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Honda

Organizational and managerial systems for learning

Honda Motor Company is often referred to as one of the best managed companies in the world. It has achieved this status by employing an innovative organizational system. In this case study, we highlight some key aspects of Honda's system of learning.

Importance of questions and openness

Embodied in Honda's operating principles are the goals ‘learn, think, analyse, evaluate and improve’ and ‘listen, ask and speak up’.

This leads to constant questioning of ideas, decisions and management, which is encouraged and even demanded of each employee. It is referred to as ‘constructive contention’. According to Honda's co-founder:

there are discordant sounds within a company. As a president, you must orchestrate the discordant sounds into a kind of harmony. But you never want too much harmony. One must cultivate a taste for finding harmony with discord, or you will drift away from the forces that keep the company alive.

It is not just management who hears the noise. The innovative enshrining of discord is systemic at Honda. Different perspectives among Honda's various functional departments are encouraged, with a view that intellectual competition sharpens and improves the end product. Design and development teams are deliberately staffed with engineers from peripheral disciplines who are unfamiliar with the core technology under development. This is designed to ensure that problems will be approached from different and innovative perspectives, and that conventional wisdom will be challenged and tested.

Importance of a culture of ‘equals’ and cross-functional skills appreciation

Honda has built a dynamic technical culture on the idea that the company needs many technologists with deep technical expertise in a given area and who must also have direct knowledge of the fundamentals of Honda as a whole. Honda's goal is to create a ‘T -shaped engineer’, where the vertical bar of the T represents an individuals depth, and the horizontal bar represents his or her cross-functional as well as market-based knowledge.

To gain necessary depth, Honda has established an ‘expert system’ (conceptualized in the 1950s). The expert system is in fact a special career track for experts who can advance through four different levels with proportional increases in salary. It parallels the regular managerial track, but with one significant difference: experts can rise to very high levels within the organization without having supervisory responsibility over others. An expert can become, for example, a director of a company solely on the strength of his or her expertise.

The expert system ensures that the best and brightest in the engineering ranks find lucrative rewards in advancing their expertise in technical disciplines. But to prevent them losing touch with the real world, Honda also places a premium on rotational job training (the crossing of the T, so to speak).

Importance of interaction and a value of experience

One of Honda's key beliefs is that a person cannot comprehend fully a situation by relying on second reports, but must experience the situation personally. From this come three corporate principles: genba, genbutsu and genjitsu (real place, real thing and real activity).

1   Genba demands the person ‘to be on the scene’ or at the place where events are actually happening.

2   Genbutsu means that in order to understand a product or a piece of hardware the person must be actively involved with the thing itself.

3   Genjitsu means that the person must seek all the facts surrounding a situation in order to make educated and wellinformed decisions.

Together, these three principles – be on the scene, be actively involved with the subject and be sure to get all the facts – constantly focus efforts on creating the products that customers really want.

The principles are not mere slogans, but are continuously applied at all levels within Honda, and new recruits are rapidly socialized into them.

Importance of structures and rewards in shaping culture

In Honda's attempts to tap deep into individual expertise, the critical goal is to ensure that design memory is not lost.

Structurally, Honda's R&D is organized as a ‘paperweight organization’ (named after the typical Japanese paperweight which is broad and flat with a handle at the top). In other words it has little room for hierarchy. Honda rigidly follows its R&D philosophy, which is best expressed by the slogan ‘All engineers are equal in the presence of technology’. There is no place for seniority or rank. Ability is all that matters, and ability can be recognized and rewarded. With the paperweight organizational structure there is room for an almost unlimited number of highlevel engineers. However, managerial positions are strictly limited according to need.

Importance of effective processing of ideas

The lack of hierarchy allows all ideas – not just ‘official ideas’ – to be judged side by side on their own merits. There are few ‘official ideas’ within Honda because such ideas tend to be the result of conventional wisdom, which itself is an offshoot of top-down hierarchical organizations. Ideas come from every corner. As ideas run throughout the company, they help prevent creative inertia at the individual level. People remember by sharing what they know.

Honda also has an early reality test for these ideas. Ideas undergo a possibility test very soon after they are registered. The evaluation is conducted by a group of senior mangers whose role is to:

• identify innovative refinements to existing ideas
• ascertain new ideas do not repeat past mistakes.

Both of these criteria serve to ensure that knowledge and learning is not lost. Also, given that the norm of the culture is that conventional wisdom is actively frowned upon, the risk of these senior people rejecting an idea simply because it was too innovative is considerably reduced.

Importance of keeping and building knowledge

The expert system institutes very early on a practice which encourages all employees to keep diaries in which to record their work in progress and creative ideas.

Importance of accepting failure

Honda estimates that up to 99 per cent of its projects end in failure. However, these failures are not simply discarded. Instead, they are pooled for possible adoption at a later time when they provide answers to a future product. The purpose is to institutionalize an effective method for maintaining design memory.

Importance of rewarding failure and success

Honda has an explicit policy of recognizing effort, even when it is not successful. It states this as ‘encouragement of challenge, which never discredits failure, but only credits success’. Allowing engineers the freedom to fail removes the stigma, and promotes innovation and learning over convention and stagnation.

Importance of design and work layout

Honda has a tradition of creating wall-less work environments. Even the executive suite is basically one large room where all senior managers work.