Human resources

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

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

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

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

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

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

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

This article originally appeared in the Nikkei Weekly.

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Has Hitachi opened Pandora’s Box with the ending of seniority based pay?

Hitachi’s announcement on 26th September 2014 that it would be abolishing seniority based pay and promotion for management positions in Japan has caused quite a stir in Japanese business circles.

One HR consultant likened it to opening Pandora’s Box, as it may spread to non-managerial ranks, other industries and may even herald the end of lifetime employment. Both Nikkei Business and Diamond magazines have linked the announcement to Hitachi’s Global HR Management strategy and the database that Hitachi have been developing for the past two years of 250,000 employees, inside and outside Japan. 50,000 management positions in Japan and overseas are now measured by the same standards. These tools and an evaluation system means that with the abolition of seniority based pay, changes can be made to globalize compensation.

The abolition will affect 11,000 management positions in Japan – those people who are at the kacho (team leader) level and above. From October this year, no distinction will be made between function and grade status pay, and there will instead be one “role and results” pay scheme. Under the old scheme, around 70% of pay was determined by the employee’s length of service in the company.

Hitachi want to ensure that they can hire and retain high performers, regardless of nationality, including as mid-career hires. This is deemed necessary if they are going to reach their target of 50% of sales overseas by 2015, compared to the 41% level reached in 2012. The new pay scheme will therefore eventually apply to all management positions in the Hitachi group, not just in Japan headquarters.

According to the Nikkei, this change to the HR system has its roots in the difficulties Takashi Kawamura, chairman of Hitachi until 31 March 2014, experienced since 2009 when as President he started to weed out businesses he felt did not fit the “social innovation” portfolio. “Westerners place emphasis on their skills and expertise, so even if the company changes, they will follow the business that they have been working in. But Japanese people want to stay with the company, even if the business they are working on is devolved elsewhere… As Japan globalises, the relationship between the company and its employees, and employees’ thinking will also change.”

As Diamond magazine points out, this is a drastic transformation from the “family style” traditional Japanese company image that Hitachi used to have. It was known that Hitachi did not pay particularly high salaries, but that its benefits were very generous, and that it would provide a secure and stable environment for employees. It was always very serious about its HR strategies, and seen as a front runner for innovations in Japanese HR systems. So the abolition of seniority based pay is potentially “epoch making”, with implications far beyond Hitachi itself. It is rumoured that Sony and Panasonic are also looking at changing their pay schemes in a similar way.

The abolition of seniority based pay will impact other sacred cows of the traditional Japanese HR system. For example, there will no longer be “Beh-ah” (short for Base Up) negotiations, whereby the same basic pay rise is applied across the workforce, so no more “spring offensive” – the ritual negotiations between the company union and management for the annual pay increase. As a consequence, the raison d’être of the company union itself may be under threat. Lifetime employment will become even more thinly upheld, as people are more able to move from company to company without worrying about losing seniority based entitlements and it will be easier then for companies to get rid of people.

Hajime Yamazaki, guest researcher at the Rakuten Research Institute for the Economy (who has himself changed employers 12 times since joining Mitsubishi Corp in 1981) makes three recommendations to Japanese employees:

Review your lifeplan
Not just in terms of when you retire, but think about potential instability of income when you are still working. It might be best to increase the amount you save.
Take more risks in your job.
If your compensation is going to be based on results, then you have to take a “no risk, no reward” view of your work.
Regularly think about changing employers
Yamazaki is not saying Japanese employees should all start quitting their jobs, but that you should constantly be reviewing your skills and experiences to see if they would help you get a job in another company.

“For a business person with ability and motivation, the end of seniority based pay means there will be many opportunities in the road ahead,” says Yamazaki.

Mitsubishi Heavy Industries – feminise and foreign-ise to stop being fossilised

The cover story for the Nikkei Business magazine (JPNS) for October 20th 2014 is somewhat doom and gloom,claiming that Mitsubishi Heavy Industries’ reforms were too slow, and it’s now in the last chance saloon. The four part special includes an interview with the president, Shunichi Miyanaga, who has been leading the reforms and also a handy checklist so you can make sure your Japanese company hasn’t also become fossilised like MHI. One of the items on the list is whether “You have lots of Japanese expatriate staff, and the local hires view them as the secret police”

The online counterpart to Nikkei Business also has an interview with Christina Ahmadjian, an American who has lived in Japan for 17 years and is now a professor at Hitotsubashi University, who was appointed as an external, or “outside” as they say in Japan,director of MHI in 2012. She’s also on the board of Eisai, the Japanese pharmaceuticals company. Needless to say, she speaks fluent Japanese – and was also an “accidental Office Lady” in her past, at Mitsubishi Electric.

