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The biggest date on the Japanese corporate calendar is about to hit us. Naturally, it is April 1. Not only it is the start of the new financial year for almost every Japanese company, but it is also when all the major announcements of promotions and restructurings happen, as well as the first day of “proper” work as a bona fide salaryman or salarywoman for thousands of shiny faced graduates.
This means that March is a month of great paranoia, as speculation mounts and information is leaked about who is up and who is down, what will please the new president and which faction is winning which battle.
I try not to be too cynical when Europeans in my training sessions tell me how refreshing it is that Japanese companies seem to have far less politics than European companies. It is of course very easy to be blissfully unaware of the undercurrents ebbing and flowing in March (and indeed other times of the year) but veterans of Japanese companies know well that the undertow may pull you under in April, if you are not paying attention.
I thought I had taken my “Kremlinology” a little too far in the Japanese company I used to work for. I kept a spreadsheet of all the people I had met, what year they entered the company, their current position and grade, and any remarks. I updated carefully every April 1, sending congratulatory emails to those who had done well.
But when I shared this secret with another British veteran of a Japanese firm, he revealed that the spreadsheet of contacts that he had compiled during the 20 years he had worked at his company had become so large, he had pinned it up on his garage wall at home!
When another senior British executive in a Japanese company asked me for my advice on who he should choose as his second-in-command, I’m afraid I went straight into Japanese political mode and immediately asked how old the various candidates were, whether they had been at the company all their career, who were their sponsors and mentors and what business groups they came from originally. He was unable to answer most of these questions, and indeed was not that interested in these aspects. His main criterion was whether they had performed well in the team.
Actually, this is quite refreshing. Too often in Japanese companies, if you come from the wrong department, or ally yourself with the wrong faction, or made a mistake, however well intentioned, you find there is no redemption. At least Western managers, ruthless though they are about firing people who underperform, reward those who do perform, often – but alas not always – regardless of their past career.
When Japanese companies truly globalise, allowing non-Japanese to make personnel decisions, life will become a lot less comfortable for the well connected but underperforming and a new lease of life may energise those who thought their careers were over.
This article originally appeared in The Nikkei Weekly
Four of the nine business units of Terumo, the Japanese healthcare company, have their headquarters outside Japan. Yutaro Shintaku, the President of Terumo, believes his company has been successful in globalizing by thoroughly integrating global acquisitions, so that the headquarters itself has changed. “As the Japanese domestic market is stagnating, overseas markets should not be seen as ’foreign’ but the platform for developing a market”.
Terumo is the 14th largest medical equipment manufacturer globally and is in the top 5 for certain devices, but “successful globalization is not about scale. What is important is to be able to motivate the acquisition, to bring into Japan their strengths and change the Japanese headquarters accordingly, and then further develop as a result of that integration.”
Terumo struggled when it first began to acquire overseas businesses, in the 1990s. They built a factory in Belgium and bought a business from 3M in the USA. Prices dropped radically in the EU however, so Japanese style high quality high cost manufacturing did not work. “We learnt we needed people who really could manage” but Terumo did not have many managers in Japan who could manage overseas business. “Nor is it a good idea to just leave everything up to the managers overseas. You cannot really develop products, execute your marketing and grow profits the way you want if you do that”.
In 2002 Terumo acquired the UK company Vascutek and initially left management up to the incumbent. When the incumbent executive retired in 2009, Terumo decided to get more involved. “But it was not in order to impose our way upon Vascutek. Rather, we sent one expatriate to the UK in order to work alongside the management”.
“Overseas management will tend to interpret what Japan headquarters say in the way it suits them. Also Japanese expatriates have a tendency to keep quiet, if the premise is that management should be left up to the local executives. So what is important is to find a ‘win/win’ – if we reform together, we will improve together.”
The example Shintaku gives of a ‘win/win’ was the introduction of the 5S methodology to the Vascutek factory. There was resistance at first, but when they saw how it made their jobs easier, and at the same time that it enabled a highly efficient but high quality production, then the mutual benefit was clear. The Japanese expatriate met with the new MD every morning for an hour so that there was joint ownership of all management issues.
Speed of decision making, particularly with regard to customer requests, in the US operations was one improvement that was brought back to the Japan headquarters.
If imposing your way is the first step in globalization, and leaving it up to the local management is the second step, then the third step is making the best of each others’ strengths. Terumo is now on the 4th stage, according to Shintaku, which is to change the Japan headquarters itself. A 3 company system was introduced in 2011 – Cardiac and Vascular, General Hospital and Blood Management. This is to provide the necessary management structure for further acquisitions.
