Questions Raised by Voluntary Kaizen Policy at Toyota

By Jon Miller | Post Date: August 31, 2008 11:27 AM | Comments: 1

Doing some more research into the "voluntary" overtime issue as a management practice in Japan, we found that American fast food giant McDonald's was recently hit with the same ruling as Toyota and must now pay their managers for overtime worked. Specifically, McDonald’s Japan was ordered by the Tokyo District Court to pay just over 7.5 million yen in overtime pay to a store manager in January of this year. The court rejected McDonald’s argument that store managers, being in management positions, were not entitled to overtime pay. Having "manager" in the title is no longer enough to make you exempt from fair labor standards laws in Japan.

Spending $11,111 to Retain Talent

Earlier this year we commented on Toyota's announcement that it would start paying for ‘voluntary’ overtime conducted for off-hours kaizen activities, and the seeming dissonance between this and their core value of respect for people. On the other hand Toyota made a bold thumb-nose at Wall Street while sticking to their principles by recently choosing to spend $50 million in not laying off workers in their factories idled by the slowing demand for vehicles in North America. Not coincidentally, this was a great PR move.

Worker as Samurai

This is a demonstration of one cultural bias of Japanese companies is seeing a broader view of society as stakeholders and aiming to do good by them, rather than putting shareholders first. In theory this elevates the consciousness of the entire workforce and creates alignment toward a common goal, making personal sacrifices seem less so. But as the cultures change, individualism increases and young people become disaffected with the myth of the worker as samurai serving their lord in the name of the industrial and economic development of their country, Japanese firms are finding it harder to ask and receive the type of voluntary dedication towards kaizen. In the simplest and oldest definition of the word, "samurai" means "one who serves" and they served the feudal lord, who in turn looked after the samurai and their families. One can imagine that the bright and yellow food service brand inspires samurai loyalty even less.

Exempt from FLSA or Not, Nonexempt from Kaizen

This issue of this policy of voluntary kaizen or unpaid overtime for the sake of improving company performance raises several questions. The first and most obvious one is whether kaizen activity should be voluntary, strictly paid or some combination of the two? We should be clear that kaizen should be mandatory and never voluntary to everyone in an organization trying to be lean. There is no good reason for not trying to improve one's lot. This is quite different from saying that voluntary equals unpaid, however. To be fair, Toyota and other companies that have thriving kaizen systems including suggestion programs, jishuken activities and QC circles do pay directly for kaizen ideas as well as give group rewards to promote these activities. Some of these kaizen activities are done in the course of work, and others during off-hours. It is this latter category that can be subject to misunderstanding or abuse.

The Success Environment for Kaizen

We could take the cynical view that the culture of kaizen that is part of TPS is only achievable within Japanese workplace culture that existed between 1950 and 1980-something. This "dirty secret" view of Toyota's success implies that their employees have been putting in countless extra hours of kaizen and QC circle activities, in a few cases to the point of death by overwork, in exchange for the promise of job security and fair treatment. This dedication to getting the job done regardless of the hours was a common sense way of working for the generation brought up in the "catch up and surpass America" post-war growth years in Japan. But it is increasingly not acceptable to or desired by the workforce of many developed countries. It is a serious question to those of us seeking to achieve similar success to Toyota's kaizen efforts: what sort of business environment and workforce culture is required to maintain full engagement in kaizen over decades?

A Sense of Urgency

Most managers in this day and age seem to understand that striving towards perfection through continuous improvement is something expected of them. There is a huge chasm between understanding and doing, however. The best way of course is to educate, enthuse and engage people in using their creativity towards achieve a common goal. When a boulder is rolling one can give it a push to help it along. If it is not, and when it has too much inertia to even get it rocking back and forth, the best you can do is to undermine the boulder's foundation and let gravity take its course. This is a metaphor for motivating people to cross this chasm is by making the alternative less pleasant than doing so. But where do we draw the line between a healthy sense of urgency and a stressful one? And when we succeed in making the intrinsic emotional motivation a positive one, how do we make sure that this volition does not turn into abusive practices of mandatory overtime to do kaizen?

We are All Knowledge Workers

A simple answer to all of this is to say, "Kaizen is a job requirement for everyone. We pay overtime for kaizen efforts by the nonexempt, we don't for exempt" and let local labor laws work out the details. But in the spirit of kaizen, this seems like an awfully inefficient way to do kaizen. Essentially we are saying that we will measure and pay for the manual and knowledge work done by nonexempt (hourly) workers but we won't bother measuring exempt (salaried) workers contribution. We pay them more, and we trust that they will put in more, and by implication produce more results. But how do we measure knowledge worker productivity, and how good are we at measuring it?

These are just questions raised by the voluntary kaizen policy at Toyota that has been in the news, not necessarily answers to these questions. It all comes back to "How do we make the act of doing things better, better?"

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