Jay Hodge taught the Toyota Production System at a General Motors stamping plant in Indiana — then got a call from Toyota asking him to come work for them. In this episode, he shares what he learned about lean culture, servant leadership, and why the gap between GM and Toyota had more to do with leadership than tools.
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My guest for Episode #402 is Jay Hodge, the founder and CEO of Jay Hodge & Associates. He has over 25 years of operational leadership experience in companies such as Toyota, General Motors, Caterpillar, and Tenet Healthcare. Jay is also the author of The Lean Treasure Chest.
Jay's career took an unusual path. He started by teaching the Toyota Production System at a General Motors metal fabrication plant in Marion, Indiana — setting up a volunteer lean production line in a union stamping environment. Then Toyota called. Jay went to work as a sequence supplier specialist at Toyota's Princeton, Indiana plant, supporting just-in-time delivery for the Tundra, Sequoia, and Sienna lines. As Jay puts it, the difference was that at GM he was teaching lean — at Toyota, he lived it.
We talk about the culture gap between GM and Toyota, what made the lean line at GM work (and what made it hard), servant leadership lessons from the Marine Corps, and why healthcare organizations keep promoting people into leadership roles without ever teaching them to lead. Jay also shares what it was like to leave Toyota and face the assumption that lean means layoffs — and what organizations like UMass Memorial Health have done differently.
The podcast is sponsored by Stiles Associates, now in their 30th year of business. They are the go-to Lean recruiting firm serving the manufacturing, private equity and healthcare industries. Learn more.
This podcast is part of the #LeanCommunicators network.
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Jay Hodge on Teaching TPS at General Motors and Then Going to Work for Toyota
Lean Blog Interviews: Episode 402 with Jay Hodge
Mark Graban: Hi, welcome to the podcast. It's episode 402 for February 24th, 2021. Our guest today is Jay Hodge from Jay Hodge and Associates. It's a really interesting conversation. What was it like teaching the Toyota Production System at General Motors and then going to work for Toyota? We'll talk about the culture piece. We'll talk about servant leadership. We'll talk about leadership lessons from being a Marine. We'll talk about all of that and more. If you want to find show notes and links, you can go to leanblog.org/402.
We are joined today on the podcast by Jay Hodge. He is founder and president of Jay Hodge and Associates. Jay has over 25 years of operational leadership experience at companies such as Toyota, General Motors, Caterpillar, and Tenet Healthcare. So we're sure gonna have a lot to talk about today. Jay is author of a book called The Lean Treasure Chest. He's the creator of something called the Dynamic Elemental Engagement System, so we can maybe touch on that. And Jay is also just now launching a podcast. So with that, Jay, welcome to my podcast and welcome to the podcasting world. How are you?
Jay Hodge: I'm good, Mark. Thank you so much. I really appreciate you having me on today. And boy, you listened to the intro and I'm impressed with myself, but then I look in the mirror and I realize, no, it's not all that.
Mark Graban: Well, thank you for leading with humility, Jay. An important lean concept, right?
Jay Hodge: Yes, definitely.
Jay's Podcast: The Thousand Year Legacy
Mark Graban: Real quick, I'd be curious — tell us about the podcast. You're talking to podcast listeners, so that's a great place to pitch your own podcast. What's it called? What's it about?
Jay Hodge: It's called The Thousand Year Legacy, and basically it's a podcast that doesn't focus specifically on the professional side. It focuses on the personal side. You look at anybody, probably anybody that you've had on your own podcast — they have a lean side, something that they do for a living. But when we think about what we do for a living, in the end game, it's a very small percentage of really what we hope to accomplish in life.
I came up with a Thousand Year Legacy simply because I like to combine what we've accomplished in our careers with what we've been able to accomplish with our families and our personal life. And then, if we had five minutes left, what would our legacy — what would we want it to look like? I called it that because I want to go beyond the personal and the professional to the lasting side, our legacy.
Mark Graban: It's a great title. Talking about legacy makes me think of Toyota concepts like long-term thinking. It makes me think of principles and values and things that are more timeless than, let's say, hitting the number this month or this quarter.
Jay Hodge: Absolutely. We've obviously had some of the same background, so yes, very much so.
Learning Lean at General Motors
Mark Graban: We have a lot of the same background. I'll warn you, you talking about your time at General Motors may trigger a story or two for me, and I'll try not to tell stories that I tend to tell all the time. I want to hear your stories today, Jay.
Jay Hodge: I've probably got quite a few of them.
Mark Graban: One question to help get things started — I like to ask guests, where did you first learn about lean? What were those earlier experiences? How did this even come to be something that you were doing and interested in?