She termed MHI “super-Japanese” for its slow decision making and initially did not want to take up the role. Her friends cautioned her, saying there are plenty of other Japanese companies who are more advanced in their reforms that she should consider. However the then President and chairman took her presentation to the board very seriously, which led her to decide to “try it for a year, and quit if it didn’t work out”.

She continues this un-Japanese attitude by regularly asking in board meetings “who is accountable” and asks for specific commitments from anyone who uses the typical Japanese vague term “kento shimasu” (we will study this further). She also insists that strategic rather than technology related subjects are discussed in the board meetings.

President Miyanaga has also changed the board meetings, through reorganising the company into four domains, and decreasing the representatives accordingly to the board, which has allowed for smoother discussions. Ahmadjian says she is surprised by the speed at which Miyanaga has moved, and also how careful he is to share all information with her, including on any M&A activities. Previously, Japanese companies had been reluctant to involve external directors as they were concerned that confidential matters would be leaked.

Nonetheless, MHI is still slow compared to the foreign competition, she says. MHI is beginning to appoint non-Japanese to senior positions overseas but there is a lack of candidates internally. It’s not always the case that it is easier to get rid of people in foreign companies, she argues – in Europe the unions can be very strong and she suggests that some Japanese companies are using legal barriers as an excuse not to restructure, and are in fact “zombie” companies.

“I am a watch dog, making sure MHI do not slack off on their reforms” she concludes.

Lessons from the Netherlands for Womenomics in Japan

The Netherlands has the largest proportion of part time workers who are women amongst the 34 OECD countries – 61.1% compared to 36.2% in Japan, which is ranked 7th. The employment rate for women is 69.6% (6th out of 34) in the Netherlands, compared to 63.2% (#15) in Japan.

One major difference between the two countries which helps account for this is that in the Netherlands, women can change from full time to part time work with the same employer without losing any of their benefits as permanent full time members of staff.

The Nikkei Business magazine describes days in the lives of several Dutch women, who have high profile, senior jobs, but work 4 days a week and pick their children up from school on their bicycles. It points out that if Abenomics is really to achieve its goal of 30% of managerial positions to be occupied by women by 2020, the whole of Japan is going to have to be much more flexible in its working arrangements, otherwise “it’s just building castles in the sky”.

The Dutch work the fewest hours in the OECD, but average salaries are higher than Japan, showing that they are highly productive. Dutch cannot understand the Japanese concept of “service overtime” (doing unpaid overtime to show loyalty to the company).

There is also very little in the way of Japanese style seniority based pay. The same pay for the same work has deep roots in Dutch society.

Part time employment boomed in the 1950s in the Netherlands to enable young childless women to work in a time of labour shortage. In the 1970s, with deindustrialization, part time work became more common in the service sector. However women were meant to stay at home to look after the children. The turning point came in the early 1980s. After the oil shock, the Netherlands lost industrial competitiveness, and there was negative GDP growth, but wages did not fall, known as the Dutch Disease. The Wassenaar Agreement of 1982 between employers’ organisations and the unions exchanged wage restraint for increasing part time work and shorter hours and thereby reducing unemployment and inflation. This also had the consequence of enabling women to take up employment.

There was a gap in benefits for part time and full time employees, just as in Japan now, but from the 1990s the concept of equal pay for equal work was promoted. Furthermore, the Working Hours Adjustment Law of 2000 means that employees have the right to adjust what working hours they will do in agreement with their bosses, eliminating “service overtime”.

The Dutch government has also invested heavily in childcare provision, but as the Nikkei Business magazine says, the biggest difference with Japan is the role that men play. It is much more acceptable in Dutch society for men to choose their working pattern based on childcare needs. The norm is for 2 working parents to do 1.5 of a full time job. And of course working from home is much more accepted than in Japan. “Without an environment where men can participate in childcare, childcare services and a revision of working hours, there is no way Japanese women will be working more than they currently do. It has taken the Dutch 30 years to change their labour market, and this raises questions for Japan” concludes Nikkei Business.

