Leadership & Succession: Akio Toyoda Newspaper Interview Part 2
Previously, in Part 1 of the Newspaper Interview series, Akio answered questions about how Toyota has changed, what Akio did during the pandemic lockdown, remembering to be “centered on people,” and about leading projects using a “venture mindset.”
In this article, Part 2, topics will cover themes related to Akio’s views on management, including his feelings towards the most recent restructuring of the company that includes the new executive structure announced on June 30 as well as the image he has of a successor – the next person that he would like to pass the baton on to as president of Toyota.
New executive structure that values roles
Similar to part one, this part also follows the interview style of a question followed by an answer from Akio. In Akio’s first response below, the editorial team is inserting part of what was written in Part One, as a way to help set the context for the additional thoughts he shared.
Q. Why did frontline staff members begin to move without specific directions from the top?
Akio After the Great East Japan Earthquake in 2011, internally, I repeatedly reiterated the order of priorities to be, “Safety first, regional reconstruction second, and then the restoration of production.” That feels like such a long time ago. People at the genba can now think and act for themselves without any reminders. This is how we have changed over the last decade or so.
But actually that’s how Toyota was to begin with. In line with genchi genbutsu (going to the source to get the facts), I believe that the people closest to the things, customers and the market, should have the biggest say and we should respect their opinion the most. Toyota was a company with support staff thinking about how to help those people in genba. However, unfortunately, sometimes I feel as though we have started to listen more to people in planning sections and people with titles attached to their names [than those in the genba].
I want the people in top management positions to see their “title” as a “role.” Both the people assigned to handle specific projects and those in top management positions have “roles.” However, the people in the top management positions have “titles” in addition to their “roles.” The question is how are they utilizing their “titles?”
“Titles” and “roles” mentioned here were keywords in the newspaper interview. Akio continued to use these words even as he went on to talk about the executive structure the second time.
In the June 30 organization announcement, Toyota redefined what members would be considered as the management charged with overseeing the activities of the whole company with the president, rising beyond a single function. That is how the roles of “operating officers” have been clarified, and regional CEOs (the heads of overseas business affiliates), presidents of in-house companies, and chief officers of each specific areas (group/function) were integrated into a category labeled in the announcement as “senior professionals.”
When Akio became president in 2009, the number of executive officers included 29 members of the board of directors and 50 managing officers, for a total of 79 people. However, two years later in 2011, that number fell to 11 members of the board of directors, and 49 senior managing officers and managing officers, leaving a total of 60 people. Based on further reforms over the following years that had been carried out based on the idea of “putting the right person in the right place,” and with the recent change in structure, the current number of board members and executive officers is now a total of 14 people, consisting of nine members of the board of directors and five other executive officers.
Q. The number of executives at Toyota has changed dramatically over just the past decade. What was the aim of drastically reducing the number of operating officers and making such a change in executive structure this time?
Akio It is the result of a variety of things I have been concerned about. I have noticed that problems don’t rise to the surface without someone making a decision and taking action. Also, as the world changes, no organization can stay the same forever. As far as Toyota is concerned, it is my hope that this personnel change can be thought of as a "change in role” rather than merely a “change in title”. That is my intention for this executive change.
As far as titles are concerned, it has become apparent that some processes become redundant, or the opinions of the higher-ups are accepted simply by virtue of their titles. But Toyota is about placing importance on the fact that “incidents” occur primarily at the genba, closer to the customer and the action. People [who are closer to the genba] deal with situations based on their roles, not by virtue of their titles.
If you use an elephant as an example, as each business function has been strong at Toyota for a long time, even with the title of executive vice president, that person trying to fulfill that role may have been limited in function to only be looking at the elephant's legs or trunk, rather than at the whole elephant.
For a while, the aim was that it would be “the Seven Samurai” who were controlling the elephant. However, because of their titles, all people saw were the titles. Instead, I wanted the people who are working with me to control the elephant without the limitations of such titles, so the decision was made to abolish the title of executive vice president. The result is that those who were originally executive vice presidents continue to have their core areas of responsibilities, but now they are key functional people I consult with as I control the elephant. I think that is what “management” really is.
Management positions are about taking responsibility, even if something is done by an individual team member under that management. It is not about doing everything on your own, but providing an opportunity for the work to be performed and providing guidance to make the results better. Also, I think it is about giving meaning and purpose to the job.
