Welcome Problems, Find Success

Creating Toyota Cultures Around the World

Kiyoshi "Nate" Furuta

• Publisher: Productivity Press
• Year: 2021
• ISBN:
  9781000449358
• Edition: 1
• Topic: Business
• Subtopic: Management
• Index: Business

In this book, author Nate Furuta, former chair and CEO of Toyota Boshoku America Inc., shares the story of his decades of experience directly leading the establishment of Toyota cultures outside Japan. Furuta was the first Toyota employee on the ground at New United Motor Manufacturing Inc. (NUMMI), Toyota's joint venture in California with General Motors, where he directly led the establishment of the most revolutionary labor-management agreement in the history of the US auto industry. In addition, Furuta was the first Toyota employee on the ground in Georgetown Kentucky at Toyota's first full-scale, wholly owned manufacturing operation outside Japan, where he led (working directly with President Fujio Cho) the establishment of Toyota's general management systems and culture there.

This book tells the stories of establishing successful operations in those two iconic organizations as well as others. Furuta reveals details, both stories and process descriptions that only he can tell. He takes you along as he and others lead Toyota's intense globalization from the early 1980s to recent days. He introduces you to the critical leaders in Toyota's history, such as Taiichi Ohno and Fujio Cho as well as Kenzo Tamai, the head of the company's HRM function in the 1980s.

This book is not about human-resource management (HRM) policies and procedures. It provides a deep dive into the way senior leaders embody deep awareness of HRM matters, developing and executing company strategy while at the same time developing organizational capability. The role of senior leaders isn't just a matter of directing the company to achieve objectives; it is a matter of building the capability to achieve those objectives, consistently, and further developing capability as it executes. Key to this is to develop the awareness, attitude, capability, and practice of identifying problems as progress is made toward achieving objectives, which is, in fact, attained through steadily eliminating each problem as it arises. This becomes a self-reinforcing loop of the organization, tapping in to the essence of solving problems while simultaneously developing ever better problem-solving skills and better problem solvers. This loop propels an organization toward meeting its purpose while developing capability for capability development.

Essentially, this book reveals Toyota's general management systems from the firsthand experience of a Toyota Japanese senior manager and describes, with stories and process examples, the attitude, behaviors, and systems needed to successfully establish and lead in a true Lean business environment.

1. No Problem, No Improvement

NUMMI

Large organizations evolve organically over decades. Often, the resulting organization is an amalgam of good and bad practices cobbled together into systems that drive management and employee behaviors to unintended consequences. By contrast, Toyota executives, during its half century of incredible success, focused intentionally on managing the company’s evolution, establishing systems that demand and encourage problem-finding behaviors, and spur improvements toward a shared, aligned vision. Such a problem-finding, improvement-minded culture (kaizen culture) depends upon individuals changing the way they think and act.

In 1982, in response to localization pressure from the US government, Toyota looked to establish a joint venture in California, particularly in a union environment, to see if Toyota practices could translate overseas. After a potential deal with Ford failed to materialize, I was told to head to the United States and meet with General Motors and the UAW to establish a legal framework to accommodate Toyota’s kaizen culture in a UAW facility. My role was to develop a Letter of Intent (LOI) as the preliminary understanding of labor relations in the pending NUMMI joint venture and to draft the labor contract with the UAW once the joint venture was established.

I was surprised to be selected. I was a legal department assistant manager who had only transferred from Labor Relations a year earlier, did not speak English, and had no knowledge of the United States. I knew Japanese law and labor union practices because I had spent 12 years in Labor Relations, but I would need to intimately understand US labor law and UAW practices. I was appointed along with Mamoru (Mike) Furuhashi, an assistant manager in Human Resources who spoke fluent English.

The GM plant in Fremont, CA had been closed after 22 years of operation. Its workforce had filed more than 4,000 grievances, and absenteeism was over 20 percent. Due to a UAW demand, General Motors requested Toyota to staff production from the Fremont union ranks. In return, Toyota demanded that the UAW agree to a framework in Toyota and UAW documents that would allow workers to find and solve problems and continuously improve operations, which would be key to NUMMI succeeding.

It is a fundamental belief of Toyota that management and the workforce must relentlessly eliminate nonvalue-creating work, processes, jobs, functions, and projects, and redeploy extra resources to value-creating activities. This means that as an organization pursues a shared vision and evolves, instead of the traditional adversarial relationship, its members and their work practices are flexible and evolve as well. The UAW would need to agree to flexible work practices. Flexible work practices are a fundamental element of Toyota culture and its ability to find problems, experiment with changes to address them, implement changes, and improve.