The 4 types of Japanese expat manager

Susumu Okamura, a veteran of Daiichi Life, DIAM in the US, UBS Global Asset Management and a Columbia MBA alumnus, believes experience of secondment to another company is a must for survival in the global economy. Thanks, however, to ‘Naoki Hanzawa’ (a TV series in Japan about a heroic salaryman banker), being seconded to another company has a thoroughly bad image in Japan. However in global companies, where spin off companies are multiplying, being seconded has become part of management development.

Foreign business people are particularly enthusiastic about being sent to manage acquisitions or struggling subsidiaries. They see it as a valuable chance to put their ideas into action and do things their own way, says Okamura.

Okamura views joining your first company as a second birth, with being seconded to another company as a third rebirth, but unfortunately many Japanese managers do not see it that way. Okamura sees four types of secondees:

The depressive – who has dropped off the elite track of the headquarters, so becomes disillusioned and loses his spark. However they are often given an important role in the subsidiary company, so they are the worst kind of boss for the employees of the subsidiary.
The look backer – who wants to make headquarters regret pushing him out by producing great financial results. Tries harder than the depressive, but his aggressive, inflexible management style can warp the subsidiary
The phlegmatist – has the same laid back style wherever he goes. Works steadily, doesn’t try to change anything.
Mindset changer – is thrilled at the chance to start a new chapter in a new organisation, pursuing new dreams

As Okamura says, in traditional Japanese companies, secondment damages your chances of becoming a top executive in the headquarters. “But I want to ask instead, is it really fun to stay in the headquarters? What are you learning which is of value in the marketplace? Do you think that value will still hold in 10 years’ time?”

“We are in the middle of a diversity boom. However, unfortunately in many cases, the foreigners, women, mid-career hires and the disabled that are hired all end up being ‘dyed the same colour’. It’s not obvious why diversity was such a reason for hiring people. But being seconded is different – there is an unshakeable diversity to having to become part of a different corporate culture.”

You need to know Japan to be a globally effective Japanese manager

Foreign companies in Japan are known as gaishikei (foreign capital managed) and Japanese who choose to work in them are often suspected of being “lone wolves” who are motivated by money. However recently some Japanese managers who have worked in gaishi joined Japanese companies later in their careers, such as Hikaru Adachi, recently interviewed in Diamond magazine. He was born in Austin, Texas, went to Hitotsubashi University and then worked for P&G, Booz Allen, Roland Berger etc before joining Japanese clothing company World and starting up a group called Gaishikei Leaders.

He says he decided to work for a Japanese company because he is so concerned that Japan is being marginalized on the world stage, and to counter this, economic leadership is needed, for which global minded managers are required.

He joined a gaishi initially in order to learn as much as possible, as quickly as possible. Although he found performance reviews tricky as he would tend to be naturally humble about what he did or did not achieve, compared to the boasting from other employees about their successes, he felt that his honesty eventually won through, and people came to trust him.

Gaishi managers have experience that purely Japanese managers lack:

Experience of having worked with foreign employees who speak a diverse group of languages, particularly English – knowing how to write emails, documents, run meetings. This cannot be achieved by only working with Japanese speakers, who are used to the non-verbal, telepathic way of Japanese corporate communication.
To have a standpoint that is not pivoting on Japan. For example, corporate cultures or customs which work fine when it is just Japanese working together, but in a global market or working with non-Japanese, they are hard to understand, or cause major problems.
Systems which are based from the outset on being global, such as HR, evaluations, finance and information systems. It’s not sufficient just to adjust Japan HQ systems for global use.

Japanese who have worked abroad with Japanese companies may be able to get enough experience in the first category, but for the second and third aspects, gaishikei managers will have the edge. Particularly on 3. he points out that with Japan’s particularly Japanese systems and structures, it is difficultto get experience in hiring and developing high quality non-Japanese staff.

He stresses he is not saying Japanese companies are inferior to gaishi, rather that Japanese managers lack the necessary self awareness about Japan’s history, culture, politics and economics to be able to represent it effectively in the global world.

Oxford Boat Club vs Japan’s “Black” companies

Maiko Tajima, formerly of KPMG, now working for the World Food Programme, explains in Diamond Online why the rest of the world does not understand Japan’s so-called “black” companies. As she points out, if a native English speaker heard “black company” they would probably think “black enterprise” was meant, ie a company run by someone of what in the UK would now be called “black or minority ethnic” origin. Apparently there’s also a series of novels written by an American author called The Black Company.

