Company culture is difficult to define, but it can make a massive difference in how competitive a company can be and whether they can remain dominant for an extended period of time.

When a company can survive varying economic environments, expand into new markets, replace its leading officers, and still thrive, it is likely because of a strong culture. That is the case in the auto industry, where the recent relationship between Toyota and GM showed that company culture can help even the biggest corporation adapt to tough times.

History

Japanese and Western car companies have a long tradition of mutual influence. It was Western principles of mass production that helped Japan rebuild after World War II, but in subsequent decades, American car companies became big, bloated, and slow.

Their workforce was heavily unionized and the powerful unions won out strong protections for the workers. That meant most auto plant workers had high wages and excellent job security, along with generous benefits packages. All of that added up to a lack of flexibility and large liabilities. On the other hand, Japanese companies perfected efficient methods of inventory management and supply chain control that gave them consistently superior quality.

Exchange

For many years, import restrictions prevented Japanese car companies from selling a significant number of their cars in the US. Toyota realized that if they wanted to make money in North America, they would need to find a way around the rules.

The company decided to start a joint venture with General Motors where the two corporations would run a plant in the US together. Although neither of them knew it at the time, this would prove to be a turning point in the history of the auto industry because it created an opportunity for GM to learn from the superior culture of Toyota.

Toyota prized teamwork and perfectionism. That meant frequent inspections, high standards for consistency, and an emphasis on group work. At GM, the strong union protections gave workers little incentive to work together or to carefully inspect their output. Instead, what mattered was just getting as many cars out the door as possible, even when quality suffered.

At the joint plant, Toyota ran things their way, and showed GM's management how an emphasis on quality would improve output and could actually save time and make production more efficient due to greater standardization. Better cars also meant less expensive insurance coverage for the customer.

A Lesson Learned

The management and leadership of GM recognized how valuable these tweaks to their culture would be for their whole company. By making visits to the joint plant and to Japanese Toyota plants, managers saw firsthand exactly how Toyota ran their production line and why that had made them a leading car company internationally.

Making changes took time because GM was a very large company that had separate plants all over the country, each with their own way of doing things. But the obvious superiority of the Toyota style of organizing and managing the workforce won out. GM not only improved their quality and consistency but expanded output to smaller cars that they previously ignored in favor of light trucks.

That change made the company not only better at making cars, but also better at reacting to change. GM survived the auto-industry collapse and the following financial crisis in the late 2000s by shedding its union benefits and becoming a sleeker, more responsive manufacturer. The seeds of that change lie in the initial collaboration between Toyota and GM, where the American company took the first step towards reforming its company culture. All it took was a first-hand experience of what a better way of doing things would look like.