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

Situational leadership for Japanese managers in Europe

One of the issues that Japanese people who come to work in Europe find most challenging is the multiple nationalities of people they have to work with. Whether you are based in London, Duesseldorf or Amsterdam, it is highly likely that your colleagues will be a mixture of not just British, German or Dutch but also Romanian, Lithuanian, Polish, Spanish or indeed Indian or Chinese.

Much of the global leadership or management training that is offered in Japan is based on American models. Europeans are used to American management styles so they will tolerate them – at least superficially. However, many of these “one size fits all” models are not ultimately effective in getting Europeans to go beyond superficial compliance. In fact, they can have quite a demotivating effect, particularly if they are too rigidly focused on quantitative targets and objectives.

European managers themselves find that the American model which works the best is known as “situational leadership”. This is not a new theory – it was developed in the 1960s and 1970s by the Americans Dr Paul Hersey and Ken Blanchard. It suits the European context because the key idea is that there is no one best style of leadership, and situational leaders are those who are able to diagnose the situation, adjust their leadership style and communicate accordingly. They also need to be able to take account of the “performance readiness” – in other words the ability and willingness – of the various members of the team.

National cultural differences are not specifically mentioned in the model, but in my training I always relate situational leadership to what is known about the preferences in each European country for top down or consensus oriented decision making styles, as well as direct or indirect and formal or informal communication in the ways of giving feedback or direction.

Of course, this can be somewhat overwhelming for someone who is new to the European workplace. It is particularly tough for Japanese people who have worked in the more traditional Japanese companies, where people just do as best they can whatever their bosses tell them, whether they are willing or able or not.

But I think Japanese managers have two big advantages. Although this is a generalization and may not apply to all Japanese managers, in my twenty-five years’ experience of working with or in Japanese companies, most of the Japanese people I have met have been humble about their own abilities and also curious about other cultures. This means they are willing to learn and to accept that their usual way of working may have to be adjusted.

This article originally appeared in Japanese in the Teikoku Databank News and also appears in Pernille Rudlin’s new book “Shinrai: Japanese Corporate Integrity in a Disintegrating Europe” – available as a paperback and Kindle ebook on Amazon.

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Why Japan’s salaries should rise

Prime Minister Abe has been pressurising Japanese companies to increase wages for some years now, and yet Japanese companies are still sitting on piles of cash. Japanese wages have not increased more than 5% a year since the early 1990s, mostly averaging around 2-3% wage rises a year. The Japanese economy has been in a period of deflation since the late 1990s until the past year or so, so these are real wage increases. Nonetheless, there is a vicious circle between deflation and low pay increases, which Abe wants to break as part of his 3 Arrows for reforming the Japanese economy.

Low Japanese salary levels

Although I knew Japanese salary levels were not that high relative to other developed economies, I was surprised to see in the Nikkei Business magazine that average British salaries for the head of R&D at a pharmaceuticals company (£400K) or a CFO of a multinational (£390K) are so much higher than Japan (less than £200K) and even the USA (£200K to £250K). I wonder if these figures are net of any bonuses. Traditionally, Japanese companies paid 1/18 of salaries monthly, retaining the remaining 6/18 for twice yearly bonuses. Increasingly these bonuses are performance related, particularly at management levels.

Earnings distributed to shareholders or retained

Nikkei Business then goes on to analyse how earnings are distributed in Japanese companies, between labour, retained earnings and shareholders. The proportion paid to shareholders has been steadily increasing for Japanese companies, recently outstripping the proportion paid to labour (which has been in decline since 2008), but still below the retained proportion, which has been fairly steady these past 10 years. In the US retained earnings is the lowest proportion, declining since 2009, whereas shareholders have the highest share, increasing since 2008, with labour’s share declining since 2000, with a slight bump upwards around 2007/8.

