The Toyota Way: The Power of Paranoia

In this fifteenth chapter of his book “How Toyota Became #1:  Leadership Lessons from the World’s Greatest Car Company,” David Magee outlines the underlying attitude behind kaizen, the practice of continual improvement.   It’s fear, fear of two things:   the fear of failure and the fear of success.   The fear of failure keeps one constantly vigilant about shoring up weaknesses in quality, efficiency, and communication.    But the fear of success means that you must always keep that vigilant attitude, and if success breeds complacency, then that vigilance may slide and with it, one’s progress.   

1.  Exercise Great Caution

In 2006, Toyota had posted tremendous results across the board for the entire year of operations . And yet, an internal report warned that Toyota’s future profitability would be threatened if costs were not held down in the United States.   Consider what Ford did after losing more than $12 billion that same year.   In the beginning of 2007, millions of dollars in executive bonuses were handed out for the previous year’s work.   It almost seems that, instead of examining the basis for the previous year’s results like Toyota did, they were almost to the point of ignoring or denying it.    

The source of Toyota’s worries was a projected increase of $900 million in U.S. manufacturing compensation in the coming decade.   The recommendation was that, rather than paying workers the traditional level received by union automotive workers in the Detroit area, as the Big 3 were doing, they would tie future benefits and wages to the levels in various regions of the United States.   They could offer $20 an hour to skilled workers in Mississippi, for example, $8 per hour less than what Ford’s union employees were earning in Michigan, and retain those workers since that $20 an hour was higher than what other companies were paying in the area.   This is not just true in Mississippi, of course; Toyota typically pays the highest waves in any areas where its plants are located.   

From the standpoint of the employee in Mississippi, for example, yes it is true that they are making $8 an hour less than their peers at Ford in Michigan; however, if you compare the number of American jobs in the automobile industry that have been eliminated by the Big 3, as opposed to the number of jobs Toyota has created in the same period, then the growth potential of the job at Toyota and its relative security might easily be seen to outweigh the short-term advantage the worker at Ford might have.  

2.  Don’t Believe the Headlines




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