Globalization

A truly global HQ, where Japan is just one of the regions?

I mentioned in a previous article in this series that Japanese companies such as Fast Retailing and Rakuten are adopting English as their corporate language. In reaction to this, various surveys of Japanese employees’ attitudes to speaking English appeared in the media, including one that showed that 73% of Japanese are reluctant to have English as a corporate language.

Adding to this, another survey just released by the Sanno Institute of Management found that 67% of the businesspeople it questioned did not want to work abroad. The conclusion drawn by many Japanese commentators is that this is all part of Japan’s withdrawal from the globalized world. In particular there is a worry, shared by the Japanese government, that the younger generation have become more inward looking and cautious, and this will have a negative impact on the economy. My personal conclusion is that these reactions show that Japanese people rather enjoy agonising over surveys about themselves, particularly if the results show how different Japan is or are in some way a cause for gloom.

It seems to me any such trends are more related to economic factors than anything peculiar to Japanese society. There is not the urgency to rebuild the Japanese economy through export led growth that there was in the post-war decades. The slow death of lifetime employment means that younger people are less loyal to their companies and therefore less willing to go wherever their employers tell them.

Japanese companies have adapted over the past twenty years to the changing global environment. They expatriate fewer staff to the expensive developed world, relying on local managers instead, and have turned their attention to investment of capital and personnel in emerging markets.

The same trends can be found in the matured economies elsewhere in the world. The US used to have a mobile workforce, who would pack up and move state in search of a job, but apparently this is less true now, despite the persistent unemployment problem there. And although Europeans love pointing out how only 20% of Americans have passports, compared to 70% or so of the British population for example – it is noticeable how most of the migration within Europe is from Eastern Europe, rather than from Western Europe.

Rather than force reluctant Japanese employees to transfer abroad or adopt English as a corporate language, many Japanese companies are trying to globalise by encouraging employees from Asia to transfer to Japan or hiring Asian students who are studying in Japan. I suspect the expectation is that these employees will have to blend in as much as possible, however, so the impact on the Japanese staff in the headquarters will be minimal.

The worry then is that the non-Asian part of the business will become increasingly disconnected from Japan and Asia, with very little exchange of staff between the two regions. A radical solution might be to accept that the majority of Japanese staff prefer to focus on Japanese domestic sales, and split the Japanese domestic side from the global headquarters. This headquarters could be situated anywhere in the world, and yes, the working language will probably be English.

This article originally appeared in the Nikkei Weekly

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“Japanese employees must become faithful to their profession, not company” – Hitachi’s Kawamura

Maybe he was being spurred on by Chinese consultant and Softbrain founder Song Wenzhou, but Takashi Kawamura, former President and Chairman of Hitachi makes some startlingly radical statements in a dialogue in the Nikkei Business magazine.

Both agree that in 2015 major Japanese companies must grow for Japan to get back on its feet, particularly so they can pull Japan’s small-medium enterprises along in their wake. But although Kawamura maintains the traditional Japanese line that companies exist to add value to society by paying wages, taxes and dividends (in that order), he asserts that Japanese employees must learn to become “faithful to their profession” rather than faithful to their companies as they have been up until now.

This includes company Presidents, who can no longer be “the person who happens to be in the position of President” and use their status and personal influence to get things done, but instead must be judged on their results, and their professionalism as a manager. “Management has become more transparent, and the responsibility to explain has become greater” says Kawamura.

As blogged previously, Hitachi hit the headlines for abolishing seniority based promotion for its Japanese managers recently, with commentators speculating that this would spread to other companies, and may even mean the end of other sacred cows of Japanese corporate life, such as lifetime employment. Kawamura openly says other Japanese companies will have to adopt the same approach and that this will result in greater labour mobility – not just in the Japanese labour market, but also for swapping people across national borders within the company.

However “moving people is tough” and it will take time, with other aspects of Japanese society also having to change, such as education and social mores, Kawamura acknowledges. Hitachi itself is facing the challenge of ensuring it does not devolve back to a ‘village mentality’.

Song remarks that he tried to get a Japanese friend of his who was a General Manager in a major electronics firm to take up a better remunerated position at a start up but his friend refused, saying his daughter was getting married soon, and he wanted to be introduced at the wedding as “General Manager of XXX company” – the status he would lose if he joined a start up was too much to contemplate.

I hope the choice isn’t as stark as Kawamura and Song make out – an adapt or die dilemma between the mutual loyalty of the company and its employees resulting in stagnation, or ruthless professionalism and mobility, resulting in growth. Not everyone can or should want to work for GE.

