One of the most challenging issues leaders must face is the balancing of short-term return vs. long-term value. In ideal circumstances, a leader will strive to balance polarized needs. The split between short term and long term is difficult territory to navigate. Deciding for one is too often at the cost of another, especially when the one getting the nod is short term gain.
The classic story of short-term pain vs. long-term sustainability is found in Odysseus’ choice between Scylla and Charybdis. One was a serpent that was going to eat some of his sailors as he passed. The other was a whirlpool that would consume the entire vessel. Avoiding the total destruction that would come from sailing too close to Charybdis, Odysseus chose to sail nearer to Scylla, who despite his best efforts, still ate 6 of his crew. The irony for the modern organizational leader is that one of the ways to avoid short-term pain is by sacrificing a percentage of the workforce. (Transferring organizational pain to employees is another blog post)
Let’s face it. The pressure to squeeze cost and drive efficiency has been at the base of managerial thinking since the day that the assembly line was born. More than one pundit has reduced all managerial science to 3 basic questions: “How do we do this faster? How do we do it cheaper? How do we improve quality?” Even in this simplest of models, 2/3 of the thinking is about efficiency. But at what cost?
Ask the executives at Toyota. The current brouhaha about accelerators may be a short-term glitch, but it will have impact on more than just quarterly sales numbers. Toyota built their brand on quality. Even their current ads focus on it, stating, “…over 80% of Toyotas sold in the last 10 years are still on the road.” So this short-term glitch has hit them in the place most important to their long-term sustainability- their brand promise.
I have read a number of articles about what brought about the debacle. Many business pundits blame a focus on opening new markets for Toyota’s taking their eye off the quality ball. The WSJ cites Lean Manufacturing practices, originated by Toyota but taken to an extreme, for sacrificing quality on the altar of efficiency. And I have heard more than one executive cite the old business joke “Quick, good or fast… pick two”. But I think that the issue may sink to a different level, one more difficult for the leaders of Toyota or any organization to change- culture.
In the current economic climate, even manufacturing environments have been subject to extreme corner cutting. We have seen what outsourcing has done to customer service and to technical support. The focus on cost cutting has turned what could be a strategic advantage into an albatross around the neck of brands that depend on service levels and customer loyalty. There is not much to recommend that the same “out of sight out of mind” standards would not govern the outsourcing of auto parts. I am not informed enough to know whether it was expansion or Lean manufacturing that distracted Toyota. But one thing is evident. Efficiency and scale became more important than the clear focus on quality that took the company to the top.
One thing I learned in my days working with clients on customer centered strategy: each new strategic initiative a company takes on is generally made possible only on the foundation one previous. Strategic focus on the quality of customer interactions does not negate the need for excellent product. It must be built on that foundation. The same must be said for efficiency and scale. If they come at the cost of the foundation of the company’s brand, then they are merely an attempt to avoid short term pain (usually in the form of poor quarterly reports) that can send the entire enterprise into the clutches of larger and more threatening monsters over the horizon.
Akio Toyoda, grandson of Toyota’s founder became CEO in June of 2009 and has kept a very low media profile in that time. It will be interesting to see if he has the subtlety to look past the operational part of this kerfuffle to the root cause, and the courage to address it without cutting corners.