Learning from Japanese Businesses: Ethics in Operational Excellence

Abstract

Humanistic management in a non-Western context is underexplored, for example, in Japan. Despite numerous publications especially on Japanese management in the 1980s to 1990s the topic of humanistic management in a Japanese context remains largely unexplored. Using Toyota as a case, this article illustrates how a company has systematically implemented Japanese ethical principles based upon Confucianism, Buddhism, Daoism, and Shintoism in its corporate ethics and operations. These moral philosophies emphasize self-improvement, social cooperation, and contribution to society as foundations for good behavior regardless of an individual’s social position. We link some of these philosophic elements with humanistic management in an Asian context. In addition, we came to understand that Toyota’s organizational architecture, i.e., production system and product development rely on an integrated ethical system as their fundamental purpose of business activities, including an expectation that all workers collectively contribute to organizational success and harmony. This differs from many Western approaches which see profit as the purpose of the firm and view their ethical responsibilities in an ex-post fashion. These findings are important, as the scope of humanistic management practices globally needs to be expanded.

For decades, Toyota Motor Corporation (henceforth: Toyota) has been at the forefront of leadership and innovation in the automobile manufacturing industry (cf. Fortune Global 500). Founded in 1937 by Kiichiro Toyoda, as a spin-off of Sakichi Toyoda’s loom production company (called Toyota industries), the company today employs more than 370.000 employees worldwide at its 71 manufacturing companies (Toyota Europe, n.d.b). In 2021, the company sold more than six million units and generated a net revenue of USD 209.6 bn and a net income of USD 22.8 bn (Toyota Newsroom 2022).

Since the publication of The Machine that Changed the World (Womack et al. 1990), with its emphasis on Toyota, the strengths of the Toyota Production System (TPS) have been documented by studies too numerous to cite here (e.g. Fujimoto 1999; Monden and Ohno 2011). With its so called ‘Toyota Way’ the company redefined what it meant to be a car and light truck manufacturer. At Toyota, there was an understanding early on that organizational success depends fundamentally on the willingness of its members to work cooperatively toward collective goals for mutual benefit. As Naruse (1991) and Liker (2004) point out, contrary to Western management practices where workers simply work, at Toyota workers both work and think, adding a significant human dimension to the TPS.

While Japanese Management as a way of management has received considerable attention by scholars internationally from the discipline of management (see Dollinger 1988; Haak and Pudelko 2005; Imai 2012; Rother 2010; Tamura 2006; Warner 1994) and some of its ethical aspects have been partially illuminated by scholars from the business ethics discipline (for more details please see footnote¹) this research seems to be limited mostly to the 1990s. The human dimension of Japanese Management more specifically has been rarely addressed despite Japanese business and management practices often being grounded in humanistic Confucian concepts (cf. Boardman and Kato 2003; Dollinger 1988). To our knowledge, there has been some research on the humanistic aspirations of Panasonic’s founder Konosuke Matsushita (Kuriyama 2021; Ono and Ikegami 2020) but not on the humanistic dimension of Sakichi Toyoda’s firm philosophy that is still reflected in the Toyota Way, Toyota’s corporate ethics.

We take this research on the human dimension of Japanese Management further by utilizing a single-case-study approach to examine Toyota and its human-centered approach down to its practice on the factory floor. Our case focuses on three important questions concerning Toyota: What are the philosophic foundations of Toyota’s human-centered approach? How does Toyota implement its human-centered aspirations? What is the link between Toyota’s human-centered approach and the company’s operational excellence? We make three major contributions to the current research. First, with the Toyota case as an empirical example, we illustrate how humanistic management by way of a human-centered approach is implemented at a Japanese business and how this ethical approach links with the company’s operational excellence (cf. Solomon 1992). Through this illustration the reader gains a better understanding of how comprehensively Toyota has implemented its human-centered approach in management and operations. Second, by drawing on a non-Western example of humanistic management, this case also adds more (and needed) insights to the discussion of humanistic management practice in a global context, i.e., humanistic management in Japan (Kuriyama 2021; Ono and Ikegami 2020). Third, by approaching this topic conceptually, providing a thorough and detailed analysis of Japan’s philosophical and socio-cultural foundations, we unravel how Japanese (humanistic) ethics and business are linked and interrelate in Japan. By taking a deep dive into the historical origins of Japanese philosophy and culture, we can deliver a more nuanced and broader analysis of the link between Japanese (humanistic) philosophy/ethics, culture, and business, adding to previous research in this area (Boardman and Kato 2003; Dollinger 1988; Rarick 1994; Taka 1994).

The article is structured as follows: The first two sections are conceptual and illustrate how philosophy shaped Japan’s culture and Japanese business. In section three, we present the case of Toyota in depth by analyzing the company’s corporate ethics, the Toyota Way. In doing so, we identify humanistic values and explain how this corporate ethics is rooted in Japanese philosophy and culture. We furthermore illustrate how Toyota has implemented its human-centered approach in its operations by looking at the Toyota Production System (TPS) and the Toyota Development System (TDS). In section four, leaning on German sociologist Max Weber (1864–1920), we conclude our case study by introducing a so called Ideal Type of humanistic management in a non-Western context. Lastly, we summarize our insights and discuss our contributions.

