Toyota's Powerful HR

In this excerpt from "Toyota Culture: The Heart and Soul of the Toyota Way," the authors discuss how the key to success at Toyota requires a production system that highlights problems and a human system that produces people who are willing and able to identify and solve them.

Saturday, November 1, 2008
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Toyota Culture: The Heart and Soul of the Toyota Way


The Core of Toyota Culture Is Not Negotiable

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.

The Toyota Way culture is the critical ingredient in the company's organizational DNA, and it allows for constructive local adaptation of a global company at the same time that it avoids the potential pitfalls of diluting the Toyota Way.

The culture at a Toyota plant in Georgetown, Kentucky is not identical to that of a Cambridge, Ontario, plant, nor is it the same as the culture in Jakarta, Indonesia. Each plant has certain unique cultural elements based on its specific context, as defined by its history, locale, leadership, and people.

However, while local culture certainly is a strong influence in the company's widespread global branches, Toyota has developed certain core principles that must be present in every Toyota operation regardless of location.

In this chapter, we summarize the human systems model around which this book has been organized. At the center of the model is the people value stream, which is essential to understanding why the Toyota Way has met with such unprecedented success. We believe that the X-factor in Toyota's ongoing success is the way Toyota develops people to not only do their jobs but to think deeply about problems and become committed to the Toyota value system.

The Missing People Value Stream

The concept of a value stream has become a common part of the vocabulary of organizations that want to improve. "Value stream mapping" may be the most used lean tool, and it can have a powerful effect on a team's ability to understand how much waste is produced in the total process of converting raw materials to finished goods.

In value stream mapping, the product's path is followed from raw material to finished goods, documenting both value-added processes and wasted steps. Value added is defined as when the part is physically being transformed to what the customer wants. Any activity that costs time and money and does not add value is defined as waste.

Value stream mapping helps team members understand how the product flows and identify the wastes in the process. For example, is it being moved about from place to place? Is it sitting in inventory? Are there quality problems creating the need for rework?

We can use this methodology on a conceptual level to understand the people value stream. In value stream mapping, there are process boxes in which value is added, and between these process boxes are inventory triangles that represent waste. It is typically found that the greater part of the life of a product is "waste" as it is being moved someplace or sitting in inventory. Imagine if you had the time to map a person's entire career, starting with when they first joined the company.

For our purposes, value is added when the person is learning and being challenged. These periods are shown as the process boxes, while every hour spent not learning is represented by inventory triangles -- waste.

A person's work may be productive, but for our people value stream, if the work does not contribute to learning and development, it will be classified as waste. We would probably expect that most of the careers mapped would exhibit a lot more waste than value-added development.

After all, most of us spend a fair amount of time doing routine work, taking breaks, or sitting in ineffective meetings. We suspect this is true at Toyota as well, but we believe a significantly larger portion of time at Toyota brings to its members value-added learning and development.

Even on the shop floor, workers who perform routine production tasks spend a great deal of time in training where they are taught the higher-level skills of their jobs. They learn multiple skills such as problem solving and group development and practice these skills regularly. They also learn more about safety and have the opportunity to become team leaders.

All of these capabilities lead to the development of an entirely new set of advanced skills.

At Toyota, the term "system" is used quite often, and the product value stream and people value stream are literally intertwined in a system that makes up the DNA of the Toyota Way. Developing people into problem solvers takes waste out of the system and leaves a leaner system in place.

Without the waste of inventory, a delay or quality problem will immediately shut down the process. This means that problems surface quickly and thus challenge team members to respond to and learn from the obstacles that they encounter on the job.

When these two value streams are connected and that DNA is reproduced, it forms the "Toyota culture," which makes it possible not only to implement but also to sustain the Toyota Way.

Problem Solving Connects the Two Value Streams

The importance of problem solving in the Toyota culture cannot be emphasized enough. It serves the very vital function of connecting the product and people value streams. If the product value stream and the people value stream make up the organizational DNA of the company, problem solving is the code that connects the two.

