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

What is the deal with Nissan?

The wave of Japanese investment into UK after NSK’s first step in 1974, feared by many in the UK, did not happen immediately. Under the Labour government of 1974-79, there was double digit inflation, unemployment of over 1 million, the IMF bail out in 1976 and the Winter of Discontent, which may have been something of a disincentive to invest in the British economy. Although NSK did prove correct about a weak sterling, which at least ensured their British made exports were cheap.

Japanese concerns over Britain’s economic, political and social stability did not end with the advent of a Conservative government in 1979, however. It took nearly 3 years of feasibility studies, Mrs Thatcher visiting Tokyo and a visit by Nissan to NSK in Peterlee for reassurance, from the first announcement in January 1981 to when agreement was reached that Nissan could go ahead with building its UK factory in Washington, Sunderland in 1983. There were also predictions by unions and other car manufacturers of “devastation” if Nissan in the UK was just an assembly operation using cheap Japanese components.

“Better for the British people to buy Japanese cars made by British workers than to buy German cars assembled by Turks”

The argument made by Norman Tebbitt, then Secretary of State for Employment in April 1981 that “surely it is better for the British people to buy Japanese cars made by British workers than to buy German cars assembled by Turks” had finally won through domestically, but Nissan had also had its own misgivings which caused the delay – both from its experience in Europe and pressures in Japan from its union.

Nissan had already dipped several toes into manufacturing in Europe. It took a stake in Moto Iberica, Spain‘s largest commercial vehicle manufacturer in 1980. The tractor division was spun off to form a new company, with Kubota taking a 55% stake and assuming managerial control. Nissan took a 67.67% stake in the rest of Motor Iberica, renaming it Nissan Motor Iberica in 1987. Manufacturing of vans and commercial vehicles continued at the plant through to the present – but not always profitably – and finally Nissan announced that it will be shut down in December 2021.

Nissan had also in 1980 started a joint venture with Alfa-Romeo, building a plant in Italy which started production in 1982, marketed as the Alfa Romeo Arna in Italy and Germany, and the Nissan Cherry Europe in the UK. However, this venture was not a success and production was suspended in 1986.

Nissan concluded an agreement with Volkswagen in 1987 to produce and market the Volkswagen Santana in Japan, hoping to counter criticism that the Japanese market was difficult to penetrate. Santana production was terminated in 1989, to be replaced by the Passat. Sales of imported Passats in Japan were so poor, however, Nissan cancelled the assembly agreement.

The 1984 Nissan deal

The Nissan union in Japan had been concerned that the size of the investment in the UK plant meant that funds would be diverted from investment in Japan, and there was no guarantee that the project would be successful. If it failed, it might even affect the security of employment within Japanese factories. Consequently, the scale of the investment was reduced from the initial announcement of a £200-£300 million investment to a two phase project, starting with a pilot plan of a £50 million investment to assemble 24,000 Bluebird cars from knockdown kits imported from Japan. This was justified as being needed to gain first-hand knowledge of operating and marketing in the UK and obtain information on local sourcing of components.

The second phase was to be a build up from 60% local sourcing to 80% by 1991, expanding to a 100,000 units per year capacity, 30-40% of which was to be exported to Continental Europe. The total cost was put at £350 million with the British governement expected to provide selective financial assistance up to 10% of the total investment.

Keeping to the deal in a Single Market

Production of the Bluebird began on schedule in 1986, and the second phase began in 1987. Initially the plant made low value added models with high value-added quality cars exported from Japan, but from 1990 the Primera hatchback was manufactured in Sunderland as the sole global production source, exported back to Japan and into Taiwan. The cost of the Nissan project had risen to about £900 million by the beginning of the 1990s and output rose to 124,000 units per year in 1991.

Whereas around 80% of the components of UK made cars were sourced in the UK when the 1984 Nissan deal was struck, by the 1990s and early 2000s the proportion had dropped to around 30-40%. Even UK components in turn contained components from elsewhere, as this comment from a supplier in the comments section of the Financial Times explains:

“We manufacture part of one component for the Nissan Qashqai. We purchase raw materials from Taiwan, we manufacture in the UK in a Japanese owned factory. Our customer is in Germany, where our product is bonded together with products from other countries. Our customer’s customer is in France, where the bonded component is integrated into a car component. The component is shipped to Sunderland and becomes a part of a “British” car.

How Mrs May and her merry band are going to sort this mess out is beyond me, and I suspect beyond them.

The development time lines for the most basic of automotive components is two to three years, which means that we are already “post Brexit” for new business development. How do I persuade customers to invest in new product development with us when nobody has a clue on what basis I might sell eventually sell my product to them, and given rules of origin, in some cases on what basis they might sell their product to their customer. We have good relationships with our customers, but at the end of the day they are running their business for their benefit and may well decide its just not worth the uncertainty and risk.”

Even if Nissan did not keep to the local sourcing part of the 1984 deal (presumably superseded by the European Single Market, so that local meant EU wide), they did expand production way beyond the 100,000 promised, peaking at 519,000 units produced in 2016/7. The 470 strong 1986 workforce grew to around 7,000 people by 2019, around 10% of whom were designers and engineers working in a design facility in Cranfield.

Nissan also exceeded its promise of exporting 30-40% of production to Continental Europe. By 2016 nearly 1/3 of UK car production was made by Nissan, 80% exported, 55% to the EU.

Nissan has tried to increase the proportion of locally made parts to 40% and even to 80%, to avoid tariffs and delays in the supply chain after Brexit, supported by a British government policy to reach 50%. It has encouraged suppliers to set up in a new industrial park in the North East in order to do so, but our data does not show any move by Japanese suppliers to increase their UK presence.

