Management to learn from Toyota's Fallout

Toyota fast move of establishing factories in five U.S. states in the late 1980s, about few years ago it began ramping up production and making big expansion plans as a way to meet soaring demand and, ultimately gotten the title of world’s largest automaker pushing GM from it’s title holder. Was this hasty ambition led Toyota to have some problem coordinating just-in-time arrivals from its suppliers and maintaining deep technical ties with those suppliers??


This could only be part of the story and there could be more to it’s flaw in it's manufacturing management and control. Let's look at some areas :

Bureaucracy

The lines of control of Toyota’s U.S. operations were murky. During most of Toyota’s expansion into America, the company’s California-based sales division and its Kentucky-based manufacturing division reported back to Japan, independent of each other. For a few years, the company’s top-ranking U.S. exec, James E. Press, was able to establish Toyota Motor North America in New York as the de facto headquarters in charge of all U.S. operations. He even rose to become the only American on Toyota’s board of directors in Japan. But Press quit in 2007 to join Chrysler and he was replaced by a series of Japanese executives with less clout. With Press’ departure, Toyota lost its key bridge between management in Japan and various U.S. constituencies — and its ability to respond rapidly when crises hit.

Too Confident

Another underlying problem is cultural. Toyota is a secretive and non-communicative organization. American insiders joke that working for the company is like working for the Central Intelligence Agency, where information is shared only on a “need to know” basis, confides one American employee. And long a scrappy underdog to General Motors and Ford Motor, Toyota developed a sense of cockiness in the past two or three years as it began to surpass its American rivals in global sales. The company did not need rebates to sell its vehicles. Consumer Reports gave the brand high praise. Toyota did not believe it needed a strong public relations effort. The company thus failed to recognize that the pressures on the No. 1 player in any market are far more intense than the pressures on No. 2 and No. 3.

Poor Management

For years, the company has been led by a series of world-class professional managers. Then last summer, Akio Toyoda, 53, grandson of the company’s founder, took charge as chief executive and some insiders did not think he was ready, say some auto industry watchers in Japan. They were right. When he took the job, Toyoda told the world that he would practice “genchi genbutsu,” which translates roughly as “management by walking around” or “going to where the problem is.” But when the safety flap came to light, he remained silent and even attended the annual gathering of world leaders in Davos, Switzerland. American crisis response experts were flabbergasted. “What is he doing in Davos anyway?” Paul A. Argenti, a professor of corporate communications at Dartmouth’s business school was quoted as saying in The New York Times. “If you’ve got a crisis of this magnitude, you get on a plane and you go to the scene of the problem.” Instead, day-to-day management of the controversy was delegated to James E. Lenz III, head of Toyota Motor Sales.

Fallout

Toyota’s problem-solving mechanism clearly broke down. The company revealed as much in the series of explanations it released. Initially, Toyota announced the floor mats were the problem. Then it was the gas pedals, which were made by an Indiana-based supplier and thus limited the problem only to U.S.-made cars. But that story didn’t hold up because of a well-publicized case involving a Lexus in California in which four people died — and that vehicle was made in Japan. Now it seems the underlying problem involves the software and the computerized controls governing acceleration and braking in many Toyota vehicles. No one knows for sure but this series of problems could take months to reformulate.

Toyota used to have a reputation for quickly correcting mistakes. It first introduced a vehicle nicknamed the Toyopet in the U.S. in 1957. It was laughed out of the market because of its ungainly design and small size. But by 1959, Toyota was back and it executed flawlessly in the United States for 50 years, even introducing the luxury Lexus brand, which beat Mercedes, BMW and Cadillac in total sales.

Now it faces class-action lawsuits and intense scrutiny from Congress and officials at the National Highway Traffic Safety Administration. The tone is reminiscent of the Big Tobacco hearings more than a decade ago: What did Toyota know and when did it know it? There’s no question that Toyota’s reputation has been badly damaged. The only question now is how long it will take to recover.

I think some of these management fall-out could happen to any big organization in any kind of manufacturing businesses, be it Rig building, Tall architectural building design and construction, medical industries, filming industry, etc… The lesson to all high ranking staffs, is to be on their toe and corporate governance is one key to maintaining the integrity and well-being of the business and let it be a wake-up call to all ( as Jack, the director, recently mentioned on his own fall-out, though it was not manufacturing related but "woman" was the cause ). Let’s not be cocky no matter how successful your trade or business is ! !

CEOs are better-off with MBA ?

