Inside Toyota: Leadership Conflict Turns Destructive

Survival of the fittest requires conflict; that's as true in the boardroom as it is in the wild. In that sense, conflict isn't just a good thing, it's a key ingredient in all great organizations. It's the manner in which businesses test new ideas and up-coming leadership talent.

But there comes a point when otherwise healthy conflict turns toxic, even destructive. I've seen it happen too many times, and when it does, it can plunge a successful company into a tailspin from which it might never recover. Case in point: the leadership crisis festering inside Toyota.

Yesterday's Wall Street Journal chronicled the long-standing feud between the founding Toyoda family and Toyota's non-family leadership faction. For generations, the pendulum of Toyota's corporate leadership has swung from one to the other. And that's worked pretty well -- until now.

Now, the warring factions have taken their long-standing feud to new heights of public, personal attacks on each other. The family faction is led by Akio Toyoda, current CEO and 53-year old grandson of the company founder. From the WSJ:

Mr. Toyoda and his allies have been saying openly that when he took the top job last year after a 15-year hiatus for the Toyoda clan, he inherited a company weakened by nonfamily predecessors who sacrificed quality for faster growth and fatter margins.

The problems arose when "some people just got too big-headed and focused too excessively on profit," Mr. Toyoda said at a Beijing news conference in March.

They say Toyota's current troubles are less a quality crisis and more a management and public-relations crisis of Mr. Toyoda's making, reflecting their longstanding warnings that he wasn't ready to run a global corporation.

"Is Akio ducking criticism of being a beneficiary of nepotism by accusing us and trying to justify his ascendancy to the top job?" one of Mr. Watanabe's top aides said.

Hiroshi Okuda -- has told at least two associates since the recalls of cars involved in sudden acceleration incidents earlier this year: "Akio needs to go."

Asked [in 2000] about future prospects for Mr. Toyoda, then a 43-year-old general manager, Mr. Okuda said: "Nepotism just doesn't belong in our future." He elaborated: "Akio-class talents are rolling around all over Toyota, like so many potatoes."

Like so many big companies before, in its relentless drive to become the world's largest auto maker, Toyota's management took its eye off the ball. In other words, growth became its priority, while the unique aspects of its culture and operational competencies responsible for its success to this point, became secondary.

After many years of stellar leadership, last year Akio Toyoda, the grandson of the company's founder, became CEO. And while Toyota's issues have gestated for some time before Toyoda took the reins, his spectacular mishandling of the crisis demonstrates that he wasn't ready for the job.

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