Good Honest Dollar $$

In a recent discussion, I highlighted some of the underlying factors which contributed to the recent debacle surrounding Toyota and problems relating to unintended acceleration in some of its vehicles.

Today, I would like to focus on the company’s response – where it was lacking and why.

 
A tardy response
Toyota’s corporate response to the crisis fell short in three key areas:

 
1) Belated nature of apology.

Given the dates of the first two recalls (November 2, 2009 and January 27, 2010 – refer Wikipedia), consumers have every reason to wonder why they had to wait until February 5 this year to receive an apology.

This delay was unacceptable, and served as a clear indication of just how far behind the eight ball management was on this issue.

 
2) Mixed signals.

In September last year, the public were told that the problem related to floor mats, and that 3.8 million vehicles would be affected.

Then, on January 21, it was the sticky pedals – an embarrassing admission (which came only after it was proven that some crashes weren’t caused by floor mats) given previous denials that mechanical problems had anything to do with it. This affected an extra 2.3 million vehicles in the U.S.  (The next day, a further 1.8 million vehicles were recalled in Europe and 75,000 in China – refer Wikipedia).

Finally, as a separate issue, consumers were told on February 09 about problems with the anti-lock braking system in the Prius hybrid model – apparently the result of a software glitch.

The inconsistent nature of these signals does not inspire confidence on the part of consumers or the general public.

 
3) How far back does it go?

But worst of all are lingering questions about how far back the problems go, what the company knew and why action wasn’t taken sooner.

According to FairWarning, Toyota noticed sticky pedal problems in August last year – months before the recalls. Worse, though they have continually denied problems in this area through eight separate investigations, a CBS News report indicates that the company was aware of electronic problems causing some cars to ‘surge’ unexpectedly as far back as 2005. And finally, according to Wikipedia, there have been 21 deaths believed to be associated with the pedal problem since 2000.

Why, the public asks, is action being taken only now?

 
Why the poor response?
The reasons behind the deficiency of the response have been the subject of a significant degree of media discussion in recent months.

No doubt a range of factors were at play:

 
• Human error.

First and foremost, let’s not forget the role of basic human fallibility in all of this.

Belated as the response was, any ideas about foul intentions or the deliberate placing of driver safety in jeopardy are not credible. Instead, Toyota simply failed to grasp the significance of the problem – a basic error of judgment.

Toyota is not the first company to suffer from misjudgment of these proportions – nor will they be the last.

 
• Expectations and pressure.

Notwithstanding the above point, the momentum associated with expansion of the magnitude which the company experienced over the past decade (it replaced GM as the world’s top selling automaker in 2008) created a great deal of expectation regarding continued growth in sales volume.

The resulting pressure undoubtedly made it difficult to be open with the general public about safety issues and mechanical problems, less an overly candid approach in this regard jeopardise sales momentum.

 
• PR Strategy.

Another factor, according to PR Week, may be a general lack of awareness on the part of many Japanese firms, including Toyota, about the whole concept public relations.

I don’t think this is particularly significant. Whilst it is true that the company’s handling of this whole affair has been less than exemplary, any problems relating to PR management are merely scratching the surface.

The real issues and underlying problems go deeper – much, much deeper.

 
• Cultural issues

As they did with the cause of the problems (refer previous discussion), cultural issues no doubt played a part in the company’s poor response.

Traditional Japanese culture places a lot of emphasis on the concept of ‘face’, whereby any loss of public face strikes at the heart one’s identity and must be avoided at all costs, especially for those in a position of seniority or authority. For senior management of such a revered organisation, the embarrassment associated with public acknowledgement of mistakes or problems of this magnitude (which would be bad enough for anyone) cannot be underestimated.

Reluctance to speak openly about these kinds of problems extends to middle and lower level employees as well – lest they cause embarrassment to their seniors (not to mention their corporate identity, to which their own personal identity is so closely tied).

Moreover, deep down, it may have been difficult for Toyota management to acknowledge that they really had a problem. Problems associated with denial in this regard are not limited to Toyota or Japan in particular, but the Japanese do seem to experience a particular degree of difficulty in this regard.

Perhaps this is partly a function of the Japanese obsession with craftsmanship and quality (and the subsequent embarrassment when things are not up to scratch). Or possibly it could spring from their drive to avoid confrontational situations – with a resulting temptation for uncomfortable matters to be swept under the carpet.

Whatever the reason, this sense of deep-down denial could well go some way toward explaining why Toyota management failed to grasp the magnitude of the situation.

