Management and Leadership

5 types of Japanese colleagues who are “workstyle reform” blockers

I was surprised to see this explanation of five generations of “workstyle reform” blockers in the Nikkei Business magazine came with a big red caution notice to readers not to take offence. The categories are not to be taken as hurtful stereotypes but based in research, and do not apply to all people of a particular age group, they explain.

So with that in mind, here’s a precis of the 5 types identified. Even though I’m not Japanese, I’m afraid I do recognise aspects of myself in the “middle manager” category, and am trying not to take offence. Although some of the characteristics are obviously derived from each age group’s experiences of the Japanese domestic economy and society, I am also reminded that there is plenty of evidence each generation around the world has complained about the other generation for the past thousand years or more.

1. The Veteran

Born between 1947-1951, so 66-71 years’ old

Work comes first
Believes in the virtue of hardship
Over strong sense of competition
Clings to past experiences of success
No intention of changing how they work
Gets angry if their way of working is rejected
Will oppose competitors’ opinions regardless of content
Caught up with “how things were” in the past.

2. The Executive

Born between 1952-1960 so 57-66 years’ old

Don’t rock the boat – doesn’t want to challenge
Laissez-faire
Always talks about “ideally”
People are people, I am what I am
Rather than change workstyle, is interested in what happens after retirement
Uninterested in reform, regardless of content
Just wants results, doesn’t make concrete proposals
Won’t listen, as retiring soon anyway

3. The middle manager

Born between 1961 and 1970, so 47 to 57 years’ old

Superficial
Thinks too highly of self
Extremely hedonistic
Sees everything in cost/benefit, mercenary terms
Reform should be done cheerfully, enjoyably without trying too hard
Won’t do it if not fun
Will oppose anything which increases own workload
Tells everyone to do their best and doesn’t do anything themselves
Will change the content of any reforms on a whim

4. The shop floor leader

Born between 1971 and 1986, so 31-47 years’ old

Pessimistic
Not good at interacting with other people
Prioritize risk avoidance
Strong sense of resignation – “they won’t understand”
“If this reform fails, there is no future for me”
Won’t promote reform if don’t trust the company
Too busy watching others’ reactions to say own conclusions

5. The staff member

Born between 1987 and 1994, so 23 to 31 years’ old.

Little sense of crisis
Not good at making an extra effort
Prioritizes personal life
Everything in moderation
“Is reform really necessary?” Won’t do it unless feels it’s necessary
Let other people take up new challenges or jobs requiring some thought
No empathy with the reasons behind the reforms
Doesn’t take the company so seriously, ignores directions

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“We will stick with the UK as a global supply base, despite Brexit” says Honda President

“Europe is the heart of global car culture” says Takahiro Hachigo, Honda’s President since 2015. Although Honda has less than 1% market share in Europe, it competes with European car brands in its main markets of the USA and China. The UK factory has been streamlined, and production lines consolidated as a global production centre, exporting Civics to Europe and the USA. Hachigo says that they are therefore committed to the Swindon factory as a global supply base, regardless of Brexit. “If there is a no deal Brexit, there will be temporary disruption, so I am very much hoping that this disruption will be avoided and outstanding issues resolved”, says Hachigo.

However, as the Nikkei points out in their interview with Hachigo, if there is a no deal Brexit, without a transition period to 2020, Honda’s exports to Europe will be affected immediately and supply chain issues may make it difficult to export so easily to the USA too.

Honda has committed to a 30 year plan with a goal of “pursuit of quality” – to develop cars that will still sell at a high price, in an age of car sharing and electric vehicles. Hachigo also seems very keen in the interview to keep participating in Formula 1 (another UK strength). UK has that “luxury car maker” image, with Rolls Royce and Bentley, so it is understandable that Honda still wants to keep a base there, but as the Nikkei says “difficult management decisions will be needed in the future” to realise this strategy. I also wonder whether Honda’s current brand image, in Europe at least, really is convincing as a luxury, higher price positioning.

What is a Japanese company? An investment perspective

Ryohei Yanagi is a self-styled untypical Japanese business person – not only is he holding down several jobs – as CFO of Eisai pharmaceutical company and also a Visiting Professor at Toyo University and a Visiting Lecturer at Waseda University, but he has changed employers in his career, even more unusually switching from a foreign company (UBS) to a Japanese company, rather than the other way round.

