Rudlin Consulting provides expert analysis and consulting to people working in or with Japanese companies in Europe.
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Kenji Momota, a former racing driver who now writes on the car industry for Diamond and other business publications, believes that Japan’s car industry is facing defeat because of the lack of a car culture in Japan.
He muses on how the only proper car museum in Japan is actually privately owned (founded by the owner of a concrete product sales company) and several hours away from Tokyo, in Ishikawa Prefecture. There are several corporate car museums (Toyota’s in Aichi prefecture, Honda’s in Tochigi, Mazda’s in Hiroshima, Suzuki in Shizuoka and Daihatsu in Osaka) and there was a state museum of transport, founded in 1936, but since 2007 it has focused on the rail industry.
The lack of a national car culture has its roots in the beginnings of the industry after the war, when joining the car industry was seen as a high risk, equivalent to joining a start up venture, by top graduates. Many employees were transferred over from the zaibatsus’ heavy machinery and shipbuilding companies. These employees felt they really didn’t really understand cars. An inferiority complex persisted until a couple of decades or so ago, with even Toyota calling itself “a country bumpkin company” or Honda saying “a small company like ours”.
Then along came the post war baby boom generation, to whom car ownership was the ultimate dream. The older generation were happy to defer to them, believing it was good to have cars made by those who loved cars. The baby boomers made cars for their own generation, during the economic boom time, and that was fine until recently, when the baby boomers have started to retire, and are buying their final cars.
The younger generations are not so fixated by car ownership, with the improvements in public transport, those living in cities can be car free without too much inconvenience. Running a car company has become more about management ability, and understanding finance. Apparently many executives that Momota has spoken to have confessed “we don’t really know what to do next” in the face of a major structural change in the motor industry, with US IT companies such as Google entering the industry via telematics.
Momota recommends constructing a culture from a zero base, as a new industry – which will be a service industry. He points to Mercedes’ “mercedes me” as an example of the future. However Mercedes have been able to do this because they have such a strong brand in the first place. He worries that if Japanese car companies team up with US IT companies, their brand will be lost in a bland global one size fits all. “Japanese car manufactures must review the past and present of their industry, and quickly, in earnest, take the first step into the future”. Judging by a conversation I had recently with a US brand consultancy, at least one Japanese car company is looking to take such a step.
Japan’s annual shareholders’ meeting season at the end of June went relatively smoothly for most companies, as their results had improved, in part due to the impact of a cheaper yen. Takeda was one of the exceptions, however, with the new President, Christophe Weber, facing protests from a 100 or so shareholders, more than half of whom were ex-Takeda employees.
Their 7 point letter claimed that the acquisition of Nycomed and Millennium Pharmaceuticals were failures, that the way Takeda was globalizing and the low morale of scientists in Japan called into question management effectiveness, that the way Weber was appointed as Hasegawa’s successor was questionable, that the focus on the executive management committee, largely peopled by “foreigners” was causing the board meetings to become a mere formality, that it was not clear why high dividends should be paid out when the financials were worsening, and finally that responsibility was not clear for the fine of $6bn in the US for concealing the risks for Actos, a diabetes drug.
Diamond Online analyses why Takeda is being criticised “from within”. Takeda was at a high point in 2006, but in decline since then, as four of its blockbuster drugs came off patent in the US. The search for new hit drugs led down the path of M&A. Takeda was the dominant Osaka pharmaceutical company, squaring up against Sankyo the Tokyo-based pharmaceutical giant. Behind the scenes, however, there were merger talks between the two. In the end Sankyo chose to team up with Daiichi.
So Takeda embarked on overseas acquisitions – Denmark’s Novo Nordisk and then Millennium in the USA in 2008, and finaly Nycomed in 2011. These acquisitions required substantial post merger restructuring, however there was noone capable of this in Takeda. The management layer below Hasegawa was “thin” ( a problem common to many Japanese companies, who cut back hiring of that cohort during the first oil shock). Hasegawa appeared isolated, and reliant on foreign executives and Japanese executives who had worked in foreign companies (in other words, not including the indigenous Japanese within Takeda)
Weber’s recent interview in the Japan Times, in which he emphasises that Takeda will remain “Japanese” is an attempt to reassure the Takeda founding family and domestic Japanese management, but whether an interview in English in Japan Times (an English language daily) is sufficient is doubtful. A charm offensive on the Nikkei group of publications might be advisable.
Takeda is #15 in our Top 30 Japanese companies in Europe, with around 7,600 employees in Europe.
