HR Practices for Sustainable Corporate Growth - The Toyota Way

HR PRACTICES FOR SUSTAINABLE CORPORATE GROWTH:

THE TOYOTA WAY

Jagadish B.1 Dr. Parashurama K.G.2

Dr. Siddegowda Y.S.3

1.0 INTRODUCTION

Many companies today are turning to lean in a time of crisis. The rapidly changing

global market demands that organizations be responsive in order to keep pace. Only

those that respond quickly and skillfully will survive. Toyota has kept its identity as a

company, including its philosophy and principles, remarkably consistent for many

years. Its values of trust and continuous improvement permeate its commitment to

long-term thinking, developing people, standardization, innovation and problem

solving. It is a learning organization that literally thrives on its people engaging in

identifying and solving problems together and achieving results that will benefit

everyone.

From the time Toyota first started its operation, the leaders believed that the key to

success was investment in its people. The Toyota culture has evolved since the

company’s founding and is the core competence of the company. It is the reason

why operations are lean, cars hit the market on time and on budget, chief engineers

developing cars deeply understand the customer, company executives anticipate

long-term trends and have clear strategies, and every employee (called team

members) is vigorously working on achieving the annual plan of the company. The

Toyota Way is first and foremost about culture – the way people think and behave is 1 Jagadish B, Senior Officer, IR Department, HR Division, Toyota Kirloskar Motor, Bidadi, Bangalore, Email:[email protected], [email protected] Dr. Parashumara K.G., HOD, PG Department of Social Work, SDM College, Ujire, D.K.District3 Dr. Siddegowda Y.S., Chairman, DoS in Social Work, Manasagangothri, University of Mysore, Mysore.

deeply rooted in the company philosophy and its principles. At the core it is about

respect for people and continuous improvement, and this has not changed since the

company’s founding.

Since its inception, Toyota has adhered to the core principle to contribute to society

through the practice of manufacturing high-quality products and services. The rapid

growth, diversification and globalization of Toyota in the past decade have increased

the scope of Toyota’s manufacturing and marketing presence throughout the world.

Today, having invested authority and responsibility in a worldwide network of

executives, Toyota is well prepared to operate as a truly global company guided by

common Human Resources (HR) practices with universal corporate culture.

2.0 TOYOTA IS WORLD’S MOST RESPECTED COMPANY

In a Study on the Corporate Reputations in 27 countries - “The World’s Most

Respected Companies 2008” conducted by Reputation Institute, Toyota Motor

earned the highest rating with an outstanding Global Pulse score of 86.53. Google

comes in a close 2nd with a Global Pulse of 85.234. Toyota Motor stands out as the

only auto maker in the top tier, and is followed by Sweden’s Volvo Bilar in the 30 th

spot, leaving BMW and Daimler a distant 80th and 96th respectively.

Toyota Motor’s reputation is clearly broad-based. Toyota tops on public perceptions

of five of the seven dimensions of reputation – Governance, Products/Services,

Innovation, Leadership and Performance. Let us have a look at these ratings:

4 The study was developed to provide executives with a high-level overview of their Company’s reputation with consumers. Over 60,000 online interviews with consumers in six continents were conducted in early February and early March 2008.

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Governance

81.46

81.52

81.79

82.56

91.80

75 80 85 90 95

Tata Group (India)

Coop (Norway)

Infosys Technologies Ltd. (India)

Ferrero (Italy)

Toyota Motor Corp. (Japan)

So what is it that makes Toyota as a leader in the global scenario? It is the culture in

Toyota that makes the difference. Culture can be defined as . . The pattern of basic

assumptions that a given group has invented, discovered or developed in learning to

cope with its problems of external adaptation and internal integration, and that have

worked well enough to be considered valid, and, therefore, to be taught to new

members as the correct way to perceive, think, and feel in relation to those problems

(Schein, 1984).