How Philosophy Shaped Japan’s Culture

“Buddhism is the fruit, Confucianism is the leaves, and Shinto is the trunk and the roots,” attributed to Prince Shōtoku (Asuka period, 538–710) (Grappard 2001:355)

Three early, successive periods of Japanese history, Asuka (538–710), Nara (710–794) and Heian (794–1185), witnessed the emergence of Japan’s three foundational traditions. In the Asuka Period, Confucianism and Buddhism were introduced into Japan via the Korean peninsula or directly from China (Heisig et al. 2011). During this time, Confucianism became established among the Japanese aristocratic elite; laws and regulations included modified Confucian (ceremonial etiquette, harmony) and Buddhist (personal development, harmony) elements (Boot 2005; Kasulis 2019). In the Nara period, the two philosophies were further assimilated into Japanese culture, gradually fusing with Japan’s naturalistic and holistic state religion (and later official national ideology) Shinto in the Heian period (Heisig et al. 2011; Kasulis 2019; Steben 2005). Eventually, Shinto incorporated the Buddhist worldview (interdependent, reciprocal relations between humans and their surroundings) and Confucian guidance on socially appropriate behavior (Kasulis 2019).

Confucian Elements in Japanese Culture: Social Order

In the Edo period (1600–1868), also known as the Tokugawa period, Neo-Confucianism² found its way into feudal Japan and became the most influential school of thought in Japan (Kasulis 2019). According to Paramore (2016) (Neo-) Confucianism had “a broad social and cultural penetration,” with increasing influence on “art, literature and other representations of general culture.” (p. 69) Most importantly, it introduced hierarchical relations and roles for social organization and order through the “importation” of the Confucian notion of the five relations (wu lun³ 五倫 go rin),⁴ meaning to achieve and maintain harmony, both at home and within the state (Nosco 1997). Confucianism “defined a place for each person and a set of shifting roles and contexts to be performed with ritual decorum.” (Kasulis 2019: n. p.) The hierarchy and etiquette (going back to the Confucian notion of li 礼 rei) are reflected in the Japanese notion of an individual’s “proper station” in society, which is tied to a specific social position, and related norms for appropriate behavior (Benedict 2005).

The Japanese Neo-Confucian school (shushi gaku 朱熹學) was based on the teachings of the Chinese Neo-Confucian Zhu Xi 朱熹 (1130–1200; Paul 2001a) and emphasized ritual/etiquette (li 禮/礼 rei), humaneness (ren 仁 jin), filial piety (xiao 孝 kō) and loyalty (zhu 忠 chū) (Davies and Ikeno 2002). Furthermore, it advocated “collective self-reform” based on individual and collective self-discipline; being a role model regarding moral self-cultivation and promoting it in others; and self-strengthening (coping with one’s situation through self-criticism and self-improvement) for a renewal of society (De Bary 1986).

Buddhist Elements in Japanese Culture: Deep Understanding and Effective Learning

The most prominent school of Japanese Buddhism is Zen Buddhism (Davies and Ikeno 2002). It incorporates elements of religious Daoism (Kasulis 2019) and classical Confucianism since Japanese Zen monks studied and taught the Confucian Classics (Boot 2005). Buddhism brought into Japan several new concepts and ways to perceive the world, including interdependency, relationality of events, karma; and that the world is in constant flux (Kasulis 2019). Additionally, an in-depth understanding of “emotions, ideas, mental states, and even philosophical assumptions” (ibid.:n.p.) was required to avoid a distorted perception of reality, i.e., self-delusion. Furthermore, Japanese Buddhism stressed “the importance of acting naturally, gracefully, and spontaneously in whatever task one is performing.” (Davies and Ikeno 2002:75) Mastering the way in which a certain activity or task is performed (dao 道 dō)⁵ implied following a specific, idealized form (形 kata), practicing it repeatedly until it was fully internalized and thus performed naturally, i.e., in a state of “no-mind” (Davies and Ikeno 2002:48). This concept from Zen Buddhism, which is also reflected in its Confucian and Daoist precursors, like ritual/etiquette (li 禮/礼 rei) and non-action or effortless action (wu wei 無為 mui) (Slingerland 2003b), has “greatly influenced all forms of cultural expression in Japan” (Davies and Ikeno 2002:75). The influence on Japanese aesthetics (Nosco 1997) is exemplified by activities such as the tea ceremony (sadō), flower arrangement (kadō), calligraphy (shodō) and the martial arts (budō) (Davies and Ikeno 2002).

Bushidō: The Coalescence of Confucian and Buddhist Influences

The “Way of the Samurai,” bushidō 武士道, builds on the Zen Buddhist concept of learning (Davies and Ikeno 2002), a practice that also stressed a high respect for the teacher (Rother 2010). Further, bushidō incorporated elements of hierarchical social organization (go rin) and aspects of moral self-cultivation of the mind and heart from classical Confucianism, especially that of the Confucian philosopher Mengzi (lat. Mencius, 371–289 BCE) (Chan 1969; De Bary 2004; Tucker and Steben 2005). Imported elements from later Neo-Confucianism particularly stressed the values of the samurai, such as loyalty, moral rectitude, temperance, and self-discipline, especially in times of peace when the samurai was not on active service (Tucker 2005). In this way, samurai training, based on Confucian, Daoist, and Zen Buddhist values, emphasized the cultivation of both mind and character, beyond mere physical skills, focusing on mental discipline and self-improvement (Bodiford 2005).

Meiji Period Thought: Social Order and Unity

In 1868, the Edo period came to an end through the Meiji Restoration, which reintroduced imperial rule as a means of modernization and abolished shogunate feudalism as it obstructed social mobility and progress (Paul 2001b). Additional pressure was added by a perceived threat of Western influence on Japan (Reitan 2010). Under these challenging circumstances, a new moral guidance was required to maintain national sovereignty and moral unity. Thus, Neo-Confucianism was abandoned as it came to be seen as backward and reactionary, while classic Confucian values such as loyalty, filial piety and other elements were retained⁶ (Paul 2001b; Reitan 2010). A renewal of Confucian morality, combined with new ways of learning (focus on practical utility vs. high-minded, impractical theory), and the inclusion of “Western” knowledge and science that was increasingly perceived as the foundations of “civilization” and power, represented the way to a better – “more civilized” –society (Reitan 2010). This renewal of Confucian morality is reflected in the values of the Meiji period: the “importance of social unity,” “survival of the state,” “loyal self-sacrifice for the social good,” “fulfilling one’s duties as a subject of the state” and “knowing one’s ‘station’ and proper role in society.” (Reitan 2010:xiii; Benedict 2005).

