1. The Toyota Way to Lean Leadership:
Leading the Way to Continuous Improvement
Jeffrey K. Liker
Professor, Industrial and Operations Engineering The University of Michigan
President. Liker Lean Advisors
Keynote Address
Reynosa, Mexico
August 21, 2012
Newest

2. The problem! “Lean” has become a global movement
There is a somewhat standard tool set (VSM, kanban, cells, hoshin kanri, standardized work sheets, kaizen events…)
Applying the right tools to the right problem can produce results
BUT:
The results are rarely sustainable
Toyota, the model, rarely teaches or applies these tools as they are introduced by consultants

3. The Secret Sauce at Toyota is Developing Leaders who engage and develop people in problem solving
Example of Toyota Profound Teaching: Gary Convis (NUMMI): “There has been a mistake in the body shop. The machines are so close together there is no room for inventory buffers. We will continually shut down the plant.” Toyota Sensei: “That was no mistake. Please fix the problems.”

4. TPS, The Toyota Way, and Driving toward a Vision: It’s a System!
People
Lean Processes
X O X O 20 L R
Company Purpose
Lean Tools
OP 1
OP 3
OP 2A
OP 2B
takt time
Problem
Solving

5. Lean Leadership Development Model
Let’s
Start Here
1 Commit to Self Development
Learn to live True North values through repeated Learning Cycles P D C A P D C A
TRUE NORTH VALUES
Challenge
Kaizen Mind
Go and See
Teamwork
Respect
4 Create Vision and Align Goals
Create True North vision
and align goals vertically
and horizontally
2 Coach and Develop Others
See and challenge true potential in others though self-development learning cycles P D C A P D C A
3 Support Daily Kaizen
Build local capability throughout for daily Management & Kaizen

6. PDCA Problem Solving is the Core of What Leaders should Learn and Coach
Each phase contains several important components.
These will be briefly described in pages that follow. keep in mind that you will be spending class time learning much more about the Problem Solving Process.
This chapter is intended only to serve as an overview.
Each of these phases contains several components.
These will be briefly described in the pages that follow.
From Toyota Way to Continuous Improvement 6

7. What is Leader Standard Work?
The repetitive activities are designed to identify abnormal situations such as:
Non-standard work
Non-standard labor
Non-standard inventory
Non-standard output
This is done where the work takes place, “The GEMBA”
Organized, Visual Management helps leader see abnormalities

8. Example of a daily round for management
Asset
Management
Board
Hiring
Plan
TPM
Sheets
Kanban
Vendor
Support
Std
Work
Sheet
Process Performance
Example of a daily round for management
Deep Dive
Today HR
Maint
CSR
Warehouse
Finance
Engr
Shipping
Receiving
Plant
Mgr

9. Leader Standard Work is a necessary step in the beginning stage until leaders develop so it is “the way they think and act” 9 9

10. Summary of what Lean Leaders Need to Learn
Managing from the gemba
Developing themselves and others
Live the core values of the philosophy (respect for people and continuous improvement)
Manage effectively from the gemba
Become a role model for discipline problem solving
Become a teacher and coach for disciplined problem solving

11. Lean Leadership Development Model
1 Commit to Self Development
Learn to live True North values through repeated Learning Cycles P D C A P D C A
TRUE NORTH VALUES
Challenge
Kaizen Mind
Go and See
Teamwork
Respect
4 Create Vision and Align Goals
Create True North vision
and align goals vertically
and horizontally
2 Coach and Develop Others
See and challenge true potential in others though self-development learning cycles P D C A P D C A
3 Support Daily Kaizen
Build local capability throughout for daily Management & Kaizen

12. Coaching and Developing Others
Learning to assess the current understanding and skills of other people
Coaching others to develop expertise in disciplined problem solving
Breaking down tasks to give people appropriate assignments to increase their skill to the next level
Teaching by questioning, instead of by telling
Ability to build trusting relationships
Interpersonal skills to balance praise with critical feedback

13. Lean Leadership Development Model
1 Commit to Self Development
Learn to live True North values through repeated Learning Cycles P D C A P D C A
TRUE NORTH VALUES
Challenge
Kaizen Mind
Go and See
Teamwork
Respect
4 Create Vision and Align Goals
Create True North vision
and align goals vertically
and horizontally
2 Coach and Develop Others
See and challenge true potential in others though self-development learning cycles P D C A P D C A
3 Support Daily Kaizen
Build local capability throughout for daily Management & Kaizen

14. Toyota Work Groups at the Heart of Continuous Improvement
Group Leader
Team
Leader
Team
Leader
Team
Leader
Team
Leader TM TM TM TM TM TM TM TM TM TM TM TM TM TM TM TM TM TM TM TM
Notes
Ideal TL:TM Ratio= 1:5
Group Leader (GL) = 1st level of management
Team Leader (TL) = Alternates working production and leadership roles.
Team Member (TL) = Production worker