In fact the shift seems to be more towards setting up additional factories in Continental Europe. Of the 29 new automotive manufacturing operations started in Europe in 2015-2018, according to the Teikoku Databank and our researches, 8 were in Germany, 4 in France, 4 in Slovakia, 3 in Spain, 3 in Italy, 3 in Hungary and 2 in the Czech Republic but none in the UK. For the first time there are now more Japanese automotive manufacturers in Germany than in the UK.

The 2016 Nissan deal – to Infiniti and beyond

Even if the long term solution to a hard Brexit is to increase the number of automotive suppliers in the UK, some short term shoring up had to be done to ensure that manufacturers didn’t conclude that the safest bet was to shift all supply chains and manufacturing to continental Europe.

Greg Clark, the former Business Secretary, revealed in 2019 that the content of his letter to former Nissan CEO Carlos Ghosn in October 2016 included “a package of support in areas such as skills, R&D and innovation” which “could amount to additional support of up to £80m”. This was modified to £61m by 2018 due to reduced production costs. It was conditional upon Nissan continuing with plans to manufacture the new X-Trail and a new model Qashqai in the UK. Clark revealed the terms of the letter after Nissan announced that it had decided to manufacture the X-Trail in Japan in 2019, thus invalidating the deal.

There were rumours that the government would therefore pull the aid package, but Business Minister Richard Harrington said in 2019 that the deal would still stand, and be tied to electric vehicle development, which in Nissan’s case would be the LEAF, which only represents around 10% of its production in Sunderland.

Nissan announced in 2019 that it would no longer produce the Infiniti in Sunderland for Western Europe. It was supposed to start production of both the new Qashqai and X-Trail in Sunderland in 2019, then it said it would start the Qashqai production in October 2020, and then announced it will delay the start to mid 2021, due to the uncertainty caused by COVID-19, and – although it did not say this – by what kind of EU-UK deal there might be. Nissan has already spent £400m readying Sunderland for the new Qashqai, supported by £11m from the UK government.

Nissan Next and the alliance

In May 2020 President Uchida Makoto announced Nissan Next, a a four year medium term plan, aiming to downsize and close plants such as Spain and Indonesia. Nissan will focus on “our highly competitive midsize segment, electrification and driver assistance technology” and increase the ratio of common electric parts across the alliance of Mitsubishi, Renault and Nissan. Nissan is seeing the Ariya as its new big hope for electric vehicles after the Leaf. The Leaf was manufactured in Sunderland, whereas the Ariya is being manufactured in Japan.

The three companies also announced the plan for the alliance in May 2020, where each will take the lead in their main sales regions, the models and technologies under development. Nissan is to take the lead as the “reference” for China, North America and Japan. Renault will be the reference for Europe, Russia, South America and North Africa and Mitsubishi in ASEAN and Oceania. Renault has already said it would be willing to manufacture Nissan cars in its European factories if needs be, and presumably if there is a no deal Brexit and/or lack of diagonal cumulation whereby Japanese parts are not accepted as “British” by the EU, then Renault can help out Nissan in terms of sourcing EU parts.

Clark’s 2016 letter promised to Ghosn it would “be a critical priority of our negotiation to support UK car manufacturers and ensure that their ability to export to and from the EU is not adversely affected by the UK’s future relationship with the EU”. Clark and Ghosn are both gone, so it’s unsurprising, 4 years’ on, Nissan feels the need for more reassurance that the UK government will keep to their side of the deal, whatever that turns out to be this time. If not, Renault is waiting in the wings.

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Should Japanese companies be compensated by the British government for Brexit?

There has been some talk of whether Japanese companies who invested in the UK might seek compensation from the UK government, should the UK leave the EU in such a way as to materially damage their investments.

To understand the basis for such a claim, we need to travel back to the early 1970s to understand what lay behind Japanese manufacturing investment in the UK, and what promises were made. Japan had recovered from the devastation of WWII to become a successful economy and trading nation.

The oil crisis of 1973 revealed, however, that Japan was a nation that had to keep pedalling to stay on the bicycle. Over 90% of its oil was imported and 70% of its energy needs depended on oil. Exports were a means to buy this essential import, but agressive exporting had led to trade friction with western Europe and the USA.

Investing in manufacturing bases abroad was one way to mitigate this friction and the USA, Asia and Latin America were the main beneficiaries of this from the 1950s, with western Europe joining rather later.

The UK had just become a member of the European Economic Community, and the British government was looking at ways to give regional support to areas in the North East where coal, steel, shipbuilding and heavy engineering were in decline. The North of England Development Council opened one of the first UK regional offices in Japan in 1975 to attract inward investment.

NSK – one of the first Japanese manufacturers to invest in the UK

The first major automotive related manufacturing investment in the UK was by NSK (Nippon Seiko Kaisha), Japan’s leading ball bearings and steering column manufacturer, in 1974. NSK had begun a feasibility study of European production in 1971 and considered other locations such as Ireland and the Netherlands, all of whom offered generous aid and grants. In the end the UK was chosen because of proximity of supply industries, cultural similarities, moderate industrial relations and the view that sterling would be weak over the long term.

Although NSK’s investment in the UK was supported by the Minister for Industrial Development, Chris Chataway, the UK bearing industry sought assurances regarding the threat posed by Japanese competition. The joint communique promoted reciprocal investment in Britain and Japan, although there is no record of British ball bearing investment in Japan happening since. Instead NSK ended up acquiring the main British competitor, United Precision Industries in 1990, in addition to establishing a £7 million factory in Peterlee, County Durham, employing 220 people, which began production in 1976.

The 1974 deal was that NSK should invest in an assisted area, and at least one half of the output should exported, with one half of the value of the product to be added in Britain, and that there should be considerable substitution of the current Japanese imports of bearings. Chataway pointed out that it was “better for Britain that we should have investment in the UK serving the European market, rather than investment in Europe, from where the goods would be exported to Britain”.