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Kraft’s recent takeover of Cadbury represents a historic moment for the world’s second largest food and beverage company.

But the contempt which the company has shown toward British workers and lawmakers regarding broken promises about the future of Cadbury’s Somerdale plant is shocking.

Workers deserve the truth. Those employed at target companies should at least be entitled to expect prospective acquiring firms to act in good faith when making pledges regarding continued employment.

This did not happen, and Kraft’s resulting loss of reputation is well deserved

 
The broken promise
Assurances regarding the future of Cadbury’s Somerdale plant in Keynsham represented a key plank of Kraft’s pitch to British lawmakers during the course of the protracted four month battle to gain control of the confectionery manufacturer.

The plant had been due to close in spring, but Kraft had consistently promised to keep it open – a pledge repeated on the day the merger was approved.

But shamefully, the company changed its tune almost immediately after, announcing just one week later that the factory would indeed close after all, and that all four-hundred workers would be made redundant as a result.

 
Contempt for law-makers
Making matters worse are management’s feeble efforts to pass the blame and the contempt which the company has shown to British lawmakers.

Rather than bothering to show up before British MPs at a hearing of the Commons Business Select Committee (which is investigating whether or not Kraft mislead unions, workers and politicians), chief executive Irene Rosenfeld merely dispatched three middle ranking deputies.

Even more abysmally, one of these, Executive Vice President Marc Firestone, sought to transfer the blame to onto former Cadbury management. Whilst Mr. Firestone did provide a “sincere personal” apology, he went on to claim that Cadbury had failed to share information due to the hostile nature of the bid. Kraft, he said, had acted in ‘good faith’, had been forced to rely on limited information (such as Google images of the factory exterior) and did not realise that Cadbury had invested tens of millions of pounds into a new Polish factory.

 
Pathetic
Where do we even begin?

To be fair, the difficulties which the company would have faced in gaining approval for the merger in absence of the pledge must be acknowledged. It must also be acknowledged that Kraft could not have been expected to continue to operate an unviable plant, particularly in light of the extent of investment in the new factory.

But this is no excuse.

Let’s start with the broken promise itself. The company changed its tune mighty fast once U.K lawmakers could no longer stop the merger – surely we can’t seriously be expected to believe that they ever had any real intention of sticking to their pledge.

(The problem is not the factory closure itself – unfortunate though they are, factory closures and job losses are essential from time to time. The problem is in the way this was done, and the contempt with which workers were treated during the takeover process)

Equally poor were their buck passing efforts. Kraft can complain all they like about how Cadbury management played hard ball and they were forced to act on limited information. But it was Kraft who made the pledge, not Cadbury management. Kraft must therefore acknowledge sole responsibility for this debacle. 

(Seriously, what company of any integrity makes ‘good faith’ promises about keeping factories open without any of its staff having actually seen the factory in question?

Besides, the factory had been slated for closure – did Kraft really have no inkling that it might not be viable?)

Added to this is their blatant lack of respect for the House of Commons. For any chief executive of such a large multinational not to appear before a ministerial committee despite requests for her presence is unprofessional. Rosenfelt’s conduct in this regard shows distain for British law-makers and the people they serve.

Nor was her reason for being absent overly impressive (she had to attend a board meeting). According to Peter Luff, chairman of the committee, the date for the meeting had been set at Kraft’s behest – couldn’t they have chosen a date when she was available? Alternatively, could they not have rescheduled the board meeting? And for that matter, is a company board meeting really more important than showing up before a British ministerial committee?

The way in which Kraft has conducted itself throughout this whole affair has been unprofessional and reprehensible. Their resulting loss of respect is thoroughly deserved.

Respect should be reserved for companies who conduct themselves in a manner of professional integrity.

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(Image provided by Mytho88 via Wikipedia)

Just a year or two ago, Toyota was a model case study in business management.

Recognised as a leader for quality, safety and reliability, and modeled by rivals for its ‘lean production’ system, the Japanese giant was arguably the most respected car maker in the world.

Nowadays, the company still features in case studies – but for all the wrong reasons.

In this series, I would like to look at what exactly went wrong.  In the next post, I will talk about what lay behind the company’s poor response to the crisis.

 
Where did it all go wrong?
Problems associated with unintended acceleration are well documented, as is Toyota’s sluggish and poor response.

But to attribute the current crisis to any one singular cause is over-simplistic. More likely, a combination of contributing factors was at play:

 
• Expanding too fast.