Toyota has always valued the genba, and so we should have a layer of those closer to the genba, who would say with confidence, "We’re looking only at the legs. But when it comes to the legs, no one can beat us.” The challenge this time is to make the roles of management and experts clear.
Until now, I think one weakness of large companies has been a need to have “titles” as a sign of rank. But from now on, senior professionals will be treated according to their “role” or function based on the idea of placing the right people in the right jobs. Since that is the way it is now, I’d like people to seize this as an opportunity.
After all, Toyota is an "engineering company," so most people should be professionals in their areas. I felt it wrong that those with high ranking titles are allowed to have a bossy attitude while most professionals doing the work are not properly rewarded. It may be weird to hear this from someone like me who has the greatest title in the company, but I think that this is one of the ways we will be able to recover “what makes us Toyota."
“Banto” and “Oyaji” are reflections of the president
Following these remarks, the discussion transitioned to focus on the roles of two specific operating officers, the ones with new titles: “Banto,” given to Koji Kobayashi, and “Oyaji” given to Mitsuru Kawai.
Q. In speaking of titles, the new titles of “banto” and “oyaji” were formed – can you talk a little about that?
Akio I have been the president for 11 years, and I am 64 years old now. At this point, the number of people who share their opinions with me has gradually decreased. Even if I tell them that I will listen, since I am older and have experience and a higher title, they would hesitate.
A good example would be Kobayashi and Kawai. Personally, I felt it was inaccurate to call them executive vice presidents, because in a ranked system, that title is lower than the president. There are these rankings in the world of titles, right? First, I thought it was necessary to remove the ranking. That is how I came up with “Banto” and “Oyaji."
In Japanese, for example, the word or designation of “Oyaji” (father in Japanese) means someone who is older, has more experience, and so naturally will have a higher position. Therefore, it serves as an indication that we value the relationship and it is one where we feel comfortable sharing anything without hesitation.
Kobayashi is 71 years old, and Kawai is 72 years old. Not only older than Akio, but Kobayashi even worked together with Akio for over 30 years including a time when Kobayashi served as Akio’s boss. Kawai has a strong understanding of one of Toyota’s genba that Akio so earnestly cherishes, having worked solely in the genba of monozukuri for over 50 years. It was to these two that the roles of “banto” and “oyaji” were given.
Akio I would hesitate to say it myself, but I believe that the “Banto” and “Oyaji” also have the authority to choose who they should work for. In that sense, “Banto” and “Oyaji” are mirrors of me, the president. They might not be happy to be referred to as mirrors of me, but they follow me willingly because of how I choose to act.
From my perspective, I don’t think that the same thing happens by simply creating posts for a “Banto” or “Oyaji". It is not a top-down, one-way relationship; it is a two-way relationship. As everyone comes to understand this without the need to explain it, I think we will become a great and interesting company.
How easily numbers can lie
Q. Despite the COVID-19 pandemic, Toyota is forecasting an operating income of 500 billion Japanese yen for the current fiscal year ending March 2021 – why are you able to do that?
Akio That’s thanks to the hard work of Toyota’s 370,000 employees and their families around the world. Except for the first founding years, I have been the only president who wasn’t able to pay taxes throughout the entire history of Toyota. Every top leader of Toyota is told, “Creating jobs, making profits and paying taxes are the biggest contribution to society.” However, I failed and that was a tough pill to swallow.
We could have attempted to use a V-shaped recovery method back then. However, I thought a V-shaped recovery would likely only create another big fall in the long run. That said, I think there were few sympathizers in the company at that time. It was a difficult period for people to endure, but I’m grateful for the people who worked really hard during those times. Without this crisis, we may have not been able to realize that we have built this strong corporate structure.
As for why I don’t usually talk about numbers, it is because it’s too easy of a goal. Once you start using numbers only, it becomes easy to make up numerical targets. While I’m a firm believer that numbers show results and that numbers don’t lie, if we only chase numbers, there is the danger of also “creating lies” in how they are used. Therefore, I feel I’d be going the wrong direction as a leader if I overtly pursued numbers.
The media has repeatedly criticized me as the “CEO who never talks numbers.” Nevertheless, I have kept my stance despite their words, and when we look at ourselves, we have managed to be a company that is able to pay our taxes now.
