Pernille Rudlin - Rudlin Consulting

About Pernille Rudlin

Pernille Rudlin was brought up partly in Japan and partly in the UK. She is fluent in Japanese, and lived in Japan for 9 years.

She spent nearly a decade at Mitsubishi Corporation working in their London operations and Tokyo headquarters in sales and marketing and corporate planning and also including a stint in their International Human Resource Development Office.

More recently she had a global senior role as Director of External Relations, International Business, at Fujitsu, the leading Japanese information and communication technology company and the biggest Japanese employer in the UK, focusing on ensuring the company’s corporate messages in Japan reach the world outside.

Pernille Rudlin holds a B.A. with honours from Oxford University in Modern History and Economics and an M.B.A. from INSEAD and she is the author of several books and articles on cross cultural communications and business.

Since starting Japan Intercultural Consulting’s operations in Europe in 2004, Pernille has conducted seminars for Japanese and European companies in Belgium, Germany, Italy, Japan, the Netherlands, Switzerland, UAE, the UK and the USA, on Japanese cultural topics, post merger integration and on working with different European cultures.

Pernille is a non-executive director of Japan House London, an Associate of the Centre for Japanese Studies at the University of East Anglia and she is also a trustee of the Japan Society of the UK.

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Here are my most recent posts

77% of Japanese companies in Europe say the Ukraine war has had a negative impact on their business

77% of Japanese companies in Europe have had their business negatively impacted by the war in Ukraine, according to a survey conducted by JETRO in September 2022. The manufacturing industry was particularly hard hit, at 83.7% and Japanese companies in Belgium (92.5%), France (87.5%) and Spain (86.2%) had the highest proportion of all countries reporting a negative impact. This may be linked to the industries most expressing concern about negative impacts – food, automobiles/motorcycles and electrical and electronic equipment. France is host to a number of Japanese food related companies and Belgium is the European headquarters of Toyota and other related automotive companies.

The main negative impacts were an increase in energy price, an increase in raw material and resource price and confusion and congestion of logistics.

The main responses to negative impacts of the invasion of Ukraine were “passing on price rises to customers” (50.5%) and diversifying procurement sources (27.5%). Manufacturers were also increasing inventory more than they were trying to find new customers.

More general concerns were rising and persistently high costs, including energy, and the extension of the frontiers of the war, the use of nuclear weapons and attacks on nuclear power plants, as well as any increase or prolongation of uncertainty about the future – when the war would end, when it would be possible to resume business with Russia.

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It’s no longer “post off” for Japanese employees in their late 50s

An increasing number of Japanese companies are abolishing the “post off” system, whereby employees are removed from line management around the age of 55, according to the Nikkei. The aim of this system was to restructure the organisation and cut labour costs. Average income fell by around 20% post “post off”. However, as most Japanese employees do not retire until they are 60, this meant 5 years of “digestion” as the Nikkei charmingly puts it, before being finally expelled.

The system dates back to 1986, when the retirement age in Japan was still 55, and a new law was enacted, making it compulsory to allow employees to work until the age of 60 – before they could receive a pension. The concern was that if seniors stayed on in management, it would make it difficult to “refresh” and have a generational change, and labour costs would rise, because of Japan’s seniority based wage system. So the post off system was introduced.

According to a 2022 survey by the HR Research Institute, 29.1% of Japanese companies have introduced a post off system, and the most common cut off ages are 55 for kacho or section chiefs and 58 for General Managers or bucho. Unsurprisingly, this has resulted in a loss of motivation for many employees in their late 50s, as they wait until they can retire.

NEC abolished the post off system in 2021, and around 1,000 managers have returned to their managerial positions and regained their salary levels. “I was evaluated in a visible way and my motivation increased” said one such manager, a software developer, who is now enthusiastic about applying for an extension to her employment, even after she reaches 60. Under the post off system, the manager had to direct her own ex-subordinates by going through her own boss, confusing everyone.

