This paper analyzes a pivotal moment in the evolution of the Toyota Production System (TPS): Taiichi Ohno’s counterintuitive decision, around 1981, to reward workers who stopped the assembly line while penalizing those who met production targets by hiding defects. Drawing on TPS literature, Goodhart’s Law, and modern research in organizational psychology and incentive design, we argue that this intervention revealed a fundamental tension within output-focused performance systems. When rewards are tied solely to measurable outcomes, individuals tend to optimize the appearance of success rather than its underlying quality. We situate this argument within key TPS concepts such as Jidoka, the Andon system, psychological safety, and the distinction between leading (process-based) and lagging (outcome-based) indicators. The study concludes by outlining principles for designing robust incentive systems that discourage the concealment of failures—principles that remain critically underapplied in contemporary management practice.
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