Leadership and Toyota

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Most of us who study management have at least a passing knowledge of Toyota and the Toyota Management System. For years this car company has been held up as the epitome of corporate excellence and the example for all to follow. Now, the bloom is suddenly off the rose and, if one believes the papers, the company is in trouble. It’s lost market share, its stock price has dropped, though as of today has recovered a little, and most importantly, its worldwide reputation is badly damaged.

Will Toyota recover? Of course they will. They are a strong company, and in spite of what may appear to be a chink in the Toyota quality armor, they still make good cars which will remain popular with the car buying public. In the interest of full disclosure, I have to admit that I own a Toyota, one that is on the recall list, and I’m happy with it.

Toyota is not the first company to suffer from such troubles and they certainly won’t be the last. It’s these times that really define what a company is. When such a disaster strikes, how leadership reacts will often determine the future of the company. For example, the Tylenol poisoning case rocked Johnson and Johnson to their core, but they recovered because they had a strong set of corporate values and the leadership took aggressive action quickly, going beyond what might have been accepted as sufficient. On the other hand, the State of Louisiana and City of New Orleans were not prepared for the devastation of a hurricane like Katrina, and then did not take aggressive and proper action when the disaster came. To contrast the two examples, Johnson and Johnson emerged from their troubles a strong, thriving company; New Orleans is still suffering.

Toyota appears to be responding well, even though they’re still taking a beating in the press. They were a little slow to respond publicly, but the company quickly addressed the problem (I’m not an engineer, but I’m willing to accept that finding the fix to the accelerator problem might take more than 30 minutes) and took action to implement the solution. In a recent press conference, Toyota president Akio Toyoda said, “I don’t see Toyota as an infallible company that never makes mistakes. We will face up to the facts and correct the problem, putting customer’s safety and convenience first.” That sounds like the right response.

There is another concern though that is often ignored in the sensational reporting of the news cycle: the reaction of the people inside the company. The C-level people are faced with the difficult decisions and harsh TV lights, but the other leaders and workers within the company are also affected and how they are led through the crisis will have long lasting effects. I notice that Mr. Toyoda has publicly stated that he will visit American manufacturers and dealers. He also said that the company can do better at evaluating complaints and that they did not have enough infrastructure in America to do that. These statements, intended for the public and governments, also go a long way towards helping the company’s leaders ease tension within.

When a company is under fire, the leaders and workers within the company are comforted knowing that their senior leadership is meeting the problem head-on, but this tactic only works if the company is strong and built on a solid foundation of integrity and quality. I’m not a Toyota insider, but I believe that is the case, and I know they will survive and prosper.

Leaders should take a lesson from the Toyota case. Does your company have that solid foundation and set of corporate values that will make it a little easier to ride out a storm? Have you given any thought to how you will respond to a crisis? If not, you should because sooner or later, it will be your turn.

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