Root causes of labour’s declining share

Root causes for this might be that labour’s negotiating power has fallen – unionization in Japan has fallen from nearly 60% of the workforce in the immediate postwar period to under 20% by 2017. Also thanks to Abe’s labour reforms, companies are not paying out so much for overtime – theoretically at least there is less overtime being done – but this is not being replaced by increases in base salaries.

Who could pay their employees more?

The juiciest bit of Nikkei Business’s feature is in the listing up and analysis of companies who have the biggest potential for increasing salaries:

1 . Tokyo Electron (scores highest on Return on Equity 10, net cash 9 and revenue growth 9 with a 3/10 on returns to labour

2. Nintendo (Dividend payouts 9, capital to asset ratio 9, net cash 10, returns to labour 2)

3. Kakaku.com (ROE 10, capital to asset ratio 9, revenue growth 9, returns to labour 4)

4. Subaru (net cash 10, revenue growth 8, dividend payouts 8, returns to labour 2)

=5. Start Today (revenue growth 10, ROE 10, dividend payouts 7, returns to labour 3)

=5. Chugai Pharma (capital to asset ratio 9, net cash 9, dividend payouts 8, returns to labour 3)

=5. Yahoo, Recruit, with MonotaRO and Fanuc at =9.

Other companies in the top 30 who are also active in Europe include Murata, Kao, Keyence, Shimano, Astellas and Hoya.

It’s an intriguing mix of new internet companies, growing fast, but perhaps preferring to pass on success to shareholders rather than employees and traditional, older companies who are preferring to retain earnings for a rainy day.

The special feature concludes with an interview with Hideto Fujino of Rheos Capital Works, in which he says investors want to hold shares in Japanese companies who raise salaries, if this is to attract more motivated, talented employees. “We don’t see payroll as a cost, but an investment”.

March of Japanese labour reforms stalled

March has always been a stressful, uncertain month in Japan. Most companies, schools and universities start their new year around April 1st and this is also when corporate promotions and restructurings are announced.

Prime Minister Abe has been adding to the stress by trying to push through various labour market reforms, aimed at expanding “discretionary labour” by the end of the parliamentary session in June, but has had to row back on some of them due to the data on which they were based turning out to be severely flawed.

Status conversion rule

One piece of legislation which will be enacted from April this year is the new status conversion rule. This will allow fixed term employees renewing contracts for more than five years – usually temporary workers dispatched from staffing companies, or part time workers or contract workers – the right to switch to indefinite employment with no fixed period. In other words, the kind of lifetime employment, regular contract that Japan’s seishain (proper staff – see other posts on this here) have.

The gap in status, job security and benefits between seishain and” irregular workers” has been an enduring sore in Japanese society since the immediate postwar period of labour shortages in Japan when the lifetime employment system became established. The proportion of irregular workers in the Japanese workforce has grown since the 1990s, to around 37.3% of the workforce – 10% up on 10 years’ ago.

Irregular workers will disappear – maybe

Toyo Keizai magazine has an article headlined “Irregular workers are disappearing” saying the new status conversion rule will be a big shock to companies that rely on non-permanent employees. However surveys show very few employees and even HR managers are aware or understand the new rule, and companies are not making much effort to stimulate interest in it, unsurprisingly.

Japanese recruitment agencies go global – again

Presumably it will also be a shock to staffing agencies in Japan too, who have done rather well out of the rise in this sector of the workforce. There is a further rule imposing a three year deadline for temporary employment from a temping agency, after which the company will have to hire the employee directly – which will come into force from September.

No wonder recruitment agencies have started a second bout of acquisitions overseas – recent acquisitions in Europe include Outsourcing acquiring JBW, Liberata and Ntrinsic in the UK and Orizon in Germany and Recruit acquiring USG People in the Netherlands.

Why the EU’s Mifid II might hurt Japanese share prices

I partly set up this blog to address the lack of good quality information on Japanese companies in English, as well as to analyse how European and Japanese business cultures interact. An article in the Nikkei Business magazine regarding the impact of the European Union’s new financial regulations, Mifid II, on Japanese share prices unexpectedly fed into both those motivations.

