The Grey Chronicles


Toyota’s Three Forces of Integration

Grey DayHarvard Business Review, June 2008This post resumes the Toyota’s Culture of Contradictions series started last Wednesday, followed by Toyota’s Three Forces of Expansion. Takeuchi, Osono, and Shimizu (2008) research, a path-breaking six-year study, reveals that to prevent the winds of change from blowing down Toyota, the organization also harnesses three forces of integration: the founders’ values, “up-and-in” people management, and open communication.

Below is an excerpt from their book, Extreme Toyota: Radical Contradictions That Drive Success at the World’s Best Manufacturer, as featured in June 2008 issue of the Harvard Business Review.

Founders’ Values

A generation of Toyodas, from Sakichi Toyoda, the creator; Kiichiro Toyoda, Sakichi’s son and founder of the Toyota Motor Corporation; to its succession of presidents developed Toyota’s values. The characteristics of Toyota executives include: willingness to listen and learn from others; enthusiasm for constantly making improvements; comfort with working in teams; ability to take action quickly to solve a problem; interest in coaching other employees; and last but not the least, modesty. These values are inculcated by demonstrating their everyday relevance through on-the-job training and through stories that managers tell succeeding generations of employees. These four simple beliefs kept Toyota from losing its way:

Naive optimism. Tomorrow will be better than today. Its employees see obstacles as challenges that energize them to do better. An attitude of never being satisfied with the status quo, or continuous improvement (kaizen), fosters experimentation.

Everybody should win. Teamwork is a guiding principle. When a problem arises, each member of the team is accountable and has the authority and responsibility to find a solution.

Genchi genbutsu. Toyota’s chairperson Fujio Cho translated it as “Have you seen it yourself?” and by deduction: if you have not seen something firsthand, your knowledge about it is suspect. Toyota’s senior executives hold themselves to the same standard, emphasizing the importance of the tacit knowledge rooted in each employee’s actions and experiences.

Customers first, dealers second—and manufacturer last. Its success depends on maintaining the trust of dealers and customers, and it goes to extraordinary lengths to forge lasting relationships with them. It also believes that customers pay their salaries, not the company.

Up-and-in people management

Toyota rarely weeds out underperformers, focusing instead on upgrading their capabilities. In fact, Toyota is still committed to long-term employment even during the 1997 Asian financial crisis, then president Hiroshi Okuda, ordered: “Cut all costs, but don’t touch any people.”

Toyota prefers on-the-job training to off-the-job programs. Employees are given the freedom to make judgment calls adhering to a broad set of guidelines rather than following a strict set of rules. Training of employees in problem-solving methods are made during their first 10 years with Toyota. Mentoring, a modern-day apprenticeship system, is a management policy.

Evaluation criteria, albeit fuzzy and subjective, usually emphasize on process performance; learning over results; and appraise persistence or resilience. The company looks at how managers achieved their goals; how they handled issues; how they fostered organizational skills; and how they developed, motivated, and empowered people. It’s part of Toyota’s DNA—nebari tsuyosa—literally, adhesive strength. It’s not the kind of company where a few shine. Promotions have become events to instill humility by “reminding them that their success is due in part to the efforts of equally accomplished colleagues.”

Open communication

With 50 foreign-based manufacturing facilities, selling vehicles in more than 170 countries, and 300,000 employees, Toyota still functions like a small-town company where “everybody knows everybody else’s business.” Toyota’s networks are human rather than virtual; personal relationships are of primary importance. Information flows freely up and down the hierarchy and across functional and seniority levels, extending outside the organization to suppliers, customers, and dealers. The five elements are:

Disseminate know-how laterally. Yokoten, short for yokoni tenkaisuru, literally means unfold or open out sideways. Communication is viral and knowledge is diffused in all directions. Everyone work together in a large room with no partitions (obeya). Project teams practice mieruka (visualization)—post information on the walls of a dedicated situation room for everyone to see.

Give people the freedom to voice contrary opinions. Employees feel safe, even empowered, to voice contrary opinions and contradict superiors. Each individual in Toyota is expected to act according to what he or she thinks is right. Every employee enjoys the prerogative to ignore the boss’s orders or not take them too seriously. Confronting your boss is acceptable; bringing bad news to the boss is encouraged; and ignoring the boss is often excused.

Have frequent face-to-face interactions. Although there are no reprisals if local operations don’t act on headquarters’ advice or if subordinates disobey orders from supervisors, refusing to listen to others is a serious offense. With information from the source available to everybody in the organization, the emphasis then is on interactions at the scene (genba).

Make tacit knowledge explicit. Another element in Toyota’s nerve system is the practice of converting experiential or tacit knowledge into an explicit form to be shared throughout the organization. Toyota identified two core values as the pillars of The Toyota Way 2001: continuous improvement (kaizen) and respect for people.

Create support mechanisms. In 2002, the company set up the Toyota Institute and the Global Knowledge Center at Toyota City in Japan and Torrance, California, respectively. These formal mechanisms support Toyota’s communication networks by disseminating best practices and company values. In addition, every employee belongs to informal groups, several committees (iinkai), self-organizing study groups (jishuken), and other social groups. This helps create a multilayered communication network at Toyota.

These forces stabilize the company, help employees make sense of the environment in which they operate, and perpetuate Toyota’s values and culture.


Takeuchi, Hirotaka; Osono, Emi & Shimizu, Norihiko (2008). The Contradictions That Drive Toyota’s Success. Boston, MA: Harvard Business Review, 86:6 (June) 2008. pp. 96-104. back to text.

Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 LicenseDisclaimer: The posts herein do not necessarily represent any organization’s positions, strategies or opinions. Read the full version of self-imposed rules for this blog: A New Year; New Rules. Unless otherwise expressly stated, the posts are licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 License.
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1 Comment »

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