15. Continuous Improvement means a little better every day:
Visual Management Boards for Each Work Group (Toyota, Kentucky)

16. Lean Leadership Development Model
1 Commit to Self Development
Learn to live True North values through repeated Learning Cycles P D C A P D C A
TRUE NORTH VALUES
Challenge
Kaizen Mind
Go and See
Teamwork
Respect
4 Create Vision and Align Goals
Create True North vision
and align goals vertically
and horizontally
2 Coach and Develop Others
See and challenge true potential in others though self-development learning cycles P D C A P D C A
3 Support Daily Kaizen
Build local capability throughout for daily Management & Kaizen

17. Floor Management Development System:
Visual Metrics Aligned from Top to Bottom to meet Annual Plan (Hoshin Kanri)
Line of Sight
Plant-Wide
Stamp
Body
Paint
Assembly
Assembly Division I
Door
Trim
Chassis
Final
Trim Shop
Trim 1
Trim 2
Trim 3
Trim 4
Floor Management Development System:
Trim Group 1 X
Problem
Safety
Quality
Productivity
Cost HR . . . .
Hoshin
Vision .
Shop KPIs . . . . .
Main KPIs x x x x x . . . . . . .
Process
KPIs . . . X X . . . . X X .
Sub-KPIs

18. Visualization & Striving to Meet Aligned Standards
Production Line
Exec Mgmt
Regional OPS
Plant Level
Production Area
Who
Forum
Frequ’cy
Detail
CEO, Group President, EVP
MOR
1/Mth
Consolidated Plant
Performance -vs- Prev
Month and Budget
Group VP, OP DIR
Conf Call
Weekly
Performance to Std
KPIs -vs- Prev Week
Plant Manager
Direct
Run Mtg
Daily
Summary of Each
Product Area to STD
Area Manager
Shift Mtg
1/Shift
STD for each KPI
Supervisor
Prod
Board
1/HR
Plan -vs- Actual for
Production Pace
For Each KPI
Product Line to
“Workers are far more committed and do a far better job when they understand how they can have a positive impact on the outcome.”
--Gary Convis

19. Lean Leaders are at the gemba, Asking Questions, listening thoughtfully
Bad news first
Every concern
is legitimate
Let’s focus on facts
And figure this out
together

20. Contributing to upper Hoshin Individual Priority Themes
Hoshin Kanri Aligns Goals & Develops People Horizontally and Vertically
Slide time:
Breakdown of Hoshin
Contributing to upper Hoshin
Function Hoshin
Division Hoshin
Department Hoshin
Individual Priority Themes
OJD
P/S
Horizontal Alignment
Vertical Alignment
Company Hoshin
Hoshin Kanri is direction management. In order to keep overall alignment within the company we have Hoshin.
The Company Hoshin is broken down into each function’s hoshin, and each function’s hoshin is broken down into each department’s hoshin, and so on, until finally it’s broken down into each individual’s hoshin.
On the other hand, each individual Hoshin contributes to the departmental Hoshin. Departmental Hoshin contributes to each function's one, and so on. In this sense, each member contributes to the whole company business.
The Hoshin should not simply be a ‘wish list.’ It must be in direct response to the overall Company Hoshin.
This will ensure our energy is put into the projects that are important to achieving the company mid-to-long-term goals. At every point, we are all spinning the PDCA cycle.
Respect for people shown by contribution to company business.
KEY: Concepts: OJD = On-Job-Development P/S = Problem Solving 20

21. Hoshin Kanri Cycle PLAN ACTION DO CHECK PDCA of Hoshin Kanri
- Standardize to Daily Mgmt
- Reflect to next Hoshin
Hoshin Development
ACTION DO
Hoshin Kanri is company-wide TBP.
Hoshin Development is the Plan step
Hoshin Implementation is the Do step
Hoshin Evaluation is the Check step
Standardization and Reflection is the Act step
In hoshin kanri there is great emphasis on planning. Even though it may seem time consuming, taking sufficient time for planning pays off in the long run.
PDCA of
Hoshin Kanri
Hoshin
Implementation
CHECK
Hoshin Evaluation
Start Here

22. (Company Department Group)
Hoshin Kanri and Floor Management System Harnesses the Energy of Work Groups
Hoshin Objectives
KPI’s
1. What do we need to do?
(Company Department Group)
Floor Mgmt
Daily Activities
2. How should we do it? (Process)
How can you develop more front-line synergy around Hoshin development?
Main KPI
Sub-KPI
Process KPI
3. How are we doing? (Results)

