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

Some thoughts for Japanese companies investing in Egypt

There were several participants from Egypt in an online training session I ran recently for a Japanese automotive company. It is one of the few positive outcomes of the pandemic, that putting training online means it can now be accessed by people who would normally not be able to travel to the regional headquarters in Western Europe to participate in classroom-based training. Technology problems still remain, however. One of the Egyptian participants was a senior manager with many insights to share, but the audio connection was too poor quality to hear what he had to say.

It was unsurprising, therefore, to see that a strong infrastructure was not one of the key attractions for investing in Egypt, according to a recent JETRO survey of Japanese companies who have operations in Africa. Where Egypt did score highly was on the size of its market and growth potential. It has a population of over 100 million, making it the largest Arab country in the world and the third largest country in Africa.

Respondents to the survey also rated Egypt relatively highly on political stability. Since Abdel Gattah al-Sisi, the current President, ousted Mohamed Morsi in 2013, the situation has improved, with the ending of a nationwide state of emergency in 2021, but it is still has military rule, with various human rights concerns. Other Arab states have been supporting Egypt’s economy since Morsi was ousted. They were previously opposed to Morsi, because of his membership of the Muslim Brotherhood.

The Muslim Brotherhood’s roots stretch back to before WWII, when it was founded in Egypt as a pan-Islamic, religious, political and social movement. It was opposed to the British rule in Egypt, an occupation dating back to the 19^th century. As a consequence of the occupation, English is widely spoken in Egypt, particularly among the management cadre.

However, as I know from my own family history, Egypt should not be viewed too complacently as an attractive investment destination. My grandfather was posted to Cairo in the 1950s, when he worked for Scandinavian Airlines. After a couple of years there, living a luxurious life with servants and a cook, he found himself having to organise the rescue of his fellow European expatriates, because of the Suez Crisis. This had been preceded by terrorist acts by the Muslim Brotherhood against buildings frequented by the British and other foreigners.

In more recent years, the continuing regular terrorist attacks on foreigners have impacted tourism and the sector has now been hit by the loss of Russian and Ukrainian visitors who were an important source of income. Russia and Ukraine also account for over a quarter of global wheat exports and around 80% of the world’s supply of sunflower oil, so the prices of wheat and cooking oil have rocketed up. This is impacting Egypt badly, as it is the world’s biggest wheat importer, with a subsidised bread programme for two thirds of its population. The intertwined histories of countries in the Europe, Middle East and Africa region continue to evolve.

This article was originally published in Japanese in the Teikoku Databank News on 11th May 2022

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Japanese digital transformation in Europe

The digital transformation being undertaken by so many Japanese companies is beginning to have an impact on their European operations. One of my longstanding clients has notified me that their European HR and Learning & Development function in the UK has been outsourced to a company in India and the UK staff have been made redundant. I suspect this is not just happening in Europe but globally, as the company has divested many of its subsidiaries and is keen to consolidate and digitize the administrative functions of the remaining businesses.

Several other UK subsidiaries of Japanese companies which had a regional coordination or regional sales function have transferred these functions to EU based subsidiaries. This was partly in response to Brexit, but it has also provided an opportunity to restructure their businesses. Some have become branches of Japan HQ or of the EU subsidiary, and still retain regional coordination functions and staff, funded by management service fees.

Those that have continued as incorporated subsidiaries have found that although their turnover has dropped, their profitability has improved, partly due to the reduction in headcount but also because they are able to focus on their UK business, without having to carry the costs for coordinating across the region.

I have seen the same influences improving the profitability of my own business this year. A few years’ ago, I transferred my EU business to my German partner, so I no longer have to bear the costs and complexity of coordinating it. This and implementing some new, user friendly, cloud-based accounting software meant that I didn’t need to pay for a bookkeeper to come in once a month.

The pandemic pushed much of my training delivery online, permanently, which has meant it can reach a wider audience, so the contract sizes are larger than before. My main overheads are now software and IT related, not travel expenses or paying locally based subcontractors.

Costs have also come down because I stopped my membership of various networking groups – partly because during the pandemic there were no in-person networking events to go to, but also because I was getting enough business from existing customers or through online enquiries, so there was no need to find new leads.

From my experience of working in or for Japanese multinationals over the past 30 years, I suspect that these changes will prove to be cyclical. Individual subsidiaries will start to ignore the global outsourced administrative functions and quietly build up their own local capability again. Then to avoid duplication of costs, a regional function will be revived.

My overheads are beginning to increase too. I’ve started renting an office, as I find my home office is too distracting, and it is good for my physical and mental wellbeing to walk to work. I may even re-join some networking groups, because after all, the point of digital transformation is not just to cut costs, but to innovate. And that is best done by meeting new people, in person, who have fresh perspectives.