The official reasons for choosing Peterlee were given by NSK as being the availability of skilled labour and a good factory site and a good communications network and local amenities. Government grants and loans of £1.4 million were also provided.

46 years later, NSK has to stockpile

Rolling on 46 years, NSK Bearings Europe now employs over 900 people in factories in Peterlee and Newark. It acts as a contract manufacturer to NSK Europe Ltd, with a turnover of over 1 billion euros, which sells 14% of its production to the UK and 70% to the EU, to the automotive and industrial sectors. NSK has had anti-dumping duties imposed on it by the EC but an EC investigation into it found that less than 60% of imported parts were used in its finished bearings, so it was cleared of being a “screwdriver” operation. So NSK has kept its side of the bargain.

NSK acquired Amatsuji in Japan (AKS Precision Ball in the UK) and expanded further in Europe – with factories in Poland and Germany as well as sales subsidiaries across the Continent. It has stockpiled on the assumption that there will be a no deal Brexit. If there is a no deal Brexit, the standard third country tariff on bearings is 8%.

So, although NSK’s investment deal was done over 40 years’ ago, a no deal Brexit would mean that the UK government has chosen to put a large obstacle in the way to NSK fulfilling the promise of that investment deal to export more than half of its UK production. It would be understandable if NSK felt this invalidated its commitment to invest in the UK. Presumably this kind of issue is why Japan has asked for some kind of investor state dispute mechanism to be put in place between Japan and the UK.

This post draws heavily on ‘Japan and the North East of England: From 1862 to the Present Day’, Marie Conte-Helm, The Athlone Press, 1989 and ‘Japanese Manufacturing Investment in Europe: Its impact on the UK Economy’, Roger Strange, Routledge, 1993.

Top 10 Japanese corporate charity donors in the UK

Japan-owned companies in the UK contributed over £17 million to charity in 2019. £10 million of this, however, was the donation made by First Sentier Investments (formerly First State Investments), owned by Japan’s MUFG Group since 2019.

£8.5m of the £10m went to the Maitri Trust which was established by the Stewart Investors team members (part of First Sentier Investments) in 2006, and helps educational initatives in India, South Africa and Mexico. The other £1.5m was given to the Charities Aid Foundation. 2019’s donation was a substantial increase on the £5.5m First Sentier donated in 2018.

The biggest Japanese corporate donors (>£100,000) increased their charitable budgets over the past two years, but overall the total dropped 3% on a like for like basis (not including First Sentier as they were not Japan owned in 2018/9).

Benchmarking Japanese corporate charitable donations

It’s difficult to benchmark Japanese companies’ charitable activities in the UK against FTSE 100 companies as many of the Japanese companies in the UK operate on a regional or global basis and the charitable donations are on that basis too. Only around 10% of the 1000 or so Japanese companies in the UK put a monetary figure on their charitable donations in their annual reports, or specifically state that they do not donate to charity.

The Charities’ Aid Foundation issued a report in 2018 on FTSE 100 charitable donations, which estimated that the FTSE 100 donated around £1.9bn in 2016. The report uses donations as a percentage of pre tax profit as a benchmark. Unfortunately some of the biggest Japanese companies in the UK such as Toyota, Nomura and Dentsu have been making losses in recent years so this is not a benchmark which can be readily applied to them. However, CAF’s cut off point of “at least 1% of pre-tax profits” as being an indication of commitment to charitable giving means that it is possible to say that JTI, Dentsu (using 2018 figures), Mitsubishi Corporation, Fujitsu Services and Ricoh are all in the “above 1%” category.

The Top 10 Japanese corporate givers

The next biggest donor after First Sentier was Japan Tobacco International through their Gallaher subsidiary in the UK. They donated £3.24m in 2019, a similar level to 2018. Gallaher “works with leading charities to improve the lives of socially isolated older people as well as those who are homeless, disabled or excluded from society in other ways”. They have a UK Community Investment Programme which has been accredited with Business in the Community’s CommunityMark. Employees have an allowance of up to 6 days’ a year to get involved in community fund raising and volunteering.

The third largest Japanese corporate donor was advertising and marketing group Dentsu Aegis Network, (soon to be rebranded as Dentsu International) whose global headquarters are in London. They donated £1m to charity (£0.9m in 2018) – but this is likely to be a worldwide, excluding Japan total. Dentsu announced in 2017 that “Society” was now one of its official stakeholders and announced a new social purpose of a digital economy for all. They are aiming to reach a billion people with sustainable development goal led campaigns and support 100 female founded businesses. They are launching a digital skills initiative to support 100,000 people to improve their skills.

Close behind are Toyota Motor Manufacturing UK, who donated £0.9m in 2019, slightly down on the previous year of £0.95m. It “seeks to support good causes in the areas local to its manufacturing operations” [Burnaston in Derbyshire and Deeside]. It has a charitable trust that makes donations in the areas of road safety, social inclusion and deprivation and health. As well as fund raising it makes in kind donations of cars, parts and volunteering hours (included in the £9.08m). Its nominated charity of the year was the Derbyshire, Leicestershire & Rutland and Wales Air Ambulance Service.

Mitsubishi Corporation donated £267,000 in 2019/20 (up from £140,000 in 2018/19) – to the British Museum , the Earthwatch Fellowship Programme, the University of Cambridge Faculty of East Asian Studies, the UK-Japan Music Society and the Mitsubishi Corporation Fund for Europe and Africa, which engages with partner organisations in environmental conservation.

