C Gopinath

A disappointing quality report

Updated on: Jun 19, 2011

Toyota got what it wanted. A report that is not too critical, gives a few suggestions that sound good and compliments Toyota for already taking action in many areas.

After Toyota was forced to undertake a series of high-profile product recalls in 2009-2010, it appointed a seven-person panel of experts to examine its ‘quality and safety processes and procedures' and make recommendations for the future. The panel has now submitted its report, and I'm not sure what to make of it.

To recap, Toyota's problems began around 2007 when it believed that the floor mats of some of its models caused the accelerator pedal to get stuck. As it initiated recalls to deal with the mats, more complaints came in, and the company found that there was a mechanical problem with sticking accelerator pedal.

Meanwhile, other charges of unintended acceleration arose. By 2009-2010, the company had recalled about 10 million vehicles to fix safety defects.

The major recommendations of the Quality Panel now are that the company: (a) is too centralised, with functional decision-making taking place in Japan for global operations, and it needs to give more local control to its regions; (b) should be more receptive to feedback from external sources; and (c) should give prominence to auto-safety in company operations and management and not see it as part of quality.

Age-old debate

The panel, with its first recommendation, was wandering into areas that form the core of academic discussions about global strategy, namely, the question of local versus global control.

To what extent decision-making is localised versus centralised depends on the nature of a company's global strategy, the company leadership preferences and culture, and industry dynamics. Companies often shift from one side to the other.

The panel is weighing in on the side of more localised control, triggered by a safety problem. It is not clear to me, and the report does not explain, how giving local (read, the US) control on safety matters would have resulted in a better response to the sticky pedal or similar issues.

If a pedal sticks, it should be obvious to any company executive whether he is sitting in Japan or in the US that the pedal needs to be dealt with forthwith. Changing the structure is not going to solve this. And by the way, Toyota had already announced decentralising decision-making to the regions in its new Global Vision 2020.

The other recommendation about paying more attention to external information is probably to deal with the charge that Toyota took too long to react to the safety complaints.

The panel wants Toyota to set up an independent team that would report to the President all external positive and negative information and for the company to be less adversarial in its relations with the US Government safety agencies. Okay, but nothing earth-shattering here.

The third recommendation about separating safety from quality is one I like. Toyota confused the two, but that is what Mr Akio Toyoda, President of Toyota, said in his mea culpa before a US House Committee — that Toyota's traditional priorities were safety first, quality second, and volume third.

And the panel quotes him in its report. So is there anything new in what the panel is recommending?

The panel's purpose

The panel in its report mentions at a couple of places how it is encouraged that the company has already started taking action on many of its recommendations.

So, a charitable view of the panel's recommendations would be to look at it as validation of what Toyota knew was wrong and was fixing any way. Was the panel then worth the time and expense?

I suppose it was. One major failing of Toyota during the crisis was its management of public relations. The company remained silent as charges were being made in the press about its vehicles being unsafe.

When the company did respond, it was as though insular engineers had taken over the communications department. To that extent, this panel has served a purpose by mending fences with the public and the government agencies.

As is often said, consultants serve a useful purpose in legitimising what the management plans to do anyway.

The panel was chaired by a lawyer with expertise in dealing with the government, and had an aerospace engineer, three academics, an insurance expert and one with corporate executive experience.

They all have some connection with safety in their careers, which was perhaps why Toyota saw their value in a panel like this. And Toyota got what it wanted.

A report that is not too critical, gives a few recommendations that sound good from a 30,000-ft kind of view, and compliments Toyota for already taking action in many areas.

A panel appointed to examine ‘quality and safety procedures' seems to have been content talking about policy concerns that had already been written about in the business press.

Why slippages

What I would have liked to see is a report that identified why Toyota had fallen into this situation of clearly ignoring one of its core competencies, namely, product safety.

From all the interviewing that the panel did of Toyota employees and the free hand it had been given, one would have expected some insights about why a company that had built an enviable reputation for so long on quality and safety had fallen to a position of having outsiders examine its safety procedures.

Sony, another market leader that was built on a competence of product innovation, has also slipped badly in that department and is struggling to regain its leadership. It would be valuable to know what causes such deterioration in successful companies.

The panel was appointed for a two-year term. It has submitted this report in the middle of its term, and sees its role in the coming year as one of overseeing the implementation.

I'm not holding my breath wondering what the final report will look like.

Hopefully, Toyota's own internal (and similarly named) North American Quality Task Force will find the real problem.

The author is professor of International Business and Strategic Management at Suffolk University, Boston, US. blfeedback@thehindu.co.in

Published on June 24, 2011

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