Back in 2002, the company set a goal to expand its global market share from 11% to 15% (refer article).

Sensible and manageable though that may sound, commentators such as James Womack, one of the authors of “The Machine that Changed the World”, a prominent book about Toyota’s innovations in manufacturing, believe that this almost certainly contributed to current problems.

For one thing, management focus became consumed with the relentless push for growth, causing traditional considerations such as safety and customer satisfaction to take a back seat.

In addition, a by-product of this was a massive expansion within Toyota’s supply chain, with the company being forced to place increasing reliance on newer suppliers outside of Japan. Reports suggest that unlike traditional Japanese suppliers, who share an intimate working relationship with the automaker, many of these new suppliers were not familiar with Toyota’s methods, nor was expansion of the supply chain itself matched by sufficient effort to integrate new suppliers into the production process or to ensure that quality control was not compromised in the process.

 
• Complexity.

Coupled with growth came increasing complexity, both of the cars themselves and of Toyotas rapidly expanding production system.

As the Taiwan News puts it:

“In an average Toyota, there are about 24,000 inputs and outputs, with as many as 70 computer chips processing information and sending it on to other chips to operate the engine control units. It is a very complex system.”

Added to this are the company’s sprawling global operations – it now has more than 50 plants outside Japan and more models on the road than any other carmaker (same article). To manage all of this effectively would require an almost superhuman effort. The associated complexity almost certainly contributed toward current problems.

 
• Focus on the parts, but forgetting the whole

Another contributing factor, believes Kenichi Ohmae from The Christian Science Monitor, relates to the company’s excessive focus on minute detail and a loss of the bigger picture in terms of the overall workings of the engine as a whole.

A large aspect of the world renowned Toyota Production System (TPS) revolves around the Japanese concept of Kaizen, which focuses on continuous improvement in the manufacturing process. These improvements, in turn, tend to be smaller and incremental, and to stem from a bottom-up type of focus upon individual aspects of the production process.

Whilst there is nothing inherently wrong with this concept as such, problems arise where it is taken to extremes and management loses focus on the bigger picture of the vehicle as a system and how all of the parts work together as a whole.

 
• Cultural issues.

Cultural issues no doubt played a part as well, as did management style.

As I understand it, Japanese culture is characterised by strict hierarchies and an emphasis on maintaining group harmony at all costs. Questioning a senior is virtually taboo, as is causing a senior to ‘lose face.’ In this environment, lower level workers are expected to tow the line and problems at an operational level are rarely reported to senior management.

Combine this with a management style which was said to be highly centralised and largely disengaged from operations on the factory floor, and one could understand the scope for serious problems to go undetected.

 
Conclusion
It is likely that Toyota’s current problems stem not from a singular cause but from a combination of contributory factors.

The conviction in Italy last week of three Google employees over a shocking video posted by a group of students on YouTube is extremely disappointing, and raises serious issues about how far providers of user-generated content platforms have to go in order to satisfy their legal obligations.

To be sure, Google does have a duty of care with regard to prompt removal of videos containing illegal or malicious content upon becoming aware of their existence. But the company cannot be held responsible every time someone chooses to upload these types of videos. Nor should they be expected to go to the extreme measure of pre-screening each and every video prior to them being made available for public viewing.

 
The Italian decision
The case in question revolves around a video which was posted by students at a school in Turin, Italy. The video in question showed them shamefully bullying an autistic schoolmate.

Although the video was posted in September 2006, Google staff were not made aware of its existence until two months later, when they received two requests to have it removed. Subsequently, the video was removed within hours, and the company assisted Italian police in identifying the individual responsible for its upload, who was later sentenced to ten months of community service (refer official company response).

But this did not satisfy the Italian courts, and a judge in Milan last Wednesday convicted three Google executives with violating Italian privacy laws in relation to the incident. Each was handed a six month suspended sentence.

 
Two troubling aspects
There are at least two troubling aspects of the decision:

1) that Google is being held responsible for content which it did not create and does not own; and
2) that the legal standard to which Google is being held does not accord with realistic commercial expectations.

Given that Google did not either own or create the video in question, neither the company nor individual members of its staff should be held responsible for its content. The same applies for all platforms of user-generated content (Blogger, MySpace, Facebook, Twitter etc). Users, not service providers, create and own the content. Therefore, it is individual users, rather than service providers (who merely provide a platform for individual users to share their creation), who should be responsibility for illegal or inappropriate material.

