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

Japanese employees’ justified fear of being expatriated

Over 1 million Japanese people are living abroad, according to Diamond magazine, and the number of countries business people are being sent to is increasing each year. The era when only those who could speak foreign languages were sent abroad is over. However the number of people who want to work abroad is shrinking. When you ask why people are so negative about expatriation, the most common reason is “worries about my career when I return”.

Diamond gives the example of Mr D, born in Tokyo, who works for an automotive parts manufacturer and had never been abroad – his furthest business trip was to Osaka. He worked in the domestic manufacturing division Only his peers who had been good at languages or studied abroad were sent overseas so he never thought the day would come when he would be asked to transfer. But his company became partly owned by a foreign company and as a consequence some of their executives joined the management team. The President declared that he would like 30% of all employees to have had some kind of overseas experience, and that this was essential for the survival of the company. Mr D is waiting for his orders to go abroad. So far, none of his peers have refused the offer.

According to a global survey by UK recruitment company Hydrogen, the most popular destination for expatriation is the US, then the UK, Australia, Singapore and Canada. However by far the most rapid increase in expatriation is to Asia. Particularly for manufacturers, countries where there are factories are the most likely, so in Mr D’s case, his destination is likely to be Indonesia or Thailand.

But even if it was Europe or the US, would Mr D’s anxiety disappear? To Mr D, it makes no difference – all regions are “foreign”. Why did Mr D join a company where there was a high chance of being expatriated? It turns out it was the only company out of 200 that he applied to that made him a job offer in the post Lehman Shock recruitment Ice Age, so Mr D lied about being willing to go abroad.

Another reason for not wanting to go abroad is that most companies will refuse to set a time limit on how long the expatriation will be. This is due to the fact that they do not know how long it will take before the expatriate becomes effective in their job in the overseas subsidiary. Usually this is around 3-5 years. But sometimes expatriates end up overseas for more than 10 years, and the expatriation has become a “one way ticket”.

Mr D worries that even if his stint abroad is only 3 years, it will still be a “blank” in his career development. Particularly as there is major restructuring going on in the domestic operation and new products will be developed and old product lines disposed of while he is away. Staff who were working on products that were thought to be the heart and soul of the company found themselves being sidelined to “window gazing seats“.

Mr D fears not only that he won’t be able to return to his own division but that by being abroad for 3 years he will miss out on the new technologies being developed in Japan.

Rather than forcing Japan HQ staff to become more “global minded” by sending a large number of them abroad – an expensive and high risk strategy I would argue – why not bring more overseas employees and managers to Japan for short term secondments so they can absorb enough HQ knowledge that they can transfer to the local factories themselves when they return? If more non-Japanese employees work in Japan then the HQ will get used to being more globally minded. It would then only make sense to send Japanese HQ staff abroad who are clearly marked out for senior global management roles, so that their expatriation is seen as a career development step rather than a blank.

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“Japanese companies are too scared to touch their overseas acquisitions” – Nidec’s Nagamori

Shigenobu Nagamori, the billionaire founder of the world’s biggest manufacturer of micro-motors for hard disks and optical drives, Nidec, has acquired more than 40 companies in Japan and overseas. He comments in a Nikkei Business article that “you cannot just leave foreign acquisitions alone to get on with things by themselves. You need thorough mutual understanding and to even replace management if necessary.”

“Although you no longer hear about Japanese companies sending lots of managers over to their overseas subsidiaries who end up issuing all sorts of misguided directions, you now hear of companies who say ‘we think the same way as the counterpart management’ and so decide to buy the company and then just leave the management as is.”

“This is an illusion. Actually they are being left alone because the Japanese company doesn’t really understand what they are doing. It ends up with compromising on the necessary management reforms and profit targets.”

“I have regrets myself. We acquired 10 or so companies in Europe and North America from about 2010. We were warned by various companies who had M&A experience and financial institutions that we couldn’t restructure foreign companies the way we would Japanese acquisitions and that it was best to ‘leave it up to the foreigners’ otherwise they will quit”

“I thought that was true at the time. I also took on board the advice that Japanese managers needed to be people with Harvard degrees and a network amongst foreign executives.”