Mifid II (The Markets in Financial Instruments Directive II, well explained by the Financial Times) has been causing much irritation amongst friends of mine who are investment advisors or equity analysts now unable to find jobs, thanks to the most well known aspect of it, which is that asset managers will now have to pay for research and phone calls to analysts. Before January 2018 the cost of this was built into the trading fees.

As the Nikkei Business article points out, it is not efficient for large securities brokers, who provide services to customers globally, just to charge research service fees to European investors. In any case, as pointed out by the Financial Times article, the requirements in Mifid II have an impact on US brokers’ status and also cover any asset that has an underlying product listed in the European Union.

So many brokers are cancelling the big ticket investor relations events that they used to host for free. CITIC CSLA used to hold a Japan equities IR event every February, but this has been cancelled for 2018. The rumour is that there was a concern that there would not be enough participants, now costs have to be justified to investors.

“People are no longer spending money on research” says Richard Kaye, Analyst for Japan at Comgest, questioning whether Mifid II is really “helpful”. Daiwa Institute of Research’s Shungo Koreeda says that foreign investors are likely to become much more discriminating in their choice of research from Japanese securities companies.

As foreign investors account for around 70% of trading in Japanese equities, if there is insufficient information available on Japanese equities to help investment decisions, it may have a negative impact on the Japanese stock market, concludes Nikkei Business.

What we can learn from Airbnb about how to manage a multinational business

There was a backlash in the summer of 2017 in Europe against Airbnb and more widely against the impact of tourism on cities such as Venice and Barcelona. With the new minpaku (guesthouse) law being enacted in Japan, and Japan having its own tourism boom, there is much to learn for Japan and Europe from the “sharing economy” and its impact not just on the tourism industry but communities and global business.

I have used Airbnb both as a guest and also to rent out our spare room. All our guests have been friendly, tidy and responsible and have ranged from a Pakistani PhD student through to a comedian duo from Canada. My initial concerns about allowing strangers into our home have not been justified.

Airbnb helps with this by verifying identities – of host and guest – and encouraging people to upload personal details such as photos of themselves, their interests and the reason for their visit. Airbnb also provides a very user-friendly platform and plenty of support and advice to enable good communication and high standards of behaviour and facilities.

What is becoming clear, however, is that Airbnb has a lot more work to do at the local level. As disruptive companies mature, their business becomes more mainstream. There are more and more professional holiday letting companies appearing on Airbnb and whole houses and apartments – not just spare rooms – can be booked via the site. This is raising concerns about whether the appropriate taxes are being paid, whether the accommodation is sufficiently regulated in terms of safety and potential nuisance to neighbours and whether the bigger profits to be gained from putting properties on Airbnb rather than traditional renting is exacerbating housing shortages for local residents.

Theories of how to manage multinational businesses tend to focus on balancing local and global needs – for example the matrix structure of vertical businesses and horizontal functions, or making sure that brands are “glocal” – globally recognisable but with a local flavour – like a McDonald’s teriyaki burger.

What I have learnt from Airbnb is that the “personal” is also important. To be able to verify, trust and feel empathy with the customer/guest or supplier/host as a person, even if they come from a different culture to you.

Japanese multinationals are usually quite good at the local aspect – they pay their taxes and are good corporate citizens. At the global level, Japanese car brands in particular are making the transition towards becoming a “platform” – they provide the globally assured brand, design and quality standards in assembling parts from multiple regional suppliers.

The next challenge is the personal level. Japanese executives are self-effacing (mostly) and Japanese social media users prefer to stay anonymous and not reveal which companies they work for. But in order to ensure your company is “verifiable” and “trusted” by your customers, it will be necessary for the local face of your company to be more personal.

This article was originally published in Japanese in the Teikoku Databank News and also appears Pernille Rudlin’s new book “Shinrai: Japanese Corporate Integrity in a Disintegrating Europe” – available as a paperback and Kindle ebook on Amazon.

