Published on February 25th, 2010 | by Jonathan Gifford
Toyota crisis: leadership on the line
Toyota’s leadership team are still struggling with one of the most intriguing – and dangerous – challenges to face a major global corporation in recent years.
How is the leadership team doing?
I think that ‘better’ must be the answer.
Is it enough?
Hard to say.
Akio Toyoda comes to Congress
The one absolutely definitely correct decision that Akio Toyoda, president and CEO of the Toyota Motor Corporation and the grandson of Toyota founder, Kiichiro Toyoda, has taken recently was the decision to appear in person before of U.S. House of Representatives Committee on Oversight and Government Reform.
There had been a growing suspicion that Toyota’s headquarters in Japan would allow its U.S.A. management take the flak bursting all around its American operation – the territory worst hit by safety concerns about faulty accelerators and an apparently growing number of new technical concerns. But Akio Toyoda had said in Japan that he would testify before Congress, and the committee promptly invited him. Whether or not Mr Toyoda was bounced into this American appearance by the invitation, it was without doubt the right decision. In this sort of crisis, people (and governments) want to see the top person step up to the microphone and tell us what is going on.
James Lenz gets emotional
One of the key functions of leadership is to be accountable, and to be seen to be accountable.
James Lenz, President and COO of Toyota Motor Sales U.S.A. has been struggling manfully to carry the can in the USA for Toyota’s apparent failures.
In his statement to another Congressional committee, Lenz said this: “In recent months, we have not lived up to the high standards our customers and the public have come to expect from Toyota. Put simply, it has taken us too long to come to grips with a rare but serious set of safety issues, despite all of our good faith efforts. The problem has also been compounded by poor communications both within our company and with regulators and consumers. [. . .] I would like to assure the Committee, and the American people, that nothing matters more to Toyota than the safety and reliability of the vehicles our customers drive.”
So far, so good. An acceptance of responsibility and an honest assessment of what has caused the problem: the failure to live up to established high standards; poor communication within Toyota itself and with its consumers and the industry. Lenz also became emotional when recalling the death of his own brother in a car crash twenty years earlier. He understood how the family of victims of crashes caused by faulty Toyota’s would feel.
A bit of human emotion from a senior manager is potentially a good thing. It’s nice to see a human side; we feel that maybe they understand where we are coming from. But was this really appropriate in these circumstances? Would the family of a victim of an accident that may have been caused by slipping standards at Toyota be consoled by the fact that Mr Lenz can feel their pain?
It did get better: Toyota is going to fix recalled vehicles as quickly as it can; local dealers are working 24/7 to get through the workload; future Toyota vehicles will be even better and safer; CEO Akio Toyoda has announced a top-to-bottom review of quality control; in the future, complaints and concerns would be dealt with more quickly and more effectively.
This is what consumers want to hear.
“Priorities became confused”
AkioToyoda himself expanded on these themes in his own statement to Congress. He took full responsibility. “Under my leadership, I would like to reaffirm our values of placing safety and quality the highest on our list of priorities, which we have held to firmly from the time we were founded. I will also strive to devise a system in which we can surely execute what we value.”
And there, unfortunately, was the rub. Is it possible – the elephant in the sitting room that no one has yet acknowledged – that Toyota cannot currently execute its core strategy?
Mr Toyoda seemed to confess that the company’s treasured values had slipped of late; that an increase in production volume had been at the expense of production quality.
“Quite frankly, I fear the pace at which we have grown may have been too quick. I would like to point out here that Toyota’s priority has traditionally been the following: first, safety; second, quality; and third, volume. These priorities became confused, and we were not able to stop, think and make improvements as much as we were able to before, and our basic stance to listen to customers’ voices to make better products has weakened somewhat. We pursued growth over the speed at which we were able to develop our people and our organization, and we should sincerely be mindful of that. I regret that this has resulted in the safety issues described in the recalls we face today, and I am deeply sorry for any accidents that Toyota drivers have experienced.”
To be absolutely frank, in my turn, this is not a message that consumers want to hear from corporate leaders.
Toyota is a volume car manufacturer. After Henry Ford, Walter Chrysler, William C. Durant (Buick/General Motors) and others had blazed their pioneering trails, Akio Toyoda’s grandfather was the man who set new standards in affordable, volume production of very reliable motor vehicles. Quality, reliability and safety are, as Akio Toyoda rightly implies, in the company’s DNA.
So what went wrong?
It’s a bit like the president of a major airplane manufacturer saying that they have made a lot more airplanes recently than they are used to making and, well, frankly, safety standards have slipped a bit as a result. Quite a few planes might be a bit dodgy – but they are going to fix them as soon as they can.
It’s not a great line.
Making it personal: Lee Iacocca and Chrysler
Still, I come back to the point that Mr Toyoda has come forward and put himself in the firing line. The family name is on the badge of every car; “when the cars are damaged, it is as though I am as well.”
There is an interesting precedent to this kind of welcome identification of the person with the corporation.
When the American car giant Chrysler got into financial difficulties in the 1980s, its recovery was led by Lee Iacocca, who was hired by Chrysler after having been fired from his previous position as president of the Ford Motor Company by the chairman, Henry Ford II, grandson of that company’s founder. In 1978, the year when Iacocca was fired, Ford had posted $2 billion profits; Henry Ford II said ‘Sometimes you just don’t like somebody.’
At Chrysler, Iacocca led a drastic programme of restructuring and cost-cutting, revitalised Chrysler’s product line and successfully lobbied the United States Congress to guarantee loans that would enable the company to stay afloat. National press advertisements attempted to win over public and government opinion for the loan guarantee scheme under the headline ‘Would America be better off without Chrysler?’ The ads carried Iacocca’s signature.
“I’m here, I’m real, and I’m responsible for this company.”
Iacocca said, “We wanted to show the public that a new era had begun. After all, a chief executive of a company that’s going broke has to reassure people. He has to say: ‘I’m here, I’m real, and I’m responsible for this company. And to show that I mean it, I’m signing on the dotted line.’ At long last, we would be able to convey that there was some genuine accountability at Chrysler. By putting my signature on these ads, we were inviting the public to write to me with their complaints and their questions. We were announcing that this large, complex company was now being run by a human being who was putting his name and his reputation on the line.”
As the company’s finances began to recover, Iacocca launched a consumer advertising campaign in which he himself appeared, promoting his company’s products.
“The pride is back”
Using the slogan ‘The pride is back’, the advertisements also featured what was to become Iacocca’s trademark catch phrase: ‘If you can find a better car, buy it.’ Consumer confidence in Chrysler rapidly recovered.
Lead from the front
When a crisis hits, leaders need to be visible; they need to show that they understand what the problem is and how their consumers feel about it, and they need to demonstrate very clearly that they have a fix; that they know what the answer is.
Toyota’s leadership has been slow in coming to the front. They were also slow – and possibly evasive – in dealing with an emerging problem.
Now they have a real, big-time problem. They need to keep communicating and they need to keep it personal. We need to see a lot more of Mr Toyoda.
And if I were Mr Lenz, I would go easy on the ‘I feel your pain’ line.