1  

     

Colleagues  in  Jesuit  Business  Education  13th  Annual  Meeting,  July  8  to  11,  2010  

     

Jesuit  Business  Schools:    Leaders  or  Running  with  the  Pack?        

Lessons  from  the  Toyota  Crisis:  Do  Students Perceive  an  Ethical  Dilemma?

Allen P. Tropea-Gray (Loyola Marymount), Michael Lee and

Dan Ross, S.J. (Fu Jin Catholic University), and Wee Liang Tan (Singapore Management University)

Special thanks to: Yaonan Lin, DBA, (Assistant Professor, Department of Business Administration, Fu Jen Catholic University, Republic of China) for editing the English version of the questionnaire into traditional and simplified Chinese with the help of tools included in the Qualtrics on-line survey system. Thanks also to the students in the 2010 edition of Exploring Business in Asia at Loyola Marymount University (Benjamin M. Allen, Jaquelyne Altuna, Karina DeLoza, Ryan T. Frace, Adam M. Harbaugh, Korbin B. Duley) for their useful insights on the questionnaire and broad contributions throughout the spring term and during visits to Southeast Asian automobile manufacturers.

  2  

Lessons  from  the  Toyota  Crisis:  Do  Students Perceive  an  Ethical  Dilemma?

Introduction For a variety of reasons, not the least of which is the expectations of accrediting bodies, college programs in business administration, whether at faith-based, private, or public institutions, are highly likely to have courses that touch upon ethical behavior, government-business relations and sustainability. The presence of these courses probably reflects an honest commitment by the faculty and administration to Judeo-Christian values and the principles of democratic rule. However, getting students to see the value and immediacy of these areas of study remains a challenge. Constant coverage of unethical and illegal practices by the traditional news media -and now Internet sources - create a highly confusing context for students especially when business leaders and companies seem to receive only nominal punishment for transgressions. The crisis in the automotive industry of the past 5 years has created a interesting platform from which to view the perceptions of business students with respect to expectations of business leaders’ ethical behavior, the role of government in promoting automotive safety, and regulation of manufacturing. Of particular interest is the series of crises faced by Toyota Motor Corporation. As the world’s largest automotive manufacturing company, Toyota extends a huge footprint around the world.1 Also, as the benchmark for lean production systems, Toyota’s manufacturing and business practices have served as a model for other automotive companies trying to transition to late 20th and early 21st century practices. First made popular by James Womack and his colleagues at MIT,2 Toyota’s manufacturing practices were seen as revolutionary. More importantly from the viewpoint of this paper Toyota’s model was seen as enabling employees at all levels of the organization and also as facilitating practices consistent with the principles of sustainability. The principles of “lean production” advocated in The Machine that Changed the World were generalized to the larger business environment in another book3 and contributed to the creation of an institute4 dedicated to spreading the mantra of lean to other                                                                                                                1  Despite all of its recent legal and public relations difficulties Toyota scheduled opening of a new automobile factory in the Blue Springs, Mississippi. The factory is the 10th facility of Toyota in the United States. It is expected to produce 150,000 Corolla models and to employ 2000. Toyota has also entered into may of the low labor cost emerging economies of Southeast Asia building largely for local markets. 2  Womack, James P., Daniel T. Jones, and Daniel Roos (1990). The Machine That Changed the World. 3 Womack, James P.; Daniel T. Jones (2003). Lean Thinking. Free Press. 4  The Lean Enterprise Institute was the extension of Jim Womack’s activities at MIT. According to their website the institute “is a nonprofit education, publishing, research, and conference organization with an action plan. Compared with traditional "think" tanks, we are a "do" tank. We carefully develop hypotheses about lean thinking and experiment to see which approaches work best in the real world. We then write up and teach what we discover, providing

