Tom Peters Speaks Out about Toyota Recalls

Podcast episode 057: Tom Peters Speaks Out about Toyota Recalls
March 28, 2010
By Ron Holohan, MBA PMP

I was recently joined by best selling author and Management guru Tom Peters to discuss his perspective on the Toyota recalls. Tom and I also talked about where other major companies such as Dell, Starbucks, Nike, Apple, Google, GM, IBM, Johnson & Johnson, and Honda fall on that elusive spectra known as “Excellence”.

If somehow you have not heard of Tom Peters, then I suggest that you crawl out from under the rock from whenst you came and quickly pick up some books from Tom Peters, Peter Drucker, and W. Edwards Deming to better understand modern management and how to become an effective and excellent business leader.

Simply put, Tom Peters is the last of the still living and truly great 20th Century management thought leaders and, incidentally, is more relevant in today’s business environment than ever before.
Ron Holohan, Show Host: Thank you, Tom, for being on pm411, today. As one of the world’s top management gurus and authors, I’m very interested in getting your perspective on the recent Toyota recalls. And, let me start by simply asking, what is your perspective and do you think that Toyota handled the crisis well or not?


Tom Peters, Author/Management Expert: My perspective, which I suspect was true of the large majority of people, at least the large majority who are not intimately involved with the automobile industry, was… “shock.” You may be so kind as to call me “leading management guru” or something like that, but I swallowed the entire bucket of Kool-Aid on the “Toyota does everything better than the rest of us” kind of routine. So, I was just shocked, flabbergasted - choose your word.

On the other hand, and let me make it entirely clear to your audience that I am in no way shape or form an expert, I’ve got some strong views based on my management perspectives, but I have zero insider knowledge.

On the other hand, what it suggests to me, and I don’t mean this in a bad way at all, is that the Japanese are just like the rest of us.

Undoubtedly, people remember “Chainsaw” Al Dunlap1 from years ago, and I am certainly not comparing Toyota to that. But the reality is, and particularly during a recession like this, that cost cutting is a necessity (A) and (B) it can go too far.

Dell had some problems that sort of started showing up a few years ago, or 3 or 4 years ago, and a lot of that was because they had lived for cost cutting and cost cutting alone and lost the customer service edge and lost some of the innovative edge and so on.2 And so, the fact that it is necessary, which of course it is, does not mean that quality has to be sacrificed.

Yesterday, as we speak, Howard Schultz sat at his annual meeting at Starbucks.3 And you know, Starbucks hit a wall, and it hit a wall primarily because they went for growth, growth, growth. Instead of being brilliant at shop location, they sort of started just grabbing a map of a city, putting a blindfold on, and hitting it with a pin and putting a Starbucks in. And in the process they lost an awful lot of ground.

So, alas, whether it is the United States, or apparently Japan, companies get conned by growth for growth-sake and cost-cutting for cost-cutting sake, and you want to do a little of both, but, boy can they go too far!

RH: Well, obviously there have been plenty of other recalls in recent months from both American and foreign car manufacturers. Just since the beginning of 2010, 400,000 vehicles with brake issues4 and another 370,000 vehicles for airbag issues5 were recalled by Honda. And Consumer Reports had published a report back in December finding that every car manufacturer including Toyota, Ford, Chrysler, GM, Honda, and Nissan had 15,000 unintended acceleration complaints over the past [10 years].6 And if you go back and look at NHTSA [National Highway Traffic Safety Administration] data, as Edmunds.com did, you would find that, Toyota is actually ranked number 17th out of 20 in complaints for their cars behind car manufactures like [the Detroit big three], [Land Rover], [Jaguar], Honda, Subaru, Hyundai, Nissan, Isuzu, Suzuki, Mazda, Mitsubishi, Volvo, Volkswagen, and BMW.7

So, Based on these statistics… and I know we have all have looked to Toyota as the masters of quality and production… but do you think that the media has kind of overhyped this and looked a little closer at Toyota than some of these other manufacturers?

TP: Again, I’m nervous about my analogies like “Chainsaw” Al Dunlap, but there’s a little “Tiger Woods” in this (laughing). And I think speaking as the “man on the street,” which I am in this regard, we had come to believe that when you look, the Honda’s in particular and the other Japanese cars, maybe a little bit more than our own, despite our advances, were the “gods of quality” and Toyota in particular.

