Corporate culture

Mitsubishi Corporation – dealing with the Black Ship of digital transformation

Miura Hiroaki, the General Manager of Mitsubishi Corporation’s IT department (and formerly in charge of IT in the Europe, Middle East and Africa region), has a series in the Nikkei Business magazine on digital transformation at Mitsubishi Corporation. He joined Mitsubishi Corporation in 1996 and like me, was trained as a new member of staff to pick up the group fixed line phone within two rings and answer it correctly – with the team name, not your own. “Fixed-line phones were not just a means of communication, but also played a part in employee education and guidance. The mentality of abolishing this was unthinkable” he says. But Mitsubishi Corporation did, in 2019.

The only way to deal with the anger that followed the abolition of fixed line phones was to build trust, he explains. He remembered what one of his mentors had told him about building trust – to take someone’s feelings seriously, and to laugh together. So he listened patiently to all the anger, which gradually dissipated.

As well as remembering the words of his mentor, he also found revisiting Prince Shotoku’s 17 article constitution, drafted in the 7th century, useful. He sees the statement in it that “harmony is valuable” as being misinterpreted by him and others in Japanese society – that people should try to understand the other person’s point of view, without arguments. Instead, it proposes the idea that “we should always build solid trust so that we can argue with each other in times of crisis”. Miura’s view is that Japan has suffered as a national power in the 1990s and 2000s from not discussing important issues enough.

IT departments should be at the forefront of change and debate, but “the reality is Japanese corporate IT departments are being overwhelmed by having to maintain obsolete systems, suffering from a shortage of human resources, and being driven into a difficult position in terms of their relationships with employees.”

Miura also found Mitsubishi’s corporate principles an important touchstone, and driving force for change – social contribution, fair play, and a global perspective. They have more absolute value, he argues, than just blindly adopting global standards. Bezo’s view that “good intentions don’t work, mechanisms do”, are not appropriate for Japanese companies. Mitsubishi Corporation’s predecessors faced up to and adapted to the disruptive Black Ships of Western globalization before, in the Meiji Era, and will do so again.

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Why elite Japanese are “useless” at foreign companies

According to Senoo Teruo, formerly of headhunters Korn Ferry Japan, it is a mistake often made by Japanese people joining foreign companies that they simply try to follow what has been done before by their predecessors. Foreign companies expect you to “find your own way to achieve greater results” – “the level of self reliance and independent, pioneering ability is incomparably higher than that of Japanese companies”. Japanese people who were at elite Japanese companies and fail to understand this are branded as “disappointing and useless.”

Ueda Osamu, Professor at Nagoya University of Commerce, says that in American companies, it’s important to know in advance that the organisation is more military-like and the chain of command is very clear (something we often reference in our Japan Intercultural Consulting training). Hiring is done by direct supervisors in American companies, rather than by the HR department as is the case in Japan. If you don’t get on with your boss, in a Japanese company one or both of you are likely to be transferred elsewhere within the company in a few years, so it is often best to just put up with it, and wait.

However in an American company, because your manager is in charge of personnel affairs, their orders are absolute, and if you fail to produce the expected results, you can be fired. Senoo agrees – “there are far more yes-men in foreign affiliated companies than in Japanese companies… Japanese people think foreign companies are more equal in terms of hierarchy, so it’s OK to argue with superiors when you disagree, but that is a complete misunderstanding. When given an order in an American company, it’s common to respond with “Yes, great! Let’s do it!” – to show at least a positive image, to start with.

Their comments are mostly to do with American companies in Japan, but in my interactions with British companies with operations in Japan, I have certainly seen similar frustrations – particularly around wanting their Japanese employees to be more proactive, and willing to change how things are done.

The inside story on how Mitsubishi Chemical selected a non-Japanese president

“Many Japanese executives are unable to think critically”, says Hashimoto Takayuki, an external director (ex IBM Japan) and chairman of the nomination committee of Mitsubishi Chemical Holdings, in a recent interview with Diamond Online.

“There is no right answer to how to manage a business now” he adds. The traditional Japanese model of low-cost, high quality, on-time delivery, based on conventional mass production methods is no longer sufficient. “There is a need for management that resolves conflicts, balancing social and economic benefits, such as carbon neutrality.” So it is not enough for a President or CEO to just have the traditional ability to sell as well as a top sales person or have a great track record as a factory manager.

Japanese people are not very good at managing subsidiaries acquired overseas

“Broadly speaking, the president has three duties. The first is the corporate branding of the company – the “purpose” that is attracting so much attention recently. The second is portfolio management – business consolidation. An appropriate business structure has to be built, in line with trends such as ESG. The third is global governance. Japanese people are not very good at managing subsidiaries acquired overseas, but it is an essential skill for a global company.”

“I believe that people who are future presidents/CEOS will need to be educated within a special track in the company, as a profession, much as you would with marketing or sales. They need to have assignments which will stretch them, such as developing an overseas business from scratch, or rebuilding a poorly perfoming subsidiary.