Remember Jeff Skilling of Enron? He had an MBA, while Bill Gates and Steve Jobs didn't even finish college. Probably with the recent financial crisis on banks,etc, there was also side-impact on MBA programs and few of these programs have received criticism and whether the graduates know what to look out for or just follow by the book. According to critics, they are guilty of many overlooked lapses: teaching the wrong financial models, riding roughshod over risk management, sidestepping business ethics, overheating the managerial job market, hiding from the real world. As a result, so the script goes, we have a generation of business leaders tainted by greed and short-term thinking.


What impact has an MBA on a CEO's overall position in the ranking. Findings are :

While information about educational credentials wasn't in the public domain for all countries, CEOs' academic records were widely available in France, Germany, the United Kingdom, and the U.S. Fewer than one-third of the CEOs of four countries had an MBA. So let's be clear certainly we do not say it's a necessity for getting the top job. But it could still be sufficient to improve performance.

As it turns out, seems there is a definite correlation between holding an MBA and achieving high performance as a CEO over the long term. CEOs with an MBA ranked on average a full 40 places higher than those without.

Those who had become CEO before the age of 50. The effect of an MBA was even more significant for this group. The advantage went up from 40 places to 100. Time and again, the MBA advantage persisted.

The Potent MBA Ingredient

The big question is, why? The simple answer is that something in the MBA curriculum or experience helps a CEO add value, particularly if that executive has comparatively few years of business experience. But what exactly is this magic MBA ingredient? For some graduates, an MBA simply gives them better skills. It can add right-brain creativity and warmth to left-brain logic and financial acumen. Or vice versa. It can even help get the hard and soft skills working together. For others, an MBA is a badge of excellence. After all, top schools only accept a chosen few. And most top companies look among the elite for their leaders.

An MBA may also provide a network of other rising stars. This network offers business contacts, opportunities, and priceless advice. And it lasts for an entire career.

Those who choose to do an MBA, are opting to improve themselves. Their openness to ideas and willingness to learn is going to benefit them all the way to the top—and long after they arrive in the executive suite.

An MBA program, or at least a good one, gives just such a perspective, especially if it recruits a globally diverse student body. And here the speculation is backed up by research. An INSEAD colleague, Professor Will Maddux, has carried out experiments demonstrating conclusively that the simple fact of having lived abroad makes people more creative.

The most successful MBA graduates are probably those who manage to mix all of the above ingredients into a potent cocktail of excellence. Perhaps they're the ones who made it into the top 200. Today's MBA students should take note.

*Some of above quoted from Herminia Ibarra, professor of organizational behavior and the Cora Chaired Professor of Leadership and Learning at INSEAD

Innovation - Key to survival of an Organization

Innovation in an organization can succeed and even thrive in an efficiently run company.

Being aware of and addressing the different external / internal environments, competition, support, skills, and drivers allow an organization to be on top compare to the others lacking the foresight. The challenge is to understand the differences, and create a system that is working against odds. Innovations challenge the norms and assumptions by thinking out- of-the-box and creating new ideas with risks. They can affect current resources, disrupt supply chains, manufacturing processes, product strategies, and even be unsettling for existing customers. Innovations can also affect structures within the company, creating a startling bump in an otherwise orderly progression in an already established and focused business. We always wonder why innovation is so difficult to initiate and maintain especially within a matured organization. The more so we have reasons to effectively manage innovation and it may be one of the best ways of differentiating a company with its strong competitors.

We may approach and manage innovation in an established organization - firstly is to protect opportunities by isolation as the innovations are identified and developed. Secondly is to integrate innovation practices and management systems to become an everyday part of the organization.

Isolating is an attractive approach since it is relatively straightforward and could include establishing separate new business ventures and isolating new opportunities. Isolating a new opportunity has the advantage of freeing the innovative enterprise from the controls of the established organization. While this approach works in some situations, it has several difficulties, including managing conflicting business models (the innovation could likely become a competitor to other operations in the company), the fact that the innovation often needs resources controlled by the established organization.

Splitting innovations from the established organisation certainly makes sense in some situations, such as those that can create an entirely new business. In most cases though, innovations would do better if they could co-exist with established businesses.

Innovations come in all sizes, and an integrated approach allows an organisation to adjust the balance in the approach between ordinary operations and systems designed for those ideas that are highly innovative.

Integrating innovation with normal business operations is done by combining top-down innovation leadership and bottom-up creation and drive of new opportunities and solutions.

Top-down innovation -

The management role in these businesses is to envision a potential new area, increase R&D, or to consolidate otherwise disparate activities within a company in a way that would be very difficult to do otherwise. Possible success initiatives could be those where the management is dependent on often newly established bottom-up ideas to further develop them into new businesses.