“Without competition, people will not develop”

Japanese construction materials and sanitary fittings manufacturer LIXIL is an example of a Japanese company that has deliberately tried to introduce a spirit of competitiveness into the company, following its acquisition of American Standard and Grohe. A German now runs a division, and many Japanese now have foreign bosses. LIXIL’s CEO Yoshiaki Fujimori says in a recent Nikkei Business article “There is no real competition inside Japanese companies. The benchmarks for evaluating employees are vague, and people are assessed on whether they are good relationship builders or come from the same background. At the very least, with a foreigner as a leader, baseless evaluation criteria will no longer be accepted.”

Fujimori is himself unusual in that he started out at Nissho Iwai (now Sojitz) and then became the first Japanese to be an EVP at General Electric, before joining LIXIL in 2011. He underwent a typical egalitarian Japanese education, graduating from Tokyo University in 1975, but even at Nissho Iwai he thought he could beat most people in terms of performance. However when he studied for an MBA he found out what real competition was like. He found it painful that other students could express their opinions so easily when he could not say anything. So he devised a study routine of making himself review the day in 1 minute every day, and then listen to himself, 30 times a day. It was even worse at GE, he claims, where you always have to win every battle. “If you lose once, you lose your job.” At LIXIL he has tried to quantify job roles in order to set performance evaluation standards and introduced Executive Leadership Training.

Another executive in the same mould as Fujimori is Yoshiaki Itoh. Born in Thailand, and a graduate of Thunderbird Business School, he has worked at Dell, Lenovo, Adidas Japan and Sony Pictures Entertainment, before becoming CEO of Haier Asia. At Haier he was shocked to find that the Sanyo (their white goods business in Asia was acquired by Haier) ‘super egalitarian’ legacy lived on – there were 14 grade levels, and everyone took an exam every two years in order to be promoted. It was not possible to jump a grade, so to get to a management position would take nearly 20 years, no matter how good you were.

Itoh cut the 14 levels to 5 and made it possible to become a team leader without any reference to age. He also went round South East Asia, and sent 20 of the 40 Japanese expatriates back to Japan. He also intends to make the R&D centre stand on its own two feet. “Japanese companies have not grasped the fact that competitiveness is necessary to win on the global stage” Itoh says. He is intending to further clear out remaining notions of “competition avoidance” and “everyone the same”.

The Mitsubishi thoroughbred who was called an alien

“When I was called ‘the alien’ I was resigned to it, realising that the people around me didn’t understand what I was trying to do. However, recently it seems as if what I was saying then is gradually becoming understood.” Minoru Makihara, former President of Mitsubishi Corporation, recollects the time when he tried to make English the second corporate language in 1992 and was criticised from within and outside the company [disclosure – I had just been posted to Mitsubishi Corporation Japan HQ at the time, and later worked with Mr Makihara to deal with the fall out from these policies]. “It was partly a misunderstanding – I was saying that ‘Bad English’ should be the corporate language. Because if you do not express yourself, no matter how poor the English, then you cannot have a dialogue.”

“English is the international language of business, not just because it is widespread, but because it is most suited to business. English can be vague when necessary, and precise when needed. Nobody thinks Japanese is suitable for business – it’s far too implicit. However, even though English is a necessity, it is not sufficient for listening globally. You need a sense of your own roots, your own “-ism” to understand someone who speaks a different language to you.”

“I have proposed a third ‘Opening up’ for Japan to the government. Japan is lagging behind in globalization. By ‘Opening up’ I don’t just mean the issue of whether there should be more immigration, but that we Japanese are the problem.”

“Ultimately it comes down to education – a liberal arts type education. To work globally, you need be able to gather data and knowledge for yourself, and make your own independent judgement. So to open up Japan again, you need to start from there. Without this, Japan will be isolated in the world.”

Japan would do well to embrace, not shun, its ‘global spanners’

I gave a talk to a group of Japanese MBA students this past week on what it was like to work for a Japanese company outside Japan. I explained about the communication issues, not just the language barrier but how the Japanese style of implicit communication, where so much is left unsaid, did not transmit well overseas. I emphasised how valuable people like Japanese MBAs with overseas experience were as brokers for the different communication styles of the Japan headquarters and overseas operations.

The inevitable discussion then ensued about why young Japanese were not going overseas to study or work. One student commented that despite or maybe because of the fact that she had experience living overseas, and also working in a non-Japanese company, she had found it impossible to get a job in a Japanese company. “They just don’t see how the way I am would fit in with them”.