Since being appointed as president, Akio has not set specific numerical targets. Instead, he has consistently stressed the goal of “making ever-better cars” both inside and outside of the company. On April 2012, approximately three years since assuming the office of president, Akio said the following on the subject of “making ever-better cars”:
Akio’s comments on making ever-better cars in April 2012
“I am not in opposition of the expansion of vehicle numbers and profit. A sales person would work hard to increase the sales volume and market share, and I believe the accountant should secure and expand profit. However, if I lead the company focusing on numbers, such as vehicles numbers and profit, people in R&D, production engineering and plants who should be focused on making ever-better cars would probably feel constrained with numbers. I believe this should be avoided at all costs.”
Since this year, comments alluding to the “next generation” have increased in Akio’s statements.
“Reclaiming what makes Toyota requires using up time on the past. I want to be the last person to promote investing time on the past. In the next generation, I want everyone to invest time in the future.”
These words have been spoken repeatedly, most notably at the financial announcement in May. To allow the next generation to focus on the future, Akio has stated his resolve as president to “reclaim what makes Toyota during his term” while being able to still “sow seeds for the future.”
Q. Recently, you have started talking about his successor. What type of person are you thinking about?
Akio Just because a person is president, it doesn't mean that you can set your own term of office. I can take certain actions on my own, to some extent, and I do have fresh ideas. That's why I say, "Come and consult with me." It's not that I'm only involved in the process of making decisions based on my past knowledge, but, rather, I have a lot of ideas, ideas that I can work with. I offer my ideas, suggesting how it is interesting. But if there is a time that ideas aren’t forthcoming, it might be the time for me to rethink if I should still be in my position.
However, I don't think it's going to come any time soon. If I find that I stop thinking "I liked that idea," or that I don't really feel frustrated with me not having come up with an idea better than someone's, that is probably the time when I would need to retire.
Akio’s ideal successor
Following these comments, more questions came about what qualities Akio expected in his ideal successor. Previously, questions have come up many times regarding Akio’s successor. On one such occasion, at the general shareholder meeting last year, this is how he responded:
“Regardless of the name of the next president, whether it’s a Toyoda or not, what is important is that we do not lose sight of our founding principles, and focus on what we can do to achieve smiles on people’s faces continuously like a tree ring grows. With regard to passing down our founding principles to the next generation, I see each and every one of the Toyota executives here [at the venue] and team members in the whole company as its successors.”
This time, Akio went a step further in specifically describing his ideal successor.
Q. What is your image of an ideal successor?
Akio I think that it would probably be someone who could suggest an idea that I couldn't come up with but where the idea makes you stop and be like “that makes perfect sense”.
Personally, there might be things about this company I would rather not see changed, because I myself have considered and tried a lot so far, but that might just be my own arrogance speaking. I guess what I want to express here is that we have been through so much since day 1, and it is my hope that we do not change what makes us uniquely Toyota.
I may be a member of the founding family, but I'm also just a successor. I have just been in a position to consider and decide what it is we are going to do. But things change when the environment changes.
Even if things changed and went in the completely opposite direction from the one I had or would have chosen, I think every stakeholder would still be happy if my successor were someone who has been able to make even me say "Wow, that makes sense. I couldn't have done that."
In fact, I would wish to pass on the baton to a successor as soon as makes sense. I thought that my term would have been completed in my first year as president when I attended the public hearing in the U.S. over the massive recall crisis, but it didn't. As a result, I'm still in my position after 11 years.
I have been suggesting new ideas, but I will really have to think things over [about passing the baton] if there comes a time when I see many ideas and proposals to which I might say, "I haven't given that any thought." In a way, they have to exceed me. It's a tough challenge, but it's what's best for our stakeholders.
I don't want to hand over my position to someone who is envious or thinks they are the best. I prefer someone who would say, "Me? Really? You have made the worst last decision."
And I want them to have a spirit of “hating to lose,” something that makes them think they don’t want to lose to me. In reality, they do lose sometimes, just like we all do, but still, I think they need to have this hate-to-lose and never-give-up spirit.
That concludes Part Two of Toyota Times' coverage of the Newspaper Interview series, covering a wide range of topics.