In Tuesday’s Chicago Tribune, a front page article in the Business Section titled “Probes piling up for Toyota” appeared. The article states:
As if Toyota Motor Company hasn’t had enough trouble, the automaker is facing a new set of interrogators: federal and local law enforcement officials.
The US attorney for the Southern District of New York, the Securities and Exchange Commission and the Los Angeles city attorney are conducting probes into the Japanese automaker. That’s on top of the investigations from federal regulators, congress and news media over Toyota’s sudden acceleration problems. For Toyota, the scrutiny adds another degree of difficulty to its attempt to rebuild its reputation and sales after issuing millions of recall notices.
“Any time a major corporation is faced with issues of Toyota’s nature, there are significant problems,” said Aubrey Harwll Jr., a Nashville attorney who helped to defend Ford Motor Co. against criminal charges in 1980 that arose from its Pinto gas tanks. “The media can become very aggressive. Lawyers tend to bring suits. Congressional hearings take place. There may be a criminal investigation. But most important, the time and focus of management is diverted from running the company to managing the problems.“
As I have studied Silent Problems (problems that are being avoided, neglected, are going unnoticed, or are being intentionally silenced - of which Toyota is a perfect example), the impact on time and focus can be tremendous. Suddenly, the strategic side of the business is abandoned, as an “all hands on deck” mentality of trying to manageg the problem emerges. And the more one tends to focus on managing the silent problem, the more difficult and frustrating the problem becomes. Simply, once a silent problem is unleashed the tentacles of avoidance begin to appear.
Today, cost estimates for Toyota’s silent problems are ranging from $2 Billion on the low side, to $5.5 Billion on the top side. My research suggests a factor of 2X to 4X is reasonable from these numbers, because none of these estimates factor in elements such as:
- Reduced organizational focus
- A shift from strategic to tactical activity
- Negative impact on team and individual performance
- Negative impact on accountability
- Negative impact on innovation…
These factors and others can break a high performance organization. They can increase employee turnover. They can impact financial and organizational performance for years to come. This is why betting on Toyota’s return to dominance is such a risky bet. Simply because we don’t fully understand the full impact on Toyota. However if history proves itself, this event will impact Toyota many years. Just ask GM,Ford and others…
Tags: organizational focus, Silent Problems, time drain, Toyota's problems
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Poor Toyota. What a mess.