Jay Hodge: I'd say I really started to learn about lean in the Marine Corps because in flight operations there's an efficiency that has to take place. The interesting thing is in the Marine Corps, they didn't call it lean. They called it efficient operations. They called it getting things done quickly, being prepared for battle.
But where I really got immersed in lean was with General Motors, believe it or not. Toyota, back in the early 2000s — General Motors wanted to follow some of the same concepts as Toyota, because Toyota was doing everything right. They were the benchmark and still are, in my opinion, for lean and being efficient and effective, high quality, engaged employees. General Motors, at least the plant I was working with, wanted to embrace that. So I started teaching the Toyota Production System at a metal fabrication plant in Marion, Indiana.
A great group of people. I can't say that everybody embraced it for obvious reasons. It's a union environment versus Toyota, which is a non-union environment. Nothing negative against the union, but it's a different mentality. Very segmented roles for almost every position you could think of. And you don't cross those lines. Whereas at Toyota it's the exact opposite. You are a team and you're responsible for getting it done. You and the team — cross training, changing positions throughout the shift and all that. That's just not something that General Motors was familiar with.
So I got immersed by teaching it at General Motors, and we actually implemented a lean production line on a stamping line. I had to get volunteers. I couldn't just tell people they had to do it. I had to get people that were willing to try something different. We implemented job sharing. We implemented just-in-time inventory. We implemented all of the things that Toyota does — stopping the line, quality first. It was a whole different ballgame and it was very effective. But it was only effective — and I have to keep this in mind — it was only effective because the people that were within the process believed in the process and were engaged. It wasn't me that made it successful. It was the team.
The Culture Problem at GM
Mark Graban: So you were there from 2000 to 2004. I was at General Motors 1995 to 1997. Engine plant. You were involved in stamping and fabrication. I was on machining lines, taking metal off of engine blocks and connecting rods. But to your comment of “not everybody was into it” — in 1995, our plant's performance on different measurable dimensions was clearly bottom of the barrel. There was no denying that. We had benchmark plants including a Toyota plant, and the data was clear. People could disagree about what the reasons were. Toyota's performance gap, leaving General Motors in the dust in a lot of ways, was quite clear.
And there was tension. At General Motors, you didn't really want to mention Toyota. The word lean wasn't being used a lot. They were talking about things like the “Global Manufacturing System.” I've still got this little guidebook. But looking back at it, it's the mechanics of TPS laid out in that book. And I think what was more difficult — I want to hear your thoughts on this — was around the culture and the management style. What did you face around culture, as opposed to putting in Andon cords and rearranging equipment?
Jay Hodge: It was the culture. I still have my sweater when they rolled out GMS. I've still got the sweater with the big GMS logo right there. I wear it sometimes, believe it or not.
It is the culture. I made the comment a few minutes ago about doing this in a union environment — it was different, very difficult in some ways, but it wasn't just the union that made it difficult. It was the leadership that made it difficult because you're talking about a very dictatorial type of leadership. We're gonna do this, we're gonna get this done. You're always ready for confrontation. I walked in as an operations manager every day ready for this. Every single day, all day long.
Mark Graban: That was the environment where I was under the first plant manager I worked under for a year. A very traditional plant manager. And yes, it was testy and it was combative between the union and management.
Jay Hodge: So getting people to understand that it wasn't about me. GMS wasn't about me. The lean system wasn't about me. It was about what we do and who we are and how we perform. Whether you're a union environment or a non-union environment, everybody that walks in that door wants to be part of the winning team. And you don't become the winning team by winning. You become the winning team by thinking differently than everybody else, which allows you to win.
It changed how people thought about what they did every single day. Instead of someone who did this same job and stood at the end of the line every single day, pulling parts and dropping them into a container — once they understood, because all of a sudden they started loading the blanks in the back also, all of a sudden they were on the fork truck. They started to understand how everybody interacted with each other. The bigger picture comes into play and they start understanding the teamwork.
That's why Toyota is so successful. When I train organizations now, when I say team, I'm not talking philosophically. I'm talking a team. You are responsible. You are part of the success of every single person on that team.
When Leaders Undermine Their Own Words
Mark Graban: The culture I was a part of was one of divisiveness and blame. I was out on the shop floor a lot, and the union UAW member employees who were out there running machines — they wanted to do good work. I've got stories I won't get into all of now, where management decisions were very directly undermining quality.
For example, there's a quality control plan that says every 30 parts you have to stop the line momentarily, pull something off, and do some manual gauging of critical dimensions. Well, when we would be behind in our production numbers, different levels of management would say, no, you can't do that. Keep the line running. We can't afford to stop. That would just further corrode any sense of teamwork or trust. A lot of that had accumulated — everyone I was working with had been there for 30 or 35 years. I learned and saw sadly that people get beat down, they get worn down.
