Corporate culture Archives - Rudlin Consulting

Where Japanese employees feel most engaged

There isn’t really a Japanese word for employee engagement, which tells you something in itself, so the concept of “hatarakigai” – which Google Translate renders as “rewarding work” – is more often used when conducting surveys on employee engagement. Foreign companies tend to dominate surveys of top hatarakigai companies in Japan, in contrast to the ranking we covered in a previous post, of companies that are most popular choices for new male graduates, where only Accenture appeared in the top 100.

In the most recent Open Work survey of nearly 90,000 Japanese who had been working at a Japan based company for over a year, in terms of hatarakigai, foreign companies take the top 3 positions – Procter and Gamble is at #1, Salesforce.com at #2, Presidential Life Insurance at #3.

The obvious overlap with the popularity rankings for graduate hires is the Japanese trading companies. Itochu is #4 in terms of hatarakigai and was top of the popularity rankings for new graduate hires too. Itochu‘s rivals Mitsui and Mitsubishi Corp are at #9 and #10 for hatarakigai. The other major trading house, Sumitomo Corporation, trails somewhat at #25.

Various consulting companies, foreign and Japanese, including Accenture again, feature in the top 50 hatarakigai. Japanese manufacturers such as Sony, Asahi Chemical, Keyence, Murata and Astellas are also in the top 50.

The financial services companies that were so popular with the Japanese male graduates are not so dominant – Tokio Marine at #14, Nomura at #36, SMBC at #37 and Daiwa Securities at #43.

Open Work includes in its criteria:

satisfaction with pay and benefits,
employee morale,
transparency,
mutual respect between employees,
opportunity for growth for people in their 20s,
long term human resource development,
regulatory compliance/awareness

It points out the biggest gap between those companies who were in the top 10 and those in the top 50 was satisfaction with pay. Foreign companies are well known to pay better and not follow seniority based pay the way Japanese companies do. Japanese companies also have a tendency to sit on their cash for a rainy day rather than use it to raise the pay of their employees.

However those companies who had improved their ranking the most over the year were those who had improve their scores on long term human resource development. Japan Intercultural Consulting, which Rudlin Consulting represents in EMEA, is delighted to offer their training and coaching services in this regard.

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Culture and conduct

I was surprised to receive a letter from my bank, NatWest, a couple of months ago, offering me £4,000 to switch my business account to another bank. It turned out that this was not a scam, but a consequence of the bank having been rescued by UK government funds during the Lehman Shock. In return for the £46bn bailout, NatWest has to encourage competition in the UK business banking sector.

Various new internet-only “challenger” banks were offered to me such Starling but in the end I chose the Co-operative Bank, which was established in 1872. This was partly due to my concern that there were likely to be technical issues with transferring to somewhere new and untested with no physical presence. It helped that I was called almost immediately by someone from the local branch, inviting me to come and meet them face to face. But I also liked the Co-operative Bank’s customer-led values and ethics.

This clearly defined corporate culture was the result of the Co-operative Bank’s own past problems. In 2013 it reported losses and a funding gap between how it valued its loan portfolio and the actual value it would realise from it.

An independent review concluded that the root of the problem was in its takeover of the Britannia Building Society in 2009 and poor management controls. The non-executive chairman of the bank resigned and was later banned by the Financial Conduct Authority from working in the financial services industry for taking illegal drugs and using his work email and phone improperly.

In the five years since, the Co-operative Bank has strengthened its management controls and ethos, as well as undergoing restructuring, including reducing the numbers of branches from over 370 to 50.

My old bank NatWest also hit further problems after the Lehman Shock. Its problems in 2008 were a consequence of management arrogance and overreach, but its involvement in the LIBOR (London Interbank trading system) interest rate fixing scandal in 2012 was found to be the result of a corporate culture of greed. The investigation into the LIBOR scandal by the Financial Conduct Authority resulted in a new regime emphasising corporate culture and conduct in financial services.

A Japanese manager who had been in the London branch of his bank in the early 2000s and had recently returned for a second posting remarked to me how much tougher the environment in the City of London is as a result. He and other managers have to undergo training not just on complying with regulations, but also on how to identify and deal with problematic conduct, both their own and their teams.

The Co-operative Bank has just received a takeover approach from a US private equity firm. SMBC and other Japanese financial institutions are investing in London’s fintech and start up banking sector. Any investors in British financial firms will need to ensure that their own corporate culture and values are robust enough to ensure further scandals do not occur.