And so, I think the media has jumped on it, but I think it’s unsurprising. You know, Tiger Woods probably hasn’t misbehaved, sorry to say, all that much more than a lot of his peers, but he made a couple of a billion bucks by telling us that he was “Mr. Clean,” and as a result, we have slapped him around pretty badly, which I believe he deserves, incidentally.

Remember, when Nike got clobbered, must have been 10 years ago now, for something that everybody did, and that is they had some worker problems, bad health issues, and so on, in some of their Southeast Asian factories.8 And, they were part of a very large crowd, but Nike had sold their brand on the notion of clean and sweet and lovely and fantastic.

To state the obvious, we live in an age of branding. And to state the obvious a second time, you live by the sword, you die by the sword. If you build your brand up to a degree that is absolutely unreasonable to imagine, then you can expect to get really, really wacked.

One thing, incidentally, that is not part of this interview, (laughing) but it is, as you probably know, you are talking to an old guy… I’m 67 now… and I’ve got to tell you, as a kid that bought his first car at the age of 16, which means a half-century ago, the crappiest car that we are making today, whatever it happens to be, is so many millions of times better. And so, I’m totally in favor of beating up Toyota and anybody else, but oh my god have we made advances!

RH: One of the things that struck me as interesting is how president and CEO Akio Toyoda handled the situation initially and he’s been criticized by many in the American media for not apologizing earlier for the recalls.9 Tom, you are familiar with the Japanese culture. Do you see this as a result of just a difference in the American versus Japanese culture or the Western versus the Japanese culture, or do you see this as really a misstep on Toyoda’s part and he should have apologized earlier?

TP: Well, I’m going to once again try to reduce expectations… I have spent a fair amount of time studying Japanese management and visited Japan on numerous times, but there are a ton of people who are more expert than I am. Again, I would have to use the word “stunned,” because it is my impression that the Japanese are a hundred times better at apologizing than we are.

There was some company, some big company years ago, who did something awful and I remember that the CEO literally went to the home of the person that had been offended and, in a fashion that we don’t do in the United States, kind of laid down on the ground on the guy’s driveway. So, I think of the Japanese thing about losing face, and you still see the occasional suicide, for heaven’s sake, by a Japanese executive who has misbehaved, and therefore I’m really surprised, was very surprised, that they made missteps.

On the other hand, just like ourselves, everybody tends to screw up in other people’s cultures. You know, the Japanese may have a Japanese instinct for being more accountable and apologetic, but they didn’t handle it right with us. Who knows why? The Japanese know we are a very litigious society and just like our doctors don’t apologize for mistakes, maybe the legal department told the bosses of Toyota, “for god sakes, clam up, don’t admit anything.” But, again, I must admit that I was really surprised on that dimension because they have a pretty amazing track record of over doing it, in the best sense of the word, on the other side.

RH: Back in 1982 you co-wrote with Bob Waterman the bestseller, In Search of Excellence, which has been called “the greatest business book of all time.” And in the book you profile 43 companies that had 8 basic attributes that made them all excellent at that particular time in history. Tom, Do you feel that the Toyota of today is still representative of those 8 basic characteristics or are there particular characteristics that they have lost touch with?

TP: Well, I think that they may end up being lucky that they still have, which is a little true with Billy Ford,10 but they still have a strong family leadership culture. And that would lead me to predict that they may make a reasonably rapid comeback from this in a way that a publicly-traded American or British company wouldn’t.

One thing I haven’t said, and I think is terribly important… It’s incredibly hard for giant companies getting more and more giant to maintain those basic virtues. We see it particularly after the giant mergers. And so “big” is a millstone around your neck, period, all stop, new communications, tools, and so on and so forth. So, there is that issue, which is damned hard to overcome. But I would say that they clearly got caught up in the “growth thing,” that you think of us getting caught up in far more than them.

They clearly got caught up in the “cost-cutting-at-all-cost thing” to a degree, that as you read the details, is pretty horrifying. So, no, I think they let their basic values slip. I don’t think that if I were evaluating them by the criteria of twenty-odd years ago, that I would give them very high marks at the moment.

