Written by Benjamin Lee for iqDynamics
Back in 2009, Toyota; the world’s largest auto manufacturer was forced to initiate several large scale recalls of several models. The cause; a sudden unintended burst of acceleration that was caused by a faulty accelerator pedal. Consequently, this resulted in several high-profile accidents with numerous fatalities. From outright denials by company representatives to the issuing of confusing and misleading statements, Toyota was roundly criticized by many for their mishandling of the situation.
In the aftermath of what is quite likely one of the most infamous automotive recalls in history, Toyota suffered billions of dollars in potential revenue on top of having to pay out exorbitant amounts to settle legal disputes from customers. Along with this, Toyota dealerships all over the world were also badly affected with customer’s taking a hit economically from plummeting car resale values.
So, what can we learn from all of this? Was it an issue with Toyota’s design processes? How is it possible that a company with a reputation for solid quality was able to make such a critical error?
From the mishandling of public communications to a delay in action taken by the management team, the root cause of all of this can be traced back to a failure in HR Management. While some experts may point the finger of blame at Toyota’s engineering team, a manufacturing defect is merely a symptom of a much larger problem at Toyota. A problem which the senior members of the organization and the company’s HR department failed to address.
The Toyota management philosophy touts the benefits of lean manufacturing processes. Lean manufacturing or production applies a systematic management of eliminating waste whilst increasing productivity. It is through the nearly religious adherence that Toyota was able to become one of the world’s largest auto manufacturers. Consisting of two parts, the Toyota Way consists of two main pillars; the first being a dedication to continuous improvement and the second being the respect and empowerment of people.
While Toyota’s recall may be a technical problem, it is unfair to place the blame squarely on production. In fact, by failing to act in several instances we can see how a failure of HR management was in fact the main contributing factor to Toyota’s 2010 crisis.
1.An issue of incentive
As part of the Toyota way, engineers are encouraged to add value to their work which meant reducing costs where possible. In fact, the remuneration of senior managers directly linked to lean management processes and cost-cutting.
By failing to balance factors such as safety and quality in their reward programs, Toyota was setting the stage for failure as employees are encouraged to place value and cost-savings over other considerations. An example of this can be seen from the complaints raised by customers over Toyota’s declining build quality.
Investigations into the crashes related to Toyota vehicles were found to be the result of manufacturing defects. From faulty accelerator pedal to a all-weather mats that jammed the accelerator, it can be clearly seen how safety is sacrificed in the name of cost.
What can we learn from this?
Toyota’s HR department failed to address the imbalances in how an employee’s performance can be measured. As lean management is a major part of the organization’s philosophy, chances are employees were reluctant to speak out against unsafe practices for fear of discrimination.
While the recall was attributed to a manufacturing defect, the root cause in all likelihood stemmed from employee behaviour. While incentive programs are great form of positive reinforcement, the case of Toyota highlights how prioritizing cost-savings at the expense of all else can lead to tragedy.
Toyota’s eagerness to create value should be tampered by an equal interest in maintaining quality and safety.
Ideally, an organization’s corporate culture should reflect its goals and objectives. Lean manufacturing practices as well as innovation are a large part of Toyota’s culture which was a significant factor in the organization’s success.
However along the way, an overemphasis on cost-cutting as well as lean production would have a detrimental effect. For example, in a high-pressure environment such as Toyota employees would have been pressured to avoid wastages or mistakes. Pressure from senior management along with a zero-tolerance attitude towards mistakes would have influenced employees to sweep problems under the carpet in order to conform with the organization’s culture.
The fact that vehicles were released onto the market with clear-cut manufacturing defects speaks volumes about Toyota’s attitude towards wastage. Employees fearing backlash from their superiors would have been hesitant to report any problems on the production line due to Japan’s corporate culture of remaining silent and ensuring total submission to senior management.
What can we learn from this?
While the product recalls may have been caused by manufacturing defects, the root cause of the problem can be traced back to Toyota’s corporate culture of constantly reducing costs. Managers and executives who were motivated solely by cost were likely unwilling or unable to act on negative feedback on the products manufactured.
As we can see, an organization’s culture is able to determine the behavior employees for better or for worse. Being the gatekeepers of their organization, HR professionals are responsible for ensuring that a healthy culture is propagated within. Failing to do so can be damaging for the organization.
The management team’s response of the 2010 recall crisis highlights a clear failure in Toyota’s succession planning. The fact that Toyota’s management team was more preoccupied with sweeping the issue under the carpet and apportioning blame speaks volumes about their calibre. Couple this with the fact that CEO Akio Toyoda was nowhere to be found during the crisis is sure to raise many more eyebrows.
Rather than promoting individuals on the basis of merit, it would appear that managers were promoted on the basis of their ability to appease senior stakeholders within the organization. The rather political nature of these promotions meant that incapable leaders were the driving force behind the organization.
Consequently, this resulted in a decline of quality as employees were actively discouraged from creating waves.
What can we learn from this?
Successful leadership development is crucial if an organization is to remain sustainable for the foreseeable future. From training staff and identifying potential leaders, succession planning ensures that the right people are trained for the right positions within the organization.
By failing to act in an objective manner, the HR department paved the way for unqualified individuals to assume positions of responsibility. Had Toyota adopted a more transparent process of succession planning, issues related to the manufacturing process could have been raised earlier and corrective action taken.
From this short case study, you can see that it is not only important to have a team of HR experts but also a great HRMS system that brings your attention to issues that you should be aware of.
HRiQ is a smart integrative HRMS and Talent Management System bringing together automation and smart workflows to assist your team with daily HR tasks as well as talent sourcing, retention, development and training.