At the same time, NEC has ensured that younger and mid career people do not feel demotivated, by introducing a common evaluation standard for each level of the business, and evaluations are conducted by multiple managers, to ensure the evaluation is more objective.

The laws around retirement have changed in Japan too. In 2013 companies were obliged to offer employment to workers up to the age of 65 and in 2021 this was extended to 70. The need to keep older employees motivated has become even more acute.

UK becoming like Japan in seeing overseas as growth driver

The spring 2022 Santander Bank Trade Barometer survey showed that 33% of UK businesses who were only domestic in focus up until now have ambitions to internationalise in the next three years – a greater proportion than in any previous survey. It was also the first time that overseas markets were seen as the most important driver of business recovery from the pandemic.

With growth prospects looking dim in the UK and trade with the EU having become more difficult thanks to Brexit, British companies are seeing overseas markets as their main source of growth, just as Japanese businesses did when the economic bubble burst.

This conclusion is illustrated in the Santander report with a photograph of a geisha in a taxi, looking at a mobile phone, but according to the survey, the main non-EU overseas markets that British companies are interested in are the US and Australia, EU countries such as Germany and France, and then India and China – ahead of Japan.

The survey was of around 1000 UK businesses with a minimum £1m turnover. Those companies who already had business overseas said they are selling more into non-EU markets than before Brexit. They saw the main operational challenges in most markets as shipping costs and bureaucracy. It was only for Japan that language and culture and having to adapt products and services accordingly were seen as the primary challenges. Perhaps deregulation in Japan and smoothing of inward investment has had an impact – bureaucracy in Japan was far less of a concern than for China, USA, India, Germany, UAE, Spain, Italy and France.

Of those British business who are currently domestic only, 42% are expecting to use online marketplaces and 40% are expecting use their own ecommerce site to sell their products. They will no doubt find that language and culture will indeed be an issue, even virtually, if they want to do business with Japanese customers. Their website will not only have to be translated, but their offering needs to be adapted to Japanese customer preferences. My belief is that physical presence in Japan is necessary for success, but only 20% are considering physical presence in the overseas markets.

Those businesses who are UK domestic but are now looking overseas also say their primary source of advice on overseas business is the internet. Whereas those who already have experience of overseas business say their main source of advice is a business partner in the target market.

I suspect many of these internet searches for advice will end up on our Japan Intercultural Consulting website, but it is notable that the only serious consulting enquiries we get are from companies who already have a physical presence or are about to set up an office in Japan. They have all been service sector companies – in recruiting, IT, advertising and financial services.

For them, the key challenge in Japan is recruiting, managing and retaining good quality employees – which may be why partnering with a Japanese company is still a preferred route.

This article by Pernille Rudlin first appeared in the Teikoku Databank News on 10th August 2022

Telecoms takeover of Japan’s top CSR rankings

Comparing the top ranked Japanese companies for Corporate Social Responsibility (CSR) in Toyo Keizai’s 2022 rankings* with the 2007 rankings shows how the Japanese corporate landscape has changed. The three telecoms companies – NTT, NTT DoCoMo and KDDI – have taken over the top 3 positions. In 2007 the top 3 positions went to the heavy engineering and electronics companies Toshiba, Hitachi and Canon. Sharp, Panasonic. Fujifilm and Sony also made appearances over the years, as did automotive companies such as Denso, Toyota and Nissan.

The woes of Toshiba, Hitachi, Sharp and Nissan over the past 15 years are well documented but although Toshiba and Hitachi are in the 2022 top 50, Nissan and Sharp are at 437 and 179 respectively. Canon, Panasonic, Fujifilm and Sony are still in the top 50 along with other electronics and IT companies such as Fujitsu, NEC, Omron, Mitsubishi Electric and Seiko Epson. Denso and Toyota are all still in the top 50 along with other automotive companies such as Aisin, Bridgestone, Isuzu and Honda. Despite being tobacco or drinks companies, JTI is ranked at 7, down from #4, Suntory is at #8, one down from #7 in 2021, Asahi at 28, up from #33 and Kirin at #31, down from #10.