  3  

manufacturing and service organizations. That institute now serves as the hub for the study of how lean principles can be applied to other enterprises. For example, the current healthcare debate in the United States includes efforts to incorporate lean principles to control cost and improve services. Similar efforts are underway in the supply chain industry. The significance of this movement is that Toyota’s practices were portrayed not just as a means for saving manufacturing costs but as a way of integrating employees into the organization in a more humane and participatory fashion. This social dimension was seen as a breakthrough in labor relations in the automotive industry. Thus, the Lean Enterprise Institute website has a regular column on lean principles in management. An early manifestation of efforts to apply Toyota’s principles in the United States was the creation of a joint venture between Toyota and General Motors in Fremont, California. Faced with an unprofitable factory GM reached out to Toyota as a last ditch effort to avoid closing down the plant and firing several thousand workers. NUMMI (New United Motors Manufacturing) was considered as an example of what the “lean” system could do to transform and perhaps save the ailing American automotive industry. The odds against GM and Toyota were great because success required transforming relations with the United Auto Workers union.5 NUMMI’s eventual success was considered evidence that Toyota’s methods were really transformative and not just from a manufacturing perspective. Labor management relationships at the plant were seen as introducing a new collaborative environment that extended beyond employees to stakeholders in the larger society. Toyota’s management was seen as more responsible and sensitive to it customers, the larger society and to issues that fall collectively under the title of sustainability. (Lean was not universally regarded in such a positive light. Canadian autoworkers were unable to resolve differences with management and actually experienced strikes at plants that were supposed to be based on the lean model.)6 According to David Magee,7 the philosophy behind Toyota Motors’ rise to prominence over the last 60 years was formally labeled “Toyota Way” in 2001. It was an effort to articulate Toyota’s corporate mission to employees and was based on two principles: continuous improvement and respect for people. Of particular interest to this paper is the language in the guidelines that speaks to respect for people.

                                                                                                               new methods for organizational transformation. We strive to answer the simple question of every manager, "What can I do on Monday morning to make a difference in my organization?" And, by creating a strong Lean Community through our website and public events we try to give managers the courage to become lean change agents.” http://www.lean.org/WhoWeAre 5  NUMMI ran successfully for many years until GM, crippled by the financial crisis opted, out of the joint venture. Toyota saw no point in continuing facility and NUMMI was closed in June 2010. Tesla Motors recently signed a lease to use the plant to produce its new electric passenger car. Meanwhile Toyota ran afoul of government agencies that sought to retrieve funds it had provided Toyota to retrain its employees. 6  See James Rinehart, Christopher Huxley, and David Robertson, Just Another Factory? Lean Production and Its Discontents, 1997: Cornel University Press.  7  David Magee, How Toyota Became #1: Leadership Lessons from the World’s Greatest Car Company, Penguin Group, 2003. P. 213.

  4  

Respect: We respect others, make every effort to understand each other, take responsibility, and do our best to build mutual trust.8

• Respect for stakeholders • Mutual trust and mutual responsibility • Sincere communication

In this statement, Toyota’s management implies that it bears a responsibility to be honest not just with its employees but also with its other stakeholders and customers. It also served to indicate that Toyota was accepting a responsibility to communicate honestly with its customer base. In the opinion of some Toyota’s response to the discovery of malfunctioning vehicles over the last 3 years was less than completely forthright. One explanation for its delayed response is that Toyota’s efforts to become the number one automobile manufacturer led it to ignore its own mission statement: management lost sight of its own mission. Another is that the occupants of the top positions at Toyota Japan changed too frequently in a short period and led to a vacuum at the top. Yet another factor was its inability to adequately supervise the work of its supplier network. The Origin of the Study and the Methodology During the spring term 2010 six students and a faculty member at Loyola Marymount University were studying the global automotive industry as part of a special course on international business. It was determined from the outset that it would be very difficult to study the automotive industry without a thorough discussion of Toyota’s production methods. Additionally, the troubles encountered by Toyota Motors during that period were covered so extensively in the news media that the world’s number one automotive manufacturer was front and center almost every day. One class discussion started out focusing on Toyota’s escalating problem with recalls.9 The discussion actually started as the course was focusing on the significance of three critical elements of Toyota’s production model – continuous improvement, just-in-time inventory systems, and the use of a sophisticated supplier network. How, one student mused, could Toyota be suffering these quality issues if their production system was so thorough? Moreover, didn’t Toyota’s mission statement imply that it would communicate in a timely and honest way with its stakeholders and customers? After an extended discussion a number of other questions surfaced. Not all of the questions focused on Toyota and its current problems. Indeed, a theme developed that focused on how the issue was being treated in business schools. Were professors discussing and evaluating the issue? How did professors and students assess the situation? How did they evaluate Toyota’s corporate response? What did students and faculty think about the leadership at Toyota?                                                                                                                8  David Magee, How Toyota Became #1, p. 214. 9  Numerous articles have been published in magazines, newspapers and industry that focus on the history of automotive recalls. One, among many, interesting Internet articles can be found at http://autos.ca.msn.com/photos/gallery.aspx?cp-documentid=22338216&page=1

