Category: Human resources

Why rising stars quit their Japanese companies

Myth 1. Young Japanese aren’t loyal to their employers

“They just use the company as a stepping stone”

Japanese companies have been worrying for a while now that young people are job hopping far more than previous generations. A Mynavi survey shows that only 22% of graduate recruits starting work in 2019 said they would be interested in staying at their company until retirement, 8% for over 10 years, 10% 6 to 10 years, 15% 4-5 years, 22% up to 3 years and 24% were “not sure”.

According to Nikkei Business, in their special feature on the myths of why young people quit, the reality is that because young Japanese people like the company they chose, they can’t bear to watch it decline. The Nikkei gives an example of an anonymous new graduate recruit who left her company after 3 years.  She had studied abroad, had good language and communication skills and a strong interest in human resources. She thought working for a Japanese manufacturer had a romantic appeal, and the HR department wooed her heavily. Her reasons for quitting were that the general manager level was resistant to change, and when a new President took over, the direction of the company turned 180 degrees, making her worry about the lack of corporate governance.

Myth 2 Young Japanese lack perseverance

“They immediately complain when work gets tough”

The Nikkei points to a survey of managers of people in their 20s and early 30s which discovered that most managers thought that a much higher proportion of their team were proactive and willing to take up challenges than were not.

If anything, it’s the bosses who do not persevere, says Nikkei Business. They cite a young employee who quit a major insurance company in 2019 after 4 years who said that he was was highly motivated by tough challenges. He had looked forward to putting his energies into sales, but was repelled by how his boss – who took no responsibility and only thought about promotion – was so well evaluated.

Myth 3 Young Japanese quit because their pay is too low

“They prioritise pay because they are worried about their future”

A survey by Japan Net Bank in 2017 showed that 21% of 18-25 year olds did not expect to earn more than their parents over their lifetime, and 43% thought it was unlikely that they would do so.

Nikkei Business comments that the key concern of young Japanese employees is whether their job has meaning, and is of value.  It quotes a young bank employee who thought that by working for a regional bank, he could support local businesses. However he did not see the point of the products he was selling and his request to transfer to a different department was refused. So he quit after  7 years.

Myth 4 Young Japanese quit out of youthful impetuosity

“They don’t have any responsibilities, so they quit on impulse”

It is true that Japanese are marrying later than before (75% of men are unmarried at 29, over 60% of women), so family responsibilities do not weigh so heavily on people in their 20s. “If I think about my future, I care more about how I am valued outside of the company than inside” says one high flier who quit a very prestigious trading company job. He had hoped to use his corporate finance and accounting skills and venture capital experience to help people in emerging markets. However he was placed in a division which did not make use of his expertise and was unexpectedly asked to transfer to another area.

Myth 5 Young Japanese quit because of too much overtime

“They want to have an easy life and hate overtime”

“I’m happy to do overtime, if I feel it’s adding value to the world” says a young Japanese rising star who quit her company after 2 years. She thought the company seemed very diverse and liked the way board level directors were involved in recruitment. However after an exhausting worklife, she felt she would be better in a job where she really felt she was contributing to society.

It’s hard to see any major cultural difference or something uniquely Japanese about this mismatch. I have vague memories of similar frustrations and worries when I was a young person thinking about joining a big multinational organisation after university 30+ years’ ago.

The dangers of going for the obvious solutions

The second part of this feature goes on to look at what Japanese companies could do to improve retention, and points out that the tactics that are usually proposed may be mistaken.

For example, thinking that there should be more 1:1 meetings between younger staff and their bosses could just increase frustration, if nothing is done as a result of the meetings. Having a system whereby young staff can request transfers is also pointless if the transfer is not approved, and often the dissatisfactions continue even in the new role. Internal commendations can also feel hollow, mentors often fail to turn up for mentoring meetings and simple pay rises don’t address key concerns about personal development either. Talking up the bright future of the company can also seem like just so much hot air.

More innovative approaches to retention

Nikkei Business recommends more innovative approaches, to address the fundamental reasons young people leave their companies.  They point out that even good contributors, or employees who were reasonably happy in their work quit their employers, for reasons which are more to do with wanting to expand horizons, develop specialist knowledge or skills, or to have a job which better fits their lifestyle.

