Why Lean Culture Is So Hard to Copy — Jeffrey Liker on Toyota Culture (Part 2)

Jeffrey Liker explains why Lean culture is difficult to replicate and why most organizations never move beyond tools and events. Sustainable Lean requires long-term leadership commitment, stability, and deep people development–not quick fixes.

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Here is LeanBlog Podcast #39, once again featuring Dr. Jeffrey Liker, Professor of Industrial and Operations Engineering at the University of Michigan. Dr. Liker is most recently the co-author (with Michael Hoseus) of Toyota Culture: The Heart and Soul of the Toyota Way and many other books, which can be found here on amazon.com.

This is part 2 of what will be a 3-part podcast series, so be sure to check back. Today, we talk about some of the challenges that organizations face in trying to adopt a Lean Culture.

Click for the entire series with Prof. Liker.

For earlier episodes, visit the main Podcast page, which includes information on how to subscribe via RSS or via Apple Podcasts.

LeanBlog Podcast #39 Key Points & Links

• Will Dr. Liker be writing more about companies who have gone through the Lean culture transformation, examples other than Toyota, ala his earlier book, Becoming Lean: Inside Stories of U.S. Manufacturers?
• Bob Emiliani's book on Wiremold: Better Thinking, Better Results
• Case Study and Analysis of an Enterprise-Wide Lean Transformation
• Why is it so hard to find examples of companies that have really adopted a Lean culture?
• Thoughts on the impact of top American leaders departing Toyota (Jim Press and Gary Convis)

If you have feedback on the podcast, or any questions for me or my guests, you can email me at leanpodcast@gmail.com or you can call and leave a voicemail by calling the “Lean Line” at (817) 372-5682 or contact me via Skype id “mgraban”. Please give your location and your first name. Any comments (email or voicemail) might be used in follow ups to the podcast.

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Key Takeaways from This Conversation

• Lean transformations fail when companies treat culture as a tool rollout instead of a long-term leadership responsibility.
• Organizations often regress when they remove or sideline Lean leaders after short-term financial pressure.
• Toyota treats leadership development as a “people value stream,” not a role-based promotion system.
• High turnover destroys Lean culture; Toyota's low attrition is a deliberate countermeasure, not an accident.
• Continuous improvement and respect for people are inseparable–one cannot exist without the other.
• Toyota responds to employee dissatisfaction as a defect in the system, not a flaw in individuals.

Why This Conversation Still Matters

Although this conversation was recorded in 2008, the challenges Jeffrey Liker describes–short-term leadership thinking, high turnover, and superficial Lean implementations–remain common today. In many organizations, Lean initiatives still fail not because of poor tools, but because leaders underestimate the time, stability, and people development required to sustain cultural change.

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Mark Graban: Hi, this is Mark Graban, and you are listening to episode number 39 of the Lean Blog podcast for March 31st, 2008. Today's episode is part two of a recent conversation with Professor Jeffrey Liker from the University of Michigan, and the author of many books about Toyota, including the most recent Toyota Culture. We are going to be talking about some of the challenges that organizations face in trying to adopt a lean or a Toyota-type culture, and I hope you'll come back in a couple of weeks when I release part three of that discussion. If you have any feedback or questions or to find other podcast episodes, you can get directly to the podcast page by going to www.leanpodcast.org. As always, thanks for listening.

Now that there has been this really detailed study of Toyota, one of my blog readers asked is there an opportunity next to study some of the companies that have started or gotten further down the path in adopting some of these styles? You have a book from about 10 years back, Becoming Lean. Is there another book in the future, somewhere along the lines of becoming a new Toyota-type culture? Are there examples like that out there?

Jeff Liker: I think that there probably are examples. There are other books already written, like a few business novels. One of my associates in France wrote The Gold Mine, which is about a company transforming itself, and there are a lot of those business novels out there about companies that have gone through transformation. In the last chapter of the Toyota Culture book, it turned out to be about a 50-page chapter that talks about the transformation process. We have a few examples, but a book like Becoming Lean Part Two, I think that would be worth doing.