Hitachi Capital donated £250,000 (up from £200,000 in the previous year) in 2019/20. Their national charity partner is FareShare which redistributes food going to waste to charities and community groups – contributing to the sustainable development goal of “no poverty”. Hitachi Capital staff also volunteer at FareShare. The group also works with Young Enterprise and The Wildlife Trust.

Nomura established The Nomura Charitable Trust in 2009, “supporting disadvantaged young people in the local communities in which it operates through both grant making and employee engagement in the form of volunteering and other engagement initiatives.” It gave £235,659 to 11 charities which aligned with the objectives of the trust and were recommended by Nomura employees in the year ending March 2019.

Eisai, the Japanese pharmaceutical company with a factory in Hatfield donated £212,000 in 2018/9, up from £116,00 in 2017/8. Around half of this was to patient organisations such as Alzheimer’s Research UK and Breast Cancer Now, according to their “Transparency” page on their website.

In 2018/9 Fujitsu raised over £200,000 for its partner charity Macmillan Cancer Support as well as 5,500 volunteer hours spent by employees volunteering and skill sharing.

The Olympus KeyMed group via KeyMed (Medical and Industrial Equipment Ltd) gave £122,621 within the UK, of which £45,905 was to healthcare charities, £40,202 was to “other”, £33,856 was to cancer charities and £2,658 to children’s charities. This represented a 10% decrease on the previous year

Ricoh UK made £110,426 in charitable donations in 2019, a significant increase on the previous year’s £66,285. The sum represents both financial and in kind, providing products and people to support charitable activities.

The others

Many of the larger Japanese companies in the UK not mentioned above do contribute to charities but do not put a price tag on this in their annual reports. Nissan Motor Manufacturing, for example, launched a Days for Change Europe wide programme where employees can take days “off” to volunteer. Kwik Fit, owned by Japanese trading company Itochu announced in 2019 that its charity partner was Children with Cancer UK, and a target of £1m to be raised through its sponsorship of the British Touring Car Championship.

Hitachi Rail says it made no charitable donations in 2019, seemingly leaving this up to its employees, who raised £156,846 for the Railway Children charity “to date.”

Canon UK describes its “social value policy” as comprising “employability skills training, education support, community and charitable activities” but goes into no further detail.

Conclusions

Japanese executives who had lived in the UK have occasionally remarked to me how many charity shops there are in the UK and how often they are approached by their employees to help with fundraising initiatives. According to Charities’ Aid Foundation, the UK is number 6 in the world in terms of individual charitable giving (money and time), after Indonesia, Australia, New Zealand, USA and Ireland. Japan is at 128 but in 6th position in terms of the number of people who volunteer time for charitable causes.

Certainly I remember when living in Japan and working for Mitsubishi Corporation that there were plenty of opportunities to get involved in volunteering via the company. Conversely, to my relief, noone ever asked me to sponsor them to take a charity ramen bath. I have vivid memories of being in a group of employees who took severely disabled people to Tokyo Disneyland. National disasters such as the Fukushima earthquake and tsunami also saw thousands of employees of various companies giving up weeks on end to go to the region to help.

Those Japanese companies who do give substantial amounts of money to charity in the UK tend either to have acquired established British companies and therefore their legacy of charitable activity (JTI, Dentsu, Fujitsu, Olympus KeyMed) or are manufacturers employing large numbers of staff and looking for ways to engage with the local community such as Toyota, Eisai and Ricoh. In many cases, the decision makers will also be local executives looking to raise the brand profile in a globally appealing way, so a specifically “Japanese” flavoured proposition may not be of great interest unless part of their corporate purpose is to represent Japanese interests abroad.

There are plenty of funds in Japan set up by companies such as Toshiba, Honda, Panasonic (Matsushita) but these tend to be educational in orientation and more in the business of awarding prizes, scholarships and research grants. Japanese companies will sometimes endow foundations overseas (Nissan Institute of Japanese Studies at Oxford, Daiwa Anglo-Japanese Foundation) which are also educational and dispense scholarships and grants.

Anyone wishing to approach Japanese companies may need to bear these differences and distinctions in mind. For local giving, it will be necessary to win over the local employees, and for large, prestigious donations, much of the funding available may be controlled from Japan.

“I love Japan but I don’t want to work in a Japanese company”

Japan is more popular than ever amongst young Europeans, who have become familiar with it through anime and manga, or love of Japanese food. Yet “securing human resources” continues to be the key operational challenge for Japanese companies operating in Europe, according to JETRO’s annual survey.

Young people love the playful popular culture of Japan but they assume that this is not going to be the Japan they will experience if they join an engineering and manufacturing oriented Japanese company.

A more serious reason for not wanting to join a Japanese company is the lack of career development opportunities, when it looks like top management reserved for Japanese only. The larger Japanese companies have made efforts to overcome this by having European or global graduate recruitment and training programmes, often involving spending time in Japan.

I suspect it is the medium to small sized Japanese companies who are having the hardest time recruiting the people they need. Their European operations are still basically sales arms of the Japan headquarters. This means when they hire qualified engineers, they are disappointed that the job is more sales than engineering in content.

Japanese companies in Western Europe are most in need of management personnel but are facing already high labour costs. Japanese companies in Central and Eastern Europe are most in need of factory workers and cite the rapid growth of labour costs as their biggest operational challenge. Presumably they are having to compete with better known Western companies who are also facing a tight labour market. The obvious solution is to offer higher salaries, but that of course undermines the economic rationale of have manufacturing in Central and Eastern Europe.

Rather than engage in a price war for scarce management or technical staff, Japanese companies need to offer something different and attractive, which brings us back to the Japanese popular culture loved by young Europeans.