In brief, the values of Meiji period thought captured several classical Confucian values – especially those related to social order and unity, whereas bushidō continued the Zen Buddhist learning tradition stressing mental and moral self-improvement and self-discipline.

How Philosophy Shaped Japan’s Businesses

The philosophy that shaped Japan’s culture correspondingly impacted the economic realm, as business cannot be separated from society. Two examples that are also relevant in relation to Toyota will be explained in more detail here: the Japanese concept ie 家 (household or economic unit), which informed the business structure of Japanese companies and monozukuri 物作り(translated as “making things”), which informed the way of production and manufacturing in Japan. Both originated in the feudal times of Edo period (Bhappu 2000; Kovacic 2018).⁷

The Japanese concept ie plays an important role as the “institutional logic for Japanese corporate networks and Japanese management practices.” (Bhappu 2000:409) Originally, it presented the structural basis for farming and family businesses (Abito 1997; Bhappu 2000). Often lasting over generations, the ie was usually tied to a village but expanded beyond familial and regional clan structures (unlike in China at the same time).

The ie concept included not only economic and social aspects but most importantly also moral aspects (Bhappu 2000). The ie represented a village “kin” that was organized hierarchically both in terms of business and internal organizational structures and emphasized seniority and master-apprentice relations. Like the family, the behavior within the ie was governed by the ethical principles of kō 孝 (filial piety and respect for seniority), on 恩 (kindness) as well as giri 義理 (obligation, which also implies reciprocity). This cycle of indebtedness and return constitutes the essential basis for ethical action in Japan (Yui 1993). Both structure and behavior reflect Japan’s Confucian legacy, specifically the five relations (wu lun 五倫 go rin) (ibid.; Sawada 2005). Cohesion and continuation of the ie were enabled through social practices like participation in rituals to manifest moral character. The ie as the extended family also took care of its members, for example through lifetime employment and other welfare measures, which, in Japan, were historically always tied to the group or community (to bureaucracy in Western nations). In return, its members demonstrated dutifulness by being industrious and maximizing profit, thereby honoring its founders, i.e., ancestors (Yui 1993).

The ie concept is seen as foundational for the Japanese way of management for several reasons. First, the contemporary company structure of Japanese businesses, consisting of a main company and various subsidiaries, a supplier network called keiretsu 系列,⁸ is built in a similar vertical fashion like the former main ie (called honke 本家) and its branches (called bunke 分家) in the past (Bhappu 2000). Second, the hierarchy in organizational structures with its emphasis on seniority still prevails, with pay and promotion linked to it. Third, the ie in modern times is transformed into a corporate kin group, where the same reciprocal relations, involving commitment, responsibility, duty, and trust based on obligation, are continued (Pudelko 2005). Similarly, shared corporate rituals today characterize the corporate kin group, as well as an attitude of support and care that originated in the ie, promising job security (Bhappu 2000; Haak 2005; Pudelko 2005).

In essence, the ie concept, as a specific way of organizing a business, captures how Japan’s philosophical legacy of the Edo and Meiji period is deeply ingrained in its socio-cultural practices today. Its “social spirit” of putting its employees center stage (rather than the shareholders, as in the US) continues to prevail in the Japanese economy (Nagayasu 1993). For example, Toyota’s chairman Okuda (1999 to 2006), emphasized that it is crucial to support employees and to maintain their jobs also in difficult economic times like during the current economic downturn in Japan (Okuda 1999).

The Japanese word monozukuri consists of two syllables, “mono” (product) and “zukuri” (process of making or creation). Yet, according to Saito (2013) the meaning of monozukuri goes beyond just “making things.” It is a “maker’s philosophy of how to make things” (ibid.:1) rather than a technique or method (Saito 2013). More concretely it “denotes the Japanese spirit and way of making things as well as the process of making, the striving for improvement, artisanship, and dedication.” (Kovacic 2018:1) This concept is rooted in the philosophies of Confucianism and Zen Buddhism (Saito 2013). As it is related to artisanship or craftmanship, monozukuri rests on traditional learning methods such as shuhari 守破離⁹ (translated as “obedience—breakdown—breakaway”), that is, learning and eventually mastering kata (form) through repetition (Asai et al. 2011). Yet, monozukuri is not about mindless repetition but in its Zen sense about an effortless, eventually perfected activity that still requires an active and creative mind (Saito et al. 2013). This dimension of learning is captured by the idea of hitozukuri 人作り(first syllable “hito” means ‘human’) that complements monozukuri. Drawing on Confucian ideas, hitozukuri assumes that humans need to develop themselves continuously (ibid). Through hitozukuri a person becomes an expert in monozukuri (Cho and Saito 2020). Monozukuri as philosophy (or a culture) of craftmanship was passed on for generations and eventually provided the basis for Japan’s modern industry in the twentieth century (Asai et al. 2011:200).