A Japanese trading company (shosha) has entered the top 10 for the first time. Mitsui has shot up from #64 in 2021 to #4 – all the more remarkable as it used to be seen as one of the more hardcore traditionalists of the 5 big shosha. The second highest ranked shosha is Itochu, up to #22 from #37. Sumitomo Corporation is at #40, down from #26 and Mitsubishi Corporation is at #45 up from #58. Marubeni is somewhat lagging the other shosha at #112, up from #143. Toyo Keizai singled out Mitsui’s distributed power supply project, using solar power and storage batteries for non-electrified areas of India and use of carbon offsets through a company owned forest as contributing to its high ranking.

Some of the companies whose rankings have fallen considerably include Nidec (down from 67 to 174, scoring low on environment) and Recruit, down from #62 to 172, also scoring low on environment and Ricoh, down from #47 to #217, with a lower score in HR.

*500 companies ranked by scores out of 600 for finance (300), HR (100), governance (100) and environment (100).

Why elite Japanese are “useless” at foreign companies

According to Senoo Teruo, formerly of headhunters Korn Ferry Japan, it is a mistake often made by Japanese people joining foreign companies that they simply try to follow what has been done before by their predecessors. Foreign companies expect you to “find your own way to achieve greater results” – “the level of self reliance and independent, pioneering ability is incomparably higher than that of Japanese companies”. Japanese people who were at elite Japanese companies and fail to understand this are branded as “disappointing and useless.”

Ueda Osamu, Professor at Nagoya University of Commerce, says that in American companies, it’s important to know in advance that the organisation is more military-like and the chain of command is very clear (something we often reference in our Japan Intercultural Consulting training). Hiring is done by direct supervisors in American companies, rather than by the HR department as is the case in Japan. If you don’t get on with your boss, in a Japanese company one or both of you are likely to be transferred elsewhere within the company in a few years, so it is often best to just put up with it, and wait.

However in an American company, because your manager is in charge of personnel affairs, their orders are absolute, and if you fail to produce the expected results, you can be fired. Senoo agrees – “there are far more yes-men in foreign affiliated companies than in Japanese companies… Japanese people think foreign companies are more equal in terms of hierarchy, so it’s OK to argue with superiors when you disagree, but that is a complete misunderstanding. When given an order in an American company, it’s common to respond with “Yes, great! Let’s do it!” – to show at least a positive image, to start with.

Their comments are mostly to do with American companies in Japan, but in my interactions with British companies with operations in Japan, I have certainly seen similar frustrations – particularly around wanting their Japanese employees to be more proactive, and willing to change how things are done.

Continued fall in UK employment by Japanese companies

Around a half of the 1,100 or so Japanese companies in the UK have filed their annual reports for the financial year 2021/2. Most paint a positive picture of recovery from the pandemic and resilience to any impact from Brexit. However, the employee totals show a more worrying trend emerging.

Overall, the total number employed by those Japanese companies in the UK who have reported their results has fallen by 8% over the past year. This is an acceleration of a decline which started three years ago – employee numbers had fallen 3% the previous year, and 2% the year before that. This was preceded by a couple of years of growth from 2016/7 to 2018/9. Projected, this suggests that the number of people employed by Japanese companies in the UK will fall to 158,000 by the end of the financial year 2021/2, below the 161,000 that were employed by Japanese companies in 2016/7 and a 14,000 drop on the numbers employed in 2020/1.

A number of factors might be behind this rise to 2018/9, followed by a fall, and more recently a sharp fall. It could be that Japanese companies continued to invest in growing their UK businesses, until the likely Brexit deal became clearer towards the end of 2019, and then the impact of Brexit played out after 31 January 2020 through to when the transition arrangements ended on December 31 2020.

It could also be that Japanese companies laid off people during the pandemic (although the decline in employment started before early 2020 in some sectors) and then were hit further by the Great Resignation in the past year.

