, testified before U.S. Congress about the company’s recalls. As in a crime scene investigation, yesterday senior management attempted to tie a yellow ribbon around this painful one year period by “having employees reflect upon the problems that the company has experienced.” ( source: New York Times) In addition, during this past week, division and department heads have been conducting 10-15 minute sessions with employees, hoping to reestablish their connection with the philosophy of management that Toyota developed, known as Kaizen or continuous improvement.

Here is the irony of ironies. Yesterday, Toyota also announced two recalls of 2.1 million vehicles to fix problems pertaining to floor mats that could interfere with their accelerator pedals. These recalls are another chink in Toyota’s armor.  According to the  New York Times, the world’s number one automaker has recalled more than 14 million vehicles since 2009.  Thursday’s recall covers 769,000 sport utility vehicles and 20,000 Lexus sedans, and added approximately 1.4 million vehicles to its November 2009 recall, which the company describes as being related to “floor mat entrapment.” If top management at Toyota is truly committed to the continuous improvement philosophy, why did it take them 16 months to determine that—in addition the millions of vehicles that were recalled in November 2009—there are potentially 1.4 million additional vehicles that have the identical problem?

The Board of Directors of Toyota is in denial. Despite the fact that Toyota has recently implemented mega-recalls to fix a variety of mechanical and electronic problems, top management still disavows any responsibility for structural defects.  According to the Wall Street Journal, company officials “don’t believe that Toyota’s core production system or engineering processes are in need of a fundamental overhaul.” Akio Toyoda, CEO, said it all in a press conference last year:  “Believe me, Toyota car is safety….”

Furthermore, despite the fact that management’s missteps have tarnished Toyota, a brand name once synonymous with the word “quality,” the consequences incurred by the management team have been minor: a mere 20% pay cut for three months this past summer.  Tellingly, the usual suspects—senior management in Toyota City, Japan— are still running the corporation. No significant heads have rolled.

Toyota’s recalls are not just a bump in the road; rather, they manifest the fact that something is rotten in the state of Toyota. There are multiple root causes of Toyota’s problems, many of which stem from a decade-old, misguided mission, namely, to increase market share and reduce costs. The good news for Toyota is that both of these goals were achieved.  Specifically, Toyota’s worldwide production more than doubled between 1985 and 2008, from approximately 4 million vehicles to 8.9 million vehicles sold in 2008.

The bad news is that, in the process of growing the company, management appears to have abandoned the continuous improvement philosophy that made it great. Its importance to the corporation is manifested by the fact that yesterday, continuous improvement was the main topic of the 10-15 minute conversation between department heads and their team members. Also, known as Total Quality Management (TQM), or Kaizen, the DNA of Toyota was a rigorous system, one that necessitated intensive training between teachers and students. The following Fig 1 is a diagram of the continuous improvement process:

Unfortunately, in the rush to grow, the company had to add-on many new employees and suppliers. Regrettably, these new hires and vendors were not adequately trained in the methods of TQM. Toyota was consequently unable to replicate its DNA.

The term “kaizen” is simply a slogan, unless employees have been thoroughly trained to use the many tools and techniques that this philosophy of management employs. So, at this point, the philosophy of continuous improvement within Toyota simply represents just another management exhortation. As the quality guru Deming stated years ago, slogans are meaningless proclamations, unless that are backed-up with methods for achievement.

Is this latest recall just a bump in the road? Or, does it suggest that the company has some fundamental issues that must be dealt with before they can return to the Kaizen method and restore their image as a quality producer of cars?

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