The Toyota Case: Ethics and Operational Excellence

Yin (2018) presents a useful case study methodology. According to Yin (2018:112) a case study approach makes sense where the “research addresses either a descriptive question (what happened?) or an explanatory question (how or why did something happen?).” We chose a single-case study to demonstrate how a company implemented a human-centered approach. Toyota was our preferred choice, as the company has been researched already in detail but without giving attention to its ethical business practices. Our case study sources are based on published material that comprises extensive reports by Liker et al. and published corporate material by Toyota. We chose the work of Liker et al. because of the depth of access they were afforded by management to investigate the manufacturing processes and consult important internal documents (Liker 2004; Liker and Hoseus 2008; Liker and Convis 2012).¹⁰ In addition, many other sources are referenced. Accordingly, the purpose of this case study is to identify and outline the ethical foundations of the Toyota Way with its strong focus on the human being, based on the operational information provided in the work of Liker and his collaborators.¹¹ The study does not include interviews, direct observations, or participant observations by the authors, which are at this point not relevant to this study. Rather, we pursue an analysis in the style of the Weberian¹² Ideal Type – not grounded in empirical evidence, as it offers a useful approach to our case. Weber’s Ideal Type (orig. German: Idealtypus) is a “construction of certain elements of reality into a logically precise conception […].” (Gerth and Mills 1958:59) The Ideal Type is not the result of an empirical study on individual phenomena. It does not exist but rather acts as a kind of ideal benchmark. The purpose of the Ideal Type is to present the typical characteristics of a phenomenon and to establish a so called purely ideal “limiting concept” (orig. German: rein idealer Grenzbegriff) by over-emphasizing specific aspects of a phenomenon (cf. Metzler Lexikon Philosophie 2008). Thus, the Ideal Type is a distinctive type of a chosen subject that at the same time denotes the boundaries of a phenomenon. In another step, this Ideal Type can then be compared empirically with the individual manifestations of a phenomenon (cf. Swedberg 2018).

In line with Yin (2018) we thus utilize the Toyota case to extend previous research on (the implementation of) humanistic management, in our case: a human-centered approach. This includes developing an Ideal Type of a human-centered approach by analyzing publicly available material on and by Toyota.

Toyota’s Corporate Ethics: The Toyota Way

In 1892, Sakichi Toyoda (1867–1930), the founder of Toyota Industries Corporation, started his business with the production of manually powered looms (Reingold 1999). Toyoda himself was strongly committed to innovation, which he combined with humanistic aspirations. These were publicly expressed in the Toyoda Precepts in 1935, which aimed at consolidating and continuing its founder’s spirit (cf. Toyota Industries Corporation 2022).

From early on, Toyota’s production was built on the idea that efficiency should be reconciled with humanity, i.e., that machines were there to serve human beings (Becker 2006). Toyoda developed his automatic looms in a way so that they automatically stop when there is a defect. This concept was called jidōka 自働化 or “autonomation” (or “intelligent automation”) and significantly increased the efficiency of the looms (Imai 2012; Liker and Hoseus 2008; Reingold 1999). As Liker and Hoseus (2008:327) explain: “Sakichi did not regard this only as a productivity gain; he had succeeded in ‘freeing the person from the machine’”. Eiji Toyoda, Sakichi Toyoda’s nephew and later CEO of Toyota, further underscored this human-centered approach: “Employees provide their precious hours of life to the company, so we have to use it effectively; otherwise, we are wasting their life.” (ibid.)

The values of the Toyoda Precepts are still evident today¹³ in the practice and methods of the Toyota Way and thus continue as a driving force in the global firm (Toyota Europe, n.d.a; Liker 2021; Liker and Convis 2012; Liker and Hoseus 2008).

The Toyota Way builds on two pillars: “Continuous Improvement” and “Respect for the People.” Continuous Improvement or kaizen 改善 is Toyota’s corporate management philosophy and utilizes methods like genchi genbutsu 現地現物 (translated as “go and see”¹⁴). This includes a commitment to challenge complacency, necessitating values like creativity and courage. The second pillar, “Respect for the People,” draws on teamwork and demands respect (cf. Toyota Europe, n.d.a). Liker and Convis (2012:47–49) explain the Toyota Way in more detail due to their in-depth access to the company:

• “A lifelong pursuit of self-development so you can serve society

• Striving for perfection, recognizing that humans are never perfect

• Openness to self-development and continuous learning

• A self-critical attitude with reflections every day on your weaknesses and what you can improve

• Practice rooted in a deep understanding of reality

• A deep respect for more senior people who have invested in developing themselves and have something to teach

• The concept of “responsibility including responsibility for developing others as you develop yourself”

Figure 1 below provides a comparison of the Toyoda Precepts and the Toyota Way and identifies commonalities between Toyota’s values in the past and today.

Fig. 1

Common Themes between the Toyota Precepts and the Toyota Way

We now take a closer look at Toyota to explain in more detail the philosophical and socio-cultural aspects of the Toyota Way. We structured our case study along three common themes that connect the Toyota Precepts with the Toyota Way today (see Fig. 1 above). Where applicable, we also link these themes back to the socio-economic legacy of the ie (economic unit) that was the starting point for putting people center-stage in business and still seems to prevail until today.

Sense of Duty and Responsibility¹⁵

The common theme of “sense of duty and responsibility” includes accepting one’s social responsibility to develop oneself and to help others to develop. It is grounded in the moral practices of on (kindness) and giri (obligation, reciprocity). It further includes the aspect of honoring seniority, as this is a social practice still alive in Japan and can be therefore assumed under Toyota’s “respect for the people” (cf. Toyota Europe, n.d.a). Seniority is honored at Toyota through ways of promotion and by assigning the role of “teachers” (sensei) to senior employees within teams (cf. Convis and Liker 2012). Respecting seniority is also grounded in culturally ingrained moral practices of kō (filial piety) and on (kindness) that naturally emerged in the context of the hierarchical order of the ie.