When asked about whether Nomura’s focus on Asia was a turning away from the direction that led them to acquiring Lehman Brothers in 2008, the CEO of Nomura Holdings, Koji Nagai, responded “It’s not a reverse, just a rethink that happened two years ago. Before, we thought we wanted to be global, therefore we should do global business. Now we think about the customers’ needs first, and where we are competitive and can add value, which is why focusing on Asia makes sense.”
However he is very cautious about China, saying it resembles Japan around the time of the economic bubble bursting in 1990. Abenomics is providing a tailwind for Nomura at the moment, but as the Nikkei journalist comments, Nagai clearly still feels a strong sense of make or break, for Japan and for Nomura.
Nomura is #20 in our Top 30 Japanese companies in Europe, with around 3600 employees.
I read in the Nikkei recently that Panasonic, Mitsubishi Estate and Rakuten are planning to make use of social networking site LinkedIn for recruitment outside Japan, including Europe. LinkedIn is the world’s largest professional networking site, based in California, with more than 270 million users worldwide, so it certainly represents an effective way to identify and attract new recruits.
I have been a member for more than 10 years, not to find a job, but to find and keep track of my European contacts in Japanese companies. It has been noticeable, however, that Japanese employees and Japanese companies in general are not very active on LinkedIn, even though LinkedIn launched a Japanese version and set up an office in Tokyo in 2011.
I assume this is primarily because LinkedIn is used for mid-career hiring and job seeking, which is still not a popular activity in Japan. Indeed, many Europeans dislike to display their skills and experience publicly, and signal thereby that they may be “for hire”. Based on my own analysis, the British and Dutch are not so cautious, whereas the privacy conscious (and possibly less comfortable in English) Germans and French hold back.
Many of my German contacts use Xing, a Germany based social networking site instead. However all Europeans (and people in multinationals in emerging markets such as Turkey) are aware of LinkedIn, and will take a look at it when they are considering moving to another company.
In other words, from an employer perspective, LinkedIn is a tool not just for searching for recruits based on skills and experience, but also for the company to present an attractive profile.
I recommend that any Japanese company reviewing their LinkedIn presence first of all ensure that the “official” company LinkedIn page is clearly labelled as official (to distinguish it from an alumnus/OB site page run by an individual), and employees are encouraged to link their personal LinkedIn profiles to this official page.
More often than not, there are several pages already existing for the Japanese company. This needs to be tidied up, so that there is a headquarters page, and any regional company pages are clearly identified as such. It is possible to interlink the regional company pages to the headquarters page, to show they all belong to the same company family.
These official pages need to be managed by someone either in marketing or HR at the headquarters and regional subsidiaries. They need a description of the company, including size, activities and a link to the correct website. The pages also need to be “branded” to look visually appealing and reflect the company image. Use should be made of the facility to add descriptions of products and services and add news about the company.
If this is done correctly, then “followers” of company will swiftly increase, both from potential recruits and also current employees, who will feel much happier now their employer has a clear and attractive LinkedIn presence they can associate themselves with.
Arata Kusunoki, who has held various senior management positions in an insurance company, is the author of several books on the meaning of work, and why “ojisan” salarymen (literally means ‘uncles’ ie middle aged men) get paid well regardless of whether they are productive.
The roots of this are in the way that large numbers of fresh graduates are hired by Japanese companies without regard to their ability or suitability and are developed to be generalists, with the result that it is assumed it doesn’t really matter who is in which job and not much attention is paid to individual talents or skills. This worked reasonably well in periods of growth but when the number of jobs higher up the pyramid is smaller and shrinking in a period of recession, there are too many people from the cohort for the jobs available.
Those who are surplus to requirements are not given any training or development and left to their own devices. The HR system does not evaluate to what extent the job they are doing adds value or produces results, but simply evaluates people by comparing them with other people in their cohort. “Only Japanese companies have such a system” says Kusunoki.
People lose their motivation, and yet their working life is longer than before. Previously, retirement was at 55, and life expectancy was no more than 10 or so years after that. Now, the retirement age is 60, and even 65 if the employee is re-employed, and life expectancy is well into the 80s.
The 40s are a key point, says Kusonoki. It is the time when Japanese employees start to wonder if they really want to carry on doing the same job, in the same company. “They spiritually retire”. They don’t see any opportunity for personal growth, and don’t know whether they are adding any value. Consequently, illness, crises and quitting to work elsewhere or start up on your own are very common at this point. But currently, Japanese companies are doing nothing about it.
