Toyota Tackles an Audacious Goal; How to lead an organization through transformational change

Gallup Management Journal, Feb 14, 2008 by George Borst

Byline: George Borst, President and CEO, Toyota Financial Services

Synopsis: George Borst, president and CEO of Toyota Financial Services, had a daring plan for leading TFS through an expansion of its customer base and product line. But that required transformation in every aspect of his organization -- new people, infrastructure, knowledge, and skills. Some of the changes offered fresh opportunities, but others presented big problems. What's more, the expansion required Borst to discover new methods of leadership. Here's how he successfully transformed his organization -- and, in the process, himself.

It would be great if leaders could learn everything they need to know before they need to know it. That's rarely the case -- most of us learn on the job, in the thick of it. Sometimes we don't even realize what we've learned until long after the moment has passed. In hindsight, I realize how fortunate I was.

We were beginning to tackle a major initiative that would significantly change Toyota Financial Services (TFS); simultaneously, I was being exposed to new leadership ideas. I would need these new ideas, along with new skills and abilities, to lead my team to achieve a "BHAG" -- a "Big Hairy Audacious Goal," as Built to Last authors Jim Collins and Jerry Porras call it.

My BHAG was to lead TFS through an expansion of our customer base and product line. TFS offers automotive loans to Toyota and Lexus customers, but if we could add credit cards, mortgages, and loans to Toyota customers and dealers, we could create much more business, profit, and ultimately, loyalty.

But that required transformation in every aspect of the organization -- new people, infrastructure, knowledge, and skills. Some of the changes offered exciting new opportunities, but others presented new problems. In every case, the expansion required new methods of leadership from me -- including framing, communication, and team-building strategies -- to face the upcoming challenges.

Where's the "wow"?

Long before we began implementing the TFS expansion, we faced our first challenge -- inertia. We came up with a solid plan, but there was no real sense of urgency. The TFS management team felt good about our direction, but it was always from 30,000 feet, with no solid implementation plan or start date. We had a five-year medium-term plan and a 10-year long-term plan, but the goals seemed too far in the future and too vague.

Furthermore, there was no "wow" factor. Not only was the plan vague, it didn't resonate with associates. We hadn't explained the overall vision of TFS, such as why we exist and what the world would be like without us. Another omission was that the project focused on the company's goals; it didn't address our employees' need to know what was in it for them, why they should care, and how they could relate.

So, we reframed the project, and I changed the way we presented it. We helped our associates understand how their work makes the world a better place by enabling people to buy safe, high-quality, environmentally friendly vehicles. We focused on their future within the TFS future and noted the positives that come out of growing with TFS.

To develop a sense of urgency and create the "wow" factor, we created a goal of having $1 billion in assets from our new business lines on the books by 2006. This announcement to the organization put us on record and defined a tangible goal that had to be initiated immediately.

Communication underload

There was another challenge: I realized that when I spoke of our goals, I constantly emphasized the need for change. Indeed, the sound bite we wanted our associates to take away was that we were a change-ready, high-performance organization.

But change is scary, and talking about it can be unsettling. I had a sense that my change message was not resonating, as there was still much anxiety in the organization. I shared this concern with my outside coach and received invaluable advice on how to frame this change message.

I started talking not only about the need for change but how some of the skill sets our associates already had could lead that change and make them successful in the new world. And I needed to give the employees credit for the changes they'd already successfully weathered. We had recently gone through a major restructuring, and using it as an object lesson gave associates confidence in their ability to execute change of the magnitude TFS was contemplating. The academic term for this is "reinforcing self-efficacy," but the real-world result was that it reminded us we were capable of handling this transition.

I also needed to be more clear about the competitive strategy behind the vision. My communication about the strategy was too complex until I started focusing on the end result of these initiatives: increased loyalty. What's unique about Toyota Financial Services? Like most financial institutions, we lend money at market rates and provide good customer service -- but what differentiates TFS is that we create loyalty. People who finance with us are 7 to 11 percentage points more likely to buy another Toyota or Lexus. It helped us explain why offering credit cards, mortgages, and banking to our customers was a key business opportunity to develop more relationships with our customer base and increase the likelihood they would buy another Toyota.