The article first appeared in the "International Journal of Human Resource Development & Management." It addresses the role of HR in a lean enterprise, explores a major crisis of trust at Toyota's plant in Georgetown, Ky., and how it responded by reorganizing the HR function.
By Jeffrey K. Liker and Michael Hoseus
From the founding of Toyoda Loom Works in the 1920s to the creation of Toyota Motor Co. in the 1940s, its leaders believed that the key to success was investment in its people (Liker, 2004). The Toyota culture has evolved since the company's founding and is the core competence of the company. It is the reason why operations are lean, cars hit the market on time and on budget, chief engineers developing cars deeply understand the customer, company executives anticipate long-term trends and have clear strategies, and every employee (called a team member) is vigorously working on achieving the annual plan of the company. The Toyota Way is first and foremost about culture -- the way people think and behave is deeply rooted in the company philosophy and its principles (Liker, 2004). At the core it is about respect for people and continuous improvement and this has not changed since the company's founding. Organizations of many kinds throughout the world have been borrowing specific methods from Toyota that have been turned into programs like lean manufacturing, lean enterprise, and lean six sigma. Underlying these programs is a fundamentally different assumption than we see in Toyota's culture. The assumption of these lean programs is that the right tools applied to specific problems by expertly trained individuals will dramatically improve business performance in a relatively short period of time. Toyota's underlying assumption is that carefully selected and developed people over long periods of time will continuously improve processes and ultimately lead to competitive advantage and mutual prosperity. These philosophical underpinnings lead to very different views of how to manage and develop people and different views of the role of the human resources department in the firm. Mention human resources in most companies and one thinks of a department that processes people in a similar way that accounting processes money. Massive computer systems and large procedure manuals with reams of data account for such things as salary structures, benefit packages, career paths, retirement programs, and health insurance. You can study HR in college and get a job as an HR professional. For most people who choose other professions such as engineering or nursing or law the HR department is a place they go to get processed into the company when they are hired or out of the company when they leave. Sometimes in between they may have a question about benefits or salary scales and contact HR. Otherwise the less contact the better. The traditional firm views human resources largely as a human accounting function. In fact it is becoming popular to outsource the "human resource function" to information technology firms as a cost reduction strategy. The purpose of this paper is to address the question of how a change to lean management impacts the HR function. We will use as a model for lean management the original -- Toyota. We will see that in fact there is a very profound difference in HR at Toyota compared to traditional companies but perhaps not in the way we might think. Toyota's view is that lean management requires more highly developed people and deeper trust than in a mass-production system. People become the most critical part of the system and their willingness to identify and solve problems is what drives continuous improvement. As such, HR is arguably the most critical function in the enterprise. The accounting roles of HR are fairly trivial at Toyota compared to roles in developing people and creating a fair environment based on mutual trust. This paper starts by...