This article originally appeared in Japanese in the Teikoku Databank News on 13th January 2021

Visualizing brands

I collect English language publications by Japanese companies dating as far back as 1910 to see how they represented themselves in the past, when they were trying to project a global image. These include books published by Mitsui and Mitsubishi, which feature many photographs of their impressive office buildings, ships, mines and founding families. The message is one of scale, solidity and history.

In the 21^st century Japanese companies don’t need to impress so much and prefer to put a human face on what they do. But there is a lack of appealing photos that show both Japanese and non-Japanese people working together in a natural way. Many such photos feature models who are impossibly glamorous, or have distracting hairdos or beards. They are also usually doing things which I have never seen people do in an office such as all gathering around one laptop and pointing at it, or writing on glass walls.

Using photos of your own employees is one way around this. I featured in several annual reports and brochures for a Japanese trading company I worked for, as I usefully represented two types of diversity at once – being both female and not Japanese. But even then I did things which I would never do in my normal working life such as pointing at a clipboard and wearing a helmet.

We wanted to use employees in our marketing at a Japanese ICT company I worked for, to communicate our corporate brand value of genuineness. Most employees are not good actors however, so looked very awkward in the photos and videos.

Japanese corporate websites tend to be bland and abstract in design, still focusing on solidity and history and look much like the websites of other multinationals. It seems that if a company tries to be globally appealing, it loses what makes it distinctive.

British brands had similar issues in the past. British Airways tried to drop the “British” and be BA, “the world’s favourite airline”, removing the British flag from the airplane tailfins. Mrs Thatcher, who was Prime Minister at the time, objected strongly to this so the plan was dropped. Similarly, Royal Mail tried to sound more global by rebranding itself Consignia, but reverted to Royal Mail after much criticism.

Arguments also break out over the words used for the brand values and mission statement. British and American native speakers can have very different reactions to words like “ambitious”, and non-native English speakers feel left out of a linguistic battle they cannot win.

Japanese companies should not be afraid to use visuals with a distinctively Japanese appeal to their global stakeholders – customers, employees and communities. Which is why the Osaka Expo mascot Inochi no Kagayaki-kun is very clever – it is clearly Japanese, but also has the quirky personality of a living thing. I hope more Japanese organisations work with designers to come up with such humanised representations of their corporate culture, which do not have to rely on English words or fake-seeming photographs.

This article was originally published in Japanese in the Teikoku Databank News on October 14th 2020

Bringing the company into the home

Under normal circumstances, British companies would be welcoming their new graduate recruits in September. This year, many big employers have cancelled or delayed their recruitment schemes and internships because of the coronavirus pandemic. More than a quarter of British companies will be hiring fewer graduates, according to a survey in March 2020 by the Institute of Student Employers.

Nonetheless, some companies are still hiring or making plans on how to welcome new staff. There is a high likelihood many of the new employees will have to work from home, so companies are having to think creatively about how to make them feel like a member of the team.

A new employee at a British law firm was delighted that her employer sent her not only a laptop and other equipment for working from home, but also a welcome pack that contained items such as a company branded water bottle and backpack. She said it made her feel part of the team when she saw other employees drinking from the same bottle or pulling files out of the same backpack on a conference call Another company sent a new recruit branded face masks, a home baking kit and a pot plant.

Companies are also being creative about the content of the induction for new staff. They show videos of the office or send employees lunch vouchers so they can have an informal lunch with their new boss over a video call.

This could be a great opportunity to make employees across the world feel part of their Japanese company. Japanese headquarters could show new hires videos of their offices in Japan or aspects of Japanese culture.

The lunch with colleagues could be bought with a voucher for a delivery bento box. Maybe there could be some global virtual karaoke sessions – although with the different time zones this could be an uncomfortable experience if some are joining in early in the morning and others late at night after a few drinks.

It’s also a business opportunity for Japanese manufacturers. Some of the best designed and made pens, diaries and notebooks I have owned during my career have been Japanese corporate ones. Japanese mascots and plushies are loved worldwide – so this could be the time to design a friendly company mascot that employees can place on top of their desk. Some employees might even welcome company uniform items like shirts, T shirts, ties and scarves. It could help them draw a clearer boundary between their work lives and their private lives, even when they are working from home.

