Corporate culture

Nissan and Ghosn – the cycle of coups d’état reaches back to the 1960s

I always prefer coincidence or cock-up to conspiracy, and former journalist and PR consultant Masaki Kubota clearly feels the same way, judging by the first few paragraphs of his article on Carlos Ghosn and Nissan in Diamond magazine.

As he says, in his years as a journalist, it was the standard defence of any Japanese executive caught up in a scandal that it was a conspiracy of people out to get him.

With Ghosn, you could easily claim, as many have, that this was a conspiracy, born of some kind of alliance between insiders at Nissan who wanted to get rid of Ghosn, his ex-wife and the Japanese government, and this kind of accusation is handy both for Ghosn and the French government or Renault who might have wanted Ghosn to continue to be influential.

But then Kubota does a classic kishotenketsu twist, pointing out the history of Nissan, going back to Ghosn’s installation and even before, is one of a cycle of coup d’etats.

Starting with the most recent history, of the inspection scandals – the exposure of the problem was a way of resisting the inspection system that Ghosn’s management team had introduced, shortly after Saikawa (identified as one of Ghosn’s team) became the new President of Nissan. It was in effect an abortive coup d’état.

Going further back to 1999 the then President Yoshikazu Hanawa was in negotiations with Daimler Chrysler and Ford but instead installed three Renault executives, without even consulting the previous Presidents who were advisors to the company at the time. “It was a kind of a coup d’état” the Nikkei said at the time.

Purging the Don

Even further back, to the 1980s, when the Chairman and former President for 16 years from 1957 was Katsuji Kawamata, there was a coup which led to the purge of union power at Nissan in Japan. It was well known that Kawamata gained his power through cooperating with the Nissan group labour union leader Ichiro Shioji. But then in 1984, Shioji, who was seen as the main obstacle to Nissan opening its factory in Sunderland UK and before that in the US, was hit by a scandal – photos appeared in the weekly magazine Focus, of Shioji on a yacht with a beautiful young woman. Criticism of Shioji, as “the Don”, mounted and he resigned on 22^nd February 1986. The Nikkei reported on this as “the 2.22 coup d’état” a reference to the 26^th February Incident, a failed coup attempt in Japan in 1936. It was said that the power behind the 2.22 coup was Takashi Ishihara who was in favour of global expansion, and was the President at the time.

Ishihara had been involved in an earlier coup, when he was still at managing director level in 1969. Documents were leaked to the media about an incident involving a Nissan microbus. It became clear that this was done in order to purge the upper ranks of the company.

As Kubota says, when there is a fraud in a company, this is often results in a clear out of those in the upper levels of management who are to blame. In fact, this kind of incident has been quite rare at Nissan, so when it happens, it is likely that it is part of a major change in strategic direction. So, Kubota asserts, it is definitely a coup d’état. In Kubota’s experience, it is hard to change a corporate culture that easily, so if Nissan is used to changing strategies by coup d’état, then it will continue to use this mechanism.

Corporate culture will not change just because foreign executives are put in place

Corporate culture will not change just because foreign executives are put in place. Kubota reminds us that for Saikawa to criticize Ghosn so strongly, when Ghosn has not yet been put on trial, is certainly a change from the usual crisis management of Japanese companies.

Kubota sees this singling out of Ghosn by Saikawa, who worked so closely with Ghosn for many years, as a kind of personal insurance.

So where does Saikawa fit in? Kubota has dug out the fact that Saikawa was executive assistant to the President from 1992, Yoshifumi Tsuji. Tsuji had taken over from Yutaka Kume, who had succeeded Ishihara, the instigator of the coup against union Don Shioji. Saikawa was therefore part of the team that survived the Renault coup.

So it goes round. As Kubota puts it, even in the midst of this coup d’état, there will be people wondering whether they will be the next to be stabbed.

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5 types of Japanese colleagues who are “workstyle reform” blockers

I was surprised to see this explanation of five generations of “workstyle reform” blockers in the Nikkei Business magazine came with a big red caution notice to readers not to take offence. The categories are not to be taken as hurtful stereotypes but based in research, and do not apply to all people of a particular age group, they explain.

