Globalization

Japanese with foreign MBAs are beginning to change corporate Japan

One swallow does not make a summer, and I am not entirely convinced by Nikkei Business’s assertion that there is an upcoming group of Japanese who did MBAs overseas in the 1990s and 2000s and are now taking over and changing corporate Japan.

The examples cited are:

Minato Koji (University of South California Business School MBA 2003), formerly of Oracle Japan, who was headhunted for a CEO position at Itoki, an office furniture manufacturer
Takahashi Hidehito (Columbia MBA 1992), President of Resonac Holdings (formerly Showa Denko)
Matsuoka Yoko (known as Yoky) who is founder of Yohana, a Panasonic subsidiary – who hasn’t got an MBA, but went out to the USA when younger, to become a tennis pro.

Nikkei Business characterises them as familiar with technology, having learned Western-style management through study abroad, including an understanding of how to take risks, and having had the experience of putting this knowledge into practice at foreign-affiliated companies.

Another example is Morimoto Masaru, now chairman of Showa Aircraft, who gained an MBA at Harvard in 1993 when he was working at Sumitomo Trust Bank. He says that in the 1990s, around 20 people a year were sent to study abroad from Sumitomo Trust Bank. “Large companies were competing to see who could send students.” Students studying abroad surged in the 1990s, reaching 83,000 in 2004.

As I was working in Japan in the 1990s (and was sponsored by my Japanese company, the first ever non-Japanese, to do an MBA at INSEAD, in 1997) I saw this for myself. The issue then was that companies did not know what to do with their newly minted MBAs when they returned. Corporate finance, or maybe send them to the USA, was the usual offer – MBAs were jokingly known as Managing Business in America. Many of the MBAs became frustrated and joined foreign companies – which is exactly what Morimoto (Club Med, Coca Cola), Minato (Sun Microsystems, Oracle), Matsuoka (Google) and Takahashi (GE, GKN) all did.

I do agree, however, that it would be positive for Japanese companies if more Japanese employees and young people studied abroad – so long as Japanese companies can work out what to do with them afterwards – perhaps the new job-type systems will help with this. The Japanese government has just announced that it wants the numbers studying abroad to reach 100,000 a year by 2027. This was achieved before, but even in 2019, before the pandemic hit, there were only 77,953 Japanese students abroad, compared to the record high of 115,146 in 2018.

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“Job type system” not the cure-all for Japanese employee engagement

Fast Retailing (Uniqlo) has caused quite a stir in Japan by announcing that it will raise salaries by up to 40%. It claims this is in order to bring the Japanese salaries more into line with what Uniqlo is paying staff overseas, so that staff can be transferred to and from Japan HQ more easily. Japanese companies have been under pressure from the government for some time to increase salaries and this seems to some extent a typically punchy move by Fast Retailing CEO and founder Yanai-san, who has always favoured being provocative and going against the mainstream.

As any global compensation expert will tell you, it’s not quite as simple as paying people the same for the same job around the world, given the very different living standards and cost of living. Nonetheless, if Japanese companies want to introduce the “job type” system, where the compensation is defined by a job description, rather than a seniority based generalist track with no job description, which has been the tradition in Japan, they are going to have to consider some kind of parity in remuneration, to make it attractive and easy for their employees to move around the world.

As Dr Kawai Kaoru, workplace health scientist, has pointed out in a recent article for Nikkei Business, the reality of the uptake of the “job type system” has not lived up to the media hype. The same names keep coming up – Hitachi, Fujitsu, Astellas, KDDI, Mitsubishi Chemical, Shiseido and Kagome. According to Dr Kawai’s research “an overwhelming number of companies said they had no plans to introduce a job-based system.”

Those who are introducing a job type system are expecting it to re-energise their staff, improving autonomy, empowerment and engagement. Kawai cautions against seeing the job type system as being a cure-all for employee motivation. Her worry is that too much emphasis on the individual may ignore the fact that what really energises employees in their work is a sense of interdependency – that other people rely on them and they can rely on others, in order to get things done.

