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

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

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

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

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

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

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

Weak black companies

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

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

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

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

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

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

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

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

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

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

Motivation to work

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

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

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

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

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Where Japanese employees feel most engaged

There isn’t really a Japanese word for employee engagement, which tells you something in itself, so the concept of “hatarakigai” – which Google Translate renders as “rewarding work” – is more often used when conducting surveys on employee engagement. Foreign companies tend to dominate surveys of top hatarakigai companies in Japan, in contrast to the ranking we covered in a previous post, of companies that are most popular choices for new male graduates, where only Accenture appeared in the top 100.

In the most recent Open Work survey of nearly 90,000 Japanese who had been working at a Japan based company for over a year, in terms of hatarakigai, foreign companies take the top 3 positions – Procter and Gamble is at #1, Salesforce.com at #2, Presidential Life Insurance at #3.

The obvious overlap with the popularity rankings for graduate hires is the Japanese trading companies. Itochu is #4 in terms of hatarakigai and was top of the popularity rankings for new graduate hires too. Itochu‘s rivals Mitsui and Mitsubishi Corp are at #9 and #10 for hatarakigai. The other major trading house, Sumitomo Corporation, trails somewhat at #25.

Various consulting companies, foreign and Japanese, including Accenture again, feature in the top 50 hatarakigai. Japanese manufacturers such as Sony, Asahi Chemical, Keyence, Murata and Astellas are also in the top 50.

The financial services companies that were so popular with the Japanese male graduates are not so dominant – Tokio Marine at #14, Nomura at #36, SMBC at #37 and Daiwa Securities at #43.

Open Work includes in its criteria:

satisfaction with pay and benefits,
employee morale,
transparency,
mutual respect between employees,
opportunity for growth for people in their 20s,
long term human resource development,
regulatory compliance/awareness

It points out the biggest gap between those companies who were in the top 10 and those in the top 50 was satisfaction with pay. Foreign companies are well known to pay better and not follow seniority based pay the way Japanese companies do. Japanese companies also have a tendency to sit on their cash for a rainy day rather than use it to raise the pay of their employees.

However those companies who had improved their ranking the most over the year were those who had improved their scores on long term human resource development. Japan Intercultural Consulting, which Rudlin Consulting represents in EMEA, is delighted to offer their training and coaching services in this regard.

Most popular employers for graduate men in Japan are companies that would make their mum proud

It’s probably a legacy from the good old sexist days in Japan when men and women followed very different corporate entry paths that Toyo Keizai chooses to split its graduate employer popularity ranking between males and females. Back in the day, men tended to be graduates of 4 year universities and follow the management track, whereas many of the women went to 2 year junior colleges and entered the administrative track.

It’s intriguing nonetheless to speculate why men in particular choose the companies they do, compared to the most popular choices for men and women combined.

Top choice for men for the second year running is the Japanese trading company Itochu. Known to be more maverick than its rather more staid rivals Mitsubishi Corp and Mitsui & Co, it has been beating them on net income in recent years too. And it pays well. It tops the combined male/female chart too. Mitsubishi Corp has regained some ground, however, and is at number 3 for men, up from 14 the previous year, but is clearly less popular with women, as the combined ranking is 8th. Mitsui is #30 for men, up from #43 a year ago and also less popular with women as the combined rank is #36. Sumitomo Corporation is at #38, down from #31 a year ago.

6 out of the top 10 choices for men are financial services companies – Nippon Life Insurance at #2 this year, up from #7 the previous year, Daiwa Securities at #4 (#3 the previous year), SMBC Nikko at #7 (down from #2), Mizuho Securities at #8 (down from #6), Mizuho Financial Group at #9, same rank as the previous year, Sumitomo Mitsui Trust and Banking at #10 up from #19.

SMBC had a big jump to #11 from #28 and MUFG is at #21 up from #29. However Nomura has significantly lost popularity, down to #27 from #17 and fares even worse in the combined male/female rankings, at #39.

Manufacturers are doing well – Sony up to #20 from #35, Toyota at #29 up from #49, Suntory up to #28 from #62. Panasonic is only at #67, but that’s a big improvement on #115 of a year ago.

The only non-Japanese employer for men in the top 100 is Accenture at #33, up one place from #34.

Overall, Japanese 21 year old men seem to have a preference for established Japanese companies that are performing well, pay well, and would make your mum proud.

Finding a balance in employee development

At a meeting I facilitated of Japanese and non-Japanese board directors of a financial services company in London, the Japanese directors had many questions about employee development in the UK. They wanted to know how the highly specialized professionals in the firm gained the management knowledge needed to reach senior management positions. The answer was that in the UK this is largely through attending externally provided courses, in contrast to Japan where this knowledge has traditionally been gained “on the job” through job rotation.

This then led to a further question – what is the incentive for employers to invest in externally provided training if employees just use this as a springboard to go to another company?