But on the other hand, they’ve got (A) an awful lot of bedrock that is pretty good and (B) as we have seen, with companies like IBM in the US who went from being gods to tripping all over their feet, also make significant comebacks.

And, the other thing is, obviously, the industry is a little bit faster moving than we imagined, and holy smoke, you look at what Hyundai has done in the last few years, that is a “Holy Smoke!” with an exclamation mark. So, you know, new people move to the fore, not just in biotech and Silicon Valley.

RH: Well, maybe to follow up on that question, when you look at companies like Google or Apple – obviously they are not going to have the safety concerns and the media jumping on them for that – although Google is facing their own battles right now with China – but do you see them handling their growth differently than the way Toyota handled theirs?

TP: Well, just like Honda, when Mr. Honda was alive, I think that Apple is some kind of a wierd special case, because I think that Steve Jobs is so wierd. I’ve said in many of my speeches, you can’t learn a whole lot from Steve Jobs because, you know, in 6 billion people we have one Nelson Mandela, and had one Mother Theresa, and we’ve got one Steve Jobs (laughing). So, he has a winning streak that makes the University of Connecticut women [basketball team] look small by comparison.

Google, on the other hand, and I certainly admire what they’ve done, if their growth continues at pace, I think they will go the same way as Microsoft, which of course continues to be a very big player, but surely isn’t “setting the table” the way they did for years and years. My family was one of those “Chevrolet families,” and whatever Chevrolet did the rest of the world followed in pretty short order, 30 or 40 years ago. So, I think you can really lose the edge.

The thing that, incidentally, makes me nervous about Apple is that now that they are playing in this “I am going to win by making you lose” space, I have a sneaking suspicion that their legal department is probably growing faster than their R&D department. That too could come back and bite them, because it could end up putting them in that Toyota space of growth for growth sake.

I mean, remember that all of these wonderful things until the iPod or the iPhone came along that Apple did, they did with about a 4% market share. Now, with the new sales, apparently, they are way, way up 15% or 20%, so they are living in a very different world. I mean, the one example, there weren’t many viruses in Macs, because who gave a damn? And, you know, Microsoft has been attacked by viruses jillions a day, basically. And suddenly, the virus implanters are going after Apple with a vengeance. So, there is a bit of a “let’s wait and see” before we anoint them the “gods of all time.”

RH: Looking at Toyota, back in 2001, Toyota adopted the highly regarded “expression of values,” known as the “14 Principles of the Toyota Way.”11 And this was developed to help Toyota transition to truly global development and production, which it sounds like it has kind of caught them up. And, these principles include:
Principle 1: “Base your management decisions on long-term philosophy, even at the expense of short-term financial goals.”
Principle 5: “Build a culture of stopping to fix problems, to get quality right the first time.”
Principle 9: “Grow leaders who thoroughly understand the work, live the philosophy, and teach it to others.”
Principle 12: “Go and see for yourself to thoroughly understand the situation.”

Obviously, it appears that Toyota’s overlooked several of these principles. How do you “stick to the knitting,” as you refer to it In Search of Excellence?

TP: I hate to fall back on old favorites, you know, as we watch companies trip and stumble, among the giant companies, I would give very high marks to Johnson & Johnson. Johnson & Johnson has a famous credo and the Johnson & Johnson people say that it guides them in their daily decison making.12 And of course the famous example, which is now twenty-odd years old, is the Tylenol crisis where they were continually ahead of the curve in acknowledging problems and so on.13 But, I think the Credo at J&J is alive and well, and indeed they have made many acquisitions over the years, so it is not a matter of standing still. I don’t know if I would give anybody that big an A+, but I sure would give them an A or an A- or something like that.

So, I think there are at least some examples where you can be a pretty enormous institution and hang in there.

And I think in the automobile industry, and they aren’t the same in terms of size, in terms of long lasters, I would give pretty darn high marks to BMW. And we all know, which I think again it kind of hangs right in there with the Toyota business in terms of shocking us, the degree to which Mercedes quality went down during a 10 or 12 year period is another one of those “Holy Smokes!” types of moments.