I proposed last August that “a charm offensive on the Nikkei group of publications might be advisable” to help new Takeda’s first ever non-Japanese President Christophe Weber gain support, and The Nikkei Business’s recent voluminous special features on Takeda Pharmaceuticals’ globalization in its online and print editions shows I was not the only one thinking this.
The Nikkei’s stance seems broadly favourable, and can be summed up as “this might happen to you too – so you might as well be positive about it”. There will be plenty more cases where a globalizing Japanese company realizes that to expand overseas, they will need executives who have produced results in doing business in other cultures, rather than executives who are well versed on the internal workings of the company but know nothing of the world outside, says the Nikkei.
The key point here is not just “overseas experience” but actually having produced results. And this is going to be a difficult requirement to fulfil for the current upcoming generation of Japanese executives in major Japanese corporations, many of whom, even if they have overseas experience, have mainly been in caretaker and liaison roles, rather than growing new businesses.
The special feature articles go into some interesting detail on the key personalities and what has actually happened at Takeda over the past few years. At the heart of it is Tachi Yamada, brought in by President Hasegawa in 2009 as a member of one of the executive committees and then to head up the R&D function. Tachi Yamada has dual US Japan citizenship and is a well known name in the pharmaceutical industry, latterly heading up the Global Health Program at the Bill & Melinda Gates Foundation. He has also been a board member at GlaxoSmithKline, and it is his network that led Hasegawa to Weber and others.
Yamada saw the need to find new drugs as the Takeda pipeline was thin and many of its drugs were going off patent. So he completely overhauled the structure of the organisation and embarked on some acquisitions. Another key person brought in by Hasegawa was Paul Chapman, also ex GSK, who has taken Japanese citizenship (and has a Japanese wife) and changed his name to Tetsuyuki Maruyama.
Maruyama interviewed each of the Japanese executives asking them why they thought they were suited to the role. As a result of this, 35 younger researchers were promoted to management, including 10 women where previously there had been none. 60 managers left the research function including one of the founding Takeda family members. Of the 6 Drug Discovery Units, 5 are headed by non-Japanese.
Yamada will retire this year at the age of 70 and his successor as Chief Scientific and Medical Officer will also be a non-Japanese outsider – Andrew Plump from Sanofi. Of course, this is causing disquiet amongst the Japanese staff – “Japanese can’t get promoted, if more and more foreigners are appointed. And they are earning many times our salary. It seems like just being Japanese is a minus in Takeda now”.
To counter this, one of the Japanese executives, Shinji Honda, who had been seen as a candidate for next president instead of Weber is now heading up a global leader programme for Japanese employees. “I want them to experience overseas business 5 or 10 years earlier than I did”, says Honda, “then they can be the next leader or the next leader after that, to succeed Weber. This is my last big job.”
But as Akie Iriyama of Waseda Business School points out, another area that will need to be addressed is for non-Japanese to join the company at middle management or lower levels too, and to bring more of the employees of overseas acquisitions to come and work in Japan, otherwise there will be too big a gulf between the non-Japanese executives and other levels of the organisation.
NTT Data had an extensive write up of their Vatican digital library project in the Financial Times recently, which must have pleased President Toshio Iwamoto. As he admitted in a recent interview in the Nikkei Business, despite the Vatican project, and also winning a global ERP support contract from Daimler, NTT Data’s brand is still not strong enough globally. Although the US represents the highest proportion of business for NTT Data overseas, they are still only #40 in the US systems market. Consequently, they do not get any approaches from major customers. “It’s not a problem of our technical strength, simply the challenge of getting them to knock on our door” says Iwamoto.
It takes time to build brand recognition “so we have to buy time”. By acquiring companies in Asia and Europe, NTT Data now has operations in 175 cities in 41 countries. Iwamoto wants the overseas to domestic turnover ratio of the company to be 50/50 by 2020. In 2014, overseas business was around Y400bn compared to Y1trn domestically. He expects to further increase overseas sales through acquisitions to around Y800bn in 5 years, and attain the remainder through organic growth.
“We have no intention of becoming a mini IBM or even a mini Google. We have to differentiate ourselves from them through creating our own value. This will be based on our experience in the Japanese domestic market of ‘a quality which satisfies the customer’ – a very Japanese aspect. Usually when IT systems companies say ‘quality’ they mean there are not many bugs in the software but we mean a total management of quality from sales through to the system management. Talking to our overseas employees, they say this quality will be recognised globally and that we should promote our ‘Japanese quality’. Previously, Japanese quality meant cars or consumer electronics, but now Japanese quality of service is becoming known around the world, in beauty or education, so we should be able to provide a service which cannot be replicated by local suppliers in the IT industry too.”