“We had three ‘first priorities’” says Kozo Takahashi, President of Sharp, in an interview in the Nikkei Business on how he changed Sharp’s corporate culture. “I know you’re only supposed to have one first priority, but we had three – firstly to meet the commitments of the three year plan to March 2016, secondly to create businesses which will see Sharp through the next 5 or 10 years, and finally to bed in a corporate culture and way of thinking, ie DNA, that will ensure Sharp survives the next 100, 200 or even a 1000 years. The embedding of the DNA is the number one priority amongst the three first priorities.”
According to Takahashi, Sharp’s corporate culture was “kettai” “weird” – “like something from the Edo period” (1603-1868). Senior managers were addressed in emails by their title and with the honorific suffix “dono“, rather like addressing someone as Mr General Manager in English. Sharp is an Osaka company, in the Kansai region, supposedly the home of “keigo” – polite Japanese, but this does seem excessive, especially as Osaka these days prides itself on hard headed business sense and rough and ready humour. This has been changed to addressing all employees, regardless of age or rank as “surname-san”.
Nemawashi (consensus building) was rampant and meetings had become ceremonial, simply for hearing the President’s directions. Now meetings are meant to be for the equal sharing of information, where actual discussions take place.
Sharp had introduced a performance based system in the 1990s, to reform the seniority based system. However it was based on deduction of points for every target not met, resulting in a highly risk averse, short termist culture. This has now been replaced with bonus points for employees who take up challenges.
There was a lot of “make work” going on, with even simple reports becoming highly formatted and stylised. Actions are now being taken to reduce the generation of unnecessary work.
Now all employees have been handed cards which read “moving from changing the culture to building a good culture” – aimed at being a 50,000 strong, first division company with Y3 trillion turnover. The emphasis on turnover, numbers of employees and the survival of the company for centuries to come suggest to me that Sharp has not strayed very far from traditional Japanese views of what companies are for. If they can make the reforms work, then it will prove that Japanese companies can throw off fossilised ways, without losing their soul.
The typical image of a woman entrepreneur in Japan as someone who worked at Recruit (Japan’s biggest recruitment agency) and then did an MBA overseas, is wrong, according to Diamond Online. The 24% rise in the number of women owned businesses over the past year (from 3724 to 4630) and is in part a reaction to Abe’s “womenomics” speculates Diamond. Many women, despairing of being able to work the way they would want at a traditional Japanese company, but wanting to return to the workplace as Abe is urging, turn to running their own businesses.
The average age of Japanese women business owners, according to a survey conducted last year, is 43.7 and over half have husbands, and nearly a quarter have children of high school through to university age. 60% also do all or most of the housework and childcare. 21% were contract or temporary workers before they started their own business, compared to 5% of men and conversely 52.6% had permanent contracts versus 73.8% of the men. Nearly a half had taken a career break. 30% were high school graduates and 21% were university graduates, nearly half the level of male entrepreneur university graduates.
Women entrepreneurs tend to work in or close to their homes, and although less profitable than men owned businesses to begin with, by the 5th year of business a greater proportion than male owned businesses are in the black.
Murata Manufacturing is one of Japan’s secret success stories. Founded in 1944 by Akira Murata (his grandson Tsuneo is now President), the Kyoto-based company has a dominant market share in ceramic components for mobile phones and other devices. It reached a record net sales level in the year to March 2014 of Y846bn, and an impressive operating income ratio of nearly 15%. A very high proportion of its sales are overseas, although as it has less than 2000 of its 48,000 employees in Europe, it’s not in our Europe Top 30. (Disclosure – they are however an important customer of Japan Intercultural Consulting Europe)
A recent Nikkei Business article (Japanese, subscription required) puts its success down to two factors. Firstly, technological prowess, and secondly, that it has a rigorous policy of delegating decisions to local operations, enabling it to make quick decisions. Tsuneo Murata cheekily compares this to the slowness of Nokia and Ericsson. High potential employees in their twenties and thirties are developed to become specialist “decision makers”, to focus on customers and are pulled away from routine operations.
Tsuneo Murata is not resting on his laurels however, and is moving into the healthcare sector, through M&A. Murata acquired Finnish 3D MEMS sensors company VTI Technologies in 2012 and wasted no time in immediately rebranding it as Murata Electronics Oy.
Tsuneo Murata himself says he is not the charismatic leader type, but as the Nikkei concludes, he does not lack confidence.