“However one company did not make any improvement no matter how often I set profit targets. I thought there must be something wrong with the company management as such a company should as a matter of course achieve profit margins over 15% but I was told that it was the limit for their industry.”

“In Japan you would try to persuade the management to adopt our “kaizen” knowhow (knowledge of how to improve) but we hit a wall with this in the West. So in 2012 we changed the management of the acquired company. But you can’t do it like pulling a trigger. I make a point of visiting each company at least once a year and have dinner not just with the executives but also the managers and discuss things with them. I also encourage them to send emails directly to me and I respond to them. I am trying to understand all the ideas people have for improving profitability.”

“It’s important that people in the company understand my thinking and I understand whether they are capable of understanding. If they are then it doesn’t matter if the CEO is changed. ”

“It’s the same in Japan. Communication is important. If you just cut back costs and improve profit, the company will not survive in the long term. Where is there waste, how can we make the most profitable products – the basics are the same in Japan or elsewhere. If this is understood, then overseas companies can be reformed too.”

“I think Japanese companies are too scared to touch their overseas subsidiaries. They overthink the differences. I used to be like that, but there is no need. The basics of management are the same everywhere.”

Will there be a return on sending Japanese interns abroad?

Sending Japanese students abroad as interns has become very popular in the past year or so, according to Nikkei Business. The Uniqlo brand owner Fast Retailing sends around 73 students a year to Singapore, London and Melbourne. Sompo Japan Nipponkoa despatched 10 interns to Singapore earlier this year and Softbank has sent 5 interns to work for its Sprint subsidiary in Kansas.

It is seen as one solution to the shortage of graduates who have overseas experience or the interest in working abroad. Most “global minded” graduates head for prestigious and well paid trading company jobs. Returns on the hefty investment in such internships are not guaranteed however. Whether enough interns actually then join the companies who sponsored them, or whether a short internship is any substitute for prolonged periods of study abroad is not yet clear. My view is that Japanese companies should invest similarly in internships for non-Japanese recruits or at least offer short secondments to Japan as part of their graduate induction programmes, if they are really serious about making their Japan HQs more globally minded.

Inclusive words

I was discussing with a client recently the way accepted terminology keeps changing in the UK business world. Apparently “flexible working” is now being renamed “agile working”. “Agile” working is meant to have a wider definition than flexible working – the idea being that the focus should be on performance and outcomes, allowing maximum flexibility on the who, what, when and where of executing the work. “Flexible” usually (as it does in Japan) means flexibility on the hours worked and tends to be used when workplaces are trying to be family friendly towards women. “Agile” working implies it is a way of working for every employee.

The client’s own job title was another indicator of change – “head of diversity and inclusion”. Diversity has become a more commonly used word in Japan now, mainly to mean gender diversity, but increasingly companies are looking at other kinds of diversity such as nationality or sexuality. The reason that “inclusion” has been added to “diversity” in the UK is to ensure that companies don’t just focus on targets for diversity, but also how the corporate culture should change to ensure that people with different backgrounds to the mainstream do not feel excluded from decision making or promotion or the everyday conversations and meetings that are going on around them.

Sometimes I find myself thinking that all this emphasis on terminology is irritating and a distraction, but then I remember what it felt like to be a foreign employee in a Japanese company headquarters. I have no complaints about the way I was personally treated, but I regularly used to point out, when asked for my input into English language documents like the annual report – that it seemed alienating to people outside of Japan if employees were broken down into male/female, or Japan-employed and overseas-employed. I knew why these categories existed – because at the time, 99.9% of females were in administrative track jobs, and 100% of men were in management track jobs – so this was a simple way of indicating the ratio of administrative versus line management/sales in the workforce. The Japan-employed and overseas employment figures aligned with the tantai (unitary – Japan entity only) and renketsu (consolidated) accounting methods.

But it nonetheless made me feel like being female or “overseas” was a lower status. This has all changed now of course, as the distinction between administrative and management track seishain (lifetime employees) has disappeared in many companies. With holding companies now being allowed, and changes in accounting methods, the tantai and renketsu distinction for employees is also less meaningful than it used to be.

I still have Japanese clients consulting me about what to call their various categories of employees however. Some choose “rotating staff” to describe Japanese expatriates – but again this implies that anyone hired outside Japan has no chance of being posted elsewhere. One British employee complained to me about an email from Japan HQ which used the term “subordinate”. Even in British class ridden society, we prefer to call all employees “colleagues” or “team members”.

