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Practically every globalizing Japanese engineering company has a ‘Way’ thanks to the success of the ‘Toyota Way’ so it’s no surprise that the highly admired, globally acquisitive Nidec has come up with a ‘Nidec Way’ too. It’s being rolled out at the same time that Nidec is reorganising itself globally, setting up 5 regional headquarters including an HQ in the Netherlands for the European region.
The Netherlands was chosen because of its low tax rates and a regional CFO will appointed, who will be tasked with reinvesting profits made by the local subsidiaries back into the region. All regions will be measured by the same cash conversion cycle standards and the company is also aiming to adopt the IFRS accounting standard by 2017.
The Nidec Way is also presumably going to be a common global standard. It is based on the current corporate philosophy of Passion, Enthusiasm and Tenacity. I haven’t found an English translation yet (which I suspect is proving problematic, as I couldn’t work up a good direct translation, as is so often the case with Japanese corporate values) but here roughly is what it appears to be:
- Passion – 卓越への挑戦 – daring to transcend, taking up the challenge to be preeminent
- Enthusiasm – 顧客満足のために to satisfy customers
- Tenacity – 知的ハードワーキング intellectually hardworking
As well as 「創造性」「敬意」「協働」「王道」 – creativity, respect, collaboration and the virtuous path/just rule (literally ‘the road of the king’).
Leaders are also expected to have the characteristics of 「決断力」「チームスピリット」「人材育成」 – decision making ability, team spirit and human resource development.
I’ve just been updating our Customer Relationship Management (CRM) database of Japanese companies and their suppliers in Europe. I recently shifted the database to a new cloud-based provider, which enables me to cross reference our customer data with social networking sites such as LinkedIn – a very popular business networking site across Europe and the USA. The way our new CRM interface works has also forced me to focus much more on how our Japanese corporate clients are organising their operations across Europe, including where they have placed their headquarters.
My conclusions are not entirely scientific, as my own business is based in the UK and therefore biased towards UK based Japanese companies, but it does seem that the UK is the most popular base for European headquarters of Japanese companies. Of the 96 European headquarter companies I have identified in my database, 53 are in the UK, 24 in Germany, 10 in the Netherlands, 5 in Belgium, 2 in France, 1 in Switzerland and 1 in Poland.
Of course there are many Japanese companies who do not have a European headquarters, but the trend among those who have been in Europe for a longer period is unmistakably towards consolidating across Europe in terms of functional areas such as purchasing or HR or finance. This seems to be to the benefit of the UK, which is the undoubted European if not world capital of professional services – with many globally capable financial, marketing, legal, consulting and HR firms in London.
The UK has long been a favourite destination for Japanese foreign direct investment, for various reasons ranging from the English language, to golf to the UK’s open economy. Germany has also been very popular, particularly with Japanese engineering companies who feel an affinity with German process orientation and risk aversion, as well as having historical ties such as Fujitsu with Siemens or Denso with Bosch. The North Rhine Westphalia region was particularly active since the 1960s in encouraging Japanese companies to set up there, although Sony decided initially to set up in Berlin, largely, it was rumoured, because of Norio Ohga’s love of the Berlin Philharmonic.
More recently, the Netherlands became popular because of the tax advantages offered, and also, along with Belgium, was an obvious logistical centre for Europe. Lately, however, there seems to be a shift of these headquarters to the UK. Canon has moved from the Netherlands to Uxbridge, near London. Denso and Bosch recently announced their break up, and although Denso continues to be headquartered in the Netherlands, there seem to be several senior managers with European roles based in the UK. Fujitsu and Siemens parted ways in 2009, with the Fujitsu European operations being split between Continental Europe, the Nordics, and UK and Ireland.
Sony sold its Berlin headquarter building in 2008 and is currently in the process of consolidating its sales and marketing across Europe, to be based in Weybridge, a few kilometres south west of London. However, it seems to be shifting towards a “virtual” European structure, with shared HR services now set up in Turkey, and individual senior executives with European remits being based in whatever location they prefer. This pattern has also become evident in other IT and telecoms companies such as NTT Data.
Even this virtual European company structure seems to benefit the UK the most, as senior executives of all nationalities are can be found in, or seem relatively happy to relocate to, London and its suburbs. With more than 40% of London’s population were born outside the UK, London has truly become a global capital and a place to develop global careers.
This article by Pernille Rudlin originally appeared in Japanese in the 10th April 2013 edition of Teikoku Databank News
Sony introduced a new personnel system in April 2015 for its Japan hired employees whereby all seniority based pay is abolished – for both junior and management grades. The current role will be the only basis for evaluation for compensation. According to documents that the Nikkei Business has seen, around 60% of Sony’s employees are likely to face a pay cut as a consequence. It will be gradual, but ultimately an employee could find themselves losing as much as $13,000 a year. The early retirement scheme which had been set up 20 years ago is also coming to an end. This was a highly favourable incentive to leave the company, representing up to around 72 months’ salary – a 50 year old kacho (team leader) grade employee could reach nearly $700,000 in a golden goodbye lump sum.