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Products/Services

84.69

84.74

84.90

85.20

88.30

82 83 84 85 86 87 88 89

Ferrero (Italy)


3 M (US)

Johnson & Johnson (US)


Innovation

81.43

81.63

83.25

83.40

84.70

79 80 81 82 83 84 85

Novo Nordisk (Denmark)

Ferrero (Italy)

Sony Corp. (Japan)

Google (US)


Leadership

84.04

84.82

85.79

87.92

92.11

80 82 84 86 88 90 92 94


Aker (Norway)

Tata Group (India)

IKEA (Sweden)


Performance

85.34

85.43

86.39

88.61

93.39

80 82 84 86 88 90 92 94

Novo Nordisk (Norway)

Inditex Zara (Spain)

IKEA (Sweden)

EI Corte Ingles (Spain)


Many companies have become frustrated with the kaizen events and six sigma

projects that yielded short-term results but had no sustainability. They are searching

for something more, and the missing element that creates long-term results is the

Toyota culture. And while Toyota’s version of its culture varies from country to

country or even from community to community, there is an important core set of

principles and practices at work that any company can learn from. DNA of Toyota

culture is the “Toyota Way”.

3.0 THE TOYOTA WAY

The Toyota Way has been evolving within Toyota since the company’s birth as a

producer of automatic looms in 1926. Founder, Sakichi Toyoda, based the original

Toyoda Automatic Loom Works on deeply held beliefs that concerned both the

purpose of the company and how all of their members should be treated. His original

reason for creating an easier-to-use wood loom was to help the women in his small

farming community who were working their fingers to the bone. Expanding from this

founding principle, the purpose of the company has always been twofold: to benefit

society as well as their team members who make up the fabric of the company.

“The Toyota Way” is based on the guiding principles at Toyota, which define the

mission of Toyota as a corporation and the values the company delivers to

customers, shareholders, associates, business partners and the global community.

The Toyota Way defines how the people of Toyota perform and behave in order to

deliver these values.

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Concepts of Toyota Way transcend language and nationality, finding application in

every land and society. The Toyota Way is supported by two main pillars. They are

“Continuous Improvement” and “Respect for People”. Toyota leaders believe people

who are continuously improving are what have allowed Toyota to grow from a small

loom company in a farming community to a global powerhouse. Continuous

Improvement is defined as, “We are never satisfied with where we are and always

improve our business by putting forth our best ideas and efforts”. There are three

values or principles under “Continuous Improvement”.

3.1 Challenge

We form a long-term vision, meeting challenges with courage and creativity to realize

our dreams. This includes:

Creating Value through Manufacturing and Delivery of Products and Services Spirit of Challenge Long-range Perspective Thorough Consideration in Decision-Making

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The Toyota Way 2001

3.2 Kaizen

We improve our business operations continuously, always driving for innovation and

evolution. This means:

Kaizen Mind and Innovative Thinking

Building Lean Systems and Structure

Promoting Organizational Learning

3.3 Genchi Genbutsu

We practice Genchi Genbutsu . . go to the source to find the facts to make correct

decisions, build consensus and achieve goals at our best speed. This encompasses:

Genchi Genbutsu

Effective Consensus Building

Commitment to Achievement

The second pillar – Respect for People is a broad commitment. It means respect for

all people touched by Toyota including employees, customers, investors, suppliers,

dealers, the communities in which Toyota has operations, and society at large.

Respect for People has two values or principles of “Respect” and “Teamwork” which

is shown in the foundation of the Toyota house.

3.4 Respect

We respect others, make every effort to understand each other, take responsibility

and do our best to build mutual trust.

Respect for Stakeholders

Mutual Trust and Mutual Responsibility

Sincere Communication

3.5 Teamwork

We stimulate personal and professional growth, share the opportunities of

development and maximize individual and team performance.

Commitment to Education and Development

Respect for the Individual; Realizing Consolidated Power as a Team

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4.0 FOURTEEN PRINCIPLES OF THE TOYOTA WAY

4.1 Long-term Philosophy

Principle 1

Base your management decisions on a long-term philosophy, even at the expense of

short-term financial goals.

4.2 Lean Processes: The Right Process Will Produce the Right Results

Principle 2

Create a continuous process “flow” to bring problems to the surface

Principle 3

Use “pull” systems to avoid overproduction.

Principle 4

Level out the workload (Heijunka) – like the Tortoise, not the Hare.

Principle 5

Build a culture of stopping to fix problems, to get quality right the first time.

Principle 6

Standardized tasks and processes are the foundation for continuous improvement

and employee empowerment.

Principle 7

Use visual controls so no problems are hidden.

Principle 8

Use only reliable, thoroughly tested technology that serves your people and

processes.

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4.3 Develop and Challenge Your People and Partners through Long-term

Relationships

Principle 9

Grow leaders who thoroughly understand the work, live the philosophy and teach it

to others.