Virtual designs for use on the computer would be good too – not just screensavers and wallpaper but also virtual backgrounds for conference calls. However, this means the technology welcome kit will also have to include a green screen for placing behind the head, otherwise employees’ hairstyles will merge into the corporate branding, which might be going a step too far in making new recruits feel part of the company.

This article was originally published in Japanese in the Teikoku Databank News on 9th September 2020

Medium Term Plan Disease

Many Japanese companies have a Medium Term Plan, usually covering three years, announced by incoming Presidents, with a second one issued half way through their 6 year term. It is sometimes translated into English, but often in a way that does not resonate with employees outside Japan. This lack of awareness or sense of connection to the MTP outside of Japan HQ is a problem for Japanese companies who want to be truly global.

The difference between a world class company and Japanese companies is reflected in the way the Medium Term Plan is developed, says Hioki Keisuke, a partner at Boston Consulting Group Japan, in a recent series in Diamond business magazine on “Reasons why Japanese companies cannot compete globally”.

He looks at various definitions of global, world class companies and notes that only two Japanese companies can be seen as global – Canon and Sony – by Alan Rugman’s definition of having less than half of their sales in their home region with two other regions representing 20% or more of sales.

Three tests of global maturity

Hioki adds three tests of being truly global:

Can your company count its global cash holdings? How much, in what currency and where, by subsidiary?
Is global talent visible? Is the information needed for discovering, training and promoting talented employees globally available, showing their experience and skills?
Is the direction of the company clear? Are management aware of the environment in which it operates, the strengths, the uniqueness and the businesses to focus on?

He points out that many Japanese multinationals still operate on the old international model, where there is a headquarters, which sits above the business divisions, who in turn control the domestic and international subsidiaries. He calls this the “Group company” model, operating on an “entity base” where there is “a castle in every domain” – a reference to the Edo feudal era in Japan.

The transnational model

World class companies are “one company” operating on a function base. There is a corporate function, but not specifically located in any one geographic region. The business units report into it, and the finance, HR, Legal, R&D, marketing and IT functions supply services across the subsidiaries, and also report into the corporate function.

When I was at Mitsubishi Corporation in the 1990s, I remember getting excited about the transnational model which Sumantra Ghoshal and Christopher Bartlett had outlined in their “Managing Across Borders” book of 1989. Hioki points out that although that seemed a far away ideal then, it is the reality now for most world class global companies.

As well as trying to promote that model internally as an organisational structure for Mitsubishi Corporation, I became involved in helping the Corporate Planning Office turn the Medium Term Plan into something that made sense in English. It was then that I realised that there was something about the Japanese language itself, as well as the way the Medium Term Plan was compiled that meant it was both extremely vague, and yet based on a huge amount of detail, gathered “bottom up”. What was lacking was what a Western company would recognise as a strategy, to link the detailed plans to the vision for the future.

Scenario planning vs vague vision

According to Hioki, the Medium Term Plan in a world class company should be seen as “guidance” across 2-3 years, and a link between the megatrends or scenarios and the annual commitment plans. It should be revised every year and then a commitment plan and forecast for the year and each quarter developed from it.

I remember about 10 years’ ago the bafflement expressed by a group of senior managers working at a German automotive company when their counterparts in a Japanese automotive company said they had never heard of scenario planning. Hioki says many Japanese companies are now working on scenarios and megatrends, but the long term, medium term and short term plans are still independent events. This was not quite the case at Mitsubishi Corporation, but certainly the Corporate Planning Office had an unenviable task in trying to tie what they were told was the plan by each business unit into something that cohered with the vision that the President had.

The origins of the Medium Term Plan

Hioki says the Medium Term Plan has its origins in 1956 when Panasonic’s founder, Matsushita Konosuke first introduced the Matsushita Electric 5 Year plan. “More than 60 years have passed since then. It’s not that a medium term plan is bad, but I think it’s time to adopt a way that suits the present times.”

The transnational model was meant to provide a way to trade off globally efficient integration and regional localisation and optimisation. Production is decentralised, and each region develops its own specialities and differentiated value add, but global management is integrated, knowledge is centralised but R&D and development is done through collaboration and shared around the world.

