A Japanese approach: Toyota

Mike Tuffrey

 

Posted in: Technology & Innovation

A Japanese approach: Toyota

December 01, 1992

In the UK, Toyota aspires to be “a truly British company”. As its first car rolls off the production line in Derbyshire, how does its community affairs programme measure up to that aspiration?

December sees the first of what will become 200,000 cars a year emerge from a new £700 million factory at Burnaston, Derbyshire. Toyota, Japan’s largest motor manufacturer and number three worldwide, has arrived in the UK. Undoubtedly competition from the Japanese has changed the sleepy old British motor industry out of all recognition in recent years. Is there a similar challenge in community affairs, or will the learning process work the other way?

As a new UK company, Toyota inevitably does not yet have an extensive community affairs programme, although a start has been made. For community affairs professionals, the process by which a Japanese company in Europe like Toyota has drawn up its plans from scratch is perhaps of more interest than what it is actually doing. This corporate review will examine that process, but first, by way of background, a little history.

British roots

In a curious twist to history, the original investment in vehicle production at Toyoda (as it then was) actually came from Britain. In 1929 Sakichi Toyoda sold the patent rights to a revolutionary automatic loom to Platt Brothers of Oldham. The £100,000 raised thereby was invested by his son to build a business which today sells 4.5 million vehicles and earns over 680 billion sales each year worldwide. Toyota employs more than 100,000 people at 29 plants in 22 countries.

Toyota has been importing cars to Britain since 1965, but corporate strategy is now to locate full research, development and manufacturing capability in each of the three main auto markets, Asia, America and Europe. So in 1989 the company announced plans for an engine plant in Deeside, North Wales, and a vehicle manufacturing plant in Burnaston, Derbyshire. Together these represent the largest single inward investment ever made in the UK. By peak production, some 3,300 people will be employed in the UK.

The Toyota approach

Toyota does not expect the UK operations to move into profit for several years. The cost of its community affairs activities – or “social contribution” as Toyota terms it – is therefore effectively part of the investment, funded direct from Japan, and cannot be viewed as “putting a little bit back” into the community from which profits have been generated, as this area is sometimes characterised. Instead the company sees corporate citizenship as a fundamental part of its operating philosophy.

This global operating philosophy is defined around certain key values:

good corporate citizenship

the customer always comes first

quality applies to everything Toyota does

respecting the value of people

responding to local needs

success through competition and collaboration.

The company pursues corporate citizenship at three levels: “through its business, providing stable employment and quality products, through social contribution activities, and through a concern for the environment”.

Mainstream

Two of these elements of corporate citizenship, employment and environment, are, as the jargon now goes, mainstream. On employment questions, several key words reoccur in Toyota as in other Japanese businesses – teamwork, job security, flexibility, consensus and trust not confrontation, consultation – words which have only recently entered into many British companies’ vocabulary.

The environment is described as a “primary consideration”. This must surely be true, given that the motor vehicle is a major user of scarce fossil fuels and the biggest source of pollution worldwide. Research and development, partly to find less harmful products, costs the company 5% of net sales (some £2 billion each year). In building the UK factories, best practice has been adopted on issues such as emission control, ground water pollution and noise. Given the environmental menace that motor vehicles represent, being a good corporate citizen is not an easy responsibility for an auto manufacturer to address. Toyota is certainly no worse than others in this regard, and arguably somewhat better.

Social contribution

The third element of corporate citizenship is “social contribution”. Toyota applies three criteria to such activities. They must:

address genuine social needs

lead to real long term benefit for the community

contain no direct commercial benefit.

On the face of it, the prohibition on commercial benefit flies against received wisdom, that community affairs must be enlightened self interest. The days of corporate philanthropy are meant to be over, taking with them the reputation of an amateur, unplanned approach, undervalued and subject to “chairman’s whim”. Instead, corporate community involvement is to be treated as any other business activity, meeting strategic corporate objectives. In fact, as will become evident below, Toyota’s “non-commercial benefit” method has taken the rigourous business disciplines associated with the mainstream approach and applied it to the “responsibility” normally associated with philanthropy.

Another consequence of the three criteria for social contributions is that in each country different projects are supported. The requirement to address real local needs has meant that Toyota in the UK started with a clean sheet of paper, with the possibility of supporting any activity provided it met the above criteria. The task was subjected to a long and meticulously planned process, a staggering example of preparation and attention to detail, unparalleled in the experience of Community Affairs Briefing and impossible to do justice to in a short profile here.

Choice of programme

Apart from sponsorship of the 1991 Japan Festival and the activities of its dealerships, Toyota had no previous record of community activity in the UK. Working from the established criteria, it commenced a slow two year, step-by-step, process, involving all the parts of Toyota in the UK and external consultants, Scope: Communications Management, with constant reference back to Japan. First, all possible options were reviewed, with research and consultation, covering issues such as high prestige arts projects, education and the environment. Education was selected as the first target area. Within education, further research, consultation and examination of the options was then conducted, testing all the alternatives, such as numeracy and literacy, against the criteria. Eventually science and technology education and training was chosen. This was felt to be particularly appropriate to Toyota, to meet a real need and to contribute to the reindustrialisation of the UK economy.