ROE of 8% was not plucked from nowhere

He is also a very dynamic speaker, and not low on ego. In his talk to the Daiwa Anglo-Japanese Foundation earlier this month he claimed credit for setting the ROE target of 8% in the Ito Review instigated by Prime Minister Abe as part of his Abenomics structural and governance reforms. Yanagi was criticised for plucking this figure out of nowhere, which was seen as unrealistic given that ROE in Japan had been averaging at just over 5% over the past 30 years.

He took us through his research, to point out that the Price Book Ratio only moves into positive territory (in other words the company is valued on the stock market at a higher rate than the cash and assets it has) when ROE is 8% in Japan. Apparently investors are discounting cash held by Japanese companies by 50%, because they fear that the company might make a stupid investment, and overpay, or just sleep on the cash instead of using it productively. By contrast, US companies’ average ROE over the past 28 years has been around 14%.

Shareholder value destruction rooted in Japan’s main bank governance system

Yanagi sees the root cause of this shareholder value destruction as being the main-bank governance system that used to dominate Japanese blue chip companies – whereby each major company had a “main bank” from one of the keiretsu, who provided most of their funding, governance and cross shareholding along with other keiretsu members. This main bank system was crumbling even before the Ito Review set the ROE target and other corporate governance reforms. Foreign shareholders now represent the largest shareholder group on average – owning around 30.8% of listed Japanese companies’ shares, up from less than 10% 30 years’ ago. Since the governance reforms of 2012-2015, Japanese companies’ ROE has increased to 9% and the Price Book Ratio has become positive.

Of course this analysis provoked quite a lot of questioning from the audience – many of whom were investing in Japanese companies, and had qualms about any notion that Japan should adopt wholesale the Anglo Saxon short term shareholder value maximization model. Yanagi was not saying that Japanese companies should drop their commitment to the environmental and social elements of ESG, but should look at the return on equity of such initiatives too.

An investment in a Japanese company is not just an investment in the Japanese economy

He gave the example of Eisai’s commitment to manufacturing – for free – medicine to eliminate the neglected tropical disease lymphatic filariasis. He believes Eisai will see a return to the cost of this, as it will increase the capacity utilization of Eisai’s factory in India, and improve their skills, and this factory then has the capability to produce other profit making drugs which can be exported to Europe.

There are quite a few investment funds in the West focused on Japan, and also several funds that exclude Japan because of its historically low returns. Most emphasise that they are aiming for long term capital growth, rather than quick returns. Usually they define a “Japanese company” as listed in Japan, or if listed elsewhere, having the majority of their business in Japan. As mentioned in another post, looking at companies like Takeda or SoftBank, or at this increase in foreign shareholdings, and more emphasis on return on equity – I do wonder whether the definition needs to be refined further.

An investment in a Japanese company is not just an investment in the Japanese economy. Many Japanese companies have the majority of their revenues from outside Japan. Takeda has more non-Japanese than Japanese executives. Whilst no shareholder should tolerate value destruction, the Japanese company’s traditional long term perspective, with emphasis on positive environmental and social contribution, rooted in specifics of the Japanese market and society, and now with added improved corporate governance, is surely an attractive one.

With Weber’s push to acquire Shire, will Takeda be a Japanese company any more?

Takeda’s French CEO Christophe Weber is on another charm offensive ahead of the get-the-popcorn-out annual shareholders’ meeting on June 28th, with an interview in the Nikkei Business.

I found the interview very easy to follow, compared to other interviews with Japanese Presidents. I suppose this is for the same reason that Prime Minister Abe’s speechwriter writes his speeches in English first, and then translates them back into Japanese. The resulting Japanese is much clearer and more logical. On the other hand, the interview is stuffed with Anglo Saxon finance concepts like EBITDA, EPS and scenario planning, which must be difficult for more traditional Japanese stakeholders to swallow.

I also get the impression the Japanese interviewer felt able to be more blunt in their questions.

Why did you buy Shire?

“We have already been focusing on R&D during our major reforms at Takeda, and this is going well. So we didn’t need to make this acquisition, it was more a case of doing this in order to accelerate the reforms at Takeda, to make us even more competitive.”

The board did not all agree at first?

