Issa Bass A lot of managers I have talked to claim that Lean is a methodology that would be hard to successfully implement in American companies because of cultural barriers. They think that it has been successful in Japan because the Japanese culture and work ethics are prone to uphold the ideals of Lean. What do you think about that?

 Jeffrey Liker They are correct that the cultures are different.  And I do believe that there are aspects of lean that are more easily implemented in Japanese companies.  For example, following standardized work seems more natural in Japan.  Paying a lot of attention to detail and continuous improvement also seem more natural in Japan.  Working in teams to solve problems without trying to get individual credit is quite common throughout Japanese society. On the other hand, I do not agree that lean cannot work in American companies.  Quite simply, it has worked and is working in many American

companies.  It has been very successful for example in Toyota plants in the United States.  It has been successful in suppliers to Toyota in the United States.  It has also been successful in many U.S. companies outside the auto industry, such as Wire Mold, Genie Industries, Alcoa, Boeing, Lockheed, United Technologies, and many more.  What I can say is that when it has been successful you can also find that behind it is a plant manager who passionately believes in the principles and has excellent people skills.  If a new plant manager comes in who lacks the vision and understanding and skills they can destroy what has been built—maybe destroy it more quickly than in Japan where it is somewhat more natural.

Issa Bass According to Fortune Magazine, Toyota made 50% more cars in 2005 than it did in 2001, it earned $11.4 billion more than all the major manufacturers combined and out of the 10 highest quality rated cars that run in America, 7 are made by Toyota at a time when GM is about to declare bankruptcy and Ford is mired in financial problems and had to layoff 30,000 employees. What is Toyota doing right or what are the US manufacturers doing wrong?

Jeffrey Liker I find there is a fundamental misunderstanding in my experience that what results seen today are a consequence of brilliant management decisions or dumb management decisions made recently.  When we look to the success of a company like Toyota we ask what decisions did top leaders make in the last few years that account for their success.  Or what missteps did Ford and GM executives make that puts them in the situation they are in today.  The reality is that Toyota’s success is the result of decades of building a highly efficient and effective learning organization based on principles that I describe in my book, The Toyota Way. Along the same lines, GM and Ford’s struggles are the result of decades of failing to build an effective learning organization.  Answers to the struggles at GM and Ford are often to change executives, fire people, move people and develop some new initiatives and programs.  The result is often better performance in the short term until the next crisis hits.  Toyota does have programs and initiatives but they are meant to strengthen their system or perhaps address some specific deficiencies and they become part of the fabric of the organization.  Their leadership subscribes to a set of principles that really have not changed much for decades.  Specific leaders prescribe specific things depending on the times and circumstances, but they are very consistent in their basic philosophy and principles.  Fundamentally, Toyota leaders believe in investing in people for the long-term success of the enterprise.  Just take today’s situation at Ford and GM.  They are closing plants, they are letting thousands of talented people go who reflect the accumulated knowledge and skills of the company.  It seems to give them a “fresh start” with less waste.  Yet, what is the cost of losing all the knowledge and momentum that has been gained by these people.  If you are starting over every 5 years or so, how can you compete with a company that just keeps going and learning and getting better.  Toyota leaders often say:  “we want to be slow and steady like the tortoise, not fast and jerky like the hare.”

 Issa Bass  The last issue of Fortune magazine had “How GE Stays On Top” on its front page. GE’s approach to leadership building seems to be very different from Toyota’s. Even though it has been instrumental in starting Six Sigma, GE builds leaders by instilling the fear of failure in them and the bottom 10% are generally sacrificed and the history of that company has shown a lack of continuity in its managerial approaches. Every time a new CEO comes aboard, the management style changes, yet GE is still the most admired company in America. Is there really a Better approach to leadership building or is leadership building unique to every company?