So with that in mind, here’s a precis of the 5 types identified. Even though I’m not Japanese, I’m afraid I do recognise aspects of myself in the “middle manager” category, and am trying not to take offence. Although some of the characteristics are obviously derived from each age group’s experiences of the Japanese domestic economy and society, I am also reminded that there is plenty of evidence each generation around the world has complained about the other generation for the past thousand years or more.

1. The Veteran

Born between 1947-1951, so 66-71 years’ old

Work comes first
Believes in the virtue of hardship
Over strong sense of competition
Clings to past experiences of success
No intention of changing how they work
Gets angry if their way of working is rejected
Will oppose competitors’ opinions regardless of content
Caught up with “how things were” in the past.

2. The Executive

Born between 1952-1960 so 57-66 years’ old

Don’t rock the boat – doesn’t want to challenge
Laissez-faire
Always talks about “ideally”
People are people, I am what I am
Rather than change workstyle, is interested in what happens after retirement
Uninterested in reform, regardless of content
Just wants results, doesn’t make concrete proposals
Won’t listen, as retiring soon anyway

3. The middle manager

Born between 1961 and 1970, so 47 to 57 years’ old

Superficial
Thinks too highly of self
Extremely hedonistic
Sees everything in cost/benefit, mercenary terms
Reform should be done cheerfully, enjoyably without trying too hard
Won’t do it if not fun
Will oppose anything which increases own workload
Tells everyone to do their best and doesn’t do anything themselves
Will change the content of any reforms on a whim

4. The shop floor leader

Born between 1971 and 1986, so 31-47 years’ old

Pessimistic
Not good at interacting with other people
Prioritize risk avoidance
Strong sense of resignation – “they won’t understand”
“If this reform fails, there is no future for me”
Won’t promote reform if don’t trust the company
Too busy watching others’ reactions to say own conclusions

5. The staff member

Born between 1987 and 1994, so 23 to 31 years’ old.

Little sense of crisis
Not good at making an extra effort
Prioritizes personal life
Everything in moderation
“Is reform really necessary?” Won’t do it unless feels it’s necessary
Let other people take up new challenges or jobs requiring some thought
No empathy with the reasons behind the reforms
Doesn’t take the company so seriously, ignores directions

What is a Japanese company?

I had anticipated the “do you have any questions for us?” at a recent final interview for a non-executive directorship for an investment trust focused on Japan. I was advised by another experienced non-executive director to think of a thought provoking question, to show the board I was capable of bringing a different perspective, something they had not thought of before.

On reflection, I probably erred too far on the “thought provoking”. It was a genuine question, however, and I was genuinely interested in their answer. As the fund’s strategy was to invest only in Japanese companies, how do you define a Japanese company?

Listed in Japan or majority of business in Japan?

The fund defined it as being listed on a Japanese stock exchange. This may seem a clear enough definition, but does this mean Sharp, now owned by a Taiwanese company, Hon Hai, is a still a Japanese company? How about Hitachi Power Tools and Calsonic Kansei, now both owned by American buyout firm KKR?

Other Japan focused funds also invest in companies that are listed outside Japan, so long as a significant majority of their business is in Japan. But if percentage of sales in Japan is the criterion, then there are plenty of Japanese companies who are listed in Japan, for whom a majority of their business is outside Japan – Takeuchi for example exports 95% of its diggers to overseas markets and 68% of Sony’s business is outside Japan.

Avoiding ‘country risk’

Why does it matter? It matters to the boards of such funds, because if they define “Japanese” as Japan listed or majority of business in Japan, then clearly they need to consider the “country risk” of Japan and ensure the strategy is adjusted, or mitigation is put in place accordingly.

They need an expert in Japanese economics or politics to read the entrails on whether Prime Minister Abe will be re-elected as leader of the LDP in September, and if so whether he will be in a strong enough position to carry on with his “Three Arrows” of reform. They need to be able to judge whether the recent dip in Japan’s GDP growth is temporary, or likely to be revised upwards in June, as often happens. They might need some inside track on trade friction around the world and how this might affect the Yen.

But if the strategy is to invest in specific Japanese companies with long term growth potential, then this is not the same as investing in the Japanese economy or a Japanese index tracker. The aim should be to look for companies that will succeed no matter what happens to the Yen or Abe.

Managed by Japanese executives?

Specifying that those companies should be Japanese indicates to me that there is thought to be something unique to Japanese companies that makes them worthy of special attention. So should it be that the management of the company is Japanese? In which case, how should Takeda be classified – likely to become even more dominated by non-Japanese executives after the acquisition of Shire?