The interviewer asks whether the many parts of the NTT group (NTT Communications as well as NTT Data) all doing different things make it confusing for customers overseas. Iwamoto says there are historical reasons (presumably to do with government ownership) why this has happened, and that it can’t be helped. In fact it is often the case that NTT group companies even team up with other companies such as KDDI or Softbank to provide the customer with what they want. The trend is towards more open systems in the IT industry, he believes.
I am quite surprised that as few as 50% of Japanese men surveyed by Nikkei Business magazine recently think that women should focus solely on looking after their children when they are young. Considering this together with 75% of the men saying that women should continue to work even if they have children, it does seem to me that Japanese men are more supportive of women in the workplace than you might imagine.
In fact according to the survey, the men too feel they have to make sacrifices for their children (60% agree that sacrificing your own lifestyle is unavoidable if you have children whereas only 40% of women agreed) and 60% say that one of the three main reasons they work is to support their family.
The reason most chosen by men and women for working is “to earn money” (85% and 95% respectively), but for men the third most chosen reason is “to do something useful for society” (25%), whereas the women chose “to develop myself” (50%) and “self actualisation” (35%) as their other two reasons for working, not “support the family” (15%). Perhaps another angle on why Japanese women might choose the relative insecurity of a foreign owned company – where there is performance based pay, and seemingly more career development opportunities.
Takeo Shiina became president of IBM Japan in 1974, at the age of 45. He joined IBM Japan just after studying in the US in 1953. “In those days, gaishi (foreign owned companies) were seen as bad. A major newspaper wrote a series called “White hands, yellow hands” basically saying white handed gaishi were “dirty” and that they would disrupt the markets in Japan, make lots of money and take it all back to the US.
“The Ministry of International Trade & Industry also did all they could to support domestic computer manufacturers. They passed a special law so that the amount of tax that IBM Japan paid every year was recycled into supporting Fujitsu, NEC and Hitachi.”
Shiina took the brave decision to study in the US, after graduating from Keio University because his father had also studied abroad, in Germany, and so he was not afraid of becoming a foreign student. As for joining IBM, the auditor of his father’s company knew the President of IBM Japan and suggested it to him, He trained at the IBM plant in Canada and was shocked when he returned to Japan, to find that IBM Japan’s main office was in the middle of a bomb site. The factory was also just an old Japanese house, with a strong smell of a cesspit toilet as you walked through the door.
Shiina became head of the factory at the age of 32 and started a new site up as well as inadvertently offering the first ever online system to a steel factory. He assumed that IBM must be doing that sort of thing in Europe and the USA, but actually it turned out there was nothing to copy.
The contract was also tricky, in terms of persuading IBM HQ in the USA to accept it. Due to a mistranslation of “this is no problem in Japan” as “in Japanese this is no problem” IBM HQ finally accepted it, as noone could read the original Japanese anyway.
Shiina is proud that IBM Japan is now seen as a desirable company to work for, particularly in terms of opportunities for women, and having performance based pay. His interview with the Nikkei Online, the basis of this precis, is illustrated by his calligraphy which reads “Building a new country – young people, women, regions, foreigners”.
Somebody writing a white paper on the reason for low engagement amongst Japanese workers contacted me this week with some questions, which I answered (possibly in more detail than was helpful!) as follows:
As you may have gathered from the articles I have written, I am cautious about applying Western standards, using surveys which are basically translations of (usually American) methodologies and materials, to Japanese companies.
Whenever I find something that is puzzling about Japanese companies – in this case that employees in Japanese companies have consistently lower engagement levels than companies with other countries of origin – then I use the framework developed by Fons Trompenaars and Charles Hampden-Turner, in Riding the Waves of Culture, which classifies Japanese companies as “Family” type companies, as distinct from Missile type companies or Eiffel Tower type companies or Incubator companies. Please see http://changingminds.org/
For Family type companies, the primary motivation is to put food on the table and look after the members of the family, and secondarily the long term survival, and therefore the reputation of the family and its acceptance by the community in which it is based. In Missile type companies motivation is more about success – personal and the company’s and therefore being materially rewarded and recognised for your contribution to that success. Eiffel Tower companies are about believing in and executing the strategy and being rewarded through promotion/status. In an Incubator company, your motivation is self fulfilment – to have a job which makes the most of your skills and interests, and make a difference or do something new.
