Globalization

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

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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.

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

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

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

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

PROFILE

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

The automobile industry is greatly affected by the new coronavirus.

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

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

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

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

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

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

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

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

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

What kind of human resources are you looking for?

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

What does ‘sense’ mean?

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

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

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

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

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

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

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

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

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

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

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

Are there any other obstacles to your competitiveness?

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

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

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

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

Do they not want to change?

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

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

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

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

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

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

Don’t avoid developing leaders

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

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

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

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

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

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

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

You end up just wanting the correct answer.

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

Side note from the interviewer Higashi Masaki

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

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

Japanese companies need a strong employee brand to attract globally minded employees

I spoke to a group of Japanese managers in London last year on the topic of my last article “I love Japan but I don’t want to work in a Japanese company” – an attitude I have heard from young Europeans who have studied Japanese at university, or worked in Japan for a couple of years on the JET scheme, or simply became fans of Japanese culture through a love of anime and computer games.

They don’t want to work for Japanese companies because they think they won’t have a fun and fulfilling career. They worry that there will be lots of overtime, bureaucracy and an oppressive hierarchy – and that Japanese companies in Europe are mostly dull, engineering sales subsidiaries.

My recommendation to the Japanese managers in the audience was to strengthen the “employee brand” in Europe, to make it more appealing to those young people. Many European veterans of Japanese companies have told me that they like working for Japanese companies because they are different, interesting, quirky, more “human” and long term in orientation rather than the standardised, numbers driven, short termist culture of many Western multinationals. Japanese companies should also offer short term secondments to Japan, so that their non-Japanese graduate hires can build networks and participate in decision-making and so develop their careers.

I realise it is tough for Japanese managers in Europe to ask their Japanese headquarters to adjust their employee brand just to appeal to overseas recruits, when Japan headquarters probably think their priority is to hire the best globally minded Japanese graduates.

So I showed them some research from Japanese recruitment company DISCO’s Caritas Research 2020 survey of Japanese students graduating from foreign and Japanese universities. It illustrates that the needs of Japanese students from foreign universities are similar to those of European students.

Whereas graduates from Japanese universities preferred a job which will provide them a secure lifestyle, would rather work in Japan rather than overseas and to work for one company for a long time, the preference of Japanese graduates of foreign universities was for a job which helped them realise their dreams, paid well, and would prefer to work overseas rather than stay in Japan.

Apart from strengthening the employee brand and offering more attractive career paths, another recommendation I made was that management training was needed for Japanese expatriates in leadership, giving feedback, managing diversity and being inclusive when managing Europeans.

I was of course hoping this would lead to more business for my company, but judging by one of the managers who approached me afterwards, it might not be for the reasons I expected. The managing director said his company was 80% Japanese, but there were big communication gaps between the younger generation and the older, between those who had graduated from foreign universities or lived abroad, and those who had mainly worked, lived and studied in Japan. Clearly Japanese companies are having to adjust to different mindsets amongst Japanese employees too.

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

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

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

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

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

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

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

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

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

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

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

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

What Japanese expatriates should do if they don’t get on with their local boss

A 28 year old Japanese female writes to the Nikkei Business Online: “I didn’t get along well with my boss when I was posted overseas and ended up with mental health issues and returned to Japan.”

“My boss only cared about a big project that would be of benefit to them, that Japan headquarters had no chance of approving. My boss kept making me do the negotiations and aggressively asking me if it was done yet. I couldn’t get my Japan HQ boss to intervene. I explained as clearly as I could to my boss that Japan headquarters had told me when I was there that there was no chance this project would be adopted. My boss refused to listen and would not even join me in negotiating with Japan HQ.

“I told them there was another project I was working on which was more urgent but my boss told me to prioritize their project. I became stressed and could not go into the office any more. My boss made out that I was the problem and my boss in Japan eventually accepted this and I was returned to Japan. I really cannot accept the way I was treated – or should I just have accepted it? How should I have dealt with this?”

Ueda Junji, formerly of Itochu and President of Family Mart: “First of all, you are still young, so try to see this as a useful experience for the future. You say you had mental health problems, and actually being an expatriate is mentally very stressful. So having experienced this at an early stage should be of help to you later on in your career.

“Secondly, in trying to think what is behind that boss’s behaviour, just seeing it as them wanting to do it entirely for their own ambitions may be too harsh. Managers in any country want to pursue projects that they think are beneficial. And of course if it goes well it may lead to their promotion.”

“On the other hand, you say you had another project which you thought was more urgent, but since you are a member of a team, you have to accept the decision of your boss, if they say another project is higher priority.”

“I wonder whether being told by Japan HQ before you were posted that this project had no chance of being adopted already sowed seeds of distrust in your mind? Then explaining this to your local boss, however carefully, will have got the relationship off to a bad start. They may have seen you as just a spy from headquarters and hard to tolerate.”

“It might have been better to try to see it from the local perspective – Japan headquarters don’t really understand what is going on overseas. Try to be more like an ally to your local boss and come to your own judgement as to whether or not the project is workable. Maybe first of all ask the boss what their aims and objectives are with the project, then get them to explain this again to Japan headquarters and then see how Japan headquarters reacts, before coming to any conclusion.”