More than half of Takeda’s board are external directors. “There were many questions. We had several meetings before we reached a final decision… Shire had R&D strengths in the same areas Takeda is focusing on, which is why we decided to buy them. We did a lot of scenario planning and clarified the risks, thinking about what would help Takeda succeed in the long run.”

So there are no big risks?

“It’s not zero, but f we have an appropriate buffer, we can avoid risks. For example, selling off businesses which are not within the scope of our strategy”. Presumably it’s this kind of approach that is worrying Takeda’s founding family shareholders.

How do you see the fall in Takeda’s share price on the news of the acquisition?

“Of course we weren’t happy. We weren’t able to explain the decision in full, so I think if we can explain in more detail from now on, people will be persuaded. We will maintain the dividend. We will increase earnings per share.

Shire turned down your approach a few times. What were your thoughts then?

“It would have been good to have progressed more quickly, but it is important to start negotiations from a point relative to the upper limit of a rational offer price. I also wanted it to be a friendly not hostile approach.”

So was it the most appropriate price in the end?

“Yes. If not, we would not have gone ahead”

Shire is known as a company that is good at making money. Why is this?

“It’s because they focus the business. 65% of turnover is in the US and profitability is also high.The organisation is lean and they focus their research.”

Something Takeda can learn from?

“Yes, very much so. I think there will be some great outcomes from the merger. We can accelerate the improvement of Takeda.” (You can feel Takeda’s founding family wince at this point)

With this acquisition, Takeda will enter the world’s top 10 pharmaceutical companies. Are you happy that Takeda will now have the scale to continue as an R&D led company, or do you want to expand further?

“I think we will be competitive enough. We will have regional balance, sufficient funds for R&D, an appropriate strategy, excellent candidate drugs. I don’t see any weaknesses… We are not going to let the pursuit of M&A go to our heads. We are very cautious in evaluating businesses. We also use partnerships with universities and other companies in order to develop drugs and have over 180 such joint development projects.”

Takeda has just set up a Health Innovation Park in Shonan, Japan to encourage such partnerships. Weber does not think this model is appropriate outside Japan, however. In the US, venture capital is more readily available. It’s true that Japanese companies in the same supply chain, or who might even be competitors in other areas, are much more willing to cooperate in an ecosystem, for mutual benefit. It’s a strength of Japanese companies which I hope they hold on to, despite pressures from Western shareholder shareholder oriented capitalism.

More than half of top management are not Japanese. Dublin, where Shire’s headquarters are, is a low tax base – will you shift Takeda’s headquarters outside of Japan?

“No No No No. Takeda is a Japanese company. The headquarters inarguably are in Japan. The name will remain as Takeda. We are in the middle of building a new global headquarters in Tokyo, in Nihombashi.

So is there a meaning to being a Japanese company?

Being a leading Japanese company has meaning on the world stage. When in 2017 we acquired ARIAD, they themselves were looking for a Japanese partner, because of Japan’s strengths in their area of research.

What were your feelings when you were approached to be CEO of Takeda?

I was really surprised. I had never met Yasuchika Hasegawa, the then president of Takeda.

That’s amazing! What made you take the job?

I was attracted by Takeda’s wish to be a global leader and their vision and values. It is an industry where you need to have a strong sense of responsibility, and Takeda has that in their DNA. Actually most people told me not to take the job. There is the rumour that foreign CEOs don’t do well in Japan as there have been more cases of failure than success.

And how was it since you took the job?

For the first few months I was in listening mode. More than 70% of employees are outside Japan and they need to be heard too.

Were there things that were difficult, because it was a Japanese company?

One thing I realised was that you cannot say “the Japanese company way” as every Japanese company is not the same. There are elements in common of course, but there are big differences.”

With the acquisition of Shire, the company will expand further – what are the priorities for management?

It is quite simple – to make sure employees feel motivated and happy, and that the company succeeds. My responsibility is to ensure the environment is where diverse employees can give their best. It’s important to take time to communicate. I am conducting town hall meetings in each operation. After a short explanation of trends, we have a Q&A.

Weber says he has been a manager for 25 years and made many mistakes, but his main philosophy is to never stop learning.

In 2016 Weber set up a Vision 2025, to encourage the development of highly innovative drugs to bring to the world and be a company that is trusted by all stakeholders. “At Takeda, the patient is number one”. He defines “Takedaism” as fair, sincere, honest and tenacious.