Functions first, not as an afterthought

Hioki also argues that accounting & finance, HR and legal functions should be actively involved in planning and strategy, rather than coming after the business divisions, cleaning and tidying up. Hashimoto Katsunori, former CFO of DuPont Japan and now professor at Tokyo Metropolitan Business School points out that another difference between world class and Japanese companies is “cash awareness”. The response to the coronavirus crisis should be to stash as much cash as possible to ride it out, but Japanese companies were not quick to do this. Japanese companies tend to be cash rich anyway, but also they do not see their cash reserves as belonging to the shareholders, the way world class companies do. And as a consequence, they prioritise sales over profits. They do not understand that cash flow contributes to corporate value.

Hioki describes traditional HR in Japanese companies as behaving like teachers with a grade book, pulling people up for mistakes and spending their whole time creating systems. In a world class company, HR should be about ensuring that the vision, mission and values of the company permeate throughout the organisation, as well as contributing to the development and growth of the company and its employees.

“Japanese companies are weak at the top” – Horiba’s CEO

I was recently asked what Japanese company’s mission statement I most admired and I said Horiba’s “Omoshiro okashiku” which is translated into English as “Joy and Fun” (but the fun also means quirky, or as Horiba says “interesting” which is what I think many Japanese companies are to Western eyes, and that’s a good thing). I know from reports from our consultants in Germany that this ethos is transmitted to the overseas subsidiaries too. This interview with the President of Horiba in Nikkei Business by Higashi Masaki, the Editor, is so interesting, I have not made a precis, rather with big help from Google Translate, have left it pretty much as is.

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Since Horiba Atsushi took office as president, sales have increased more than five times, and overseas employees are now the majority, transforming it into a global company. He has also developed a unique corporate culture, including calling employees “Horibarians” regarding them as part of the family. We asked about Japan’s challenges as seen by companies competing globally in technology development.

(Interviewer: Masaki Higashi, Editor-in-Chief of Nikkei Business)

PROFILE

Atsushi Horiba was born in 1948 in Kyoto Prefecture. After graduating from Konan University Faculty of Science in 1971, he joined Olson Horiba, Inc. of the United States. He then joined HORIBA, Ltd. in 1972. He is also graduated from the Department of Electronic Engineering, Faculty of Engineering, University of California, USA in 1977. After that, he directed the overseas expansion of the group, and after working as a director in 1982 and managing director in 1988, became president in 1992. He has also served as chairman since 2005. He has been in his current position for18 years. He is also the face of the local business community, such as serving as the vice chairman of the Kansai Economic Federation. He is the eldest son of Masao Horiba, the founder of HORIBA, Ltd.

The automobile industry is greatly affected by the new coronavirus.

It was a difficult time for car makers even without the coronavirus. This is because there is a dramatic switch towards “CASE” (Connected, Autonomous, Sharing, Electric). It is necessary to move from the “hard” industry, which competes through productivity gains to steadily manufacture high-quality cars, to the “light” industry, which has become IT (information technology) intensive. What was a simultaneous equation with one variable has now become treble the pain.

HORIBA has the largest share of car exhaust gas inspection equipment in the world. The main business is conventional car-related products.

Electric vehicles will be the mainstream in urban areas. However, the combustion type will not disappear in areas with harsh climates. Regulations will also become stricter. However, it is not a growing market, so I would like to expand the CASE field.

How to secure human resources is very important. In 2015, we acquired a British company called Mira (which supports the development of automobiles). We wanted the excellent R & D unit of about 600 people, but it also had test equipment related to CASE. Mira’s test track has research bases for automobile manufacturers such as Toyota (automobile) and major parts manufacturers, so tests and research can be done together.

The company motto is “Joy and Fun”, but is that feeling the same even with the coronavirus?

Now more than ever is the time to have “joy and fun”. All managers are at a loss now. Even so, we don’t feel so sad because we are working in various fields under this company motto. “Fun” does not mean “funny” but “interesting”. With that idea, we shifted our direction. It’s not absolute, but I feel that this helps us be responsive.

It is necessary to strike a good balance between being extremely advanced in a specific field and expanding the range in order to foster new businesses?

To be honest, I don’t think this is managed properly. But that’s what’s interesting, and it’s made up of the enthusiasm of each unit. Trust is at the base. For example, if you are studying optics, you can think of many people who would be good to consult with within the company.

It is unreasonable to expect people who are developing the products that are profitable now think about what the future needs will be. There is no Superman in the world. In many cases, human resources are crushed in search of Superman.

What kind of human resources are you looking for?

I often say that I don’t want a guy who has a good memory, that is, a guy who just graduated from a good university with good grades. Some of the students who are considered to be excellent in the world outside join us, but from our point of view, they are also “stupid” children (laughs). I often join in on the quiz shows for highly educated people on TV, but they are just competing for memory and have no sense.