One recommended approach is to transfer young people abroad, or to more challenging environments.  I would add a note of caution here, which is that I have often seen young people enjoying the freedom and challenge of living abroad, and then not wanting to return to their traditional Japan HQ, and quitting.  Nikkei Business also suggests an “intermediate” mentor – closer to the junior employee in age and seniority, who acts as a go-between with the more senior mentor.  Finally they recommend using AI to understand the motivations and fit of the person with various job roles.

I would add to this that Japanese companies might need to consider setting up continuing professional development associations similar to the ones we have in the UK – whereby members advance through a professional hierarchy through self study and examinations, in professions such as HR, accounting, finance, IT etc. Then, even if the company cannot offer them roles which have an instant career development impact, young employees can gain satisfaction from developing their knowledge and skills, supported by their employer.

For more content like this, subscribe to the free Rudlin Consulting Newsletter.

Share Button
Read More
Japanese companies need to add professional accountability to their corporate governance

When the topic of meaningless meetings in Japanese companies comes up in my training workshops, I often tell the story of how I once had to attend a meeting in the Japanese headquarters of the company I was working for, as the representative of the corporate planning department, on a topic I knew nothing about.  I was told to read the ringisho and not say anything, except for “ryōkai” (understood, agreed) at the end. “It was two hours of my life I will never get back.  The two people in charge of setting up a loss-making factory simply read out the ringisho (circular memo for making a decision) line by line and then asked for approval to write off several hundred million yen.  This had been approved already, so obviously we just said yes. I still don’t know to this day what the meeting was for – perhaps it was a kind of punishment”.

Japanese companies have internal accountability

On reflection, I think it was about ensuring internal accountability – to give an account of decisions made, actions taken and the reasons behind them.  Most Japanese companies have these kinds of mechanisms for internal accountability and their executives are also expected to be accountable to Japanese society for any failures, hence the succession of shazai (deep bowing to apologise) rituals we have seen recently.

There is a missing piece though, both in the recent Japanese corporate scandals and also the sexual harassment revelations in the Western media and entertainment industry, which is professional accountability.  As Japanese companies globalize and diversify their workforce, I believe they will have to add this piece to their corporate governance and compliance systems.

A wide range of professions in the West, from traditional professions such as law, medicine and accountancy through to newer professions such as HR, banking or engineering all have associations to which professionals are expected to belong if they want to practice.  They sign up to a set of ethics and regulations and are expected to take exams in order to progress through a series of grades and also undertake a certain number of hours of professional development every year. 

Professional qualifications help diversity

Although it has proven tricky to get mutual recognition across countries of professional qualifications, it does help companies build a diverse workforce because they can be “blind” to the gender, age, disability or ethnicity of the person they are hiring, if they have the necessary professional qualifications.

Japanese companies will find it easier to ensure accountability internally and externally when they operate overseas if they employ professionals.  Employees who have professional accountability know they will lose their professional status if they do not abide by ethical and regulatory standards, and this gives them the strength to resist any unethical pressure that is put on them by their bosses or customers.

Ensuring accountability is a two-way process, however.  Although employees will be accountable internally and to their professional association, their bosses will still be accountable internally and externally for their subordinates’ behaviour.  This means that bosses must enable an environment of trust, achievable targets and adequate resources.

This article appears in Pernille Rudlin’s latest book “Shinrai: Japanese Corporate Integrity in a Disintegrating Europe” available as a paperback and Kindle ebook on Amazon.

For more content like this, subscribe to the free Rudlin Consulting Newsletter.

Share Button
Read More
TDK President Ishiguro – quietly magnetic

TDK is in our top 30 largest Japanese companies in Europe, with over 7,000 employees – mainly working their factories in the Czech Republic and Hungary. But we’ve never blogged about them before as their senior executives tend to stay rather quiet.  In fact I wonder if that many Europeans are even aware of them as a company, or that they are Japanese.

People of my age will remember TDK cassette tapes.  The company’s origins date back to 1935, when TDK was founded as Tokyo Denki Kagaku Kogyo (Tokyo Electrical Chemical Industries) and they began manufacturing magnetic tapes in the 1950s. TDK has pretty much phased out its magnetic tapes now and instead is focused on sensors, actuators and power electronic components.  It has acquired various companies in these sectors, including EPCOS in Germany, the Lambda Power Division of Invensys in the UK, and Micronas in Switzerland. As a result, more than 90% of its sales and its employees are outside Japan.

