Arguments

Masaya Hanai. The fourth chairman of Toyota.

Not necessarily the friend of Taiichi Ohno. Or the rival. Both were coached by Taizo Ishida. Both became directors of Toyota in 1959. Hanai was responsible for finance, accounting, and purchasing. Ohno was responsible for production.

And many saw the two arguing¹.

But these arguments were important. This is not resistance. Such internal competition strengthens the organization.

One of the arguments between Ohno and Hanai happened as follows.

Hanai, “Are you kidding me to stop the line for an hour?”

Ohno, “Even if the line was down for one day or two, it doesn’t matter as long as we get stronger.”

Hanai states that they argued for 20 years but never reached a conclusion².

If someone claims that what Ohno said is 100% right, that’s a problem. Both are right. That’s why TPS evolves.

First of all, this argument is taking place on the shop floor. This is why many have seen the two arguing. Hanai is the finance and accounting guy. He could have summoned Ohno to his room and asked him to explain why the line had been down for 1 hour. But Hanai went to where Ohno had the advantage. At this point, we have to respect Hanai's approach.

Second, downtime is downtime. It costs the business. We do need to stop the line to understand a problem. But what happens if we lose that sense of urgency, or the cost of downtime? A machine was down, but no one was nearby. Production claims maintenance hasn’t arrived. Maintenance claims production hasn’t called. There is an information system to connect the two, but both know its purpose. It measures the mean time to repair. And management only wants to see the number. So, let’s show them the better numbers by not using them. But now, how should they communicate? Walkie-talkie? And more importantly, where is the cost mindset toward downtime? Without such awareness, downtime remains downtime, not an opportunity for improvement.

Third, Hanai’s question and Ohno’s response back his statement that unless the problem is solved, we are not moving forward. Many try to escape problem-solving. They do exactly what Hanai states. “If we don’t start production now, we are going to miss the shipment. Let’s start production now, and we will work on the problem later.” And that ‘later’ never comes. Eventually, they try to justify the current condition. Hanai never justified the current condition. Ohno’s non-common-sense response puts production in a situation where, unless the problem is solved, they will not move forward.

If someone like Hanai did not exist in the organization, what could happen? There was a factory with a huge inventory. We asked the finance department, hoping to find support: "Isn’t this inventory killing the cash flow? What is the cost of capital?” Their response was that the cost of capital is cheap, so don’t worry. (This was a few years ago.) This kind of response is common. I ran into such finance and accounting departments. Instead of fostering cost awareness or a sense of urgency, they send the wrong message. Reducing costs or improving cash flow can be left to the production team. But finance and accounting need to drive the organization's cost and cash awareness.

At the same time, some bureaucratic organizations require ROI calculations for every improvement. This is nonsense. It means we need to allocate resources to calculate ROI. Then, if the improvement is smaller than the cost of the calculation, including approvals, we can’t do it. Are we saying we should ignore small improvements? This doesn’t mean we shouldn't create a hypothesis about what the improvement is for. But that should be measured with something production is more familiar with, such as safety incidents, defects, output, or cycle time. And then the improvement should lead to cost savings. Besides, if we are required to calculate the cost in such a manner, Ohno’s one-hour downtime will not be justified. Ohno’s thinking is much more long-term, not short-term.

How Ohno felt about Hanai is unknown. Did they hate each other? I don’t think so. I got the feeling they enjoyed their rivalry. Why? Because my coach had a rivalry. He had many arguments with the rival at the Genba, and he enjoyed them. Many thinkers strengthened the organization. They didn’t eliminate each other. Competition within is normal.

They say many ‘lean’ initiatives fail. But let me ask, ‘Do you have a ‘good’ CFO?’ ‘Good’ doesn’t mean a yesman. It means creating cost awareness and cash flow. They come to the Genba and challenge. But the bottom line is that they give the production team autonomy to improve.

Hanai became the chairman of Toyota in 1978. In 1984, he became the president of Teleway Corporation. He was undoubtedly one of Japan's prominent managers.

1. 井上隆一郎, 張鄭紅 トヨタ自動車における持続的競争優位の源泉 － TPSの模倣困難性の諸要因－, 桜美林大学ビジネス科学研究 Journal of Business & Management Sciences (JBMS), 2020

2. 中日新聞社経済部 編, 時流の先へトヨタの系譜, 中日新聞社, 2015