The answer to this was that British financial services companies are under increasing pressure from the regulatory authorities for managers to be accountable for not only their own conduct and behaviour but also that of their team. This means that the annual performance appraisal is not just about whether performance targets have been met but also behavioural goals. Any gaps between expectations and achievement in terms of performance and behaviour should then lead to a development conversation about what kind of training and resources the employee needs to do their job better.

With the introduction of “job type” (job kei) HR systems, this kind of approach will be needed in Japan too. It is different from seika shugi/performance based systems because seika shugi was more focused on performance targets and the impact on bonuses, whereas job type appraisals are both on performance and behaviours and what this means for the person’s future development.

Managers cannot just leave it up to HR departments to take their usual approach to training each cohort simultaneously because the training has to fit the job descriptions and personal development plans. Similarly pay and bonuses cannot be set at a “one size fits all” basis across every department either.

It may take a while for a graduate recruit to grow into the job, however, depending on the function or business they are allocated to, so it would be unfair if there was too much disparity in the way the graduate intake was treated, early on.

This is why major employers in Europe such as Unilever have multiple graduate training programmes. Unilever offers 7 different tracks for its Future Leaders Programme for new graduates: marketing, HR, finance, R&D, supply chain and engineering, technology management and customer development (sales).

I nearly joined the Unilever marketing track (more than 30 years’ ago) but rejected the offer because I felt overwhelmed by the huge binder they placed in front of me, mapping out my first three years in minute detail. Instead, I joined a PR company as one of their first graduate recruits. I later came to regret this choice, as the training programme was entirely in-house, poorly executed and graduate trainees were treated inconsistently. Japanese companies need to find a balance between these two extremes and the Japanese one cohort model, both overseas and in Japan.

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

An end to one size fits all training in Japan

This then led to a further question – what is the incentive for employers to invest in externally provided training if employees just use this as a springboard to go to another company?

With the introduction of “job type” (known as “job kei” in Japanese) HR systems, this kind of approach will be needed in Japan too. It is different from seika shugi (literally “results based system”, introduced in many Japanese companies in the 1990s and 2000s) because seika shugi was more focused on performance targets and the impact on bonuses, whereas job type appraisals are both on performance and behaviours and what this means for the person’s future development.

Managers cannot just leave it up to HR departments to take the “yoko narabi” (one size fits all) approach to training each cohort simultaneously because the training has to fit the job descriptions and personal development plans. Similarly pay and bonuses cannot be set at a “one size fits all” basis across every department either.

This article by Pernille Rudlin originally appeared in Japanese in the 11th November 2020 edition of Teikoku Databank News

The generation gap in working from home in Japan and UK

Despite the UK government’s announcement that companies can allow employees to return to their workplaces from August 1^st2020, the Royal Bank of Scotland told 50,000 of its staff to continue working from home until 2021. A friend who travels into their City of London office once a week tells me it is still eerily quiet and only essential staff are coming in. Lifts can only take 1 person at a time and half of the toilet cubicles have been shut down. A British architect has predicted that this will mean the end of the high-rise office building in London as many firms are making changes for the long-term. Some smaller City firms have shut their office permanently, and others are sub-letting their office space to other businesses.

I see similar trends in Japan too, judging by announcements from banks such as Mizuho or ICT companies such as Fujitsu, wanting to accelerate their digital transformation.

When I was a UK-based employee of Fujitsu ten years’ ago, I used to work from home quite regularly. My team was scattered across the world anyway, so most meetings were done by teleconferencing. Working from home is already well embedded in Europe. For people with children where both parents are working, it is often the only practical solution.

Most people who work in London and have children cannot afford to live centrally, so have long, crowded commutes – just like in Japan. They have no intention of being made to ride on a packed train until a coronavirus vaccine is commonly available.

But there is a generation gap in Europe with regard to working from home, which companies will have to address. Younger, single employees, despite being “digital natives”, are finding working from home very stressful. Partly it is to do with loneliness – for young singles, the workplace represents a vital social life. It is also to do with trust. More senior employees have already built relationships with their co-workers and are confident in their own abilities. Younger people lack that confidence and have not had enough time to prove themselves to their colleagues.

There is also the problem of the environment for working from home. More senior workers have bigger houses. Whereas many young Londoners share houses and flats with other young people. They may have a very small bedroom and no communal rooms apart from a kitchen.

This issue is true for city dwellers in Japan as well of course – a 1 bedroom apartment may have no space for a desk or the possibility of shutting the door on noise and distractions.

But it seems there is one dissimilarity between Japan and Europe – which is that middle aged people in Japan find working from home stressful too. As managers, they have been used to evaluating staff on the amount of effort put in, rather than results, and communicating through horenso and ishindenshin. None of these approaches work well remotely. Digital transformation is going to be as much about managing people as managing ICT.

