Leadership Principles That Drive Toyota’s Culture of Continuous Improvement

Brett Wood

President & CEO at Toyota Material Handling North America

Learning Objectives

Is your culture what you want it to be or what you have allowed it to become? If you’re not talking about it and working on it every day, chances are it’s the latter. At the foundation of any successful company is a strong culture, driven by the spirit of continuous improvement, and powered by passionate leaders. If you’re lacking any of those elements, you’re missing an opportunity to create lasting growth with your most important asset – your people. In this presentation, Brett Wood, the President & CEO of Toyota Material Handling North America, will provide leadership principles and practices that you can implement to create a culture of continuous improvement, and he will give tangible examples of Toyota’s Kaizen culture in action.

Key Takeaways:

  • Educate, engage, and empower your teams to create a culture of continuous improvement

  • Consistency is key. To maintain a stron culture, you must be intentional about working on it and talking about it every day

  • It starts at the top. Creating and maintaining a culture of continuous improvement is only possible with great leadership

"Great leadership differentiates great companies from good ones."

Brett Wood

President & CEO at Toyota Material Handling North America


Hello, everyone, my name is Brett wood, and I’m the President and CEO for Toyota material handling North America. I’m sure the first thing that popped in your head when I said Toyota was a Camry, or a Tacoma, or any one of Toyota’s excellent automobiles.

I’ve been working at Toyota for more than 30 years, and I would be a rich man if I had $ for every time I’ve seen this look when I tell someone where I work and what I do. So I’m always armed with my 32nd elevator speech to explain our business and our industry. I tell them that each year over 200,000 forklifts are sold in North America, and more than 1 million are sold worldwide. In fact, we’re on track for a record year in 2021. We expect to hit 265,000 units sold in North America this year.

Forklifts touch almost everything you own, where you eat… you drive somewhere in our massive Supply Chain, and one in three forklifts sold in North America is either a Toyota brand or a Raymond branded product. We are a four and a half billion dollar company within Toyota. We have four factories in the US in New York, Iowa II, Chicago, and our main headquarters is in Columbus, Indiana. We employ over 10,000 people. We build nearly 200 forklifts a day just in our Indiana factory. And we make a forklift about every three minutes. Now Surely, after people learn that Toyota makes forklifts, they start seeing them in various locations. You might even see when rolling up to the valet on a Friday night. You think I’m kidding? Watch this.

Now watch, you’re going to start seeing four clips everywhere and probably realize they are a bigger part of your life than you ever would have expected. I’m sure many of you had probably heard of the Toyota Production System. Matter of fact, some of you watching this might know as much about TPS as I do, and maybe even more. But I’m not going to teach you about TPS today, you can find many excellent books written about it. Instead, I’m going to spend some time explaining how we use the principles of TPS to drive continuous improvement throughout our entire organization. Before we get into the specifics, I have a photo to share with you. It’s a photo of a paper towel on a bathroom floor. I’m not going to share the significance of this photo now. But keep in your mind, because it’s an important visual that we’ll revisit later in the presentation. Here are the three main ingredients to create a culture of continuous improvement. We call them the three E’s, engage your team and making changes, educate your team on what is expected of them. and empower your team to make the changes. Now underlining everything we do is a Japanese phrase monozukuri ba he chose a curry. Making things is about making people we believe to create this type of environment, we have to get the right people in the right place, we have to execute on the three E’s of continuous improvement. And we want to engage our people in a way that encourages them to identify and participate, to go all in on their education. And then align them with the right teacher, somebody who can learn from and who will allow them and empower them to use those skills. Because the more we do that, the more excited they become about the spirit of lifelong learning, which is the whole idea of continuous improvement. If we invest in people, our people will naturally invest and use these skills in what they do each day. Think about this, you go to a drugstore and see a magazine rack. Your eyes will be drawn to the hobby or stories that most interest you. You’re curious to learn more. You may like to hunt or fish or garden or cook or whatever it may be going to be enticed to go there because we have a natural desire to self educate and learn more about the things that interest us. So we try to create an environment where our people have new learning opportunities. to dive deeper on the things they know how to do. That leads us to the idea of Kaizen. Kai means change in Zen means for the better. In other words, continuous improvement. taiichi Ohno said that people don’t come to Toyota to work. But to think this is something very natural. When we wake up each day, we remember the challenges of the day before and try to do things easier, better, smarter, safer. This is the spirit of Kaizen. Kaizen is not just about a big project or event, but something that is done by everyone, everywhere and every day. How do we engage people to embrace change and stay motivated and involved in continuous improvement? Well, we show them our commitment to continuous improvement by practicing it every day. And we asked them to have such a strong understanding of their processes. They can explain it to anyone. It was Albert Einstein, who said, you don’t really understand something unless you can explain it to your grandmother. I love that. In other words, if we want to get better at what we’re doing, we need to break down those tasks into repeatable types of patterns. In Deming said, If you can’t describe what you’re doing as a process, you don’t know what you’re doing. And put another way, Mr. Ono said that the basis of improvement is a standard without which no sustainable improvement can be made.