What does ‘sense’ mean?

Whether you are interested. That is, whether you can do “joy and fun” However, if only “sharp angled” human resources are hired, the company will collapse. That is the balance.

In order to maximize the breadth of the business, it is necessary to have an organizational structure for that purpose.

Now, the biggest issue is the wall between each department. In a pyramid-type organization, individual departments do their best, but there is no interface to connect the results. But if the organization is flat, it’s not necessary. It’s in a mixed state. Instead, the person above needs to be a Superman who can figure out where and what is going on (laughs).

Is the solid financial structure with an equity ratio of over 50% also a factor that guarantees the realization of “interesting and funny”?

Companies with weak internal reserves will have a hard time during coronavirus. When it was said that it was bad to retain earnings, I thought that retained earnings should definitely be increased. This is to ensure that opportunities for M & A (merger / acquisition) are not missed. If you have to ask the bank for money, it may be too late and the target is acquired by someone else.

What do you see as the challenges facing the Japanese economy now?

We manufacture all the key products such as detectors, filters and electronic boards in-house. The problem with Japan is that we have go outside to get the basic science for these key products. You cannot apply knowledge if you do not have the basic science. Nevertheless, Japanese industry and academia are only doing applied science.

We have R & D units in France, Germany and the United States because the academia of these countries never let go of the basic science. Not only is China accumulating product know-how, but it is also conducting basic research. China is the best-selling market for the latest optical analyzer developed in France. It’s neither Japan nor the United States. We need to be aware of the fact that China is doing this very thoroughly.

It is a worry that China’s technological capabilities are rising rapidly.

Japan has not lost yet. I just don’t know after 4-5 years where we’ll be. They are thinking very clearly about the combination of academia and industry. The winners and losers in a battle of comprehensive strength are becoming clear. How do you get around this? I don’t like the word “niche,” but we’ve survived because we’ve put more people and money into a specialty than a giant company.

The Japanese, and Japanese technology and schools are excellent. However, various regulations and past shackles are in the way. For example, why does the faculty council have personnel rights even at universities? At Tsinghua University in China, the top management is steadily being replaced with excellent human resources. But in Japan, once you get tenure, you stay in academia until retirement. This is such an unfair situation.

Are there any other obstacles to your competitiveness?

If I weren’t Japanese, I would have headquartered in California, USA, and the company would have been three times as large as it is now. Taxes are high and fixed costs are high in Japan. Our main medical base is located in France because of problems with Japanese regulations. We just pay lip service to “deregulation” and in the meantime Japan declines.

Industry-academia-government must think about industrial policy and decide what to make a strength.

Even if the government and others hold meetings to gather the top executives of large companies, they cannot take the plunge because they have a company. When I first became President I was called by the Ministry of International Trade and Industry (currently the Ministry of Economy, Trade and Industry), and when I talked about what I thought, I wasn’t called on again. The people around me just gave textbook answers.

However, the current Ministry of Economy, Trade and Industry is different from that time. What is worrisome is that bureaucrats who are trying to reform in line with our opinion tend to be off the career track.

Do they not want to change?

Perhaps they prioritize their own lives rather than the country. The sense of life or death of officials and politicians of the Meiji era is not there. I’m afraid that there is no sense of crisis about the fact that Japan is buying in more and more technology now.

China’s “brain” is talented people educated in the United States. There is no brain in Japan. People who are active (at the forefront) don’t end up leading government councils. Even if the technology and the times change, Japan still has excellent human resources, but they cannot “overtake” the incumbents. It’s the same with the top executives of large companies.

Because the term of office is fixed, the number of “salarymen” in top management has increased.

There is absolutely no business that will produce results in 6 years [the usual stint as President of a Japanese company] after investing from zero. It just means continual losses.

It takes at least two years for our products to be researched, tested, designed and finalized. It will be five years if the basic research is redone. It will take another 2-3 years to make a profit from it. Many things can be done with technology and machines, but this is useless if you do not develop people as well.

When the top executive who started a growth business retires after six years, and that business is making losses, he is said to be the “worst executive”, and when the next top executive harvests from what his predecessor has sown, he is celebrated as “great”. That shouldn’t be the case.

Don’t avoid developing leaders

What does it take to enable top management to think about things in the long run?