Principle 10

Develop exceptional people and teams who follow your company’s philosophy.

Principle 11

Respect your suppliers by challenging them and helping them improve.

4.4 Problem Solving and Continuous Improvement Drive Organizational

Learning

Principle 12

Go and See for yourself to thoroughly understand the situation (Genchi Genbutsu).

Principle 13

Make decisions slowly by consensus, thoroughly considering all options, implement

decisions rapidly.

Principle 14

Become a learning organization through relentless reflection (hansei) and continuous

improvement (kaizen).

5.0 THE HUMAN SYSTEMS MODEL

According to the systems model, any given organization should have a very clear

understanding of its purpose, and Toyota has a remarkably clear vision that is

broadly shared among the leaders of the company. There are a variety of mission

statements in the various business divisions within Toyota that change over time, but

each one always includes these fundamental elements:

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Add value to customers and society,

Contribute to the economic growth of communities and countries in which

Toyota does business,

Contribute to the stability and well being of team members, and

Contribute to the overall growth of Toyota.

Toyota thinks long-term, viewing profits as a means to a long-term mutual prosperity

for all stakeholders in both the company and the communities in which it does

business, but it also knows that profits are the result of competitive advantage. The

competitive advantage comes from doing an exceptional job of adding value to

society, and to achieve this, the people value stream must produce key outputs:

quality people producing high-quality, low-cost, and on-time products. To accomplish

this, the value-added steps are:

Attracting people with the right characteristics who are trainable and can

contribute to the value-adding processes

Developing those people so that they have the capability to do quality work

every day

Engaging the people so that they go beyond doing the work to improving how

the work is done through rigorous problem solving

Inspiring the people so that they are committed to the organization and will

continue to learn, grow, and do their best for the customer, community, and

society.

The inputs to the Toyota Way culture are its:

Philosophy

Values

Partnerships

Production system principles

Job competencies, and

Eligible human resources.

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Quality People

Value Stream

Respect for People and Continuous Improvement via Plan-Do-Check-Act

- Recruitment- Selection- Initial orientation

- Roles- Training/ Coaching- OJD

- Follow standards- Improve standards- Problem Solving- ID w ith Team

- Enhance Toyota Values- Community/Family- Environment- ID w ith company

Organizational Supporting Processes

Human Resources Management

Commitment & Tools for Stable Employment

Pow erful HR Supports Fair & Consistent Policies & Practices

Slow Promotion & Rew ards for Teamw ork

Hoshin KanriPolicy Deployment

Work groups and team problem solving

Clean (5S) and safe w orkplace

Tw o-w ay communication via visual management

Servant leadership

People Supporting Processes

Daily Management

INPUTS

Philosophy & values,

partnerships, Toyota

Production System

principles, eligible human

resources

OUTPUTS

Quality people working

together with shared Toyota

values to continuously

improve

PURPOSE

Long-term mutual

prosperity by producing high quality, low-cost &

on-time products

Attract Develop Engage Inspire

Trainable Able Performing Committed

Practice

Plan

Do

Check

Act

THE HUMAN SYSTEMS MODEL

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5.1 PEOPLE-SUPPORTING PROCESSES AND DAILY MANAGEMENT

There are many systems in place to support team members as they are developing

to become committed members of Toyota. Developing people, in Toyota’s history is

rooted in learning by doing which is taught on the job by highly skilled mentors. It is

more of a craft-based system. Intimate daily contact is the way the apprentice is

trained. Similarly throughout Toyota new hires are immersed in living the Toyota

Way daily through involvement in work groups, in a clean and safe environment, with

intense communication, and guided by leaders who are there to support and teach.

Working Groups and Team Problem Solving

At Toyota, the old adage “All of us are smarter than any of us” is truly practiced on a

daily basis. People are organized into work teams with team leaders and review daily

progress, taking problems as opportunities for kaizen.

Clean and Safe Workplace

Health and safety committees are formed which respond rapidly on the same day. In

addition, leaders also promote preventive safety measures, safety awareness, and

ergonomics awareness that alert team members to abnormalities with potential

health and safety consequences.

Two-way Communication and Visual Management

Toyota leaders work continuously to ensure open channels of communication

throughout the team by emphasizing the key values of mutual trust and respect,

sharing the management point of view, and encouraging team members to

participate in team activities and share their ideas.