Occasionally I would see people build a little cardboard fort and take a nap and sleep during the day. It would be easy to look and say, well, that guy's lazy. That's everything that's wrong with the Detroit automakers. I'm like, give that guy a break. What's he been through for 30 years? I tried to learn some empathy for why people would check out and give up when they weren't part of a team built around trust.
Jay Hodge: Absolutely. I think that's some of the reason that we were successful in what we did — I'd spent the first four years in operations, managing production. So to move into that role, I knew most of the people. In fact, I knew all of the people because they volunteered to be part of the team that I was creating.
But you're exactly right. It's as much, if not more, of a leadership culture issue than it is the union issue. As leaders, we say, this is what we stand for. This is what we're gonna produce. Every single part that leaves this facility is gonna be at this level of quality. And then until we get behind, or until someone calls and they need to pull some parts in advance — all of a sudden quality, instead of being number one, becomes number two or three or four. We gotta hit the numbers.
Anytime we do the opposite of what we say, regardless of union or non-union, our people all of a sudden stop believing everything we say because we've just subverted our own legitimacy. We've subverted any reason for them to have confidence in us to begin with, so they're not gonna trust what we say next time. And then we turn around and go, I don't understand why people are being so difficult. Why do they not trust us? Why would they? You probably wouldn't trust yourself.
Mark Graban: Yeah. And when you talk about the leadership resistance — it's taken me time to think back and be more empathetic towards some of the leaders I worked under, where I would've been quick to label them in a derogatory way for their behavior. When we got a second plant manager, that second plant manager was one of the original General Motors NUMMI people.
Jay Hodge: Oh, NUMMI, yes.
Mark Graban: He was one of the original “NUMMI Commandos.” And we were, I think, the third plant he had come into post-NUMMI. So he had a different leadership style. For example, the union contract had changed the title from production foreman to team coordinator.
Jay Hodge: Oh.
Mark Graban: They were foremen with a different title. Changing the title didn't create any sort of warm and fuzzy different approach. They were still acting the way they had always acted. And that's difficult when people have decades of habit accumulated and expectations have been set. There were internal lean consultants that powertrain headquarters had hired from Nissan and from some Toyota suppliers. They were brought in, and it was frustrating for them because they were sent in to solve a problem that leadership didn't define the problem that way. You had these internal people, seven or eight of them, literally exiled into a mezzanine level office where they were basically told, stay out of the way. Don't bother us. But they ended up being good mentors to me.
So part of my question for you — who were some of your teachers or mentors? Because there were opportunities to learn within General Motors, even if it wasn't the predominant culture there.
Jay Hodge: I had a couple of senior leaders at my plant that were common sense kind of people. In fact, one of them was a female. They got it. They understood that the union is made up of people. They understood that leadership is made up of people. Everybody has different objectives, and they saw the big picture. They didn't get into the little fighting and feuding. They got past that.
Them helping me understand that was huge, because before they kind of took me under their wing, you walk in ready for battle. It almost becomes a way of life. They taught me how to deal with people differently. Even people that were being difficult. Even people that were doing things that made no sense. Even people that were sabotaging the production just so that they would get overtime this weekend because they needed to make a payment on the boat.
Mark Graban: I was gonna say boat. In Michigan it was a boat or a snowmobile.
Jay Hodge: I had people buy brand new trucks and then buy a brand new boat and then have the boat painted so that it matched the color scheme of the truck. And I'm like, if you have looked back in the last five, ten years — automotive is very cyclical. All this overtime you're seeing is probably gonna go away at some point. Are you ready for that?
Mark Graban: In my plant, the bulletin board would have — when the overtime was drying up, you would see stuff going up for sale.
Jay Hodge: Oh yeah. But you know what, that's one of the huge differences that I think stand out between Toyota and General Motors. When I went to work for Toyota, one of the things they did — and this was just so amazing — they gave out the Dave Ramsey whole package. Dave Ramsey's money management. And Dave Ramsey talks specifically about things like don't buy new cars. Now wait a second. You've got a car manufacturer giving out packages to their employees telling them don't buy new cars. But it's because Toyota saw the big picture. They understood that people, when they managed their money and their finances effectively, they were happier at home, but they were also much better employees, more productive. Night and day type difference.
Mark Graban: Well, even think of encouraging people to buy a used car coming off lease where it's already taken the depreciation. You can still have a warranty and a lot of the benefits by buying a nearly new car. I'm sure even if you really had to boil it down to business conditions, strong demand for used cars helps resell values, which helps encourage the people who are buying new cars. But I appreciate your point of having respect for people and educating people. That comes back in different ways — happier, less distracted workforce. That's a great point.