Japan is overwhelmingly strong in terms of both technology and human resources. The only weakness is the top. The United States and China are working hard on how to raise the elite. If we don’t train leaders, society won’t progress. On the other hand, in Japan, “elite” is a forbidden concept. In Japan, both politicians and business owners are a disorderly mob.

Japan is in a very dangerous state now. It has become a bogus democracy. True democracy has competition, and everyone is different. In the United States, they first educate elementary school pupils about how different each person is. But in Japan, it’s like “stop it, you’re annoying the old guy.” The responsibility of the media is also heavy.

It’s rare for a person at the top of a listed company to have a beard.

I nearly died of hepatitis when I was about 35 years old. Until then, I was just being the diligent president’s son. But at that time, I thought this is a turning point and I thought I would live a life where I do what I think is best, no matter what others say. My beard is a proof of that. From then on it became a lot easier.

You don’t know what works and how it works.

It feels like God only knows the future (laughs). However, there is a belief that we will make the best decision at that time by listening directly to the stories of people on the front line. I’ve done my best so I can’t help if it doesn’t work. However, people end up worrying about seeking more than the best.

You end up just wanting the correct answer.

The difficulty of management is that there is no correct answer. Everyone has the illusion that there is a correct answer, but there isn’t. The answer will come.

Side note from the interviewer Higashi Masaki

I don’t know if it’s because Japan has become richer or there is more inequality now, but as Mr. Horiba points out, “how individuals live” rather than the desirable way of organizations such as countries and companies should be has become increasingly the priority. It is important to note that the pursuit of personal well-being can sometimes be inconsistent with the interests of the organization.

For example, there is a tendency for top management to change and quickly write off assets of unprofitable businesses to generate a deficit. Then their predecessor has not made a loss, and the successor is certain to recover in a V shape during his term. The rewards for the two executives may be good, but is the timing as an organization optimal? As the mobility of talent increases, the relationship between individuals and organizations can become more difficult.

Top 10 Japanese corporate charity donors in the UK

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

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

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

Benchmarking Japanese corporate charitable donations

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

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

The Top 10 Japanese corporate givers

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

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

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

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

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

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

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

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

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

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

The others

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

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

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

Conclusions

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

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

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

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

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

The fall of Mitsubishi?

Diamond Business magazine has decided to take another pop at the Mitsubishi group of companies, with a special series titled “The Fall of Mitsubishi“.

It kicks off with looking at trading company Mitsubishi Corporation and the fall out from its most recent employee survey. Apparently the survey showed an increasing mistrust of management by the employees and a higher negative rating for the changes that had been made including the new personnel system and improvements in productivity than in previous surveys. President Kakiuchi sent out an email to all employees explaning that he wanted there to be no “us and them” distinction and that everyone should feel free to discuss and challenge, without deference. He announced the establishment of a company wide culture reform task force, appointing Murakoshi Akira, EVP charge of HR, Sakakida Masakazu EVP in charge of compliance and corporate communications, Hirano Hajime, formerly of the Energy division and Uchino Shuma, formerly from the accounting division – both audit and supervisory board members – to head it up. However many employees were not convinced. It does seem like a lot of old guys, many of whom are rumoured to be retiring next year, who are likely to be part of the problem, being made to sort it out.

What had caused such dissatisfaction in a company renowned for high pay and benefits, perennially popular as a destination for Japan’s top graduates? Mitsubishi Corporation is always contrasted with Mitsui as being about “organisation” (knowing how to get the organisation on board to support ideas) with Mitsui being about “people” (convincing the influential people to get things done). Kakiuchi, since he took office in 2016, has made changes to that organisation, by centralizing what has historically been (as in many Japanese conglomerates) a highly vertical power structure. He abolished the Vice President post which traditionally had been the the next layer down from President. This layer ensured that the business groups had the ear of the president and also included a “Chief Secretary” who came from the corporate functions and relayed any dissatisfactions felt in the organisation to the President. There had been 5 such Vice Presidents under Kakiuchi’s predecessor.

The aim was to speed up decision making and bring on younger staff into management with a new HR policy. However younger employees say nothing has changed and deference to the President is still the norm.