Servant Leadership

Leaders in Toyota coach, teach and support the members of the work force that are

doing the value-added work. In other words, they serve as a team. They do this by

clarifying and reinforcing common goals, specifying and integrating team roles and

job tasks, articulating standardized work, providing training for required job

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competencies, scheduling regular team meetings for supplying timely information,

assisting in resolving issues, and ensuring earned recognition.

5.2 ORGANIZATION SUPPORTING PROCESSES AND THE ROLE OF HR

HR is one of the most important and powerful departments in the company. Toyota

has intertwined HR with its production management department, and as such, HR is

involved in daily concerns of team members on the shop floor. The role of HR is to

partner with manufacturing while facilitating ownership by manufacturing.

Organization supporting processes that HR facilitates include:

Commitment and Tools for Stable Employment

Fair and Consistent HR Policies and Practices

Slow Promotion and Rewards for Teamwork

Hoshin-Kanri (Policy Deployment)

Toyota as a company, wants and needs to make a profit, but that is not the driving

purpose of the company. Rather, the company exists to satisfy customers, contribute

to society, contribute to the economy, and achieve long-term prosperity for all

employees and partners. Employees, too, expect the minimums of a paycheck and

benefits, but they also desire the personal growth that comes from a lifetime of

working in a positive environment. They want to continue learning, develop new

capabilities, and work for a company that is making a positive difference in society.

When we add up the interests of each party, the common purpose is long-term

prosperity for team members, the company, and society.

Company Goals- Profit- Long-term success- Contribute to economy- Contribute to society- Excellent quality

Employee Goals- Paycheck

- Growth- Good benefits

- Safe workplace- Meaningful work

Long-term mutual

prosperity

Mutual Trust

Mutual Prosperity Creates Partnersip between Company & Employee

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5.3 ATTRACTING COMPETENT AND TRAINABLE PEOPLE

In Toyota, the expectation is that people hired will be with the company for life. So

every hiring decision is taken very seriously. To balance out hiring and carefully plan

for future needs, the human resources department plays a very critical role. Hiring

the right person, in the right amount, in the right form, at the right time is what HR

looks at. Recruitment at Toyota can be explained in terms of a funnel. As indicated in

the figure, Toyota wants a large number of potential members at the front end of the

funnel in order to yield the right number of matching members at the other end.

Since selection is a long-term match, the following dimensions will be scanned:

Team orientation

Initiative

Oral communication

Problem Identification

Problem Solution

Practical Learning

Work Tempo

Adaptability

Mechanical ability

Recruitment

Selection

Initial Orientation

Recruitment to Selection Funnel

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Classroom training

Personal training opportunities

Motivation and practical application

Human Resources Development Modes

Team Leader & Group LeaderManage standardized work, process improvement &

develop problem solving skillsTools: FMDS, TBP and OJD

Manager LevelFocus on shop floor & systems

improvementTools: Visual Factory & TBP

GM & VP LevelBusiness Planning & Policy

DeploymentTools: Hoshin Planning & Toyota Business

Practices (TBP)

Toyota Training & Development Strategy: Roles, Focus & Tools

5.4 DEVELOPING COMPETENT AND ABLE PEOPLE

For decades, Toyota has worked diligently to develop a strong and effective culture

of people who are continually improving its processes. Toyota is a learning

organization and a lot has been gleaned about how to do each and every job. Much

has also been learned about how people can effectively work together,

communicate, and solve problems. Thus, Toyota trains people like they are

surgeons.

The Human Resource Department is responsible for the new team member for the

four-week orientation period, after which the team member is turned over to the

home department. Different training modules cover the following:

Work conditioning

Human Resource Policies

Production

Training to do the job

Classroom training

Pre-promotion training programme

Post-promotion training programme

On-the-job development

Fundamental skill training (GPC)

Standardized work training

Problem-solving training

Job Instruction training

Toyota Way Foundation

Toyota Business Practices

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5.5 ENGAGING COMPETENT AND WILLING PEOPLE IN CONTINUOUS

IMPROVEMENT

It is clear that there are no silver bullets in the Toyota Way in the sense of absolute,

universal quick fixes, but if there is one key, it is problem solving. Toyota Business

Practices (TBP) is a standard approach to problem solving but like standardized

work, rather than limit people’s creativity, it aims to be a vehicle for its development.