With this deal, you have become one of the most famous business people in the world. Aren’t you getting invitations to join other companies?

My timeframe is the 2025 deadline for realising the vision. I have said repeatedly I will stay at Takeda until then. I have not become president in order to become famous. I believe this acquisition is the right thing for Takeda to do. That is why we are doing it.

If you do leave Takeda before 2025, you owe me a dinner.

Of course, but I get to choose the restaurant.

Nikkei Asian Review has an interesting article on Weber’s impact on Takeda here (in English).

Mitsubishi Corp alumnus toasts the Suntory spirit

When I left Mitsubishi Corporation after 9 years, I felt guilty that I had not found a way to repay (in business development rather than money) the MBA they sponsored me through and worried that the wonderful sempai (mentors) who had supported my career would now be angry with me. I was delighted and relieved therefore, when one of the sempai, very senior in the company, invited me for a drink when I was in Japan on a business trip, and explained to me and the other team members at the table that Mitsubishi Corporation should regard people who leave as alumni, just as McKinsey do. “We may end up doing business together one day,” he predicted.

Indeed Mitsubishi Corporation is now a valued customer of mine, and I have seen many other MC alumni rise to some of the top positions in the Japanese business world. Probably the most well known one is Takeshi Niinami. A graduate of Keio University, as so many MC people are, he was sponsored by MC through a Harvard MBA. He eventually became President of Lawson, the convenience store chain that MC had invested in, leading its turn around.

He is now the President of Suntory Holdings and was interviewed in Nikkei Business magazine about recent developments there, including the acquisition of Beam Inc (but not its acquisitions in Europe of Lucozade, Ribena and Orangina) and the “Suntory Way”.

What Beam got from Suntory

“The Suntory Way means that we develop products that our competitors do not have”, says Niinami. “When I explained this to the Jim Beam factory in Kentucky they were very supportive. Beam Inc headquarters people all had MBAs. American marketers get a sense of consumer trends from consultant’s reports and decided their strategy based on that, they never went to the gemba (shopfloor) the way we do in Japan. They just told the Kentucky factory what to do, top down, from afar. If you told them to go to the gemba they’d probably quit. There wasn’t one single person in the executive team who came from manufacturing and they weren’t investing in the factory. But the Kentucky people loved making things. So when we told them we saw manufacturing as the most important thing and appointed someone from manufacturing to the board, their motivation shot up.”

“When they came to see our factories in Japan, they became aware of the need to improve their Kentucky factory. Beam is even older than Suntory – more than 200 years of history. We were able to revive their DNA.”

What Suntory learnt from Beam

“Beam are really good at managing profitability. Suntory got heavily into debt to buy Beam and we are all focused on reducing this debt. Suntory was not as good at managing cash flow as Beam but we have learnt.”

What’s next for Suntory and Niinami

Niinami was brought in by the previous President and now CEO and Chairman, Nobutada Saji (also from the founding family) in 2014. Niinami thinks his successor is likely to be another member of the founding family – current COO NobuhiroTorii – and seems in favour of this, as a way of maintaining Suntory’s spirit. He also expects Suntory to remain a privately held company, despite discussions to the contrary when he first became President. The advantage, he says, is that Suntory is able to contribute to society, through the Suntory Hall (a famous concert venue in Tokyo) and also a water sustainability initiative, without having to justify this to shareholders.

As an outsider, Niinami feels he was able to see objectively how good the Suntory spirit was, and how to roll it out globally. He has set up a Suntory University to help with this. Although Niinami is only 59, he says he is willing to finish his career at Suntory. “I am already “of age” and I don’t think anyone will be asking this “odd fish” to join them.”

Situational leadership for Japanese managers in Europe

One of the issues that Japanese people who come to work in Europe find most challenging is the multiple nationalities of people they have to work with. Whether you are based in London, Duesseldorf or Amsterdam, it is highly likely that your colleagues will be a mixture of not just British, German or Dutch but also Romanian, Lithuanian, Polish, Spanish or indeed Indian or Chinese.

Much of the global leadership or management training that is offered in Japan is based on American models. Europeans are used to American management styles so they will tolerate them – at least superficially. However, many of these “one size fits all” models are not ultimately effective in getting Europeans to go beyond superficial compliance. In fact, they can have quite a demotivating effect, particularly if they are too rigidly focused on quantitative targets and objectives.