I was surprised recently that the European participants in my seminar who were 15+ year veterans of a Japanese technology company listed “the eccentric, child-like mindset” as one of the positives of working in a Japanese company. My 17-year-old son also noticed this on his first trip to Japan with me last month – and happily joined in by buying a Pokemon Piplup plushy and a Shiba dog pencil case which now have pride of place amongst his philosophy, maths and economics textbooks.

“Strengthening the company’s brand” was the top initiative selected for selling products and services in Europe in the JETRO survey. But this should be less about advertising to customers, and more about having an employee brand that appeals to young people. They will then be able to see a future for themselves where they make, design, manage or sell on behalf of a Japanese company, and have fun at the same time.

A video of Pernille Rudlin’s presentation on this topic is available on the Rudlin Consulting YouTube channel here in English and here in Japanese.

The original version of this article was published in Japanese in the Teikoku Databank News. Pernille Rudlin’s new book “Shinrai: Japanese Corporate Integrity in a Disintegrating Europe” is available as a paperback and Kindle ebook on Amazon.

“There is no point in workstyle reforms if you don’t change everything at once” – Fujitsu’s President Tokita

President Tokita of Fujitsu was interviewed by Saeki Shinya of the Nikkei Business magazine in August 2020. The beginning of the interview focused on the impact of the pandemic and China on Fujitsu’s business but the bulk of the interview was regarding Fujitsu’s recent announcement of various workstyle reforms (the English translation of hatarakikata kaikaku, a government led initiative to change Japanese workplaces).

Tokita felt Japan was unlikely to recover economically from COVID-19 until the end of FY 2021. As for China, clearly this was a delicate subject and Nikkei Business had to issue a correction to how they described what Tokita said. He said the progression of nationalism should not be welcomed. It would be disrespectful to say it’s a great chance for Fujitsu if the USA or Europe move away from Huawei, however the need for a secure communication infrastructure is important, regardless, for a more resilient society, and this is helping Fujitsu employees to “reset their mindset”.

The Q&A regarding workstyle reforms I have translated as below:

Q: Why did Fujitsu announce work style reforms such as a 50 percent reduction in office space, the abolition of commuting passes, the introduction of telework allowances and job-type employment (to assign and evaluate human resources after clarifying duties such as roles and skills to be fulfilled) all at once?

Mr. Tokita: It just happened that way – actually I narrowed down the scope somewhat.

In the first place, we didn’t announce it in July just because of coronavirus. We have been introducing telework since 2017, and we had already introduced a job type system overseas – only Japan was different. Since I became president last year, I realised Fujitsu’s biggest value is that its 130,000 employees can move in the same vector. Therefore, I wanted to unify the way we work, and we thought that we should utilise good governance as a global company.

Q: You had experience of being assigned to Europe – you had doubts yourself about the difference in personnel systems in Japan and overseas?

Mr. Tokita: My desire for globalization was strong. In fact, I hated the phrase “one Fujitsu” when I first became president. It was used because we were not “1” but there was no point in using it like a slogan if behaviours don’t change. I used it officially for the first time in June when we celebrated our 85^th birthday, because our internal systems and communication have now improved, and we are convinced that it can happen.

Work style reforms have been carried out in many different ways. There are also criticisms that the results based system failed and there were people saying “how much longer are we going to use man-months as a basis for calculation?” I understood all of this. That’s why this time it happened all at once.

So far, we have been reforming little by little. Because it is a large company, it is scary if the change is too big. However, the reason why it did not work was that the personnel system itself had not changed in nature. Changing if you only change the structure and operations superficially will not work. I decided to go with the idea to change everything at once.

Q: Isn’t there an overlap between the new “job type” system and the failed results based system [known as seikashugi in Japanese – introduced in many companies in the 1990s]?

Tokita: There are many viewpoints – some say the results based system failed, and I haven’t heard many stories of it succeeding.

However, a job type system will be different from company to company and for Fujitsu. Evaluations are no longer top down. We have no choice but try to make sure it will lead to Fujitsu’s growth and sustainable business. Of course there are some lessons to be learnt from what happened in the past but I try not to worry too much about that.

Q: What does Fujitsu want employees to do with the introduction of a job-type personnel system?

Mr. Tokita: It’s about each and every employee being autonomous. If the general employees, the managers, the executive, and I are all autonomous individuals, the collective body becomes stronger. Ideally, a strong individual can both work collaboratively and create a healthy conflict. We stopped uniform education by hierarchy and year of entry to the company. Instead, we encourage people to advance their careers through free educational programs online.

Q: How do you get your employees to collaborate once they haves become autonomous?

Tokita: We are currently working with in-house culture change teams. In order to work collaboratively, physical contact is necessary, so it is important to create space in various offices where people can discuss each other’s opinions.

Q: It is said that young people are disadvantaged because they do not have enough experience of the job-type personnel system, what are your thoughts on this?

Tokita: Is that so? I didn’t think it was an advantage or a disadvantage. I know OJT (on-the-job training) was inadequate. Rather, I hope that young people will be able to take on challenges without any restraints.

Q: Some say that the reforms, which will reduce office space by 50 percent, are just about cutting costs.

Mr. Tokita: It’s not just about cutting the office space in half. It will also cost money for renewal.

The aim is not to cut costs, but to increase the choice of employees. The main objective is to help employees to feel engaged in their work. Whether there is a coronavirus pandemic or not, there are many employees who have problems with commuting time, childcare, and nursing care, and we have been building telework and satellite offices to solve this. It is true that Coronavirus became a driver to push this. But I’ve been thinking about it for a long time. Future behaviours and growth will show if this is correct or not

Q: Many people say that the corona shock will accelerate digital transformation (DX). Isn’t this is an opportunity for Fujitsu, which advocates DX for companies?

Mr. Tokita: I’ve been working longer hours at home so I saw a daytime show which said that digital transformation of medical institutions, public health centers and education is very behind in Japan.