Japanese boards in Europe should reflect their customers, employees and community

I have just completed the first phase of research into how diverse the European subsidiary boards of the biggest Japanese companies in Europe are, both in terms of the nationality mix of Japanese and European directors, and also the number of women on the board.

More boards in Japan had women on them than in Europe, which is surprising if you were expecting boards to reflect the employee mix – particularly the pipeline of managers coming through the ranks of an organisation – as there are without doubt more women employees and proportionally more women managers in Japanese companies in Europe than there are in Japan.

The proportion of directors with European nationalities on the board of Japanese subsidiaries varied wildly from none in the case of Toshiba, Sharp and Fast Retailing (the Uniqlo subsidiary in the UK), through to 100% in the case of Asahi Glass, Bridgestone, Canon and Nidec. So national diversity does not seem to be influenced by which industry the company is in. This also means that what to me is the most compelling case for a diverse board, that it should reflect the customers it is serving, is not the key factor I thought it would be.

20 years’ ago, becoming less reliant on Japanese customers abroad as well as in Japan, was the driving force for many Japanese companies embarking on “kokusaika” (“internationalization”). Canon was a pioneer then in appointing Europeans to senior positions in overseas subsidiaries and does as a consequence appear to have fared better than other companies in the consumer electronics sector, both in Japan and in Europe.

The current favoured path to globalization for Japanese companies is through M&A rather than growing international businesses and executives internally, and the major acquisitions of the past decades account for the diverse boards of Asahi Glass (who acquired Glaverbel) and other companies that still have a high proportion of European directors such as Fujitsu (International Computers Ltd), Nomura (Lehman Brothers) and NSG (Pilkington).

There is some sectoral influence. For example, the financial services industry is under intense scrutiny by European regulators who have the power to approve board appointments. They expect directors to have deep understanding and experience of local markets – something which not many Japanese executives can claim.

Both Fujitsu and Hitachi have substantial public sector oriented businesses in the UK (government services, nuclear power and rail) which means that they not only need to meet the diversity requirements of government purchasing but also gain acceptance of the communities in which they operate. For example, the board of a Japan-owned UK utility recently advertised for a director, with a requirement that applicants be a customer of that utility.

For smaller Japanese companies, or those which are just starting in Europe, it is tempting to stick with a small board with just a couple of non-resident Japanese directors, but as boards come under pressure to have greater transparency and better governance in Europe, appointing local directors from the start should lead to better relations with regulators, customers and employees.

(This article first appeared in Japanese in the Teikoku Databank News in December 2015 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.)

Brexit is already priced in – the failure of British soft power

I’m on what has become an annual business trip this time of year, to Duesseldorf. Just before my flight out of London City Airport, I met with one of our Japanese corporate clients in the City, who told me that they are about to establish their European Union headquarters in the Netherlands. Brexit was not directly mentioned as the reason for this, more that “compliance and regulatory issues” made Amsterdam the preferred choice. The EMEA (Europe, Middle East and Africa HQ) will remain in London. The Amsterdam office will be beefed up and some of the regional functional people are being transferred there from London. This is precisely the sort of gradual drift to the Continent that I fear will follow an actual Brexit – and it is happening already.

Arriving at Duesseldorf airport, I was struck by the clear division at passport control between “EU Citizens/Burger” and “Other Nationalities”. An EU blue path (that made you feel it was a red carpet) took you to a completely separate set of passport officials. In UK airports, the different lanes are side by side, and it’s often quicker to go to the “all passports” queue than wait in the EU queue. There is no mention of us all being “citizens” either in British immigration control. Some Brits may find this willingness to treat us as equal citizens of Germany somewhat troubling from a historical perspective, but I felt rather flattered.

Then on to my hotel, with a huge array of channels including BBC World. But there was no signal for the BBC channel. So I ended up watching some fascinating documentaries on the cultivation and cooking of lotus roots, and Indonesia’s fad for J pop Wotagei dancing on NHK World instead. Japan/NL/Germany soft power 1, British soft power 0.