She points out that the five factors needed for high employee engagement (which I have seen appear in many an employee engagement survey) are

Sufficient resources to do the job
Discretionary power to make decisions, get things done
Being recognised and rewarded for good work
Fairness – being respected and able to express opinions, regardless of age, gender, nationality etc.
Community – that staff members help each other and trust each other

Japanese companies have always been strong on the last point – Dr Kawai and I are both hoping it is not lost in the quest for a more global standard.

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.

Hitachi’s new risk management

Up until now, Hitachi’s risk management team was mainly centered on the legal department – which I suspect is probably the case in most Japanese companies. Now Hitachi’s President Keiji Kojima has added the finance department to it, wanting the company to take a more proactive approach to global risks. The aim is to visualize risks – such as the impact of the economic slowdown in Europe due to the Ukraine crisis and soaring component costs due to inflation – and respond quickly.

When Russia invaded Ukraine, GlobalLogic was empowered to act quickly to evacuate 7,200 local employees in the country – and was told that they could put off contacting Japan HQ until later. By the end of April, remote working and overseas bases had been put in place and the operations were back up to 95% level.

Hitachi’s overseas business has expanded recently thanks to the acquisition of US company GlobalLogic and the power grids business of ABB, now Hitachi Energy.

Strengthening the risk management system is one response to this, along with introducing a global standard job description system to the Japanese organisation, aiming to have 30% women and 30% non-Japanese representation ont he board by 2030, aiming for zero carbon by 2050. Five out of the 9 external directors are non-Japanese.

Hitachi has learnt from past failures in overseas expansion, such as the Horizon Nuclear Power project in the UK, and the failure of a joint venture thermal power project in South Africa.

These changes have impacted the way the board operates. Now, when an executive officer reports that a plan has not been achieved, the non-Japanese directors respond “so?” – by which they mean, don’t just report the result, tell me what you are going to do next. A former external director of Hitachi, Harufumi Mochizuki comments in the Nikkei that “thanks to training by foreign directors, the executive officers have acquired a world class management style, and the ability to action, with a sense of speed.”

The next challenge for Hitachi will be to make the best use of the global human resources that it now has thanks to its acquisitions. Only three of Hitachi’s 34 executive officers are non-Japanese. The Nikkei comments that these changes are very much in line with the vision of Mr Nakanishi, the former President and Chairman who died in 2021, for an organisation with world class leaders who can respond quickly to global risks.

Authenticity and food

I often ask participants in my cross-cultural training sessions what symbolises home to them. This acts as an ice breaker and allows them to talk about their diverse cultural backgrounds – their Guyanese mother’s curry or Moroccan grandmother’s tagines, even if their own nationality is New Zealander or French.

At a recent session, the Japanese participant said ramen most reminded him of home. We agreed that although it is possible to buy ramen and make it in the UK, ramen at a yatai – in Japan – was what he really meant.

The ramen you can buy in England is made by Nissin, but manufactured in Hungary. I also checked the udon brands available online at Sainsbury’s – one of the UK’s biggest supermarket chains – three were made in China and one in Thailand.

Japanese food is so popular in the UK, there was a Japanese themed week in the current TV series of Great British Bake Off – where someone made a matcha cake and another chef used soy sauce in their cooking.

This caused a controversy on Twitter because the Department for International Trade used the programme as an opportunity to claim that soy sauce would be cheaper in the UK thanks to the UK-Japan Comprehensive Economic Partnership Agreement. It turned out, however, that Japan-made soy sauce would only be cheaper in the sense that without the UK-Japan deal, the WTO tariff of 6% would have applied. Now that there is a UK-Japan trade deal, there will be a 0% tariff, as there was between the EU and Japan anyway.

In fact, a large proportion of UK imports of soy sauce comes from the Netherlands – Kikkoman has a factory there – or from Poland, where Associated British Foods brand Blue Dragon has a factory. If there is no UK-EU trade deal, these will be 6% more expensive. Soy sauce from other countries such as China and Malaysia will be cheaper even with a 6% tariff, as previously they attracted the 7.7% EU tariff.