Global governance means empowering

The Nikkei recently interviewed TDK’s President since 2016 – Nasunari Ishiguro. Ishiguro is confident that TDK’s approach to global management by having a structure that encourages self-directed action is working well.  “We had to think about how to have effective global governance.  How to be disciplined as a group  but at the same time not impact society in a negative way.”

“It’s not something that a president can do on their own. We have a phrase “functional equality” at TDK, meaning every department should be functionally equivalent.  We thought the word “governance” didn’t really suit our culture.  It’s not about delegating authority – so we use the word “empower” instead.”

“Instead of just providing money, people and technology to group companies and leaving it up to them to get on with it, we encourage stakeholders to become more transparent with each other, in a spirit of give and take, so it is not a centralized organization, but autonomously distributed”

“For example, a subsidiary in China that makes batteries, then makes use of the structure to propose other things that they want to do, rather than being commanded to do things by the President.”

“So we have regional headquarters in China, the USA, Europe and Asia so that group companies can cooperate with each other. So for example, if a lawyer is needed, they can be sent from a regional headquarters, or they can share a finance function.”

TDK garitto philosophy

“We are currently developing a “Day 1″ book that summarizes our philosophy and the values to be shared, such as contribute to society/the industry, ensure trust, keep quality standards etc.  It should be no more than 3-5cm thick. Each group company can freely exercise their discretion in how they adhere to it.”

“All management meetings are in English, and because of “functional equality” each person is equal in the debate. So meetings can take more than 2 hours.  Overseas group officers are to point out problems without hesitation and feel free to give their opinions and voice doubts”

Ishiguro is worried that manufacturing has moved outside of Japan and wants to ensure that TDK’s monozukuri (craftsmanship) is systematized. He has started a “Garitto monozukuri” initiative with the aim of systematizing and conveying manufacturing know-how to future generations.  “Garitto” is Akita dialect (one of TDK’s original factories was in Akita) meaning “with all your might” and “sturdily.”

Equal global people

“We need to have global employee mobility too. The head of global HR is the Germany HR Director. We have established a cross border HR team as an organization that is not bounded by location.  For example the leader of one project is Chinese, and there are Japanese and German people in the team.”

As for a successor, Ishiguro says he doesn’t care what background or nationality someone has, it just needs to be “someone with a spirit of adventure, and a light in their eyes, who is not afraid of change.  We have to change in order to be of use to society.  They need to put out their antenna, even when the way forward is not clear.”

Although Ishiguro has been at TDK all his career, he actually dropped out of university and also spent some time working in Luxembourg, setting up a magnetic tape factory.  Perhaps this is where he got his un-Japanese tolerance of being equals in argument and thrashing out problems. “I’m not a flashy person” he says, “I believe I was asked to be president because I will consolidate our foundations. I think I have revived the company through open debate and steady reforms.”

For more content like this, subscribe to the free Rudlin Consulting Newsletter.

Share Button
Read More
I love Japan but I don’t want to work in a Japanese company

I’ve done a screencast (around 11 minutes long) of my talk at the Centre People Appointments HR seminar earlier this year, on why people love Japan, but don’t want to work for a Japanese company, and what Japanese companies can do about it.

If you  want to know more about working in a Japanese company, you can find our Japan Intercultural Consulting e-learning modules on Teachable, starting from £39 https://japan-intercultural-emea.teachable.com/

For more content like this, subscribe to the free Rudlin Consulting Newsletter.

Share Button
Read More
Record number of immigrants working in Japan, but unhappily?

It hit the headlines in Japan recently when the proportion of immigrants there rose above 2% of the population for the first time. For comparison, the average across the EU of people living in a country who were not born there is 13%. 40% of Londoners were not born in the UK. Much of the increase in Japan is in younger workers coming from Asian countries such as the Philippines and Vietnam, with new visa categories for highly skilled engineers or to care for the elderly. Chinese nationality residents are the largest group, as they were 10 years’ ago, but only represent around 25% of foreign residents now.  According to a special feature in the Nikkei Business magazine, in 2008 Chinese people made up around 45% of foreigners in Japan and there was also proportionately a much larger group of Brazilian residents (often Japanese ethnicity Brazilians working in car factories).  In 2016 Japan had the fourth largest number of new foreign residents, after Germany, USA and the UK.

