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I can’t help be impressed by the many ways in which Panasonic’s President Kazuhiro Tsuga has ripped up the kaisha (Japanese company) rulebook. In the latest interview with Tsuga in the Nikkei Business magazine, he does not mince his words when describing the past three years where he has had to explain to shareholders why the “V-shaped” recovery promised by his predecessor Fumio Ohtsubo did not happen and instead Tsuga had to explain record breaking losses two years running. “We are in the losing group when it comes to digital home appliances. We have been in a cycle for the past 20 years of low growth, low profit, where even when we restructure, it only brings a temporary improvement… I have to recognise that we are not a normal company, as our starting point.”
Fortunately 2014 brought better results but not after Tsuga faced complaints from shareholders and also internally, as he restructured the company into 4 divisions (Automotive & Industrial Systems, Eco Solutions, Appliances and AVC Networks), selling off non-core businesses, removing around 60,000 people from the consolidated employee total, skipped paying a dividend for the first time in 64 years and shrinking the honsha (HQ) staff from 7000 to 120. “Ohtsubo was also responsible [for the losses], but the HQ was not to be depended on. I shrank the honsha down to a select few so I would not be fooled by it.”
Perhaps his own background in the company has helped him be more ruthless about disowning his predecessors’ strategies and restructuring legacy core businesses like TVs, mobile phones and semi-conductors. He is comparatively young (55) and spent the first part of his career in the R&D lab, has a masters in computer science from the University of California Santa Barbara and then headed up the (then non-core) automotive vehicle components internal business unit.
As the Nikkei comments, his tough words and actions cannot but be seen as a rejection of his three predecessors, Morishita, Nakamura and Ohtsubo. However Tsuga is careful to reference the granddaddy of them all, Konosuke Matsushita himself. “Matsushita said many very rational things.” “I want our company to serve society by the time of our 2018 centenary, whereby we are able to employ more people again.” But as Matsushita himself says “when it rains, you should put up an umbrella.”
There’s no mention of business outside of Japan in his Nikkei interview, but Tsuga’s restructuring is beginning to take effect – with the announcement this October of the finalization of the new Panasonic Automotive & Industrial Systems Company Europe (PAISEU), headed by Dr Wilhelm Steger, bringing together several companies into a business with more than 1250 employees in Germany and several thousands in Europe.
At my last workplace it became a custom in our global marketing team for anyone visiting Japan to bring back the latest Kit Kat flavour – green tea, cherry blossom and even edamame (soy bean) flavour. As a mainly British team, we found it bizarre to see what seemed to us an iconic British brand become so utterly Japanese.
Of course the Kit Kat brand is actually owned by a Swiss company, Nestle. The President of Nestle Japan, Kozo Takaoka, turns out to be the person who instigated the campaign, turning Kit Kat into a premium brand, to the surprise of the Swiss headquarters. The editor of Nikkei Business Kenji Tamura asked Takaoka in a recent interview if this meant European marketing was not as advanced as Japanese believed.
Takaoka’s response is that Nestle HQ itself is beginning to wonder if marketing has become bloated. The marketing costs for Nescafe, for example, cover 100 countries and 100 flavours of Nescafe. Advertising is still effective in developing countries, but no longer in matured markets. TV advertising and celebrity endorsement worked in Japan during the period of rapid economic growth, but this method is no longer persuasive, Takaoka believes.
“Marketing is the management of the company” says Takaoka, because to manage a company you have to innovate to produce new value and work out how to get that to the customer. “Up until now this kind of marketing was lacking in Japan. We have continued with the developing country model. We don’t seem to be able to escape from that model – that we just need to make products and then advertise them” – words that will resonate with my former marketing team colleagues I suspect.
The Netherlands has the largest proportion of part time workers who are women amongst the 34 OECD countries – 61.1% compared to 36.2% in Japan, which is ranked 7th. The employment rate for women is 69.6% (6th out of 34) in the Netherlands, compared to 63.2% (#15) in Japan.
