How “Japanese” are European Mangers?

A study on the transferability of Toyota’s Managerial Practices to its European

non-manufacturing subsidiaries

University of Greenwich / Univ. of Kent Joint H.R.M. Research Day

University of Greenwich 08 April 2005

Niels-E. Wergin and Mun Yee Cheek

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Lean Production

Interest in “lean production” began in early 1990s

Raised by MIT study “The Machine that Changed the World” (Womack et al.1990)

Higher productivity and quality with different organisation of work, not different technology

UK, US: Japanese transplants (Kenney and Florida 1990)

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The Toyota Production System

Main principles of “Lean Production” were developed by Toyota

Main person behind the “Toyota Production System”: Taichi Ohno

Elements:• Just in time (JIT)• Kanban (Sign, Index Card)• Kaizen (Continuous Improvement)• Muda (Waste)• Heijunka (Production Smoothing)• Andon (Signboard)• Pokayoke (Foolproofing)• Jidoka (Autonomation)

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Transferability

Lean Production debate has focused on transferability• To which degree can the principles of lean production

be transferred to factories in the west?

Role of “Transplants” such as NUMMI (Toyota-GM joint venture)

Focus on manufacturing

Very little research on impact of Japanisation on white-collar workers

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Research Question

To which degree is Toyota able to transfer its managerial practices and principles from Japan to its (non-manufacturing) overseas operations in Europe?

• General management principles (“The Toyota Way”)

• HRM practices

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Toyota’s Managerial Practices

1. Challenge: “current trends are addressed in the light of a longer range vision” (Toyota 2002)

2. Kaizen: continuous improvement by involving everyone in quality matters

3. Genchi-Genbutsu: identify root cause of problems (rather than symptoms), attention to detail

4. Respect: stresses sincere communication and mutual trust

5. Teamwork: facilitates mutual learning

6. Consensus: decisions are made consensual

7. Long-term orientation

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Toyota’s HRM practices

1. Recruitment of fresh graduates

2. Internal labour markets and lifetime employment

3. Job rotation

4. Extensive internal training & socialisation

5. Implicit performance evaluation

6. Seniority plus merit pay (nen-ko)

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Cases

Research is based on interviews in three non-manufacturing subsidiaries of Toyota in Europe

TMME – Toyota Motor Marketing Europe n.v./s.a.• 1670 employees

• established in 1989 (as TMSE); based in Brussels

TFR – Toyota France S.A.• 145 employees

• established in 1971; based in Paris

TGB – Toyota (GB) Plc• 484 employees

• established in 1965; based in Epsom

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Interviews

20 interviews:

TMEE: 1 japanese co-ordinator3 managers2 senior managers

TFR: 2 directorsSécrétaire Générale Président

TGB: 2 senior managers1 directorChairman

Six additional interviews

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Results – TMEE

General Management Principles

1 Challenge X 2 Kaizen X 3 Genchi-Genbutsu X 4 Respect X 5 Teamwork X 6 Consensus X 7 Long-term orientation XX

Human Resource Managment Practices

1 Recruitment of fresh graduates - 2 Internal labour markets & lifetime empl’t - 3 Job rotation - 4 Extensive internal training & socialisation - 5 Implicit performance evaluation - 6 Seniority plus merit pay (nen-ko) -

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Results – TFR

General Management Principles

1 Challenge XX 2 Kaizen X 3 Genchi-Genbutsu X 4 Respect X 5 Teamwork X 6 Consensus X 7 Long-term orientation XX

Human Resource Managment Practices

1 Recruitment of fresh graduates X 2 Internal labour markets & lifetime empl’t X 3 Job rotation X 4 Extensive internal training & socialisation X 5 Implicit performance evaluation - 6 Seniority plus merit pay (nen-ko) -

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Results – TGB

General Management Principles

1 Challenge XX 2 Kaizen XX 3 Genchi-Genbutsu XX 4 Respect XX 5 Teamwork XX 6 Consensus X 7 Long-term orientation XX

Human Resource Managment Practices

1 Recruitment of fresh graduates - 2 Internal labour markets & lifetime empl’t X 3 Job rotation X 4 Extensive internal training & socialisation X 5 Implicit performance evaluation - 6 Seniority plus merit pay (nen-ko) -

