WSJ - Toyota: A Crisis Made in Japan

Jeff Kingston of the Wall Street Journal attributes Toyota's latest spate of errors to a cultural failing. An excerpt:

Japanese firms often seek to cover up or fudge the facts and the people communicating with the media and public often do not have the information they need to do their job. The absence of a structure to quickly get accurate information to top management hampers an accurate and adequate response. That leaves management unprepared to deal with media questioning and conveys an image of stonewalling and indifference.

There is a cultural element to this penchant for mismanaging crisis. The shame and embarrassment of owning up to product defects in a nation obsessed with craftsmanship and quality raises the bar on disclosure and assuming responsibility. And a high-status company like Toyota has much to lose since its corporate face is at stake. The shame of producing defective cars is supposed to be other firms' problems, not Toyota's, and the ongoing PR disaster reveals just how unprepared the company is for crisis management and how embarrassed it is. In addition, employees' identities are closely tied to their company's image, and loyalty to the firm overrides concerns about consumers.

There is also a culture of deference inside corporations that makes it hard for those lower in the hierarchy to question their superiors or inform them about problems. The focus on consensus and group is an asset in building teamwork, but also can make it hard to challenge what has been decided or designed. Such cultural inclinations are not unknown elsewhere around the world, but they are exceptionally powerful within Japanese corporate culture and constitute significant impediments to averting and responding to a crisis.

This crisis offers an opportunity to reform Toyota's corporate culture and improve quality assurance. This can be done by becoming more focused on the customer, using two-way flow of information and feedback; improving corporate governance by appointing independent outside directors; and making risk management more than an afterthought. It is not too late to turn the situation around, but this means shedding the constraints of a fusty corporate culture and wowing customers with a recall and above-and-beyond after-sales service and care. Yet early signs are that Toyota is no longer the nimble company that took the world by storm over the past half-century.

When Mr. Toyoda took the helm in mid-2009 he was unable to express a reassuring sense of how he would deal with his company's problems of overcapacity as well as the need to diversify away from reliance on the U.S. market and build its presence in China, India and Brazil. A string of successes, most notably the Prius, may have made the juggernaut a bit complacent, losing the edge that helped it surge since the 1970s by being ahead of the curve on fuel efficiency and top of the class on reliability. Regaining that edge and repositioning the company to tap into growing markets promises to be a difficult transition.

The Japan Inc. model of cooperative and collusive relations between the business and the government delivered the economic miracle, but has run out of steam. Japan's Lost Decade of the 1990s is entering its third decade, discrediting the powers that be.

I am hesitant to ascribe all failings solely to cultural issues, but Kingston is on the money in this case. While not all Western organizations are as open as they should be, Asian cultures should certainly learn to be more open.