23. Relationship between HK & Daily Management
Daily Mgt with Kaizen P D C A
Hoshin
Performance (KPI)
Say: Both DM and HK are essential for company success
It is important to maintain good balance between HK and DM
How do these two kinds of work relate to each other? They compliment each other at Toyota. This red line shows how Hoshin and DM work together to achieve the ultimate company goals and mission. We must pay attention to both Hoshin items as well as DM items in order to continuously meet our targets.
Management must keep a good balance between these to kinds of work as well.
What would happen if we focused only on DM and forgot about Hoshin items? [Show DM with no HK line]
We would see only incremental improvements and ultimately we would go out of business because our competitors would easily pass us by.
What would happen if we focused only on HK and neglected DM items?
[Show HK with no DM line]
We would see dramatic advancements falling away once we achieved them since there would be no attention paid to maintaining the newly created value.
It is extremely important for all of us to maintain a good balance between HK Items and DM items in order to produce continuously competitive results.
Generally, how much time should we devote to HK and to DM? [Answer depends on position in the organization. Higher levels spend more time on Hoshin items, while genba Team Members spend more time on Daily Management items. Roughly speaking, 75% of your time should be dedicated to Daily Mgt. Items while 25% should be dedicated to Hoshin items.]
Example: We make cars (among other things). This is our Daily Management (with Kaizen to improve the existing models we make). In the meantime, the customer (market environment) requires cars that are better suited to the ecological environment. So we develop new technology (like hybrid) cars. This is our Hoshin.
We can’t stop making cars to put all energy into research. Visa versa we can’t stop research to only make our existing models.
Both Daily Management and Hoshin are essential for Toyota’s success, and they need to be maintained in good balance.
DM with no HK
HK with no DM
Time
- Both are essential - Maintain good balance
DM & HK are both important at Toyota HK DM
Team
Member
Mid Mgt.
Top Mgt

24. Comparison between MBO and Hoshin Kanri
Slide time:
Management by Objectives
Hoshin Kanri
Short-Term, No Philosophy
Long-Term, Strong Guiding Principles
Results Oriented Evaluation of Effort
Concerned with Results and Process with Focus on People Development
Top down
Communication
Top down Direction Setting and Bottom-up flow of Information and means
Directive
Participative
Primarily Authority Oriented
Primarily Responsibility Oriented

25. Warranty Reduction Problem Solving
HK Drives Kaizen at all Levels: Toyota Business Practices for Warranty Reduction
TBP Step
Warranty Reduction Problem Solving
1. Clarify the Problem vs Ideal State
Ideal is customers who are completely satisfied. Currently some customers are inconvenienced by automotive problems.
2. Grasp the Present Situation and See the Gaps
Too many customers are bringing in Toyota vehicles for warranty work which costs them time and satisfaction and costs Toyota money.
3. Breakdown Problem and Set Targets
Warranty problems originate in product development (e.g., poor error proofing), are contributed to in manufacturing (e.g., errors) and discovered in the field. Immediate focus will be on manufacturing through to customer feedback and response. Target=60% reduction.
4. Analyze Underlying Causes
Manufacturing--poor understanding of potential errors throughout manufacturing process and miss defects in inspection.
Feedback and response--Problems in field not well diagnosed and communicated and requests for changes are diffuse and ineffective.
5. Develop Countermeasures
Manufacturing--Built-in Quality with Ownership at every work process + improved inspection process.
Feedback and response--System for finding root causes of warranty returns and streamlining feedback to appropriate engineering design function.
6. See Countermeasures Through
Deployed through global network of leaders who take responsibility.
7. Monitor Results and Processes
Monitored closely over seven years with continual adjustment.
8. Standardize and Spread
Many new processes were standardized in manufacturing, engineering and sales. Work progressed further on root cause: better training and development of engineers and standardization in engineering, built--in quality with ownership in manufacturing, and an improved warranty reporting system in sales.

26. Percent Annual Warranty Reductions
Figure 5-11: North American Plants Overall Warranty at 3 Months in Service
Percent Annual Warranty Reductions

27. Strong Lean Foundation Long-Term Strategy
Individual initiative
People development
Grow through challenging assignments
Strategic roadmap for success
“Management has no more critical role than motivating and engaging large numbers of people to work together toward a common goal; defining and explaining what the goal is; sharing a path to achieve it; motivating people to take the journey with you; and assisting them by removing obstacles.”
Now let’s talk more specifically about what we did in the wake of our rapid growth and stabilization …
As I mentioned, I first decided that we had to re-energize and re-focus the entire organization to embrace TPS thinking and embed it in our daily operational management.
I believe the quote you see here says it all:
“Management has no more critical role than motivating and engaging large numbers of people to work together toward a common goal; defining and explaining what the goal is; sharing a path to achieve it; motivating people to take the journey with you; and assisting them by removing obstacles.”
My vision included a strong foundation of TPS as the basis for our business; building on the capabilities of our people to lead the company through their knowledge, initiative, and experience.
It was time for me to start TMMK on this journey and it was my job to bring the people along.
I wasn’t sure about how to get there; but I knew that I would need to initiate large-scale change in our thinking and approach to TPS. 27