American business is getting an important lesson in civics as one of the world’s most beloved automakers dramatically and temporarily falls from grace.
Toyota Motor Company is accused of delaying its response to countless service complaints about “sticky” accelerators. Millions of cars, including the wildly popular Prius, have been recalled in an effort to avoid more accidents, injuries and potential fatalities. To date thirty four deaths in the U.S. have been attributed to the sudden surge in acceleration.
U.S. journals wrote scathing reports claiming Toyota sacrificed quality for profits. Tough questions about motives for the negligence were fired at the CEO by a U.S. congressional panel. One represenative asked, “Where’s the remorse?”
The remorse was apparent as Akio Toyoda, grandson of the founder,repeatedly apologized to the families of victims, “I extend my sincerest condolences to them from the bottom of my heart. I’m deeply sorry …” His sincerity was palpable. Either because he was looking at hundreds of millions (perhaps billions) of dollars in losses, or because he was losing “face” as the leader of the company his ancestor built.
Apologies will never be enough for the families that lost loved ones. Yet the acknowledgment of responsibility offers some relief to those who held the company in trust. One lawmaker spoke of the almost mythological reverence he held for the Japanese car maker. He remembered those “like myself <who> have grown up in an atmosphere that we had a great deal of faith in something that was stamped Made in Japan.”
Toyota was a brand held in reverence. The brand was built on reliability and integrity. The Toyota Way was the official name for the top of the line production quality and efficiency that Detroit envied, but could not repeat.
Toyota will undoubtedly right its sinking ship and get to the top of the industry heap again. The automaker has enjoyed a reputation for excellence stretching back for decades. Their downfall was to veer from the integrity model and focus instead on maximizing profits. A lesson for all businesses that your best profit model is to serve your customers first. To remedy the problem, the car company should use its own tried and true model for creating value for its loyal customers.
Professor Jeffrey Liker, an expert on the Toyota business model, summed it up this way, “Failure to follow all the principles of the Toyota Way led to this crisis. Now the Toyota Way is the only way out of it.”
Saving Face
Shame is a great burden in Japanese culture where honor has almost religious qualities. In America, where honorable business is often a quaint memory from our parents and grandparents, the U.S. financial industry could learn a thing or two from Toyota.
One Congressman revealed a document written to the chief of Toyota Motor North America, Yoshimi Inaba, celebrating the official agreement for a limited recall. The sentiment ignored public safety issues and focused on the bottom line. Inaba confessed, “It is inconsistent with the guiding principles of Toyota.” They have principles? How refreshing.
“Saving face” is a deeply ingrained principle in Japanese culture and business affairs. Unlike American business, Japanese corporate culture sees business as personal. Clark Roundy, VP of Marketing at Luxul Wireless, writes “When doing business in Japan, never underestimate the importance of personal relationships or the role that honor, loyalty, and saving face will play in your success.” American Roundy claims that to do business successfully in Japan, there must be a respectful relationship of mutual concern behind monetary goals. In other words, trust and honor are your bread and butter in Japan.
Clearly, things go wrong in business. Products malfunction and quality can be compromised in the rush to get products out to the market. How a company responds to a problem is the key to recovery.
The American Way
The remarkable aspect to Toyota’s tragic debacle is the glaring comparison to top corporate behavior in the U.S. this past year. We have seen former national treasures, including some of our largest financial institutions, not only shame and embarrass us around the world, but deliberately attack us where we live.
Through marketing predatory loans, hiding bad debt inside complex securities, hedging debt against worthless paper “swaps,” and unloading products on an unsuspecting public through Government Sponsored Enterprises, the actions of professionals and institutions were not due to neglect or oversight. Their actions were the result of a calculated strategy to market lethal quality loans to financially vulnerable citizens and sham securities to ignorant investors. The “shame” is on all of those who participated in this economic American tragedy, yet somehow those individuals feel little or no responsibility for their actions.
Apologies from some of those directly involved have been absent. Executives from now defunct subprime and predatory lenders such as, New Century Financial, Countrywide, Wachovia, and Washington Mutual have never admitted culpability nor offered any explanation or apology. Most of the executives at the top of these companies have found jobs in other banks or recreated new firms.
Investment and large commercial banks called before Congress offered lukewarm responses to the effect of, “I am sorry for my firm’s part in the industry’s negligence…” Always passing the buck to someone else and never acknowledging direct responsibility. To apologize with sincerity for an American financial firm would be to admit weakness. No company or manager wants to be that vulnerable. Denial goes a long way in corporate America. It minimizes legal and social costs and lets the deniers stay happily in their “not my problem” bubble.
Unlike the Toyota and Japanese business model, the American business model has been based on a “principle” of pure profit. The “rip-your-face-off,” “eat what you kill’ language of the financial industry reveals the whole story. As a culture, we have embraced and celebrated a model that leaves out any sense of moral decency or collective responsibility. Shame, embarrassment, or any other behavior modifying emotion are antithetical to the American business model.
In the wake of the economic collapse, we have begun to examine why this moral vacuum exists and how we got here. Pursuing profit without connection to the greater society that supports it is the primary misunderstanding of modern business. In the Japanese model, executives understand their direct responsibility to society, colleagues, and employees-hence the severe social consequences of their corporate actions. (Some executives are “shamed” enough to take their own lives based on professional missteps.)
Business and society are inextricably linked in Japan. In America, with the exception of conscious business leaders and companies, this link is remarkably absent.
The actions of the last decade, as well as the response to the crisis over the past 18 months, reveal that the overwhelming majority of America’s financial industry remains unconscious. They are seemingly unaware and indifferent to the enormous material and personal effects of their acts on the greater society.
The Toyota tragedy opens the window into deeper self-examination of the American business model. Toyota will rebuild itself in its own image-based on tried and true historical values. What values do we have to return to as we rebuild American business other than the principle of profits before people?
The continuing economic recession has (and continues to) put tens of millions of people out of work, forced millions of businesses to close, cost billions of dollars in savings and lost income, interrupted retirements, put millions out of their homes, destroyed marriages and families, caused heart attacks and suicides, and wrecked the American Dream for hundreds of millions of homeowners and ordinary citizens.
Shame is a useful thing if it propels one to better behavior or inhibits poor behavior. In Japan perhaps shame has too great a consequence. In America’s corporate boardrooms and everyday trading desks, there isn’t enough shame or simple conscience. There isn’t enough sense of commitment to the greater collective that would prevent our “best and brightest” from bringing down their own economy or compel them to build it back up.
Our continuing economic suffering is reason enough to re-evaluate our for-profit “value” system. Is it only money we are after? Or in the wake of the on-going Great Recession and all its inherent moral turpitude is there something like “human decency” we can add?
A dangerous moral vacuum exists in modern American finance and throughout large portions of American business. It propels us to do in the pursuit of profit what we would never justify in our personal lives.
If we don’t use the lessons of the Toyota Way to rebuild American business in the image of a morally responsible society, a for-profit model that understands its direct obligation to the greater collective, that would be the real shame.
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