Around 40% of companies in Japan surveyed by the JRI say they are currently employing non-Japanese, a further 4.5% say they have non-Japanese as temporary workers and 12.7% say they hired non-Japanese workers in the past. The biggest reason by far given by Japanese companies for hiring non-Japanese workers is that they were not able to hire Japanese (50%)  with other reasons being “to liven up the organisation” (15.8%) and “because foreigners work hard” (13.1%).

Japanese companies say the main issues they have with hiring foreign employees are communication difficulties, that employees who they train are only allowed to stay for  a fixed period and that there is a large variety in the quality of foreign employees.

But as the Nikkei Business special feature points out, many foreign workers are not happy either. Japan only ranks number 32 of 33 (Brazil is bottom) in terms of countries where people would like to work, according to a survey by HSBC. The main reasons for the low ranking are that Japan is seen as a closed society, that it is difficult to settle permanently there, that pay is low, worklife balance is bad and the educational environment for children is not good.

The Nikkei Business feature tries to end on a positive note, pointing out that this influx of foreign workers is a $27bn business opportunity for Japan – helping the new immigrants with accommodation, banking, living essentials and education.

 

 

For more content like this, subscribe to the free Rudlin Consulting Newsletter.

Share Button
Read More
No sacred cows for NEC’s President Niino

I was reminiscing a couple of days’ ago with a Japanese business person about how in the 1990s there was a Silicon Glen in Scotland hosting many Japanese electronics and semiconductor factories, including NEC’s semiconductor plant in Livingston. After the IT bubble burst in 2000, most of these plants disappeared, including NEC’s. Silicon Glen has remade itself, focusing more on software and semiconductor design and development.  NEC has also reinvigorated its presence in the UK with the acquisition of Northgate Public Services in 2018.

NEC is not out of the woods yet, however. In a tough interview in the Nikkei Business, President Niino seems willing to slaughter several sacred cows and even commits to taking responsibility (presumably by resigning) if his revival plan to FY 2020 does not succeed.

He said he was open to merging with rival Fujitsu, even if it meant the NEC name disappeared. I certainly recognised from his descriptions some similar characteristics in the way they operate.

NEC, like Fujitsu, was part of the so-called Den Den Family, where stable, dependable business came from government contracts from what is now NTT. “Customers would make very stringent requests of us and we would always try to respond with the best possible technical solutions, and deliver 100%. This is an important quality, but you cannot survive globally just on this”.

Niino thinks there were many reasons for the halving of NEC’s turnover since 2000.  They had relied on introducing new technology in areas such as semiconductors, PCs and mobile phones, but once these became volume businesses with many newcomers, spending far more on R&D, NEC was no longer able to compete.

Niino is focusing on profit targets rather than turnover and sees NEC’s future strength as being in “safer cities” – using AI and software development rather than hardware. Clearly China will be a major competitor in this, but I guess NEC and other Japanese suppliers will be preferred by many who might view China as a threat.

Niino has brought in an HR director from Microsoft Japan to shake up the HR system.  He has appointed 31 “change agents” and made evaluations more visible, and the distinction between specialists and managers more clear.  Corporate officers on the board have all been asked to step down temporarily and then are being rehired on 1 year contracts. “I won’t be firing them if they don’t meet targets within one year, but if they miss two years’ running, it might be that they are better off working outside NEC”.  As Niino is himself a Corporate Officer, no wonder he has to commit to taking personal responsibility for any failure too.

For more content like this, subscribe to the free Rudlin Consulting Newsletter.

Share Button
Read More
Mitsui tells employees – come and go as you please

I remember when I left Mitsubishi Corporation 2o (!) years’ ago, I was surprised how friendly some of my most senior Japanese sponsors continued to be towards me.  One of them explained to me that he thought Mitsubishi Corporation should think like McKinsey and view employees who leave as “alumni” who might one day come back and work there again, or end up as business partners or customers.

It was very far sighted, and I often joke that he was right in that Mitsubishi Corporation does seem to have become a McKinsey with a venture capital/investment arm attached. Mitsubishi’s arch rival Mitsui Bussan also seems to have gone down this path, according to an article in the Nikkei Business magazine recently.

They have set up a separate office called Moon Creative Lab in Tokyo and Palo Alto to look for new business opportunities in the IoT and AI sectors, inviting ideas from their 44,000 employees around the world. Mitsui also hosts networking events, inviting alumni who head up start ups in Japan such as atama plus, Shippio, Nature, Sansan and B Platz.

