In fact, Toyota makes very large investments in its people, as we will further
discuss in Chapter 11. For example, it takes about a three-year investment to
develop a first-class engineer who can do the basic work Toyota expects. Thus, an
engineer who leaves in three years is a completely lost investment. The reason
for the three-year investment is that Toyota is teaching the engineer to think,
solve problems, communicate, and do engineering in the Toyota Way. It is not
simply a matter of learning basic technical skills.
We see that Toyota views its own people in light of the broader philosophy of the
Toyota Way. This leads to long-term investments they would not otherwise make.
The philosophy provides the framework in which individual actions are taken.
Lean Enterprise
The philosophy just keeps building. Since 70 to 80 percent of Toyota's vehicles
are engineered and built by outside suppliers, a Toyota product is only as good
as the supply base. Toyota realizes customers do not excuse it for faulty parts just
because an outside supplier made them. Toyota itself is responsible. And the
only way to be responsible is to ensure that suppliers have the same level of
commitment to lean systems, a learning community, and the lean enterprise as
Toyota does. It’s all part of the value stream—part of the system.
Therefore, Toyota makes investments in its partners that often seem to defy
common sense. But consider what was learned several years ago when a plant
that produced p-valves for Toyota burned down. P-valves are a critical brake
system component in every car sold in the world, and Toyota had made the mis-
take of sourcing to one supplier and one plant. With just a three-day supply of
p-valves in the supply chain after the fire, a total of 200 suppliers and affiliates
had to self-organize and have p-valve production up and running before the
supply ran out. Sixty-three different firms were making p-valves on their own
without Toyota even asking. How much is loyalty like this worth? It allows
Toyota to run a very lean supply chain with confidence that in a crisis it can
mobilize vast problem-solving resources. This dramatic example illustrates the
powerful strategic weapon Toyota has amassed by investing in a lean enterprise.
Value-Adding Contributor
What drives Toyota executives to get up in the morning, go to work, and make the
right decisions for the long term? If their goal were to simply maximize their own
personal utility, as some of the economics theories presume, they would not do the
things they do. Jim Press, executive vice president and chief executive officer of
Toyota Motor Sales, admitted that his total compensation was much less than his
counterparts in American automobile companies. When asked why he put up
with it, he said: “I get paid well. I am having a ball. I am so fortunate that I am able
to do this. The purpose [of the money] is so we can reinvest in the future, so we
can continue to do this... and to help society and to help the community.”