Monday, November 24, 2008


Quote. What Toyota knows that GM doesnt?

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 And now they're asking you and your government for a bailout to end their troubled, outdated, low quality, wasteful production system.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. Unquote.
Received by e-mail. Source unknown. However, the lessons are very real for today's economic meltdown scenario.......Love the message. No doubt Toyota is a market leader - their cars are the 'best value for money', and reliable too. (I can personally vouch for them. I drove a Toyota Sienna van for 4 years; put in only the recommended oil and gas, and never had to do any other repair/ service. Clocked over 90000 kms in 4 years without any problems. The Toyota off road guarantee in North America never needed to be tested). With this kind of a company philosophy, I have no doubts that these employees would build cars that are as reliable as their company - hats off to Toyota. Leadership cannot exist without followership. What good is a leader if the only way out of a slow down is to fire the followers?? Do you know of any other leaders in industry who standby their employees during really tough times??
Post Script: I recently heard an interview on TV wherein Mr Nandan Nilekani, Co-Chairman of Infosys was asked a question if he was going to lay-off people because of the slowdown. He responded that Infosys had invested in human capital and there was no question of laying off anyone. I have always admired Infosys and its work ethics. Nandan Nilekani's response was quite inline with the best of leadership practices. (28Nov08)


1conoclast said...

So there ARE other people who think like me...!!!

My views exactly sir. I have said this in my BPO Blog earlier. No wonder employee loyalty & retention rates are at all time lows!!!

Specially this one.

Would love to know your thoughts.

Risestar said...

the comments arent exactly true, let me explain.....I work for Toyota and if you ask me if there have been any layoffs at the plant during the economic downturn? I would have to answer YES!!! in fact hundreds!!! does this surprise anyone? it probably does, well here is how they do it.
Toyota is the master of PR, in fact I was told that exact statement during my orientation with the company, also, I was told that toyota sells the "illusion" of quality, with the illusion bubble finally bursting with the acceleration recall....but right now I wish to tell you how Toyota can lay off hundreds of people yet brag that they don`t layoff`s how it`s done...Toyota hires its workforce on a contractual basis which renews every 3 months.On average these employees are forced to work as cheap labor for between 2.5 to 3 years before becoming full time employees (talk about a long probation period) during that time, if there is a slow down in production the contract employees are quickly laid off so that the company can say that they didn`t lay of any full time`s an illusion! as contract workers can make up to 50% of the workforce. It`s almost as if toyota is saying that these contract workers are not worth anything or are meaningless and can be disposed of as desired, but in reality they have mortgages, car payments and families which are affected by they have a "no layoff policy' at Toyota? absolutely! does it apply to everyone? maybe half! Just another slight of hand brought to you by Toyota! a contract worker!