Category: Corporate culture

Surviving the end of lifetime employment in Japan – if you’re an underworked uncle

Plenty of Japanese companies went virtual, scaled back, cancelled or postponed their entrance ceremonies for new graduate recruits this year, because of COVID-19. Hitachi had already cancelled its entrance ceremony, however, and changed it to a Career Kick-off Session (which has also been postponed) to mark the radical departure it has made from lifetime employment and seniority based promotion.

Since its record breaking loss in 2008/9, Hitachi has moved away from simply cutting employee numbers to reduce costs and instead radically altered its business portfolio and introduced a new HR system. President Nakanishi was responding to the often heard concern in the company that “we don’t have any leaders who are effective globally”  – a major problem when Hitachi was moving away from being a purely domestic supplier to Japanese energy companies to be more active globally in social infrastructure.

Japan HR as “just one of the regions”

In 2011 Hitachi tore down the 3 distinct layers of its old HR structure  – Hitachi HQ’s own HR division, the HR divisions of the Hitachi group companies and the HR divisions of overseas subsidiaries. Now there is a global HR division, 30% of whose employees are non-Japanese.  Each region reports into the global HR division, with Japan being one of the regions along with Europe, the Americas, Asia etc. The HR departments of the subsidiaries within those regions report into the appropriate regional HR division.  This presumably means the group companies have far less autonomy and Hitachi HQ and Japan are just “one of” the regional or subsidiary divisions.

Hitachi also moved away from the “Shokuno” model much used by Japanese companies – where experience and potential of the employee are the key factors in deciding pay and grade to the “job” model – where each post carries a detailed job description and the pay is determined by the market rate for jobs requiring similar levels of skills and experience.

Toyota goes triangular

Toyota‘s President Akio Toyoda has also begun to have doubts about lifetime employment and seniority based pay. Last year, during the “Spring Offensive” when Japanese company unions negotiation with the directors on base pay, bonuses and conditions, Toyoda said “I have never felt such a distance between us as I felt this time”.

So in 2020 he introduced a new triangular negotiation structure – instead of unions and directors being face to face, he sat three groups around a triangle – the union, the management/executive officers and the board directors. From April of next year the use of evaulations in setting pay and bonuses will become much more widespread and automatic seniority based pay rises will cease. Differentials in bonuses will also become much wider from July of this year.

Get motivated, underworked uncle!

Similar changes are being made at LIXIL, Ajinomoto, Citizen, Sapporo Breweries and Eisai Pharmaceuticals. The end of lifetime employment and seniority based promotion is seen as mainly about trying to deal with the “hatarakanai ojisan” or “underworked uncle” – middle aged men who are in their management position and being paid accordingly largely because of the length of their experience in the company than the value they are adding.

The rest of the Nikkei Business special feature includes a handy worksheet for underworked uncles, to regain their motivation and revive their careers, with some case studies of career changers and encouraging words from recruiters.  The recruiters say that middle aged employees are good networkers who can link their company to other companies and look out for new ideas, that they have good communication skills, a learning mindset and are good negotiators. Sounds like they are going to need all of these to succeed in the final 15 years’ of their careers, if they don’t want to end up gazing out of a window.

For more content like this, subscribe to the free Rudlin Consulting Newsletter.

Share Button
Read More
What’s going on, Panasonic?

The front cover of the January 27 2020 edition of Nikkei Business, one of Japan’s leading business magazines, must have made their PR department’s hearts sink. どうなってる？Panasonic (dounatteru? -” what’s going on?” maybe even “what the hell is going on?” depending on tone of voice) it says in stark letters across a simple blue cover.  The inside is not much more cheering.

Culture change has nothing to do with me

It talks about the change in corporate culture that new internal companies like Connected Solutions are bringing about, but notes that there are plenty of veteran employees who think it has nothing to do with them, don’t want a culture change or suspect it will only last as long as the “returnee” President of Connected Solutions, Higuchi Yasuyuki, lasts.