Servant Leadership Lessons from the Marine Corps
Mark Graban: I wanted to ask about your experience as a Marine. Recently I also interviewed Patrick Adams — he's got a book coming out. Patrick is a Marine and you served in the Marine Corps. He talked about leadership lessons and servant leadership. I was wondering if you had some reflections you'd want to share from your experience there.
Jay Hodge: Absolutely. My favorite commanding officer — my last two and a half years were stationed in Washington DC at Andrews Air Force Base. It was an F-18 squadron right next to the F-16 squadron. We had airspace control.
One of my favorite experiences that I've used for years: me and one of my buddies were out — I worked on the communication navigation and special weapons systems for the F-18s — and we're out there in the middle of the winter working on an aircraft at night. It's cold, it's snowing, it's miserable, but we had to get this fixed. I've got half my body stuck up inside of one of these bays trying to work on a piece of equipment. It was so miserable.
I reached my hand out and told my buddy I needed a tool. He doesn't hand it to me. I'm like, what's going on? Tell him again, nothing. Finally reached back one more time and said a few choice words that I didn't normally use and I still don't use. So if my kids are listening to this, I don't use those words, okay?
Mark Graban: Frustration was kicking in. You were cold.
Jay Hodge: I was cold and miserable. And I turned around and who was standing there but my commanding officer. Full bird colonel, looking through the toolbox to try and find the tool for me. And my corporal buddy's just standing there pointing, saying, “It's right there, sir. It's right there, sir.”
I turned around and said, “I apologize, sir. I did not realize you were there.” He finally found the tool and gave it to me, and I went in and fixed it. But what stood out to me is this: it was probably one o'clock in the morning, freezing, miserable. That colonel had no reason to be out there other than the fact that he was out there with his men. He could have been at home in bed. He could have been warm, doing colonel stuff, which is a lot more comfortable than what I was doing. But he made a decision to go out in the cold, miserable night and to be cold and miserable with his men.
I tell you what, to this day, if I saw him on a street and he said, “I want to go jump off a bridge,” I'd be all, “I'm right behind you, sir.” Whatever you need. Servant leadership.
Mark Graban: Back in episode 382, I had a chance to talk with Tom Peters. He was in the CBS — early in his career. Here's one lesson. What he said vividly in that podcast was — I'm quoting him as directly as I can — “If you're a leader and you don't absolutely get off on being on the shop floor at 2:00 AM with your people, then you're in the wrong line of work.”
Jay Hodge: Absolutely. That's kind of hard to get people to understand, especially in healthcare. Whether you're a COO, a CNO, a CEO — at two o'clock in the morning when you walk around that facility and those people see you, all of a sudden they realize you're their leader. Because most of the time you're in this ivory tower and they see you once or twice a year at different celebrations. All of a sudden they realize, wait a second, they're out here with us. You start talking about trust. You start talking about collaboration, engagement. None of that happens until you trust your leader. None of it.
Mark Graban: Yeah. I was having similar thoughts around how often does that happen in healthcare? Do people even know who their leaders are? Sometimes the answer is no.
Jay Hodge: They struggle with it. I'm working with a CEO right now and a COO and a team. They get it. And you can see the difference in the organization. It's interesting — when people hire me as a consultant to come in and help work with their leadership team or help implement a management system, people say, “Oh, you're here to fix this.” I'm like, I don't even know where your bathroom is. I just got here. How in the world could I ever fix you?
Mark Graban: But that's what they expect from an outside consultant.
Jay Hodge: They do. And that's one of the first things I say. I'm not here to fix you. I'm here to help you understand your processes. Fix yourself. Plain and simple.
From GM to Toyota: A Different World
Mark Graban: I want to talk more about your Toyota experience. But one other reflection I was gonna share, thinking about time at General Motors and maybe a comparison to Toyota and to healthcare.
Toyota is famous for promoting people from within. If you're a team leader, you worked as a team member. If you're a group leader, you worked as a team leader. At General Motors, the tendency was to hire somebody right out of college with an engineering degree or a business degree. I interviewed for some of these jobs and I think I knew enough about workplaces to say, why would you bring me in to supervise work I don't understand? Work I haven't done. That was part of the problem with the GM model.
Now, healthcare does tend to promote up through the ranks. It's very rare that a laboratory director is not a medical technologist. I've seen it, and that could be effective. When I think back to my friend Stephanie Mitchell, she had been a nursing director. When out of necessity she kind of stepped up and said, okay, I'll be the lab director — she couldn't fall back on telling people what to do. She couldn't fix them, but she could lead.