One major difference between the two countries which helps account for this is that in the Netherlands, women can change from full time to part time work with the same employer without losing any of their benefits as permanent full time members of staff.
The Nikkei Business magazine describes days in the lives of several Dutch women, who have high profile, senior jobs, but work 4 days a week and pick their children up from school on their bicycles. It points out that if Abenomics is really to achieve its goal of 30% of managerial positions to be occupied by women by 2020, the whole of Japan is going to have to be much more flexible in its working arrangements, otherwise “it’s just building castles in the sky”.
The Dutch work the fewest hours in the OECD, but average salaries are higher than Japan, showing that they are highly productive. Dutch cannot understand the Japanese concept of “service overtime” (doing unpaid overtime to show loyalty to the company).
There is also very little in the way of Japanese style seniority based pay. The same pay for the same work has deep roots in Dutch society.
Part time employment boomed in the 1950s in the Netherlands to enable young childless women to work in a time of labour shortage. In the 1970s, with deindustrialization, part time work became more common in the service sector. However women were meant to stay at home to look after the children. The turning point came in the early 1980s. After the oil shock, the Netherlands lost industrial competitiveness, and there was negative GDP growth, but wages did not fall, known as the Dutch Disease. The Wassenaar Agreement of 1982 between employers’ organisations and the unions exchanged wage restraint for increasing part time work and shorter hours and thereby reducing unemployment and inflation. This also had the consequence of enabling women to take up employment.
There was a gap in benefits for part time and full time employees, just as in Japan now, but from the 1990s the concept of equal pay for equal work was promoted. Furthermore, the Working Hours Adjustment Law of 2000 means that employees have the right to adjust what working hours they will do in agreement with their bosses, eliminating “service overtime”.
The Dutch government has also invested heavily in childcare provision, but as the Nikkei Business magazine says, the biggest difference with Japan is the role that men play. It is much more acceptable in Dutch society for men to choose their working pattern based on childcare needs. The norm is for 2 working parents to do 1.5 of a full time job. And of course working from home is much more accepted than in Japan. “Without an environment where men can participate in childcare, childcare services and a revision of working hours, there is no way Japanese women will be working more than they currently do. It has taken the Dutch 30 years to change their labour market, and this raises questions for Japan” concludes Nikkei Business.
The cover story for the Nikkei Business magazine last month was on Japanese corporate governance, specifically focusing on what makes for effective use of outside directors (and citing Sony as a case of ineffective use of outside directors).
One of Japanese prime minister Abe’s policies for strengthening Japanese corporate governance has been to introduce a comply-or-explain regulation for any company listed on the Japanese stock markets with less than one outside director on its board. The Nikkei notes that in other countries such as the USA, UK, France and Germany, regulations are stricter, requiring comply-or-explain for boards with less than half the directors as outside directors, in most cases.
Some other statistics caught my eye:
- Outside directors of listed Japanese companies who have board level experience elsewhere – 38.1%
- Average time served as director – 4 years
- Average salary – Y12m (not much more than US$100K)
- Female directors are 6.5% (159 directors) of the total
- Foreign directors are 2.9% (70 directors) of the total
- They spend around 10-11 hours a month on their directorial duties
Best paid directors overall for Japanese listed companies:
- Carlos Ghosn – Nissan (US$9m)
- Frank Morich – Takeda Pharma (until April 1 2014) (US$9m)
- Kohji Tanabe founder of U-Shin (automotive and industrial equipment) (US$7.6m)
- Kazuo Okada founder of Universal Entertainment (Pachinko) (US$7.4)
- Tadataka Yamada – Takeda Pharma (US$7.4m)
Other foreigners in the top 30 include Timothy Andree at Dentsu (advertising agency), Roger Barnett at Shaklee (nutritional supplements company which was majority owned by Japanese pharmaco Yamanouchi and is still listed on JASDAQ), Carsten Fischer at Shiseido and Ronald Fisher at Softbank.