One of the problems I have is that it is so hard to find a good example. There are companies that have been at this for 10 years or 15 years even, and that have done really good things, but usually, they really are still weak on the cultural side. They still haven't convinced themselves that people are their most valuable resources. So they make a lot of improvements and things start to click in specific factories, and then they mistreat the plant manager or decide that the person who became their lean expert, who has really learned a lot, is costing them too much. They give them an early retirement package. They lose their key leadership and then they have to go back to zero. Not really zero, but they regress. Or they have a bad quarter and miss their earnings reports and kick out all the consultants who are teaching them.

There are a lot of short-term knee-jerk reactions that kill the momentum. There is one company, Wiremold, that's been written about a lot. That is a great case example, and you can learn a lot from Wiremold in their journey. They did everything almost as good as you can do it until they got bought out by a French company that systematically undid everything that had been done and fired everybody who knew about lean. So there is nothing about this that is permanent. It can be undone by bringing in different leaders who don't understand. I am still searching for the companies that have been doing this for 10 years, really understand it is a culture, make a big effort to maintain the culture and maintain the leaders, and keep on improving instead of going backwards and going on to some other fad .

Mark Graban: I did a podcast last year with Bob Emiliani, who is one of the authors of the Wiremold book, and it seemed to prove that point. As soon as you write about somebody, there is that risk.

Jeff Liker: It was a bummer for him. He had spent all that time studying them and wrote that great book. Then suddenly they are not doing it anymore and all the people he wrote about are gone. Now the thing is that what he wrote about, in fact, is still legitimate because what he wrote happened. They turned the company around and they were really on a path to becoming a great company. You can't take that away because of what new owners did, but in fact, there is a lot less interest by people when you are talking about a company that is no longer very successful.

Mark Graban: I want to get your thoughts on the impact of some of the top American leaders within Toyota moving on to other things or retiring, Jim Press and Gary Convis among them. I would hope and assume that Toyota's culture is more established and more resistant to a couple of key people moving on. I was wondering if you know if the culture will keep sailing along or if there is some risk from even a Toyota losing some key leaders like that?

Jeff Liker: Certainly Toyota is not Superman or invulnerable; they have their kryptonite. Part of it is that they need a core group of leaders who really understand the Toyota Way and live it and teach it. Guys like Jim Press and Gary Convis were two of the people who really lived it and understood it. But the other part about Toyota is this people value stream is turning along and everybody is going through that people value stream and being developed to different levels.

Toyota has about 60,000 people in North America, and then they have a lot of Japanese coming over. If there is a problem, like a weakness someplace, they will send over some people from Japan to reinforce the culture. So losing two or three people, frankly, out of 60,000, is barely noticeable. In the US, we would typically think that the more senior you are, the more serious it is to lose that person. So you lose Jack Welch from GE, there is a big question of can the company ever recover from that.

That is not the case in Toyota; the leaders call it servant leadership.

I remember the story of Gary Convis. He became a vice president at NUMMI, and his Japanese sensei says to him, “Gary, you realize now that you are vice president, it means that you no longer have any power”. Gary realized that the higher up he went, the more distant he became from the shop floor and from the core activities of the company. The more he had to find ways to be helpful and to support the people doing the value-add work, his role became more of teaching and less of directing and making day-to-day decisions. At some point, people like Gary Convis feel like, “I have taught what I can teach, and I have got to step back”. In fact, the next generation of leaders are not going to develop fully if I am around all the time making decisions and they keep on looking to me for answers. So at some point, you have to pull yourself away and let them struggle a little bit.

In Gary's case, he retired in the usual Toyota Way like they would in Japan, and he is now a senior advisor and he is halftime for three years. He is still bopping around the company advising people. He played an important role as a teacher and a mentor. Jim Press, it is more unusual that he just left and went to a competitor, and that doesn't happen in Japan. But Jim Press was also toward the tail end of his career at Toyota and not making daily decisions anymore. His main contribution is that he was made part of the inner core of senior managing directors, and he was the only American, the only non-Japanese, on that group. Now they don't have that anymore, and they have to develop the next person who will play that role. But as far as all their operations and engineering and R&D and manufacturing, they would barely notice that these guys were gone.