Bottom-up innovation -

Bottom-up innovation drives everything from day-to-day improvements to multi billion dollar new-to-the-world products and platforms.

Management systems are designed to allow bottom-up entrepreneurialism co-existing with normal businesses. These management systems recognize the unique needs for internal entrepreneurial activities. They may be :-

Allocation of some time: Spending 5-10% time with employees to work on programmes that they believe are important to the company. The time can either be to work on a programme or innovative quality circle that they initiate, or to support other's activities. Managers are expected to support employees' use of this time, and the employee can stay with the programme as the champion or team member.

Funding: Peer group allocated, self-managed funds to support feasibility work.

Design Forum: A networking program fostering peer to peer exchange and interaction, or could be strategic alliance or brainstorming amongst SBUs.

Use of company capabilities: The company's process and material capabilities are managed by groups that can provide access. Technologies are owned by the company, not by any one group.

Access to the company's markets: While the focus for an employee is to their direct business, they are encouraged through their allocated time to apply ideas anywhere where they think there may be an application. The reward system is designed to recognise both contributions to their business, as well as creating new businesses elsewhere in the company.

There are potential and the innovation determines the degree of one system or the other used. Small, sustaining innovations can be usually assessed and incorporated through normal processes. Moderate innovations often challenge assumptions, and by giving a champion of the idea resources, access, and support, they can lead testing those assumptions.

Large innovations, especially those involving new technologies and opening new markets for the company need the full support of senior management or the board or committee. The champion needs resources, access, and support to protect the innovation. Senior management gives enough independence to the new innovative group to make the right decisions, while at the same time encouraging collaboration and interdependence between the new and established groups.

Integrating innovation opens the organization to improve their style of working with customers, employees, partners, and suppliers in new ways. With this, it could possibly lead to many new opportunities and the experience staff in the organization with the vast experience will eventually drive to grow it’s company to a higher standard and compete in the global arena with stronger product and service.

The need to assess how effective your staff manage Emails ?

Everyday your inbox is being flooded with emails that tire your eyes while raising your blood pressure and killing more of your brain cells. Email exchanges that cc or bcc to you occasionally makes you wonder what your direct reports, and their clients, actually do for a living? We will irk those "FWD" mails linking you to long spools of detailed correspondence that you have zero desire, or need, to review or read. You are only just peeking into the abyss of digital dysfunction and human self mis-management. The bigger office communication picture may be even more disheartening or threatening.

It will soon be seen that the art of effective email exchange is going to lead to a critical success factor in business performance, therefore mismanagement of email may in fact be a symptom of weakness or poor operation of your organization.

Executive has no time (or obsessive-compulsive disorder) to review and edit their people's correspondence — it's not possible and it wouldn't be healthy in working organization. So how can management or HR department quickly and cheaply create the shock of self-consciousness to push their people to take the style and substance of their correspondence more seriously? And how can you find out the interoffice spam actually reflects a deeper issue of employee performance?

A possible approach is to make email an intrinsic part of performance reviews. Insist that colleagues and subordinates better evaluate their email so that you may better evaluate their performance. There are few better proxies for assessing how well individuals are communicating, on task and on target, than the digital transmittal they send in order to get their work done.

The key is to politely demand self-assessment and review. Ask people to present correspondence that demonstrate how well they've used the medium to manage successful outcomes. In other words, have them select examples illustrating their own email "best practices" for results. From here, we may find such assessment and prioritization procedure a lot to reveal and understand. Culling their email correspondence is a wonderful way for individuals to remember and reconnect with what they think works and what doesn't. Your ability to weigh their self-assessed success with your own experiences gives this simple technique particular power.

At one project review, every single example selected by one manager featured brief emails with large reports or presentations attached. Email is not a medium of communication; it is a tool for referral. The larger issue was that this person was so intent on being "comprehensive" that they avoided getting to the essence of what their colleagues asked for and needed in the moment. At another, the employee literally annotated and expanded upon the emails received; all the "best practice" emails were "responses" to others rather than ideas and solutions he initiated. These email styles raised larger and more important issues around performance and personal effectiveness. They likely would not have surfaced without the email self-assessment demand.

It's remarkable what can be discovered when people are asked to show examples of what they think they're doing well.

Some of us may not be so tech-naive to constrain this performance review technique to email alone. Firms using wikis, blogs, and other digital media for coordination and collaboration should similarly broaden the purview of their performance reviews. But it may be surprising that only a small handful of the managers and executives make this tactic a part of their assessment process.