Companies with the most directors earning over Y100m (US$900K) were
- Mitsubishi Electric (18)
- Canon (12)
- FANUC (automation products) (10)
- Mitsubishi Corporation (8)
- Mitsui & Co (8)
- Nomura (7)
- Toyota (7)
- Daiwa Securities (6)
- Itochu (6)
- Nissan (5)
Susumu Okamura, a veteran of Daiichi Life, DIAM in the US, UBS Global Asset Management and a Columbia MBA alumnus, believes experience of secondment to another company is a must for survival in the global economy. Thanks, however, to ‘Naoki Hanzawa’ (a TV series in Japan about a heroic salaryman banker), being seconded to another company has a thoroughly bad image in Japan. However in global companies, where spin off companies are multiplying, being seconded has become part of management development.
Foreign business people are particularly enthusiastic about being sent to manage acquisitions or struggling subsidiaries. They see it as a valuable chance to put their ideas into action and do things their own way, says Okamura.
Okamura views joining your first company as a second birth, with being seconded to another company as a third rebirth, but unfortunately many Japanese managers do not see it that way. Okamura sees four types of secondees:
- The depressive – who has dropped off the elite track of the headquarters, so becomes disillusioned and loses his spark. However they are often given an important role in the subsidiary company, so they are the worst kind of boss for the employees of the subsidiary.
- The look backer – who wants to make headquarters regret pushing him out by producing great financial results. Tries harder than the depressive, but his aggressive, inflexible management style can warp the subsidiary
- The phlegmatist – has the same laid back style wherever he goes. Works steadily, doesn’t try to change anything.
- Mindset changer – is thrilled at the chance to start a new chapter in a new organisation, pursuing new dreams
As Okamura says, in traditional Japanese companies, secondment damages your chances of becoming a top executive in the headquarters. “But I want to ask instead, is it really fun to stay in the headquarters? What are you learning which is of value in the marketplace? Do you think that value will still hold in 10 years’ time?”
“We are in the middle of a diversity boom. However, unfortunately in many cases, the foreigners, women, mid-career hires and the disabled that are hired all end up being ‘dyed the same colour’. It’s not obvious why diversity was such a reason for hiring people. But being seconded is different – there is an unshakeable diversity to having to become part of a different corporate culture.”
Eriko Kawai didn’t say much when she first started at Harvard University. She had learnt English the usual Japanese way, in order to pass written exams, so had become a perfectionist. It was only when she did her MBA at INSEAD in France, and had to learn French quickly that she realised the importance of having a balance between reading, speaking, writing and listening and not being afraid of making mistakes.
She then worked for the Bank for International Settlements and the OECD in Europe, and came to realise that Japanese opposition to globalization is on the assumption that globalization means extreme Anglo-Saxon capitalism, when in fact in Europe there are many models of capitalism, and national cultures are still strong.
Consequently, to communicate effectively, you have to understand the different cultures – their politics and history, but also need to be able to talk about Japan’s own politics, history and culture, she believes.
Japanese should not be afraid that teaching English at primary school will mean that they will not speak Japanese properly, she asserts – however Japanese children should be taught to reason effectively in Japanese, otherwise they will not be able to reason in other languages. She still tries to memorise any presentations she has to make or interview questions she wants to ask in English, to ensure that there is eye contact and emotional engagement.
By practicing every day, speaking out loud and having fun doing it, you should be able to develop English “muscles”, says Kawai.
Japan Intercultural Consulting Europe is launching a Communication for Business course with PS English of 10 or 20 1.5 hour sessions in the office, at home or via Skype with experienced teachers, covering all aspects of using English in business for Japanese people – the “muscles” and the culture. For further information click here to download our pdf leaflet.
Foreign companies in Japan are known as gaishikei (foreign capital managed) and Japanese who choose to work in them are often suspected of being “lone wolves” who are motivated by money. However recently some Japanese managers who have worked in gaishi joined Japanese companies later in their careers, such as Hikaru Adachi, recently interviewed in Diamond magazine. He was born in Austin, Texas, went to Hitotsubashi University and then worked for P&G, Booz Allen, Roland Berger etc before joining Japanese clothing company World and starting up a group called Gaishikei Leaders.
