Human resources

Japanese education system is most similar to UK in relying on “on the job training”

It’s well known in Japan that entry to good universities is fiercely competitive, and then students mess around for four years, sleeping in lectures, putting more effort into club activities than study. As a consequence, the large employers who recruit hundreds of graduates every year mainly assess applicants on character and potential, and treat new hires as “trainees” to be developed, rather than contributors.

Those graduate recruits then mostly follow a generalist career track, being switched around various businesses, functions and locations. As you may have noted from other blog posts on the Nikkei Business series “Wake Up Japan”, many Japanese business people feel this system no longer works. So Nikkei Business took a look at the Japanese education and recruitment system, comparing it to the UK, China, France, Germany, South Korea and the USA. It concluded that the only other country out of those six that had a similar university education system to Japan was the UK.

Will the younger generations prefer more applied university degrees?

Initially I was surprised by that conclusion, but then I reflected on the discussions I’ve been having with my son, who is dithering over which university and what courses to apply for, if at all. I admit my prejudice is towards him doing a generalist degree in the social sciences at a good university, and then, once he has a better idea of what he wants to do, doing a more applied post graduate qualification. There are applied, practice oriented degrees in the UK, but we snobbily assume they are second rate and will not lead to elite careers.

My son and others of his generation may well be rebelling against the idea of a generalist liberal arts degree at a top university, requiring eye wateringly high exam grades at 18 to enter. He is more tempted by a digital media degree at Leeds University. I was surprised that such a degree was offered at Leeds, which is one of the top, so-called Russell Group universities in the UK. But actually the curriculum looks fascinating, and is not just about learning coding. Unsurprisingly, the post graduate employment rate is close to 100%.

Specialist training provided by UK companies, vs generalist track in Japanese companies

The post graduate career outcomes are different between Japan and the UK, however, the Nikkei points out. Whereas Japanese companies expect graduate recruits to stay in the company, receiving generalist “on the job training”, with the result that after 10 years, 44.5% of graduate recruits are still working at that company, the rate is only 31.6% in the UK. British companies train their recruits in more specialist skills, which are transferable to other companies. It’s not mentioned in the Nikkei article, but as I often point out, the UK also has many chartered institutes for various professions, requiring annual professional development, offering exams and qualifications.

French, Swedish and German university degrees are more specialist, teaching applied skills that can be immediately put to use in a company. I recently spoke with two Spanish AI researchers at a Japanese company in the UK and they confirmed that the Spanish system is also to do an applied, practice oriented first degree, then if you want to explore more general theoretical aspects, to do this as a post graduate degree.The US has both types – applied degrees but also liberal arts degrees that are more generalist. Unsurprisingly, Chinese universities are focused on providing education which fits with the national strategy. They limit university entrance to 1 million people per 1% of GDP growth, so currently with 6% GDP growth, they are admitting 6 million to 7 million students a year. Korean universities are not well evaluated, so companies look at other grades and experience, such as English language ability tests.

Impact on youth unemployment

There are some downsides to the French system however – Nikkei Business points to how the French youth unemployment rate is still around 20%, compared to 3% in Japan. They speculate that the cause of this is French companies preferring to hire experienced, skilled people, offering little in the way of internal training to support graduate recruits.

Nikkei Business concludes that there are disadvantages and merits in all the systems, and it is not obvious what changes Japan should make. If they are to follow the British path, then more professional development institutes offering training might be one strategy to follow.

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The latest in Nidec President Nagamori’s string of acquisitions – a university

Shigenobu Nagamori, the founder of Nidec is interviewed in the Nikkei Business series on how to “wake up Japan” about his latest acquisition – not a company this time, but a university – Kyoto Gakuen. He feels that Japan has become too brand name obsessed about higher education and that 18 year olds should not have their future decided simply on the basis of their standardised score for the university entry exams.

“You get into university in Japan on rote memorization and exam technique, so when you graduate, you have a rather fake identity, with no real strength, so don’t know how to survive in society.” Nagamori is aiming for a university where “you graduate with fluent English [science graduates do not have to study English at university in Japan] and specialist skills that you can put to immediate use”. He has changed Kyoto Gakuen’s name to the Kyoto University of Advanced Science.

“Japanese university students aren’t fully formed human beings. They don’t know how to speak for themselves. They fall asleep in lectures or mess about on their smartphones. This has to change, starting with the teachers. That’s why I became the chairman of the university. Lectures will be in English. 1/3 of the teachers will be foreign. There will be some students who cannot cope with this, so we will have the same lectures in the evening in Japanese. We had 600 lecturers apply for 30 positions. The evening supplementary lectures wll be given by post doc students or research students. The lectures will not be 90 minutes of sitting down. There will be a 45 minute lecture and the rest will be doing experiments. ”

“The administrators become the elite in Japanese companies – hardly any technical specialists become CEO. This is completely different to the USA. We also need to encourage overseas study – and encourage overseas students to come to us – maybe half our students should be from overseas. If they achieve good results, we will fund their fees and living costs. If results fall off, they pay half, if they hit the bottom, they have to pay all of it. That’s what we’re thinking. This might seem extreme, but it’s normal in the USA.”