Panasonic’s President Tsuga Kazuhiro has been in post for nearly 8 years. The usual term for Panasonic (and most other Blue Chip Japanese company) presidents is 6-7 years, so there must be a thought that he will not be president for much longer.  Nikkei Business  closes its interview with him by asking about this.  Tsuga says he hoped to step down at the centenary of Panasonic’s founding, in 2018, but “I wasn’t good at quitting”.

The Nikkei opens its interview with him by asking him about the forecast Panasonic has made for the current financial year, that both turnover and profits will be down on the previous year.

No regrets on shift to B2B and automotive

Tsuga admits that he had aimed to increase turnover and raise operating profit to 5% of turnover, but blames about 80% of the decline on US-China trade friction which damaged the profitability of Panasonic’s operations in China. The EV battery venture with Tesla is also not at full operational strength.

Tsuga maintains he was right to shift Panasonic to business to business sectors, including automotive, despite the current problems facing the automotive industry.  He describes the problems popping up in the various sectors he expected to generate stable growth as a game of “whack a mole”.

Panasonic is not an ordinary company

Nikkei Business points out that Panasonic seems to be going against Western business orthodoxy, that companies should specialise in what they are good at and cut out any remaining businesses. Tsuga says that is because Panasonic is not an ordinary company. “We persist in staying close to the every day lives of our customers… that is our strength.”

“We will continue to have an integrated, comprehensive strength and we need to have a model for our future business otherwise we cannot explain “why Panasonic?”.  People might say they cannot understand our model very easily but I don’t think it’s necessary for it to be that easily understood. We’ve been going for 100 years, if we fall over in the next 10 or 20 years that’s a problem. We have to change into the right shape to deal with the changing times. ”

Bringing in outsiders

This why Panasonic has been proactive in bringing in outsiders, says Tsuga. When Matsushita Konosuke first set up Panasonic, there was a shortage of top quality employees. “Now Panasonic has grown to a point where it attracts people from the top universities, but this means there is a certain uniformity to the type of employee working here.”

Tsuga has high hopes for the team headed up by Matsuoka Yoko, known as Yoky, who joined Panasonic from Google in 2019. “She starts from thinking about “koto” (situations) rather than “mono” (things). I have an image of Yoky being the centre of starting up various venture companies together. To create internal companies that people want to acquire or partner with.”

Other outsiders who have recently joined Panasonic include Baba Wataru, who used to be CIO at SAP Japan, and Eiichi Katayama as Chief Strategy Officer who used to head up the research division at Merrill Lynch Japan Securities.

Tsuga also reduced the number of Corporate Executive Officers from 49 to 16 – including Katayama and Higuchi – so no wonder Panasonic old timers feel sore  – outsiders are taking up increasingly scarce senior level jobs.

4 diseases impeding growth

Nikkei Business points to four “diseases” which have prevented Panasonic from growing. One is that the strategy and business model were not based on market needs, but what Panasonic’s product manufacturers wanted to do.  This is a very common issue for Japanese manufacturing companies.

The second problem was a lack of funds for investment – a lot of capital was expended on absorbing Sanyo, and yet turnover did not increase, so there was a lack of free cash flow for big investments that were needed in automotive (although they did acquire Ficosa and Zetes in Europe).

Again, like many Japanese companies, Panasonic had a silo organisation – with big vertical walls between each business, making having an overall strategy for developing Internet of Things business in sectors such as air conditioning very difficult – the Life Solutions company (focused on lighting, energy, housing) and the Appliance company (household appliances, airconditioners) kept bumping up against each other.

And the fourth problem is that to try and fix this, Panasonic kept reorganising itself, but this in turn weakened Panasonic’s ability to deliver.

Turning the “tap water philosophy”

The final part of the Nikkei Business special feature looks at what other companies have done to turn themselves round – Microsoft, Siemens, Sony and Hitachi. It concludes that consistency of strategy over several generations of CEOs is necessary.  It looks as though Tsuga, by hanging on, has adopted this approach.

