Colin D. Baird, Vice President, Sullivan Curtis Monroe
Executives I speak with are interested in learning more about how Dr. W. Edwards Deming from M.I.T., and Dr. Taichi Ohno transformed Toyota Motor Corp (TMC) from a small fledgling automatic loom company in 1924, into one of the world’s most efficient, and profitable automotive companies in 2013. Toyota also maintains some of the highest levels of employee engagement in the business while maintaining the highest inventory turns, so how do they do it?
Dr. Ohno taught us about the inherent value and benefits from fostering a culture where employee engagement in the problem solving process led to better outcomes for stakeholders, and the employees they serve. He demanded that his executives train employees in the value of leadership. As a result, less oversight was needed at Toyota for leadership teams that greatly inspired those they led. By perpetually training its employees on leadership, Toyota ensures itself it always has an ample supply of leadership talent in the making.
Dr. Ohno was fanatic about identifying, then eliminating anything that didn’t add direct value to the customer’s finished product. Under utilization of talent is one example of the many types of waste he worked so hard to eliminate. Under utilizing talent is a great contributor to employee disengagement today. Dr. Ohno may go down in history as one of the most persistent executives in modern history in finding new ways to eliminate waste and improve flow. He did so while remaining extraordinarily committed to the unique needs of stakeholders and employees even though at times their interests may have seemed to have directly conflicted with one another.
Examples in visiting the gemba but doing nothing – What does it look like?
Recently I visited a client who asked me to take a tour with him of his shipping and receiving area. During our 2 visits to the gemba, we both were able to spot waste that wasn’t contributing any value to the customer’s final product. Examples of that waste included moving the product too many times, repeated motion, excess inventory, damaged products, and damaged racking systems where carelessness caused forklift drivers to plow into the bases of racks used to store the finish products.
Employee satisfaction and engagement was very low, and many employees were visibly disengaged. You could physically see it in the employee’s body language by their slumped shoulders, poor eye contact, and few smiles or hellos to fellow employees, or guests. It also showed up on the books. For years actual profits have not met company projections. The company continues to rely on its Line of Credit during non peak periods, and safety costs and accident rates remain nearly 3x those of their competitors. When the business slows down in non peak periods, employees are laid off, and then rehired all over again when business picks back up. This cycle has been repeated for 15 years.
While the CFO/COO often visits the gemba, many of the other executives do not, and therefore don’t really understand why warehouse operations are in such disarray, and would benefit from radical change. Consistent regular visits by the other executives to the gemba would go a long way in helping better understand and implement the new processes and standardization mechanisms that are being identified and developed daily by the employees in the warehouse. All of the process and standardization mechanisms will radically improve flow, and eliminate waste thereby increasing stakeholder profitability, and improve safety. Having information directly from the gemba could have enabled these executives to more actively engage their employees, and help remove hurdles and roadblocks that are preventing employees from doing their best work.
Examples in Visiting the gemba and taking action – What happens when we get it right?
An enlightening example of a successful Japanese gemba walk can be better understood by looking at how Toyota dealt with the loss of raw material suppliers of nearly 500 major Toyota parts shortly after the earthquake in 2011. Toyota learned immediately after the quake that because of the tremendous damage done to raw materials supplier’s plants in the Northern Prefectures of Japan, parts suppliers would be unable to deliver critical components made exclusively for Toyota. To further exacerbate the situation, Toyota learned they didn’t have immediate back up plans for this part of their supply chain. In a Lean environment, products are manufactured based on a pull system where inventories are kept to a minimum, and therefore Toyota did not maintain excess inventories to cover the immediate needs of production going forward.
Toyota decided to send its executives to Northern Japan to take tours of these facilities to see and experience for themselves what barriers and hurdles were preventing the raw materials from being processed further. Converting raw materials into steel, aluminum, and plastics was critical to the continuing success for Toyota, the raw materials suppliers, and the suppliers of these components.
What the leadership team of Toyota discovered was tragic, and very discomforting. The utter devastation was on display for the world to see, and Toyota had some tough decisions to make that would be very visible. Help the communities of the suppliers wrought with devastation rebuild, or find other suppliers in other countries not impacted by the devastation and ignore suppliers who had helped Toyota become the great company most people identify with today. While the right choice may have looked easy on paper, it certainly wasn’t, and any executive who’s faced an extraordinary crisis where human lives and futures are at stake, knows the excruciating pain that accompanies such difficult decisions.
While each decision came with consequences, executives from Toyota elected to help the devastated areas by providing resources that would rebuild the businesses and communities in the affected areas. Resources such as food, water, clothing, and toiletries were all donated by employees of Toyota. Little by little, each one of the prefectures came back online thereby allowing Toyota and their suppliers to remain in business with minimal long term impact to customers, or employees. During any down time in production, instead of layoffs, Toyota elected to aggressively train employees with Kaizen events in how to spot waste, and improve flow within the Value Stream. Toyota was fully operational within 6 months of the earthquake, nearly 6 months earlier than they had planned.
Imagine being the son or daughter of a plant employee in Northern Japan who’s lost his house, and job because their family’s whole world changed in an instant. Now imagine having executives and their families from Toyota show up at your doorstep to offer to help your family rebuild your life, home, and career! This is a classic example of the leadership team and employees of Toyota demonstrating what makes them such a great company. Was there ROI attached to their decision, you bet? Can it be measured, nope.
American executives today have tremendous responsibilities which often make it challenging to go to the gemba to see for themselves. Toyota however, conducts routine gemba walks to see for themselves where waste, flow, and employee disengagement often intersect. They do so by making it a part of their regular daily routine. Dr. Ohno recognized very early on in his career that he couldn’t lead simply by looking at metrics in a spreadsheet, or book work he learned in college.
By consistently going to the gemba for themselves, and taking action from what they learned after they studied the problems with their employees, Dr. Ohno and Toyota revolutionized an industry, and gave the American manufacturer a tremendous opportunity to revolutionize theirs (again).
After the earthquake crisis, Toyota maintained an inventory turn rate (2011 fy) of 11.7 which was nearly 10% above that of GM (which had also embraced the lean concept in recent years).
Toyota’s leadership team continues its tradition of gemba walks today, and is a prime example of go and seeing for yourself just like the executives in Undercover Boss.
(For the first part of this post click here)
About the Author
Colin D. Baird, Vice President at Sullivan Curtis Monroe implements strategies and process improvements that improve operating efficiencies using a holistic approach to reducing risks related to people, excess motion, and waste. His approach mirrors those developed by Toyota Production Systems (TPS). By teaching leaders how to spot and eliminate waste, stakeholders achieve greater operating efficiencies while improving their organization’s culture and employee engagement.
Colin encourages leaders to utilize the Japanese concepts of genchi genbutsu (go and experience things for yourself), and gemba (go to the site where work is being done). He routinely coaches leaders and those they lead in their actual working environments.
He enjoys public speaking, writing, and is a contributing author to various industry publications.