Mitsui continues to be popular with top Japanese graduates but they only hire around 130 a year, compared to over 200 at the end of the Bubble Era. They have also found that their retention rate has worsened in recent years.  Luring alumni back in to create businesses that are not in its traditional sectors is seen as one way to move away from its dependency on resource and commodities businesses. For example, Yusuke Tamura, who was a graduate hire in the metals division in 2004 but left in 2014.  He  started up a fashion brand as CEO but parted ways with the founding partner.  He returned to Mitsui in 2016 and is now working on the restructuring of Mitsui’s catering business.

Mitsui was always characterised as being more about “people” than Mitsubishi, who was more about “organisation”. The idea was that to get things done at Mitsui, it was about who you knew, whereas Mitsubishi worked in a more organisation driven way.  So Mitsui is making use of who they know outside the company as much as inside – and maybe even outside Japan?

For more content like this, subscribe to the free Rudlin Consulting Newsletter.

Share Button
Read More
Is Sharp still a Japanese treasure?

Sharp Corporation Chairman and President Tai Jeng-wu was the second in command at Taiwan’s Hon Hai when it acquired Sharp in 2016.  His cost cutting organisational reforms have turned the company’s results around in a “V” shaped recovery.  He is now hurrying ahead with restructuring the business portfolio.  In an interview with Nikkei Business he says Sharp is “Japan’s treasure” and is at pains to point out how influenced he has been by Japanese teachers in the past.  Japan and Taiwan continue to have good relations (reinforced by a common threat of China, hinted at in this interview with the dig at unfair competition from state owned companies), and many Taiwanese speak excellent Japanese.

He says that unlike Carlos Ghosn, he did not arrive at Sharp with a posse of executives.  He feels that the reforms are still only half way but he wants to work alongside Sharp employees – rather than a top down imposed change.

Asked what was the problem at Sharp, he said “it is not for me to say, but I suppose the crisis occurred when there were problems with management in the 2010s – when people who have only had experience in one particular technical area or business become president.  You need to have a general overview to be a top executive, so when there was a crisis they were unable to respond. How I fixed the $2.5bn loss was to cut costs by around $1.7bn and then cut back investments and with some transient profits, we were back in the black.”

Don’t be a big fish

“You have to develop people step by step.  When I started at Sharp, I said when announcing my strategy that “Sharp should not be a big fish, but should aim to be a fast swimming fish”. So I kept asking every day for things to speed up.  I set some rules for developing successors.  I lowered the limit requiring presidential approval to Y3m ($27,000).  That was to ensure I would be aware of all the company’s problems. I then increased the limit to Y20m ($184,000) in 2018 when I put the CEO structure in place and this year I increased the limit to Y100m.”

“I will stay on as chairman of Sharp until March 2022.  My wife and family want me back in Taiwan though. All the time from 2016 I have been looking for a successor.  I even asked a Japanese consultant to help, but I cannot find one.   I want the successor to be Japanese – it doesn’t matter if it’s an internal or external appointment. Maybe it could be someone from Hon Hai even.  They should be able to manage in the current harsh environment, covering a wide range of businesses and find synergy with Hon Hai.  It is the second criterion that makes finding the right person difficult.”

Japanese managers became bureaucrats

“It used to be that Japanese management of factories and businesses were strong, and my teachers were all Japanese. But then Japan went into a recession and the founder managers all disappeared, and managers became bureaucrats. That is why management strength declined.  Japan is now only strong in parts and materials. ”

Sharp’s employee levels are back to the same as before the management crisis.  “There were two early retirement drives during the crisis, and a lot of good people left.  Those who remained when I joined the company in 2016 were one of three types – highly capable and loyal, those who couldn’t find another place to go and those where were waiting to be pushed. I actually never cut employees. In fact we need to increase our employees – we had some influxes from when we took over Toshiba’s PC business and other M&A.”

“I am not a god, I just improved everything step by step”

“I renegotiated the contracts for solar battery procurement and saved around $100m. I have also brought the Sharp brand back in house for the US TV production business.  A brand is like a person’s name. Selling it is wrong. During the crisis Sharp sold off its precious buildings for $188m and then spent $30m on out of date computing.   I am not a god, I just improved everything step by step. I was taught to do Horenso (keeping bosses in the loop) and check everything thoroughly, not just sign off easily by Japanese teachers.”