Nikkei Business quotes the founder of Panasonic, Matsushita Konosuke, as saying that in a changing society, new value cannot be created just by imitating the master’s methods, which were based on what is known in Panasonic as the “tap water philosophy“. New value shoud be created by absorbing this philosophy and updating it to improve people’s lives as they are currently lived.

 

For more content like this, subscribe to the free Rudlin Consulting Newsletter.

Share Button
Read More
It’s not over yet for Honda in the UK

“Don’t be ordinary, Honda” urges a 20 page special feature in Nikkei Business magazine. It points out that Honda occupies a similar space to Sony in Japanese people’s hearts. They both had maverick founders, produced quirky, innovative products for decades, lost their edge and then had to undergo deep restructuring to survive.

The loss of face for Swindon

Part 1 of the special feature starts in Swindon, lamenting that it has come to a point where Honda, “the face of Swindon”, is having to shut down. “Falling European sales and the chaos of Brexit are not the only reasons”. Honda says it is because of the need to respond to the rise of electric vehicles, a recognition that it had not set up the necessary structure in Europe to deal with the EU’s strict environmental regulations and supply electric and hybrid vehicles.

Going it alone made it difficult to innovate

This lack of preparedness may have been because Honda was going it alone, in contrast to Toyota working with Mazda, Suzuki, Subaru and Daihatsu and Nissan’s alliance with Mitsubishi and Renault.  Even adding in Honda suppliers like TS Tech, Keihin, Showa, Musashi and Nisshin, its total supply chain sales amount to a tenth of Toyota’s. Toyota’s supply chain includes other large multinationals like Denso, Aisin, Toyota Industries, JTEKT and Toyota Boshoku. R&D expenditure is similarly tiny compared to Toyota’s spend.

Honda is not in Boston Consulting Group’s Top 50 most innovative companies of the world – whereas Toyota is at #37.  It’s not even in the top 50 of Japan’s own ranking of most innovative domestic companies. Toyota is at #2, Honda at #105.

Only 70% of Honda’s sales are 4 wheel vehicles however – 13% are motorbikes, 2.2% power products like lawnmower engines and 14.9% is financial services. Honda has been innovating in these areas as well as becoming active in Mobility as a Service, investing in electric vehicle charging, including in the UK and Sweden.

Honda still has roots in the UK

In fact it’s not over for Honda in the UK by any means. Nikkei Business’s special feature takes a nostalgic look at whether Honda can grab back the “speed” and “challenge” spirit that Honda showed in the Isle of Man TT races, illustrated by a headline from the Daily Mirror in 1967 “The Japs are Laps in Front”. It described the 3 times Honda has left Formula One, only to come back again. Honda R&D and Honda Motor Europe are still based in the UK, and Honda has mainly supplied engines to UK based Formula One teams over the years – most recently to Red Bull in Milton Keynes.

The special feature finishes with an interview with Honda’s President Hachigo Takahiro – who was himself posted to the UK during his career.  He shows no interest in merging with Toyota or Nissan in order to achieve scale.  “We are not thinking about making a bid for Nissan…We are innovative when we face challenges, like we did with Formula One.  As for Toyota, we won’t get very friendly, we will have a fight occasionally.  Otherwise the Japanese car industry would be very dull. We have different personalities.  We should be good rivals, and help Japan rise up. We have no intention of taking Toyota’s money.”

Even if Honda is shutting down its manufacturing in the UK, the hope seems to be that the UK can play a part in recharging its innovative spirit.

 

For more content like this, subscribe to the free Rudlin Consulting Newsletter.

Share Button
Read More
How a failed merger led Tokyo Electron to world class HR

Tokyo Electron originally sold car radios when it was founded in the 1960s, but reinvented itself as a manufacturer of semi conductor making equipment in the 1980s. A failed merger (following objections from anti trust regulators in the US) has led it to reinvent itself again. This time, the reinvention is just as much around management as it is product lines.