What about other companies who, like Takeda, have substantial overseas business acquired through acquisition, but manage it mostly through an international HQ based outside Japan, such as Japan Tobacco (Swiss HQ) or Dentsu (Dentsu Aegis Network in the UK)?

Or how about SoftBank, founded and run by Masayoshi Son, ethnically Korean and educated in the USA? The original telecoms business is clearly Japanese, but what about ARM in the UK and Sprint in the US – not to mention Softbank’s massive Vision Fund which notably is not investing much into Japanese companies at all?

Where Japanese companies have the edge…

I propose some further, admittedly fuzzier definitions of “Japanese”. Firstly, the business should reflect an aspect where Japan has an “edge” – a comparative advantage. For example, any business that is focused on the elderly, as Japan has the most rapidly ageing population in the world, with over 25% over the age of 65. Or a business which has evolved from Japan’s traditional manufacturing and craftsmanship strengths, what is known as monozukuri in Japanese – highly sophisticated machine tools, robotics and components.

But I think there is something more than that to being “Japanese”. It’s about the corporate culture and governance – a different model to the Anglo-Saxon shareholder value maximization model. Investing in a Japanese company should be for long term capital growth rather than a quick dividend, as well as some satisfaction that the investment is going into a company which does not engage in creative destruction type capitalism.

…is also where the risks lie

And this is where the risks also lie. Japan’s stakeholder capitalist model means job security, but also hidden underemployment and low productivity. Jealous guarding of corporate reputation can mean cover ups when something goes wrong. Strong loyalty to other members of the corporate family can mean deference to seniors without questioning or challenging orders given. Extreme risk aversion can mean opportunities missed.

Understanding and mitigating these risks is not something that can be resolved by an informal chat with a contact in a ministry, nor by looking at exchange rate forecasts and putting some hedges in place.

This was the conversation I wanted to have, and where I thought I could add value, but that’s the trouble with the “any questions for us” coming at the end of the interview. As the board chair said – fascinating question, but you’d need a whole afternoon or a seminar to thrash it out. And no, I did not get the job.

Mitsubishi Corp alumnus toasts the Suntory spirit

When I left Mitsubishi Corporation after 9 years, I felt guilty that I had not found a way to repay (in business development rather than money) the MBA they sponsored me through and worried that the wonderful sempai (mentors) who had supported my career would now be angry with me. I was delighted and relieved therefore, when one of the sempai, very senior in the company, invited me for a drink when I was in Japan on a business trip, and explained to me and the other team members at the table that Mitsubishi Corporation should regard people who leave as alumni, just as McKinsey do. “We may end up doing business together one day,” he predicted.

Indeed Mitsubishi Corporation is now a valued customer of mine, and I have seen many other MC alumni rise to some of the top positions in the Japanese business world. Probably the most well known one is Takeshi Niinami. A graduate of Keio University, as so many MC people are, he was sponsored by MC through a Harvard MBA. He eventually became President of Lawson, the convenience store chain that MC had invested in, leading its turn around.

He is now the President of Suntory Holdings and was interviewed in Nikkei Business magazine about recent developments there, including the acquisition of Beam Inc (but not its acquisitions in Europe of Lucozade, Ribena and Orangina) and the “Suntory Way”.

What Beam got from Suntory

“The Suntory Way means that we develop products that our competitors do not have”, says Niinami. “When I explained this to the Jim Beam factory in Kentucky they were very supportive. Beam Inc headquarters people all had MBAs. American marketers get a sense of consumer trends from consultant’s reports and decided their strategy based on that, they never went to the gemba (shopfloor) the way we do in Japan. They just told the Kentucky factory what to do, top down, from afar. If you told them to go to the gemba they’d probably quit. There wasn’t one single person in the executive team who came from manufacturing and they weren’t investing in the factory. But the Kentucky people loved making things. So when we told them we saw manufacturing as the most important thing and appointed someone from manufacturing to the board, their motivation shot up.”

“When they came to see our factories in Japan, they became aware of the need to improve their Kentucky factory. Beam is even older than Suntory – more than 200 years of history. We were able to revive their DNA.”

What Suntory learnt from Beam

“Beam are really good at managing profitability. Suntory got heavily into debt to buy Beam and we are all focused on reducing this debt. Suntory was not as good at managing cash flow as Beam but we have learnt.”