Contributing to Company and Society

The identified common theme of “contributing to company and society” plays out on a more organizational level. Like the ie, Toyota pursues a long-term perspective, lasting over generations (Liker and Hoseus 2008) and takes care of its employees. This care is exemplified by measures like job rotation, learning of multiple skills, planned career development (Bhappu 2000; Pudelko 2005), and formerly also job security¹⁶ provided through lifetime employment (Liker and Convis 2012). This commitment leads to a virtuous circle in that the company can better retain highly trained and qualified people operating with higher efficiency to secure a competitive advantage through better products to serve society. This combination of caring for its employees and serving society is further reminiscent of Meiji period thought that stressed social unity through an ultimate harmonization of organizational and societal goals. It also reflects the founder’s values, continuing Toyota’s ancestral “spirit.” (cf. Yui 1993).

Self-Development and Continuous Learning

This theme is linked with certain assumptions regarding the human being implicit in the Toyota Way that reflect its cultural-philosophical legacy of (Neo-) Confucianism, Zen Buddhism, bushidō, and Meiji period thought¹⁷: First, humans are not perfect; second, self-development is a precondition for contributing to society, to which the company and its employees inextricably belong (cf. Toyota Europe, n.d.a; Liker and Convis 2012). At Toyota, the assumed “imperfection” of humans implies a need for self-improvement and self-development, which requires critical self-reflection to address individual weaknesses (cf. Liker and Convis 2012). This goes back to the classical Confucian notion of self-cultivation.

The company’s approach to self-improvement and self-development is captured by its corporate management philosophy kaizen, which rests on uniquely Japanese cultural-specific approaches, concepts, and ideas. Kaizen emphasizes incremental continuous improvement regarding work practices and personal efficiency through the elimination of wasteful motion (Imai 2012). Kaizen pushes the employee to develop deeper, reflective thinking to solve problems autonomously and effectively (Liker and Hoseus 2008). Deeper thinking and understanding are further promoted through genchi genbutsu, a corporate practice that implies thorough observations at the work site or shop-floor level, genba (or gemba) 現場, the center of a manufacturing company. Yet, kaizen is not only about improved mental capacities but also improvement of the physical workflow. Here, Toyota applies the traditional way of learning, shuhari, to master a specific way or dō of artistry (also found in martial arts or tea ceremony). At Toyota, the shuhari learning cycle builds on a deeper understanding gained through genchi genbutsu; through internalizing and routinizing the observed, underlying standard pattern (kata) of a specific task or action (shu stage); through identifying opportunities for further improvement of already established routines and giving it a more “personal” style (ha stage); and through naturally or effortlessly (mui) accomplishing one’s task with perfection in one’s individual style (ri stage).

Like traditional learning methods, Toyota’s learning process builds on a hierarchical teacher-student relationship that implies a senior person being a mentor and acting as teacher or master, sensei 先生 (Liker and Convis 2012). During the learning process, the mentor, i.e., the leader,¹⁸ challenges student(s) by requiring them to think deeply and to self-reflect, hansei 反省 (Liker 2004). The learning process may appear rigid, as the strong emphasis on standardized routines and patterns are seemingly incompatible with Western values like autonomy. Yet, perfected routines imply ease and opportunity for freedom, creativity, and improvement that are reminiscent of the Confucian notion of ritual (li 礼/禮 rei) and Daoist non-action (wuwei 無為 mui). Moreover, agreements upon standards reduce mistakes¹⁹ and provide measures for improvement (Liker and Convis 2012).

The management philosophy kaizen together with the traditional learning method that is utilized to realize continuous improvement connect with the Japanese concepts of monozukuri and hitozukuri that Toyota also adopted. Toyota has increasingly communicated these concepts in connection with the Toyota Way since the early 2000s to emphasize its Japanese roots (“Japanese originality”) (Toyota Global, n.d.e).²⁰

Figure 2 below provides a systematic overview of how the Toyota Way links with Japanese cultural aspects and philosophy via its values and related implementation.

Fig. 2

The Toyota Way and its cultural and philosophical roots

The overview below (Table 1) shows what concepts at Toyota were invented by the company itself and what concepts originated in Japanese philosophy and culture, and where only adopted by Toyota. It is important to understand where the concepts originated from, as this also points to possible overlaps with management practices of other Japanese companies.

Table 1 Concepts utilized at Toyota and their main source of origin

Lastly, the following figure illustrates potential overlaps between the Toyota Way and practices in the West. The main concepts of the Toyota Way are also reflected in practices by Western companies to some extent. There are also Western (types of) companies being well-known for their social responsibility approach. However, whether this approach also includes personal social responsibility for developing oneself and others for the greater good of society beyond socially responsible products is not known. Particularly the approach to self-development carries strong Confucian characteristics (Fig. 3).

Fig. 3

The Toyota Way, its cultural roots and how it links to the West

Ethics in Toyota’s Operations and Organizational Behavior: The Toyota Production System

Our purpose in this section is limited to understanding the linkages between Japanese ethics and Toyota’s organizational behavior, and not to present a detailed discussion of operations. Thus, the focus in this section is on the ethical aspects of Toyota’s business practice, i.e., how the human-centered approach described in the previous part has been implemented in the company’s operations. We explain the human-centered approach in practice along the common themes already identified in the conceptual part.

Toyota is a hierarchically organized automobile manufacturer with discrete steps in the manufacturing process, where each subsequent step in the process depends upon the previous one. This makes the attribution of a Japanese form of Scientific Management appropriate to Toyota’s manufacturing operations.²¹

At Toyota, business practices are organized to enhance the company’s contribution to society by producing high-quality products strongly focused on customer value (Toyota Global, n.d.c ). Central to the firm’s managerial philosophy enunciated by Akio Toyoda (CEO since 2009 and grandson of founder Kiichiro Toyoda) is a commitment to quality, innovation, and building better cars.