In 2013 Tokyo Electron spent a year planning a merger with the US’s Applied Materials. They even had a new name and were planning to put their global headquarters in the Netherlands.

To prepare for the merger, Tokyo Electron reduced its stake in an affiliated trading company, Tokyo Electron Device, and withdrew from the solar cell business.  This renewed focus on the core business has led to increased profits and turnover.

Role not potential

One area on which it proved difficult to reach agreement with Applied Materials was how the HR system should be configured. Tokyo Electron was still focused on having lifetime employment and salary boundaries based on potential (the untranslatable Japanese word nouryoku) with actual performance influencing take home pay upwards or downwards each year. This was very different from Applied Materials system of having a transparent relationship between actual job roles and compensation and ensuring the appropriate person was assigned to that role, without much thought for maintaining long term employment.

Howevever when younger Tokyo Electron employees heard about the Applied Materials HR system they had high expectations as they felt frustrated by the traditional Japanese system. Tokyo Electron realised it would have to change its HR system to motivate its younger staff.  They recognised, however, that there was a big difference between Japan and the USA, where people job hop frequently in their career.

The new system was introduced worldwide in 2017-8.  6 role categories which were applicable globally were introduced – operations, engineering, sales and marketing, business support, management and executive management – up from three previously: the untranslatable sougoushoku (generalist management), ippanshoku (generalist administration – usually for women) and technical. The number of levels increased from 7 to 20 and they applied to all categories (apart from executive). So someone in a senior business support role at level 8 could be considered to be “doing a highly complex job, with a strong influence over the results of their department” just as much as someone in engineering or sales and marketing.

This might seem vague, but Tsuchii Nobuhito, HR General Manager, justifies it by saying that as the semi conductor business is fast changing, roles need to be kept flexible.

Further changes included making it possible to be promoted in consecutive years. Previously Tokyo Electron employees had to stay in one grade for three years before being considered for the next promotion.  Before, the criteria for a job role were evaluated relatively but now there are evaluated by an absolute standard.  This is intended to make it more transparent to people where their job role and grade sit within the whole organisation and what their future career path might be.

Inevitable changes as the semiconductor industry globalizes

These changes were inevitable, says  Nikkei Business.  Japan’s semi conductor industry has hollowed out and most of the customers are overseas. 80% of Tokyo Electron’s sales are outside of Japan and 40% of its employees are overseas. Only around 500 employees in Europe and the Middle East out of 12,500 total.  Unsurprisingly, Asia has the largest number – around 2,800. Japan headquarters also has more Asian employees.  Nikkei Business interviews one Korean employee in Japan who says she was surprised to have stayed so long. She started as a Chinese/Japanese translator but enjoyed the challenges in her job and stayed on.

Higher than average salaries probably also helped. Tokyo Electron pays an average Y12.7m a year (around US$115K) compared to the industry average of around US$60K. As a result of the new HR system 90% of staff had a pay rise – mainly the younger and middle ranking employees.

Global employee communication

President Kawai has been careful to communicate company strategy and objectives as clearly as possible around the world. He has held 35 employee meetings around the world and also holds smaller discussion meetings with staff to talk about the direction of the semi conductor industry, or whether to continue with M&A activities.   He asks them whether the strategic direction is getting through to people, and if it is appropriate for their workplaces.

There are still some issues – how far it is possible to be objective in evaluations, for example.  “It will take another 3-5 years before the system really beds in” says Tsuchii.  Kawai has set some ambitious targets and is confident there is room for further growth.  Whether Tokyo Electron can continue to motivate its staff will be key, says Nikkei Business.

Their website certainly reflects the brand values they aspire to – clear and transparent, with an emphasis on “people, technology, commitment” – although just like every other Japanese technology company, their mission pretty much boils down to “contributing to society through innovative technology”, with added “reliable service and support”.

One of the puzzles of Japanese HR is how employee engagement is so low and yet the employees seem so dedicated and diligent. Kawai at least seems to have found a solution – transparent career paths.