“Even a child can appreciate that rather than be bullied by the new pay system, it would be better take the money and go” says a former Sony employee, who has done just that. Another current Sony employee says that there has been a negative impact on morale. Apparently some staff went home immediately, with pale faces, on being told their new pay grade. “Since last year 2 people have been having to do the work formerly done by 4 people. Physically, it’s difficult to take.”
There has been sniping from former Sony executives about the strategy too, even though results have improved and the share price has revived. “The medium term plan is just about pleasing shareholders” says one, complaining that there is a lack of leadership or any sense of where Sony is going.
The Nikkei Business summarises the 10 reasons Sony won’t change as:
- Interest bearing debt
- Too many employees
- Lack of a long term view
- Overcautious product development
- Unprecedented successes in the past
- Too much reliance on the strength of the brand
- Walls/silos inside the company
- Talent walking out the door
- Fewer “odd” people
- Increase in employees who are “too smart for their own good”
Although critical of current President Kazuo Hirai, some former employees say the rot set in 20 years ago, and can be traced back to the reforms that former President Nobuyuki Idei introduced, “bringing in American style management, destroying the ‘ordered chaos’ of the engineers, who had given the company its competitive edge”. Hirai of course defends his new plan, particularly the spinning out of business divisions, in an interview in the second part of the article, and the Nikkei then ends its hatchet job with an article concluding that whilst Apple has grown up, Sony remains a troubled teenager.
‘Power harassment’ is a term that has been coined in Japan, in English (as ‘pawahara’ for short), to describe the kind of psychological bullying that may happen to junior staff in Japanese companies, primarily because they do not have the protection of a clear job description that outlines their duties and working hours.
Consequently, you would not expect to find it in Western owned companies (known in Japan as gaishi) where there is supposed to be a clearer set of expectations, job descriptions and performance based evaluations.
According to Diamond Online, however, there are cases of power harassment in foreign owned companies in Japan. Diamond journalist Norifumi Yoshida interviews a 50 year old IT manager, Mr A, who left his foreign owned finance company through power harassment arising from being caught in a battle between a Japanese and an American executive officer (director).
Mr A joined the finance company at the age of 45, having worked for four other foreign owned companies in the past. The first few years went by without incident, but then he found himself the target of attack by the Japanese director. Apparently this director had failed in his original intention to become an actor and was bullied by the troupe he had entered. Then thanks to his politician father’s connections he was able to join a financial services company, but was teased there too for having reached middle age without any competencies and left that too. Again through his father’s connections he found a post in the foreign owned company. Through assiduous sycophancy he managed to jump from team leader to director without going through the usual route of General Manager (GM).
Mr A was GM of the IT department and reported into an American director so should not have had to cross paths with the failed actor, who was responsible for 15 staff in PR, HR and General Affairs. However there were overlaps between the departments, so whenever Mr A’s work affected the payroll or accounting systems, the failed actor would complain in front of everyone that he had not been informed and Mr A was ‘out of order’. In fact Mr A was just doing what he was told by his American boss, but clearly the American boss had not gained consensus from the failed actor.
The American boss was more concerned with doing what he had been asked to do by the President of the company. When Mr A was scolded, 10 or more times a week, for 20 minutes at a time in front of 30 or so employees, and made to apologise, for petty things he had no recollection of doing such as not greeting the director properly, he did not intervene.
The American director probably wanted a quiet life says Mr A, and not to fight with the ‘pawahara machine’ as the Japanese director was known. The Japanese director was on good terms with the President, and was widely thought to be in line for promotion to managing director/board director in a few years, says Mr A.
The President was a Chinese American, who had been brought in by a foreign venture capital company to restructure the company. Mr A says he did not intervene because he preferred to back the winning horse when there was trouble and Mr A’s boss was somewhat of a yes man to him, and probably hoped to get on the board himself.
Yoshida comments that most Japanese would think Americans are open minded, frank and fair, but in his experience “Americans who come to work in Japan can often be rather cold and dry – egoists, to put the worst slant on it – in some ways almost scarily so”. Mr A says he has experienced plenty of upstanding American bosses in his career, but there is definitely a tendency towards egoism and a lack of compassion. “Many of my Japanese friends tell me Europeans are better. I think Japan was a bit brainwashed about America these past 60-70 years but now we have suddenly woken up.”
