This article was originally published in MIT Sloan Management Review by Keivan Zokaei in March 2014.

For decades, Toyota caught the imagination of managers around the world. It became an emblematic case for everything from quality and reliability to employee engagement and continuous improvement. Recent years have tarnished its image somewhat due to recalls related to manufacturing defects once unheard of in a production system synonymous with efficiency, productivity and customer satisfaction. (The most recent product recalls came within two days of each other last month.)

Yet despite its recent troubles, Toyota remains highly regarded by both its customer base and its peers. That’s in part due to a lesson its president (and grandson of the founder of the company) Akio Toyoda took from the most serious recall incident in 2010. As described by business journalism professor Micheline Maynard in a 2012 Forbes article about the episode, the company relearned that it had “to earn [its] reputation every minute.”

To understand Toyota, you have to understand its long-standing corporate philosophy. The company’s core values revolve around having a sense of duty to contribute to the development and the welfare of the society at large rather than using the company just as a money-making machine. Toyota’s official website puts these values in terms of a concept that may be unfamiliar outside of Japan:

“Toyota has always sought to contribute to society through the monozukuri philosophy — an all-encompassing approach to manufacturing. In its application of monozukuri to the production of automobiles, Toyota has pursued a sustainable method of making its cars ever more safe, environmentally friendly, reliable and comfortable.”

The Japanese word monozukuri has a literal meaning of “production” — “mono” is the thing that is made or created, and “zukuri” refers to the act of making. Monozukuri, however, has meanings beyond the literal; it can be best compared to the word “craftsmanship” in English, which describes the making of an object with particular skill, care or artistry.

There is, however, a difference between the two concepts: “craftsmanship” emphasizes the skill and attentiveness of the maker, whereas monozukuri focuses more on the qualities of the object being made and less on the qualities of the person making it. This subtle difference reflects the Japanese sense of responsibility for the inherent value of the materials of production and the Japanese culture’s deep respect for the world at large, both animate and inanimate.

In the Japanese tradition of monozukuri, the craftsman takes great care using resources not to be wasteful or frivolous. When an item or human effort is taken into use, there needs to be a benefit for the society in the result — while, at the same time, the balance between production, resources and the society should be maintained. You could even say that monozukuri is the older sister of the concept of sustainable manufacturing.

On the whole, Toyota’s environmental performance is driven far more by a commitment to monozukuri and the company’s role in the society as a value-adding corporate citizen than it is by environmental regulations. Our recent benchmark study of the environmental performance of various automakers, published in Creating a Lean and Green Business System (CRC Press, 2013), shows that Toyota outperforms the rest of the industry in terms of the direct emissions measured in tons of CO₂ per vehicle manufactured.

Toyota is also actively developing greener vehicles to reduce end-to-end life-cycle environmental impacts. The company’s remarkable success in hybrid technologies is soon to be followed with the introduction of several plug-in hybrid, electric vehicle and fuel cell hybrid vehicle platforms.

Over many years, Toyota has developed rigorous structures for generating environmental strategies and integrating it into its daily operations through meticulous hoshin planning, a system for strategic planning that creates implementation plans that align at all levels, so that all personnel are working toward the objective in concert. Across all Toyota plants, there are cascading measures in place at all levels, from the top board to operators, to determine the correct direction. Steve Hope, general manager, Environmental Affairs and Corporate Citizenship, for Toyota Motor Europe, says that when opportunities are identified, Toyota employees are encouraged to weigh those opportunities by applying five criteria. In the order of priority, these are: safety, environment, quality, production and cost.

Sustainable resource use also includes human resources, and monozukuri is also about deeply respecting the individuals who do the job. Mindless repetition of tasks is anathema to this mindset. Workers “bring their mind to work” and are fully empowered and trained to deal with different situations, creating an elevated sense of ownership.

Toyota’s philosophical position holds that it is crucial for workers not to get robbed of their right to pride of workmanship and to gain intrinsic satisfaction in what they do. In this concept, making products is also making people (hitozukuri) because the company’s manufacturing workforce is instilled with pride and passion for their jobs. According to this line of thinking, Toyota’s green vehicle technologies and other lean or green initiatives will not work without the full engagement of its people. Mutual trust, empowerment, lifetime employment and the inquisitive culture of genchi genbutsu (go to workplace and see) are all tenets through which Toyota expresses its respect for its people. As Maynard notes in the Forbes article, failure to live up to genchi genbutsu was intrinsic in the problems that developed in Toyota’s quality control — and re-establishing it was among the first steps CEO Toyoda took in the period immediately following the 2010 crisis.

Toyota's temple

Toyota’s Temple.

Throughout its history, challenges large and small have reinforced Toyota’s discipline and stoked its passion for innovation. In short, the company’s method for rejuvenating itself post-crisis is going back to its guiding principles. By practicing its monozukuri mantra, Toyota hopes to resume its leadership in creating a more dynamic — and more sustainable — automotive sector and shape a more harmonious future for manufacturing.