“All of us at Toyota are determined to demonstrate our gratitude to our customers… It means building relationships of trust and mutual respect with customers and also with business partners, with members of the community at large, and with our fellow team members at Toyota… Those are the values that underlie our monozukuri commitment to conscientious manufacturing. They are values that people at Toyota have expressed over the years in the

Toyota Precepts, in the Toyota Guiding Principles, and in the Toyota Way… Creating “always better cars” is our chief focus as an automaker. And our success in earning smiles from our customers and from other people in our host communities contributes to community vitality. As I have noted, it enables us to generate steady employment and to engage in mutually beneficial business with partners.” (Akio Toyoda, n.d.:2,3)

These business practices, which are described in more detail below, also demonstrate how social and human capital contribute to Toyota’s success through the efforts to continuously improve and to be forward-looking and thinking.

Toyota Production System’s Contributions to Company and Society

The TPS is a holistic system of continuous improvement of manufacturing processes and best practices. In this system, no group or individual can achieve success without everyone voluntarily working together (Marksberry 2019:9,13). When coupled with Japanese ethical principles (such as continuous learning, self-improvement, relationships, and collectivism) the TPS is both Taylorist and Japanese. It implies not only the development of best practices but also their continuous improvement.

The TPS is rooted in a lean production system, focusing on customer value (Becker 2006). Hierarchy does not begin with senior management pushing their orders top-down but with customers and society. Toyota customers are at the apex of a “pull” approach, where customer requirements “pull” products through the development and manufacturing systems, i.e., determine all behaviors and activities through the organization (Liker and Hoseus 2008; Liker 2021; cf. Liker and Morgan 2019). This approach is illustrated by the development of the Lexus and Prius, which were innovative products at launch and based upon a detailed understanding of customer requirements (Liker 2004).²² This emphasis on customer requirements flows down the hierarchy throughout the organization and its suppliers. It creates a socially responsible process that encompasses all company activities, leading to harmonious relationships between the company and its customers that eventually extend to the larger community. This focus on customer requirements is also the foundation of Toyota’s idea of social contribution (Becker 2006). It ensures that the organization is outwardly oriented and connected with its markets and social environment.

Self-Development and Continuous Learning in the Toyota’s Production System

This section explains how Toyota’s management philosophy of kaizen (self-improvement) is implemented through corporate practices, such as shuhari (routinization through self-development), hansei (self-reflection), genchi genbutsu (translated as “go and see”) and hoshin kanri 方針管理(translated as “catch ball” or direction).

Both lean and Total Quality Management (TQM) approaches are linked with Toyota’s overarching imperative of kaizen, continuous improvement (Imai 2012:passim). As a lean production system, it requires a high level of efficiency in production processes, and the elimination of waste through kaizen (Chiarini et al. 2018). Wasteful behaviors on all levels need to be identified and improved, starting from strategic planning down to the one-minute routines on the factory floor (cf. Ohno 1988; Reingold 1999). In the process of identification and improvement, all levels of the organization at Toyota, from senior managers down to factory floor workers in the plants, are involved. This inclusive involvement of all employees encourages them to both work and think, engage in finding solutions and contribute to organizational success. In pursuing kaizen, the TPS relies on processes and routines that are learned through shuhari and implemented by observing  and implemented by observing a balance between standard behaviors and individual responsibility through teamwork. Standardized behaviors in the form of routines must be executed not mechanically, but with a worker’s full engagement. This approach to routinization can be seen as humanistic management allowing freedom, creativity, and individual development to meet targets, reach challenging and complex objectives, and identify further opportunities for improvement (Liker 2004; Toledo et al. 2019). In effect, Toyota’s way of routinization as a part of kaizen combines planned activities with craftsman-like behaviors and engages workers as human beings (Becker 2006). Kaizen’s small, incremental changes can result in significant transformations in knowledge, quality improvement, cost reductions, innovative products, customer satisfaction, and eventually profit.

Routinization through self-development (shuhari) also involves self-reflection (hansei). Hansei is a corporate ritual (in this sense, it connects with li 礼 rei) related to self-improvement and closely coupled with its team-based structure (Liker 2004). Both individuals and teams are expected to assess their performance to identify and rectify “weaknesses.” (Liker 2021:285–286) This process challenges the status quo and contributes to improvements throughout the organization by transferring appropriate knowledge, processes, and routines. shuhari and hansei are closely related to other corporate practices (or ritual, rei), such as genchi genbutsu and gemba (work site or place), which Akio Toyoda defined as:

“Whenever there are real objects there is gemba (work site). When customers drive our cars the gemba is how they are using our products and what works for them and what causes them difficulties…. Going to the gemba means observing firsthand how our products are being designed, built, and used, and what problems we have. There are always problems because we are never perfect. The only way we can really understand the problem is at the gemba.” (Liker and Convis 2012:xi, italics in the original, cf. Ohno 1988:78)

Focusing on the gemba is a Japanese attitude intrinsic to team members as well as management. It is not uncommon for all levels of management to be present at workplaces, including factory floors, to identify problems, develop solutions, and for employees to learn from senior management with years of experience in manufacturing directly at the gemba (Liker and Convis 2012). It allows managers to demonstrate their interest in employees and provides first-hand information about conditions at the worksite. Through this process, which amounts to a better understanding of routines, waste is eliminated, and work and product quality are improved.

