Lean Manufacturing

How Exactly Does Toyota Put People on the Balance Sheet as Assets?

By Jon Miller Published on March 2nd, 2006

Toyota executives are heard to say that “we put people on the balance sheet as assets” but I had taken this figuratively not literally (philosophy rather than accounting practice). At the moment I have no concrete evidence that Toyota puts people on the asset column of their balance sheet. Toyota’s consolidated financial statements are not a great help in this area.
Assets are listed on page 7 as:
– Cash and cash equivalents
– Time deposits
– Marketable securities
– Trade accounts and notes receivable…
– Finance receivables, net
– Other receivables
– Inventories
– Deferred income taxes
– Prepaid expenses and other current assets
– Noncurrent finance receivables, net
– Investments and other assets
– Land
– Buildings
– Machinery and equipment
– Vehicles and equipment on operating leases
– Construction in process
There is no mention of “people” unless it is hidden under “Investments and other assets” which is very possible. These statements are prepared “in accordance with accounting principles generally accepted in the United States of America” also known as GAAP (Generally Accepted Accounting Practices).
GAAP doesn’t do a very good job of showing how assets create wealth today. More and more intangible assets and “intellectual capital” such as patents, copyrights, brand names, and human resources are creating wealth but these are seldom reported as assets. The ability of people to generate wealth by making new things (innovation) and making existing things more effective (kaizen) is certainly worth measuring more accurately.
Perhaps Toyota has their own internal balance sheet to account for their people assets. Now that there seems to be increasing interest on the question of how to put people on the balance sheet as assets, we will do some research into how Toyota does this and report back what we find.

  1. Josef Horber

    March 2, 2006 - 11:29 pm

    thank You. This will definitely be a very interesting research. Looking forward to the results.

  2. Joe

    March 3, 2006 - 5:47 pm

    On page 29 in the Financial Section of Toyota’s 2005 annual report, there is a line in the Consolidated Balance Sheet, under assets, named Employees Receivables. I don’t know what this is but it is the only “Employee” reference made in the balance sheet.

  3. Juergen Boenisch

    March 3, 2006 - 7:23 pm

    Hello Jon,
    This is surely an interesting research project but I think you first assumption was closer to the truths. It mend that Toyota developed a system over more than 50years! hat not only covers the processes very nicely and flawless, but also addresses The Human Side of Lean, too. Employees are respected and allowed to make mistakes in order to learn.
    They are not only entitle to stop the assembly line when a quality issues might leave their segments, but it’s their duty to stop the line. Can you imagine some worker at GM
    or Ford stopping the line, or even doing it twice? …and another person for the job bank…
    There was a time when companies in N.A. but also in Europe had people as asset on the balance sheet, so to say. I don’t think we should even elaborate on this unbelievable kind of historical people treatment at all.
    So, lets look at the Toyota statement in the way you figured it at the beginning.
    Thank you for you article!
    All the Best, Jon,
    Juergen Boenisch

  4. Jon Miller

    March 4, 2006 - 9:23 am

    This is in response to Joe’s question.
    Typically “employee receivables” are monies owed to the company by the employee as a result of overpayment of salary caused when errors are made in reporting, or when there has been a change in the salary and the payroll system did not catch up with it.
    Employee recievables can also result from fees, fines or other reasons an employee would pay an employer.
    I don’t believe this is what Toyota means when they say they put people on the balance sheet as assets.
    Toyota has consistently received an average of one implemented kaizen idea per employee per month for decades. These kaizen ideas average $3,000 in savings per year per person. Planning for these employee-generated savings and accounting for them as “employee receivables” could be one creative way to put people on the balance sheet as assets.

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