Arab and Japanese Culture

An Arab participant in one of my seminars in Dubai last month suddenly put up her hand and blurted out, “I recognise this so well in my family!” when I was describing Japanese group orientation and non-verbal communication and concepts such as “ishindenshin” and “omoiyari”.

I asked in what way she thought Arab people and Japanese people were similar, and she told me that three generations of her family live together, just as traditional Japanese families used to. One evening, her grandmother asked her “what are you thinking of eating this evening?” The young woman was actually about to go and get a McDonalds hamburger, but recognising that her grandmother was hungry, asked her what she would like to eat. Her grandmother said “oh I am not hungry. I don’t need anything.”

So the young women went to buy a take away traditional Arab meal. When she offered it to her grandmother, her grandmother refused it. So they started to eat, leaving a portion with her grandmother, who then finally started to eat it.

This is not the first time I have been told by an Arab person that Japanese and Arab cultures have a lot of similarities. When I ask why, they mention a mix of family orientation, a strong relationship orientation in business, respect for seniors, and, as the young woman’s story about her grandmother illustrated, being very indirect in expressing needs.

So you would think it might be easy for a Japanese person to fit into the Arab business culture, but actually there are two issues for the many Japanese expatriates working in Dubai that make this less easy. One is that Dubai itself is one of the most multicultural cities in the world. 88% of the population are not Emirati. Almost everyone is a guest worker rather than having permanent residency. So Japanese expatriates in my workshop had to cope with many nationalities on their team, ranging from Europeans to Indians to Lebanese.

Secondly, group orientation means that there is a clear sense of in-group and out-group. Expatriates in Dubai find it very hard to become an “insider” in Dubai society. For example, amongst Arab business people, during Ramadan, it is customary to visit customers’ houses in the evening for the meal which breaks the fast. Hospitality is another very strong cultural value in Arab culture. Nonetheless, I can imagine you would have to be a very brave person to turn up at a customer’s house if you weren’t an Arab yourself.

So Japanese companies have done the sensible thing, which is to hire young local Arab graduates, offering them training and a career paths. However, there is huge diversity even amongst Arabs. Sitting next to the headscarf wearing woman who told me about her grandmother was the other graduate recruit, another young woman, wearing an abaya (traditional Arab dress), but with her long hair uncovered. She had been educated at an international school, and felt more close to the American cultural values I described.

This article appears in Pernille Rudlin’s latest book “Shinrai: Japanese Corporate Integrity in a Disintegrating Europe” available as a paperback and Kindle ebook on Amazon.

A second look at France

I have written previously about the difficulties of doing business in France, particularly the amount of bureaucracy that has to be dealt with. The new French government under Emmanuel Macron has been trying to overcome this image problem by promising to deregulate and lower taxes, particularly for banks. There have even been advertising campaigns promoting the charms of Paris in an attempt to lure banks from London post Brexit.

So far this does not seem to be working for Japanese banks and financial services companies, who are largely choosing either Frankfurt or Amsterdam for their post Brexit EU base and in any case look likely to keep their broader European or EMEA coordination functions in London.

Financial services companies need to be based near where their customers are, so it is not surprising Japanese banks would choose Germany or the Netherlands over France, and not move too much out of the UK for the time being, as there are far more large Japanese companies, regional headquarters, and also Japanese expatriate staff in the UK, Germany and the Netherlands than in France.

I found, through my researches, that the Japanese companies with substantial presence in France reflect France’s traditional strengths of food and drink, imaging technology and fashion and beauty, along with automotive companies, which have a dominant presence across the EMEA region.

The EU Japan trade agreement and partnership will boost trade in the food and automotive sectors so it may well be that more Japanese companies will be looking at France again and French companies will also be trying more actively to do business in Japan.

Nonetheless, I am very reluctant to have a registered company in France, even though it is becoming clear it will be difficult for us to provide training to our clients in France if I do not have a legal entity there.