There is a manufacturer of soy sauce in the UK too – Shoda Shoyu acquired a British company Speciality Sauces, with a factory in Wales, in 2000, where they also make miso and mirin.

There are plenty of food snobs in Europe who claim that only soy sauce made in Japan tastes truly authentic, but obviously for every day cooking of the hybrid culture kind that British enjoy, cost performance is important too.

Europeans, including the British, are keen to impose “Geographic Indicators” in their trade deals – that Parma ham must come from Parma, Champagne from Champagne, Stilton cheese from Stilton. But for many of these items, like ramen at a yatai, it is not just the location of manufacture, but the location of consumption that makes it a truly authentic, delicious experience – the atmosphere, the climate, the other food. I did not really appreciate the taste of Guinness until I drank it in a pub by the sea in Ireland, with soda bread, butter and mussels.

This article was originally published in Japanese in the Teikoku Databank News on 2nd December 2020

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

Makihara Minoru

I was sad to hear of the death of Makihara Minoru, former president of Mitsubishi Corporation, on 13th December 2020. He was my daisempai (most senior mentor) – both tough and supportive to work for. A wise visionary on globalization, he was progressive in his attitude towards women and non-Japanese employees in Mitsubishi Corporation and spoke elegant, fluent mid-Atlantic English. He was the ultimate Mitsubishi shinshi (gentleman).

I have taken some extracts from my book on the history of Mitsubishi Corporation in London as a tribute to him:

London – 1959 – “If you were your father, you would not have done this”

In 1959 Makihara Minoru was posted to London to take over the tinned salmon, crab and mandarin orange business. He was the son of Makihara Satoru, who was the General Manager of the London branch from 1939 to 1940 and also was in charge of the tinned salmon and crab business in London from 1927 to 1937. ‘I did business with many of the people that my father did business with. They remembered my father very fondly and were always telling me “if you were your father, you would not have done this…”‘ One such business partner was Dan Tobey, of Unilever, the largest single customer of Mitsubishi for tinned salmon. The rest of the tinned salmon was done through the same brokers as before the war, Anderson & Colman. Mr Colman had also been a friend of Makihara senior. One of Anderson & Colman’s largest customers was Princes Foods, whom Mitsubishi Corporation was to acquire in the 1980s.

Mitsubishi Corporation was the dominant supplier from Japan to the UK of tinned salmon and Japan was still the main supplier of tinned salmon to the UK in the 1960s.

The Japanese community in London in the 1960s

Makihara Minoru was in London until 1967. Despite the tripling of the number of Japanese resident in the UK during the 1960s, according to Makihara “there were still too few Japanese in London to feel that there was a community.” The 1000 residents barrier was broken by the late 1960s, and just as before the war, Japanese restaurants began to appear in London. The lifting of travel restrictions by the Japanese government also stimulated tourism and business travel from Japan to London. Up until then, Mitsubishi’s Japanese employees had to improvise, trying to find Chinese restaurants that most suited Japanese tastes.

Despite the lifting of travel restrictions Makihara only returned to Japan once in the eight years he lived in the UK, and made an international phone call to Japan just once a year.

Half of the Japanese Mitsubishi staff lived in South London and half in the North. Hampstead (where the Makiharas had lived before the war) and Finchley had become popular amongst Japanese, known as J&J town (Jewish and Japanese) but Makihara chose Purley. “Because my superior Mr Itoh had decided to seek other directions and had moved to East Croydon. I thought this was a very good choice – the rent was reasonable and the surroundings were much better. We moved twice but always stayed in Purley – the houses had nice gardens and were very superior by Japanese standards. The travelling time was about the same as from Hampstead.” They sent their two children to St David’s School, a small co-educational school in Purley.