He says he decided to work for a Japanese company because he is so concerned that Japan is being marginalized on the world stage, and to counter this, economic leadership is needed, for which global minded managers are required.
He joined a gaishi initially in order to learn as much as possible, as quickly as possible. Although he found performance reviews tricky as he would tend to be naturally humble about what he did or did not achieve, compared to the boasting from other employees about their successes, he felt that his honesty eventually won through, and people came to trust him.
Gaishi managers have experience that purely Japanese managers lack:
- Experience of having worked with foreign employees who speak a diverse group of languages, particularly English – knowing how to write emails, documents, run meetings. This cannot be achieved by only working with Japanese speakers, who are used to the non-verbal, telepathic way of Japanese corporate communication.
- To have a standpoint that is not pivoting on Japan. For example, corporate cultures or customs which work fine when it is just Japanese working together, but in a global market or working with non-Japanese, they are hard to understand, or cause major problems.
- Systems which are based from the outset on being global, such as HR, evaluations, finance and information systems. It’s not sufficient just to adjust Japan HQ systems for global use.
Japanese who have worked abroad with Japanese companies may be able to get enough experience in the first category, but for the second and third aspects, gaishikei managers will have the edge. Particularly on 3. he points out that with Japan’s particularly Japanese systems and structures, it is difficultto get experience in hiring and developing high quality non-Japanese staff.
He stresses he is not saying Japanese companies are inferior to gaishi, rather that Japanese managers lack the necessary self awareness about Japan’s history, culture, politics and economics to be able to represent it effectively in the global world.
At the beginning of our training sessions with Japanese expatriate managers, I describe to them the positives and challenges Europeans say they face when working in Japanese companies. If I have already done similar sessions with Europeans in that company, then I also highlight those aspects which are specific to the company or were give a particular emphasis.
You can probably guess what the common positives and challenges are. The European employees usually say they find their Japanese colleagues are polite/friendly/calm, take a long-term view and have a high degree of commitment to their jobs and the company. The challenges that they find are communication problems centering on indirect/direct communication styles and attitudes to conflict, and also the long-winded, nontransparent decision making processes.
It is often said that Japanese people are more than usually curious about how they are perceived by other cultures. Certainly my list of common positives and negatives arouses great interest among Japanese participants. However, when I try to turn it into a debate about the company’s culture – asking questions like, “Do you think your company is more or less nemawashi (consensus based decision making) oriented than other Japanese companies in your industry?” – there is hesitation, a few tentative comments, and then thoughtful silence. It is almost as if such questions had never been considered before.
As lifetime employment has been so prevalent in these large companies, and still is for the majority of employees, the opportunity to compare the company you chose to join at the age of 22 with another company only arises once – during the graduate recruitment process. Because this a career-long commitment, both the graduates and the companies put a great deal of effort into the process of finding out whether there is a good fit between the candidate and the company culture.
But the actual nuts and bolts of working in a company – how decisions are made, attitudes to process, risk, hierarchy and so on – are not made so explicit, because the candidates have never worked in a company before and have no way of identifying these characteristics. If you are going to stay at the company for the rest of your career, then you just accept that “this is the way things are done around here.”
Now that more Japanese people are changing employers, and mergers between companies are increasing, it is surely time to be more aware of these differences, so that adjustments can be made by employees and companies.
Some insights will of course come from the job hoppers themselves, but it might also be time for Japanese companies to lose their allergy to using outside consultants. As a consultant myself, I would say this, but consultants who have worked with a range of companies probably have the best overall view of how Japanese companies differ from each other.
As the British writer Rudyard Kipling famously put it, regarding English insularity, “And what should they know of England, who only England know?”
This article by Pernille Rudlin originally appeared in the August 17th 2009 edition of The Nikkei Weekly