Anyway, the closest translation would probably be “sweatshop” but most in the West would think of this as referring to factories, or workshops, in the US or Europe in the 19th and 20th centuries, and more recently in developing countries, and find it hard to believe Tajima when she explains that such conditions are occurring in a developed country such as Japan, in the 21st century. A recent survey of its employees by Sukiya, a late night restaurant labelled a “Black Company” revealed comment such as “regardless of night or day, put all your life into your work, and if you survive, then you get to give the orders next time” and “work until your nose bleeds and you faint. Then you won’t be able to say anything is impossible any more”.

She explains how this occurs by contrasting her experiences as a member of the boat club in Oxford and also of a fencing club in a Japanese university. In the Japanese university club, the concept of “sempai” (seniors) was strongly adhered to – she calls it a “caste system”. You could not eat before your coach and your seniors started eating. Practice was to see how much you could endure. If they felt you lacked “konjo” (guts, willpower), it was the collective responsibility of the rest of the club too, so you all had to sprint around the sports hall. Tajima did get results in her matches, but she is not sure to this day if the “guts” she had at that time has really helped her in her life since.

As a member of an Oxford University Boat Club, there were of course the early morning, 5:30am starts on the river, that had to be endured over several months, but the reason behind this was “doing what we had to, to win” – starting with the desired outcome and working backwards.

The team was multicultural – American, British, Indian, Chinese and Taijma herself, and teamwork was heavily emphasised, but only in terms of getting the team to be a winner – there were no bonds outside the boat club. You were also allowed to make suggestions as to what should be done. “It was not what you could or could not endure, just what was the most rational course of action in order to win.”

As she points out, in European countries such as the Netherlands, there is the right to leave work 2 hours early, if the previous day you worked two hours overtime, and plenty of maternity and paternity leave. The focus is on trying to have a “good life” both in work and home life, as part of government policy.

She thinks that the roots of the 21st century Japanese “black companies” lie in the kinds of behaviours described by Ikujiro Nonaka in his book “The Essence of Failure” – an organisational study of the Japanese armed forces in the Second World War – emphasising human relationships over rationality, and to strive for spiritual virtue, no matter what had to be endured.

What to do with the window gazing tribe

I visited Japan for the first time in a year and a half at the end of last year. I try to go to Japan once a year, each time looking out for subtle changes in a country I have been visiting or living in for the past forty years.

This time I felt some of the “genki” (a useful Japanese word meaning energy and health) had come back, compared to visits in 2011 and 2012 when there seemed to be a general atmosphere of depression.

However I also felt Tokyo had slowed down. There were visibly more elderly people, but also the younger people moved more slowly, partly as they were gazing into their smartphones as they walked.

Japan’s “yasashisa” (gentleness) and rich cultural life make it a great place to grow old. Of course I realise that it is the current generation of retirees who have it the best – a decent pension and healthier, longer lives in which to enjoy it.

My generation, both in Japan and many European countries, face the prospect of not being able to retire until we are 70. So we have at least another 20 years of working life ahead of us. In Europe it is now illegal for employers to discriminate on the grounds of age, and the default retirement age of 65 has been phased out in the UK.

Europeans reaching their fifties will not be able to afford to retire early as previously. But if they cling on to their jobs they are made to feel like they are blocking the way for younger people and are vulnerable to redundancy programmes.

It is hard to get a job in another company once you are over fifty – and there is also a question of motivation. The prospect of another 20 years doing the same thing – particularly if it is a “gemba” (shopfloor) type, active, high pressure job, is not appealing. The second half of a working life should be more about reflecting on acquired knowledge and skills and handing them on to the next generation.

I’m not sure the initiatives taken in Japan since the 1990s to deal with this – such as kata tataki (literally “shoulder tapping” where employees in their late 40s are forcefully offered very early retirement) and madogiwazoku (the window tribe – people who have been given a seat by the window and no real job to do) really worked. It was not only disheartening for those directly impacted, but also for the younger generation, who have reacted by becoming more risk averse. They want lifetime employment, but don’t see the point of being ambitious or taking risks such as working abroad.

