• The Convergence

The Toyota Way: A solution to Singapore’s productivity challenge

By Quek Ee Pin, Editor


Introduction


In recent years, productivity has become one of the trending buzzwords with regard to Singapore’s economic growth. Of late, the government has introduced a slew of measures, such as promoting skills-upgrading through SkillsFuture and granting small-medium enterprises (SMEs) various financial aid, to improve the productivity of businesses. However, productivity growth remains uneven across different industries, and has been particularly slow for industries with a heavy reliance on foreign workers. [1]


To the common man, one may wonder why is there a need to focus on productivity growth?


Macroeconomic theory suggests that a country’s economic output is dependent on its resource inputs, usually defined in the form of labour, capital, natural resources and technology. Thus, there are two ways for an economy to sustain its growth: either by increasing the amount of inputs or by making more efficient use of existing ones. With Singapore’s lack of natural resources, the country can only depend on increasing and making a more efficient use of inputs such as labour and capital.


Focusing only on increasing inputs for labour and capital has its disadvantages. Both labour and capital experience diminishing returns, which means that as more labour and capital are utilised, the returns for economic growth decrease until additional inputs no longer bring about an increase in economic growth.


Growth in labour, for example, is limited by the number of working hours one can work. Choosing to combat this by hiring more people can lead to a detrimental impact on real incomes, causing them to fall. Similarly, given low reproduction rates within the population, labour growth requires Singapore to bring in either cheap labour in the form of migrant workers, or foreign talent in the form of expatriates.


The influx of foreign workers in recent years has led to local issues such as overcrowding of Singapore’s transport services, citizen dissatisfaction regarding the job market and xenophobia against foreign workers. With regard to the latter, there have been concerns that attracting foreign PMETs - professionals, managers, executives and technicians - displaces the local talents in the workforce.


In light of these issues, the need for productivity takes on a renewed, localised focus. By ensuring productivity growth amongst the local workforce, Singapore can reduce its growing dependence on foreign manpower whilst still sustaining long-term economic growth. The challenge now lies in finding new and alternative approaches that can help generate sustained productivity growth.


The Toyota Way


To most Singaporeans, Toyota is likely to be a household name for automobiles. The brand and its luxury marque Lexus are a common sight on Singapore’s streets and carries the status of the best-selling car in the country. [2] This popularity is also seen worldwide, where in spite of the COVID-19 pandemic, Toyota has regained the title as the world’s largest automobile manufacturer in 2020. [3]


Toyota's luxury marque, Lexus. Photo: Christopher Tan (The Straits Times)

While numerous automobile manufacturers possess a similar scale and reach as Toyota, none have come close to matching its long-standing reputation as a reliable and affordable manufacturer of automobiles. Much of this success has been attributed to the Toyota Production System (TPS) and the ‘Toyota Way’, the term first coined by Professor Jeffrey Liker from the University of Michigan.


In referencing the Toyota Way, Liker lists 14 principles that he believes explains Toyota’s success. These principles include Toyota’s belief in systems thinking, particularly its focus on long-term results rather than short-term gains and its employee-centred working culture. [4]


However, the most important aspect is arguably the company’s adoption of the kaizen philosophy. Translated directly to Chinese and Japanese, kaizen (改善) is defined as “improvement” and refers to Toyota’s philosophy of continuous improvement with no set objective in mind.


In other words, kaizen is a never-ending process, with a constant development of new ideas that may help to improve the organisation’s collective productivity. For Toyota, this means progressive improvements in its manufacturing process, such as rectifying defects along the production line to improving the quality of its products over time.


With regard to Singapore’s productivity, the Toyota Way presents an extremely relevant case study in finding new solutions to promote productivity growth. Adopting kaizen can potentially provide a guide for consistent and collective improvement for Singaporean firms. This could bring about the productivity gains necessary for the country to remain successful on a global stage.


However, it should be noted that Toyota’s success is not merely down to its production process or kaizen. Another key facet of the Toyota Way is the focus on people.


For Toyota, each and every employee is seen as having the ability and knowledge to contribute towards kaizen. Fundamentally, this results in employees taking ownership and pride in their work, as well as respecting the ideas and contributions of seniors and subordinates. This is seen across all departments, from its main office to the manufacturing line.


This approach has led Toyota to not only accept the existing differences amongst their employees, but rather embrace them. Instead of enforcing a top-down corporate culture led by compromises, Toyota seeks to utilise these differences to find effective solutions that can help improve the efficiency and quality of its manufacturing process. [5]


All in all, the Toyota Way encompasses a philosophy of continuous improvement and an inclusive work environment, combining a result-based and a human-centric focus to ensure productivity growth.