However, DX does not take root just by promoting systemization and IT. The essence of DX is whether each and every one of us can be autonomous, acquire skills, collaborate, and create new value. This is also a challenge for Fujitsu. No matter how much IT as a tool is implemented, it will not be the whole solution.

Q: So DX hasn’t taken root in Fujitsu yet?

Mr. Tokita: I don’t think it has.

It doesn’t make sense for DX only to develop in certain industries. Fujitsu has been promoting IT by forming teams across industries. It will not function unless the whole aspect of an issue is grasped, rather than small points, and the issue is addressed as a society.

Coronavirus has increased the need to do this, but we need a system that allows us to collaborate properly. It’s easy to standardize in the IT industry, but without a deeper or higher level of common understanding of rules, no one will be able to make it work.

Q: Japan as a whole needs to deepen its understanding of DX. What should we do?

Mr. Tokita: It will be difficult to discuss on a national basis. We have no choice but to move forward with small communities and companies. In that sense, Fujitsu has a responsibility. We are a global large company and have a mission to solve Japan’s problems because we are based in Japan.

Inside the company, I often say, “Think about what it means to work for a large company.” Large companies have large company sized responsibilities. A large company can make big ripples in society – that’s a kind of responsibility.

Mr. Tokita: We will make use of our own knowledge and experience. This will make Fujitsu stronger. Companies that have accumulated their own experience and can turn it into a business are definitely stronger. If you don’t do it yourself, you’ll end up in running a race in borrowed shoes, and you can’t be a strong company.

If you want to hear more from Mr Tokita, he’s one of the keynote speakers at the Fujitsu ActivateNow digital event in October – more information here

If you want to understand further about the history and changes to Japanese corporate HR systems, I made a 5 minute video on this for my Japanese Business Mysteries Explained series – here.

Choice, constraint and creativity

COVID-19 is forcing us all to rethink our business models. For many larger companies I suspect it will be a good cover for undertaking some of the more drastic measures that they may have been considering before the pandemic took hold. I am even less optimistic about the future of car manufacturing in the UK than I was when there was just the impact of Brexit to consider, for example.

Many of the small retailers in my city have shut down and moved online. They are taking orders through their Facebook pages and posting lists of the products that they have available.

The supermarkets are mostly delivering only to elderly and vulnerable people, so the rest of us are having to drive or carry home staples from the supermarket – trying to buy in bulk to keep the number of shopping trips to the minimum.

I already anticipated that we would have to focus on buying staples, and that treats would be welcome so I signed up for subscriptions to monthly cheese deliveries and weekly healthy snack deliveries. You do not have much choice over what you get, but you can tell the company your preferences and dislikes. I am also getting creative with food which has been in my store cupboard for a while but I have never tried to cook with before.

It reminds me of the time when I used to have organic vegetable boxes delivered once a week – there was anticipation and enjoyment in seeing what had been delivered and finding a recipe to fit the ingredients. But in wintertime this became more depressing, when faced with nothing but root vegetables.

Human beings around the world need to be in control of their food supply to feel secure, but after a certain point, want to be able to choose so they can enjoy what they cook and eat. So I predict the food market stalls will all be back once the pandemic is over, but with a new customer base of people who have the staple foods delivered to them.

I’ve also been subscribing to more on Amazon – pet food, coffee, tea, laundry liquid. Amazon has just announced that it is prioritizing these kinds of basic supplies over its original business of books and music.

So content providers (of which I am one) are also having to rethink how to get their products to their customers digitally. I have been a big fan of political satire – on TV and on radio. Most of these shows were filmed in front of a live audience. Initially, when they tried to record the shows without an audience, in the usual format, the result was very boring. But now they are becoming more creative with the format and are funny again.

I am using my time at home to revise our eLearning, put sample modules up on YouTube and make new videos. This is our challenge whatever business we are in – to work with the constraints to innovate.

This article was originally published in Japanese in the Teikoku Databank News on 24th June 2020

Pork for cars and a fog lamp

As the UK-Japan Free Trade Agreement is in its final stages, it seems a good moment to revisit our Top 30 Japanese companies in the UK. Although the headlines seem to be heading towards “pork for cars”, the most important win-win for the UK and Japan should be protecting Japan’s investments in the UK. Japanese companies employ around 170,000 people in the UK by our estimates, and many thousands more indirectly.

The EU-UK deal is still the biggest source of concern for Japanese companies

There is a limit to what the UK-Japan deal can do to protect those investments, however. For Japanese companies in the UK, the EU-UK trade deal is the bigger source of concern. Many of them have their regional headquarters in the UK or have invested in the UK as their base for exporting to the rest of Europe.

The shape (or non-existence) of a UK-EU trade deal will determine not only whether it is worth continuing with manufacturing in the UK for Japanese companies but also whether Japanese companies will continue to coordinate services regionally out of the UK such as finance, legal, IT, HR, engineering, R&D etc. These services account for why the UK has a trade surplus in services exports to Japan – it’s largely due to Japan HQ sending money to their UK based regional operations to fund professional support services needed both for acquisitions and day to day operations.

If the barriers between the UK and the EU to mutual regulatory recognition and movement of people become too high to run European operations from the UK effectively, and as a consequence UK companies are no longer attractive investment targets, Japanese regional HQs and acquisitions will begin to drift to the continent. In fact, they already have started to shift piecemeal to the EU. No amount of bilateral recognition of services and data regulations between the UK and Japan is going to help stem this.

According to our estimates, the number of people employed by Japanese companies in the UK levelled off comparing 2018/9 to 2017/8 – rising by only 0.2% to 170,187, having risen around 6% a year in the previous two years.