“Just being able to speak English is not going to be enough for Japanese people to succeed in a globalizing world” says Yoshida. “There are more wily foxes amongst Americans than amongst Japanese. Japanese are too trusting of people and do not know to be suspicious.”
Mr A points the finger at the executives of the company having no understanding of how to look after or create a structure that looks after mid career hires. “They have no sense of responsibility to the people below them, and just insult those employees who leave by saying that they ‘weren’t collaborative’ or ‘she was more suited to housework’ That way they can justify their own management style, if they say it was the fault of the people who leave. Performance based systems (seikashugi) are just a tatemae (a front) for an irresponsible egotism.”
Clearly Mr A is still very traumatised by his experience – still refusing to go anywhere near his old employer. To me, it seems less about whether the company is foreign owned or some difference in character between Americans or Japanese. I certainly recognise those kinds of selfish management behaviours, but usually they are kept in control by HR systems which result in negative consequences for those bosses who do not make efforts to develop a supportive environment for their employees. Western bosses often have employee engagement, retention and training and development targets as part of their annual evaluations. Also HR departments usually conduct exit interviews with staff who resign, to make sure there is not a major problem that had not been aired before. I suspect the foreign financial services company was actually too old-fashioned Japanese, not too American, in not having those mechanisms in place for its own management team. But as it was the ‘pawahara machine’ that was heading up HR, maybe that’s not surprising.
Despite the acquisition of Spanish streaming media company Wuaki.tv and Viber (Israeli founded VOIP instant messaging company) and plenty of noise in the Japanese media about forcing employees to speak English, Rakuten’s profile in Europe seems pretty low to me, considering it’s the ‘world’s 3rd largest e-commerce company’.
Indeed, according to Nikkei Business, only 14% of its revenues are from outside Japan and it seems is not very profitable either. Japanese domestic business – the so-called ‘Rakuten economic bloc’ of e-commerce, travel, banking and e-publishing – makes up the bulk of Rakuten’s business.
To charges that Rakuten’s business model does not work outside Japan, the founder Hiroshi Mikitani counters that he has only just assembled the ingredients for overseas success and that the first market in which he has started “cooking” is Taiwan. He is hoping to learn from the experience to speed up overseas expansion.
It’s five years since Mikitani announced that the corporate language would be English, attracting much scepticism in Japan. “If we had not done that 5 years ago, we would not be the company we are today” says the Global HR GM Koichi Noda. Japanese, Chinese and English flow around the canteen, and when different nationalities sit together, they naturally converse in English.
Mikitani’s recurring comment “Easy English is OK”, to Japanese struggling to present in English, must have helped overcome the Japanese perfectionist attitude to using English, as well as allowing people to attend English lessons during working hours. The average TOEIC score of Japan based Rakuten staff has risen from 526 in 2010 to over 800 in 2015.
As the Nikkei says, this has ensured that when overseas acquisitions join the family, other employees besides the person who led the acquisition can now converse with the new subsidiary. Indeed, this is often the frustration of the local and expatriate executives of overseas acquisitions I have worked with, that the number of people in Japan HQ who could happily join a global conference call to improve communication flows is very limited.
The next phase of “Englishnization” as Mikitani calls it, is to improve conversation and presentation skills. Just speaking English does not make you a global person, Noda agrees. The second phase is intended to enable employees to negotiate and debate and will be using Pearson’s Versant testing rather than TOIEC as a measure. The third phase is the Global Experience Program – whereby 100 or so Japan based employees spend half a year to a year overseas.
All very laudable, and I imagine there plenty of longer established Japanese companies who wish they could get away with doing something similar.
Honda is not in the Boston Consulting Group’s World’s 50 Most Innovative Companies of 2014, having reached #12 in previous years. Other Japanese companies include Toyota at #8, Sony, Softbank, Hitachi and Fast Retailing (Uniqlo). Other automotive companies in the Top 50 are Tesla, BMW, Ford, Volkswagen, Daimler, Audi and Fiat. “It’s becoming a mini Toyota” says Nikkei Business Magazine, “consumers will soon be saying ‘we don’t need a Honda like this'”.
Takanobu Ito became President of Honda in June 2009 and is stepping down in June 2015. This has been portrayed in the Western media as being a consequence of the Takata airbag scandal, but this was not mentioned by Honda as a reason, and 6 years is a standard stint for many Japanese company presidents.
Ito does apologise, however, in a Nikkei Business Magazine interview, for setting the numerical target of 6 million vehicle sales by 2016. “It was just a dream” he says now. Honda had fallen into the trap which many Japanese companies find themselves in, of stretch goals and visions being taken at face value by employees, particularly outside Japan. Honda was selling around 2.5 million vehicles a year when the “dream” was announced in 2012, as part of the 2016 Mid Term Plan. Honda in the US decided to boost sales of the Accord and Civic by offering even better incentives than Hyundai.