What’s next for Suntory and Niinami

Niinami was brought in by the previous President and now CEO and Chairman, Nobutada Saji (also from the founding family) in 2014. Niinami thinks his successor is likely to be another member of the founding family – current COO NobuhiroTorii – and seems in favour of this, as a way of maintaining Suntory’s spirit. He also expects Suntory to remain a privately held company, despite discussions to the contrary when he first became President. The advantage, he says, is that Suntory is able to contribute to society, through the Suntory Hall (a famous concert venue in Tokyo) and also a water sustainability initiative, without having to justify this to shareholders.

As an outsider, Niinami feels he was able to see objectively how good the Suntory spirit was, and how to roll it out globally. He has set up a Suntory University to help with this. Although Niinami is only 59, he says he is willing to finish his career at Suntory. “I am already “of age” and I don’t think anyone will be asking this “odd fish” to join them.”

What Dentsu’s woes tell us about Japan’s advertising industry and beyond

A British former advertising executive once told me that he and his counterparts in other ad agencies in Tokyo regularly held FUD drinking sessions where the D stood for Dentsu and the F and the U, well… But it does seem as if Dentsu’s iron grip on Japan’s marketing and advertising industry is coming to an end.

Dentsu is Japan’s largest advertising agency and has also recently entered our Top 30 Japanese companies in the UK thanks to the acquisition spree it has been on, consolidating multiple purchases of agencies in the UK and elsewhere into Dentsu Aegis Network, headquartered in London.

So dominant is Dentsu in advertising spend (although its rival Hakuhodo is traditionally stronger in magazine advertising) that you rarely get much critical coverage about it in the Japanese media. Critical analyses are starting to appear now though, following the suicide of Matsuri Takahashi in 2015 from overwork and then revelations in the Financial Times (clearly undeterred by being owned by the Nikkei group) of Dentsu overcharging clients for digital advertising, both leading to the resignation of the President Tadashi Ishii in December 2016.

“Corporate culture at Dentsu is like the military”

Shinichiro Kaneda in the Nikkei Business takes a look at whether the culture of Dentsu has changed since, in the May 8^th edition of the magazine. “The corporate culture is like the military” according to Takahashi’s mother. Kaneda says yelling can still be heard coming from the “sermon room” as one meeting room was known, for small mistakes or a lapse by junior staff. New graduate hires have been threatened with the tonsure if they do not reach the peak of Mount Fuji in the top group during the new staff orientation programme.

This military culture is necessary to Dentsu says Kaneda, because it is based on Dentsu’s unique position with regard to its clients. “What the head of the advertising section of a client says is an order which must be obeyed” says a former executive. “Even if they give two contradictory orders, you have to comply with both.”

Crush new graduates’ pride

But the new graduate hires have all come from elite universities like Tokyo. “People who think logically want to answer back. So Dentsu have to, at the outset, crush graduate hires’ pride and personality. That way, they will just fall in line with what other people tell them to do”.

Takahashi was a graduate of Tokyo and suffered when she found herself being sucked into this culture. Dentsu bears responsibility for not changing this culture, but behind it is a wider problem across the whole of the business sector of Japan, says Kaneda.

A wider problem across Japan’s business sector

Dentsu’s clients are major companies with advertising budgets in the millions of dollars. The head of the advertising section reports straight into the top executives of the company. Requests from clients bypass Dentsu’s own sales force and go straight to the business units and in some cases to Dentsu’s top executives. Everybody gets copied in and it becomes a “stamp rally” and if even one person opposes it, then the plan is overturned,” says a Dentsu insider.

This affects the shop-floor at Dentsu who are forever urgently redrafting proposals while at the same time having to keep an eye on costs.

The media is also very demanding. TV stations try to sell advertising as a package of both late night spots and peak time spots which Dentsu has to persuade its clients with large budgets to swallow.

When economic times were better, money flowed around and budgets and manpower were generous. Results were measured with a few qualitative surveys.

But now the Japanese economy is stagnant and with digitalization, large budgets covering everything are being subject to the scalpel and foreign companies in particular are asking for a much greater level of detail.

Traditional mass media is less influential and internet advertising is not only cheaper but results can be measured quantitatively.