Jay Hodge: Yeah. I think there's a couple things going on when you look at General Motors versus Toyota versus healthcare. At General Motors, I think they struggled with leadership to begin with — what real leadership means, whether you're a level seven or an eight or a six or whatever. They struggled with what leadership was.
If I was to go back to my plant during those times, there were some good leaders, but they struggled with leading because leadership didn't look like leadership. It looked like a boxing match. Whoever had the biggest gloves. So if you're someone just coming into General Motors, you're brought up in that environment, and you're gonna be that way when you progress through the levels. That's leadership. That's what it looks like. So you become plant manager and guess what? That's what it still looks like.
In healthcare, I think it's a little different because what I've found is that they often don't know what leadership is to begin with. The ones I'm working with right now understand this and they're doing a very good job. But I've worked with some where we take someone who's really good technically, really proficient, and all of a sudden we have an opening. “Let's promote them to manager. We can teach them how to do productivity, budgets, overtime scheduling, put in work orders. Oh, what? We don't have time to teach them what it means to lead.”
Mark Graban: There's the mechanics of being a manager.
Jay Hodge: We teach them how to manage the processes of that role, but we never teach them how to lead the people. Everybody I talk to, I tell them, leadership would be much easier without people. It's absolutely true — leadership would be easy without people, because you wouldn't have anything to lead.
What I've found is that we take people and promote them to manager. We don't give them leadership skills. Then we promote them to director. We don't give them leadership skills. Then we promote them to senior director or VP or COO or CNO. We don't give them leadership skills. And all of a sudden we have this entire organization that's struggling with leadership. Well, of course you're gonna be struggling with leadership. You've never brought up any leaders. You've just brought up people that were either head-nodders or they were proficient in their role.
Toyota on the other hand taught people how to lead at the very base level. They teach their people how to be leaders before they're leaders. They teach them how to show respect for people, how to interact with people, how to engage people, how to ask questions, how to ask questions the right way. How to tell someone that you don't agree with them, but doing it in a way that's very respectful and that nurtures a greater relationship. Very different. I think there are three different avenues for all three of those examples we talked about.
Mark Graban: That's making me think about a lot of things. People will talk about wanting to provide education and coaching around lean leadership. Well, at some point you've gotta start with just leadership.
One thing I appreciated — unfortunately now, this lean journey at ThedaCare in Wisconsin is a past tense discussion. But a decade ago, one thing I was really impressed with was that they were making a very specific and intentional investment in management development courses, leadership development. You wouldn't have even put a lean label on it. There are some things we might call lean leadership practices, like how to effectively facilitate a huddle. But that's all detail if you don't have a good foundation of leadership and if you haven't selected people who really want to lead. Or again, the Tom Peters way of saying it — if they don't get off on leading people, why are they in that role?
They may have wanted the salary increase, or they might say, okay, I'm up for that challenge. But are we equipping them properly for that challenge? In a lot of cases, no.
One of the other differences — within manufacturing corporate structures, there's intentional rotation in leader development across different functions. I think it would probably be very rare to have someone promoted to plant manager who had risen up through the ranks of engineering manager, engineering director — and now you're gonna make them a plant manager with no production experience. Probably not.
Healthcare — because the professional boundaries are so tight, a physician will get promoted up through physician ranks, and then suddenly, boom, you're a hospital CEO. And I don't know if that sets people up for success either.
Jay Hodge: From my experience, no it doesn't. I had someone tell me years ago: if you're a leader and you turn around and no one's following you, you're not a leader. Plain and simple.
Going to Toyota: Living TPS Instead of Teaching It
Mark Graban: Let's talk about your Toyota experience. You, like some other people, had the opportunity to go from General Motors to Toyota. I'm curious how that came about and, at a high level, what that transition was like.
Jay Hodge: It was interesting because I was teaching that GMS, the Toyota Production System — General Motors had rebranded it to their own thing. But it was interesting when I got a call from Toyota out of the blue. They wanted me to take a sequence supplier specialist position.
So Toyota is known for just-in-time inventory. They don't keep more than they need at the line. It's for space, it's for efficiency, it's for flow. Sequence suppliers are a small group of suppliers that deal with things like frames, dashboards, seats, tire assemblies, and all of that.
What a lot of people don't realize is that, for example, the tire assemblies at the plant I was working at in Princeton — for the Tundra, the Sequoia, and the Sienna — they were actually being produced and assembled a couple of hours before they were going to go on the vehicle. They were being delivered in a truck, put in this elevator system, and they got there right before they were needed because they were sequenced. These tires belonged to this specific vehicle.