The irony of the Toyota thing is they instill those wonderful values at exactly the same moment on the same pretext of global growth that they go hell-bent for growth and look as silly as some of the American companies who have gone for growth at all costs. It’s a real contradiction in terms, and again, speaking as a non-expert, it certainly sounds like that they had a guy at the helm who was closer to “Chainsaw” Al than he was to the great the members of the Toyota or the Honda family.

RH: In your book, Thriving on Chaos, you state that “The winners of tomorrow will deal proactively with Chaos, will look at chaos per se as the source of market advantage, not as a problem to be got around. Chaos and uncertainty are market opportunities.” Can Toyota somehow turn this into a positive opportunity?

TP: Well, we’ll see. The new Ford and the new GM seem to be making some non-trivial comebacks. Honda, continues, problems notwithstanding, to hang in year after year. Hyundai is coming to the fore. So, Toyota is going to have a long road back.

I think the one thing that they can’t come back from, is the business of standing alone at the head of the pack. I think if they do everything right, they will be a full scale member of the best of the bunch team. But, they kind of stood away from the crowd, the way an IBM did in, say, in the 1960′s and the early 1970′s and the way that GM did from the immediate post-World War II period, from say 1951 or ’52 when their production was domestic again, until probably 1970. I think that kind of leadership – league of their own – I think that’s gone. I think that if they did everything right, they are not going to get that kind of a mystique back.




RH: Tom, I’m currently reading your latest book, The Little Big Things: 163 Ways to Pursue EXCELLENCE, and that is “EXCELLENCE” all in capital letters. And, in the section on Excellence, you quote James B. Stewart in the Wall Street Journal as describing the demise of General Motors as “this slow death of what was once the greatest and biggest corporation in the world. The myriad causes of its demise have been thoroughly chronicled, but to my mind one stands out: The custodians of GM simply gave up trying to build the best cars in the world. To accommodate a host of competing interests, from shareholders to bondholders to labor, they repeatedly compromised on excellence. Once sacrificed, that reputation has proved impossible to recapture.”

I guess my question to you, Tom, is do you see this as a possible slow death, or as you mentioned, it is going to keep them from leading the pack, it is going to bring them back more into one of the front runners rather than the leader?

TP: Well, I think that it is partially again that family influence. I would be surprised if they followed the slow death route. I know the CEO said at one point recently that we are in the process of dying. I think the recent moves by the family, I think the strength of the family… I still stick with what I said before, I don’t think they can go back to the position of being alone at the head of the parade. But, the notion of a slow death and the notion of turning their back on excellence…

See, I don’t think, which is kind of unfortunate, I don’t think Toyota has gotten slapped in the face the way GM did. I think they still have got a chance, I think that GM just watched something erode over a long period of time, and I think that Stewart was right in his analysis. So, I would have to say that I am a lot more optimistic about Toyota returning to excellence, with the caveat that it won’t be excellence that’s head and shoulders ahead of the pack.

RH: So, Tom, what lessons learned should managers and project managers, like myself, take away from this crisis?

TP: Well, Let’s start with the other 99% of us who are not CEOs of Toyota and GM and with your definition of the project manager (laughing). You were kind enough to refer to my new book, and one of the things I wrote in the new book was a list of 46 ideas for surviving and thriving in the Great Recession.

One of the ones, and you referred to it again in a slightly different fashion, was that this is the best time and not the worst time to focus on excellence. For many reasons, and of course, again, I would look at it from the perspective of a 67 year old who is clearly in the last half of his life, regardless of what the biotech people do, and you are a lot more aware you are going to have to look in the mirror and be accountable, whether you’re religious or not a religious person.

And so, I think excellence is a way of life that you can share with your children, and share with your spouse, and so on and so forth. I think you’re really a fool and not so good a person if you don’t realize that.

And, I think that excellence over the mid to long-term does pay. None of us believed that quality was free back in 1977. And we learned that it wasn’t free, which is to say, it could save us a hell of a lot of money (laughing). And, I think that excellence is free. Which like quality, doesn’t mean you don’t have to work 27 hours a day, 8 days a week.

I know that we are probably on the good side of the Great Recession now, but to look at these last couple of years, this is professionally the number one test of character for every manager. I mean all of us can be incredibly smart when a market goes up 10 years in a row. And the question is, how do you behave toward each other, how do you behave toward your employees, how do you behave toward your communities and your competitors when the times are tough.