Militaristic approaches do not work in this kind of situation. “It has exposed the contradictions of the Japanese workplace” says a Dentsu executive.

In order to keep up profits and save the face of the advertising departments of clients, Dentsu keeps offering advertising services that they claim will sell, but then the results are measured quantitatively, and if targets are not made, harsh treatment is handed out. This is particularly true of digital advertising.

“Dentsu is a warning to Japanese companies who do not look at what is happening at the ground level, and just pursue profit” says Kaneda.

How Dentsu compares to Hakuhodo

Former Hakuhodo (the second largest ad agency in Japan after Dentsu) employee and now author of many books, Nakagawa Junichiro, was interviewed in the Toyo Keizai magazine regarding the “super elite” of Dentsu and Hakuhodo. “they are neither a normal company nor are they media. They do anything that is related to communication. They have both made a lot of money and the employees are paid well. Yet they because they do not make their internal workings transparent, it is not clear what kind of companies they really are.”

“They will say yes to whatever the client asks for. The employees are simply a mass of corporate slaves. There are lots of internal organisations going by foreign sounding names or numbers. For example, one local government was told their account was being looked after by the #13 section but then this section split off and changed its name. This happens almost on a daily basis to meet client needs.”

“The human networks are complicated. For example if a magazine says it wants to write about Company A, the PR department of Company A will ask Hakuhodo if the magazine is respectable or just trying to blackmail them into taking advertising. Hakuhodo will ask one of its sub contractors who know this area well. But it’s not always so clear what the sub contractor’s own interests might be.”

Political campaigning

Both Hakuhodo and Dentsu run campaigns for political parties – usually Dentsu for the LDP, the centre right party that has been in power during most of the post war period and Hakuhodo for the DPJ (now the Democratic Party). Since the election has moved onto the internet, the amount of money following around has become greater. All kinds of media are now being used from videos to animated graphics and Dentsu and Hakuhodo try to offer the full range.

Learning to bow

Shazai press conferences (where executives have to bow in apology for some misdemeanour) are also good business. A rehearsal generally is charged at Y1m to Y2m ($9000-$18000) – the agency role play being journalists, they create various scenarios and make a recording of it and guide executives on what to say. “I am pretty sure you can see Dentsu’s influence on Sarah Casanova, the President of McDonalds Japan’s apology, if you look at the way she behaved the first time compared to the second time” says Nakagawa.

The amount the agencies earn from one client can be significant. In 1996 when Hakuhodo won both the Nissan and the Mazda accounts, their turnover rose by Y130bn. “So it’s tough on your career if you lose accounts like that. Retaining clients by being totally devoted to them becomes key and the sales executives are seen as the elite. Although at Hakuhodo the creatives are the elite, and the salaries are about 70% of Dentsu’s, but still pretty good. What’s true of both agencies is that sense that you cannot do anything in your own organisation or by yourself, you are nothing without the agency.” So meetings tend to be full of people, and so as not to anger the client, instead of creating the trend, you tend to go with the flow.

Nakagawa left Hakuhodo because “when I started working on the Amazon account, I realised I had become a typical agency salaryman who simply supports the career of some middle aged guy at the client’s, who I don’t even like.”

Overtime is a problem not just in the advertising agencies

“Overtime is a problem for all Japanese companies” not just advertising agencies. “People take the “customer is god” idea too much too heart. Both Dentsu and Hakuhodo try to achieve over 90% for their clients. If they stop doing that then maybe overtime will disappear.”

“Dentsu is not that strong in the digital space. There’s still things they need to learn. They are good with TV for the World Cup and the Olympics, but they are being beaten on digital. The specialist shops are stronger. Unfortunately, with digital you can always keep adjusting and improving so the work never ends”

“Advertising executives are remote from real life. They only hang out with the top few percent of income earners. They are all graduates of top universities. But they are not that corrupt.”

Why people from Osaka like their bread really thick sliced

I’ve blogged before about the importance of knowing the regional differences in Japan, particularly the rivalry between Tokyo/Kanto region and Osaka (the second largest metropolitan area) and other cities in the Kansai region, if you want to understand the corporate culture of a Japanese company. This is a translation and precis of a recent Diamond Online article by Yuki Takahashi, which further explains the Osaka culture, using variations on the untranslatable Japanese word 濃い(koi) – which can mean “strong”, “thick”, “close”, “deep”, “dense”, “dark”:

As Takahashi says, Japanese people think they know Osaka, because so many of the celebrities on TV come from the city. Yet, according to one Japanese woman “it’s kind of scary” – and she says when she goes to Osaka on a business trip, she prefers to stay in nearby Kyoto.