The contract between GM and Toyota was signed Feb. 17, 1983 by Roger Smith and Eiji Toyoda. It had a contingency clause to establish a harmonious relationship with the UAW to enact the contract. We selected former US Secretary of Labor William Usery Jr. to be the negotiator with UAW President Owen Bieber, as a way for us to gain a basic understanding of labor relations. We provided Usery with TPS concepts, as well as the minimum requirements we would ask of the UAW. We successfully obtained these requirements, including introduction of TPS with flexible work practices, in the LOI dated Sept. 22, 1983. This allowed the company to establish the initial terms and conditions of employment and pledged a harmonious relationship between parties to negotiate the final contract by the end of June 1985.

Flexible work practices—such as a minimum number job classification, flexible production standards, kaizen program, company-initiated transfer of employees between work assignments, no lockouts, a no-strike clause with binding arbitration, limited seniority, broader mandatory overtime—were agreed to by the UAW in the LOI. But there was no guarantee they could be incorporated in a final contract. In fact, AAI—the Mazda-Ford joint venture under negotiation at the same time—failed to obtain a flexible work practices agreement in the labor contract for the Flat Rock, MI, facility. This happened even though it had secured the identical Letter of Intent from the UAW soon after our preliminary negotiations with the UAW.

Early in our negotiations, the union shop committee, which had not been part of the LOI negotiations but represented the majority in the final contract negotiation, presented to NUMMI management the old GM contract clauses as their proposal. The UAW local was, essentially, proposing that we run the plant like the GM plant that had been shuttered. I reminded the UAW of the contingency clause and that we would revoke the joint venture if we could not agree on a harmonious relationship. In other words, no flexible work practices and TPS, no NUMMI.

I had heard that UAW President Walter Ruther had told members that the role of the union was to establish and defend “production standards” to protect workers from the abuse of management. This was a cornerstone of the UAW’s mission.

Production standards would certainly kill TPS, because TPS constantly requires finding and resolving problems, pursuing better processes, and eliminating waste. It was my personal responsibility to negotiate the work practices—including this contentious issue of “production standards”—because no American within NUMMI management understood Toyota’s work practices to the level that I did. Because the production standard was so important to the UAW, Dick Shoemaker, assistant to UAW President Bieber, negotiated with me one on one.

This issue was critical to the UAW and Toyota. But we had a huge gap in understanding that this was the critical problem that needed to solve. Toyota utilized standardized work charts to define pace and process—not “production standards,” as defined traditionally in the US auto industry. The standardized work charts described the step-by-step production process for each worker, the time required for each step, the amount of work-in-process inventory to hold, as well as many safety and quality points to be checked. The operator must follow this standard procedure, but anyone—often the operator—can change it if they find a better or easier way, with the approval of the immediate line supervisor or group leader. This was very dissimilar to the traditional US production standard.

The initial setup of standardized work is done by a team leader, who also is a union member, and not by industrial engineers (i.e., management). Given this condition, the pace of the operation is reasonable and sustainable from an operator’s perspective, but future improvement is expected. The key distinction is that a union member, in this case the team leader, designs the initial work process under the assumption that the operator knows best his/her own operation.

Well, the Toyota approach and my initial descriptions simply frustrated my UAW counterpart. He could not imagine how to actualize our flexible practices. I spent countless hours in conversation with Shoemaker—working many late nights, sometimes arguing and sometimes talking over a few beers as we tried to understand one another. I described how flexible practices would work within Fremont and with a UAW workforce.

Eventually, we agreed to use their terminology, but our definition. When I described standardized work as a “production standard,” Shoemaker had familiar terminology he could take back to Bieber. Shoemaker eventually bought in that it was the initiative of workers to set up the so-called production standard- not management—and accepted our description of production standards (standardized but flexible work practices).

I believe that incorporating flexible work practices into the contract was the essential concession we got from the UAW and, most importantly, laid out the mutual trust concept for the UAW and NUMMI. Resolving this problem enabled Toyota to establish operations at NUMMI with a workforce authorized to find and solve problems and make improvements.

Toyota was able to plant the seed of kaizen culture in Fremont. On Dec. 10, 1984, eight months after the Federal Trade Commission approved NUMMI, Toyota, GM, and proud UAW workers launched the Fremont-built Nova with the highest quality rating in GM history. Flexible work practices remained in place until the end of the joint venture in 2010.

What is Your Problem?