Within this topic, each age group was separately assessed, looking at the problems currently experienced and the potential for improvement. A short-list of six priorities were chosen, for example school leavers and undergraduates, looking at possible projects and potential organisations to work with. These options were tested for political sensitivity (in the run up to the General Election) and cost versus effectiveness. Eventually, the 5-14 year old age group was selected: an analysis of expert opinion confirmed that the causes of Britain’s failure to educate sufficient scientists and technologists for manufacturing are deep-seated and start early. The sooner children develop an interest in science and technology the more likely they are to consider a career in manufacturing.

However the process was still not over. To address this tightly focused area, two alternative proposals with different third-party organisations were then worked up in detail, and assessed on the following grounds: timing, ability to be evaluated, potential benefit in the locality of Toyota UK’s plants, ability to involve staff, cost, demonstrable worth, compatibility with accepted UK educational practice, clear social need, innovation and absence of direct commercial benefit to Toyota. Finally, after two years, the choice was made.

Even then, the process was not over. Despite all the preparation, only a commitment to a pilot scheme was approved. Only after a one year test would the scheme be expanded to full size. The result: in September 1992 a Science and Technology Education Fund was set up, offering grants worth between £500 and £1,000 through local education business partnerships to projects which link schools and local companies. Projects are vetted locally and must contribute to implementation of the National Curriculum. The first year cost is £130,000 and, if found successful on independent evaluation by the School Curriculum Industry Project (SCIP) and by the Teacher Placement Service, the scheme will be expanded at a cost of £250,00 pa.

Management

Toyota in the UK has three elements – Toyota UK itself, which built and now operates the factories and employs most of the staff, the London office of the parent company, Toyota Motor Corporation, and the sales company jointly owned with Inchcape Plc, Toyota GB. The latter has its own programme of community involvement, not covered in this review. It is hard to assign clear responsibility between these three because of their consensus approach under which decisions are only taken after extensive consultation and agreement. The education initiative is, however, coordinated from TMC in London.

In Derby, there is a separate community relations unit of two staff, handling all aspects of local links. A community liaison committee, with members drawn from neighbouring villages and the public sector, acts as a forum for dialogue with the community. A broadly-based social contributions committee including production line workers makes small donations to appropriate local charities.

Communication

In keeping with the prohibition on direct commercial benefit, social contribution activity is not seen as a major vehicle to promote a good image for the company. Publicity for the launch of the Science and Technology Fund was focused on the education media, as much to attract applicants as to generate good will. External communication is directed mainly at opinion formers. Internally, a similar low key approach is adopted, again since social responsibility is not seen as a primary tool to motivate staff.

The future

Toyota has made an impressive start. Now several challenges face it in the future. First, staff involvement is inevitably only in its infancy, and the company will need to address the whole employee volunteering agenda, once sufficient staff are in post. Second, it needs to develop a wider role on the national community involvement scene, perhaps starting with the Education Leadership Team. Third, the company will have to address the environmental issue head on. Finally, the scale of the programme will need to be expanded. Next year community affairs spending is likely to be around £300,000 – £200 per employee: not at all bad for a company not making any profit, but still smaller than comparable leading corporate citizens.

An assessment

Toyota is to be congratulated in not attempting to ‘buy’ respectability and acceptance, as others have perhaps tried through expensive support of establishment-orientated projects in higher education and the arts. The company’s policy is certainly more altruistic than is the current fashion in community affairs, while its management approach is remarkably more business-like. Whether UK community affairs professionals will ever forsake their more intuitive approach in favour of a meticulous Japanese technique is questionable, but there are real lessons to learn. And it will not be a one-way process – just as Japanese companies were influenced by the American corporate philanthropic tradition in the post war years, so they will pick up British practices in due course, provided we all enter into dialogue.

FactFile

Toyota Motor Corporation*

Year ended 30 June 1992

Chairman: Shoichiro Toyoda

Main business: manufacture and sale of cars, buses, trucks and industrial equipment – over 40% of sales outside Japan

Turnover: 681.3 billion

Profit before tax: 63.4 billion

Employees: 108,167 (UK only: 1,100)

Total community contributions: not available

% of profits: in excess of 1%

Memberships: BITC, CBI, Keidanren

UK Corporate Communications Manager: Stuart Dyble

Address: 9 Clifford Street, London W1X 1RB

Phone: 071 287 7171 (fax: 071 437 6161)

* the financial data relates to the consolidated accounts, not to the UK alone, where separate figures are not yet relevant

Corporate Citizenship Briefing, issue no: 7 – December, 1992

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