Mark Graban: Yeah. And the overhead conveyors and things. This is magic when you see this choreography and it lines up and there it is. There's the match.
Jay Hodge: It was amazing to go from General Motors where you get into a production run and think, “I've got an extra 2,000 blanks, let's just go ahead and run it.” We won't think about the fact that we're delaying the next production run, which is actually gonna be shipping parts this evening. But now chances are they're not gonna be shipping this evening because I'm running these extra parts. Or we're gonna take an extra 30 containers when I'm actually short containers for the job that's being run two machines over, and all of a sudden I've gotta jump through hoops and find new containers.
It was amazing to go from an organization that thought like that — General Motors, nothing negative, it's just the way they ran — to Toyota, which thought about every single action they took.
Mark Graban: Well, to be fair to the General Motors people, take a look at how were they being measured. How was that driving behavior? Were they being measured on production quantities or on-time delivery? If they were gonna make a decision that boosted one metric at the expense of the other, they weren't dumb. The issue wasn't that Toyota people are smarter at the assembly line level or in leadership. It's just a different approach.
Jay Hodge: Absolutely. Competing metrics at General Motors. We stood there all day long and talked about it. If we get this, our productivity goes up, our numbers go up, our run rate goes up. But all of a sudden we're messing with these two or three other metrics, and whoever is pushing the production button is the one who's gonna win that battle.
It was a very interesting transition. The difference between General Motors and Toyota for me was that at General Motors, I was teaching lean, the Toyota Production System. At Toyota, I lived it. And everybody at Toyota lived it. It wasn't just something you wore on a T-shirt that said TPS. Everything you did was the Toyota Production System.
Being Mentored at Toyota
Mark Graban: What did they do to educate you or coach you or continue developing you? Obviously they hired you because you had experience. But how did they really bring you into the fold of living TPS, other than what was being modeled around you?
Jay Hodge: They mentored me. I'm gonna say someone's name: Brian Bold. He was my manager when I first started. He was probably one of the smartest people I've ever met in my life. And it just intimidated the crud out of me because I was pretty smart too. He taught me and took the time to teach me what it meant to be part of Toyota. Not to just do the job, but to think differently.
That's what I try and tell people — what we want to become starts with thinking differently about what we do. Not just doing something different, but thinking about what we do.
And then every interaction reinforced the lean principles, the Toyota Production System, the respect, the kaizen, always looking for continuous improvement. Even the little teeny things. Those are the things that make Toyota different than everybody else. They don't see this little thing right here as insignificant. They see it as important enough to do something about.
When I started working with the sequence suppliers, the goal was to embed the same principles into the suppliers. Toyota is smart enough to know that you are only as good as your suppliers are. Period. And that's why I ended up going to Caterpillar, because Caterpillar realized that and said, “Hey, we want our suppliers to improve so that we can get better.”
Toyota was the turning point of my career because it gave me something that few people have on their resume.
The Hardest Part of Joining Toyota
Mark Graban: I had a chance to follow up with the second plant manager I worked under, Larry Spiegel. He was retired from General Motors, teaching at the University of Michigan. I asked him for some reflections. One thing he said was that looking at some of those other leaders that I was quick to criticize — these shaming and blaming, screaming leaders — I asked him, why were you so patient with the number two production superintendent? He was behaving in a decidedly non-lean way. He was not behaving the way you were modeling. Help me understand.
One thing I learned was that they were fraternity brothers from the General Motors Institute, now Kettering University. That might have partly explained the long leash. But then Larry said, more instructively, that people like Bob didn't have the good fortune that I had — to really live in that NUMMI environment and to be exposed to what I was exposed to. I think that was personally transformational for Larry.
He was kind of a short fireplug of a guy, kind of a Pittsburgh accent. He was brought up in and thrived in the rough and tumble, combative General Motors. He wasn't a shrinking violet. People would comment about “oh, kumbaya,” and no, I don't think that was necessarily the first 20 years of his time with General Motors. But it was a good lesson for me: be careful being judgmental of people who haven't had the benefit of having good role models. I understand better now that for somebody like Bob, change would be a process. Don't just flip a light switch and be a different type of leader immediately. He may have been trying, and I just didn't have insight into that at the time.
Jay Hodge: That makes perfect sense. Because if you look at when I left General Motors, it took time for me to come down. Being a Marine, I liked confrontation. I can handle it, it's kind of fun. But going to Toyota, that's not how you dealt with people. That's not how you engaged people. That's not how you became part of a team. It took me a while to figure that out. And it happened because people took the time to coach and mentor me.
Mark Graban: And you may have already answered it, but when you came into Toyota, what was the most difficult thing?
