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Governance Was Missing Link at Toyota

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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.

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