Governance Was Missing Link at Toyota

Ann All

A series of problems, rather than any single problem, led to the stunning turn of events for Toyota, which until recently was America's most popular automaker. Last month I wrote a post in which I mentioned that Toyota's use of common parts and designs across multiple product lines, a key tenet of lean manufacturing, contributed to its problems. I got plenty of comments, many of which accused me of attacking lean, which was not my intent.


Again, a whole host of problems, with new ones surfacing every day, are to blame. With almost any issue, it's our natural tendency to look for one or two obvious problems, but it's rarely realistic -- and certainly not in Toyota's case. As lean expert Jamie Flinchbaugh notes in a blog post, complex problems are complex. So there won't be an "ah-hah" moment or a single issue to rectify.


It now looks as if Toyota's dysfunctional corporate culture, rather than a defective technology or flawed manufacturing process, may end up with the lion's share of the blame. A Los Angeles Times article describes a culture with huge gaps in governance, in which different U.S. divisions did not share data with each other and were kept in the dark about decisions emanating from corporate HQ in Japan. The article quotes John Jula, former engineering manager at Toyota's technical center in Ann Arbor, Mich.:

You know the joke that every bank branch has a president -- well, every Toyota facility has a president, and one can't tell another what to do.

Another former Toyota employee, responsible for regulatory compliance, recalled that he was assigned in 1979 to collect information requested by U.S. safety regulators about sticking gas pedals in the Celica model. The data was sent to Toyota's engineering operations in Japan, and when he later reviewed Toyota's submission to the National Highway Traffic Safety Administration, he found the information he had gathered had vanished.


Former Toyota attorney Dimitrios Biller, who defended the company in liability suits, said though he knew documents he requested for trials were housed at Toyota offices in Washington, Ann Arbor and Kentucky, he had to request them from Japan. He said:

Everything had to come through Toyota City [the Japanese headquarters] before I could see it.

This kind of culture isn't exclusive to Toyota. Robert Bea, a UC-Berkeley professor who has accumulated about 800 case studies of corporate and government-agency meltdowns, said Toyota's problems are similar to those that allowed NASA and the Army Corps of Engineers to ignore problems that ultimately led to the Columbia space shuttle and Hurricane Katrina disasters.


This serves as yet another reminder that corporate governance is important, a lesson often conveyed by blogger Lora Bentley, who covers regulatory and compliance issues for IT Business Edge. In July, Lora highlighted a positive correlation between between a company's corporate governance practices and its stock prices.

Add Comment      Leave a comment on this blog post
Feb 24, 2010 2:01 AM Jamie Flinchbaugh Jamie Flinchbaugh  says:

Thanks for the mention. Here is the blog post you were referring to:

Mar 2, 2010 5:41 AM Tim Tim  says:

"You know the joke that every bank branch has a president"

I'd be willing to bet that many or most people do not in fact know this joke. what is it? Is it hilarious? Is it a secret joke?

Mar 4, 2010 10:51 AM Russ Russ  says:

It is comical to call this a governance problem.  If they have problems, it is a management one - not a governance one.  Calling Toyota's culture "dysfunctional" is almost comical.  I have only owned one Toyota in my life but implying that this company is dysfunctional is beyond belief.  No company is mistake proof - the key to how functional they are lies in their ablity to respond and recover from mistakes - you can't judge this for 2 years so trying to imply that they need a goverance makeover strikes me as the typical conjecture of someone in the media who has never really done anything other than write about others issues.

Mar 6, 2010 1:14 AM Saurav Saurav  says: in response to Russ

This may be Ann's personal view. It is insensible to publicise the subject line as a stunning turn of event for Toyota. The write-up  in fact reveals strong corporate governance within Toyota. Strange!

Nov 17, 2010 9:52 AM toyota parts toyota parts  says:

Absolutely insane! The workers of Toyota is missing the cooperation and not the governance. They have the powerful leaders and they only need to brainstorm in order to come back in the arena.

Sep 10, 2011 5:46 AM Marcia Gentile Marcia Gentile  says:

Good post!!! Based on what I have read they are much concern on the quality of their products. They lack management handling. They are not much focus on the customer that's why they lost customer loyalty as well. But anyhow , they will be back in track somehow. Toyota will always be popular as ever.


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