Bridging the division between local and Japanese staff

According to Makihara Minoru, there was no clear division of roles between Japanese and British staff in Marine Products Department and the Japanese and British staff would visit the brokers together.

There was, however, inevitably some friction between the Japanese and British staff. In Makihara’s view, this arose for two reasons: differences in style of work and differences in native language.

“As far as style of work was concerned, while the Japanese staff tend to work together and share information, which is the basic foundation of a general trading company, the British staff would tend to guard their territory and, on occasion, be unwilling to share information with others, even when that would have enhanced the business. This fact was aggravated by the language barrier. Even when Japanese staff were carrying out a normal conversation in Japanese, some suspicious British staff would imagine that they were being talked about behind their backs. Telexes used to come from Japan mainly in Japanese, which was another source of friction. I frequently requested Tokyo that telexes be sent in English but this was mostly in vain, and as a result, a lot of the time of the Japanese staff was taken up by translating telexes into English.”

In order to overcome the language barrier, Makihara started a japanese class for the British staff, but most of the senior men dropped out, leaving Makihara with five of the female staff. His efforts lasted for about two years. “I was finding it increasingly difficult to prepare material and texts for the British staff. Japanese is virtually without grammar, and it is an extremely difficult language to learn.”

Makihara Minoru, born 1930 Hampstead, London. Harvard University BA 1954. Joined Mitsubishi Corporation in 1956. President of Mitsubishi Corporation 1992-1998

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.

The soft power of Japanese content

From time to time clients have requested that I show videos in my seminars for Europeans on how to work with Japanese counterparts. I usually try to dissuade them from this. Partly because the technology never works well – I either have to try to get a DVD player to work on the client’s system, or if I try to stream something from YouTube, there is a problem with the firewall or internet connection.

Also, there used to be a lack of good content to show. There are films like Karate Kid or Lost in Translation but they are either rather stereotyped or it’s difficult to find a clip that makes sense on its own without seeing the whole film.

We thought about making our own videos of Japanese and European actors interacting in typical business situations, but not only is this costly, it dates very quickly, and can look awkward and artificial.

I can understand why it would be good to show some videos. They would not only bring variety to the training, but also to help people feel empathy with other cultures through watching emotionally engaging films of people from those cultures, behaving in a way that they can relate to.

Recently I’ve noticed a huge improvement in the amount of video content available on Japan. I have been crying with laughter at Aggretsuko, the anime from Sanrio about a red panda office lady which is currently showing on Netflix in the UK. I assumed it would not be appealing to people who did not know the Japanese workplace, but actually my 18-year-old son, and our Hong Kong Chinese homestay student both really enjoy it too.

It led to an interesting conversation with my son who compared it to the Japanese manga Beastars which also had anthropomorphic characters. It turns out this will be shown as an anime on Netflix in 2020, joining other “made in Japan” series like Midnight Diner, The Naked Director and Terrace House.

My son’s generation get most of their content from Netflix, YouTube and Amazon Prime, to the extent that we hardly ever watch live TV together any more. The UK public broadcasting service, the BBC, is beginning to see its license fee revenue decline because younger people are watching these channels on their laptops and smartphones, and so do not have TVs.

This means that for businesses, the way to reach the younger generations is not through live TV advertising or news stories on TV or newspapers, but through online videos.

What seems to work best is either an authentic rather than scripted conversation, between real people rather than actors, or a short “how to” or story telling style narration of a video. These kinds of videos are much easier and cheaper to make than the older style feature film type videos. So I have started to record my own – but they will be to advertise my business rather than to use in a training session.

This article was originally published in Japanese in the Teikoku Databank News on 11th March 2020

Japan’s new “job type” system explained

Many Japanese companies such as Hitachi and Fujitsu are introducing a “job-type” (job-gata in Japanese) system. The term “job-type” will not be familiar to Europeans, so we will draw on a series in the Nikkei Business to explain the background to this change.

