Following is shortened version of Dr John Sullivan’s views on how HR contributed to Toyota’s billion dollar direct loss and $30 BB decline in stock evaluation. Full article was posted on ERE.net today. Link is included at end.
Excellent process points for Executives, including those in HR, to remember/consider.
To Find the Root Cause of Toyota’s Problems, Look Beyond the Gas Pedals.
“In any situation where employees fail to perform as expected, investigators must determine if the human error could have been caused by factors beyond the employee’s control. Such external factors might include actions by senior management, lack of adequate information or job training, faulty inputs to the process, or rewards that incent actions not in line with documented goals.
If you believe in accountability, you have to accept that human errors that lead to corporate catastrophes could be the result of faulty HR processes, most notably those related to acquiring, developing, motivating, and managing labor.”
“The Eight HR Processes That Contributed to Toyota’s Downfall”
- “Rewards and recognition — The purpose of any corporate reward process is to encourage and incent the right behaviors and to discourage the negative ones. Key questions — Were rapid growth (sales have nearly doubled recently) and “lean” cost-cutting recognized and rewarded so heavily that no one was willing to put the brakes on growth in order to focus on safety? Were the rewards for demonstrating error-free results so high that obvious errors were swept under the table?”
- “Training — The purpose of training is to make sure that employees have the right skills and capabilities to identify and handle all situations they may encounter. Toyota is famous for its four-step cycle — plan/do/check/act — but clearly the training among managers now needs to focus more on the last two. Key question — If Toyota’s training was more effective, would the managers involved have been more successful in convincing executives to act on the negative information received?”
- “Hiring — The purpose of great hiring is to bring on board top-performing individuals with the high level of skills and capabilities that are required to handle the most complex problems. Poorly designed recruiting and assessment elements can result in the hiring of individuals who sweep problems under the rug and who are not willing to stand up to management. Key questions — Did Toyota have a poorly designed hiring process that allowed it to hire individuals who were not experienced in the required constructive confrontation technique? Were their hires poor learners that did not change as a result of company training?”
- “The performance management process — The purpose of a performance management process is to periodically monitor or appraise performance, in order to identify problem behaviors before they get out of hand. Key questions — Was the performance appraisal and performance monitoring process so poorly designed that they did not identify and report groupthink type errors? Did Toyota’s famous high level of trust of its employees go too far without reasonable metrics, checks, and balances? Did HR develop sophisticated metrics that produced alerts to warn senior managers before minor problems got out of control?”
- “The corporate culture — The role of a corporate culture is to informally drive employee behaviors so that it closely adheres to the company’s core values. Key questions — Did HR’s failure to measure or monitor the corporate culture contribute to its misalignment? Was the corporate culture (the Toyota Way) so biased toward positive information that employees learned not to make waves, in spite of their professional responsibility to be heard on safety issues?”
- “Leadership development and succession — The purpose of leadership development and succession planning processes are to ensure that a sufficient number of leaders with the right skills and decision-making ability are placed into key leadership positions. Key question — Was the leadership process at Toyota so outdated that it produced the wrong kind of leaders with outdated competencies, who could not successfully operate in the rapidly changing automotive industry?”
- “Retention — The purpose of a retention program is to identify and keep top performers and individuals with mission-critical skills. Key question — Did the retention program ignore people that brought up problems and as a result, did these whistleblowers often leave out of frustration?”
- “Risk assessment — Most HR departments don’t even have a risk assessment team whose purpose is to both identify and calculate risks caused by weak employee processes. Clearly HR should have worked with corporate risk management at Toyota in order to ensure that employees were capable of calculating the long-term actual costs of ignoring product failure information. Key question — Should HR work with risk-assessment experts and build the capability of identifying and quantifying the revenue impacts of major HR errors, including a high hiring failure rate, a high turnover rate among top performers, and the cost of keeping a bad manager or employee?”
“Final Thoughts”
“Toyota’s problems are not the result of a single individual making an isolated mistake, but rather due to a companywide series of mistakes that are all related to each other. So many corporate functions were involved, including customer service, government relations, vendor management and PR, that one cannot help but attribute the crash of Toyota to systemic management failure.
The key lesson that others should learn from Toyota’s mistakes is that HR needs to periodically test or audit each of the processes that could allow this type of billion-dollar error to occur.”
To view the complete article, or to post comments directly to John Sullivan:
http://www.ere.net/2010/02/15/a-think-piece-how-hr-caused-toyota-to-crash/#more-11718