We try to capture our best process with work instructions that break the job into its major steps, key points and reasons what to do, and how to do it. And most importantly, why I’m sure most of you have had people tell you what to do, and how to do it many times in your life, but they probably rarely took the time to explain the all important why. Now that’s a problem. Why? Because humans become quite independent. At a young age. The average four year old asks 300 questions per day, maybe more. We want to know why. But most people don’t take the time to explain it to us. We often have to figure out the why through trial and error. Most people are capable of figuring things out on their own. But why would we want them to have to relearn lessons that we should have been able to eliminate through our standardized process. Even if we do something wrong, doing it consistently gives us a starting point to make it better. So at Toyota, we begin today with one simple question. How’s your process, if one of our employees has a problem or an idea one day, they simply note it on their clipboard, and their leader will come around to talk to them about it within an hour or two. It’s a small change, we empower leaders and team members to go ahead and make that change. But if they need assistance, we get engineering or maintenance or other groups involved. Either way, our goal is to analyze and complete the improvement in less than 25 days. how fast we respond is key. We don’t want our people to lose trust in our commitment to the process. But at least respond. That’s the very important thing. And you should never let this paper shredder become your suggestion box. Of course. Along those same lines, when we are making improvements to a particular area, involve all of the people who work there. People feel that you are driving change without their input, they will find 1000 reasons why something won’t work. But when you involve them in the process and solicit their ideas, they are much more willing to work towards the improvement. getting them involved also gives them an opportunity to participate in the cycle of process improvement. So they can learn by doing. You know the old saying about teaching a person to fish. Well, the same is true here. If you improve a person’s process, it will stay the same until you return to prove it again. And if you teach someone to improve their process, they can make improvements every single day. Now some of you may know that eliminating waste is a core principle of TPS. When TPS started, seven categories of muda or waste were identified, which you can see on the screen. More recently, we added the eighth Buddha which is under utilization of people and their creative minds. We believe this is the worst waste of them all, because it can have the most significant impact on the other seven. So when you create a culture of continuous improvement, your employees become experts at identifying waste. And you multiply the number of smart people looking for ways to improve, and that will really drive results. But eliminating waste does not mean this. However, it would reduce wasted fucking to the restroom of course. But I want to share a specific Kaizen example, from one of our employees to illustrate this point. The example comes from an employee named owl, l uses a laser to cut steel plates, this process wouldn’t be too labor intensive if he only had one size plate to fit on his work table. But because we have several different sizes of forklifts, and we follow the just in time production model, l has many different size plates run through his process. So one day, I really realize he was spending a lot of time and energy switching jigs and vices every time he received a new size plate, he recognized the third muita unnecessary motion. So let’s hear l talk about what happened. In his own words.