Hoshin kanri is another process and corporate ritual at Toyota. This process connects all levels of management and employees in a reciprocal performance dialogue (Liker 2004, 2021). In the hoshin kanri process, management transmits performance objectives in areas such as quality and waste reduction down the hierarchy. The objectives are “caught” by the appropriate personnel who then evaluate their ability to achieve them. They communicate their estimate on the feasibility of meeting this new objective, as well as potentially required changes, back to management, who “catch” the response. In essence, hoshin kanri engages all units and members of the organization, by communicating and executing high-level goals from leadership to working levels (Marksberry 2019). As Tennent and Roberts observed:

“Hoshin kanri is a strategic planning process designed to align corporate goals with operational processes and behaviors. It is a critical element that requires continuous communication to ensure the development of appropriate targets and means, and their deployment at all levels in the organization. Processes must be developed to ensure feedback in multi-directional horizons, which requires a company commitment to employee involvement and continuous improvement.” (Tennent and Roberts 2001:291)

This management practice is important for TPS implementation, as it provides a top-down goal-setting and bottom-up means of achievement mechanism that allows for the alignment of various organizational units from larger to smaller (Liker and Morgan 2019; Marksberry 2019; Monden and Ohno 2011).

Reciprocity, trust, and respect play a central role in hoshin kanri because employees understand that management will not communicate unreasonable and unachievable objectives, which would negate the entire Toyota Way. Managers appreciate that employees have expert knowledge of the job and team tasks and will provide a frank evaluation. However, management also knows that improvement and waste reduction principles embedded in the Toyota Way will allow them to establish difficult objectives and catalyze organizational, team, and individual improvement. These objectives will enable employees and teams to stretch and extend themselves, as well as to develop creative ways to achieve difficult tasks because the right people have been selected and trained. All these practices in the context of kaizen add a significant socio-ethical and human dimension to the TPS (Liker 2004; Naruse 1991).

Toyota Product Development System’s Contributions to the Company and Society

Like the TPS, the Toyota Product Development (TPD) system is contributing to society through the recognition of societal needs, thus putting customer value first. This section explains how this contribution happens in the TPD system.

Manufacturing routines have limited flexibility and room for creativity, though Toyota incorporates as much as possible into the TPS. In design and development, the process, led by a chief engineer, has routines but of necessity needs to be open, flexible, and creative (Liker et al. 1998). In many ways, the Toyota Product Development system is equally important to the Toyota Production System (Cleveland 2006). Put simply, it would be difficult to implement the Toyota Way and build high-quality automobiles without designs developed with efficient manufacturing and customer requirements included from the beginning, the seamlessness essential to The Toyota Way.

The Lexus was Toyota’s entry into the North American luxury car market, conceived as an automobile that, through high performance and elegant styling, would change the concept of automobile luxury (Liker 2004). Since the customer is at the center of the Toyota Way, the first activity was to understand the meaning of luxury for customers of Mercedes, BMW, Jaguar, Cadillac, and other luxury brands. To accomplish this, development personnel held focus group meetings with owners of various luxury brands and conducted competitive benchmarking. The new product was designed in a way so to realise two basic Toyota values: improving customers’ lives (in this case through delivering reliable high performance and design) and thereby contributing to society, as well as contributing to the long-term competitive advantage of the company.

When the Prius was developed, environmental issues were becoming more important (Becker 2006; Reingold 1999). Applying hoshin kanri, management responded with a hybrid propulsion system that would not only be more efficient and less polluting but also give Toyota a first-mover advantage in a new market. This presented a challenge to Toyota since the company had not produced a hybrid previously. A commercially successful one was not available until the Prius.²³ To successfully manage this challenge, Toyota decided to pursue two fundamentally new goals in its design and production process: “1. Develop a new method for manufacturing cars in the twenty-first century” and “2. Develop a new method of developing cars for the twenty-first century.” (Liker 2004:52).

Thus, the design and development of the Lexus and the Prius illustrate how Toyota was able to meet customer needs and contribute to both customers’ and humanity’s quality of life.

Figure 4 below illustrates the Toyota Way and its practice.

Fig. 4

The Toyota Way and its practice

Toyota as an ‘Ideal Type’ of Humanistic Management

This section brings together the insights on Toyota’s human-centered approach gained from the analysis of the company’s corporate ethics, the Toyota Way, and its manufacturing and design processes.

A so called Ideal Type of a human-centered approach based on the Toyota case comprises the following features: First, on an intangible level, there is a general humanistic attitude vis-à-vis the employees and society. At Toyota this is visible early on through the statements by Sakichi Toyoda (“freeing the person from the machine”, Liker and Hoseus 2008:327) and his nephew Eiji Toyoda (the company should not waste their employees time with inefficient processes).

Second, on a material but mainly conceptual level, there is an explicit corporate ethics statement reflective of a humanistic attitude. At Toyota, these were the Precepts in the beginning and later the Toyota Way. The humanistic attitude is reflected through the two pillars of the Toyota Way, “continuous improvement” and “respect for the people,” (cf. Toyota Europe, n.d.a) but also through Toyota’s aim of serving society (cf. Liker and Convis 2012:47–49).

Third, on a material and practical level, this statement is then implemented through several human-centered measures. For example, “respect for the people” at Toyota is realized through the company’s commitment to job security, lifelong employment and a guaranteed pay rise through a hierarchical structure based on seniority,²⁴ in the company’s investment in its employees through numerous internal training opportunities (Liker and Convis 2012), and in emphasizing learning and improvement with the help of a teacher (sensei) as opposed to a blaming culture. The second value, “continuous improvement,” implies self-development which is seen as a precondition for contributing to society.²⁵ Toyota contributes to society through excellent products and product quality. These are the result of Toyota’s operational excellence driven by the company’s values, such as self-development, striving for perfection, continuous learning, and a self-critical attitude, as emphasized by the Toyota Way (cf. Toyota Europe, n.d.a; Liker and Convis 2012).