  5  

A decision was made by the class as a whole to make business school student and faculty responses to Toyota dilemma the focus of a research project. Moreover, since we were scheduled to interact with students and faculty at Fu Jen Catholic University as part of the overseas portion of the course, we would ask the faculty at that institution if they would be interested in collaborating on the study. A cross-national focus would make the study that much more interesting and significant. To make the study even more interesting it was decided that an effort would be made to include at least one other university in the study. Professor Tan of Singapore Management University agreed to distribute the questionnaire at his university. A fourth institution was contacted but the logistics of translating the survey made it too difficult to include that institution into the study. Unfortunately, that school was in Japan. Since Toyota is based there and highly regarded in Japanese society, the inclusion of students from that country may well have added an important dimension to the study. The survey questionnaire was first developed and tested at Loyola Marymount using an online survey tool developed by Qualtrics, Inc. using its research suite for conducting online surveys. The final English version of the survey was shared with Professor Yaonan Lin of Fu Jen University. He accessed the survey over the Internet and used a translation feature implemented by Qualtrics10 to perform an initial translation of the questionnaire into both traditional and simplified Chinese. The resulting translations were determined to need additional editing. Professor Yaonan Lin completed the translations to both traditional and simplified Chinese. Students taking the survey would be able to select any one of the three languages to take the survey. The finalized version was loaded onto the Qualtrics site. Tools available on the Qualtrics site allowed email messages to be sent to students at the participating institutions. The emails contained links to the survey.

` A breakdown of the number of respondents each institution follows: Discussion of the Survey Instrument The first part of the survey attempted to measure the news gathering habits of the students. It asked how frequently they used traditional media such as the newspapers, television, radio and the Internet as a general source. A second set of questions sought to determine how frequently the students reported using some of the so-called “new                                                                                                                10  Google’s translation tool is available over the Internet. Access to the tool is available at http://translate.google.com/#.

  6  

media” – blogs, Facebook, and Twitter. We wanted to determine if there was a greater reliance on new media. In addition, we wanted to see if cultural differences in the three countries led to differences in media reliance.

  7  

Exhibit 1 looks at what might be considered the traditional media (newspapers, television and radio) plus the Internet as a general medium. There are visible differences between the U.S. students and those from Taiwan and Singapore. The U.S. students report relying much less on printed media than the other two student groups - especially if the two most frequent usage categories (once every day and once every two or three days) are collapsed. At the same time, the reported frequency of use of television among U.S. students isn’t different than the usage levels of their Taiwanese and Singaporean peers. Use of the Internet among the students from all three schools is quite high. The two top frequency categories (daily and 2 or 3 times a week) account for something in the neighborhood of 70 percent at all three institutions. Of course, using the general label “Internet” masks their specific usage patterns. Exhibit 2 tries to identify the nature of the Internet usage in more specific detail. It provides an interesting and, at first glance, somewhat puzzling picture. While blogs would seem to be an ideal place to obtain news coverage they also represent parochial perspectives. Students may well see them as biased sources and therefore avoid them. Students at Fu Jen are the most frequent users of blogs and further analysis of their responses seems worth pursuing.

