What Akio Toyoda Looks for in a Successor

2022.06.24

Following up on our report on Toyota’s response to key business topics at the General Shareholders’ Meeting, this article focuses on questions about President Akio Toyoda’s potential successor and passing the baton to the next generation.

The spirit of TPS

“When asked what we do, I want Toyota members to respond with pride, confidence, and ambition: I make cars. I see my mission as nurturing such individuals by passing on the legacy of Toyota’s skills and philosophy.”

Akio described his mission during his address using the keywords “philosophy” and “skills.”

He used these words twice before his closing remarks. The first time was in response to a shareholder question about the spirit of the Toyota Production System (TPS).

The shareholder suggested that the TPS’s lean inventory approach was failing in the face of COVID-19 and chip shortages. Akio took it upon himself to respond as follows.

Akio

Over the past 13 years, what I did to transform Toyota was call on employees to “make ever-better cars” and strive together toward that goal, rather than leading the company through numerical targets.

Much has changed over these 13 years, and I believe Toyota now offers a wide variety of products that have become the preferred choice of customers worldwide.

Everyone involved in Toyota’s car making, including suppliers, has contributed to improving these products. Our dealers have also played an important role in understanding customer feedback.

I believe that our ability to offer such a wide range of products results from everyone striving together to make ever-better cars, with a shared desire to work for the good of all stakeholders.

We continue to hone Toyota’s philosophy, originating in the Toyoda Principles, and our technique of TPS. I believe the fruits of these efforts are our products.

In fact, at today’s venue, our methods for handling attendee flow in these wet conditions employed TPS concepts.

You may think that TPS only applies to production, but it has become a companywide skillset used by everyone from office staff to developers. I hope you understand that.

I am also doing everything I can to pass on our philosophy and skills to the next generation. I hold weekly morning meetings with executives and regional CEOs, along with other meetings with a broader group, to share my management philosophy. And I continue to get behind the wheel on the front lines of car development.

The world is moving towards a more diverse, uncertain future. As a company seeking to “produce happiness for all,” I have three dos and don’ts at Toyota: “empathy, not confrontation,” “winning hearts, not winning arguments,” and “smiles, not anger.”

The publication we distributed today describes the importance of passing on the organization’s philosophy, skills, and conduct, as seen in the leadership in “iemoto” (master of the house) of traditional Japanese culture, such as tea ceremony and flower arrangement.

I will continue doing my best to pass on what makes us Toyota to the next generation.

The words “philosophy” and “skills” are featured in a book distributed to shareholders at the meeting, entitled “Toyota Revolution for ‘Iemoto’ Organization—Ever-Growing Company’s Philosophy, Skills, and Conduct,” written by SPARX Group CEO Shuhei Abe.

Mr. Abe likens Akio’s management to the “Iemoto (master of the house)” system found in traditional Japanese culture.

Within these traditional arts, an Iemoto embodies the philosophy and skills of a given school at the highest level. Mr. Abe describes how Akio Toyoda has transformed Toyota by putting its time-honored philosophy and skills into practice at the genba, ranging from car development to sales.

In his response, Akio pointed out examples of TPS-driven improvements that shareholders had experienced firsthand at the meeting, showing how Toyota’s philosophy and skills are rooted in genba beyond production.

Successor requirements

With the session nearing its end, another question touched on the point of Akio’s potential successor.

In April, Toyota brought back the vice president position after having scrapped it in 2020 by appointing three executives to the role: Chief Financial Officer Kenta Kon, Chief Technology Officer Masahiko Maeda, and Chief Human Resources Officer Masanori Kuwata.

Given this management change, a shareholder asked whether a newly appointed vice president might be next in line for the top job. Banto Koji Kobayashi shared how Toyota is approaching the succession, along with his thoughts on more than 30 years spent alongside Akio.

Koji Kobayashi, Banto

Akio Toyoda became president right after the company’s plunge into the red. He then had to deal with a series of crises, such as the Great East Japan Earthquake and floods in Thailand. I started working with President Toyoda a few years after joining the company. Looking back, he always became more dynamic under pressure, and his energy spurred us on.

President Toyoda always makes in-person visits in the spirit of genchi genbutsu, as he did after the recent cyber security incident at Kojima Industries. He acts swiftly to tackle the true cause once he has all the facts.

One gets the sense that TPS runs in President Toyoda’s blood and is in his DNA.

President Toyoda believes most strongly in working for someone other than yourself.

As JAMA chairman, he works for the 5.5 million individuals involved in Japan’s auto industry. He also speaks of resolving past issues ourselves, leaving the next generation to work for the future.

President Toyoda has seen his fair share of problems and conflicts, yet he has managed to come this far. All the while, he has followed his strong convictions in gradually planting seeds for the future.

In truth, I would be glad if Akio Toyoda remained president indefinitely, but people are finite.

He has laid the groundwork for the next generation by establishing management structures and cultivating personnel. Thanks to these efforts, I am confident that the company will remain strong regardless of who succeeds him.

As for who that person will be, President Toyoda always says that everyone, from the three vice presidents to the operating officers, senior management, and 370,000 other employees throughout the company, will have their moment to shine. All we can say for certain is that my moment is already past…

In any case, President Toyoda is not disappearing, and the people who have inherited his management philosophy and vision will continue to do their best. We hope you will continue supporting us for many years to come as fans of Akio Toyoda and Toyota.

With Kobayashi joking that his moment had come and gone, Akio, 66 years old, noted: “I can say that these four men are not on the list of potential successors. At the very least, I want to bring in some youth!” referring to Koji Kobayashi (73), Mitsuru Kawai (74), Vice Chairman Shigeru Hayakawa (68), and Chairman Takeshi Uchiyamada (75). He then shared his ideas about successors.

Akio

If I can set just one precondition for my successor, it should be someone who has mastered the company’s philosophy, skills, and conduct—namely, the Toyota Philosophy and TPS. The person needs to keep an unwavering commitment to Toyota’s purpose as a company.

In hindsight, I came on the scene as a president that not many welcomed. I am considering the options for personnel and timing to ensure that the next president is someone all will want.

I hope we can count on the support and encouragement of you, our shareholders, as we work together to identify and foster successors.

Akio used the words “philosophy” and “skills” throughout the general meeting whenever the discussion turned to nurturing personnel. Clearly, developing people has always been his top priority, as Akio often says: “I want this company to be known for making good cars and nurturing good people, rather than making lots of money.”

With this vision for the company, he continues to demonstrate the company’s philosophy, skills, and conduct through his own actions, as the most genba-focused president.

Shareholders’ Meeting Q&A

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