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Results – Comparison

TMEE: Transfer of the “Toyota way” general management principles is very limited

Main reason: none of the HRM principles have been transferred• Main reason: Belgian labour market is occupational rather than

internal (Marsden 1986)

TFR: Transfer of the “Toyota way” general management principles is limited, but less so than at TMEE

Four out of six of Toyota’s HRM practices have been transferred

TGB: By far the most complete transfer of managerial practices:

All general management principles have been transferred fully to TGB, apart from ‘consensus’

Half of the HRM practices have been transferred

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Hypotheses

The following factors explain the degree of transferability:

Employment legislation (different from JP)

Number of Japanese expatriates

Ownership structure

Cultural factors

Labour market conditions & HRM practices

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Hyp. 1: Employment Legislation

In none of the cases, employment legislation seems to have affected the transferability of Toyota’s managerial principles, although working time legislation and legislation on works councils means that Toyota managers in France and Belgium operate differently

Hyp. 1 disproved

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Hyp. 2: Expatriates

TMME: ca. 170 Japanese staff (ca. 10%)

TFR: 3 Japanese Staff (2%)• General Secretary, President (MD is French), one

coordinator

TGB: 2 Japanese staff (0.5%)• Chairman (MD is British), one coordinator

Causation seems to be reverse to what was expected• “there may be an element of them thinking ‘if it’s not broken, don’t

fix it’, ‘these guys know what they are doing, they understand their market, they are doing a good job, so let them go on with it’” (interview 11)

Hyp. 2 disproved

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Hyp. 3: Ownership Structure

1990 2005

TMC

100%

TMME

100%

TFR

Inchcape

100%

TGB

TMC (Japan)

100%

TMME

100% 100%

TGB TFR

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Hyp. 3: Ownership Structure (2)

Currently, all three subsidiaries are fully owned by TMC (Toyota Motor Corp.)

However, TGB was previously owned by Inchcape venture capitalists

One should expect therefore that transfer to Britain has been less complete – but the opposite is the case (though there were some changes since the sale to Toyota)

Hyp. 3 disproved

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Hyp. 4: Cultural Differences

According to interviewees, some problems with ‘cultural differences’ in all three cases, however:

TGB managers seem more willing to accept the ‘Toyota way’ than managers in BE and F, e.g. in regard to consensual decision making• “I think that we’ve all bought into it very well… we all

see the benefit… there is a general understanding and very little resistance” (interview 12)

TGB managers seem more willing to accept the ‘Toyota way’

Surprising – UK has more individualistic culture than F, BE (role of social Catholicism)

Hyp. 4 disproved

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Hyp. 5: Institutional Structure

BE, as coordinated market economy, has institutional structures quite similar to those in JP – firms are more organisation-oriented than market oriented (Dore 1989)• e.g. training

• e.g. financing – debt, not equity

French firms, too, are more organisation-oriented, but moving towards being more market-oriented

UK is liberal market economy, quite different from Japan• e.g.labour markets – more fluid

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Labour market characteristics

median length of tenure (yrs)

vocational training system

skill profile

J 8.3 company-based firm/ occupational

BE 8.4 vocational colleges and apprenticeships

industry/ occupational

F 7.7 company-based firm/ occupational

UK 5.0 weak occupational/ general

adapted from Estevez-Abe et al. 2001

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Institutional structure

Looking at institutional structure, transfer to F should be most wide-ranging, to UK most limited – but opposite is the case. Why?

Companies in LMEs, which lack the coordinating capacities of CMEs, have to stabilise their core workforces through other means, such as internal training and promotions• “…employers (in LMEs) seeking to pursue high-quality

production (and lacking the strong non-market coordinatin mechanisms that support this in the CMEs) often turn to strategies that involve internalising skill formation and instituting various plant-based mechanisms for securing labour cooperation and peace” (Thelen 2001:74)

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Conclusion

Employment legislation, the number of expatriates, ownership structure, and cultural factors/behavioural dispositions do not explain why the transfer of Toyota’s managerial practices to BE, F, UK does (not) take place

The institutional framework and the structure of the labour market have some explanatory power, but not in the way anticipated

The existence of Toyota’s HRM practices seems to facilitate the transfer of its other, general management principles

Yet, HRM practices were adapted to local circumstances in all three cases

Japanese managerial practices are an integrated whole