 

 

For more content like this, subscribe to the free Rudlin Consulting Newsletter.

Share Button
Read More
“If we carry on like this, Japan will perish” – Uniqlo’s founder Tadashi Yanai

Tadashi Yanai, founder and president of Fast Retailing (Uniqlo) has some hard hitting words for the Nikkei Business magazine series “Wake Up Japan”:

“Japan is the only country which relies mainly on one big intake of domestic graduate hires for its recruitment. But you have to recruit globally. There is competition around the world to hire people, and Japan is falling behind.  Only hiring Japanese people is pointless.

At the moment Japan just seems to be hiring raw manpower, but we need to hire people with advanced skills, knowledge workers. Yet we are still just hiring Japanese people for this too.

Japan’s executives need to globalize too

Japan is two steps behind in terms of skills, yet we think we are ahead of the game. We don’t know the reality of the wider world outside. This is because executives are not learning and not going outside of Japan.  Executives think they are globalising their companies, but they just send out business unit heads, without actually changing at the executive level. If executives aren’t taking risks, with their own money, it won’t go well.

If you want to hire top non-Japanese, you have to radically change Japan’s HR and reward systems. If you look at compensation, levels in China and Europe are around 2-3 times higher, and around 10 times higher in the USA.

Only non-Japanese who love Japanese culture can put up with Japan’s current HR system

Japanese companies set pay just by looking at other companies in their sector, in Japan. So there is pressure for everyone to toe the line. So if you want good non-Japanese people to join you, you will only attract the ones who love Japanese culture.

The lifetime employment and seniority based promotion systems have become calcified. I think they are good systems, but only if the company is growing. It’s OK if the outcome is lifetime employment and seniority based promotion, but this has become very superficial. If you bring in people from outside Japan, seniority based promotion and lifetime employment will collapse.

For example, if you want to build up strength in robotics and AI, you have to hire top people from Silicon Valley, or India or China and work with them. Seniority based promotion is irrelevant then. If you want to work together, it has to be based on a transparent, fair system.

The need for strong, good values to attract good people

If you want to work with people from all round the world, you have to have strong good values yourself.  This attracts good people. Good companies attract good people.

Japan still behaves like a closed country even though it thinks it isn’t any more, just because more and more tourists are coming here. Real globalization means working alongside non-Japanese people. So you have to build a system that enables this.

So I don’t think of career development as being in 10 year increments, rather as 3 year units.  Talented people can become directors within three years, even if they are graduate recruits.  If you don’t have that kind of system, they will quit.”

For more content like this, subscribe to the free Rudlin Consulting Newsletter.

Share Button
Read More
Fundamentally rethinking Japan’s lifetime employment system

Toyota’s President Aikio Toyoda made the headlines in May 2019 by saying that if there are not more incentives to continue employing people, lifetime employment can no longer be maintained.  Toyota has still been sticking to the seniority based system common to many Japanese companies where the promotion path is to become kacho (team leader) by 40, then bucho (general manager) in the second half of your 40s.  If you drop off this path, there is no return to it.  “Which means that if you are in your 50s, with no people reporting to you and no major work to do, it is hard to be motivated, and yet because your salary is Y12m a year (around $110,000), nobody quits” says an employee in his 40s, in a Nikkei Business magazine special feature.

Hidden unemployment

Up until recently, those in their 50s who were in the production side would be taken away from the production line but now, because of a labour shortage, they need to be kept on the production line.  So from 2012, Toyota introduced new appraisal systems and health policies, so that those in the 50s can also be productive. The lifetime employment problem is more acute with those in office functions. A Toyota source says “up until the Lehman Shock, they could hide somewhere even if they did not have much work to do, but now the “unemployed layer” is becoming more apparent.”

Toyota has already shrunk its board directors down from 55 to 23 and merged several executive level layers into one. It has been in a series of negotiations with the company union on revising the appraisal system and increasing mid-career hires.  Toyota group companies such as Denso, J-TEKT and Aisin are following suit.