This article originally appeared in Japanese in The Teikoku Databank News on 12 August 2020

Medium Term Plan Disease

Many Japanese companies have a Mid or Medium Term Plan, usually covering three years, announced by incoming Presidents, with a second one issued half way through their 6 year term. It is sometimes translated into English, but often in a way that does not resonate with employees outside Japan. This lack of awareness or sense of connection to the MTP outside of Japan HQ is a problem for Japanese companies who want to be truly global.

The difference between a world class company and Japanese companies is reflected in the way the Mid Term Plan is developed, says Hioki Keisuke, a partner at Boston Consulting Group Japan, in a recent series in Diamond business magazine on “Reasons why Japanese companies cannot compete globally”.

He looks at various definitions of global, world class companies and notes that only two Japanese companies can be seen as global – Canon and Sony – by Alan Rugman’s definition of having less than half of their sales in their home region with two other regions representing 20% or more of sales.

Three tests of global maturity

Hioki adds three tests of being truly global:

Can your company count its global cash holdings? How much, in what currency and where, by subsidiary?
Is global talent visible? Is the information needed for discovering, training and promoting talented employees globally available, showing their experience and skills?
Is the direction of the company clear? Are management aware of the environment in which it operates, the strengths, the uniqueness and the businesses to focus on?

He points out that many Japanese multinationals still operate on the old international model, where there is a headquarters, which sits above the business divisions, who in turn control the domestic and international subsidiaries. He calls this the “Group company” model, operating on an “entity base” where there is “a castle in every domain” – a reference to the Edo feudal era in Japan.

The transnational model

World class companies are “one company” operating on a function base. There is a corporate function, but not specifically located in any one geographic region. The business units report into it, and the finance, HR, Legal, R&D, marketing and IT functions supply services across the subsidiaries, and also report into the corporate function.

When I was at Mitsubishi Corporation in the 1990s, I remember getting excited about the transnational model which Sumantra Ghoshal and Christopher Bartlett had outlined in their “Managing Across Borders” book of 1989. Hioki points out that although that seemed a far away ideal then, it is the reality now for most world class global companies.

As well as trying to promote that model internally as an organisational structure for Mitsubishi Corporation, I became involved in helping the Corporate Planning Office turn the Medium Term Plan into something that made sense in English. It was then that I realised that there was something about the Japanese language itself, as well as the way the Medium Term Plan was compiled that meant it was both extremely vague, and yet based on a huge amount of detail, gathered “bottom up”. What was lacking was what a Western company would recognise as a strategy, to link the detailed plans to the vision for the future.

Scenario planning vs vague vision

According to Hioki, the Mid Term Plan in a world class company should be seen as “guidance” across 2-3 years, and a link between the megatrends or scenarios and the annual commitment plans. It should be revised every year and then a commitment plan and forecast for the year and each quarter developed from it.

I remember about 10 years’ ago the bafflement expressed by a group of senior managers working at a German automotive company when their counterparts in a Japanese automotive company said they had never heard of scenario planning. Hioki says many Japanese companies are now working on scenarios and megatrends, but the long term, medium term and short term plans are still independent events. This was not quite the case at Mitsubishi Corporation, but certainly the Corporate Planning Office had an unenviable task in trying to tie what they were told was the plan by each business unit into something that cohered with the vision that the President had.

The origins of the Mid Term Plan

Hioki says the Mid Term Plan has its origins in 1956 when Panasonic’s founder, Matsushita Konosuke first introduced the Matsushita Electric 5 Year plan. “More than 60 years have passed since then. It’s not that a mid term plan is bad, but I think it’s time to adopt a way that suits the present times.”

The transnational model was meant to provide a way to trade off globally efficient integration and regional localisation and optimisation. Production is decentralised, and each region develops its own specialities and differentiated value add, but global management is integrated, knowledge is centralised but R&D and development is done through collaboration and shared around the world.

Functions first, not as an afterthought

Hioki also argues that accounting & finance, HR and legal functions should be actively involved in planning and strategy, rather than coming after the business divisions, cleaning and tidying up. Hashimoto Katsunori, former CFO of DuPont Japan and now professor at Tokyo Metropolitan Business School points out that another difference between world class and Japanese companies is “cash awareness”. The response to the coronavirus crisis should be to stash as much cash as possible to ride it out, but Japanese companies were not quick to do this. Japanese companies tend to be cash rich anyway, but also they do not see their cash reserves as belonging to the shareholders, the way world class companies do. And as a consequence, they prioritise sales over profits. They do not understand that cash flow contributes to corporate value.

Hioki describes traditional HR in Japanese companies as behaving like teachers with a grade book, pulling people up for mistakes and spending their whole time creating systems. In a world class company, HR should be about ensuring that the vision, mission and values of the company permeate throughout the organisation, as well as contributing to the development and growth of the company and its employees.

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 comonly 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.

——————

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.

Last updated by Pernille Rudlin at 2021-11-11.

Human resources

Category: Human resources