Leadership in crisis

In a recent interview with Fortune magazine, the new chief executive of Toyota Akio Toyoda, grandson of the company founder, said the world of auto manufacturing had changed forever.

“We are talking about a once-in-a-century transformation of the market. I believe the auto industry is now trying to face the challenges of presenting a solution to this once-in-a-century change. And what is clear to me is that what is going to happen will not just simply be an extension of the past,’’ Toyoda said.

“Last year was the 100th anniversary of the invention of the Ford Model T and the 100th anniversary of GM. I don't believe this was an accident. Industrial revolutions were experienced for 100 years as the position of workers improved so that they became able to buy cars. However, these conditions that supported the prosperity of the auto industry started to disintegrate. I believe it is an important time for Toyota to present some answers for the coming 100 years.”

Toyoda’s comments highlight the issues confronting advanced manufacturing leaders today. Globalisation, mobility and economic upheavals have transformed manufacturing, and with it, manufacturing leadership.

The story of General Motors is a case in point. Under the leadership of Alfred Sloan in the 1920s, GM introduced radical changes, pioneering the concept of “planned obsolescence”, with a new vehicle every year. It segmented the market with different cars selling at different price points, locking in consumers at all levels as GM customers. GM’s strategy was to cash in on the upward mobility of American society.

Sloan also created the radical innovation of the multi-division company. In 1962, GM controlled nearly 51 per cent of the US car market. Then it became slow and arrogant, unable to see the changes in the market with petrol prices soaring and competition from the Japanese. Once upon a time, GM had been a great company because of its leader Sloan. Now, a lack of leadership contributed to its bankruptcy. Toyoda’s comments highlight how fine a line it is and how crucial the leader’s role is in recognising changes and getting ahead of them. The fate of GM is the alternative.

Toyota’s production system was instrumental in shaking up the world of manufacturing. Many companies are now embracing lean manufacturing techniques but, unfortunately, many are not achieving Toyota-like results because they will not invest in infrastructure and leadership. Indeed, leadership is one of the keys to lean thinking.

Taiichi Ohno, the father of Toyota’s lean production system, once said that the heart of the system was “management’s commitment to invest in its people to promote a culture of continuous improvement”. This is the antithesis of many workplaces today where there is disengagement, increased churn and high turnover. Under the Toyota system, the leader becomes a coach to ensure the company’s transformation. This is why many automobile manufacturers have not been able to copy Toyota's production system. That is despite there being piles of material on it in books and journals and despite Toyota even giving tours of its manufacturing facilities.

Significantly in that same interview, Toyoda says his favourite job at Toyota has been getting out on the factory floor and mixing with the front line workers to implement kaizen (continuous improvement) ideas. It is an observation that goes to the heart of what’s required in manufacturing leadership today. It’s very much connected with the Toyota maxim of genchi genbutsu which means “see it for yourself”.

This was not invented by Toyota. It dates back to the leadership style practiced by HP’s David Packard and Bill Hewlett in the 1940’s. It has since been labelled “management by walking around”. The idea is simple: to figure out what’s really going on in an organisation, a leader needs to get out of the office, go to factories and loading docks and even retail outlets. True leaders need to get their hands dirty.

Cost pressures and the threat of outsourcing, where companies face the prospect of sending their operations and jobs to countries where labour costs are low, continue to force managers to turn more to this technique. But of course, it is not always physically possible to do this. Fortunately, technology now provides collaborative tools such as instant messaging, videoconferencing that link people at design facilities, plants, and at business partner sites.

Two other massive changes are transforming manufacturing leaders. In today’s market, the manufacturing plant leader tends to have less autonomy and less training.

Cost pressures in a global economy have forced organisations into making tough calls about training and development. That, combined with the push for flatter organisations, has had an impact on the traditional cross-functional training plans for tomorrow’s leaders. Traditionally, management trainees would be groomed through a series of cross functional roles. Now, they might be exposed to only one or two of these areas, for example, engineering and accounting.

This creates a significant problem because of another change. About 30 years ago, the role of the manufacturing site leader took on the job with total responsibility and authority. The leadership landscape has since changed. The simultaneous devolving and centralisation of power to functional areas such as procurement, warehousing, finance and accounting, IT and, in some cases, human resources has transformed the shape of work. This creates major challenges for the new manufacturing leader as it means the leader needs to have the relationship skills with colleagues without having too much authority or control over their areas. These relationships need to be focused on strategic goals for the business.

Significantly, there are few training opportunities for these sorts of skills. Instead, it requires a certain selflessness which as Jack Welch, former chief of one of the greatest ever manufacturing companies General Electric said, can be boiled down to one thing: true leadership is not about you. In the manufacturing world, says Welch, it is about relentlessly upgrading teams, taking every opportunity to evaluate, coach and build self-confidence. It is also about making sure everyone not only sees the vision but lives and breathes it. And it’s about having the courage to make unpopular decisions and gut calls.