My researches into Japanese companies in France also revealed that Sony has shrunk its French workforce considerably over the past few years and that reminded me of the incident where the Sony France CEO and HR director were held hostage overnight by the workers of a Sony factory that was being closed down.

France has a long tradition of striking, protest and direct confrontation between workers and employers and citizens and their government. This attitude also impacts the way they do business – the City of London Envoy to the EU described in a recent memo how shocked he was to discover in his meeting with Banque de France that the French wanted a hard, disruptive Brexit, even if it came at a cost to the EU overall, and saw the City of London as adversaries, not partners.

I am not at all surprised by this, nor was it particularly surprising to read that the French military, teachers and local authorities are starting to protest about Macron’s proposed cuts and deregulation. We can expect plenty of strikes, demonstrations and blockades in the months to come.

This article originally appeared in Japanese in the Teikoku Databank News on 9th August 2017 and also appears in Pernille Rudlin’s new book “Shinrai: Japanese Corporate Integrity in a Disintegrating Europe” – available as a paperback and Kindle ebook on Amazon.

Hitachi Rail’s CEO Alistair Dormer on Brexit, speeding up and the need to speak simple English

Hitachi’s rail business is only 5% of the whole group’s turnover, but is growing rapidly and moving from being “double domestic” to a truly global business. Overseas sales are now 83% of turnover, having been 28% of the business in 2012.

Nikkei Business interviewed Alistair Dormer (subscription only, in Japanese), the CEO of Hitachi Rail who is also a Senior Vice President and Executive Officer of the Hitachi Group about his four years as CEO – at a time when the railway business is undergoing major change, with Siemens and Alstom joining forces in Europe for their rail business.

Dormer talks about the importance of being able to scale multilaterally through M&A, with the acquisition of Ansaldo Breda and other companies, which resulted in acquiring customers across 27 countries – 26% of business is now in the UK, 17% in Japan, 10% in Asia Pacific. Hitachi Rail is also moving, like every technology business, into “solutions” adding a services side, including communication technology, software development, signalling systems and operations.

Speed up every aspect

Dormer says the most important thing for Hitachi Rail as a Japanese company was to speed up every aspect. “It is a strength of Hitachi as with other Japanese companies that business advances on a consensus basis, carefully harmonizing in-house planning and business negotiations with partners. This leads to stable quality standards and organizational cohesion, but it is also a weakness in that it takes too much time when you face global competition. The leader needs to be able to make quick decisions and communicate rapidly.”

Of course this is even more difficult when communication and decisions have to be made across long distances such as between the UK and Japan. So Dormer decided the best way was to move people around, to raise the frequency and density of communication. So there has been substantial exchange of people between the factory in Japan and manufacturing bases in UK and Italy.

If there is a substantial geographical and time distance, then people prefer not to have meetings about trivial things, but these details can later become obstacles. So having more regular interaction is necessary. Hitachi Rail thererefore also has regular video confererence and Dormer himself visits sites, holding meetings with 50-80 people to exchange opinions.

Only use simple English

With English as the common language, Dormer (as a native Brit) instituted a rule that only simple English should be used. “When native English speakers are talking, they speed up. It should be easy to say, “I don’t understand, I can’t follow what you’re saying”, but it’s difficult to do this in a teleconference or an important meeting. So then the meeting ends inconclusively and you find out later that people did not understand. So not only should you use simple English, but also I put in a process to confirm understanding after the meeting. The productivity of our meetings has greatly improved as a result”

Hitachi Rail has also introduced common standards across all countries for HR reviews, cost, engineering performance etc. “Each country, the UK and Italy and Japan, have different cultures and ways of doing things, so we did not force conformity, but respected each others’ cultures while working to Hitachi’s values as the common standard.”