I am now promoting management based on data, and a shift to B2B (business to business). B2C (consumer) business is currently 65% of our turnover, I want to make it 50/50. The structure of trade in B2C is unfair – companies like ours in a free trade country have to compete with state owned companies who don’t have to invest or write off so much. That is why Japan’s IT/electronic companies’ share is falling – it’s a structural problem.   In B2B it is a fairer fight. W have built a good ecosysytem over many years, so we have a good chance.

A Rising Sun Alliance of Japanese electronics companies

“I think there should be a Rising Sun Alliance of Japanese companies. There are a lot of Japanese electronics manufacturers but I don’t see that they will merge -t here is too much pride. I do have to be careful as Hon Hai is not a Japanese company. I am reflecting every day on how to manage employees. If I am criticised, it is not just my, but Taiwan’s pride at stake.”

“Sharp will last over 100 years.  It is a treasure of Japan. I would like the brand to last another 100 years. I come to the office every day before 7:00am and give a bow to the statues of the founders in the front entrance. Sharp is a treasure to me too.”

Nikkei Business comments that there is no doubting his sincerity and dedication – apparently he lives in a single man’s dormitory and walks round the factory at 5am in the morning thinking about Sharp.  He is at pains to seem almost more Japanese than the Japanese in this. But, the Nikkei wonders, will this be enough to succeed in the new territory for him and Sharp of B2B platform business.

 

 

For more content like this, subscribe to the free Rudlin Consulting Newsletter.

Share Button
Read More
The successes and failures of Japan’s era of big overseas acquisitions

The era of Japan’s big overseas acquisitions began with domestic mega M&As in the 1990s according to Nikkei Business magazine.  Following the bursting of Japan’s economic bubble in 1990, a wave of M&As happened in the financial sector, giving birth to Mizuho from Fuji Bank, Daiichi Kangyo and the Industrial Bank of Japan and Sumitomo Bank and Sakura Bank producing SMBC. In the steel sector with NKK merging with Kawasaki Steel and becoming JFE and in the pharmaceuticals sector with Yamanouchi and Fujisawa merged to become Astellas.

The key concept for these M&As in the 1990s was “restructuring” – to rationalise the back office and integrate R&D. Then in the second half of the 2000s came a wave of overseas acquisitions, to counter the business impact of the shrinking, ageing population of Japan by growing overseas but also to benefit from further restructuring and rationalisation.

Mega overseas acquisitions of the 2000s

In 2007 Japan Tobacco acquired the UK’s Gallaher from RJR, becoming the third biggest tobacco company in the world. In 2006 SoftBank acquired Vodafone Japan and then the US company Sprint Nextel, then British ARM Holdings in 2016. Takeda acquired US Millennium Pharmaceuticals in 2008, then Swiss Nycomed in 2011, with the biggest M&A ever by a Japanese company, acquiring Ireland’s Shire in 2019.

“Growing overseas means the development of our human resources has become an urgent necessity” said the President of Takeda in 2006, Yasuchika Hasegawa. Hasegawa  was seen as “an alien from outerspace” for his dry, rational management style, arising from many years working in the USA.  Although Takeda had been the biggest pharmaceutical company in Japan for some years, it only ranked around 17 in the world before its acquisition spree and urgently needed to find new drug development sources. It felt it was lagging competitors.

The need for global management skills

Hasegawa decided to globalise the company internally by recruiting a foreign successor to himself in 2014 – Christophe Weber from GlaxoSmithKline.  Three out of the seven current Takeda directors are not Japanese.

Japan Tobacco‘s managers sent overseas after the Gallaher acquisition found themselves caught between overseas executives determined to defend their patch with rational, logical arguments about productivity, logistics and profitability. After years of painful discussion, it was agreed to close the factory in Northern Ireland.  Even now, says Masamichi Terabatake, the current President of Japan Tobacco, a Japan based executive needs to be prepared to travel around the world regularly to discuss strategy with local executives. “You need to keep global staff motivated. Investment and marketing cannot be left vague, they have to be quantitative so they can be transparently discussed. That’s probably why executives in the West are a bit younger!” he says.