Before I used to have to take these and set them on to three by three tubings that run on the table right here. And then I would have to take a hammer and pound them with the whole slide. Now I don’t have to do that with this jig, it automatically just sets the rod in place. I’m ready to tap. Before I had to have these I would take and put a pin right here in the polls to make sure that they stayed lined up all right. When I got done tapping them, I would always have to turn around and unload them from the back side. And it was really a lot of twisting and turning. I just thought there’s got to be an easier way to do this than the way I’m doing it. So I knew the parts that I had, I could I knew there’s 13 different parts that I can tap on this jig. Before I had to either move everything around or pick up a big vise, it’s down here under the table and set it up to put my smaller parts. Now I don’t have to do that I make I’ve got another part that I can set right here and put different parts in to tap them. At the same time. It has probably saved me probably two hours of production today on all the different parts that want to help my job as easy as I can, you know, and they let me do that. They tell us they they tell us that they want to do that, you know and that’s that’s what I do.

Now, obviously, we don’t hire actors that Toyota. True isn’t so great. And we couldn’t even get all the stuff working to record the video. Well, he’s living a culture of continuous improvement and is always looking for ways to eliminate waste. Can you see how the three E’s encouraged al to come up with his great idea. It’s not magic or rocket science. But it is something you have to practice every single day. As I said earlier, consistency is a key factor to continuous improvement. And earlier we mentioned our how’s your process daily checking? Well, we do something similar in the office to every day at 130. In the afternoon, we hold a quality assurance meeting. And I’ll play a video while I explain what we do during this meeting. So starting with quality quality is the cornerstone of Toyota, which means if there is a faulty part in a Toyota Forklift, we want to know about it. Once we know about it, we want to analyze it. So we pay for the part to get shipped to the factory at our costs. Most companies do the same thing. But what happens when they get the part back? If they don’t do anything, they really missed an opportunity to improve. So we built it into our process. When we receive a warranty part we bring it to our daily quality assurance meeting, and bring in the engineers and managers involved in the making of the part. The goal is to get the right experts and decision makers to examine the failed part and confirm it was defective and more importantly, determine the countermeasures to take the to ensure the same defect doesn’t happen again. Now another example of consistency to support our drive for continuous improvement is our 7:30am Daily Kaizen meeting, again, I’ll play a video where I’ll explain what we do. Before we begin our day, we get together for 20 minutes to talk about the day before. We actually call this meeting room, our adrenaline room. We discuss three things, what went right, what went wrong, and what we can do better today. So in 20 minutes, every department leader has an opportunity to present data and information to look for ways to improve. We talk about everything from safety to production numbers to maintenance issues, how many people call in sick, the weather forecast, if it can affect our day, we talk about it in this meeting. In addition to troubleshooting, there’s another benefit to having these meetings first thing in the morning, when you begin the day thinking about continuous improvement, it stays in your mind all day. So before long, the drive to identify ways to improve becomes a habit and it’s something you do without even thinking about. Now, I like to take visitors into our adrenaline rooms. And oftentimes, they comment about the colored pencils and markers that they see throughout the room. Well, I’d like to note that the paper on the screen that you see shows data for the whole month, every day for the whole month. We believe that asking a manager to color in the charts by hand versus a computer leaves a stronger impact with that individual and has a psychological effect to drive home, their personal accountability, and it saves paper.