Osaka people like to get close and personal

One man in his 30s said when he was running a cafe for a chain, customers were always sticking their noses into conversations, wanting to know what your birthday was and what you liked. “Next thing I knew, they’d brought me some cheese for my birthday. When they go on holiday there were even customers who’d bring souvenirs back for the cafe”. Another Osaka man says “it’s the kind of place where if you’re having a drink at the bar, some old granny you’ve never met will start a conversation with you”.

Osaka has the lowest suicide rate in Japan

Japan’s overall suicde rate is 14.7 per 100,000 population. The worst rate is Akita Prefecture, at 26.8. Osaka’s low rate may well be connected to the above point.

Osaka banter

People who are not from Osaka just crumple into embarassed silence when Osaka shop assistants say things like “here’s your million yen change!”, whereas Osaka people will snap right back with a joke.

Osaka food is also strong and thick…

Osaka is famous for its takoyaki (octopus balls) and okonomiyaki (savoury pancake) but according to Yuki Takahashi, curry is the iconic food. It arrived first in Osaka, in the 19th century, and Osaka people loved to make a thick strong curry “roux” to go with Japanese rice. Vermont Curry, one of the most famous curry roux brands, comes from Osaka.

…and its bread is too

Japanese like to eat something called “shokupan” – literally “eating bread” – a thick cut soft white bread, particularly toasted for breakfast. But apparently a standard shokupan loaf is cut into 4 slices for the Kansai region, increasing to 6 slices on average across the country and as many as 8 slices north of the Kanto region.

High bicycle density = high accident rate

Apparently bicycle related accidents are 30.1% of all road accidents in Osaka, compared to 18.4% nationwide and the number of bicycle related deaths is also the highest in Osaka. The main cause is ignoring traffic lights.

Osaka is now trying to lure its sons and daughters back, from Tokyo, promising a better lifestyle – shorter working hours and less commuting, as it is more possible to live in central Osaka than in Tokyo. I used to live in the Kansai area myself, between Osaka and Kobe, and I have to admit, I still find Osaka a bit scarily “in your face”, and if I were to live in Japan again, would choose the more cosmopolitan and laid back Kobe.

Mitsubishi Motors & Nissan – Is Ghosn prepared to try to nail jelly to the wall?

When it comes to the Mitsubishi group of companies (keiretsu), I did almost literally write the book (A History of Mitsubishi Corporation in London: 1915 to Present Day), although my focus was more on the way the pre-war Mitsubishi Goshi evolved into Mitsubishi Corporation, the trading company, and more specifically, its London office.

It’s generally perceived in Japan that the Mitsubishi keiretsu has been the most cohesive and robust of all the keiretsu (Mitsui, Sumitomo, Fuyo being the other main ones) but as you might imagine, the current Mitsubishi Motors fuel economy data manipulation scandal has put this to the test.

According to Nikkei Business magazine (April 22^nd edition, not available online), the cracks are appearing. Whereas in the previous Mitsubishi Motors crises (recalls for various defects in the 2000s) Mitsubishi Heavy, Mitsubishi Corporation and Bank of Tokyo Mitsubishi UFJ all stepped in and financial support came from Tokio Marine, Mitsubishi Electric and Mitsubishi Materials as well, this time seems different.

Even now, having been hit by the commodity price slump, the automotive sector remains an important profit generator for Mitsubishi Corporation as it is involved in the sale and financing of vehicles in Asia and Europe as well as engine manufacture. Mitsubishi Corporation also seconds quite a few employees to Mitsubishi Motors, including the current Chairman and CEO Osamu Masuko.

Other Mitsubishi companies do not have such ties. Even though Mitsubishi Chemical Holdings supplies products to the automotive sector, its main customers are Toyota and Nissan. Mitsubishi Paper also said “we are busy with our own affairs”.

It’s not just about whether the companies have business together, points out the Nikkei. It’s also an issue of corporate governance. The Mitsubishi UFJ Financial Group has been reducing cross shareholdings, where appropriate. Mitsubishi Corporation is also checking shareholdings regularly for rationale and yield and disposing of them as necessary. Presumably it is hard to justify “Protecting the Three Diamonds” as the sole reason for support, to external directors and shareholders.