A better way might be to help people in the second half of their working life find ways of capturing their accumulated knowledge and skills and transmitting them to the younger generation in Japan – through teaching rather than as a manager.

Locally hired employees and managers in overseas acquisitions would also welcome having an appointed mentor to help them feel more connected to Japan headquarters and understand the corporate culture and processes. If Japan could refresh its traditions of sempai/kohai (mentoring of juniors by seniors) and apprenticeship for the 21st century, I believe it could be a pioneer in developing a humane but productive ageing society.

This article by Pernille Rudlin originally appeared in the Teikoku Databank News in Japanese on February 12th 2014 and also appears in Pernille Rudlin’s new book “Shinrai: Japanese Corporate Integrity in a Disintegrating Europe” – available as a paperback and Kindle ebook on Amazon.

Japan’s M&A boom – a way of forcing globalization?

I was reading the last chapter of a book (The 1990s and beyond (pdf)) I wrote which was published in 2000 about the history of Mitsubishi Corporation in London, and was reminded that I had come up with a concept of “forced globalization” to describe what Japanese companies might need to do to truly globalize, based on their experiences up to the 1990s. Much of what I said still holds true, but what I had not anticipated was the surge in cross border acquisitions by Japanese companies as another route into globalization these past ten years.

My view then was that Japanese companies will not “naturally” globalize, in a business-led pursuit of profitable growth, because of the “representing Japan” mindset of companies such as Mitsubishi Corporation, and the fact that so much knowledge creation and business creation is in Japanese and the Japanese staff feel most comfortable with keeping it that way.

I proposed that human resource-led “forced” globalization – starting with globalizing the management, might be the only way to break the mould.The graphic I produced to illustrate this is not in the pdf, so I have reproduced it here:

“Natural” globalization:

“Forced” globalization:

I was imagining Japanese companies would continue doing what we attempted at Mitsubishi Corporation in the 1990s, which was to hire and develop more non-Japanese people, in the hope that they would then create more global business. This strategy still continues for many Japanese companies, but as I predicted, takes time, and often the non-Japanese employees quit before it bears fruit, through frustration.

Acquiring an overseas company is an instant way to globalize the business, and in theory should instantly globalize the management. But as described in previous posts, often the overseas managers are kept at an arm’s length.

The bottom line from all of this, which has not changed at all in the past decades, is that Japanese companies will only do what the Japanese employees of that company see the need to do. The majority of Japanese employees are not likely to want to become global themselves – it is too far out of their comfort zone. Nor do they want to bring non-Japanese into their circles as this would be a threat to their own careers and status in the company. Nor do they want to be actively involved in the management of the overseas subsidiaries – the risks of being associated with any failure are too great.

The constructive message of this, however, is it is therefore up to the employees and management of the acquired company to take the initiative and ask to integrate with the Japan parent – just as the Brazilian employees and managers at Schincariol asked Kirin to change the company name to Brazil Kirin. Japanese executives are familiar and happy with complying with requests that come from “bottom up” and represent the consensus views of a group of employees.

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

Successes & Failures of Japanese cross border M&A (#3 Ricoh and Ikon)

Ricoh undertook a “10,000 person restructuring” in 2011, using the usual method in Japan of trying to force into early retirement or transfer to subsidiaries their unwanted staff. This resulted in a judgement in the Tokyo courts in favour of two Japanese Ricoh employees on their claim that they had been unfairly forced to transfer to a subsidiary.

The Nikkei Business magazine, in its recent series on the successes and failures of Japanese cross-border M&A links this domestic issue to Ricoh’s acquisition of the US office equipment distributor Ikon Office Solutions in 2008 for $1.6bn. Ricoh acquired Ikon in order to compete with Canon, particularly in trying to enter the office tablet and projector markets in developed countries. However, just as with Nippon Sheet Glass/Pilkington and Daiichi Sankyo/Ranbaxy, the sudden change in operating environment from the Lehman Shock meant that Ricoh’s resulting bloated structure with many overlaps following the acquisition became a far more acute problem.

As the Nikkei points out, Japanese companies need to recognise that following a major M&A, their own Japan headquarters needs to change its structure in order to remain strong in everchanging global business environments.

On that point, during my recent visit to Japan, I was surprised how often the idea of setting up a separate, global headquarters, possibly not even based in Japan, was brought up by Japanese executives at the various blue chip companies I visited.

Category: Human resources