What is your problem? This simple question is the key to finding a problem—and solving it. Everyone, starting with the CEO, must find problems that prevent an organization from reaching a shared vision. If there is no problem, there is no continuous improvement (kaizen). Having worked all over the globe, I’ve seen how leaders and managers everywhere struggle to find their place in a problem-finding culture and why it is so difficult to ask, “What is your problem?” Senior leadership should hold a spotlight to dramatically illuminate problems. However, we often see them:

• View problems in a negative light (as do those who assess their performance) and see association with problems as worse than other employees because they are supposed to have everything under control. (”No problem.”)
• Think they should delegate problem finding and problem solving because their job is to deal only with big issues.
• Don’t know how to find problems and don’t know their role in problem finding.
• Afraid they won’t know how to solve a problem when they find one.
• Unwilling to admit their own mistakes, to highlight their own problems.

By contrast, Toyota leaders and managers ask, What is your problem?—of others and themselves—thousands of times a year. In doing so, they create an environment where kaizen is pursued relentlessly and, more importantly, one in which managers nurture a problem-finding culture in the organization. Toyota managers have been fortunate to have highly visible leaders who exemplify a kaizen culture, leaders that take great pride in finding problems.

I asked Mr. Fujio Cho if his mentor Taiichi Ohno—the man considered the father of TPS—had a clear theory in mind when he began the implementation of TPS. Mr. Cho answered, “No.” He explained that Mr. Ohno had developed TPS through solving problems that Toyota faced at an early stage of the company—like the shortage of cash—in very practical ways, not theoretical at all, including lots of trials and errors.

Mr. Cho said that Mr. Ohno gave him and other executives difficult problems to solve. Ohno checked to see how much the executives thought things through and expanded their ideas to really solve an issue. Mr. Cho explained, “Mr. Ohno’s whole attitude about improvement was such that he was always evolving his thinking to overcome new problems, to the point where he did not mind showing his operations to others because, by the time they implemented copied ideas, he would have already come up with better ideas.”

No one has more trouble than the person who claims to have no trouble.
— Taiichi Ohno

Mr. Ohno saw the identification of problems as a competitive advantage and the key competency required to master TPS. His TPS was the result of constant problem finding, constant problem solving, and constant improvement. Without an awareness of problems, no kaizen can occur; a manager who accepts two defects out of 10,000 parts will not be able to eliminate those two defects.

Make Finding Problems Your DNA

As Toyota expanded around the globe, its philosophies, kaizen culture, and problem-finding behaviors—Toyota DNA— became increasingly difficult to transfer to thousands of new managers and team members. Many earnest attempts were made to define Toyota DNA between 1987-2000. This was frustrating: documentation was scarce, and language and corporate barriers grew location by location. As it expanded, the company was not physically centralizing its facilities as it had in Japan. It went from having 10 plants within a 30-mile radius of Toyota City to far-flung plants around the globe.

The need within Toyota at that time and the problem to be solved was how to manage and guide people around the world, presenting a single system of what a Toyota person is and what they must do—find problems and solve problems anywhere. But, with expansion, the Toyota DNA was diluted. How could we communicate it outside of Japan? How could we make people believe in problem finding and solving? How could management provide the methodology and establish the systems to reveal or create problems?

Mr. Cho, president of Toyota, and his staff—including me and my Georgetown colleagues, Tak Hata and Hiro Yoshiki-wrote The Toyota Way 2001. The purpose of the document was to preserve and articulate Toyota DNA and to emphasize the need for further development. It describes how people at Toyota should act on a daily basis (i.e., common culture) in order to achieve Toyota business goals.

For the first time, Toyota corporate culture was codified and organized in a way that could make it globally applicable. While most Western managers at the time were learning about TPS and its tools, Toyota was instead looking to communicate and clarify its culture. In fact, only about one page of the 14-page document addresses lean systems and structures (i.e., TPS).

The Toyota Way 2001 describes the two essential pillars— continuous improvement and respect for people—that are the core of Toyota DNA. Within these two pillars, five supporting concepts must exist for problem finding and problem solving to flourish. A successful company also needs to have a shared vision that, when unmet, presents a problem for all in the organization to find. An inspirational vision challenges people to take calculated risks with little fear of failure because of the valuable lessons learned in the process of trying to find and solve a dynamic problem and continuously improve.

Toyota’s guiding vision: better cars for more people.

For years, the guiding vision was simply to provide better cars for more people. At its inception, Toyota sought to make a car affordable for the ordinary Japanese citizen. Given that they were without any auto manufacturing experience or a supporting auto supplier base, the dream was ambitious and executives found many problems. Since then, top Toyota exec...