Jay Hodge: I think the most difficult thing was going from a union environment to a non-union environment where everybody was actually part of the team. You didn't have us versus them. We're all “us.” There is no “them.” Including our suppliers — it's all us.
Learning to deal with the fact that there isn't two cultures, there's one culture, “us” — that was probably the most difficult. But once you figure that out and once you realize it, you start to trust it. Once you see that there's not something around the corner just waiting to jump out at you — when you do finally trust it, it was a very easy transition.
Mark Graban: And the follow-up. Same question, different circumstances. What was the most difficult thing about going back out into a non-Toyota company?
Leaving Toyota: The “T on My Resume” Problem
Jay Hodge: Well first, when I went to Caterpillar — and Caterpillar's a great company, but they are 100% market driven, at least during my time. The market dictates their stock price and all of that, which drives their decisions. The more you can get out of the plant, regardless of if there's a demand for it or not, the better.
Going from Toyota to Caterpillar, I was already at a disadvantage because as soon as people saw the Toyota name, they're like, “You want to reduce jobs here, don't you?” And I'm like, no, no, no. That's not what this is all about. It's not about reducing jobs. It's about understanding our processes and becoming better at what we do every single day. Getting past the whole “T on my resume” thing — that was by far the most difficult part.
Mark Graban: That's a challenge in healthcare. I face that all the time. In healthcare, there's this longstanding habit of organizations trying to hit bottom line numbers by laying off employees. They've been burned by that, scarred by that in the past. It's often done by outside consultants with spreadsheets and benchmarks and numbers. That's a race to the bottom.
A lot of times in healthcare, they don't know anything about lean or Toyota, but you're an outside consultant and that triggers fear. Or nowadays, people have their preconceptions. In 2005 when I started in healthcare, people were like, “Lean what?” It was a good opportunity then to try to educate them from a blank slate. But now, people have colleagues where the health system unfortunately did equate lean with layoffs. I think that's a horrible misunderstanding. It's taking that old habit of laying off staff — which is a decidedly non-Toyota approach — and slapping a lean label on it. You end up having to dig yourself back up out of a hole.
Jay Hodge: I think a lot of the reason that healthcare has gone that way is because reducing headcount to meet your budget is the easiest course of action. In the short term, absolutely. That's what I try and get leaders in healthcare to understand: the only way you're gonna become world class is if you have world class processes and world class people. But if every time you have a budget crunch, you reduce your people, you're never gonna have world class people.
Because the people that are at the top of your echelon, the most talented people you have, they've probably already got three or four other hospitals that have called them within the last three or four months asking if they're interested. So you go through this cyclical up and down, people stop trusting the leadership. They realize, “I don't trust this organization.” The great employees, the top 10 to 20 percent, they find somewhere where they know they're gonna be successful and be able to stay. And all of a sudden you start to slowly reduce your pool down to the bottom 50 percent. Then we ask, why can't we be world class? Why can't we have top level quality? Why can't our people be engaged? Well, that's probably because of the way you've been leading.
Investing in People During Downturns
Mark Graban: I've heard a very experienced healthcare leader, once they had understood lean, explain the common dynamic: when things are growing, we don't really know how to manage our processes, so we throw people at the problem. We grow by throwing people at it. And then when times get tough, we don't know how to manage our processes either. So we see the releases come out and regret is stated, but the leaders or spokesperson will say something like, “We had no choice,” or “We were forced to lay off.”
I'll sing the praises of Dr. Eric Dickson, who is CEO at UMass Memorial Health. I interviewed him for the Habitual Excellence Podcast, episode 11, where Eric talked about even in the pits of the pandemic. Revenue had dropped 40 percent. That's totally a situation where a lot of organizations would say, well, our hands are tied. What do you expect us to do? The community wouldn't even criticize them for it because it's a pandemic.
But Dr. Dickson, with his experience with lean and realizing that this is an investment — he's got a former Toyota person coaching him for many years — Eric went to the board and he had to sell them on it: we are not going to furlough anyone. We are not going to lay off anybody. We are going to commit to our people. We are going to invest in process improvement. And he said, when things then started picking back up, we're a better organization now than we were before the pandemic. I can't say enough about what they've done there.
Jay Hodge: That's absolutely correct. I talk about that at length in my book. Toyota looks at things differently. When Toyota went through those cyclical environments where sales would drop, they didn't lay people off. They had this pool of contract employees that they would let shrink and expand, but those would also be the people that they pulled into the full-time positions.