European managers themselves find that the American model which works the best is known as “situational leadership”. This is not a new theory – it was developed in the 1960s and 1970s by the Americans Dr Paul Hersey and Ken Blanchard. It suits the European context because the key idea is that there is no one best style of leadership, and situational leaders are those who are able to diagnose the situation, adjust their leadership style and communicate accordingly. They also need to be able to take account of the “performance readiness” – in other words the ability and willingness – of the various members of the team.

National cultural differences are not specifically mentioned in the model, but in my training I always relate situational leadership to what is known about the preferences in each European country for top down or consensus oriented decision making styles, as well as direct or indirect and formal or informal communication in the ways of giving feedback or direction.

Of course, this can be somewhat overwhelming for someone who is new to the European workplace. It is particularly tough for Japanese people who have worked in the more traditional Japanese companies, where people just do as best they can whatever their bosses tell them, whether they are willing or able or not.

But I think Japanese managers have two big advantages. Although this is a generalization and may not apply to all Japanese managers, in my twenty-five years’ experience of working with or in Japanese companies, most of the Japanese people I have met have been humble about their own abilities and also curious about other cultures. This means they are willing to learn and to accept that their usual way of working may have to be adjusted.

This article originally appeared in Japanese in the Teikoku Databank News 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.

Hitachi Rail’s CEO Alistair Dormer on Brexit, speeding up and the need to speak simple English

Hitachi’s rail business is only 5% of the whole group’s turnover, but is growing rapidly and moving from being “double domestic” to a truly global business. Overseas sales are now 83% of turnover, having been 28% of the business in 2012.

Nikkei Business interviewed Alistair Dormer (subscription only, in Japanese), the CEO of Hitachi Rail who is also a Senior Vice President and Executive Officer of the Hitachi Group about his four years as CEO – at a time when the railway business is undergoing major change, with Siemens and Alstom joining forces in Europe for their rail business.

Dormer talks about the importance of being able to scale multilaterally through M&A, with the acquisition of Ansaldo Breda and other companies, which resulted in acquiring customers across 27 countries – 26% of business is now in the UK, 17% in Japan, 10% in Asia Pacific. Hitachi Rail is also moving, like every technology business, into “solutions” adding a services side, including communication technology, software development, signalling systems and operations.

Speed up every aspect

Dormer says the most important thing for Hitachi Rail as a Japanese company was to speed up every aspect. “It is a strength of Hitachi as with other Japanese companies that business advances on a consensus basis, carefully harmonizing in-house planning and business negotiations with partners. This leads to stable quality standards and organizational cohesion, but it is also a weakness in that it takes too much time when you face global competition. The leader needs to be able to make quick decisions and communicate rapidly.”

Of course this is even more difficult when communication and decisions have to be made across long distances such as between the UK and Japan. So Dormer decided the best way was to move people around, to raise the frequency and density of communication. So there has been substantial exchange of people between the factory in Japan and manufacturing bases in UK and Italy.

If there is a substantial geographical and time distance, then people prefer not to have meetings about trivial things, but these details can later become obstacles. So having more regular interaction is necessary. Hitachi Rail thererefore also has regular video confererence and Dormer himself visits sites, holding meetings with 50-80 people to exchange opinions.

Only use simple English

With English as the common language, Dormer (as a native Brit) instituted a rule that only simple English should be used. “When native English speakers are talking, they speed up. It should be easy to say, “I don’t understand, I can’t follow what you’re saying”, but it’s difficult to do this in a teleconference or an important meeting. So then the meeting ends inconclusively and you find out later that people did not understand. So not only should you use simple English, but also I put in a process to confirm understanding after the meeting. The productivity of our meetings has greatly improved as a result”

Hitachi Rail has also introduced common standards across all countries for HR reviews, cost, engineering performance etc. “Each country, the UK and Italy and Japan, have different cultures and ways of doing things, so we did not force conformity, but respected each others’ cultures while working to Hitachi’s values as the common standard.”