Most of the rest of the interview is about facing the threat from China. Nagamori finishes by comparing himself to Konosuke Matsushita, the founder of Panasonic. Matsushita developed his management philosophy, and set up the Matsushita Institute of Government and Management , “but I don’t have any interest in politics, so I want to develop people who can set up businesses in advanced science – kids from poor Asian families who can come here to study, and then go out into the world and start something new.”

The cause of Japan’s low productivity: 5 generalists doing one specialist’s job

In the Nikkei Business series on how to “wake up Japan”, Senior Chairman and former CEO of Japanese leasing and financial services company Orix Yoshihiko Miyauchi sees three mistakes that have led to Japan’s “lost three decades”

Allowing an asset bubble to develop in Japan the first place
Not stabilising the economy after the asset price crash.
Not restructuring the Japanese banking system quicker – real restructuring did not happen until the 2000s, 10 years after the crash.

As a result, Japanese companies were “like tiny boats on a big ocean, using all their energy to avoid large waves. Rather than innovate or grow, they focused on cost cutting”, says Miyauchi.

Miyauchi rates Japanese employees very highly – “they have a strong sense of responsibility, and do all they can to fulfil their obligations. But there is a lack of creative thinkers. There is a problem in the way we develop people – Japanese companies are always developing generalists, when in the future we need to focus intensively on supporting the development of specialists. If you don’t have specialists who are the complete experts, then you cannot achieve high performance. Japanese companies end up having 5 ‘semi professionals’ doing one specialist’s job. ”

“It would be a big shock to change this immediately, so probably Japanese companies will need a hybrid development system with a specialist track and a generalist track.” I agree, but I have seen that in the past when this is done in Japanese companies, the specialist track is seen as a demotion away from line management. Japan may need to introduce specialist, professional organisations such as the various chartered institutes we have in the UK, which certify qualifications and support continuing professional development, to ensure that specialists are less reliant on the prejudices of their company’s HR system for their careers.

Japan’s lost three decades – what are the causes?

The 1990s were called the Lost Decade in Japan, and then as the economy seemed to stagnate in the 2000s, it became the Lost Two Decades. Now the Nikkei Business in a recent special series seems to be saying it has been a lost three decades. Turnover and profitability were growing through to around 1990 when the economic bubble burst. Then profits fell – although since 2010 they have been growing again. The total revenues of Japanese companies (excluding financial services) has been static, with only a small bump upwards around 2005-2008.

Nikkei Business says the lack of growth in turnover is the key problem. Even sales overseas, which were meant to be the growth driver, have not shown much of an upward trend. According to Nikkei Business the root causes of this lack of growth are:

low investment (1991 capital investment as a percentage of cashflow was 133%, compared to 82.2% in 2018)
low wages (106.5 in 1990 indexed against 100 in 2015, down to 99.6 in 2019)
low efficiency (return on assets was 4.3% in 1990, down to 3.8% in 2018)

It cites Panasonic as an example of #1. Every time profits rose, Panasonic increased its investment, but every time profits shrank, it cut investment back, since 2001. As for #2, Nikkei Business lists all the major restructurings since 1999 with major Japanese companies, which makes for sobering reading for a country famed for lifetime employment:

1999 – Nissan plan to cut 21,000 from its workforce, closing 5 factories
2008 – Sony announced it would reduced its electronics workforce by 16,000
2009 – Panasonic announced it would cut 15,000 people and 27 factories. Pioneer axed 10,000 jobs.
2010 – All Nippon Airways proposed reducing its workforce by 16,000 as part of its revival plan
2011 – Ricoh announced a mid term plan aiming at reducing its workforce by 10,000
2012 – NEC announced a workforce reduction programme of 10,000 job cuts
2013 – Fujitsu announced it that by axing its semi-conductor business, it would remove 5,000 jobs.
2015 – Toshiba announce it would erduce its workforce by 15,0000
2017 – Mizuho Financial Group announced an administrative work reduction programme targetting 19,000 roles.
2019 – Nissan restructuring to impact 12,500 personnel

The low efficiency seems to be in the service sector, where there has been a lack of economies of scale. The number of Japanese companies with turnover of over Y100bn/$1bn doubled from around 40 to 80 from 1980 to 1991, but has not risen much since – apart from a blip in 2008 – after the birth of Japan Post, and is still heavily manufacturing oriented.

I will cover the analysis and suggestions from the rest of series for how Japan can “wake up” in my next blog posts.

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.

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.

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/

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.

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.

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.

Rudlin Consulting has assisted many European companies acquired by a Japanese parent. Please contact Pernille Rudlin for further details.

Category: Human resources