When we went through those times of expansion and contraction, we took that time to fix our processes. We took that time to train our people, to improve our equipment, continuous improvement — so that when we came back out of the dip, we were stronger, smarter, our processes were fixed, more robust. We came back way better than when we went in. Versus dropping people. Because when you get rid of your people, some of the good people are gonna leave too, just because they can. And all of a sudden you come back a lot weaker than when you went into it. It's a different philosophy.
Mark Graban: You think of the loyalty that's engendered by that commitment. I think it's a difference between short-term and long-term focus. Caterpillar, like a lot of public companies, was probably driven very much by the quarterly stock guidance and the analysts, and are we gonna beat our estimates or not.
Toyota's a public company, but there's a different approach. I think of a company like Amazon. I don't think Amazon is necessarily a lean exemplar, but Jeff Bezos — they're a public company, and he basically said, “We're gonna be reinvesting in the long-term growth of the company. If you don't like it, you don't have to buy our stock.”
Of those 14 principles in Jeff Liker's book The Toyota Way, number one: take the long-term perspective, even at the expense of the short term. I almost want to scream at people about that. I don't know about you — I've never had anyone call me up and say, “We want to do this lean thing. We want to be like Toyota. Can you help us be better with long-term thinking?” Not once.
Jay Hodge: Nope, it doesn't happen. I'm working with an organization right now — it's a private hospital system that gets that though, and it's very refreshing. They realize that where they are right now versus where they want to go isn't a one-year journey. It's not a two-year journey. It's probably not even a five-year journey, but they're not in it for the short term. So the decisions they're making right now are the decisions that are going to allow them to be successful in two, three, five, ten years. That's the long-term perspective, and that's a whole different way of thinking for a lot of leaders anymore.
Mark Graban: There's kind of a systemic advantage of being privately held. A lot of the great lean examples out there are often family, privately held, multi-generational family businesses who are thinking long term and don't have anyone breathing down their neck saying you've gotta hit the annual number. I've seen private not-for-profit health systems that, for whatever reason, still feel pressured to hit that end-of-year number. And you can have similar dysfunctions even if it's not being driven by investors or a stock price.
Leaders Taking the Hit First
Jay Hodge: I worked for an organization as a VP of operational excellence. When we went through a downturn, the very first decision that we made as a leadership team is that we're taking a 25 percent reduction in our pay. No bonuses. That was the very first decision and announcement we made. So anything that happened after that, people already knew we were trying first to do everything we could to avoid any other activities required during that downturn.
Mark Graban: You don't see that very often. From my trips to Japan, even though not all Japanese companies are Toyota, it does seem like there is a very common management dynamic where the top senior leaders take the hit first. And then they are the last to recover if pay cuts or things end up rolling down toward the front line.
Patrick Adams was talking in our episode about servant leadership from his time in the military. The Simon Sinek book Leaders Eat Last. Patrick had a great story about going through SERE training — if you were gonna be a POW, what to expect and what to do. It wasn't just a manual. It was experiential. Practice and simulation and training.
He was talking about a food line in the training, and the made-up captor country was intentionally putting the officers at the front of the line and feeding them first, serving them soup. And then the big soup container was, as Patrick explained, “accidentally” knocked over. Now there's no soup for the troops. And the officers in that training almost instinctively — or it's part of the culture — started dividing up their soup for others.
Jay Hodge: Absolutely. It's called living the leadership. You live leadership. It's not something in passing. It's not something you wear on a badge or is on the sign in your parking spot. It's something you live every single day.
Mark Graban: So Jay's book is The Lean Treasure Chest. You can find it on Amazon. The podcast is The Thousand Year Legacy, so I'll invite people to go find that and subscribe and take a listen. Jay, what's your website, your firm's website, or what would you point people to if they want to connect with you and learn more about the work?
Jay Hodge: They can go to our company website, www.jhodgeassoc.com. It's got everything about our company, all the people in the network that I work with. It's all about our clients. Plain and simple. That's how we define success — our clients.
Mark Graban: That's great. That's well said. Jay, let's do another one of these before long. I think we can go deeper into your experiences working within healthcare and serving as a consultant and a coach for organizations.
Jay Hodge: Absolutely. And I'd be more than overjoyed if you would be a guest on my podcast as well.
Mark Graban: I would be happy to, and I hope I have something helpful to contribute.
Jay Hodge: Oh, I think you do.
Mark Graban: And I start thinking, I don't know what my thousand-year legacy is. Something to noodle over.
Jay Hodge: It is a deep one, yes.
Mark Graban: Great. Well, Jay, thank you so much for being a guest and for sharing and tolerating some of my stories that you triggered and I threw back at you.
Jay Hodge: Thank you for having me, Mark. I appreciate you doing this podcast and everything you add.
Mark Graban: Thanks again.
