Gill South: Kaizen offers another strategy for working through the recession

One in three New Zealand companies believe they are overstaffed and are planning redundancies, a Business New Zealand survey found last month.

But are redundancies in time of recession absolutely necessary for most companies? Some are resisting the move more than others. Toyota is one of the few to be holding firm in its resolve to keep its workforce intact. According to one source, Toyota hasn't made redundancies since 1950, and regrets making them then.

"The core pillars of the Toyota Way are respect for people and continuous improvement," says University of Michigan Professor Jeffrey Liker, interviewed in globeandmail.com. Liker, who has written two books about the company, says: "Respect for people is a commitment to the economic and social wellbeing of all permanent employees. That's a commitment that 'we're not going to dump you because it's convenient for us'."

Whether Toyota will manage to ride out the entire recession without making permanent workers redundant remains to be seen. At this stage it is cutting pay for its North American senior executives, eliminating their bonuses and those of salaried and hourly employees, further cutting production and offering its first US-wide voluntary separation programme to reduce its workforce.

Simply shedding 10 per cent of its North American workforce would be a disaster for Toyota, says Liker.

"If respect for people goes out the window, then they lose the foundation for the future because then suddenly people are going to say this company is not any different from any other company."

Liker believes it is far more likely that Toyota will use the downturn as an opportunity to increase productivity, raise quality and cut costs using a process known as kaizen - the Japanese word for continuous improvement.

Kaizen is not unknown to New Zealand. Masaaki Imai, founder of the Kaizen Institute, set up the organisation in New Zealand 20 years ago when he was in the country helping Fisher & Paykel with its manufacturing operations.

Danie Vermeulen and Richard Steel took over the institute in 2006 and have just set up the Kaizen College, which will run professional development seminars to help local businesses navigate their way through the downturn. Kaizen clients range from large consumer goods organisations, to tertiary institutes such as the Open Polytechnic, to smaller firms.

"Lean management professional development will be a key part of the methodology and it will not be what people necessarily think it is," says Vermeulen.

When managers hear the phrase Lean management, they think it's about cutting staff, but that is not what it means. Cutting staff is very short term - when there is the turnaround, you don't have the capability to respond, argues Vermeulen.

"I think people have become very reactive. They think of the short term and take their eye off long-term issues rather than thinking about, how do you grow the business and get more sales? Management is looking at ways of cutting corners, looking for cheaper ways to distribute product - but in the long term, they are not thinking strategically," says Vermeulen.

"It's not about how you cut a few people. You can free up capacity so that people are more involved in strategic direction."

Too often companies throw out the baby with the bathwater in these times, says Vermeulen. Smaller companies take a DIY approach. "People do self-help, they read up on Lean management and they really do a lot of damage."

The Kaizen approach, he says, "is about turning the company on its head". Rather than managers criticising staff in bad times, they should encourage people and give them the resources they need.

"Spend a lot of time out on the floor," says Vermeulen, and make encouraging rather than negative comments. "It's about getting people to feel proud of what they do."

You need managers to understand the big picture; it's about building a sustainable culture, says Vermeulen. And when people feel part of that culture, they feel happy to solve problems.

Managers should not take sole ownership of a problem, he says. They should work as a team.

"It's about making you self-sufficient. You don't want to use consultants forever."

People try to make things too complicated, he argues. They invest in big computer systems which only a handful of people at the top understand. "Keep it simple ... Often people just jump into a technical solution without understanding the process. They become servants of the computer system."

Vermeulen has visited Toyota and says it was very obvious the company was focusing on improving everything it was doing, even though it was feeling the pain.

"They'll probably go back to basics and make what's needed, not over-produce."

Gill South is a freelance business writer based in Auckland