Governance – interview with Yoshimitsu Kobayashi, external director at Toshiba and Tokyo Electric Power

Yoshimitsu Kobayashi, chairman of Mitsubishi Chemical Holdings, seems to be attracted to intractable problems. Not only has he become an external director of Tokyo Electric Power Company, post Fukushima but is now also a director of Toshiba, as it goes through a massive restructuring of its business, following its falsified accounting scandal (see our previous post – Toshiba – where did it all go wrong?). On top of all that he is also the chairman of the Japan Association of Corporate Executives.

Asked by the Nikkei Business magazine why he has taken on both TEPCO and Toshiba, he explains that he regards both as extremely important to the Japanese economy. “Nuclear power is a Japanese national policy, and Toshiba is a national policy company. If it is damaged, then it is damage to the whole Japanese economy” (as we explained in another post Shazai and the art of being a corporate shame magnet). “That doesn’t mean we have to preserve it at whatever cost. We need to be open about all the bad parts of Toshiba, and take responsibility for explaining what happened. Then we can rebuild. Governance needs to have concrete substance, not just on the surface.”

Nikkei Business calls 2015 “Year Zero of Corporate Governance” for Japan. Kobayashi says it will take 10 years to change corporate culture at the roots. Toshiba and TEPCO resemble each other, he thinks, in that TEPCO is learning to be a privately owned company, that looks after public infrastructure, which is similar to Toshiba.

“Aspects of Japan that had been good such as life time employment and seniority based promotion have now become a minus, and Japan has lost its competitiveness. Companies should not rely on politicians. It is not just about deregulating but changing the spirit behind the regulations.”

Kobayashi points out that while Japanese companies have been investing large amounts in overseas M&A, domestic M&A is still a fraction of that. There are 3 nuclear power companies, 8 car companies and yet 20,000 chemical companies. As a consequence, research and development is behind the West and China.

“What’s key is for Japan to keep hold of its traditional technical strength, but work out how to team this up with services.” “Mitsubishi Chemical Holdings is doing this – working on new materials, for the environment and healthcare… and also for light weight cars”.

Kobayashi also believes that top executives in Japanese companies should walk away once they have finished their stint as chairman. However he think that it takes 10 years at the top to really understand a company. The Toshiba system, whereby Presidents only stayed in post for 4 years, but then carried on for many years after as advisors was not healthy. “Maybe it’s because their remuneration is not as high as in the West that they stick around. Dow Chemical’s CEO is earning 50 times what I earn. Although Mitsubishi group companies don’t have so much cross shareholding in common now, we keep an eye on each other’s governance, so oldies are not allowed to hang around”

“Toshiba has a surprising number of businesses. In companies like that where there are many capable people, there are a lot of big fish swimming in small ponds. They think they are the company, and forget the public interest.”

Virtue or vice? “Hear no evil, see no evil, speak no evil” – Japan HQs in the Year of the Monkey

We have decided to celebrate in 2016 – with a series of lunch seminars for clients – the 12^th anniversary of the founding of our company. The excuse is that we have completed the full cycle of the Japanese/Chinese years, back to the Year of the Monkey.

Reflecting on the trends we have seen evolving over the past 12 years for Japanese companies, the most obvious development has been the increase in major acquisitions by Japanese companies of Europe-based multinationals. Most recently, Mitsui Sumitomo Insurance Group acquired UK Lloyd’s underwriters Amlin for £3.5bn and Hitachi has just finalised the acquisition of AnsaldoBreda and Italian company Finmeccanica’s stake in Ansaldo STS, for around €800m.

Both these acquisitions are representative of a structural change I have seen evolving in quite a few Japanese multinationals. Hitachi has moved the global headquarters of its rail business to the UK and it seems the Japanese insurance majors, who have all now acquired underwriting firms based in the UK, are hoping that their acquisitions will act as pivots for further global expansion.

Clearly Japanese companies are not just buying into a market with their acquisitions, but hoping that they have also acquired global management capability. Whereas in the past there were some examples of Japanese companies using their US subsidiaries to manage the global network, it seems now that Europeans are being asked to manage operations in the US and beyond.

This is partly due to another long term trend in Japan, which is the lack of “global jinzai”, particularly at senior management level, to manage overseas growth, but it also reflects the fact that European multinationals are used to managing companies scattered across many countries, in a virtual matrix structure. This means the heads of various business units or functions may not all be physically located in the same headquarters. European managers need to have strong, globally effective professional expertise but also good cross cultural communication skills to be able to manage teams remotely.