This article by Pernille Rudlin first appeared in the Teikoku Databank News in September 2022

Ukraine – winning the digital communication war

A week before Russia invaded Ukraine, I received an email from two Ukrainians working for a Japanese technology company in Lviv, enquiring about the training I do, and asking for a meeting. I was aware even then of rising tensions in the region, but thought it best to respond as I would normally do, and we arranged an online meeting for the next week.

Unsurprisingly, the meeting was cancelled. When I replied to their cancellation email by asking them what we could do to help, they said “keep telling people what is happening here.” They had already grasped the importance of communication in 21^st century warfare.

I have to confess I had not paid much attention to what was happening in Ukraine up until then in terms of my own business. I had been aware of the Maidan uprising and the Russian invasion of Crimea in 2014, especially as I knew that the brother of the Ukrainian HR manager at one of my Japanese clients had been fighting in the Ukrainian army.

I assumed Japanese investment in Ukraine would be limited, and mostly automotive related, but the contact from the Japanese technology company alerted me to the fact that there was a technology cluster in Lviv, with many IT related companies and technology start-ups. Indeed Hitachi, through their recent acquisition of American software engineering services provider GlobalLogic, turned out to have over 7,000 employees in Ukraine.

The reasons for this boom in IT related services in Ukraine become clear on reading the latest JETRO survey of Japanese companies in Europe. This showed that Japanese corporate interest in investing in digital transformation technology is second only to their interest in investing in carbon reduction technology in Europe.

37% of Japanese companies in Europe are already using digital technologies. This rises to over 50% in the case of Japanese companies in central and Eastern Europe, where it is possible to find digitally skilled employees at a lower cost than in the West.

The impact of a digitally sophisticated population is certainly being felt in the current war. Not only have Russian websites been hacked, but it seems to us in Western Europe that Ukraine is winning the social media communication war at least. In between the harrowing footage of bombing and killing, we have been in awe of the dark humour and cheerful bravery in the videos Ukrainians are sharing of their farmers removing tanks with tractors and mines with their bare hands, while still smoking a cigarette.

The communication skills of Ukrainians and in particular their President Zelensky, help Europeans, with our own memories of wars, dictators and invasions, to empathise with them. In the UK, one of our TV channels has been showing the comedy series that Zelensky appeared in, as a history teacher who was elected President. The storyline shows how he won popular support, after one of his young students filmed his passionate and swear laden anti-corruption speech on their smartphone and posted it on Facebook.

This article was originally published in Japanese in the Teikoku Databank News on 13th April 2022

Rhymes from history – the Japanese Business Mission to Britain – 100 years’ ago

I’ve been researching the visit of the Japanese Businessmen’s Mission to Britain, which ended a hundred years’ ago, to see if there are any parallels with today.

The visit took place around the time that the Anglo-Japanese Alliance of 1902 became defunct, superseded by the Four Power Treaty of the Washington Conference between Japan, the UK, the USA and France. The conference ended in February 1922, but it was not until the treaty was ratified in August 1923 that the Alliance was officially terminated.

The alliance was originally directed against Russian expansionism in the Far East, and latterly to deal with the threat from Germany, but by 1921 Britain no longer feared Russia, and Germany had been defeated in WWI. Instead, Britain wanted to maintain close relations with the United States, which had a more hostile attitude towards Japan and saw potential conflicts of interest in the Pacific region and China.

The mission, led by Dan Takuma, visited the United States, Britain and France from October 1921 to February 1922, deliberately coinciding with the Washington Conference. There was some confusion in Britain over what to call the mission – sometimes it was referred to as an industrial mission, sometimes as a commercial mission, but it seems from accounts of the speeches that many of the British hosts were well aware that there was also a diplomatic agenda.

Japan had become a net exporter and a creditor nation as a result of WWI, deeply involved in the international economy. Shibusawa Eiichi felt that this was the moment for Japan to strengthen its global influence, by ensuring its economic and social infrastructure was up to the level of a developed nation.

As a consequence, the members of the zaikai (powerful business people) on the mission showed as much interest in British labour relations, the cooperative movement and the Federation of British Industries as visiting shipyards and factories or discussing tariffs and trademarks. They also were keen to understand Britain’s transportation infrastructure. After their tour of Britain, they went to France to inspect the newly formed International Chamber of Commerce.

There was plenty of talk during the dinners and lunches for the mission, hosted by British businessmen, of keeping open doors in trade. However, it was clear the British were beginning to see Japan as a competitor in its colonies, particularly in cotton goods. Dr Dan responded to this by saying that the competition for both Japan and Britain would be China.

The Japanese mission was worried that the end of the Anglo-Japanese alliance might therefore lead to more trade barriers, as well as harm Japan’s global standing, as the alliance had been proof of Japan’s creditworthiness.

It seems they were right to be worried. Once the Great Depression hit in 1929, the US became more protectionist. In 1932, Britain implemented the Imperial Preference tariff policy, of home producers first, empire producers second, and foreign producers last – the same year that Dan Takuma was assassinated.

This article was originally published in Japanese in the Teikoku Databank News on 9th March 2022

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.

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.

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