Japanese automotive sector dominates Japanese jobs in UK, but is declining

Our Top 30 Japanese employers in the UK employment total has also levelled out at around 94,000 or 55% of the 170,000 people employed by Japanese companies in the UK.

Nissan (#1), Honda (#5) and Toyota (#8) employ around 18,400 – 11% or so of the total. If other Japanese automotive suppliers are added such as Denso (#20) and Unipres (#30), the total number employed is 37,489 (22% of the total employed by Japanese companies), down 2.8% on 2017/8.

Making sure that there are tariff free automotive components from Japan for manufacturing in the UK will help sustain Japanese manufacturing in the UK at least in the short term, if tariffs are imposed on EU automotive imports as part of the UK-Japan FTA or there’s a no deal. But the shift in automotive production to eastern Europe has been going on for some time.

Japanese trading companies growing steadily in the UK but no acquisitions

The UK, or more especially London, has been the commercial and trading location of choice for Japanese companies in Europe for over 100 years. At the heart of this are Japan’s trading companies – Mitsubishi Corporation, Mitsui & Co, Sumitomo Corporation, Itochu, Marubeni and Sojitz. They are still involved in commodity trading but also financing and more recently acquisitions – although there have not been any UK acquisitions since 2017. The most notable recent European acquisition was Mitsubishi Corporation acquiring Dutch energy company Eneco in 2019 for €4.1bn.

Japanese trading companies currently employ around 14,700 people in the UK, and this has grown just under 2% a year over the past couple of years

Japanese financial services holding steady in the UK

The next biggest Japanese sector in the UK is financial services, including MS&AD (#15), MUFG (#16), Nomura (#17), SMFG (#22), Mizuho (#29). It accounts for around 13,000 employees and growth has been around 1% to 2% a year.

All Japanese financial services companies that are impacted by Brexit have set up or strengthened their subsidiaries in the EU, but the scale of these organisations is still far smaller than their UK operations. There may be an issue eventually not so much about the quantity as the quality of these EU subsidiaries for the EU – they will want to see the decision makers based in the EU as a condition for regulatory approval. But as most decisions are ultimately made by multiple people in Japan headquarters, it is not clear how Japanese companies can respond to such a demand. In the meantime, Japanese financial groups are repositioning their London operations as EMEA (Europe, Middle East and Africa) headquarters.

Electronics, ICT and acquisitions

Fujitsu (#3), the pioneer of big acquisitions in the UK (ICL in 1990) is no longer the biggest Japanese employer in the UK, having shrunk its workforce by 38% since 2014/5. Sony (#9) has also cut its workforce by 11% over the past four years. Canon (#12) and Ricoh (#7) have grown by less than 10%, Brother (#28) grew around 15%, Mitsubishi Electric (#27) by 17%. Konica Minolta (#24) has grown over 40% in the past 4 years through acquisitions but seems to be shifting more towards the Czech Republic recently.

NTT (#11) and Hitachi (#2), both with ex Japan global HQ in the UK, have grown 60% and 175% respectively over the past 4 years, partly through acquisitions but also in Hitachi’s case through organic growth, with the investment in the rail manufacturing and assembly plant in Newton Aycliffe.

Other new entrants over the past four years have been through acquisitions too – Outsourcing (#26) in recruitment, Sumitomo Rubber (#19) through its acquisition of Micheldever in 2017 and SoftBank acquiring (and soon to be disposing of) ARM.

A holding pattern until the fog clears

The years of double digit growth and acquisitions by Japanese companies in the UK seems to be coming to an end, or at least is on hold until the picture is clearer after the fog lifts from the UK-EU negotiations and the coronavirus pandemic. The UK-Japan FTA does not clear this fog, but at least lays out a path for the UK, which Japan very much would like it to follow, of reintegrating itself back into the rules based international order, towards joining the CPTPP and continuing to be one of Japan’s closest allies in terms of digital security and strategic interests.

Japanese companies in the UK

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The American/British language barrier through Japanese eyes

I visited Japan last year, to conduct a couple of training sessions for the subsidiaries of British companies on how to work effectively with their UK headquarters. Listening to the issues brought up by the Japanese employees, and also having heard the perspectives on those issues from the UK side, I realised yet again how often a language barrier is at the heart of many misunderstandings.

But it is not the obvious language barrier between the very different languages of Japanese and English. It is the language barrier between American English and British English, which is more rooted in cultural differences than linguistic differences.

Not only were the employees at these British subsidiaries taught American English at their Japanese schools, but several had also lived in the US or worked for American companies. British companies hired them because they assumed their linguistic ability and experience would make it easier for them to work in a multinational.

As many of the Japanese employees pointed out, however, the British and the Japanese are similar in the way they are so vague and indirect in giving direction and feedback, particularly negative feedback. “I can’t tell whether my British colleagues are angry or not”, said one Japanese participant. “I assume they are, when their emails are very long”.

The British were praised for making an effort to understand, forgiving bad English and being courteous, even when they were senior to the Japanese employee. Germans and Americans were seen as rather less gentle and standing more on their dignity. Those British who had experience of working in Asia were able to express themselves more clearly and slowly, but other British were very talkative, yet not at all clear in what they were trying to say.

I explained how the British management style is consultative and casual – preferring to give a vague, general guidance and ask team members for their input. Whereas the US leadership style is built for speed – setting targets, standardising reporting and directing individuals on what to do.

A Japanese manager, fluent in American English who had been working for American multinationals previously, was very frustrated that he kept having to repeat himself in emails, because of the lack of clear responses from the UK. “Don’t they understand what I am asking for or are they deliberately ignoring me?”

We agreed that the solution to this might be to have agreed timeframes for responses and processes on how to communicate urgency, negative feedback and whether a request had been understood and was being worked on.

