Whats Behind the Wheel at Toyota

By Janet Wiscombe

Jan. 8, 2007

Former Secretary of Transportation Federico Peña says it should come as no surprise that Toyota Motor Corp.’s diversity program in North America—like its exploding profits—is a reflection of two bedrock philosophies: respect for people and haizan, Japanese for continuous improvement.

    Peña, a managing director in Denver at the investment firm Vestar Capital Partners, is a veteran member of Toyota’s Diversity Advisory Board, which advises company executives and serves as a watchdog for the company’s 35,000 U.S. employees.

    In the past five years, Toyota has far exceeded its targets and has increased its spending to a $1.2 billion annual commitment to diversity, he says. It focuses on key areas such as implementing philanthropy, job training, hiring and increasing the number of minority and ethnic dealers and suppliers.

    “Toyota made it into the Billion Dollar Roundtable, which is very prestigious,” he says. “It has built diversity into the whole company. It isn’t just a program. The entire culture supports it.”

    The Diversity Advisory Board, thought to be the only such group in the industry, was established in 2001. That’s when Toyota Motor Sales U.S.A. and Toyota Motor Manufacturing North America Inc. developed a 10-year, $7.8 billion diversity strategy for minority-oriented business and philanthropy after a threatened boycott by the Rev. Jesse Jackson, who deemed a Toyota TV ad offensive to blacks.

    The seven board members are experts in the fields of diversity, public policy and economic development and include former Secretary of Labor Alexis Herman and former U.S. Reps. Jack Kemp and Susan Molinari.

    They meet four times a year and talk on the phone more frequently, Peña says, providing an outside perspective, helping to set a diversity strategy and working closely with management. The program was intended to go beyond a focus on compliance to help launch careers and fill the automotive dealership pipeline with diverse talent.

    A key diversity and inclusion initiative is Toyota’s Business Partners Groups, employees who collectively advance company interests and support employee development. One, the Diversity Champions program, charges outstanding employees with working at the grass-roots level to develop diversity and inclusion programs.

    Other business partners are TORQUE-Women’s Development and Empowerment, and TAASiA (Toyota Asian American Society in Alliance)—both of which were established in 2006—and older groups such as GALA (Gay and Lesbian [Bisexual Transgender & Friends] Alliance), the AAC (African American Collaborative) and TODOS (Toyota Organization for the Development of Latinos).

    “People don’t come to complain,” says Jennifer “Jae” Requiro, manager of the diversity consulting and inclusion strategies department. “And they don’t bring up issues without looking for solutions.”

    Toyota is the recipient of several honors, including the National Minority Supplier Development Council’s Corporation of the Year.

    Last spring, however, the top Toyota executive in the U.S., Hideaki Otaka, left his position after he was accused of sexual harassment by his former assistant. An undisclosed settlement was reached. In response, the company formed a special task force, led by diversity advisory board member Herman, to review the company’s harassment and discrimination policies.

    A company spokeswoman says the lawsuit resulted in “immediate actions to enhance training for (company) executives” and plans to strengthen and clarify its procedures for responding to allegations.

    “As a supplement to existing training, all executives of our North American affiliates are now required to undergo a special training program to enable them to better recognize, prevent and handle any instances of inappropriate behavior,” Toyota spokesman Steven Curtis says.

    In addition, Curtis says the policy requires that any allegation of harassment or misconduct be immediately investigated and reported to the executive’s superior—and each affiliate has now clarified its procedures to provide that if the chairman, CEO or president is involved, a report will be made directly to that executive’s board of directors.

    Peña points out that the issue of diversity is only increasing in importance. “The number of minorities—especially Hispanics and Asians—is exploding,” he says. “Today one-third of the population in the U.S. is minority. By 2050 about half the population will be ethnic minorities.”

    The company is paying careful attention to changing demographics and to driving diversity, he says. “It’s the Toyota Way. When they commit themselves to something, they do it.”

    That’s why it isn’t surprising that the company is on track to post record profits this year, Peña observes. In November, Toyota reported a 34 percent increase in its fiscal second-quarter profit and raised its full-year earnings forecast to more than $13 billion.

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