“Men in their 50s are inflexible. They are a drag on reform”

Outside Toyota, Hiroaki Nakanishi, now chair of Japanese business federation Keidanren, formerly President of Hitachi has also said that “we have reached a limit to how far a company can run its business on the precondition of lifetime employment”.  Electronics companies who developed staff in the 1980s for their semi conductor business are now finding it hard to switch over to AI and other skillsets. “Men in their 50s are inflexible. They are a drag on reform” says the head of a Japanese manufacturer.

Japanese telecoms company KDDI conducted an internal survey to try to revitalise the rapidly growing “over 50s” segment of its workforce, only to find that most of those in their 50s were happy with staying as they were, and had no interest in becoming more energetic in their work.  It has not been so much of an issue for Japan’s banks, as there was a tradition of employees in their 50s being transferred to clients.  But some clients are beginning to refuse secondees from banks, if they are not adding value.

Fourth time round – a fundamental change is needed

According to Rikkyo University assistant professor Satoshi Tanaka, this is the fourth time round that the middle-senior age group has been a labour issue. The first time was directly after the oil shock in the mid 1970s, the second time was in the mid 1990s, the third was after the Lehman schock. The countermeasure after the oil shock was to second people to sister companies and subsidiaries, the countermeasure in the 1990s was to introduce more performance based HR systems. The Lehman shock aftermath saw more “early retirement” systems (although I saw this being introduced in the 1990s when I was in Japan too) and now the 4th time round, the focus is on how to “revitalise” those in the mid-senior age groups rather than get rid of them, due to Japan’s labour shortage.

Nikkei Business contrasts Japan’s “membership system” with the “job system” of the West. Japan has the three treasures of a company union, seniority based promotion and lifetime employment in contrast to the harsher world of the West, where there are job descriptions, it is easier to fire people and unions are by sector. The consensus fourth time round seems to be that a fundamental rethink of Japan’s HR system is needed.

For more content like this, subscribe to the free Rudlin Consulting Newsletter.

Share Button
Read More
The cause of Japan’s low productivity: 5 generalists doing one specialist’s job

In the Nikkei Business series on how to “wake up Japan”, Senior Chairman and former CEO of Japanese leasing and financial services company Orix Yoshihiko Miyauchi sees three mistakes that have led to  Japan’s “lost three decades”

  • Allowing an asset bubble to develop in Japan the first place
  • Not stabilising the economy after the asset price crash.
  • Not restructuring the Japanese banking system quicker – real restructuring did not happen until the 2000s, 10 years after the crash.

As a result, Japanese companies were “like tiny boats on a big ocean, using all their energy to avoid large waves. Rather than innovate or grow, they focused on cost cutting”, says Miyauchi.

Miyauchi rates Japanese employees very highly – “they have a strong sense of responsibility, and do all they can to fulfil their obligations. But there is a lack of creative thinkers.  There is a problem in the way we develop people – Japanese companies are always developing generalists, when in the future we need to focus intensively on supporting the development of specialists. If you don’t have specialists who are the complete experts, then you cannot achieve high performance. Japanese companies end up having 5 ‘semi professionals’ doing one specialist’s job. ”

“It would be a big shock to change this immediately, so probably Japanese companies will need a hybrid development system with a specialist track and a generalist track.”  I agree, but I have seen that in the past when this is done in Japanese companies, the specialist track is seen as a demotion away from line management.  Japan may need to introduce specialist, professional organisations such as the various chartered institutes we have in the UK, which certify qualifications  and support continuing professional development, to ensure that specialists are less reliant on the prejudices of their company’s HR system for their careers.

For more content like this, subscribe to the free Rudlin Consulting Newsletter.

Share Button
Read More
TDK President Ishiguro – quietly magnetic

TDK is in our top 30 largest Japanese companies in Europe, with over 7,000 employees – mainly working their factories in the Czech Republic and Hungary. But we’ve never blogged about them before as their senior executives tend to stay rather quiet.  In fact I wonder if that many Europeans are even aware of them as a company, or that they are Japanese.