NSG acquired UK’s Pilkington in 2006, becoming heavily indebted to do so. From being very domestic, it became a company whose sales were 80% overseas. Unfortunately this proved to be terrible timing as the automotive and architectural glass market crashed after the Lehman Shock.

Many of the acquirers also struggled because they did not have managers with experience of managing overseas businesses.  As Nikkei Business magazine says, mega M&A means mega complexity for which plenty of preparation and a high level of management know-how, with the ability to spread this know-how horizontally and vertically is needed for success.  It’s still not clear how far Japanese companies have progressed in this.

For more content like this, subscribe to the free Rudlin Consulting Newsletter.

Share Button
Read More
The enduring Japanese family firm

I attended a Japan Society talk last month on shinise  (Japanese family firms) – given by academics Innan Sasaki and Davide Ravasi.  Sasaki and Ravasi argued that shinise have survived over 100 years, by keeping small and focused on traditional crafts like sweet making, sake brewing, and textiles.  They are very much embedded in the society and community in which they operate – the highest concentration is in Japan’s old capital, Kyoto.  In return for their commitment to the local community, they gain a social status and support from the community.  They are meant to have a higher moral purpose than pure profit and therefore do not seek to take risks and grow much beyond their current geography and sector – which means they are more resilient to external economic shocks.  When downturns happen locally, they survive through the strength of local support. This contrasts with what Sasaki and Ravasi call “instrumental” firms, who exist for a purely economic purpose.

Even large Japanese multinationals behave like Kyoto shinise

Listening to their descriptions of shinise‘s motivations and behaviours, I realised they were very similar to the way I describe bigger, multinational Japanese firms in my seminars.   Even though Japanese multinationals have taken the risk to expand overseas, and are often no longer owned by the founding family, the ethos of having a higher moral purpose than shareholder value, of corporate contribution to society and strong risk aversion to ensure longevity still endures.

And like the shinise, the darker side is the sacrifices needed to be regarded as a proper member of the family firm and the difficulty of becoming a senior manager if you were not born into it – or at least recruited straight from university like Japanese headquarter permanent staff.

Nikkei Business magazine had a feature last month on family firms in Japan showcasing research that family owned firms in Japan perform better than non-family owned firms in terms of Return on Assets. “They don’t hold on to unnecessary assets” says Professor Yasuhiro Ochiai of Shizuoka University.

Japanese family owned multinationals that have performed well

DMG Mori is still owned by the Mori family and has been particularly active recently in M&A overseas since the current Mori took over as President in 1999, most notably in their merger with German machine tool manufacturer DMG.  Apparently quite a few of DMG Mori’s employees come from the wider “family” of customers and suppliers.

Of course the most famous Japanese company still managed by a founding family member is Toyota.  However the current President Akio Toyoda is adamant that the company name is Toyota, the family name is Toyoda, and Toyota is not a Toyoda family company, “it’s everyone’s company.”

Those that are listed on the Tokyo Stock Exchange and also active in Europe were:

  • Suntory (Torii family – founded by Shinjiro Torii in 1899) – chairman is from the founding family.
  • Aisin (automotive parts maker in the Toyota group founded in 1949 – chairman is part of the Toyoda founding family)
  • Shimano (Founded 1921, president is a Shimano)
  • DIC (Dainippon Ink) founded in 1908 by Kijiro Kawamura, a Kawamura is on the board of directors

And how to avoid toxic family rows

It’s not all joy in a family of course. Nikkei Business also looks at the family rows that have affected the performance of companies like Idemitsu (petroleum company) founding family shareholders fighting a merger with Showa Shell and the rebellion against founding family member Yoichiro Ushioda and chairman by executives of LIXIL (owners of German bathroom fittings company Grohe).

Nikkei Business’s prescription for avoiding trouble is:

  1. Frequent communication between family members
  2. Treat family members who are employees the same way as other employees in terms of company regulations
  3. Don’t withhold information for family only, be transparent in management
  4. Don’t appoint a successor from the family if there is noone suitable
  5. Keep family assets and company assets separate
  6. When there is a generation changeover, keep criticisms to yourself
  7. Avoid too many family members as employees
  8. Ensure a structure is in place to stop family members going rogue

For more on what being a “family” means for Japanese firms and the non-Japanese employees that work for them, this was one of my most popular articles in recent years.

For more content like this, subscribe to the free Rudlin Consulting Newsletter.

Share Button
Read More

Last updated by at .