Afterwards, when we all exchanged business cards, the student told me I could find her on Facebook. This jogged my memory of an article I had just read about how a large proportion of Japanese Facebook users have lived outside of Japan. I sense this is not just because they would have been exposed to Facebook in the West as a commonly accepted way of keeping in touch with friends, but also because the kind of people who have lived for prolonged periods outside their home country tend to be natural networkers, and therefore enthusiastic adopters of social media.

When you have lived outside of your home country, it becomes important to you to keep in touch, not only with your home country friends and relatives, but the ones you make in your new country, and then you try to keep in touch with them as you move around further. I also believe that people who have lived abroad for a long time are more comfortable than most with forming what are known in sociology as “weak ties” – connections to people who are not close friends or relatives, but are acquaintances. Gree and Mixi are popular social networks in Japan, but according to a recent survey, Japanese have 29 friends on average on such sites, compared to a 130 average for all Facebook users.

Global spanners with many weak ties can become bridges between the more close knit groups to which they also belong. In other words, in a Japanese company, a global spanner could have strong ties with either their Japan headquarters colleagues or their colleagues in the overseas team where they are working. Their weak ties, preferably to another global spanner, mean that a pipeline of communication between two inward-looking groups is opened up.

But as I mentioned in a previous article in this series, the problem in Japanese companies is that often the global spanner type is seen as an outsider, and is viewed with suspicion and not allowed to connect into any close knit group. It’s not a problem confined to Japan – ask President Obama – but it does seem to be particularly acute in Japan.

This article originally appeared in the Nikkei Weekly

Forcing English on workers won’t automatically solve the globalization puzzle

The management guru Peter Drucker once said that Japanese businesspeople have a tendency to get the problem right, even if they sometimes come up with the wrong answer – whereas Westerners usually get the answer right, even if it is sometimes to the wrong question. This was in reference to the amount of time Japanese people spend defining problems, before they move onto solutions, whereas Westerners are quick, maybe too quick, to try to fix whatever they perceive the problem to be.

In the case of corporate globalization, there has been a rash of initiatives by Japanese companies to ensure their Japanese employees are more global, mostly centered around the issue of speaking English. They have set minimum Test of English for International Communication (TOIEC) scores for promotion, or English is imposed as the common corporate language, or all employees at a certain level are sent abroad for English language training. There is no doubt in my mind they have analysed the problem correctly – Japanese multinationals need to globalize their business further if they wish to grow rather than stagnate, and to do so requires the ability to develop and manage businesses outside of Japan. This, ultimately, is a human resources development issue.

I am not sure that the ability to develop and manage businesses outside Japan rests so much on a blanket rule about making everyone speak English, however. Eiko Harada, president of McDonald’s Japan, said in an interview with Nikkei Business Online that “if you think in Japanese, speak in Japanese. If you think in English, speak in English. If you think in Japanese and speak in English or think in English and speak in Japanese you will not be understood”.

What he was pointing out, I believe, was that foreign language ability does not necessarily mean you have the bicultural understanding to communicate effectively. If you do not have bicultural understanding, it also means you are not going to be effective at marketing to overseas customers, nor will you know what information your headquarters needs to make the right decisions.

Yet Japanese companies are failing to hire the very Japanese graduates who have had the experience of living abroad needed for such bicultural understanding. And decreasing numbers of Japanese students are studying abroad, fearful in the current climate that by doing so they will miss out on the extensive process that has to be undergone to get a “naitei” agreement that they will join a major Japanese company on the graduate intake track.

One Japanese company I used to work for tried to overcome this by having a special entry process for those who had studied overseas. I am not sure this was the right approach either, as it meant these hires were seen as “special” and Japanese blue chip companies have a habit of sidelining people who are “specialist” in some way. Steps are being taken to delay the “naitei” deadline to allow more time for all students to study, overseas or otherwise, rather than chase jobs – a move in the right direction. Rather than blanket rules for conformity, flexibility and diversity should be the norm for global companies.

This article originally appeared in the Nikkei Weekly.

The lack of information from Japan – “it’s like gold dust”

After a recent trip to Japan I came back clutching various documents from some contacts I met at one particular Japanese company. I only recently got round to translating them and forwarding them to the appropriate people in the overseas operations of that company. I asked in advance, before spending too much time translating, if the content was already familiar to the people outside Japan. Apparently it was not and the content was described as “gold dust” by one person.

It’s a perennial complaint in the overseas operations of Japanese companies that they don’t get enough information from Japan, to the point where they begin to wonder if things are being deliberately hidden from them.