The Nikkei sees this as a chance for the Mitsubishi group to embark on a delayed restructure [the article was written before Nissan stepped in to acquire a 34% share]. In previous restructurings, there was a discussion about selling off the largely domestic ‘mini-car’ business, so this might be finally realised.

A more recent article in the Nikkei Asian Review points out that a key question is whether Nissan’s CEO Carlos Ghosn’s aggressive brand of reform will suit the corporate culture at Mitsubishi Motors “where change is not exactly a buzzword”. The question I have is what the corporate culture of Mitsubishi Motors actually is, other than a reluctance to change. The lack of a clear definition of values and vision may indeed be one of the causes of the repeated scandals. There are the Mitsubishi Three Principles, but not all Mitsubishi companies showcase them, and they lack the strong philosophy and toolkit of something like the Toyota Way.

Along with my official book on Mitsubishi in London I wrote a further unpublishable chapter, called “The Vague Company”. It talked about the benefits and difficulties of having a vague, unspoken corporate culture. Employees can enjoy the sense of being treated like adults, to work out for themselves what the right “way” is, but it makes global expansion – particularly post-merger integration – highly frustrating, when new, hybrid cultures need to develop. As one frustrated American employee at another Mitsubishi group company said to me the other day “I can’t get a handle on what the Mitsubishi Way is”. It is, as we say in British English, like trying to nail jelly to a wall. I suspect Ghosn may quickly tire of this and use his hammer in more brutally effective ways.

For more on Mitsubishi Motors’ future, I recommend this blog post by my old friend and former head of corporate communications at Mitsubishi Motors in the Daimler Chrysler days, Jochen Legewie: http://www.cnc-communications.com/blog/the-future-of-mitsubishi-motors/

For more on Mitsubishi corporate culture, I have gathered some resources on Pinterest here

Bending over backwards to be inclusive

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

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

Sometimes I find myself thinking that all this emphasis on terminology is irritating and a distraction, but then I remember what it felt like to be a foreign employee in a Japanese company headquarters. I have no complaints about the way I was personally treated, but I regularly used to point out, when asked for my input into English language documents like the annual report – that it seemed alienating to people outside of Japan if employees were broken down into male/female, or Japan-employed and overseas-employed.

I knew why these categories existed – because at the time, 99.9% of females were in administrative track jobs, and 100% of men were in management track jobs – so this was a simple way of indicating the ratio of administrative versus line management/sales people in the workforce. The Japan-employed and overseas employment figures aligned with the Japan parent company-only and consolidated accounting methods.

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

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

(This article first appeared in Japanese in the Teikoku Databank News in February 2016 and also appears in Pernille Rudlin’s new book “Shinrai: Japanese Corporate Integrity in a Disintegrating Europe” – available as a paperback and Kindle ebook on Amazon.)

How regular is your Japanese company?

Toyo Keizai has ranked the top 500 companies in Japan with the most non-regular staff (see our previous post for what this means and why you should care if you work for a Japanese company). Consciously or unconsciously, however, the “total employee” number they use includes overseas employees and the non-regular staff number is for Japan hired staff only, as far as I can work out. Maybe it’s an indicator that overseas staff are seen as “regular” after all. It certainly would account for the large increase in regular staff at NTT Data over the past 5 years for example – as they have been on a major acquisitions spending spree overseas – and will grow further once they integrate Dell Services.

We took a look at how this applies to the Top 30 Japanese employers in Europe. Numbers are missing for some major employers like Canon, Sony, and Bridgestone. Checking on the sources, which are mostly the Japanese stock exchange submissions, it seems these companies do not break down employee numbers by contract type.

My old employer Mitsubishi Corp does not disclose regional break down of consolidated employee numbers), but I note that the number of non-regular employees has fallen 8% the past five years (presumably due to the re-introduction of the “regular employee” administration track), although they still represent 20% of the total consolidated employees (18,054 out of 72,000). Conversely, regular employee numbers have risen by 23%. As there are only around 6000-7000 employees in the Japanese offices of Mitsubishi Corporation, and around 10% of them are classified as non-regular, this must mean the other 17,000+ are non-regular staff in consolidated companies (not the main MC offices) in Japan. That still leaves 46,000 or so “regular” employees of consolidated companies outside Japan.

