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Posted on 03.25.2010

Lessons from a crisis: how Toyota lost its way

lessons-from-a-crisis-how-toyota-lost-its-wayLike many of you, I’ve been following the Toyota recall with great interest. Aside from the many PR lessons to be learned, I’m fascinated by the role Toyota’s corporate culture seems to have played in shaping not only the company’s response to the crisis but also in shaping the very crisis itself.

Revered for its meticulous attention to quality, many industries – including healthcare – have tried to take a page from Toyota’s playbook, developing ‘lean’ business processes and encouraging employees to take ownership of quality. The famed “Toyota Way” empowers employees to pull the andon line – a cord placed on every assembly line – and stop production when they see a problem. It also advocates going to the root of a problem to solve it and sharing that information across the company. However, new reports suggest Toyota’s top management may not have been practicing what it preached. A recent Wall Street Journal article examined how the company’s secretive culture likely contributed to its problems. Long known to regulators as being resistant to outside input, Toyota appears to have turned a blind eye to information coming from within its own organization as well. After the first cases of sudden acceleration were reported in 2004, the company worked with the National Highway Traffic Safety Administration on multiple investigations over the course of three years – each time denying problems. Even as a 2007 probe resulted in the recall of 55,000 vehicles for floor mats that could pin the gas pedal, Toyota insisted no defects existed. It continued to make this claim as new reports of fatal crashes tied to sudden acceleration – including those involving vehicles without the defective floor mats – began trickling in. At the same time, Toyota was dealing with similar problems across the pond. Incidents of sudden acceleration in Europe were traced to a defective part in the gas pedal – a problem that would later be linked to a second, much larger U.S. recall. However, the company failed to share this information across its own organization. Even as the pedal was being redesigned in Europe, Toyota was insisting a similar problem didn’t exist in the U.S. It later admitted it “failed to connect the dots.” While it’s easy to play Monday morning quarterback, it certainly appears Toyota’s arrogance factored heavily into its current situation. Had the company pulled its own andon line at the first sign of trouble, perhaps it might have been able to avoid production shut-downs and plummeting sales. More importantly, lives might have been saved. This story serves as a powerful reminder that a company’s culture – no matter how renowned – must continually be nurtured. And that starts at the top.

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