Some have the opinion that many managers think that they already have adequate insight into the communications styles of colleagues and subordinates because of their own interactions with them. Or because they are cc:ed on correspondence that matters. We must not be shortsighted and misleading as the truth is that it is always important and relevant to learn how one's people rate and rank their own effectiveness. Of course, getting people to submit the "worst practices" and stupid emails they sent would truly be a fool's errand for a performance review. But gaining insight into your staff perceptions — quickly and cheaply — from the examples they themselves choose might strike you as an ideal way to improve one's own effectiveness as a communicator and leader.

Top Ranking companies in US to work for ?

Top rank: 1 Apple

Rank in Computers: 1

It is a tribute to its CEO that Apple, which ten years ago seemed headed for the slag heap, is No. 1 on this list. Steve Jobs has always had a knack for weaving magic out of silicon and software. But who knew he could build a $24 billion (in sales) company on the strength of a portable jukebox and a computer with a single-digit market share?

His pitch, as he leveraged the success of the iPod, was very simple: Apple products work, and if you buy more than one, they work better. The company (if not its stock) is on a tear, but even with the economy weakening, it will be interesting to see how economically sensitive this growth engine is.

Top rank: 2 Berkshire Hathaway's

Rank in Insurance: Property and Casualty: 1

To see "admiration" in action, just look at Berkshire Hathaway's stock chart from last fall. As other financial shares were getting hammered -- some Berkshire investments among them -- investors bid up Berkshire's own stock by 27%.

Why? Wall Street believes that Berkshire and its acclaimed leader, Warren Buffett, possess a matchless ability to turn today's problems into tomorrow's profits. The key to this ability: "An absence of any regard for short-term results," says Don Graham, CEO of the Washington Post Co. (of which Berkshire owns 18%). Indeed, Berkshire has just launched a bond insurance company to compete with troubled MBIA and Ambac. It has also invested $800 million in subprime-battered Swiss Re.

Can Buffett, 77, continue making lemonade from lemons? There's no reason to think otherwise. Of greater concern: Who takes over once the legend is gone? -Jon Birger

Top rank: 3 GE

Rank in Electronics: 1

GE is no longer No. 1, but its reputation has still held up well, considering. The company gets half its profit from financial services but announced it was bailing out of subprime in July, before the worst trouble hit.

The resulting write-offs didn't dent earnings significantly. While its stock is stuck where it was six years ago, GE remains America's top shareholder-wealth creator, and it continues to deliver profit growth of 15% or more, remarkable for a $173 billion company. -Geoff Colvin

Top rank: 4 Google

Rank in Internet Services and Retailing: 2

Microsoft may be bigger, but everything in the tech world revolves around Google. Its "Do no evil" motto has become a kind of Hippocratic oath for other Silicon Valley firms, and even its fiercest critics agree that Google sees itself as the caretaker for the web. Competitors talk of meetings where Googlers, as altruistic as Santa's elves, ask, "What's good for the web?" Of course, what's good for the web has also proven to be very good for Google. -Josh Quittner

Top rank: 5 Toyota Motor

Rank in Motor Vehicles: 2

In the past 12 months Toyota has seen three top American executives defect to competitors, been humiliated in its first season of NASCAR racing, and had its reputation for impeccable quality sullied. Yet those were mere speed bumps as it cruised to second place in U.S. car and truck sales (passing Ford) and took the winner's circle in worldwide sales.

Toyota continues to add capacity, invest in hybrid technology, and roll up the healthiest profits in the industry. If 2007 was a tough year for Toyota, imagine what a good one looks like. -Alex Taylor III

Top rank: 6 Starbucks

Rank in Food Services: 2

After years of dizzying growth, there's trouble brewing at Starbucks, which dropped four places on this year's list due to weak sales, overexpansion, and intense competition. Its once-soaring stock trades for about half what it fetched a year ago, and in January chairman Howard Schultz returned as CEO. But Starbucks remains a sought-after employer, and its brand, while bruised, is still powerful. -Matthew Boyle

Top rank: 7 FedEx

Rank in Delivery and Logistics: 2

With fuel costs rising, it may be FedEx's environmental efforts that matter most these days. Aside from hybrid vehicles, which are becoming key across the industry, the company has also focused on solar energy; a new installation at its Oakland hub generated 80% of the facility's energy demand.