This is why the top person from within was not selected to become the President, because they had not been educated in management. There were many excellent performers heading up business divisions, but whether they can become President is another matter.

We asked a headhunter to produce a long list of candidates to be President – there were more than 30, including people from outside Japan. The shortlist had 4 people from outside the company, outside Japan, and 3 people who were in-house candidates.

Why an external, non-Japanese candidate was selected

“Mr Gilson gave a good impression of deep understanding of Mitsubishi Chemical’s vision of KAITEKI management. Other people wanted to change this vision as soon as possible, but that was not the kind of successor we were seeking. Also, external candidates may want to bring in a team they are familiar with, but Mr Gilson clearly said he would prioritise teamwork with the current management members.”

Furthermore, during the interview, Mr Gilson summarized his business improvement ideas in a proposal of 2 sides of an A4 and presented them. The proposal was accurate, but above all, it showed a passionate intent.

There were some concerns, as Jean Marc Gilson‘s previous company (Roquette Freres) had sales of several hundred billion yen, compared to Mitsubishi Chemical sales of nearly 4 trillion yen.

Avoiding backlash

“I expected a certain amount of backlash within the company, but I’ve heard that actually there was a more welcoming atmosphere amongst the younger employees. After all, the younger the person, the stronger the desire for change.

Having the former chairman of Mitsubishi Chemical (and the person who came up with the KAITEKI vision), Yoshimitsu Kobayashi on the nomination committee was also a big factor. It was the first time Mitsubishi Chemical appointed a president through a nomination committee, so there was a risk that a decision made solely by people with no experience of Mitsubishi Chemical would not be seen as valid.

Mr Hashimoto still thinks that it is best if the President has been developed within the company, but it takes time to reform internal systems and culture. If this is not worked on right now, the company will never change.

Japan’s less equal companies

I often cite in my seminars that one obvious sign of the ethos gap between Japanese listed companies and the top 350 US companies is that Japanese presidents generally earn a multiple of 10-20 of the average salary in their companies, whereas the multiple for American CEOs is 350 or so.

There are exceptions of course, but even the board directors of the company at the top of Toyo Keizai’s income gap ranking (Toshin) earn an average of just under 60 times the average salary in the company. Many of the other companies at the top of Toyo Keizai’s rankings have non-Japanese executive directors, who are usually paid closer to American levels, such as Takeda Pharma (#3), SoftBank (#5) but there are other companies whose executives are all Japanese, such as Toyota (#6), JT (#15), Itochu (#16), Horiba (#17) and Canon (#20). Even so, only the top 10 have multiples of over 30, and only the top 25 have multiples of over 20. So the ethos gap is still holds.

Japan’s “weak black” companies and the motivation to work

It has been five years since the “work style reforms” of the Shinzo Abe Cabinet of 2016 were introduced, supposedly making it easier for Japanese employees to have diverse and flexible work styles. The pandemic has given the reforms a further push, but, as the Nikkei Business magazine asks, have these reforms really had the expected positive impact on retention rates?

The Nikkei asked three masked recruitment agents (masked to conceal their identity rather than for health reasons we assume) for their impressions so far and it seems that because the underlying problem of employee engagement has not been addressed, if anything the reforms have accelerated the rate at which people are leaving their jobs.

Agent A : Through work style reforms, companies have complied with the new laws by reducing overtime hours and encouraging the use of paid leave. Many people chose larger, stable companies because they were more likely to comply with the requirements to reduce overtime work.

But at the same time, the pandemic meant that companies started looking more seriously at automation and the use of AI so manufacturers, many of whom who were previously seen as being in the large and stable category, became a riskier bet as they started to restructure and did not seem to be growing as positively as before.

“When a young person who wants to work more and develop faster is told to “go home at 6 pm”, he or she may feel that “I want to work more but I am being constrained.” There are an increasing number of young people who are daring to commit to a growth environment, such as changing jobs from major companies to new ventures and startups. ”

Agent B : During the pandemic, the reason for changing jobs switched from focusing on workplace comfort to focusing on personal goals. According to a survey by Doda, a job switching service, the number one reason for changing jobs from January to March 2020 before the declaration of emergency [in Japan] was “because the atmosphere in the company is bad”, but after the declaration of emergency during the period of April to August 2020, it changed to “Because the salary is low and no salary increase can be expected.” Also of note was that “I want to improve my skills” jumped from 6th place before the state of emergency to 2nd place.

Weak black companies

Companies which are easy to work in but have no growth are called “Yuru Black” in Japan. Employees in Yuru Black companies have a sense of crisis about whether they are growing and developing as a person. “Black companies” was the name given to companies where there was too much overtime. “Yuru” means weak, so these are “weak black” companies where there is no overtime, but also no challenge.