Brexit – nobody knows what the future will hold

With regard to Brexit, Dormer says he is repeatedly asked about it, but at the moment there has been no change. “Hitachi has good relations with the UK government. All we can do is continue to ask that companies like us who have their regional base in the UK can continue to access the EU market as seamlessly as possible. There is no choice but to believe this. A transition period is being discussed, so it’s possible the environment will not change for the foreseeable future. However it is still a shock to me on a personal level that the UK made such a decision – even when we knew there was nothing to gain from leaving the EU. There are many people in our offices who were born in the European Union outside the UK, and they are worried. My priority is to reassure them, but the only thing I can say is that nobody knows what the future will hold.”

Nidec’s Nagamori on the root causes of Japanese corporate scandals.

The founder and President of Nidec Corp, Shigenobu Nagamori has been high profile in the Japanese media (again). As well as a long interview in Diamond magazine about why all 57 of his acquisitions (many in Europe) have been a success, he gives some punchy analysis in his final column for the Nikkei Business magazine on what the root causes of the succession of scandals coming out of corporate Japan.

“It is the top management’s fault if bad news does not reach them. If there is something wrong with the production process or sloppiness in quality control, this is a matter of life or death for a manufacturer. That such important information is not being communicated is because the management is not going to the genba (where the action is) and seeing what is going on for themselves.

4 root causes of scandals at the genba

Nare (becoming used to something) Thinking that a certain level of irregularity won’t be a problem, getting accustomed to it.
Amae (being indulged) – believing that you won’t get found out anyway
Tiredness – when the cost price seems to have reached rock bottom or kaizen has been continuing for a while
Takotsubo (octopus pot – for more uses of this analogy, see our post on octopus appointments) – silos where a problem in one unit is hidden and not communicated to other units

This happens because managers are not ensuring a sense of urgency in the genba. This doesn’t mean they have to keep pressurising employees. They should be making frequent efforts to strengthen and pull up the genba. That’s why they should enter the genba themselves and see for themselves what is going on in R&D and manufacturing, sales. This will naturally lead to a sense of urgency.

Of course managers set targets, but if they don’t know the genba, then these are just words, and feel very distant to the genba.

The need for “hands on”, “micromanagement” and “making responsible without giving away responsibility”

Hands on means the genba solves problems with the management alongside. Not just throwing problems at them.

Micromanagement is that managers make decisions about all the issues in the genba. When I acquire a company that is in trouble, in order to reconstruct it, I check purchasing for even 1 yen. Some people say this will undermine the ability to think for themselves but it’s quite the opposite. It is to make the employees think, come up with suggestions and work alongside managers to review it. Not just get told, in a one way fashion.

“Making responsible without giving away responsibility” means that I delegate authority, but I don’t just leave people up to it. Otherwise the genba logic just becomes stronger and they fail to see what is appropriate overall. So delegate, but regularly check, very thoroughly.

The importance of developing generalists

It’s also important to develop executives. Although there is a tendency in Japan at the moment to reject generalists, it’s no good if someone only knows one business area and has no idea about other parts of the business. While people are young, they should experience management in different divisions in order to become proper executives.

That’s why I am always visiting our subsidiaries around the world. We have 300 companies and over 100,000 employees so I can’t do this by myself. So I get other people like our CSO (Chief Sales Officer) to travel around too. I am visiting somewhere pretty much every week. If managers had this attitude, the morale of the genba will also improve. You cannot take it easy.

Giving feedback is not just a language issue

There has been a marked increase in the number of clients asking me to provide training for Japanese expatriate managers in Europe on giving feedback and performance appraisals. I’d like to think this is because our marketing is having an impact – but on talking to the HR departments of our customers, it seems they have become aware of an increasing number of workplace conflicts between Japanese managers and their teams.

European employee dissatisfaction with Japanese managers’ feedback style is not a new issue. Complaints usually include that no feedback is given, or only negative or quantitative feedback. I usually explain that giving feedback is not as embedded in Japanese workplace culture as in Europe. Also, Japanese employees are used to working collaboratively as a team rather than having individual performance evaluated. The best employees are deemed to be the ones who look to improve themselves without having to be told.

I remember when I was working in Japan in the 1990s, many Japanese companies started introducing seika shugi (performance based systems) but often not very successfully. Evaluating individuals ended up destroying the collaborative, knowledge sharing work environment that is one of the strengths of the Japanese workplace.

