How focusing on employee engagement and customer value drives this automaker's success
Toyota is one of the best run companies in the world. With less revenue than the Big Three automakers, its market capitalization is still larger than that of General Motors, Ford, and DaimlerChrysler combined.
A big part of Toyota's success is that it applies "lean thinking" not just to products and manufacturing processes, but also to relationships with employees and customers. Indeed, Toyota has been an early adopter of HumanSigma, Gallup's process for measuring and managing the human difference in a company's performance. Toyota finds HumanSigma compelling because the process focuses on improving employee and customer engagement, which in turn drives business outcomes and increases shareholder value.
As Dean of Toyota University, Mike Morrison is responsible for providing education to Toyota's U.S. associates. He is a pioneer in applying "lean thinking" principles and practices to people. Morrison recently spoke with Gabriel Gonzalez-Molina, Ph.D., Gallup's Global Practice Leader of Path Management Practices and coauthor of the book, Follow This Path, about his management discoveries.
Gabriel Gonzalez-Molina: How did Toyota discover lean thinking?
Mike Morrison: We have watched it emerge as of one of the most transformational business strategies available to organizations.
But let me back up a bit. Toyota USA is the largest Toyota sales arm outside of Japan. We market, distribute, sell, and service vehicles through a dealer system of independent franchisees located throughout the United States. These activities require product design, customer relationship building, technical service support for vehicles, brand development, and advertising and sales promotion capabilities. We also handle logistics and delivery, plus a wide range of additional activities best characterized as service or knowledge-based work.
Toyota didn't discover the principles and practices of lean thinking through dramatic breakthroughs. Instead, we uncovered them through an evolutionary process that has demonstrated Toyota's superior learning capabilities. Lacking market share, scale, or access to capital resources, Toyota had to rewrite the rules of the industry by focusing on customer value, continuous improvement, and employee engagement.
Gonzalez-Molina: How is lean thinking different from other management concepts?
Morrison: It's vastly different from most corporate improvement programs, which are oversimplified, rule-centered, and too conceptual to be effective. In lean thinking, there are no "one best ways," no sophisticated management models, and no built-in dependencies on outside experts. Instead, lean thinking frees knowledge workers to become independent goal seekers and encourages them to apply their problem-solving skills and critical thinking capabilities to serve customers.
Its philosophy is unflinchingly clear: Create a laser-like focus on serving and adding value to customers. Lean thinking also requires us to reframe -- from negative to positive -- how we look at failure, constraints, and complexity. Paradoxically, the biggest thing knowledge workers need to make lean thinking effective is discretionary time. The common misperception is that lean thinking is a practice in efficiency. The reality is that there is no efficiency in knowledge work -- it's the wrong target. Discretionary time is required for problem solving, innovative thinking, and fruitful collaborations.
Gonzalez-Molina: Most manufacturing companies still think quality is for products and processes, and it can't be applied to the human aspects of performance. How does managing the human difference, or HumanSigma, apply to the practice of lean thinking?
Morrison: Lean thinking is best defined as creating organizational wealth. Lean thinking:
- adds value by focusing on customers
- creates flow by focusing on people and processes -- and by developing engaged employees who collaborate to engage customers by understanding and anticipating their needs
- achieves mastery by focusing on personal and group learning. This is the final element of lean thinking. It encompasses one of the most basic human needs: the drive for meaningful growth and progress.
Lean thinking works perfectly with HumanSigma, which is all about managing the human difference in a company's performance. When leaders effectively manage the human difference, they build employee engagement and align associates' performance to work that drives customer value. This requires managers who can match talent to task, build shared values among team members, and develop all employees to their full potential. (See "Managing Your HumanSigma" in the "See Also" area on this page.)