People of my age will remember TDK cassette tapes.  The company’s origins date back to 1935, when TDK was founded as Tokyo Denki Kagaku Kogyo (Tokyo Electrical Chemical Industries) and they began manufacturing magnetic tapes in the 1950s. TDK has pretty much phased out its magnetic tapes now and instead is focused on sensors, actuators and power electronic components.  It has acquired various companies in these sectors, including EPCOS in Germany, the Lambda Power Division of Invensys in the UK, and Micronas in Switzerland. As a result, more than 90% of its sales and its employees are outside Japan.

Global governance means empowering

The Nikkei recently interviewed TDK’s President since 2016 – Nasunari Ishiguro. Ishiguro is confident that TDK’s approach to global management by having a structure that encourages self-directed action is working well.  “We had to think about how to have effective global governance.  How to be disciplined as a group  but at the same time not impact society in a negative way.”

“It’s not something that a president can do on their own. We have a phrase “functional equality” at TDK, meaning every department should be functionally equivalent.  We thought the word “governance” didn’t really suit our culture.  It’s not about delegating authority – so we use the word “empower” instead.”

“Instead of just providing money, people and technology to group companies and leaving it up to them to get on with it, we encourage stakeholders to become more transparent with each other, in a spirit of give and take, so it is not a centralized organization, but autonomously distributed”

“For example, a subsidiary in China that makes batteries, then makes use of the structure to propose other things that they want to do, rather than being commanded to do things by the President.”

“So we have regional headquarters in China, the USA, Europe and Asia so that group companies can cooperate with each other. So for example, if a lawyer is needed, they can be sent from a regional headquarters, or they can share a finance function.”

TDK garitto philosophy

“We are currently developing a “Day 1″ book that summarizes our philosophy and the values to be shared, such as contribute to society/the industry, ensure trust, keep quality standards etc.  It should be no more than 3-5cm thick. Each group company can freely exercise their discretion in how they adhere to it.”

“All management meetings are in English, and because of “functional equality” each person is equal in the debate. So meetings can take more than 2 hours.  Overseas group officers are to point out problems without hesitation and feel free to give their opinions and voice doubts”

Ishiguro is worried that manufacturing has moved outside of Japan and wants to ensure that TDK’s monozukuri (craftsmanship) is systematized. He has started a “Garitto monozukuri” initiative with the aim of systematizing and conveying manufacturing know-how to future generations.  “Garitto” is Akita dialect (one of TDK’s original factories was in Akita) meaning “with all your might” and “sturdily.”

Equal global people

“We need to have global employee mobility too. The head of global HR is the Germany HR Director. We have established a cross border HR team as an organization that is not bounded by location.  For example the leader of one project is Chinese, and there are Japanese and German people in the team.”

As for a successor, Ishiguro says he doesn’t care what background or nationality someone has, it just needs to be “someone with a spirit of adventure, and a light in their eyes, who is not afraid of change.  We have to change in order to be of use to society.  They need to put out their antenna, even when the way forward is not clear.”

Although Ishiguro has been at TDK all his career, he actually dropped out of university and also spent some time working in Luxembourg, setting up a magnetic tape factory.  Perhaps this is where he got his un-Japanese tolerance of being equals in argument and thrashing out problems. “I’m not a flashy person” he says, “I believe I was asked to be president because I will consolidate our foundations. I think I have revived the company through open debate and steady reforms.”

For more content like this, subscribe to the free Rudlin Consulting Newsletter.

Share Button
Read More
No Matsushita in Panasonic

Panasonic is now in the 8th year of Kazuhiro Tsuga’s Presidency but none of the seeds he has sown seem to have blossomed.  The most recent quarterly results, unveiled on July 31st 2019 showed that despite Tsuga’s focus on profit over turnover, operating profit fell by 44% on the previous year, with tunover down 6%.

