Toyota Production Line
Do you know how many hourly jobs GM has laid off from 2006 to July 2008? Take a guess. How about 34,000? And now, they’re talking about another 5,500 layoffs. And they’re asking you and your government for a bailout to end their troubled, outdated, low quality, wasteful production system. But, let’s not focus on fixing GM’s problems with an infusion of cash. There’s something even deeper going on here that’s really wrong.
OK, here’s a better question. How many hourly jobs has Toyota’s American production system laid off in the same time frame? Zero. That’s right. ZERO. How? Isn’t Toyota experiencing the same slow down in auto sales as GM is? Yes, it is. And yes, Toyota has halted production at its Texas and Indiana plants for the past 3 months. But the 4,500 people who work at those plants have not been laid off. What!?!?! How? Why?
The answer: Toyota has a special culture, deep-rooted values, and respect for their workforce. Toyota’s tradition is to NOT lay off employees during hard times. This tradition hasn’t really been put to the test until now. And Toyota has stuck to its guns and its values.
“This was the first chance we’ve really had to live out our values,” says Latondra Newton, general manager of Toyota’s Team Member Development Center in Erlanger, Ky. “We’re not just keeping people on the payroll because we’re nice. At the end of all this, our hope is that we’ll end up with a more skilled North American workforce.”
Interesting. But what does that last line mean? “At the end of all this, our hope is that we’ll end up with a more skilled North American workforce.” It means that while these employees were not manufacturing automobiles, they were in training. They were doing safety drills, participating in productivity improvement exercises, attending presentations on material handling and workplace hazards, taking diversity and ethics classes, attending maintenance education and taking a stream of online tests to measure and record their skill improvements. Toyota is shifted the Texas and Indiana workers temporarily to Toyota plants whose assembly lines were moving at full speed, such as the Camry assembly plant in Georgetown, Ky. In addition to all of this, the workers also spent some time painting the plants and even helped build Habitat for Humanity homes. And they were getting paid.
Wow! So what is this costing Toyota? The estimate is at least $50 million dollars, plus the loss of revenue of shutting down production. Why is this value and tradition worth so much to Toyota? Why would they be willing to spend $50 million rather than lay people off? It’s because Toyota believes that its people, yes, its PEOPLE are its greatest investment and its greatest asset. You hear so many companies say that, but would they really put their money where their mouths are when the rubber hits the road (no pun intended)? In Toyota’s case, the answer is yes they would.
So what does Toyota get out of this? When, not if, the plants return to full production, Toyota will have well trained employees on the front line, ready and able to meet the demand for their vehicles. And not only will they be well trained, they’ll be happy and motivated to work. Because Toyota is willing to go to the mat for their people, their people will be willing to do the same for Toyota.
The lesson here: Unlike their counterparts GM and Ford, Toyota has always taken a long-term strategic view about their employees. Toyota understands that laying off thousands of employees for slowdowns or plant retooling is counter productive. They wisely utilize the time to redistribute their workforce to understaffed plants, provide additional training for the new products, and leverage their workforce to speed the transition for newer products. Their philosophy has avoided labor disputes and staffing shortages. It has kept the company as a leader in quality and profitability over its shortsighted competitors.
So, the message for you in all of this: Really commit to upholding the value that your people, let me repeat that, your PEOPLE are your greatest asset. Treat them with respect and dignity. Do everything in your power and your imagination to keep them on the payroll during the rough times. If you don’t, you may not find those people again on the upside of the downturn. And if you do, you’ll have hyper-productive, motivated teams delivering quality because they’re committed on a deeper level to your company.
Note 1: If you really want to understand why the Big 3 are losing big time compared to Toyota in terms of market share, take a listen this excerpt from Public Radio International’s “The World” report from last Friday (Nov. 14, 2008) describing why Toyota and other Japanese manufacturers seem to have a leg up on their American counterparts (for the complete report, from The World, click here). After reading this post, you might not be so surprised when you hear that the employees being laid off by the Big 3 are now working at Toyota. Click here to listen to the excerpted report.
Note 2: From Forbes online: At American companies, finance guys and marketers rise to the top. Not at Honda. Read the whole article here.
Note 3: Another Japanese leader shows the way to be a true leader: When Japan Airlines JAL slashed jobs and asked older employees to retire early, their CEO cut every single one of his corporate perks, and then for three years running slashed his own pay. In 2007, he made about $90,000 U.S., less than what his pilots earn. Compare that to United Airlines CEO Glenn Tilton: In 2006, Tilton’s compensation alone exceeded $39.7 million ($38 million in stock and options) in a year the company emerged from bankruptcy and employees were forced to accept painful cuts! Read the rest of the story about JAL and United here.