  8  

Facebook and Twitter also present interesting results. Students from all three groups report heavy use of Facebook. Twitter seems equally unimportant to the three student groups. These data demonstrate that the students do use the media to follow the news in general but what about their attention to the Toyota crisis in particular? Exhibit 3

reports the students’ use of radio, television, newspapers/newsmagazines, and the Internet for directly following the Toyota crisis. The cells of data highlighted with a white background point to the significant concentrations of usage. Thus, radio is very low in both Singapore and Taiwan and may reflect differences in that media’s format and content in the three countries. In any case, use of the radio appears to be relatively low across the board. This may well be indicative of the fact that the respondents are young people.

  9  

Use of television provides a mixed picture: A significant proportion of students in the U.S. (60 percent) report using television at least once a week to follow the Toyota drama. Students from Fu Jen are not that different but the usage level of television by the SMU students is much smaller. Whether the latter is related to the political regime’s policies on news coverage needs further analysis. The point is television played a greater role among US students. The role of newspapers and newsmagazines provides a more mixed picture. A significant number of US students (>56%) report reading newspapers and news- magazines a least once a week. Nearly 29 percent of the students from Singapore and Taiwan report reading printed media at least once per week. Overall printed media play a significant role. Reported reliance on the Internet to follow the Toyota crisis indicates a large proportion of the US students report frequent use of the Internet. Heavy reliance upon the Internet was significantly less likely for students from Singapore and Taiwan. A significant percent of these latter students reported moderate use of the Internet. In reviewing these data it seems important to keep in mind that much of the Toyota crisis unfolded in the United States. Whether, and to what degree, news coverage of those events channeled across the Pacific to Southeast Asia is a serious question. Perceptions of Manufacturing Quality The next group of questions tried to establish the students’ perceptions of the quality of the various major automobile companies of the world. These questions were intended to establish the nature of the students’ images of Toyota. Had the numerous problems faced by Toyota adversely affected Toyota’s image? One question asked students to indicate the degree of confidence they had in the quality of the vehicles manufactured by a list of well known/popular manufacturers. Exhibit 4 summarizes the students’ confidence levels in various automakers. The data represents the average confidence levels. The students were asked to evaluate each company and assign it a value between 1 and 10 where 1 was no confidence, 5 represented an uncertain attitude and 10 represented complete confidence. The exhibit reports averages for each group of students and for the combined pool. It is clear from these data that even after all the bad news coverage Toyota maintained a relatively high level of confidence among all three groups of students. Indeed, the students from Fu Jen (7.09) and Singapore Management University (7.72) ranked Toyota second behind only Mercedes. The evaluation of the students from LMU (6.02) was lower enough to impact Toyota’s overall confidence score. Nevertheless, Toyota maintained a relatively high level of confidence despite it problems. How this positive assessment of Toyota would impact the students’ assessment of Toyota’s behavior will be discussed shortly. First, we look at whether students felt that they were aided in their evaluations by their professors and coursework.

  10  

Exhibit 4: Students’ Expressed Confidence in Automakers

Treatment of Toyota Crisis at the Universities A major objective of the study was to determine how the Toyota crisis was addressed at the three institutions. Thus, several questions sought to determine whether and how Toyota’s travails were handled in the classroom. A follow up question asked whether students discussed the issues amongst their peers. Finally, questions sought to establish perceptions of (a) whether Toyota’s behavior was unique among automakers or typical, and (b) what punishment should be leveled against Toyota and or its executives. Exhibit 5 reports whether students at the three schools hoped that the Toyota crisis would be discussed in class. It is clear that a majority of the students at each school would be favorably disposed to classroom discussion. However, nearly 25 percent of the students from the United States viewed in-class discussion unfavorably. Exhibit 5: Wanted Toyota Crisis Addressed in Class