I wrote in a previous article in this series about the unquenchable thirst for information amongst Japanese employees. In Japan this thirst is partly met through implicit knowledge sharing, by having an open plan office full of people who spend years working together and who all speak Japanese, so do not need to be formal and explicit in the way they communicate. There are more formal communication methods in most departments, such as weekly and monthly reports as well as the infamous A3 sized planning documents and the “ringi” proposals, which are circulated around numerous people.

But the problem is these are all in Japanese, and no one feels like taking on the onerous task of translating them into English. They all mostly have higher priority day jobs to attend to. Outsourcing them to a translation agency is one option, but it often takes an insider to truly distinguish what is important and what is really meant by internal documents.

I have come to the conclusion that there needs to be a conscious process set up for communicating between Japanese operations and the rest of the world, and it needs to be a recognised part of someone’s job. The person selected for this should not be shunted into some “global” group but be part of the actual business department, otherwise they will not understand the context of the information and which bits are most needed by overseas subsidiaries.

The final piece of the process is identifying the organisational units and people that are counterparts to each other, and therefore need to share information. This is more complicated than it might seem, as most large Japanese companies in my experience are organised in quite different ways to Western equivalents. In Japan there are no sales directors in charge of specific regions or customer segments. There are no marketing directors, in fact there is rarely a standalone marketing department. The organisation is highly vertical, so each business group has to be combed for people who have a global remit or functional role that looks relevant.

This is not easy when few people have written job descriptions. But once the right person and team are found, I am sure their thirst for information from outside Japan and satisfaction derived from being useful to global colleagues will mean the process becomes well embedded.

This article originally appeared in the Nikkei Weekly and also appears in Shinrai: Japanese Corporate Integrity in a Disintegrating Europe, available as a paperback and e-book on Amazon.

Sometimes, the unquenchable thirst for information is hard to swallow

As a home-stay student with a Japanese family, I became used to being asked by my host mother where I was going every time I left the house. If it had been my own family, I would probably have responded “Out!” before leaving as quickly as I could, slamming the door behind me. I was trying to avoid my parents interfering in my plans but I soon realised my Japanese home stay mother didn’t really have a hidden agenda behind her inquiries – she was simply curious, and wanted to show she cared.

In the Japanese corporate world, there are hidden agendas, but the same thirst for “information for information’s sake”, continues. A constant niggle I hear from people who aren’t Japanese who work in Japanese companies is the sheer quantity of questions, often on seemingly irrelevant details, that they have to deal with from their Japanese colleagues.

These non-Japanese staff worry because they fear that their answers might be seen as commitments and they want to sort out the business case or the strategy before they give the full details of a plan. Or, like my teenage self, they are just concerned that there is some kind of ulterior motive.

I sense that Japanese colleagues are frustrated by this – they want to know the details as soon as possible because they need to feed them back into their network in Japan. If they have “overseas” or “global” in their title then they are supposed to be the instant expert on what overseas operations are doing, regardless of how complex the local cultures and markets are. Their knowledge is currency, or “neta” as it is known in Japanese – the inside scoop on how things really are. Japanese people are so used to the idea that in Japanese society nothing is as it really seems, they assume that those who claim to know the real story are the ones with the power and intelligence.

By contrast, many Westerners are surprisingly incurious about the world beyond their immediate sphere. Multinationals run on US lines tend to function on explicit knowledge – distributed through regular updates amongst a select group of global managers, maybe via a weekly phone conference, where predetermined targets are matched against actual figures, and arguments are had about any shortfalls. As a result, US type multinationals send far less headquarters staff out to work in overseas operations than Japanese multinationals, which feel that they need to have a mole in every operation to keep HQ in the loop.

I have some sympathy with the worries of non-Japanese staff. Information casually shared with Japanese colleagues does have a habit of escalating up the Japanese hierarchy and turning into formalised fact, to be thrown back in the face of the overseas staff when commitments never given are not met. Also, Japanese headquarters staff, who are so used to sharing knowledge in informal ways, fail to share it more explicitly with their overseas colleagues.

Information flows need to be two-way to work. Maybe I should have responded to my home stay mother by asking her what she was doing during the day. She might have been pleased to know I cared.

This article originally appeared in the Nikkei Weekly and also appears in Shinrai: Japanese Corporate Integrity in a Disintegrating Europe, available as a paperback and e-book on Amazon.)