B : Because the future outlook has become uncertain under Corona, many people are switching jobs from major companies in order to feel like they were stepping up to a challenge. There was a woman in her late twenties who changed jobs because the company’s brand power was too strong and she wanted to go to a place where she could use her skills more, even though she was in a high flier role in marketing for a major consumer goods manufacturer. A man in his twenties, who entered a company with the highest annual income in Japan in the electrical industry, where the company had a systematic training system, felt it was too slow in having him be involved in actual work and therefore furthering his own development. So he moved to a startup.

Agent C: Most people in their 20s and 30s change jobs in search of reward and growth. The main reasons for changing jobs are that they are not evaluated correctly, that they want more chances to use their own judgement, and that they want to do an important job in the metropolitan area. Recently, many people in finance and insurance are flowing into the IT industry.

Personally, I feel that “a lack of yarigai (rewarding work)” has been increasing mainly amongst people in their 20s and 30s since about 10 years ago. There are various definitions of rewarding work, but the first is whether the work content and compensation are balanced. In other words, whether you are getting paid for your skills, growth, and using your own judgement. Some people find it rewarding just to have a high annual income, such as insurance sales, but that is a minority. Some people choose a company that has a performance-based compensation system such as an annual salary system or a job type system (clear job descriptions). If people are only paid more because they do overtime, then the incentive to work productively and efficiently is lost.

A : Although the number is not large, the switch from major companies to venture companies is becoming apparent in some groups with good educational background and high needs for personal growth. When you are in your the 20s, there are fewer life events such as child-rearing and long-term care, so we recommend choosing a new job that emphasizes the sense of growth.

A : As the lifetime employment system collapses, more and more people are thinking that they must have more transferable skills in the long run. In the past, many people chose their place to work because of the short overtime hours and the number of holidays, but more and more people want to use their own judgement and their brains.

B : The number of people who registered for a job switching service immediately after joining the company seems to have increased more than 20 times compared to 10 years ago.

C : The number of positions for trainee engineers is increasing, and some people from completely different industries want to become IT engineers. There are also intermediary companies that train engineers and dispatch them to each company.

B : Even at our company, the number of people who are pursuing skills is increasing, such as young people who have been doing face-to-face sales have changed to be trainee engineers. Recently, during job change consultations, I sometimes get a person saying “I’m thinking of getting a qualification”, but because of the pandemic there is more need for immediately applicable skills, so getting a qualification does not immediately lead to a job.

Recently, there is an option not only to change jobs but also to have a side job. In the case of a man in his late twenties at a major electronics manufacturer, he was in charge of new business development overseas, but he was not rewarded because the decision-making was so slow, and he gained experience by doing a side job. Since the number of companies that permit it has increased, it is an option to do a side job while having a solid foundation of a main job.

Motivation to work

A : With regard to the provision of growth opportunities, efforts are polarized. IT / web companies are advancing, andin some companies, such as CyberAgent, you can be a president from a young age or get another chance even if you fail. On the other hand, it seems that the manufacturing industry, retail industry, and infrastructure system are lagging behind as a whole, but among them, there are companies such as Aeon and Seven-Eleven Japan that are promoting digital transformation (DX) in retail as well. On the manufacturer side as well, businesses are being reorganized in response to the IoT, finding ways to reduce the number of employees who are just coattail hanging, making the P&L of each department more visible, and creating mechanisms that can properly evaluate whether the business is successful.

A : The theory of “hygiene and motivational factors” by American psychologist Frederick Herzberg is key. First of all, it is important to promote healthy work style reforms so that people can live a healthy life. Keeping the ease of working within the bounds of common sense has the effect of reducing employee dissatisfaction. Certain regulations make sense in terms of reducing overtime hours, which has been difficult to reduce without regulation.

On the other hand, “motivation to work” is important in terms of how much employees can demonstrate their abilities. Productivity does not increase just by focusing on workability. It is important to give employees discretion and responsibility and evaluate them appropriately. Long working hours and no discretion are the most stressful, but long working hours and greater discretion can be less stressful. I feel that discretion, the freedom to use your own judgement, will be one of the keys to working styles in the future. Even within the work style reforms,it may be necessary to shift the axis to “motivation to work”.

I’ve translated the above fairly literally from the Japanese, which is why some of it may sound a little unnatural. But one thing that struck me, even allowing for the rather different ways that opinions are expressed in a more abstract way, is how the role of the manager in both workability and improving team motivation is not directly addressed. If this article had been written in the Western media, there would be much more focus on what you as an individual manager can do. Instead the assumption here seems to be that this is something the company as a whole has to address, in order to avoid being a “weak black” company.

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 improved 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.

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 (2020), 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 Mid or 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 Mid 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 Mid 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 Mid Term Plan

Hioki says the Mid 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 mid 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.

Last updated by Pernille Rudlin at 2022-12-28.

Category: Corporate culture