Ueda’s somewhat unsympathetic comments may come as a surprise but is an example of the tough love that Japanese bosses can be capable of. It’s reassuring that he was able to see the perspective of the local boss so clearly. It’s also also understandable how a Japanese junior expatriate, whose ultimate career lies back in Japan, will see it as their job just to comply with Japan headquarters rather than ally with the local management.

If you’re a boss to Japanese expatriate employees and/or trying to persuade Japan headquarters to accept your proposal, you may find our online coaching on building relations with Japan HQ a useful resource. More details and registration here.

Are Japanese companies leaving the UK because of Brexit yet?

I asked this question just over a year ago and the answer is still yes and no. To which I would add, it’s more a case that Japanese companies aren’t investing in or coming to the UK as much as they used to, replacing the ones that are leaving or downsizing.

Asia continues to dominate as location for Japanese companies overseas

The number of Japanese companies overseas is, according to Toyo Keizai*, continuing to increase – up 65% from 2008, but the rate of increase has been slowing since 2013. The number of Japanese companies overseas grew 2% from 2018 to 2019, with growth in all regions – higher growth in Africa/Oceania (from a small base) but only 1% growth in Europe compared to 3% in North America and Asia.

63% of Japanese companies overseas are in ex-Japan Asia – up from 62% in 2018 and 69% of the employees of Japanese companies abroad are in Asia. Around 15% of Japanese companies abroad are in Europe and 14% in North America, with both regions having around 11% of employees. As pointed out last year, the obvious factor in why there are proportionately more employees to number of companies in Asia compared to Europe and North America is the greater number of manufacturing operations in Asia, with larger workforces.

The number of UK employees of Japanese companies has fallen for the first time, by 9%

Within Europe, the number of people employed by Japanese companies rose 18% from 2015 to 2019. Those countries where the number of Japanese company employees has fallen are countries where there has been a rise in populism, civic unrest and political risk. UK employee numbers fell 9% 2018-9 (the first decline since at least 2015), Spanish employee numbers fell 19% 2018-9, Hungary’s fell 18%, Turkey’s 10%, Poland and Italy also showed small decreases in employee numbers.

Countries where Japanese employee numbers are growing are the Netherlands (up 11% 2018-9), France (10%), Germany (2%) and the Czech Republic (2%). Employee numbers in Romania doubled from 2018-9 but this is largely due to Toyo Keizai recording employee numbers at Alcedo (acquired by Sumitomo Corporation in 2011) as being 20,284, having been 318 in 2018. The 2018 number is more in line with other available data.

Number of Japanese companies in UK has fallen for first time

The number of Japanese companies in the UK has fallen by 1% 2018-9, from 972 to 966, the first drop since at least 2015, having risen 11% 2015-2018. France also saw a 2% drop in the number of Japanese companies, even though employee numbers are up. Germany attracted a 4% increase in Japanese companies from 2018-9, having risen 13% 2015-8. Netherlands had a 1% increase 2018-9 (13.5% 2015-8) and Italy had a 2% rise in Japanese companies 2018-9, and an increase of 11.8% 2015-8.

It’s hard to work out where Toyo Keizai derives the net drop of 6 Japanese companies in the UK from. Their list of the 7 companies which have closed down in the UK 2019 shows that this was mainly due to reorganization of holding companies or merging of companies rather than full withdrawal from the UK. Of the 8 new Japanese companies in the UK in 2019, 5 were indirect investments into energy companies by Nippon Koei, a civil engineering company and 2 were indirect investments by WDI, a Hong Kong originated Dim Sum chain which is registered in Japan.

Germany now hosts more Japanese automotive companies than the UK

The Japanese automotive sector is of course the sector being most carefully watched for Brexit impact. Japanese automotive manufacturers are continuing to set up overseas – the total number globally has increased 10% in 2019 on 2015. And “despite” the EU-Japan EPA, 15 more Japanese transportation equipment manufacturers set up in Europe in 2019, a 20% cumulative increase on 2015. Of the 15 new companies, 4 are in Germany, 3 in Poland, 2 in Spain, 2 in Portugal, 1 in France, 1 in Italy, 1 in Slovakia and 1 mystery one. This means Germany now hosts more automotive/transportation equipment companies than the UK – 31 to the UK’s 30.

Japanese acquisitions of UK companies reduced in scale and number

Toyo Keizai’s data is reliant on companies filling in their surveys, so tends to underreport and often misses acquisitions. From my database, I estimate 20 British companies were acquired by Japanese companies in 2019-2020, although some of them were indirect acquisitions through acquiring a parent company with a subsidiary in the UK. Dentsu and Sony continued to acquire UK based companies, and other acquisitions were of British companies in software, gaming, hotels, seafood, recruitment, a manufacturer of drives for electric motors and paper wholesale. The scale is far less than in previous years, both in terms of numbers of acquisitions and value of the deals.

Even adding these acquisitions in shows a 3% drop in the number of people employed by Japanese companies in the UK from 2018/9 to 2019/20 according to my database – the first drop since I started tracking these numbers in 2015.

* Toyo Keizai Data Bank: Directory of Japanese Companies Abroad 2020

Japanese business mysteries explained in 5 minutes #3 Antiquated technology

Non-Japanese people who work in Japanese companies are often shocked at how antiquated the IT is in Japanese companies, considering how much Japanese people love new technologies.

Why is this, and will COVID-19 force change?

The next in our series “Japanese Business Mysteries Explained in 5 Minutes”

Category: Globalization