Do Employee Selection and Development Really Matter?

The Toyota Way is represented as a house with two pillars—respect for people and continuous improvement.  It is almost expected these days that serious businesses have mission statements and purport to value customers first, teamwork, integrity, and so on.  In fact, many senior executives seem to deeply believe in these values.  But, are they actually carried out in the workplace?

I recently had an interesting conversation with a friend who works in real estate.  He joined a new employer with a reputation for developing its employees.  Prior employers chose the approach of “throw the newbie agents into the deep end and retain who figures out how to swim.”  No training program.  Not even any shadowing of an experienced realtor.

In manufacturing, as the economy recovers, we are hearing about companies opening new plants and hiring thousands of employees at a time.  How much training can they possibly provide?

Mike Hoseus and I, in Toyota Culture, write about the “people value stream.”   It is analogous to a product value stream that focuses on purchased materials being transformed to a finished product, with both value added and waste in between.  In the people value stream, waste is anytime the person is neither doing value-added work, nor learning anything new.  People not developing are stagnant, like material sitting in a pile of inventory doing no good for anyone.

Figure 1: Quality People Value Stream Model

The above Figure represents the quality people value stream.  The starting point is the pool of potential human resources in the environment.  Selection in a high performance company includes both assessment for potential to learn the required skills and a fit of values with the desired culture.  The right people must be attracted to join the company at which point development can begin. Development starts with basic skills and evolves to engaging the person in the organization so they contribute to continuous improvement.  We define the highest level of development as enrollment – when the person actually identifies strongly with the mission and values of the organization and naturally reflects this in their commitment and behavior.  All of this takes place in the context of supporting organizational structures and systems as well as a leadership environment that supports engagement and learning.

Toyota tends to go over the top in people development since they define it as a core pillar of their long-term success as a company.  They take months and even years to identify potential employees, intensively train them while on probation, then continue to develop them throughout their years as a Toyota associate.  In Japan employees almost always stay for their full career, whereas in the U.S., turnover is typically low, e.g., 1-3 percent.

When a new plant is launched, there is a tremendous selection and development effort.  The new plant is considered a baby that must be nurtured by a mother plant assigned as the responsible teacher.  Typically, the plant will be given a single product and run for only one shift for at least a year before a second shift is added.  Existing plants offer up some of their best managers and group leaders to relocate to the plant so there is an experienced leadership team to develop the Toyota Way culture.  Toyota is not even satisfied accepting the human resource pool currently available and works to influence this.  In Japan, they have their own technical high school, and they have replicated it in India too.  In the United States, they have developed their own non-profit organizations or funded others to teach Toyota methods in the public school system to increase the portion of the population who is employable by their strict standards.  Engineers out of college are treated as good raw material and spend two years in training at Toyota before working on their first product development program.

One software development organization in Ann Arbor, Menlo Innovations has its own approach to intentionally developing an organization of highly committed people who live the culture.  It starts with extreme interviewing:

For software developers, they bring in a large group of potential candidates for a day, and existing programmers are there to observe.  Resumes are largely irrelevant.  What is relevant is how they work in pairs, as all of Menlo’s work is done in pairs:

They are given three tasks throughout the day similar to what they would be doing at work.   For example, Menlo develops story cards that represent features of the software program and estimates, in pairs, the time it will take to perform the tasks.  So the interviewees, in pairs, estimate times for story cards of common tasks.  They are being observed not for getting the right answer, but for how they work in pairs.  Dominating your partner is an absolute no-no.  Working to make your partner look good, even though they are in a sense competition, is very positive.  Those who survive this first cut then come for a day of paid work where they are paired and work on a software project.  If it works out, they earn a temporary contract for three months before becoming permanent.  One of the biggest parts of the pairing process is learning from others, every day.

Intercar is a small family-owned Italian company that sells Toyota material handling devices.  It learned a great deal about the Toyota Way from Toyota, but it was the Great Recession that pushed them over the edge to truly develop their people.  Instead of laying off their skilled technicians who repair the equipment, they paired them with sales people on sales calls.  They also taught the technicians about lean transformation in their own shop.  The technicians could easily explain to the customer how spare parts and additional accessories could improve their productivity, and they could also make suggestions for improvement of their processes.  In the end, both sales representatives and technicians learned and blossomed, and what’s more, sales on spare parts and accessories increased by 90 percent.

It is difficult to demonstrate in a simple return on investment equation the value of investing in people.  This is one investment that may require some degree of faith.  Yet, look at companies that truly excel in their field and you will usually find they believe in investing in people and culture.

Dr. Jeffrey Liker is professor of industrial and operations engineering at the University of Michigan and author of The Toyota Way.  He leads Liker Lean Advisors, LLC and his latest book (with Gary Convis) is The Toyota Way to Lean Leadership.