Lean Transformations Group

What I Learned About Planning at Toyota

Toyota did not plan by management of assigned tasks. They planned for responsibility to think. By this, I mean Toyota planned by deploying thinking responsibility, not just objectives, from level to level… on strategy to goals and goals and tactics, to targets and action plans.

I remember learning so many new ways of rethinking management practices from my time in Toyota. I had done planning before, but not the way Toyota did it. Their process was so different from what I had experienced in North America. Their planning usually involved assigning unit managers MBO objectives (now KPIs) that specify how managers are to contribute to the department head’s objectives (primarily financial). But in Toyota, planning was generally done through cascading A3s and plans. A department head created an A3 explaining department strategy with a plan that deployed responsibility for individual goals to achieve or to support parts of the larger strategy. 

In this way, Toyota raised planning to an art as well as a science. Department heads deployed responsibility to unit managers for achieving specific performance improvement and capability development outcomes (goals) to help achieve the department’s strategic goals. The key point was that one level deployed responsibility to the next level for achieving certain ends and gave people the responsibility for thinking about and proposing the means to get there.

That’s why having an A3 describing the purpose and thinking behind the upper level’s strategy and goals was so necessary. Managers coordinated plans with each other to align with the larger strategy through a back and forth discussion process called “catchball.” Obviously, this process forced me to think in ways I had not before, nor even considered part of strategic thinking. Until then, like so many of us I imagine, I was more accustomed to being told what to do and of course, when to have it done!

The first major difference, again, was that I actually had to think about what I needed to get done, not just how to do what I was told to do.

This involved answering questions like…

  • What’s the purpose of my boss’s strategy? The purpose of my unit, what the other unit managers are doing and planning?
  • What does the business need from my specific function?
  • What is the current capability of my unit and how do we need to develop it for now… and for the future?

This was basically the PDCA (Plan-Do-Check-Adjust) problem solving thinking I had been learning, and it started with gap analysis.

  • Where are we now in terms of our performance capabilities?
  • Where do we need to be to contribute as needed to the company and the department?
  • What are the significant differences and changes that need to be made so we can perform as needed?

The questions didn’t end!

My responsibility was to figure out, with my staff, how to answer those questions and close those gaps over the course of the planning year. By answering those questions, my staff and I created a plan for the year that basically mapped out a series of operational and organizational (primarily people and process capability) development initiatives. This was all for the purpose of contributing to the department strategy and the strategic aims and success of the business by achieving the performance improvement outcomes we were responsible for that year.

The differences between Toyota’s approach planning and the kind of planning we typically see in North America did not end there. For example, the format of the planning document was much the same, but the content and process to create it was totally different.

Toyota Plans included the following:

Goals and Target: Improve What, Why, by How Much, by When (a goal is not an action; it is an accomplishment).

Roles and Responsibilities: Who will be responsible for leading, doing, supporting, and reviewing what, when and how?

Execution Process: Action Plans for each Goal, Alignment of Action Plans in a Master Schedule, Visual Tracking Board/Center, Anticipation of Obstacles and Issues, and Plans for Contingencies.

Management Process: Review Schedule. Who will lead Plan versus Actual Project Reviews and Gap Problem Solving? Who will do work site checks and lead project team meetings? Who will report what, when, and how on at the tracking center?

Change Leadership: Who will plan and lead organizational communication processes? Schedule and facilitate cross-functional/team coordination meetings? Prepare leadership and employee status reports?

Fundamental Features of Toyota’s Approach to Planning

  • A plan is an agreement by those developing it and taking roles in it; a plan without agreement is not a plan because there is no commitment to follow through as described. Those agreeing to responsibility in a plan demonstrate their commitment by adding their initials next to their names.
  • Implementing countermeasures involves more than making technical and work flow changes in a process or procedure. It also affects the people doing the work because it will result in changes in their work and work situation. The social aspects of creating a plan (participation, discussion, clarity of roles and responsibilities, and communication) are as critical, if not more so, than changing the organization and flow of the operation. They are essential to success in follow through and follow up, in execution and for sustaining the improvements thereafter.
  • Change leadership activities during execution need to be shown as separate processes with their own scheduling (e.g. Gantt schedule lines with goals, a flow of discrete deliverables including communication, cross-functional sessions, and training). Successful planning and execution depends on strong relationships through which people help each other work through the rough spots and sort out any unanticipated issues.
  • The progression of actions to implement a change should be planned as a sequence of action steps that result in handoffs of deliverables from one processing activity to the next like the flow in a value stream.
  • Targets for the flow of execution steps in individual action plans should specify not just expected timing, but in process-indicators of what will be in place or delivered as a result of each activity in the process.
  • “Plan versus actual” reviews are scheduled at the anticipated end of major phases in actions plans. Teams members check timing and assess impact, and initiate problem-solving activities to address gaps immediately (rather than give promises to catch up). These action plan team reviews do not require management involvement unless there are major issues.
  • Teams reporting at these reviews are expected to come prepared to explain “plan versus actual” differences and how these are being addressed. Red-Green-Yellow status reports alone do not provide the information management needs to know if effective problem solving is underway and to later check and reflect the reasons for the gaps.
  • The master schedule for implementation of a countermeasure includes timing and targets for outcome or deliverables. Leaders schedule reviews at major transition points in the execution plan, and responsibilities for review and reports are indicated in the plan. The purpose of these reviews is coordination, communication, and assessment of overall change progress status, not problem solving. General status summaries such as Red-Yellow-Green are not presented in these reviews.
  • In planning, as in problem solving, Toyota also takes little for granted. Leaders want to work with the real facts that can be obtained, not individuals’ assumptions. One of Toyota’s sayings that illustrates its thinking is, “Planning is absolutely critical. Things never go according to plan.” Plans go through a form of “Pre-Failure Mode Analysis” and leaders include contingencies in the master plan. In deciding where to locate its first North American Toyota plant, for example, Toyota had three full sets of plans for each of sites it was discussing with the states where they were considering locating.

Looking at a study done on planning practices in Japan in the 1990s compared to North American planning practices, one thing that stood out to me is how there was a significant difference in overall effort spent. In North America, approximately 30% of project time went into planning and the remaining 70% was used for execution. In Japan, the opposite was true. Companies typically spent 70% of a project planning and 30% in execution. The startup of GM’s Saturn plant in Tennessee as compared to Toyota’s planning process for selecting and building its plant in Kentucky is another example. The Saturn plant was announced a year before Toyota announced its Kentucky plant. The Toyota plant started producing vehicles a year before the Saturn plant went into production. It took GM nearly two years to plan and complete construction and reach agreements with suppliers and unions. How was such a large difference possible? How could Japanese companies accomplish so much with less effort?

At least from what I have seen in North America, one reason may be that we tend to create a plan in isolation, announce it, and spend a lot of our effort in execution explaining what we want to do and why, responding to objections, dealing with conflicts, and trying to get alignment so that we can proceed in the first place... In Toyota, the opposite was the case. Planning was a process of building agreement and alignment as you develop a plan. Perhaps more than anything else, this is what made all the difference.

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