The Japan HQ appraisal systems that have developed since the 1990s are much more quantitative than European systems. The manager gives numerical scores not just for performance and achievement of objectives, but also of behaviours, mindsets and competences. In Europe, we usually just give qualitative assessments of the latter, such as “meets expectations” or “exceeds expectations” or “below expectations”.

I suppose the Japanese quantitative approach seems more objective, and less personal. Numbers can be analysed across the whole company, and are not subject to interpretation or language barriers.

European managers use qualitative appraisals to stimulate a dialogue about what expectations they have for each individual and then come to an agreement on development opportunities for individual employees in terms of support that they need from the manager, training needs and potential career paths.

The norms of the workplace are rooted in our educational systems

My experience of the Japanese education system is that exams are of factual knowledge and knowing how to do something, often using multiple choice tests. Such exams assume there are clear right and wrong answers.

European education focuses more on critical thinking and understanding the reasons behind something. Exams are essay based, even in science. Scores are partly on getting the facts or the methodology right, but also on the quality of your arguments and the evidence you bring to prove your point.

Consequently, European employees do not unquestioningly accept numerical scores for individual behaviours, mindset and competences. They expect a manager to set clear expectations, give regular feedback and then be able to explain, with evidence, why the employee has met or not met them when challenged. The millennial generation is particularly demanding in this respect. No wonder Japanese managers need training on this – it’s not just a language issue.

This article was originally published in Japanese in the Teikoku Databank News 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.

“Everyone has responsibility, but nobody can take responsibility” – the roots of nemawashi

One of the most practised concepts in Japanese business is nemawashi, often described as “Japanese style consensus building”. Sometimes explanations go further, getting into the word’s literal meaning- to dig around the roots of a tree in preparation for transplantation. When I talk about nemawashi in my training sessions, I try to create a more vivid image by pointing out that if you want to transplant a mature tree, just yanking the tree out of the ground by the trunk will kill it. The metaphor holds if the goal is to transplant a new idea in a Japanese company. If you were approach whoever you think has the decision making authority (‘the trunk’) and obtain only their approval, it is likely the decision would die in implementation, because you did not get the understanding or agreement of all the other people likely to be affected or interested (the roots).

Europeans do consensus too…

Europeans from consensus oriented national cultures like those of the Netherlands and Sweden, respond to this lesson by saying “well of course, we would always do this kind of consensus building anyway, it’s common sense.” In the Netherlands, consensus-based decision making is known as the polder model. Polders are low lying tracts of reclaimed land protected from the sea by dykes. In the past, all Dutch, regardless of whether they were peasants or noblemen, whether they lived on or near the polders, had to reach a consensus on how to protect them, and everyone had to be involved in carrying out the plan, otherwise all would suffer. Nowadays the word describes the kind of political consensus reached between government, the unions and business to adjust wages or social benefits or environmental protection.

…but it’s differently interpreted

Both Dutch and Japanese would therefore say they have a long history of consensus based decision making, but a study published in the Journal of Management Studies* concludes that “the concept of consensus is interpreted quite differently by Japanese and Dutch managers.” In Japanese companies, nemawashi is carried out through a series of informal, often one-on-one discussions, so that there is already a consensus when the meeting to discuss the “transplantation” is held. The meeting, then, is more about formally recognising the decision. In Dutch companies, the consensus is reached during a meeting, often through quite heated debate. Also, the Japanese managers demand a more complete consensus, whereby all agree, including other departments, whereas Dutch “appreciate the process of trying to reach consensus, but when a difference of opinion persists, the decision is taken by someone”.

This someone would therefore be expected to take responsibility for the decision, if things were to go wrong. In Japan, the view is that a comprehensive consensus is necessary to avoid putting the decision maker and the company at risk, and to preserve harmony and the employee loyalty. Given the time and care taken to get such a comprehensive consensus in Japan, once a decision is made, there is no turning back. To the Dutch, this is symptomatic of Japanese companies, where “everyone has responsibility, but nobody can take responsibility”.

*Comprehensiveness versus Pragmatism: Consensus at the Japanese-Dutch Interface, Niels G. Noorderhaven, Jos Benders and Arjan B. Keizer, Journal of Management Studies, 2007

This article by Pernille Rudlin originally appeared in the Nikkei Weekly. This and other articles are available as an e-book “Omoiyari: 6 Steps to Getting it Right with Japanese Customers”

Category: Management and Leadership