(Also troubling is the fact that the punishment applies not to the company itself but to individual Google employees. If Google committed any crime, surely the offense occurred at the corporate level and not at the level of any individual staff member. Any associated punishment should therefore apply to the company itself, not to individual employees)

 
Unrealistic expectations
More troubling still – questions the decision raises about the length to which Google and others have to go in order to satisfy legal requirements.

Given the extent of Google’s efforts in this case, it is hard to see what more the company could have done, and the fact that these efforts were not deemed to be sufficient raises some very troubling questions about the extent to which Google and others have to go in order to satisfy Italian law. Really, what else could they do? Pre-screen each and every video prior to upload? Pre-screen each and every blog post prior to publication on Blogger? How about Facebook – should they have to pre-screen each and every message or photograph?

No. Even if Google and others are deemed to have a duty of care regarding illegal or malicious content, such a duty should not extend beyond realistic commercial expectations.

 
Let’s hope the law adapts
Services like YouTube, Facebook and Blogger are subject to abuse by those intent on malicious or illegal activity.

But they also allow millions worldwide a platform by which they can create, share and connect with others.

Hopefully, over time, the law will adapt to the new media environment. But for now, decisions which impose unrealistic burden on providers of these services are very concerning for both the industry and the millions of users who enjoy the wonderful benefits which these types of services provide.

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One might have thought that private security guards are supposed to ensure the safety of the general public on premises which they patrol.

Apparently not – at least not in the case of those employed by Olympic Security at the Seattle Bus Station, who just stood there and watched as a fifteen year old girl was beaten unconscious and robbed in a vicious assault last month.

Three parties share in the blame for this appalling incident: Metro Transit, the guards themselves and Olympic Security (the guards’ employer), which should certainly be stripped of its contract.

Taxpayers do not pay for guards to stand around and do nothing.

 
The incident
Footage of the entire incident can be seen here.

Shortly after the girl in question was seen talking to one of the guards (apparently pleading for help), another girl approached, launching a vicious assault in which the victim was knocked to the ground and repeatedly punched and kicked in the face. Meanwhile, a third person stole her bag, including mobile phone and iPod.

Aside from having one guard call for help, none of the three guards on duty did anything. They simply stood there and watched. Even after the victim lost consciousness, they did not bother to check if she was OK.

Their excuse: strict orders preventing them from intervening in any confrontation – a claim supported by both Metro Transit and Olympic Security, employer of the guards in question.

 
Three parties at fault
Pathetic.

All three parties involved had a duty of care regarding public safety. All three failed abysmally and share in the blame:

 
• The guards themselves.

To be sure, the guards themselves are not police and do not have the same rights or authority as members of the police force – especially in cases like these involving physical contact with members of the public. Furthermore, it should also be acknowledged that failure on their part to comply with strict orders could have serious legal and/or disciplinary repercussions, and that they themselves are not therefore in any position to disregard these orders willy-nilly.

Still, they have no excuse. There were three of them – surely their ‘orders’ would not have stopped them from either: (a) preventing the attack by simply standing between attacker and victim; or (b) bothering to check whether or not the savagely beaten victim was Ok.

(Moreover, surely there is a case where you abandon orders for blatant simple common sense when it is clear that the safety of a member of the public is in serious jeopardy)

No – their actions reflected blatant negligence for which they had no excuse.

 
• Metro Transit.

Bottom line: Metro Transit are responsible for public safety at any station or terminal under their operation, and cannot be absolved of responsibility when incidents like this occur regardless of any contributory negligence on the part of either Olympic Security or the guards themselves.

The buck stops with them – period. They failed miserably.

 
• Olympic Security:

Finally, Olympic Security themselves must share the blame, and it is pleasing to see that their contract is under review following this incident.

They can argue all they like about how their staff did as required under the contractual agreement with Metro Transit. But this is a weak argument. As a private security firm, they share in a duty of care, and should not accept any contract under which members of their staff are prohibited from doing what is necessary to protect the public. And given their expertise, it is their responsibility to ensure that these types of contracts allow for proper procedures to handle any security incidents that might occur.

They are also responsible for training their staff how to handle confrontations – and this does not include standing, watching and doing nothing.

Rather than miserably trying to justify their actions, Olympic Security should just come clean and publicly acknowledge a clear and simple fact – they, too, failed in their duty of care.

They should also be stripped of their contract. They are not paid to have their staff stand and watch whilst fifteen year old girls are beaten and robbed. If that’s what’s going to happen, then their services are not of a standard which is appropriate to meet the ongoing requirements of the travelling public.

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