Individual vs Collective Productivity


Toyota and Singapore are alike in more ways than one. In its early years, the company experienced financial difficulties (almost going bankrupt in 1949). [6] This has resulted in the company developing a ‘paranoid’ corporate culture that focuses on frugality and survival. [5] This mindset to save for a rainy day draws parallels to Singapore’s rise as an independent nation and its long-standing fiscal prudence.


Given these similarities, it is possible to consider Toyota Way as a solution to achieve Singapore’s productivity goals. By adopting a similar approach to the Toyota Way, Singapore can achieve productivity gains by shifting its focus on improving collective productivity.


Over the past decade, numerous policies and initiatives have been introduced to increase productivity, such as promoting life-long learning via SkillsFuture and industry roadmaps for SMEs. However, productivity in Singapore is not addressed holistically. Rather, policies are implemented in an isolated manner, some targeted at individuals while others focusing on firms.


Hence, existing policies may create unnecessary overlaps, whereby improving a worker’s productivity does not necessarily translate into higher output for the firm. These issues highlight how existing policies are lacking a grand philosophy that can effectively bind them together in achieving greater productivity growth.


The next step then should be to encourage collective productivity amongst workers. Rather than focusing on the individual, policies should focus on the productivity of workers as a collective unit. These policies can be potentially derived from current workings of the Toyota Way.


The Singapore Way?


Given Singapore’s lack of resources, its obsession with productivity growth is a necessary one, However, there is a need for constant revision and improvements to its existing policies.


These improvements may become harder to come by as Singapore’s economy develops further and the law of diminishing returns set in. Thus, Singapore must look to adopt new and alternative approaches in order to remain economically relevant globally.


Toyota’s continued success as the world’s leading manufacturer of automobiles presents a potential case study for Singapore to learn from, in its quest for productivity. Using the Toyota Way as an inspiration, Singapore can work towards building a broader philosophy on productivity - one that encompasses a human-centric approach towards management and the adoption of kaizen.


Such an approach will help tie in with the government’s long-term objective of creating a caring and inclusive society for all. But of course, Singapore should not blindly adopt the values and methods embedded within the ‘Toyota Way’. By learning from it, the country can hopefully also craft its own ‘Singapore Way’ to achieve sustained productivity gains in the long run.




Bibliography:


[1] Toh, Benjamin, and Ting, Jessica. 2020. “Drivers of Labour Productivity Growth in Singapore.” Economic Survey of Singapore Third Quarter 2020, 42-53. (https://www.mti.gov.sg/-/media/MTI/Resources/Economic-Survey-of-Singapore/2020/Economic-Survey-of-Singapore-Third-Quarter-2020/FA_3Q20.pdf)


[2] Tan, Christopher. 2021. “Toyota retains top sales spot in Singapore in turbulent year, with BMW close behind.” The Straits TImes, January 20, 2021. (https://www.straitstimes.com/singapore/transport/toyota-retains-top-sales-spot-with-bmw-close-behind-in-turbulent-year)


[3] Nikkei Asia. 2021. “Toyota returns as globe's top automaker after 5 years.” Nikkei Asia, January 28, 2021. (https://asia.nikkei.com/Business/Automobiles/Toyota-returns-as-globe-s-top-automaker-after-5-years)


[4] Liker, Jeffrey K. 2021. The Toyota Way: 14 Management Principles from the World's Greatest Manufacturer, 2nd Edition. New York: McGraw-Hill.


[5] Takeuchi, Hirotaka, Osono, Emi, and Shimizu, Norihiko. 2008. “The Contradictions That Drive Toyota’s Success.” Harvard Business Review, June 2008. (https://hbr.org/2008/06/the-contradictions-that-drive-toyotas-success)


[6] Toyota. n.d. “Organizational Changes. July 1950: Toyota Motor Sales Co., Ltd. Established.” Accessed March 15, 2021. (https://www.toyota-global.com/company/history_of_toyota/75years/data/company_information/management_and_finances/management/organizational/index.html)



Ee Pin is an Editor for The Convergence majoring in Economics. He feels that politics should not be polarising, rather it should seek to include everyone in society. By taking an informed and nuanced stance in his articles, he hopes to inform readers on subject matters, allowing for more balanced and constructive debates. Some of his hobbies include photography or watching sports such as Football and Formula 1. He is usually seen drinking his coffee in the morning while randomly browsing through the latest videos on his YouTube feed.


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