Toyota's Management Challenge

To the dismay of its growing chorus of critics, Toyota Motor (TM) continued to insist this week that its electronic throttle control isn't to blame for any unintended acceleration in its cars. But what the company has readily conceded—and what Peter Drucker would have surely seen as the key to its hoped-for resurgence—is that it needs to get a much better handle on another type of control system: that by which the entire enterprise manages the reliability of its products.

"We are fundamentally overhauling Toyota's quality assurance process…from vehicle planning and design to manufacturing, sales, and service," Shinichi Sasaki, an executive vice-president, told a Senate committee.

Given the pleasure that some lawmakers and news outlets seem to be taking in Toyota's fall, it would be easy to dismiss Sasaki's comments as empty rhetoric or to overlook them altogether. At the same time, Toyota hasn't done itself any favors with some of its behavior. The company's now-infamous "safety wins" presentation—in which it boasted of having saved $100 million by averting a full-blown recall of 50,000 sedans—has only helped fuel the tar-and-feather-them attitude that many have adopted.

Yet the steps that Sasaki outlined—and that have been echoed by others, including Toyota President Akio Toyoda—are anything but hollow or trivial. For they get right to the heart of a question that Drucker thought every company needs to rigorously address: What set of "controls" will provide the utmost "control"?

"The synonyms for controls are measurement and information," Drucker wrote in his 1973 book Management: Tasks, Responsibilities, Practices. "The synonym for control is direction. …Controls deal with facts, that is, with events of the past. Control deals with expectations, that is, with the future. Controls are analytical, concerned with what was and is. Control is normative and concerned with what ought to be."

Manager Control

Drucker explained that to give a manager proper control, controls must satisfy a number of criteria, including several that Toyota seems to be zeroing in on. For example, the company has pledged to increase its collection of consumer complaints and to then respond to them more quickly than in the past by deploying "SWAT teams" of technicians. It has also vowed to give its executives in the U.S. and other regions across the globe a greater voice in safety-related decisions. Until now, such authority has resided largely in Japan.

Drucker, having stressed the need for controls "to be timely," would undoubtedly have favored these moves. But what may be most crucial here is the way that Toyota is positioning itself to meet another one of his specifications: "Controls," Drucker wrote, "must be operational. They must be focused on action."

In a day-to-day context, Drucker added, "this means that controls—whether reports, studies, or figures—must always reach the person who is capable of taking controlling action. Whether they should reach anyone else, and especially someone higher up, is debatable. But their prime addressee is the manager or professional who can take action by virtue of his position in the flow of work. …This further means that the measurement must be in a form that is suitable for the recipient and tailored to his needs."

More Than Just Data-Tracking

There is more, as well. "Controls," Drucker wrote, "have to be appropriate to the character and nature of the phenomena measured." In other words, it's quite possible to track data on quality and safety—and yet completely miss "what the real structure of events is," as Drucker put it.

Toyota, for its part, seems to be cognizant of this danger. Rather than just paying attention to "technical and regulatory considerations" going forward, Sasaki said, "we need to do more to consider customer expectations and real-world usage of our vehicles, even irregular use."

Another Drucker insight: "Control is a principle of economy. The less effort needed to gain control, the better the control design." One imagines that Toyota had this very notion in mind when it committed to Congress that it would go beyond the use of Event Data Recorders—the so-called automotive black box—and "improve our vehicle diagnostic tools."

Finally, there is Akio Toyoda's promise to push senior managers to actually drive those cars in which troubles have surfaced. "I believe that only by examining the problems on-site can one make decisions from the customer perspective," he said. "One cannot rely on reports or data in a meeting room."

Such sentiments speak directly to a big concern that Drucker had about controls: their tendency to be inward-looking. "The central problem of the executive in the large organization is his…insulation from the outside," Drucker asserted. "This applies to the president of the United States as well as to the president of United States Steel. What today's organization therefore needs are synthetic sense organs for the outside."

Setting Values

In his testimony on Capitol Hill and in other recent remarks, Toyoda acknowledged that his company became preoccupied with precisely the wrong metrics: market share and short-term profitability. By enhancing its controls around safety and dependability, the automaker is sending a powerful message to all of its employees about what really matters.

Drucker, whose teachings have had a great influence on Toyota, noted that the mere act of measuring something is "neither objective nor neutral." For "no matter how 'scientific' we are are," he wrote, "the fact that this or that set of phenomena is singled out for being controlled signals that it is…considered to be important." In this way, Drucker concluded, controls in any company are both "goal-setting and value-setting."

In the end, this is what's most significant about the overhaul that Toyota is undertaking: It recognizes that regaining control of the company's gas pedals and brakes cannot be achieved without also regaining control of its values.

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