  11  

Another interesting dimension is that students from Fu Jen were most likely to indicate a desire to have Toyota’s dilemma discussed in class. By contrast, students from SMU expressed the greatest degree of ambiguity about having the topic discussed. Whether students wanted the topic discussed or not, it is important whether faculty did in fact discuss the issue. Moreover, how did they treat the topic? Did they merely describe the circumstances? Did they limit their comments to the damage done to Toyota’s reputation? Did they comment on the ethics of Toyota’s behavior? Exhibit 6: Professor’s Handling of Topic in Class

The survey permitted students to report the activities of up to 3 professors. Exhibit 6 provides the students’ reports for the first two professors - the majority of students only provided data for one professor. At least one trend seems to jump out of the table. The professors in the United States are reported as being more likely to discuss the ethical dimensions of Toyota’s actions. Faculty from LMU were nearly 4 times as likely to discuss the ethics of Toyota’s behavior than professors at SMU. Nearly twice as many LMU students reported their faculty as addressing the ethical dimension as Fu Jen students. One potential reason for this difference may be geography. The bulk of Toyota’s problems occurred within the United States. That distance may have impacted the professor interpretation of the relevancy of the topic. A second factor may be differences in culture: Is it considered appropriate to discuss ethical issues in class. Hopefully, discussions of ethical issues occur not just in the classroom, but also in small peer groups. The study included a question that tried to tap the level of student-to-student exchange regarding the Toyota situation. Exhibit 7 summarizes their reported discussions.

  12  

Exhibit 7: Incidence of Student-to-Student Discussion of Toyota Crisis

The pattern in this data is unmistakable: Students discussion of Toyota’s problems was sketchy at best. Even in the United States, where the issue was on the front pages of newspaper and a major story on the evening television, only about one-quarter of the students reported having extensive discussions. In both Taiwan and Singapore the extensive discussion of the topic was limited to a handful of students. Substantial portions of all three groups of students reported having a “little bit” of discussion. This lack of peer group discussion is somewhat surprising when you consider that 60 percent of all of the student respondents considered it very important or important that their professor help them understand situations where business leaders are discussed in the news. Exhibit 8 displays students’ responses to the question “To what degree do you think it is a business professor's responsibility to help you understand and evaluate controversial issues about business and business leaders when they appear in the news?” Their responses reinforce the notion that students look to their professors for guidance. The importance of faculty roles as influencers of student thought is confirmed in Exhibit 9. At all three institutions a majority of students report looking to faculty as Exhibit 8: Importance of Professor Helping Students Understand Controversial News Items

  13  

role models. There are big differences in intensity of agreement with the statement across the three schools. This difference deserves further analysis; especially, the question of why the U.S. students are so much more inclined to look to their faculty as role models. Is there any relationship to the role of family in Asian cultures? Exhibit 9: Perception of Faculty as Role Models

These data reiterate the potential influence of faculty. They also indicate that student-to-student interaction may be less than we as professors might imagine and hope. It also suggests that we may want to look at ways to encourage students to engage in discussion of issues. Indeed, with the drastic reduction in communication costs we may want to find ways to encourage student discussion groups across campuses and continents. Exhibit 10 provides data that suggest students are looking to have these types of discussions in class. That desire is even strong in Singapore where students were somewhat less enthusiastic in previous questions. Exhibit 10: Students Desire for Classroom Discussions

  14  

Student Evaluation of Toyota’s Behavior We’ve looked at student awareness of the Toyota crisis and the attention it received in our institutions. What did the students think of Toyota’s behavior and whether it deserved some form of discipline? Exhibits 11 and 12 try to address these issues. Exhibit 11: Student Perceptions of Toyota’s Activities

The first question in Exhibit 11 deals with the students’ perceptions of the responsiveness of Toyota and its leadership:

Which of the following best describes your feelings with respect to how quickly Toyota's leadership responded to the safety problems of the last 12 to 18 months?