Fourth, also on a material and practical level, there are corporate practices or management techniques that further institutionalize a company’s human-centered approach. At Toyota this is happening through kaizen, which is based on constant self-development and learning for continuously improved processes leading to excellent products.²⁶ Self-improvement, although happening on the individual level, also has a communal dimension at Toyota. In line with the Confucian tradition of self-cultivation to develop and maintain social harmony (Nosco 1997), self-improvement is meant to benefit the group or collective, for example, the team but also the entire company, and society at large.²⁷²⁸

Conclusion

As a late modernizer, Meiji Japan was able to benefit from the knowledge and experience of Western industrialization, such as Taylorism with its mechanistic management approach (Liker 2021). Toyota has successfully utilized a form of Japanese Taylorism that creates a unique approach to its manufacturing processes by connecting a mechanistic approach with an organic and humanistic one. The latter two are reflected in the integration of Japanese cultural values, such as harmony, mutually beneficial relationships, respect, trust, and the idea of collective or communal success (Warner 1994).

Our article delivered the following insights. First, through an in-depth case study on Toyota we identified several humanistic values through an analysis of the company’s corporate ethics. We further investigated how the company implements its humanistic values through a human-centered management approach visible in its manufacturing and design processes. We linked the insights gained from our philosophical and socio-cultural investigation with Toyota’s corporate practice, humanistic ethics, operational approach, and corporate goal of social contribution. Here, we identified kaizen, Toyota’s management philosophy (or technique) as facilitating the institutionalization of a human-centered approach in the company. We also identified further organizational practices rooted in the humanistic Confucian concept of rei (ritual) such as hoshin kanri (“catch ball”) and hansei (“self-reflection”) that contribute to the dissemination of Toyota’s humanistic values. In brief, with kaizen and related corporate practices, the company aims to contribute to society, with social contribution clearly defined as creating “customer value,” that is realized through a strong customer focus in product development and the highest quality in manufacturing.

Second, we expanded previous research on humanistic management in a non-Western context (see Kuriyama 2021) which remains vastly underexplored until today despite the hype around Japanese management in the 1980s and 1990s. Here, we identified several aspects linked to Toyota’s management practices, corporate ethics, and the company’s corporate goal that are in line with Kuriyama’s (2021) analysis regarding humanistic management at Panasonic, such as the principle of seniority for promotion and pay rise and contribution to society. In addition, we also found the Toyota-born concept of jidōka (autonomation) and other Japanese concepts implemented by Toyota, like kaizen (continuous improvement; self-development), and shuhari (the learning cycle that has its origins in mastering a trait assisted by a sensei, teacher/mentor) relevant in the context of humanistic management in a non-Western company that is more influenced by Asian philosophy and Confucian humanism than by Judeo-Christian ethical concepts and principles. Based on a Weberian analytical approach we then developed a so-called Ideal Type of humanistic management in a Japanese context, which could be utilized for further empirical research.

Third, we approached the topic of ethical foundations in Japanese business conceptually by providing a thorough and detailed analysis of Japan’s philosophical and socio-cultural foundations, such as the various Japanese philosophies and their socio-cultural ‘product’ of organization, the Japanese ie.

This case further illustrates that ethics and profits are not only reconcilable but also that ethics indeed leads to excellence (cf. Solomon 1992) in many areas, for example in products or customer service. Consistently implementing a corporate philosophy that rests on ethics and encourages ethical behavior is also supportive of (global) business success (Becker 2006).²⁹ Furthermore, Japanese humanistic ethics in business teaches us a broader and holistic understanding of “contributing to society.” Whereas CSR practices are usually planned and implemented by a separate department, such as Corporate Responsibility, and are often isolated from the main business operations, Toyota illustrates that every single employee can contribute to society through measures like self-reflection and self-improvement in operations that are grounded in humanistic assumptions.

In summary, the Toyota case study brings to light the strong communal character of business in Japan, one that is based on harmony, cooperation, diligence, and dedication (Yui 2013). A business in Japan is much more “restricted by social norms in deciding its strategic goals” (Kobayashi 1993:211) than businesses in Western nations, due to a persisting socio-ethical fabric that permeates not only society but is continued in business (cf. Wokutch and Shepard 1999). However, not only does the strong socio-ethical fabric influence business behavior, but also the idea that business and ethics are not contradictory and are, instead, perceived as two sides of the same coin. Whereas morality is the principle of spiritual life, the economy is the principle of material life (Nagayasu 1993, referring to Hiroike, the founder of Japanese Moralogy). This is mirrored by Toyota, which became very profitable through its humanistic aspirations within and outside the company of serving society by providing excellent product quality, which in turn is the result of dedicated and diligent workers. Readers may think this is a rosy picture of Toyota’s business, yet the Toyota Way is a demanding methodology for ethical business practices.

As with all conceptual research, we too arrived at limits regarding more detailed empirical data. Single-case studies generally have their limits when it comes to generalizations to be deducted from such studies. Since this is a difficult endeavor, we chose to utilize this case study to develop a so called Ideal Type that functions as a first benchmark for other case studies and based on more empirical data gained, could be adjusted further.

The case study on humanistic management at Toyota could be further expanded through empirical studies drawing on employee surveys or interviews. Our case does not include this type of data, as it was not a requirement for developing an Ideal Type of humanistic management in a Japanese context. To test the validity of this first Ideal Type, we suggest conducting more case studies, comparing existing ones against this newly developed type, and to also utilize other types of data to see whether this is an adequate theoretical model.

Furthermore, comparative studies of other Asian countries and humanistic business practices (for example South Korea) would be helpful to get a better idea of humanistic management in Asia more broadly. It also helps to better delineate and understand the socio-cultural and philosophical differences within Asia, despite their shared roots in Confucianism. A more nuanced view across “Confucian” societies would further advance non-Western perspectives of ethical practices.