Without a practical and continuous problem-solving process that is used on a daily basis, there will be a gap in any company's lean transformation. Toyota emphasizes that the tools of the Toyota Production System (TPS) are designed to highlight and identify problems within its organization.

Kanban, continuous flow, and Just in Time all expose problems that one may not see otherwise. The same is true for 5S, Standardized Work, and Andon. The interplay of these systems sets company standards, thus enabling the process of identifying waste-producing, out-of-standard conditions.

For example, if we reduce the quantity of parts brought to the production line from one day's worth once per shift to one hour's worth every hour, we will notice problems with those parts much more quickly and there will be immediate pressure to solve the problems, since there is less than one hour of parts available before we shut down. The out-of-standard condition is observed more quickly, and when it is observed, the potential consequences are severe.

The key to success is to have a production system that highlights problems and a human system that produces people who are able and willing to identify and solve them. This requires team-minded people who are not only competent enough and well trained enough to identify and solve a problem, but who also trust their supervising group leader, feel safe in identifying the problem, and are motivated to solve it.

We put mutual trust at the center of [the Toyota culture] because it is instrumental in creating an environment that both encourages the identification of problems and motivates people to solve them.

Without trust in their employers, employees are reluctant to admit to the existence of problems and learn that it is safest to hide them. Now imagine a company that has not established mutual trust: A team from the front office value stream maps the process and then implements a kanban system here and some standardized work there, and even hangs an andon light connected to a cord to stop the line.

What is likely to happen? If inventory is reduced, problems will surface more quickly, but is the worker likely to pull the cord and identify the problem? Is the worker going to try and solve the problem or throw up her hands and say it is management's responsibility?

On the other hand, if problems are hidden, the entire system of continuous improvement stops functioning and the lean systems lose their value. In the Toyota Way 2001 document, there is a sub-element called "promoting organizational learning," which includes learning from mistakes:

We view errors as opportunities for learning. Rather than blaming individuals, the organization takes corrective actions and distributes knowledge about each experience broadly. Learning is a continuous company-wide process as superiors motivate and train subordinates; as predecessors do the same for successors; and as team members at all levels share knowledge with one another.

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. One might think that developing team members is the function of the training department which puts together a schedule of classes, but Toyota's history is rooted in learning by doing what 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:

1. Work 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. Many companies have taught problem solving and have groups that meet periodically to make improvements, but Toyota has integrated this into the daily management system.

Getting the right people together to solve a problem is the way much of the work gets done in engineering, sales, finance, and in the factory. People are organized into work teams with team leaders and review daily progress, taking problems as opportunities for kaizen.

2. Clean and Safe Workplace -- Leaders must articulate and reinforce their commitment to a healthy and secure work environment. This starts with a health and safety system that reflects company policy and compliance with laws and regulations.

The bigger issue is to put in place systems to prevent health and safety problems and then respond rapidly to health and safety issues and accidents. Like Toyota, your company could implement a variety of formal mechanisms, such as health and safety committees that respond within the same day that a health or safety issue materializes.

In addition, leaders must promote preventive safety measures, safety awareness and ergonomics awareness that alert team members to abnormalities with potential health and safety consequences.

3. 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.

There are a variety of mechanisms we will discuss for formal face-to-face communication, and we will also emphasize the principle that all leaders should manage from where the work is done, not an isolated office.

4. Servant Leadership -- Compared to traditional organizations, Toyota's organizational chart stands on its head. Put the core value-added worker at the top and it is a better representation than the top-down structure we are used to seeing in most corporate organization charts.

Leaders coach, teach and support the members of the work force that are doing the value-added work. In other words, they serve the 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 competencies, scheduling regular team meetings for supplying timely information, assisting in resolving issues and ensuring earned recognition.

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The Organizational-Supporting Processes and the Role of HR

Once you have developed your future-state value stream flow, you need to identify the formal systems required to support this flow. Often these are represented on a product value stream map as kaizen bursts, which represent specific supporting process improvements (kaizen) needed.

The organizational supporting processes to a large degree fall under the auspices of the human resources department.