It's that kind of innovation, says CEO Fred Smith, that has made "FedEx" a household verb. And it shows no signs of exiting the lexicon anytime soon. The $35.2 billion company experienced its busiest day ever in December, handling 11.4 million packages. -Nadira A. Hira

Top rank: 8 Procter & Gamble

Rank in Soaps and Cosmetics: 1

As a Navy veteran, A.G. Lafley knows that turning around an aircraft carrier can't be done on a dime. Neither can turning around a mature conglomerate. That is the task Lafley assumed in 2000, after the company had suffered two profit warnings.

But like a ship, once the change in direction is made, a company can gain a certain momentum. And that has been the case with P&G, whose adjusted stock price has more than doubled on Lafley's watch. The key to P&G's success: strategic focus, innovation, and internationalization. Lafley's next challenge: to make sure he has trained his officers to take command. -Cait Murphy

Top rank: 9 Johnson & Johnson

Rank in Pharmaceuticals: 2

From the common cold to clogged arteries, J&J has the remedy. The $61 billion company recorded operating margins of almost 25% last year. More broadly, the 122-year-old health-care conglomerate is admired for its ability to be competitive in three businesses -- consumer health products, branded pharmaceuticals, and medical devices.

That's nothing to sniff at. J&J's competitors have responded to uncertainty in health-care markets by narrowing their focus. -John Simons

Top rank: 10 Goldman Sachs Group

Rank in Securities: 1

At a time when much of Wall Street is begging for capital infusions, it's not a shock that Goldman Sachs, which posted record profits in 2007, earned a spot on this list.

But it's not just about the money. Goldman's peers admire it because the profits are more than a matter of luck (though there's some of that too). Its results are a testament to its culture, an impossible-to-replicate mix of extreme aggression, deep paranoia, individual ambition, and robot-like teamwork.

Even as Goldman has morphed from a U.S. banking partnership into a global colossus, the firm's culture has kept it as nimble as a startup. And that's helped it balance its greed with a hyper-awareness of risk. Sound too simple? Just ask Goldman's rivals. -Bethany McLean

Top rank: 11 Target

Rank in General Merchandisers: 2

Consumer jitters rattled retailers' nerves in 2007, and even mighty Target -- the $60 billion purveyor of cheap chic -- was unable to escape the gloom.

But while Target's 2007 numbers were lackluster -- same-store sales, a key measure of a retailer's health, fell in December, and profits fell in the fourth quarter -- the Minneapolis discounter kept its cool. Target continued to do what it does best: churn out trendy trappings with marketing mastery.

It also gave $3 million a week back to the community, boosting its image as the good guy of discount retailing. That helps explain why it jumped two spots this year, making it the top merchandiser on the list. -Julie Schlosser

Top rank: 12 Southwest Airlines

Rank in Airlines: 1

It was officially the second-worst year in aviation history. More than a quarter of all flights in the U.S. arrived late. Planes were packed. Airports were madhouses. Passengers were irate. So the fact that any airline is considered admirable says something.

Southwest, which dropped seven spots this year, to No. 12, shows it's possible to shine even in an otherwise dire industry. Besides posting its 35th consecutive year of profitability, it was the most punctual, lost the fewest bags, and had the least complaints compared with its peers. But its stock lagged, and there's fear that its quirky culture is starting to go stale. -Barney Gimbel

Top rank: 13 American Express

Rank in Megabanks, credit card cos.: 1

American Express was one of the few Wall Street giants to escape subprime trouble, but it still got whacked by the deteriorating economy. Investors had hoped AmEx would sail through the slowdown; instead the company announced (after our Most Admired survey was complete) that profits fell last quarter. The stock dropped, but that looks like a bump in the road, as the company has been a stellar performer for the past seven years under CEO Ken Chenault. -Geoff Colvin

Top rank: 14 BMW

Rank in Motor Vehicles: 1

The German automaker has doubled the number of models, expanded its global manufacturing -- and fallen on its face with the disastrous acquisition and subsequent divestment of Britain's Rover Group. Yet even as it has transformed its operations, BMW has strengthened its image as the sporty and cool German luxury-car brand. BMW's biggest challenge: to achieve margins as fat as those of rival Daimler. That would make BMW's shareholders as happy as its drivers. -Peter Gumbel

Top rank: 14 Costco Wholesale

Rank in Specialty Retailers: 1

Costco CEO James Sinegal is a stickler for keeping prices low. The savings he wrings from suppliers are often passed on to consumers, sometimes to the chagrin of investors. But the stock is up 12% over the past year, bucking the general retail trend. With $64 billion in sales (more than Wal-Mart's Sam's Club), a 50-million-strong membership base, and loyalty among hourly employees for its generous compensation, it's no wonder Costco (tied with BMW) has joined the ranks of the Most Admired Companies. -Suzanne Kapner