It is certainly partly due to the impact of Honda closing its Swindon factory in July 2021. That meant the loss of nearly 3,000 jobs and it looks likely a further 5,000 jobs will have been lost in the automotive sector over the past year – many of which were dependent on Honda. The decline in employment in the automotive sector began in 2018/9, a year or two before other sectors began to lose jobs.

So what about the 6,000 jobs that look to be disappearing in other sectors? Finance seems to have stayed steady, even growing slightly, employing around 14,000 people, but non-financial services, after years of high growth, are beginning to show a decline, maybe by 1,000 or so to around 55,000.

Wholesale (not including automotive), having grown strongly to 2019 has dropped around 5,000 or so jobs in the past couple of years, employing around 38,000 people. This could be reflection of the change in structure of Japanese wholesalers in Europe, who have moved their EU logistics and warehousing to the continent. There are also another 1,000 or so jobs likely to be lost in non-automotive manufacturing sectors.

We have not been able to publish a final Top 30 UK for 2020/2021 of the largest Japanese corporate groups, as there are still outstanding annual reports due to be filed at Companies House for NTT and NEC. Taking both of those groups out, it seems the biggest employers are cutting back, deliberately or through passivity, on their employee numbers in the UK. The decline represents around 5,000 jobs, 5% of the 97,000 who were employed by the big corporate groups in 2019/20, and it seems likely the total will fall further in 2021/2022. This is not just because of the Honda Swindon closure feeding through, but also from factoring in the 700 or so fewer staff at SoftBank-owned ARM, down from the 3,700 peak a year or so ago, when it fulfilled its 2016 promise to double its workforce in the UK.

The key question, particularly for Brexit watchers, is whether this decline in employment by Japanese companies in the UK is also occurring in the rest of the region. The Top 30 Japanese companies in Europe, Middle East and Africa employed around 577,000 people as of the annual reports for the year ending 2022. The data for Yazaki is yet to come in, but for the remaining 29 companies (which includes Honda), there was a 2% increase in employees in the region. Without the loss of 4,500 jobs at Honda UK companies, this would have been a 3% increase. So while EMEA has seen gradual growth in numbers employed by Japanese companies in the past couple of years, the UK has seen an accelerated decline.

New approaches by Japanese companies to Generation Z

Judging by this article in the Nikkei Business magazine (¥), many of the concerns and values of Japan’s Generation Z work are equally applicable to young people in other countries. However, the adjustments that Japanese companies have made or need to make, to ensure Generation Z’s engagement and retention, reflect some of the unique aspects of Japanese corporate culture.

The article, co-written by female Nikkei journalists, two of whom who are themselves Generation Z, outlines 5 key points of the Generation Z work ethic:

Work is just one aspect of “life” – the company is not at the center of this generation’s life, as it has been for previous generations in Japan. Generation Z are keen to improve their own happiness through self improvement, hobbies and family. So employers should not say “that’s just how it is” but rather try to find new value in work that they are assigning to Gen Z.
They want self actualization and to contribute to society – so an employer needs to find common ground between the employee’s goals and the company’s goals, in order to motivate them.
Time performance – Generation Z are used to picking through mountains of information to get answers, so emphasise the value of producing results efficiently in a short space of time. They want to be trained, and given clear direction and targets. This is often misinterpreted by Japanese bosses as an unwillingness to do any more than is asked and an insistence on going home on time.
They are fearful of failure and look for empathy and sharing of problems. It is important for managers first of all to praise work that they have done well, and then help them improve through advice
They prioritise a healthy working environment and good human relationships. Managers must look to communicate on a frequent, individual level with Gen Z team members and make sure they don’t feel isolated.

Specific examples given of what Japanese companies have done include how juniors at Sumitomo Chemical are encouraged to recommend and review books to executives as part of their training. A junior engineer in the article described his delight at receiving a positive response from a managing executive officer to one of his recommendations.