We will transform Takeda into a global company within 5 years

Christophe Weber, President and COO of Japanese pharmaceuticals company Takeda, responds to “7 Questions” in the Nikkei Business magazine:

1. You announced your new strategy in October?

I spent the past 8 months since I joined Takeda [from GlaxoSmithKline] talking to various employees, from which I have reached an understanding of Takeda’s strengths and weaknesses. The strategy is to support Takeda in becoming a global, R&D led company. The structure needs to be changed to become more effective, and to develop global minded human resources.

2. How long is needed for this transformation?

I am expecting it to take 5 years. We will focus the structure on the 4 disease areas of R&D strength in Takeda such as oncology and gastroenterology and also vaccines. We will join up the R&D functions which are distributed across various countries, and strengthen their links to improve their efficiency at the same time , as well as their agility.

3. Doesn’t globalization go against becoming more agile?

It’s true that globalization can cause the organisation to become more complex. However each R&D region will be given responsibility and decision making powers. Sales channels will also be delegated more decision making authority. This should enable them to have a degree of agility and for us to grow as a global company.

4. To be a truly global company, you need to expand in developing markets?

We bought the Swiss company Nycomed in 2011. Nycomed has strong sales channels in Russia, China and Brazil. We will develop these further, to sell drugs that we have been selling in Europe and North America. Developing markets are reforming their healthcare, and this will grow rapidly in the next decade.

5. The majority of your management team come from outside Takeda. Why are so few executives from within Takeda?

I expect to hire people from outside Takeda only when there are no suitable candidates within. If there are too many external hires, it gives the impression that we are not developing our own people sufficiently. Takeda currently lacks people with global experience. We are currently thinking how to develop more globally minded people.

6. You attracted a lot of attention as a foreign executive when you were appointed President in June?

It is still rare for a non-Japanese to run a Japanese company and it is a difficult job. However, when Chairman Hasegawa called me to talk to me about this, I thought it was a challenge I wanted to take up. Mr Hasegawa has a strong will to take on the world. I felt he was a fellow spirit.

7. There was some opposition to you as a foreign President from shareholders?

There were many opinions expressed, and I listened to them with respect. It is to be expected that there will be some negative reactions when a foreigner takes on this big a reform. History will judge whether this reform is correct. I was at my previous company for more than 20 years, so I am different from other foreign CEOs who change companies every few years. I have a similar character to the Japanese in that I value stability.

Japanese management by telepathy and Ninja skills does not work for overseas M&A

The precis below is from an article written by Chieko Matsuda (Executive Director of Booz Allen Hamilton in Japan) for Nikkei Business Online’s “Corporate Governance for Everyone” series, in Japanese, but I felt as I translated it, that it was my own words, so completely do I agree with what she is saying:

Japanese companies often have an “overseas business development unit” to carry out their global M&A. However the mission of this organisation should change depending on the stage reached in expanding overseas. Even if it starts as “business development”, it often turns out that it has to manage the subsidiaries as well. So at the same time as stepping on the accelerator to grow the business, it is supposed to press on the brake, as a shareholder and auditor. When it comes up with solutions to this dilemma, nobody will help the unit out, claiming that “overseas business is your specialist area”, and “nobody speaks English in our unit”

The audit function needs to be strengthened – Japanese companies are far too weak when it comes to risk management with regard to their overseas operations. It is necessary, if expanding overseas, to “control through structure” and review rules, processes and formats. Japanese style management through telepathy will not work for overseas M&A.

In order to design the structure in detail, it is necessary to decide on the direction. What the company should not do, and what it should preserve. If this is left vague, then it will lead to a sense that “we have no idea what the parent company is thinking”.

The top priority therefore is to set the corporate mission and values. What are we trying to do, how will we do it, which way are we facing – it is control through corporate culture as well as through structure.

The corporate vision needs to be concrete, and something that can be translated in an understandable way into many languages. It should be a base for making decisions – to go left or right – not just pretty words.

If the corporate vision and culture is not secure, then it is difficult for diversity to take root. WIthout diversity, the company will not be competitive. A homogenous workforce was efficient for labour intensive production, but we are now in an era of competition of ideas and innovation. New ideas and innovation require a diverse workforce, and what will unite a diverse workforce is common corporate culture and vision.

It is of course partly up to the top management to communicate this corporate culture and vision, but middle management must also be able to use it within their teams. It can’t just be about “reading the air” in the traditional Japanese Ninja way. What do you do if there is a claim from a customer? It cannot be resolved through kiai (“fighting spirit”) and konjou (“guts”). Wouldn’t it be convenient if you had a touchstone, for when there was a problem to be solved?

If you are being acquired by a Japanese company, you may be interested in Japan Intercultural Consulting’s (represented by Rudlin Consulting in EMEA) post merger integration services.

Category: Globalization