If you think of Japanese employees as members of a family, and replace “company/employer” with the word “family” then you can quickly see that they will have trouble answering questions in employee engagement surveys which are more suited to Missile, Eiffel Tower or Incubator companies. For example, “would you recommend your family to others/are you proud to tell people you belong to/work for your family” – when it would be seen as boastful to tell others what a great family you have, particularly for modest Japanese people – and traditionally it’s been very difficult for people to join big Japanese family style companies later in their careers, so why would you recommend it to your friends? You wouldn’t say – hey why don’t you leave your family and be adopted by mine?
Families all pull together, nobody expects to be rewarded individually, and if they were this would cause big arguments and accusations of favouritism. So again, there is likely to be a negative to neutral response about being rewarded or recognised or able to make an individual contribution/impact.
Families don’t have strategies, mission and purpose other than, as I said above, long term survival and protection of their reputation. So questions about whether you understand the mission and purpose and strategy will be tough to answer. Japanese employees are used to doing what they are told by mum and dad, and the mission of the family is implicit, not explicitly explained.
So if you asked Japanese employees different questions about their motivation, like “do you feel confident or secure that your company will look after you and your family in the long term” or “do you believe your company acts in the best interests of the community and therefore gives you the opportunity to contribute to the community too” then they might be much more positive.
Even questions about teamwork are tough to answer for Japanese employees – you would expect your family to be supportive and work well together because you know each other so well, so Japanese companies don’t spend much time thinking consciously about teams and individual roles within those teams. They are also, like families, very well aware of each others’ flaws and also the flaws of their seniors – mum and dad – who are the leaders but also just ordinary people who happen to be older – you didn’t choose for them to be your parents.
Even the family members are being forced into taking very early retirement (basically redundancy) and the younger family members are wondering whether staying inside the family until retirement is quite as attractive as it used to be – as so many are not getting married or having children, they have less need for a secure and protective employer.
What we did at Fujitsu was to refresh the values and vision, to try to come up with something that made sense inside and outside Japan. We communicated them internally and externally, with a new visual identity and some very emotionally driven advertising about contributing to society through supercomputers etc. Interestingly, the Japan side of Fujitsu were not so keen to have workshops about the values and vision but the one thing they did do was to compile a book of stories of individual employees, – called something like “the power to challenge” in Japanese, translated into “Fortune Favours the Brave – the Fujitsu Way”. So it was celebrating individuals, but again in a very family type way, which is to create some new inspiring family myths/stories.
Families like to tell good stories!
We are coming to the end of the final quarter of the financial year for most Japanese companies. There will be a greater sense of urgency than in previous quarters, not only to make the numbers, but also to find tangible proof that the strategies in place are the right ones, or if they are not, to draft some radical proposals for the President to make at the end of April, when the year’s results must be declared.
It’s a predictable part of the annual cycle, but I sense that in recent years, the sense of crisis is stronger than ever. So many Japanese companies feel that their very existence on the global stage is under question and the cheaper yen will only provide temporary respite from this.
The usual bottom up accumulation of midterm plans, based on projections of the previous years’ sales, a chat with customers and ”putting a finger in the air”, all jammed into several A3 sized sheets of paper, won’t do this time.
Some companies will announce, or already have announced, radical restructuring plans, but behind such plans is still the huge question of why the company exists at all – a question that most Japanese companies take very seriously, as so many believe that contributing to society, not just by keeping people in employment, but by making a positive impact on the future shape of the world, is at the core of their being.
This means they have to venture into the touchy feely territory of vision, values and corporate culture. Something which I believe they are pretty good at communicating to customers and employees in Japanese, but not outside Japan.
Words and numbers are not enough – there need to be stories, heroes and artifacts. Japanese companies have plenty of these, the question is how to communicate them globally.
One example is Alpine Electronics, the Japanese car audio manufacturer. The current chairman, Seizo Ishiguro, talks of how when he headed up the US operation, a cassette deck was returned to the company riddled with bullet holes by an unhappy American customer. The cassette deck is now in Alpine’s museum, as a reminder of how the key to Alpine’s survival in global markets is the highest possible quality and customer satisfaction.
This is a very tangible artifact, and a great story. Somewhat gentler is the brush painting bought by Sazo Idemitsu, the founder of the Idemitsu petroleum company, when he was 19, at an auction, of Hotei (often known as the Laughing Buddha) pointing to the moon. Apparently he often told employees to “look at the moon” (the big picture) not at Hotei’s finger (the details). In other words that Idemitsu was in the petroleum industry not just to make money, but to benefit society.
Intriguingly, in the painting Idemitsu bought, the moon is not depicted at all. It’s as if the artist is telling us to go and look for the moon for ourselves. The challenge Japanese companies face is ensuring that this kind of subtlety does not get lost in translation.
This article by Pernille Rudlin originally appeared in the Nikkei Weekly