Brexit – nobody knows what the future will hold

With regard to Brexit, Dormer says he is repeatedly asked about it, but at the moment there has been no change. “Hitachi has good relations with the UK government. All we can do is continue to ask that companies like us who have their regional base in the UK can continue to access the EU market as seamlessly as possible. There is no choice but to believe this. A transition period is being discussed, so it’s possible the environment will not change for the foreseeable future. However it is still a shock to me on a personal level that the UK made such a decision – even when we knew there was nothing to gain from leaving the EU. There are many people in our offices who were born in the European Union outside the UK, and they are worried. My priority is to reassure them, but the only thing I can say is that nobody knows what the future will hold.”

First decrease in Japanese nationals living in UK since Lehman Shock

The number of Japanese nationals resident in the UK fell by 4.5% in 2016, from 67,997 in 2015 to 64,968 – the first time since 2008-9, when the Lehman Shock hit and numbers dropped from 63,526 to 59,431.

It’s difficult to avoid concluding that the Brexit referendum vote had an immediate psychological impact along with the beginning of a renewed crackdown on non-EU migration. I expect the downward trend to be intensified in 2017-8 as it has become much more expensive and difficult to bring in Japanese expatriate staff from 2017. The non-EU immigration cap has been hit for the third month running in February 2018. It is estimated that the cost of bringing in a Japanese expat has increased from £2151 to £7174 in 2017 (and might double again in later years) after the introduction of the immigrant skills charge of £1000 per year in April 2017. The charge to use the NHS is proposed to rise from £200 to £600 over the next couple of years.

Given that some Japanese companies have hundreds of Japanese expatriates in the UK, this is a significant cost, even though it does not seem to have deterred more non-EU migrants from coming to the UK in 2018 compared to 2017.

Delving further into the Japan’s Ministry of Internal Affairs and Communication’s Statistics Bureau’s statistics, it is clear that other European countries are still seeing significant rises in Japanese nationals as residents – Sweden has seen an increase of 8% from 2015 to 2016, the Netherlands a 7% rise and the two largest Japanese populations after the UK, Germany and France have also seen 3-4% rises, to 44,027 and 41,641 respectively. Belgium and Russia are the only two other countries to record a decrease in Japanese nationals, of 9% to 5,707 and 4% to 2,650 respectively.

Global Japanese companies have a diversity problem in their Japan HQ (and it’s not just gender)

Mid career hiring seems to me a good indicator of the degree of acceptance of diversity in its broadest sense, and Toyo Keizai obviously agrees, as they have published a ranking showing the percentage of employees in Japan who are “graduate hires” in the total year’s intake as part of their Corporate Social Responsibility data publications.

Companies in our EMEA and UK Top 30 largest Japanese employers who are also in the Toyo Keizai rankings of companies with the highest proportion of Japanese graduate hires are therefore in a rather paradoxical position of having a high number of non-Japanese employees in their overseas subsidiaries, being managed by a very traditional Japanese group of employees in their Japan headquarters.

Most of the companies in these categories are trading companies, banks and major manufacturers – the latter two having substantial domestic branch networks or domestic manufacturing and markets to cater for I suppose. They include:

NYK 65 graduate hires in April 2017, 2 mid career hires in 2016
NTT Data 385/13
Canon 475/15
Toyota 1935/98
Sumitomo Corporation 157/8
Itochu 149/12
Marubeni 135/11
Sumitomo Mitsui Financial Group 1347/115
Mizuho Financial Group 1394/175
Toyota Industries 284/27
MUFG 1206/111
Dentsu 145/19
Fujitsu 740/110
Mitsui 180/30
MS&AD Insurance 1183/254

No sign of Mitsubishi Corporation in the rankings – which may be due more to non disclosure of data rather than not being in the top 150. When I was working at Mitsubishi Corporation, we used to refer to the hiring of similar Mitsubishi graduate types every year as having led to a “Kintaro ame” situation in terms of diversity – Kintaro ame (Kintaro sweets) are rather like British sticks of rock, the same wherever you cut through them.

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