Previously, Honda’s brand had been so strong, it had not had to discount at all. And then followed the recalls of the Fit hybrid and the Takata airbag problems.
Ito had also restructured the company away from its previous bipolar Japan and North America organisations into 6 regions – Japan, North America, Latin America, China, Asia, Europe. He has reorganised the R&D side, cutting the number of new models in development by 20%. Honda used to sell itself as a pioneer, but is now behind Toyota in hybrid car and fuel cell vehicle development.
Ito believes Honda must learn from smaller manufacturers like Subaru and Mazda and focus on its brand image. “We have structured the company to be global, but now we need the system to make sure this bears fruit”. The relatively young (55) Takahiro Hachigo (former VP and Director of Honda Motor Europe) will become the 8th President of Honda, with four out of the 6 board directors also changing.
Honda is still making profits, but Nikkei Business concludes that it may be facing the same issues as Sony, another formerly innovative Japanese company, if it does not “rip up the unwritten rules”, and stop relying on past successes. Both Honda and Sony had become too focused on playing it safe and lost the ability to respond to customer needs. Honda is harshly judged because it was so innovative in the past. But it should not look to the past, says the Nikkei, but to the future, and not just to innovative products but innovative management.
This is a comment we have received frequently over the past 12 years of working with Japanese companies in Europe. I hoped the situation would have improved, as Japanese affiliates localise, and more Europeans are in senior positions, but what seems to have happened is that the communication gap between the senior Europeans and the remaining Japanese expatriates has actually widened, and the senior Europeans feel very cut off from any decision making that happens in Japan headquarters.
I recommend to the European managers a three step plan to improve relations and communications: 1. People, 2. Process and 3. Particulars. For ‘People’, they need to build relationships with Japanese colleagues, in Europe and in Japan headquarters. There are obstacles to this – travel expense and rapid rotation of Japanese expatriates. But mutual trust is necessary if Europeans are to be including in the nemawashi process.
By ‘Process’, I mean the nemawashi (decision making) process needs to be made more explicit and transparent and the purpose of meetings (information exchange or discussion or decisions) needs to be clarified. And for ‘Particulars’, the European managers need understand the kind of detail and data needed to reassure risk averse executives in Japan.
But this is only half the picture. The Japanese expatriates must accept that their job is not simply to report back to Japan headquarters what is happening in the European subsidiaries. They need to communicate the Japan headquarters’ corporate culture, decisions and strategy, and find ways to get European staff feel involved and have a sense of belonging to the wider company.
For Japanese expatriate staff I recommend 1. Debate, 2.Distil and 3.Disseminate. Europeans love to debate – it makes them feel valued, and it is an opportunity to convince them of the direction the company must take, by explaining the background and logic to what is coming out of Japan.
‘Distil’ means to be clear, precise and concise about what the strategy, corporate culture or decision is. It must be “actionable” – so it can be the touchstone for deciding how to act in a business situation.
‘Disseminate’ means to take practical steps to make sure that the strategy, corporate culture or decision is communicated to all parts of the European network. This may need to be through cascading information through the correct chains of command if the company is a traditional hierarchical Continental European organisation. Or it could be through workshops, to enable people to have a sense of ownership, and understand how the strategy or corporate culture applies to their daily work. Or it could be through more meetings – but hopefully this time, if ‘debate’ and ‘distillation’ have already happened, the meeting attendees will feel more involved and accepting of the outcomes.
This article originally appeared in Japanese in the Teikoku Databank News
Toyota’s appointment of not one but two non-Japanese to executive ranks (and one of them a woman!) plus a Japanese veteran who left school at 16 is evidence of President Akio Toyoda’s commitment to diversity in its widest sense. The reason he gives for this commitment is not the usual vague nod to the need for diversity for good governance or globalization but because he wants to build a company which will last for ever. “I think constantly about what kind of condition this company should be in when it passes on not just to the next President but two Presidents after that” he said in a recent comment. “Unlike human beings, if a company continues to grow, it can have eternal life”. Toyota’s concern, as the archetypal traditional Japanese ‘company as family’, for legacy and longevity shines through.
Julie Hamp will be Toyota’s first female senior executive, heading up global communications, and is moving to Toyota City to carry out her role, which should give her a better chance of success if she can survive the culture shock, than those foreign senior executives who tried to straddle bases in their home country and Japan. It sounds like she gets what Japanese companies are about, as she was first impressed, when she was at GM, by the amount of community work Toyota dealers did. She also says she’s looking to do more “visual story telling” which definitely should suit visualisation oriented, family myth style Toyota well. Here’s hoping she’s successfully adopted into the heart of the family.