Employment status in Japan, is, as they say “complicated”. But you can bet Japanese employees have a very clear idea who is in-group and who is out.

Top 30 Japanese companies in Europe 2021

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Japanese companies in the UK

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“Like a marriage gone stale” – why is Japanese employee engagement so low?

Japanese salarymen are envied around the world – as Junko Okamoto, former Yomiuri journalist and Dentsu consultant and now CEO of Glocomm says – for not being fired no matter what they do or how little they do. So you would think this means they have a high degree of engagement towards their employers. But actually, no matter what survey you look at, Japanese tend to come lowest in terms of engagement and trust.

For example – in Gallup’s 2011-2012 global survey of 142 countries and 20,000 people:

Japan – 7% engaged, 69% not engaged, 24% actively disengaged
UK 17% engaged, 57% not engaged, 26% actively disengaged
France 9% engaged, 65% not engaged, 25% actively disengaged
Germany 15% engaged, 61% not engaged, 24% actively disengaged
USA 30% engaged, 52% not engaged, 18% actively disengaged

Japan’s percentages are not far off China, so maybe it’s an “Asian” thing, you might think. But another survey by Aon Hewitt looking just at Asia Pacific levels of engagement found that Japan – at 33% actively disengaged – had the lowest engagement score.

As Okamoto points out, there is no direct translation of “engagement” in Japanese and also, the Japanese may have a tendency to be understated and modest in such surveys. However, if the wording is framed differently, there is still seems to be a problem. Edelman issues a world trust survey every year of 28 countries, including the question of whether people trust their own company. Japan comes bottom on 40%, compared to 64% for the US, 57% for the UK, 29% for China, 83% for India – even lower than Russia on 48%.

There are many reasons you could list up for Japanese salarymen’s disengagement – and Okamoto does so:

Long working hours
Low or even decreasing take home pay
Rigid corporate culture – based on precedent, demerit/points off systems, emphasis on sheer doggedness
Seniority based promotion
Inappropriate assignment of people
Sexual harassment, power harassment, maternity harassment
Rigid compensation and HR systems (egalitarian to the point of unfairness or too strictly perfomance based)

Okamoto adds “friends foreign and Japanese who work for foreign companies often point out that Japanese companies force you to travel economy class even if you’re very senior, which would be unthinkable in their companies, or that foreign companies will incentivise their best people to stay, with money or motivational schemes.”

Employees of Japanese companies don’t understand what is being rewarded. They point to those who are slacking off and yet are paid the same. But even the slackers are unhappy, because they feel like the company is not making the best use of them. Japanese people seem to think that work should be a penance and that you become happy by working hard. Okamoto cites various Western researchers who say that you should first find out what makes you happy, and then you will succeed.

Okamoto’s conclusion, as is mine, is that Japanese companies are bad at communicating – to their staff as well as to the outside world. “Being hired by a Japanese company is like getting married. The company is your family or your home. And although the divorce rate has risen in Japan recently, it’s still lower than the USA. In Japan the view is that even if you hate the other person or don’t love them any more, there is a shared fate. However in the USA you either get a divorce or if you don’t want to get a divorce you put more effort in with gifts and words of love… Japanese companies and their employees are like a married couple who have forgotten each other’s good points and become stale.”

Category: Corporate culture

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What is a Japanese company?

Listed in Japan or majority of business in Japan?

Avoiding ‘country risk’

Managed by Japanese executives?

Where Japanese companies have the edge…

…is also where the risks lie

Mitsubishi Corp alumnus toasts the Suntory spirit

What Dentsu’s woes tell us about Japan’s advertising industry and beyond

“Corporate culture at Dentsu is like the military”

Crush new graduates’ pride

A wider problem across Japan’s business sector

How Dentsu compares to Hakuhodo

Political campaigning

Learning to bow

Overtime is a problem not just in the advertising agencies

Why people from Osaka like their bread really thick sliced

Mitsubishi Motors & Nissan – Is Ghosn prepared to try to nail jelly to the wall?

Bending over backwards to be inclusive

How regular is your Japanese company?

Top 30 Japanese companies in Europe 2021

Japanese companies in the UK

“Like a marriage gone stale” – why is Japanese employee engagement so low?

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