NEC has online drinks parties – where 4 younger employees and 1 executive participate from their own homes, in casual clothes. The meetings are streamed online and can be viewed by other members of NEC. “Some of the executives wear cute T-shirts and by seeing an unexpected side of executives, young people realise they are not so remote from them,” says the organiser. One of the executives is quoted as saying “I want to create an atmosphere in which young people’s opinions and ideas are positively considered.”

Other companies are experimenting with putting new joiners into teams to work on projects together, rather than having the 1:1 apprentice/master relationships with senior employees that were normal in the past. Training has become much more formalised that the “On the Job Training” offered to previous cohorts. NTT Data is rotating new recruits around various assignments and training courses, three months at a time – which has been the norm in Western companies for graduate recruits.

The pressures on Japanese managers to respond to the challenges of Generation Z means that we at Japan Intercultural Consulting have seen an increase in demand for our leadership courses in Japanese, where we cover topics such as psychological safety and servant leadership.

The energy crisis

With warnings of train strikes in the summer and power cuts in the winter, and rising inflation, it really does feel like Britain has returned to the 1970s. I was a little girl, living in Japan, during most of the 1970s, but was still in Britain for a year or so when the first power cuts happened. I remember being quite excited about having to do everything by candlelight. I doubt the adults were as thrilled, however.

Memories of my childhood in Japan came back to me as I was looking for alternative heating for our house that was not reliant on mains electricity or gas. I discovered that Japanese manufacturers are selling wick type paraffin heaters in Europe, just like the ones I remember from my childhood in Sendai, only less smelly.

I shared this with one of my friends, about the same age as me, and she told me that her family home, in 1970s Britain, was also heated with paraffin heaters. They did not have any central heating, and, she added, the paraffin heaters were used to heat the bathroom on bath night. In those days, it was quite common just to have a bath once a week, often sharing the dirty water with other members of the family.

For many homes then, there was only enough hot water for two bathfuls a day, coming from an immersion tank, which ran on electricity and would often be set to switch on at night, when electricity was cheaper.

Now most British people shower once a day, getting their hot water “on demand” from a combination gas boiler, which also runs the central heating. Even before the threat of power cuts, the government has been considering incentivising households to switch away from gas boilers to air source heat pumps for their central heating and water heating. So far, however, there has not been a big take up.

One of the issues, apart from the high upfront cost of installation, is that planning permission may be required for an outside unit. This also caused difficulties in the uptake of solar panel installation. Many British people live in old houses, or conservation areas, where visible changes to the houses that are not in harmony with the surrounding environment cannot be made.

This may also prove to be an issue with the new home batteries that Japanese companies such as Toyota Motor have been introducing. Because they are also used to charge cars, they need to be outside – which is fine for those who have homes with a parking space incorporated. But many city dwellers park their cars on the road in front of their house, and this means that they have to run a cable out of their front door and across a pavement to charge their cars.

No doubt the energy crisis will eventually provide ingenious answers to this, but this winter I think it might have to be candles and paraffin heaters for many of us.

Hitachi’s new risk management

Up until now, Hitachi’s risk management team was mainly centered on the legal department – which I suspect is probably the case in most Japanese companies. Now Hitachi’s President Keiji Kojima has added the finance department to it, wanting the company to take a more proactive approach to global risks. The aim is to visualize risks – such as the impact of the economic slowdown in Europe due to the Ukraine crisis and soaring component costs due to inflation – and respond quickly.

When Russia invaded Ukraine, GlobalLogic was empowered to act quickly to evacuate 7,200 local employees in the country – and was told that they could put off contacting Japan HQ until later. By the end of April, remote working and overseas bases had been put in place and the operations were back up to 95% level.

Hitachi’s overseas business has expanded recently thanks to the acquisition of US company GlobalLogic and the power grids business of ABB, now Hitachi Energy.

Strengthening the risk management system is one response to this, along with introducing a global standard job description system to the Japanese organisation, aiming to have 30% women and 30% non-Japanese representation ont he board by 2030, aiming for zero carbon by 2050. Five out of the 9 external directors are non-Japanese.