I went on and on in the book that this is the time to be decent to your competitors. I hate the kind of language that says “this is the time to really go in and nail and fight for competitor’s customers away!” I mean, give me a break (laughing)! Because, you and I are as good… you and I as individuals, and our friends who are project managers of 10 person project teams – we’re as good as our reputation. And I remember you being a decent guy and bad at times for the next 20 years! And a little hand up, and a little decency, and a little thoughtfulness, I think is the best way to get your competitors customers, incidentally, over the long haul.

RH: Absolutely! Yeah, that makes a lot of sense. And to me, it’s all about looking at the long term rather than the short term. Even the fourteen principles that Toyota laid out, that was part of their credo. And, I think that is something that all of us in this Great Recession need to keep our eye on as well.

TP: Yeah, I totally agree. All I would say to that is “absolutely, Amen!”

RH: Yes… Well, Tom it has been great hearing your perspective on this and congratulations on your new book, The Little Big Things: 163 Ways to Pursue EXCELLENCE. And, like I said I’m reading it, and I highly encourage everyone to pick it up and thank you again for your time, Tom.

TP: Well, thank you for your kind words about the new book and the old book, In Search of Excellence, and thanks for some great questions. I will say something that I don’t say anywhere near 100% of the time, and that is… “This was fun!”
So, I can tell you that you will definitely want to go out and buy a bunch of Tom’s books. I have read many of his books and I would highly recommend them all. You will want to also go right now and check out Tom’s blog page. You can find it on the World Wide Interwebs at tompeters.com. And if you so care to know what Tom is doing every moment of his day, you can follow Tom on Twitter at tom_peters. And while you are there, why not also follow us on twitter at pm411. And finally if you enjoyed this podcast, tell your friends and you can download all the episodes by simply searching for pm411 in iTunes and clicking the subscribe button. You’ll be glad you did.
Albert John Dunlap (born July 26, 1937) is a retired corporate executive. He was best known as a turnaround specialist and downsizer. The ruthless methods he employed to streamline ailing companies, most notably Scott Paper, won him the nicknames “Chainsaw Al” and “Rambo in Pinstripes”. However, his reputation was ruined after he engineered a massive accounting scandal at Sunbeam-Oster. [↩]
According to an article in BusinessWeek in 2005 entitled “Hanging Up on Dell?” “Complaints to the Better Business Bureau [concerning Dell] rose 23% in 2004 from the year before, and they’re up another 5% this year [2005]. And Dell’s customer-satisfaction rating fell 6.3%, to a score of 74.” [↩]
Starbucks Outlines Strategy for Accelerating Profitable Global Growth MarketWatch, March 24th, 2010 [↩]
Honda to recall 410,000 vehicles for brake problem. Yahoo News! March 16th, 2010 [↩]
News Wrap: Airbag Issues Prompt Honda Recall. PBS Newshour. February 10, 2010. [↩]
Analysis shows over 40 percent of sudden-acceleration complaints involve Toyotas.


ConsumerReports.org. December 7th, 2009 [↩]
Toyota Recalls Put into Context by Edmunds.com. Edmunds.com. February 10, 2010. [↩]
Taking A Look Inside Nike’s Factories. Time.com. March 30, 1998. [↩]
Toyota President Avoids Media Amid Burgeoning Vehicle Recall. BusinessWeek. February 3rd, 2010. [↩]
William Clay “Bill” Ford Jr. (born May 3, 1957 in Detroit, Michigan), is the great-grandson of Henry Ford, and serves as the Executive Chairman of the Board of Directors of Ford Motor Company. [↩]
The 14 Principles of the Toyota Way: An Executive Summary of the Culture Behind TPS. University of Michigan School of Information. Download. October 23rd, 2003. [↩]
Our Credo Values – Johnson & Johnson. [↩]
Tylenol made a hero of Johnson & Johnson : The recall that started them all. The New York Times. March 23rd, 2002. [↩]

Tags: al dunlap, apple, authors, auto manufacturers, chevrolet, Chrysler, Ford, GM, google, Honda, ibm, in search of excellence, johnson&johnson, nike, Nissan, quality, recall, safety, starbucks, the little big things, thriving on chaos, tiger woods, tom peters, toyota


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