Of the 5 internal companies, only the Life Solutions business showed a profit. The slowing down of the Chinese economy had an impact but profitability in China was worse than forecast even taking that into account.  It had been designated a growth area and a special company set up to focus on it. The US China trade conflict and decrease in infrastructure investment seem to be at the root of the problem.

The automotive business is also challenging. The joint venture with Tesla for battery supply is still loss making. Another joint venture with Toyota has been set up, but this might be outside the consolidated Panasonic earnings.

A third area of concern is the home appliance business. Although airconditioning and washing machines are selling well in Japan, profits were thin overseas. Panasonic executive Hirokazu Umeda says the price of EL panels fell far more sharply than expected in Europe and Panasonic could not compete on pricing even in Asia. Panasonic is going to shut its TV factory in Mexico and look at OEM and ODM (original display manufacturing) options and withdrawing from the USA and China markets.

As of June 2019, there is no representative of Panasonic’s original founding family on the board, with the retirement of Matsuyuki Matsushita, a grandson of the founder Konosuke Matsushita. Matsuyuki Matsushita’s eldest son is still working at Panasonic however. As to whether he wants him to become a board director “that is up to his effort and ability” says Matsuyuki Matsushita. “Sometimes founding families are involved in management, sometimes they are not involved at all. Which is better is up to the management academics to debate.”

Matsuyuki Matsushita says his father set up to the internal company system so that each division could focus and compete with specialist manufacturers. “The current problems are probably showing the limits of monozukuri (manufacturing or craftsmanship) and the shift from analogue to digital, to services. Panasonic has not shown the answer to this yet.”

For more content like this, subscribe to the free Rudlin Consulting Newsletter.

Share Button
Read More
No sacred cows for NEC’s President Niino

I was reminiscing a couple of days’ ago with a Japanese business person about how in the 1990s there was a Silicon Glen in Scotland hosting many Japanese electronics and semiconductor factories, including NEC’s semiconductor plant in Livingston. After the IT bubble burst in 2000, most of these plants disappeared, including NEC’s. Silicon Glen has remade itself, focusing more on software and semiconductor design and development.  NEC has also reinvigorated its presence in the UK with the acquisition of Northgate Public Services in 2018.

NEC is not out of the woods yet, however. In a tough interview in the Nikkei Business, President Niino seems willing to slaughter several sacred cows and even commits to taking responsibility (presumably by resigning) if his revival plan to FY 2020 does not succeed.

He said he was open to merging with rival Fujitsu, even if it meant the NEC name disappeared. I certainly recognised from his descriptions some similar characteristics in the way they operate.

NEC, like Fujitsu, was part of the so-called Den Den Family, where stable, dependable business came from government contracts from what is now NTT. “Customers would make very stringent requests of us and we would always try to respond with the best possible technical solutions, and deliver 100%. This is an important quality, but you cannot survive globally just on this”.

Niino thinks there were many reasons for the halving of NEC’s turnover since 2000.  They had relied on introducing new technology in areas such as semiconductors, PCs and mobile phones, but once these became volume businesses with many newcomers, spending far more on R&D, NEC was no longer able to compete.

Niino is focusing on profit targets rather than turnover and sees NEC’s future strength as being in “safer cities” – using AI and software development rather than hardware. Clearly China will be a major competitor in this, but I guess NEC and other Japanese suppliers will be preferred by many who might view China as a threat.

Niino has brought in an HR director from Microsoft Japan to shake up the HR system.  He has appointed 31 “change agents” and made evaluations more visible, and the distinction between specialists and managers more clear.  Corporate officers on the board have all been asked to step down temporarily and then are being rehired on 1 year contracts. “I won’t be firing them if they don’t meet targets within one year, but if they miss two years’ running, it might be that they are better off working outside NEC”.  As Niino is himself a Corporate Officer, no wonder he has to commit to taking personal responsibility for any failure too.

For more content like this, subscribe to the free Rudlin Consulting Newsletter.

Share Button
Read More

Last updated by at .