Now, this is called the Toyota mindset. Another TPS principle, there’s a place for everything, and everything has its place, as you can see here. Now this can be a blessing. Or if he asked my wife or daughter, it can be a curse. They don’t always appreciate the TPS principles I implement in our house. Like the rule that you cannot walk up the stairs without taking a few items with you. When you get to the top of the stairs, you can’t just leave them there. They have to be returned to their proper place. Even if you’re not the one who use the item. With the TPS mindset, you won’t have steps or misplaced items in your house or your garage either. I can see my teenage daughter’s eyes rolling right now as I speak. Now another tool we utilize are electronic and on boards. They are great examples of how data can be used in a smart factory type of environment. And on boards are a visualization tool that display real time data related to our daily production and processes. The data is presented in a format that clearly identifies where we have any problems or opportunities and onwards help us support Kenji can bid to which mean actual place actual thing. In other words, go and see with your own eyes. So nm boards combined with canagan batsu results in real time data driving real time action. We have included and on boards in our office environment, so that everyone can visualize our daily situation quickly, and act accordingly. By the way, this process was really not that expensive, as we developed the software in house using SQL data and resulting in pretty much a minimal investment. And this daily information can also be easily displayed on an iPad. Well, now that I’ve emphasize the importance of processes, let’s talk about culture. It all comes down to this simple fact. You can teach processes, but you must live culture. Culture is tenuous and can be lost easily if we fail to continue sharing lessons about the processes. Our core values are critical to our culture. And they are based off the original Toyota precepts developed when the company was founded many years ago. GPS can help you be more efficient in what you want to do. But it won’t help you be who you want to be and who you want to become. That’s where culture comes into play. And the bedrock of that at Toyota are core values. Oftentimes, when you hear about a company’s core values, you see pretty words that are on the wall or nice words on a website. Sometimes people can even recite some of those. But the question is, do people live any of those? Those are just words on the wall, then they’re no better than this picture of a bald tire. On a smooth, dry surface. It’s fine. No problems. bald tire has air in it, I can put it on a cart and pull it around. But the first time that I hit an icy surface, it’s going to slide off the road, it has no traction, the first time I hit a pothole, that tire will pop. We need to have the values that keep the wheel turning, but it is the tread on the tire, our business ethics that stick this to the road, it’s important to remember that the right behaviors lead to more sustainable results. And to sustain a culture of Kaizen, we need to do these three things. Reward effort, and not just results. We’ve all worked hard at something and failed. Let’s not punish people, but encourage them to think about their next steps. So let’s reward where we’ve been the journey, the lessons learned, the detours we’ve had to take along the way. Those things helped us identify ways not to do something. So if ABC didn’t get us to where we want to be, then CDE might, what are the next steps to get us there.

And the next step is we need to provide guardrails, not speed bumps. My wife and I traveled to Arizona a couple weeks ago, we were driving up the side of one of the mountains, I looked over and realize it was about a mile drop off the edge of the mountain, and there were no guardrails. I had no intention of running into a guardrail, but there’s a confidence we have when a guardrail is in place. So we want people to be creative, and we want to create a safe environment for them to do so. If they’re always looking over their shoulder, or they’re always worried that somebody is going to criticize them, or they’re going to be in trouble for making mistake, that’s really not a safe environment. And finally, train others to become problem solvers come to work with the attitude that what we have learned, we need to share and always open our minds to new opportunities to learn. that we’ve created a core values award to recognize and reward our people who live our culture every day. Here’s a description of the core values of word that we share with our employees. The winners receive $1,000 reward and the plaque. Nominations can be submitted by all employees by their peers, not just managers. We also share some of the things the peers of the winner had to say about them on their nomination. And we share this with the entire company, not just the winner. Here’s a picture of one of our recent winners, Sarah, noting. A big part of our culture is also giving back to the communities in which we live and work to be a good corporate citizen. We’ve established a formal partnership with the American Red Cross, and we provide equipment for disaster relief all across the country. As you can see, in these photos, our focus are used to help distribute many things, including the COVID-19. Much more. Now we give each of our associates 16 paid volunteer hours every year. That’s pretty cool, right? But just offering it is not enough, just offering is not actively maintaining the culture that we want. So we’ve started tracking, each team’s used volunteer hours, and categorized it by their manager. Our company leaders are not only offering paid volunteer hours, they’re actively encouraging their teams to use those hours, and take advantage of opportunities, volunteer with other teams to build relationships and strengthen the culture in the office as well. As you can see, our effort to intentionally maintain our culture has resulted in significant growth in the percentage of volunteer hours use rising from 15% in 2019 to 56% last year. Now this slide shows that these are the top leaders in our company, including the President Jefferson around the left. This is the percentage of volunteer hours used by their direct reports. And you can see how important it is for them to always try to be above their peer and it’s turned into kind of a nice competition actually. We don’t encourage our associates to use their CSR hours or hours, but our leadership team sets the example and is just as active in their participation. On the left photo you can see several of our senior executives participating in the Habitat for Humanity project and on the right you can see a Make a wish kid whose Wish we granted and we also made him CEO for the day and then Tire company participated in making him feel comfortable and make him feel at home. Now leadership comes with a number of responsibilities, and investing in your personal growth, especially leadership development is something I recommend throughout your career. at Toyota, we believe that great leadership starts with great culture. take a good hard look at the culture of your group. Is it tangible? Can you see it? Can you feel it? Can you touch it? Is it aligned with your company’s core values? Do you understand your role as a leader in creating a winning culture? Is your culture what you want it to be? Or what you have allowed it to become? If you’re not talking about culture and working on it every day, chances are it’s the ladder your leadership beliefs and practices are an expression of your culture. nothing more and nothing less. What is your leadership? Exactly?

