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Tom Johnson: Reduce cost by nurturing relationships, not by cutting costs

By , - Last updated: Thursday, January 7, 2010 - Save & Share - Leave a comment

Since my first encounter with the company over 20 years ago, what has always impressed me about Toyota is a deep commitment to the idea that financial results emerge from managements’ careful attention to nurturing process, not from their taking steps to achieve financial targets.   For decades, no other company has been as focused as Toyota is on reducing costs.  But no other company seems to understand as well as Toyota that lower cost is not achieved by cutting costs; instead, they lower cost is reached by cultivating patterns of relationships that are designed to continuously reduce the resources (including time) and effort required to serve customers better than anyone else.  Unfortunately, a campaign to grow output and global market share that began in the late 90s caused Toyota’s top management to lose sight of this decades-long commitment to nurturing process and to focus, instead, on meeting quarterly financial targets.  The dire consequences of this campaign are all too visible today.  Hopefully Toyota’s leaders can restore the process-focused spirit that was lost in the past decade.  If they can’t, then I’m afraid that the fanatical cult of financial management that brought the modern industrial economy to its knees in the last few years will also have destroyed the best-run business ever to exist in that economy.

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