Jeffrey Liker I agree with your summary of GE and its approach.  I do think this approach is appealing in the U.S. and many companies have tried to emulate the “GE Way.”  It fits the cowboy image of riding into town, shooting it up, and taking no prisoners.  And the six sigma “black belt” approach fits this culture.  Find smart and aggressive individuals, train them, anoint them as warriors of improvement, and let them loose. This does achieve certain goals, but what does it do to the town?  Again, it is hard for me to imagine that this management approach, which builds a culture of fear and regular disruption, can

compete with a culture of continuous improvement like that of Toyota.  Toyota does have a process called “hoshin planning” in which each year the President of Toyota in Japan sets aggressive objectives for the company and then every level in the company is expected to set challenging objectives to support this working down through the company and then reporting up results with a lot of coaching between levels.  It is remarkable that Toyota seems to always hit its targets.  And they do this without fear and intimidation.  They do this because they have created a culture of improvement, people have learned powerful tools for problem solving and continuous improvement, and Toyota has developed a system based on visual management and standardization that sustains improvement.

Issa Bass In your book The Toyota Way, you showed how important it is for Toyota to invest in its employees and build trust in them. You gave the example of the of the NUMMI plant to illustrate that approach. GM is going through the most tragic and sad period of its existence after spending a lot of money on the welfare of its employees. In fact the problems that GM is facing now are the direct result of the luscious benefits that it granted its employees. How do you reconcile GM’s failure and Toyota’s success in that respect?

Jeffrey Liker Toyota has made many investments in training and developing its people and also keeping them as employees even in difficult times.  But Toyota is an extraordinarily cost conscious company all the time, not just in tight times.  As I see it GM incrementally over decades agreed to the luscious benefits and pay levels when times were pretty good, making annual agreements with the UAW.  At the time they could afford it and they did not seem to realize they were sowing the seeds of their own destruction for the long term.  I think this lack of long-term thinking really hurt GM.  Toyota leaders are always

thinking about the long term and thoroughly considering all decisions from every imaginable angle.  For example, Toyota wishes to invest for the long-term in its people and maintain job security so they keep a large portion of temporary workers who have lower pay and benefits.  This can be 20-40% depending on the situation and location in the world.  They are not offering the same investments in people to all people.  They would have great difficulty doing this in a traditional union environment.   Having said that, GM grew up in the U.S. in a particular historical period and Toyota did not, so it is not entirely clear what Toyota would have done in similar circumstances.  And if Toyota did get in the severe financial situation of GM they would certainly go through a tragic and sad period.

Issa Bass Why do some companies try to implement Lean and fail and what does it take to successfully implement it?

Jeffrey Liker In my experience most companies that try to implement Lean mistakenly assume it is a program or set of tools that can be implemented in a short period of time.  They do not understand that the Toyota Production System is a total system of people, processes, and tools that evolve and grow stronger over decades.  It is not a toolkit or program that you can “implement” as you would a computer system.  To really get anywhere close to the level of excellence of Toyota senior leaders have to understand that lean is a way of thinking—a philosophy on how to run the business.  And it requires a long-term perspective.  Anyone with that understanding and perspective would never just drop the lean program because there are problems.  They would see the problems as more opportunities to learn by identifying the root causes of the problems and changing the system that is preventing them from being successful.

Issa Bass Do you consider the Theory Of Constraints and Lean as conflicting methodologies or do you seem them as complementary?

Jeffrey Liker As I mentioned earlier I do not consider lean to be a methodology at all.  I consider it to be a philosophy for running the business.  I believe that Theory of Constraints is also a philosophy for running a business.  These philosophies are definitely in conflict.  TOC is a very short-term way of thinking about identifying constraints and fixing the constraints to increase throughput.  It is not about building a total system of people, processes, and technology that can solve problems, get stronger every day, and break whatever constraints come along.  Having said that, anyone well schooled in the Toyota Production System is aware of constraints and under certain circumstances will apply resources to solving problems at the constraints.

Issa Bass is the managing editor of SixSigmaFirst. He can be reached at issa@sixsigmafirst.com

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