Itochu, another trading house, had carried out a similar reform 10 years’ previously. Itochu has always been seen as the more progressive and radical of the five big trading houses, true to its Kansai textile merchant roots rather than dominated by heavy machinery, commodities and energy businesses as with the other trading groups. The CEO of Itochu in 2010, Okafuji Masahiro, purged the board of 13 officers and sent some of his textile division buddies to the food division, the power base of the former chairman Niwa Uichiro, to ensure his own power base was secure. Dissatisfaction was silenced by the fact that he produced results. The reason Diamond magazine feels moved to headline its feature as the “fall” of Mitsubishi is because for the first time in history, Itochu’s market capitalisation exceeded Mitsubishi’s earlier this year, while Mitsubishi made a loss in 2016, declared it would move away from the resources trading and was then promptly rescued by a V shaped recovery in its resources business. It is expected only to make half the profit of Itochu this year and is also badly impacted by its investment in Mitsubishi Motors.

Mitsubishi Corp executives are taking the “no pain, no gain” approach to change management. Diamond magazine wonders whether the organisation will collapse if it cannot bring its employees with it, however, and concludes gloomily that the suffering faced by the Mitsubishi Group is a symbol of the suffering of Japanese companies as a whole.

Japan’s trading companies try to ditch the old ways – again

Yet again the changes being trumpeted in the Japanese business press that Japan’s influential trading and investment conglomerates are making to their HR and internal systems seem rather less radical to those of us who have been watching them for decades, but I will try not to be cynical.

Sumitomo Corporation is enabling third country transfers of staff – in other words someone locally hired outside of Japan transferring to another location. An HR manager from Mexico was posted to New York, someone from the Life Sciences division of their China subsidiary transferred to Australia and someone from the metals division in South Korea moved to Japan and then to Houston. We tried this at Mitsubishi Corporation 25 years’ ago with some limited successes. Theoretically it is the right thing to do, as it is more or less impossible to reach senior management levels in Japan’s trading houses without having experienced a stint outside Japan – and then only if you are Japanese.

The business reasons are clear too – it’s not easy to develop overseas business that is not reliant on Japanese suppliers or customers in some way if you only have Japanese staff working on it. And overseas is where the profitable growth is. Sumitomo Corporation points out that the percentage of profit that its overseas business represents has increased from 45.9% in 2010 to 56.4% in 2020.

We found when we tried to do more third country personnel transfers in the 1990s that many capable people hired overseas just weren’t able to move to another country, for family, financial or legal/political reasons. The real elephant in the room though is that there were not that many employees hired overseas that the elite who had joined Mitsubishi Corporation (and similarly Sumitomo Corp, Itochu, Mitsui, Marubeni) would consider their peers, even with the requisite overseas experience.

It’s a vicious circle – if you don’t offer the possibility of working globally and in the headquarters to people hired outside of Japan, you will not attract the ambitious high fliers. So Sumitomo appear to have tackled the other obstacle we came up against at Mitsubishi – the disparity of remuneration and benefits if you do try to transfer people from one country to another – by introducing a common Global Mobility Policy so that people receive the same benefits and pay regardless of where they originate from.

Trading companies very much rely on individual employees to be proactive in finding roles and developing new business and obviously it is necessary to get more non-Japanese staff to do this too. However if you look at the directors and executive officers of the Big Five, only Mitsui has 2 non-Japanese external directors. Actually this is a step backwards – Mitsubishi Corporation had at least two non-Japanese directors on the board in the 1990s as far as I can recall.

Mitsui was also in the business news recently. It has just moved to new offices in Tokyo and has introduced DocuSign – an electronic signature service – to the whole company in an attempt – made even more urgent by COVID-19 – to wean employees off the dependence on stamping documents in person with their seal of approval. Mitsui has also stopped assigning seats to each employee – there is only room in the new office for 70% of staff at any given time. Each person instead gets a locker. One of the reasons for hotdesking and DocuSign is to encourage people to go paperless – it becomes too cumbersome to lug armfuls of files around the place so electronic document systems become the easier option. Mitsui used various international law firms and local partners to check that DocuSign was acceptable overseas too. Unsurprisingly some Japanese government departments resisted, but it seems they too will have to change. The new Prime Minister of Japan, Suga Yoshihide has made digitization of Japanese government a priority and administrative reform minister Kono Taro has declared war on hanko personal seals and fax machines.

As for the latest changes at Mitsubishi Corp itself as it tries to catch up with Itochu – well – please see our next post.

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

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

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

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

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

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

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

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

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

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

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

Last updated by Pernille Rudlin at 2021-06-11.

Corporate culture

Category: Corporate culture