The data paint a mixed picture both within and across the schools. In the US school the distribution is bi-modal. There are nearly equal sized groups that think Toyota

  15  

responded responsibly and those that feel it deliberately delayed its response. There was also a sizeable group that felt is lacked sufficient information to make a judgment. The students at Fu Jen and SMU tended to give Toyota and its management far more leeway. The SMU students were also nearly twice as likely to state that they lacked sufficient information to judge. These patterns suggest very different dynamics at the three institutions. The authors need to review this data in much greater detail reflecting upon how the local cultures may be playing a role in the differential evaluations. The second and third questions focus on the students’ assessment of (a) the responsibilities of Toyota’s leadership to cooperate in the investigation, and (b) the role governments should play in forcing a company, i.e., Toyota, to do the right thing. The students’ opinions here are far more uniform both within and across the schools: They overwhelmingly see a role for government in investigating safety issues and an obligation on the part of companies, i.e., Toyota. There seems to be a general acceptance of limits on business behavior and an acceptance of the role of government.

To what extent do you agree with the following statement? "The leadership of Toyota Motors has an ethical obligation to provide government investigators with all documents pertinent to the malfunctioning of its automobiles." To what extent do you agree with the following statement? "Government agencies should have the ability to require automobile makers to recall automobiles that are demonstrated to have manufacturing defects."

The questions in Exhibit 12 deal with the students’ opinions of Toyota’s guilt and whether and how it should be disciplined. The last question attempts to tap the students perceptions regarding whether Toyota is different from other companies.

To what extent do you agree with the following statement? "If it is demonstrated that the leadership at Toyota deliberately delayed notifying the government about the safety problems with their automobiles they should be disciplined. Which of the following forms of discipline should Toyota experience if it is proven that they deliberately delayed notifying the government of the safety problems with their automobiles? Check all that you feel are appropriate. Do you think that Toyota is more or less guilty of hiding product problems than other automakers?

With respect to punishment the students from all three institutions are in strong agreement that if found to be concealing information Toyota should be disciplined. In reading the results for the punishment/discipline question it is important to note that the students were permitted to check more than one form of punishment. Thus the percents displayed in each column exceed 100 percent. Several interesting patterns can be discerned from the data. First, the students from Fu Jen seem far more inclined to deal more harshly with Toyota if it is found culpable. Second, the students at Fu Jen were more inclined to select multiple forms of discipline although the American students were also inclined to support multiple forms of sanction.

  16  

Exhibit 12: Student Perceptions of Guilt and Punishment

The third question in Exhibit 12 deals with student perceptions of whether Toyota is any more or less guilty of hiding product problems than other companies. Here the students from Taiwan seem to give Toyota the least leeway. They are nearly twice as likely as the SMU and LMU students to say that Toyota was guiltier than other companies. However, a majority of the students at all three schools assessed Toyota as “no more or less guilty”. This position requires some serious reflection. Are the students being cynical or are they just assuming that the business environment just works that way? Students’ Desire for Coursework in Ethics and Business Behavior We often wonder whether students would use their limited time to sit through a course that focused on ethical behavior and business. The students in this study left no doubt. Exhibit 13 reports their responses to a question regarding their willingness to participate in an “elective” course. A significant majority of all reported they would likely enroll.

  17  

Exhibit 13: Student Willingness to Enroll in Elective Ethics and Business Course

Final Thoughts The authors ran into some significant logistical and practical problems in analyzing the data from this study and plan to do further analysis and to engage in additional discussion of the cross-cultural aspects of the survey results. Nevertheless, several observations seem appropriate. These are listed below without comment in hopes that they will stimulate discussion.

• Students see value in coursework that addresses ethics and business. • Students look to their professors as role models and want to see current issues

discussed in class. • Students do not appear to engage in a lot of peer-to-peer discussion of current

topics. How do we encourage such engagement? • There appear to be significant differences between students from different

campuses (we’re assuming that also translates to different countries/cultures) and it would seem important to find ways to get those students to interact on an ongoing basis.

• Do our students follow current business events closely enough and how can we encourage them to seek out information that will help them formulate their frames of reference?