Europeans are comfortable with doing this in Europe and to some extent working with the US too. However working with Japan is still a new experience for most of them. They are often baffled by the fact that their professional expertise and remote communication skills are not enough to persuade or win support from Japan headquarters. Managers in Japan headquarters are only used to communicating with people who are physically present in the office. They tend to be generalists, who do not find arguments grounded solely in expert opinion all that convincing.

Unless conscious effort is made to overcome these communication barriers, Japan headquarters maybe behave like the three monkeys, who see no evil, hear no evil and speak no evil. In Japan my understanding is that this is seen as virtuous behaviour. However, in the West this is seen as ignoring problems and misbehaviour until it is too late. I foresee the next twelve years of my business as being about opening eyes, ears and mouths on both sides of the world.

This article originally appeared in Japanese in the Teikoku Databank News on 13th January 2016 and iis in the introduction of “Shinrai: Japanese Corporate Integrity in a Disintegrating Europe” by Pernille Rudlin, available on Amazon as a paperback and ebook.

Why Japanese companies are behind in using IT and what they need to do about it

For as long as I’ve been working in or for Japanese companies (25 years…) I’ve been surprised by how behind they are in using IT, considering how much Japanese people love the latest technology, much of it developed by Japanese companies themselves. Like so many paradoxes of Japanese corporate culture, the roots may lie in the post war system of life time employment, generalist track careers and seniority based promotion.

The Nikkei Business magazine cites one example of how, as it puts it, Japanese companies are not just one but three steps behind their Western counterparts. Most Western banks (Barclays, HSBC, RBS, Deutsche Bank, Commerzbank, Societe Generale in Europe) are adopting the highly cost effective blockchain system for settling payments. MUFG is the only Japanese bank to use the system.

The Nikkei recommends 4 countermeasures Japanese companies need to take:

1. Keep replacing top executives

According to an IDC Japan survey, only 15.7% of Japanese presidents and other CXOs think investment in IT is “very important” compared to 75.3% of US executives. Alternatively, as the Nikkei says, if you don’t understand IT, make sure you appoint executives who do.

2. Bring in an external CIO

According to a Japanese Ministry of Economy, Trade and Industry survey, whereas in the US over 70% of IT specialists can be found working in-house in US companies, in Japan, 75% of IT specialists are working at IT vendors.

3. Make your IT systems department a key function

Staff in Japan’s IT departments are ageing. 56.9% of companies in a 2015 survey said the majority of staff in their IT departments were over 40.

4. Use people from outside Japan

Japan’s Recruit Holdings has just started to recruit non-Japanese data scientists by starting up competitions on Kaggle, a data scientist network of over 350,00 people from over 100 countries, in order to make the Recruit brand name better known.

Japanese business people want UK to stay in the EU (letter in the Financial Times)

Sir, As a supplier of services to over 70 Japanese companies across Europe, I am not at all surprised that Toyota do not intend to move manufacturing away from the UK in the event of a Brexit (“Toyota will stay even if Britain votes to leave the EU” January 12) The key point to bear in mind is that Toyota’s European headquarters are already in Belgium.

What should be of concern is what will happen to the rest of the major Japanese companies, more than half of whom have their European headquarters in the UK, and how any changes in their location might impact the fact that major share of employees of Japanese companies in Europe and of Japanese investment in Europe has been in the UK.

Judging by the mood of the 200 or so Japanese business people at the UK Japanese Chamber of Commerce New Year party last week, the overwhelming wish is for the UK to stay in the EU.

Japanese business people would much rather their companies were based in the UK, but if the UK is no longer in the EU, the straw poll I took suggests that there will be a gradual drift of European HQs away from the UK – and with it related jobs, investment and taxes – and most importantly, for suppliers like my company, the locus of purchasing decisions will also shift.

Norwich, where my company is based, is two hours away from London but only 1 hour away from Amsterdam, so I am making contingency plans accordingly. I assume I am not alone in this.
Pernille Rudlin
European Representative, Japan Intercultural Consulting
Managing Director, Rudlin Consulting Ltd
Norwich, UK

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