The roles and responsibilities of the HR department are multifaceted, and its function at Toyota goes way beyond hiring people and administering policies related to pay, promotion and benefits. It seems that in many companies the role of HR is largely to act as people accounting systems. Indeed now there are technical service companies that will allow you to "outsource your HR function" to save money which basically denigrates HR to a computer systems function.

At Toyota, HR does much more than manage databases and it is certainly not a function that can be outsourced. In fact, since people are so integral to its management philosophy, HR is one of the most important and powerful departments in the company.

HR managers typically enter the department by way of other job rotations, such as production management and production control, so that they have an understanding of the core value-adding processes.

As evidence of its influence within 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.

In fact at Toyota no one can be promoted or get a raise without HR approval. They are not simply administering procedures manuals; they are intimately involved with the career paths of all employees, and they must know the people personally and understand in detail their performance and career paths.

What's more, HR at Toyota is considered to be every manager's job. The role of HR is to partner with manufacturing while facilitating ownership by manufacturing. Let's consider each of the organizational supporting processes that HR facilitates:

1. Commitment and Tools for Stable Employment -- Stable employment is the foundation of Toyota's commitment that team members are its most important resource and investing in team member development is a top priority.

It is well understood throughout Toyota that, short of an economic catastrophe for the entire company, like that of the late 1940s, employees will not be laid off. This provides a safety net that allows team members to safely participate in continuous improvement, even when the project is focused on eliminating positions to improve productivity.

The HR department at Toyota is the company's key aid in providing this job security due to its prowess in stable employment management. It has developed sophisticated methods to predict labor needs and uses temporary work forces (not guaranteed employment security) as a flexible shock absorber against natural economic cycles.

2. Fair and Consistent HR Policies and Practices -- Obviously HR strives to infuse fairness into all of its policies and actions, but this common company mission statement takes on a different meaning at Toyota. If you were to follow HR representatives at Toyota around and watch what they actually do, you immediately would discern the Toyota difference.

While employees stationed within most companies' HR departments might spend the majority of their time in front of a computer screen or answering the phone, at Toyota, HR representatives roam throughout its many departments to keep abreast of the latest company happenings. This is referred to as genchi genbutsu within Toyota, which means going to the actual place where the work is done to see and understand company situations firsthand.

Disciplinary issues, employee dissatisfaction, kaizen promotion and employee career progression are just a few of HR's responsibilities. HR representatives must always be visible to team members and aware of what is really going on in the workplace.

To ensure fair and consistent HR practices, Toyota employees cannot be promoted or given pay raises without HR approval. If employee pay and promotion is left solely to the discretion of supervisors and managers, which in most companies is the case, then individual differences in understanding of company promotion policies will cause variation in their administration and consequently low employee morale and lack of trust.

3. Slow Promotion and Rewards for Teamwork -- Becoming a Toyota leader does not happen overnight. It is as much a maturation of the individual as it is a set of management tools and techniques. People mature in their self-confidence and interpersonal sensitivity at different rates but for all people it takes time -- years and even decades.

Since Toyota views the employer-employee bond as a long-term relationship, the company is willing to be patient and allow each person to mature and grow into the level of leadership that fits their capability. In turn they expect the individual to have patience and take any position as an opportunity to learn and grow.

Teamwork is more highly valued than seeking to stand out as an individual genius. The individual who needs to be fast tracked through the company and get lots of individual recognition will not be a good fit in the Toyota environment.

4. Hoshin-Kanri (Policy Deployment) -- Developing people so they learn how to solve problems and continually improve the work is a marvelous asset, but how does this energy and creativity get directed toward a common goal.

Much of Toyota's continuous improvement is driven by hoshin-kanri, also referred to as policy deployment, which is a system of setting objectives for improvement, starting at the very top of Toyota and coming to agreements at every level down to the team member.

Each employee has a hoshin, which is defined as specific measurable objectives that are reviewed throughout the year. When all team members feel like they are a valued long-term part of a team whose fate is tied to the fate of the company, hoshin-kanri is a powerful mechanism for converting their energy into exceptional levels of performance.

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