Their attrition rate is really very good. We have the data in the book, at least as of last year. The rate for all members in North America was 1.7% per year. They are keeping over 98%, and for senior executives, it was 1.5%. They are keeping a lot of people. I am dealing with companies now that want to be the next Toyota, and we do consulting and teaching, and we ask what their attrition rate is for their hourly people in their plants. They say, “Well, I'm ashamed to tell you, but it's 35%”. Toyota is about 2%. Toyota is a problem-solving company. So if they lose some people in a given year, they do a root cause analysis and they ask, “What can we put in as a countermeasure to keep people?” and then they work on that. Typically the companies I am dealing with outside Toyota are saying things like, “We never realized it was so important to keep people”. They figured as long as somebody else came along and they had the background and credentials, it didn't really make any difference. So they didn't really have an appreciation for the value of culture. They figured an engineer is an engineer, a mechanic is a mechanic, and they will lay somebody off just as quickly as they will work to keep them.

Part of it is just simply having the really deep understanding of the value of people, of that person, not of a person who has those skills. It is about that person who has been with us for 10 years and developed an understanding of our culture and fits in and knows problem solving and really knows how to contribute. Toyota really works hard at keeping people. The reason people stay are a number of reasons; one is if you are in Georgetown, Kentucky, you live there and your family lives there and they are the best employer in the area. They work to be the best employer wherever they are in that local area, and they have been successful at doing that for executives. Some leave, some don't. The ones who stay will typically say, “I'm learning every day and it's a pleasure to come to work and I can go someplace else and make twice as much money and be miserable”.

Mark Graban: I don't have the whole list in front of me, but I just started flipping through Fortune Magazine's new top a hundred companies to work for list, and I am pretty certain Toyota is not on that list. That might be more of a function of them not taking the time to fill out whatever applications are required for that. Some of those companies had really high turnover rates, in the 30% range, but yet because they have a great gym or something, they end up on that list. It seems like the Toyota approach to creating a great workplace goes beyond some of the perks.

Jeff Liker: They are interested in how people are developed and wanting to stay because they keep on learning. They are interested in that commitment. They are not particularly interested in winning awards or getting on external lists, but they do very intensively study their employees and they keep on improving that as well. Gallup does a lot of surveys for them. They at some point figured out that customer satisfaction wasn't enough. They could have a poor person giving a five on a five-point scale of satisfaction and saying, “This is a great place to work,” but that just means that somehow nothing is feeling bad to them, or the pay is good enough, or maybe they don't have another alternative that is better. They decided that what they really wanted were engaged people who actually were continually challenged in learning. That was a different thing that had to be measured in a different way. So they started to switch and try to find ways to measure engagement instead of satisfaction.

This is a continual process. Then what do you do with the measures? Let's say that you find that 93% of the employees are a four or five on some scale. What do you do with that data? From Toyota's point of view, you have some number of people, five to 10%, who are defects who are not happy, so they want zero defects, so they are going to work on that. What Toyota does in a plant is they get that data at the work group level and then they feed back to the group leader the data for their people. The data includes what their people are saying about them and what they are saying about other aspects of the job. Then the group leader now has a responsibility to use that for problem solving. They have to go through all the data in detail. Again, a defect is a defect. It is not, “Well, only 5% of the people complain about this, I'm not going to worry about it”. That is 5% defects.

They go through intense problem solving, I think it is twice a year, based on that feedback as well as their daily checking in with the employees. There is a continuous improvement process and improving employee relations. Other companies, if they did a survey and had a good score, they would sit back and say, “Good, we are good, we don't have to work on it”.

Mark Graban: But it seems like there is a difference between saying we have 5% defects as opposed to 5% defective people or pointing the blame.

Jeff Liker: That is another good point. The bias is always, “What is it about the system that allows employees to be unhappy or to make mistakes or to get hurt?”. It is not, “What is it about the person who causes them to screw up?”.

Mark Graban: That seems like just one of many examples of a mindset that is very fundamental or deeply ingrained in people that would be difficult to change in the course of hoping to adopt a more Toyota-type culture.

Jeff Liker: They have to think about continuous improvement and respect for people as going hand in hand. That has to be every place in the company. Typically it is not, even if they are one of the great places to work. They have to think, “How can we start to work on that? Start to make progress toward that and be very honest with ourselves about where we are at any good point in time”.

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