I thought back to my early days at Mitsubishi Corporation, where we communicated by telex, even though email was available. The good thing about telexes was that there was a standardised way to write them, using simple, clear English which every new employee was trained in.

I wonder whether British and Japanese multinationals might need to introduce something similar, for email communication, to overcome their mutually polite, vague, miscommunications.

This article was originally published in Japanese in the Teikoku Databank News on 12th June 2019

What Japanese expatriates should do if they don’t get on with their local boss

A 28 year old Japanese female writes to the Nikkei Business Online: “I didn’t get along well with my boss when I was posted overseas and ended up with mental health issues and returned to Japan.”

“My boss only cared about a big project that would be of benefit to them, that Japan headquarters had no chance of approving. My boss kept making me do the negotiations and aggressively asking me if it was done yet. I couldn’t get my Japan HQ boss to intervene. I explained as clearly as I could to my boss that Japan headquarters had told me when I was there that there was no chance this project would be adopted. My boss refused to listen and would not even join me in negotiating with Japan HQ.

“I told them there was another project I was working on which was more urgent but my boss told me to prioritize their project. I became stressed and could not go into the office any more. My boss made out that I was the problem and my boss in Japan eventually accepted this and I was returned to Japan. I really cannot accept the way I was treated – or should I just have accepted it? How should I have dealt with this?”

Ueda Junji, formerly of Itochu and President of Family Mart: “First of all, you are still young, so try to see this as a useful experience for the future. You say you had mental health problems, and actually being an expatriate is mentally very stressful. So having experienced this at an early stage should be of help to you later on in your career.

“Secondly, in trying to think what is behind that boss’s behaviour, just seeing it as them wanting to do it entirely for their own ambitions may be too harsh. Managers in any country want to pursue projects that they think are beneficial. And of course if it goes well it may lead to their promotion.”

“On the other hand, you say you had another project which you thought was more urgent, but since you are a member of a team, you have to accept the decision of your boss, if they say another project is higher priority.”

“I wonder whether being told by Japan HQ before you were posted that this project had no chance of being adopted already sowed seeds of distrust in your mind? Then explaining this to your local boss, however carefully, will have got the relationship off to a bad start. They may have seen you as just a spy from headquarters and hard to tolerate.”

“It might have been better to try to see it from the local perspective – Japan headquarters don’t really understand what is going on overseas. Try to be more like an ally to your local boss and come to your own judgement as to whether or not the project is workable. Maybe first of all ask the boss what their aims and objectives are with the project, then get them to explain this again to Japan headquarters and then see how Japan headquarters reacts, before coming to any conclusion.”

Ueda’s somewhat unsympathetic comments may come as a surprise but is an example of the tough love that Japanese bosses can be capable of. It’s reassuring that he was able to see the perspective of the local boss so clearly. It’s also also understandable how a Japanese junior expatriate, whose ultimate career lies back in Japan, will see it as their job just to comply with Japan headquarters rather than ally with the local management.

If you’re a boss to Japanese expatriate employees and/or trying to persuade Japan headquarters to accept your proposal, you may find our online coaching on building relations with Japan HQ a useful resource. More details and registration here.

Time for a logistics revolution in Europe

(This article was published in Japanese in the Teikoku Databank News in November 2018, but it seems even more relevant now)

Now I am back working in my home office, I have become much more conscious of the activities in the street in front of my office window. Once a week, a massive, noisy refrigerated lorry backs itself up against my house, to deliver food to the Italian restaurant three doors down from me. The lorry comes from a food wholesaler with depots the nearest of which is 300km away.

The reason the lorry parks right outside my house is that there are vehicles blocking the road outside the restaurant, caused by the building works which are converting offices into 50 student apartments. Huge trucks reverse up our 16^th century street, damaging the ancient buildings, in order to deliver 50 sets of kitchen or bathroom units. I realise it is cheaper to deliver 50 bathroom units at once in a big truck, but actually the builders did not need all those units at once, as they were fitting out the apartments in phased batches.

When I heard a loud howling noise just after I woke up at around 6:45 one morning I thought it was from the building site again, but it turned out to be from an even bigger refrigerated lorry making deliveries to a chain restaurant in the square at the end of our street.

Chain restaurants have had a bad year in the UK – shutting down a third of their outlets in some cases. Many of these chains are owned by private equity firms, who saw a way to scale up a small chain of restaurants with a distinctive brand into a much bigger, national chain, and reduce costs through bulk purchasing.

The decline of these chain restaurants is partly to do with the economy, but also that the quality of food deteriorated as they expanded. The cooking had become reheating days’ old readymade ingredients.

The quality of the food and the impact on the environment could be improved by more frequent deliveries, in smaller, eco-friendly trucks. Most trucks in Europe run on diesel, and although diesel produces less CO2 than petrol, a huge concern now across Europe is the air pollution diesel causes. French and British governments are banning petrol and diesel cars (but not trucks) from 2040 as a consequence.

But this will require governments to invest much more in electric vehicle charging points and a revolution in logistics. Cities might need to set up hubs in their outskirts for consolidation of deliveries per customer into smaller electric trucks. Logistics companies will need to work with AI specialists like the British company Prowler, whose software is used in logistics to optimise decision making amongst multiple agents.

I realised Japanese companies could be part of this revolution when I saw in my neighbourhood a small electric truck (Isuzu – partly owned by Itochu) belonging to a British tyre wholesaler (owned by Itochu), quietly make a delivery to the city centre outlet of a UK-wide garage chain (also owned by Itochu).

The original version of this article was published in Japanese in the Teikoku Databank News and can also be found in “Shinrai: Japanese Corporate Integrity in a Disintegrating Europe” available as a paperback and Kindle ebook on Amazon.

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