Has Toyota Lost Its Continuous

Improvement Mojo?

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 theWall 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?