It’s common practice in Japan to hire full time, permanent staff, usually straight out of university, known as “seishain” with a ‘blank contract’ and no clear definition of the content of the work or the location of employment. Many Japanese commentators call this the “membership type” system, because the new recruit has in effect become a member of a corporate community. I like to use Trompenaars Hampden-Turner’s description of Japanese companies being a “family” company too, even if the founding family are no longer in control.

In contrast to this, the “job type” system is commonly used in Europe and the US, where the company and the individual have a carefully worded employment contract, and the content of the job and remuneration are clearly set out in advance.

	Job type	Membership type
Duties	In principle, duties outside the job description are not undertaken	Boundaries of the role are not clearly defined. Job rotations are common.
Salary	Salary is based on job evaluation/duties	Salary is based on ability and position in a career track, which in turn is based on years of service
Job location	Job location is defined and limited. In principle there is no relocation	Job location and assignment is not defined. Relocation is the norm
Training	for immediate applicability – up to the individual to acquire	long term employment is the precondition, so the company trains the individual.

3 decades of HR reforms

There is plenty of criticism that this is just a repackaging of the much criticised seikashugi or performance based system. Many Japanese companies introduced this after the economic bubble burst in the 1990s but it was seen as simply a cost cutting exercise. Managers started looking for ways to reduce employees’ bonuses, which up until then had mainly been based on company or divisional performance. Nikkei Business notes that the “3 lost decades” in Japan have seen a series of crises followed by changes to HR systems, but somehow the change is watered down and the company reverts to seniority based HR management.

Companies that have introduced the job type system include Mitsubishi Chemical. When they first introduced it in 2017, it was still the manager who made the decision on promoting employees, and as a consequence the seniority element remained. So from October this year they are introducing an open application system, to increase fairness and transparency. Mitsubishi Chemical’s HR Director Nakata Ruriko notes that their workforce is no longer the homogenous group of lifetime employees recruited as graduates. There are more mid career hires and dual income couples, trying to balance child and elderly care. Nakata is introducing choice and the ability to build your own career, to respond to this diversity.

The telecoms company KDDI has skipped trying to negotiate with the labour union to introduce the job type system to current union members and is only introducing it to managers and new graduates from April 2021. There will no longer be the same salary for all new graduate recruits – compensation will depend on skills and internships undertaken before entering the company.

Fujitsu has ended “side by side” cohort based training and a mandatory retirement age. The position of manager will be open to all, but if you do not ask to be a manager, you will not be promoted.

Working from home and relocations

Having a job type system also helps with working from home, as people have more autonomy and clarity on the boundaries to their work. Several Japanese companies are also ending the “tanshin funin” job relocation where the employee (usually male) would be assigned to another location and move there without their family.

From the management side the intentions behind bringing in a job type system depend on the sector, but at least one of three main reasons are usually cited:

the need to bring in people from outside the company who have the skills to support the company with technological innovations such as AI
to counter the constant increase in labour cost brought about by the seniority based system
a unified, globally applicable HR system which will improve internal job mobility across multinational operations

Over half of Japanese employees prefer the job type system

Nikkei Business surveyed over 1100 employees and found that nearly half preferred the job type system, compared to 24% who preferred the membership type system. When asked “do you think you can survive a switch to the job type system?”, 62.4% felt they could. More than 75% of the respondents said they would like to continue to work from home even after the pandemic was over.

But better state support and retraining are needed

The chairman of Rengo, Japan’s Trade Union Confederation, points out that Japanese employees are still very dependent and tied to their companies. If the aim of a job type system is to increase labour mobility, there needs to be more of a state safety net provided than there currently is. Some companies will simply be looking to reduce costs and those employees whose skills are no longer needed will find it very hard to switch to another company if they are no longer satisfied with the pay they receive for the work they do.

Takeda Yoko, a Director at the Mitsubishi Research Institute recommends FLAP as a way to succeed in a job type system – Find the work you want to do, Learn how to do it, Act upon this learning and then Perform – be evaluated and treated correctly.

Last updated by Pernille Rudlin at 2023-02-08.

Category: Globalization