Well, that’s not an easy question to answer because leadership is difficult to define. But we all know great leadership when we see it. Great leadership differentiates great companies from good ones. It can turn a toxic environment into a nurturing workplace, it can turn a disengaged group of people into a high performing team. Now I tell people, you don’t have to have your MBA. But I’d like you to work on your mb WA. And that’s management by walking around. You can learn a lot about your culture about your company by leaving your desk and walking around your office, your factory, your warehouse, especially your customer locations. Speaking of customers, we talked a lot about Kaizen and a lot of companies practice continuous improvement, they accept suggestions within their company. But you should also consider going to your customers and ask for their feedback. You’d be surprised the good ideas you might get from the people using your products. Can you get better you can also be applied outside of the factory environment, go and see where and how your products are being used. Early in my career, I was in charge of product planning. And I would strive to visit 20 customers a year. Some of the best product improvement ideas we ever heard came from our dealers and our customers.

There is a saying that managers manage but leaders do the right thing. leaders know that sometimes the right thing to do is to drive change. Now I’ve talked about a lot today. So let me recap a few things and wrap it up and hopefully give you a few takeaways. Number one, remember the three is to create a culture of continuous improvement. Educate your team on what is expected of them. Engage your team and making changes and empower your team to make the changes. Number two, consistency is key. And number three, in things is about making people and number four, daily meetings to reflect and improve. Number five, consider new visualization tools. Number six, practice getting in bed to go and see with your own eyes. And number seven, visit customers and ask for their ideas. Number eight, look for Kaizen opportunities everywhere, even in the office environment. Number nine, to maintain a strong culture intentionally work on it every single day. Culture cannot be automated. And number 10 change starts at the top. Now this brings me back to this photo. Remember the photo of the paper towel at the beginning of my presentation. Let me explain to you the significance of this photo. Part of our culture is to treat our facilities as if it’s our own home. One day I noticed a paper towel on the floor of the office bathroom. I picked it up and threw it away a few days later, I walked in and saw another paper towel on the floor. So I didn’t pick it up right away. I lingered for a few minutes I washed my hands for a really long time, looked in the mirror combed my hair, which didn’t take very long, but really I was waiting to see if anyone else would notice the paper towel and throw it away. Well I was disappointed when several people walked by and did nothing. That’s when I really I had a duty and an opportunity to drive change. I talked to our operations leader. Well, the word spread pretty fast, that a clean environment was very important to me to the president of the company. And you know what? It’s been a long time since I’ve seen trash on the floor of our plant or our office. So I love this, quote, The culture of an organization is shaped by the Worst Behavior the leaders willing to tolerate. Well, the paper towel on the floor is a great example. I could have let it go. But what example would that have set? What message would that have sent? It would tell our employees that leaving trash on the floor is an acceptable behavior at our company, and it would have a negative impact on our culture. Most of you are in positions of authority at your respective organizations. But I think it’s important to remember that no matter where you are in your company or in your organization, you are an influencer who can drive change. I hope you learned something today to take back with you. I really enjoy this opportunity to share a few leadership principles that drive our culture of continuous improvement. I hope you can apply some of these concepts at your company and with your team. And if you ever want to visit our Manufacturing facility in Columbus, Indiana, you have an open invitation to come and take a tour. Here’s the information to contact us to set it up. If you do visit I would love to say hello. And let me know if you see any paper towels on our floors. Thank you very much for your time and have a great day.

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