Hitachi has learnt from past failures in overseas expansion, such as the Horizon Nuclear Power project in the UK, and the failure of a joint venture thermal power project in South Africa.

These changes have impacted the way the board operates. Now, when an executive officer reports that a plan has not been achieved, the non-Japanese directors respond “so?” – by which they mean, don’t just report the result, tell me what you are going to do next. A former external director of Hitachi, Harufumi Mochizuki comments in the Nikkei that “thanks to training by foreign directors, the executive officers have acquired a world class management style, and the ability to action, with a sense of speed.”

The next challenge for Hitachi will be to make the best use of the global human resources that it now has thanks to its acquisitions. Only three of Hitachi’s 34 executive officers are non-Japanese. The Nikkei comments that these changes are very much in line with the vision of Mr Nakanishi, the former President and Chairman who died in 2021, for an organisation with world class leaders who can respond quickly to global risks.

The inside story on how Mitsubishi Chemical selected a non-Japanese president

“Many Japanese executives are unable to think critically”, says Hashimoto Takayuki, an external director (ex IBM Japan) and chairman of the nomination committee of Mitsubishi Chemical Holdings, in a recent interview with Diamond Online.

“There is no right answer to how to manage a business now” he adds. The traditional Japanese model of low-cost, high quality, on-time delivery, based on conventional mass production methods is no longer sufficient. “There is a need for management that resolves conflicts, balancing social and economic benefits, such as carbon neutrality.” So it is not enough for a President or CEO to just have the traditional ability to sell as well as a top sales person or have a great track record as a factory manager.

Japanese people are not very good at managing subsidiaries acquired overseas

“Broadly speaking, the president has three duties. The first is the corporate branding of the company – the “purpose” that is attracting so much attention recently. The second is portfolio management – business consolidation. An appropriate business structure has to be built, in line with trends such as ESG. The third is global governance. Japanese people are not very good at managing subsidiaries acquired overseas, but it is an essential skill for a global company.”

“I believe that people who are future presidents/CEOS will need to be educated within a special track in the company, as a profession, much as you would with marketing or sales. They need to have assignments which will stretch them, such as developing an overseas business from scratch, or rebuilding a poorly perfoming subsidiary.

This is why the top person from within was not selected to become the President, because they had not been educated in management. There were many excellent performers heading up business divisions, but whether they can become President is another matter.

We asked a headhunter to produce a long list of candidates to be President – there were more than 30, including people from outside Japan. The shortlist had 4 people from outside the company, outside Japan, and 3 people who were in-house candidates.

Why an external, non-Japanese candidate was selected

“Mr Gilson gave a good impression of deep understanding of Mitsubishi Chemical’s vision of KAITEKI management. Other people wanted to change this vision as soon as possible, but that was not the kind of successor we were seeking. Also, external candidates may want to bring in a team they are familiar with, but Mr Gilson clearly said he would prioritise teamwork with the current management members.”

Furthermore, during the interview, Mr Gilson summarized his business improvement ideas in a proposal of 2 sides of an A4 and presented them. The proposal was accurate, but above all, it showed a passionate intent.

There were some concerns, as Jean Marc Gilson‘s previous company (Roquette Freres) had sales of several hundred billion yen, compared to Mitsubishi Chemical sales of nearly 4 trillion yen.

Avoiding backlash

“I expected a certain amount of backlash within the company, but I’ve heard that actually there was a more welcoming atmosphere amongst the younger employees. After all, the younger the person, the stronger the desire for change.

Having the former chairman of Mitsubishi Chemical (and the person who came up with the KAITEKI vision), Yoshimitsu Kobayashi on the nomination committee was also a big factor. It was the first time Mitsubishi Chemical appointed a president through a nomination committee, so there was a risk that a decision made solely by people with no experience of Mitsubishi Chemical would not be seen as valid.

Mr Hashimoto still thinks that it is best if the President has been developed within the company, but it takes time to reform internal systems and culture. If this is not worked on right now, the company will never change.

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