Toyota’s TBP method has two parts – the method described as “concrete actions

and processes” and the approach described under “drive and dedication”.

TBP – The Revised Problem-Solving Process

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5.6 INSPIRING PEOPLE TO BE COMMITTED TO THE COMPANY, FAMILY,

AND COMMUNITY

Toyota’s development of its employees is not limited to minds alone: hearts are

considered equally important. Since its inception, Toyota has seen itself as a social

institution as much as a money-making company, with a role to play in regards to its

employees, the community which surrounds its plants, and society at large. Toyota

shows its commitment to its employees is by inspiring them through offering unique

learning opportunities.

Toyota believes in the pillar of respect for people. Team Members need not become

a “Toyota Man” or a “Toyota Woman” to the full extent that might happen in Japan,

but they have to behave according to Toyota core values. According to the Toyota

Way 2001, team members need to:

Respect other people,

Respect themselves and strive to become better people,

Work co-operatively with others to continuously improve products and

processes,

Do this through genchi genbutsu: through actual time spent on the floor and

direct interaction with others,

Always think about how to serve the

end customer,

Treat all team members and suppliers

as partners in the business,

Work to make others on the team

better, and

Work to positively impact society.

Company

Members

Family

Community

Society

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Toyota respects people, and believes that the success of business is created by

individual efforts and good team work. Human Resources (HR) practices in Toyota

are ideal, standard and a guiding beacon for the corporate sector.

6.0 CONCLUSION

Thus, Toyota selects, develops, and motivates people to become committed to the

goal of building high quality products in a safe and fair work environment. Respect

for people and continuous improvement go hand in hand. Treating people as

permanent members of a community sets the stage for teaching people not only to

do their jobs, but to continually improve products and processes. Carefully selected,

well trained and challenged people combined with exceptional processes leads to

exceptional results. The lean mindset is a result of a broader culture that supports

and engages people. Toyota culture is the key ingredient in Toyota’s success as the

global leader in operational excellence.

Toyota is known for its famed “Toyota Production System” and companies all over

the world are working to “implement” the system in their organizations. In most

cases, the results are impressive in spots but are overall disappointing. What they

are missing is a strong “human system” which for Toyota is the key ingredient to

long-term competitiveness. The technical and social systems work together to create

a culture of teams working to solve problems. The tools of the production system are

designed to expose problems, while the human systems are designed to attract,

develop, engage and inspire people to solve those problems. The “Human Systems

Model”, while not a silver bullet, is a depiction of how all the factors come together to

create Toyota culture.

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BIBLIOGRAPHY

1. Collins, Jim, “Good to Great: Why Some Companies Make the Leap . . .and Others Don’t, New York, Harper Business, 2001.

2. Hofstede, Geert and Gert Jan Hofstede, “Cultures and Organizations, Software of the Mind, New York, Mc-Graw Hill, 2004.

3. Liker, Jeffrey K and Hoseus Michael, “Toyota Culture, Heart and Soul of Toyota Way”, Tata Mc Graw Hill Publishing Company Limited, New Delhi, 2008.

4. Liker, Jeffrey K, “The Toyota Way: Fourteen Management Principles from the World’s Greatest Manufacturer, New York, McGraw Hill, 2006, P.295.

5. Liker, Jeffrey K, “The Toyota Way”, New York, McGraw Hill, 2004.

6. Liker, Jeffrey K and David Meier, “The Toyota Way Fieldbook, New York, McGraw Hill, 2006.

7. Liker, Jeffrey K and David Meier, “Toyota Talent, Developing People the Toyota Way, New York, McGraw Hill, 2007.

8. “Lessons from Toyota’s Long Drive”, Harvard Business Review, July-August 2007, pp.74-83

9. Reingold, Edwin: Toyota: People, Ideas, and the Challenge of the New, London, Penguin Books, 1999.

10. “The Toyota Way 2001”, Toyota Institute, Toyota Motor Corporation, Japan, April 2001.

11.Schein, Edgar: “Coming to a new awareness of organizational culture,” Sloan Management Review, Winter 1984, Vo.25, No.2, pp.3-116.

12.Schein, Edgar: “The Corporate Culture Survival Guide, San Franciso, Jossy-Bass, 1999.

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HR Practices for Sustainable Corporate Growth - The Toyota Way