Management and Leadership

Why Japanese companies are behind in using IT and what they need to do about it

For as long as I’ve been working in or for Japanese companies (25 years…) I’ve been surprised by how behind they are in using IT, considering how much Japanese people love the latest technology, much of it developed by Japanese companies themselves. Like so many paradoxes of Japanese corporate culture, the roots may lie in the post war system of life time employment, generalist track careers and seniority based promotion.

The Nikkei Business magazine cites one example of how, as it puts it, Japanese companies are not just one but three steps behind their Western counterparts. Most Western banks (Barclays, HSBC, RBS, Deutsche Bank, Commerzbank, Societe Generale in Europe) are adopting the highly cost effective blockchain system for settling payments. MUFG is the only Japanese bank to use the system.

The Nikkei recommends 4 countermeasures Japanese companies need to take:

1. Keep replacing top executives

According to an IDC Japan survey, only 15.7% of Japanese presidents and other CXOs think investment in IT is “very important” compared to 75.3% of US executives. Alternatively, as the Nikkei says, if you don’t understand IT, make sure you appoint executives who do.

2. Bring in an external CIO

According to a Japanese Ministry of Economy, Trade and Industry survey, whereas in the US over 70% of IT specialists can be found working in-house in US companies, in Japan, 75% of IT specialists are working at IT vendors.

3. Make your IT systems department a key function

Staff in Japan’s IT departments are ageing. 56.9% of companies in a 2015 survey said the majority of staff in their IT departments were over 40.

4. Use people from outside Japan

Japan’s Recruit Holdings has just started to recruit non-Japanese data scientists by starting up competitions on Kaggle, a data scientist network of over 350,00 people from over 100 countries, in order to make the Recruit brand name better known.

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The Suntory revolutionary from Mitsubishi Corporation

Takeshi Niinami is probably the most famous alumnus of my alma mater, Mitsubishi Corporation. Born in 1959 and a graduate of Keio (as so many Mitsubishi ‘gentlemen’ are), he started off in sugar trading and after a Mitsubishi Corp sponsored MBA at Harvard, he was involved with the foundation of the Sodexo joint venture in Japan with MC, and then transferred to and ultimately ran the convenience store chain Lawson, which MC had acquired a majority share in.

He was lured to the family run Suntory in 2014 by the grandson of the founder, Nobutada Saji, and has been shaking the place up ever since, much to the consternation of many employees. The revolution was already underway, as Suntory had already announced its $16bn acquisition of US whisky maker Beam and the year before had acquired the UK brands Lucozade and Ribena from GlaxoSmithKline for $1.35bn and in 2009 acquired Orangina Schweppes for $1.97bn.

A former director who worked with him at Lawsons says “there are people who cannot keep up with him. He keeps coming up with new things, and then says do it within a year”. Niinami believes that Suntory will not be able to function well as a global company if it only promotes from within, so has appointed Vincent Ambrosino, formerly CFO of Pepsico Canada as an Executive Officer of Suntory Holdings, in charge of strategy, finance and accounting. He only joined Beam in 2013 as the CFO so this by Japanese standards was seen as meteoric rise to a top position.

Furthermore, Makiko Ono, one of the rare senior Japanese businesswomen in a major company, who had been involved with various collaborations with foreign companies as executive officer of Suntory Food & Beverages, has transferred to Suntory Holdings, to become the GM of global HR. Around 17 people from Suntory Holdings will be seconded to Beam Suntory, with the aim of improving global mobility. Niinami himself announced that he wants to hire more people from outside the company, “including those who have investment experience who were in trading companies” – hiring in his own image, in other words.

Suntory Holdings mid term plan has highly ambitious double digit targets for turnover and profit. It is unlikely this will be reached organically, says Toyo Keizai magazine. More M&A can be expected. Niinami is not likely to slow down.

Using Europe as a global pivot

One trend we have noticed in the past few years of observing Japanese companies in Europe is a move away from having global operations either directly managed by Japan HQ or via their US subsidiary. In fact there have been a few cases, usually following a major acquisition of a European company, where the Japan HQ pretty much delegates overseas management functions to the European executive team.

One such example is Asahi Glass. When it decided to set up operations in Brazil in 2013, Japan HQ made a decision to leave local management to their European managers, thereby hoping to avoid the three traps that, according to Nikkei Business, Japanese companies often fall into when entering overseas markets – 1) treating developing markets contemptuously 2) disciminatory hiring and HR practices 3) forcing the “Japanese Way” of doing things. The president of AGC Brazil is Italian – AGC reasoning that they are “both Latin cultures”.

The European team thoroughly investigated the local labour pool and came to the conclusion that there was a severe lack of high level skills, They decided to implement a brand new hiring and training system. Local media publicity attracted applications from 5371 people, which they whittled down to 600 through looking at educational attainment, and then after a written exam, this was further filtered down to 120 candidates.

These 120 candidates were sent on the Brazilian government SENSAI 3 month training scheme. Most continued working, participating in the course from 18:00 to 23:00 at night. Asahi Glass paid the training fees. Many dropped out because of the punishing schedule, and other participants were able to find jobs elsewhere, using the fact that they persisted to the end of the course to enhance their employability. In the end, Asahi Glass hired 33 people – 1% of the original applicants. Even though this may seem ineffecient, they repeated the process 4 times and were able to gather a workforce of 200 people before the factory began operations.

Around 100 of them were then sent to Europe, to factories in Italy, Hungary and France, for around 3 months. In the two years since the factory started operations, hardly anyone has left of their own accord. Some have become managers, and of the original European team of 13, only 7 remain. The Italian president expects that his successor will be Brazilian.

Nikkei Business magazine comments that Japanese companies are not as serious as they should be about hiring and developing people overseas, and that is why they are having problems hiring outside Japan. “Expatriates from Japan do their best, but does Japan HQ really give much priority to HR strategy?”

The Olympus scandal – has anything changed since then?

Unfortunately Michael Woodford did not answer the question in the title of the talk, which he gave to the Japan Society this week. It was pretty much the same talk I heard 3 years ago, only even more melodramatic and self dramatizing. But from what he said, I assume his answer would be that nothing has changed, if loyalty to seniors in Japanese companies continues as an excuse to cover up fraud. And certainly, with the recent frauds and cover ups in Toshiba, Asahi Kasei and Toyo Tire and Rubber, it’s hard not to worry that there is something rotten at the heart of Japanese corporate governance.

Woodford rather let his (understandably bitter) personal feelings towards former Olympus Chairman Kikukawa get in the way of two key points I felt. Firstly that Kikukawa was in turn covering up for his predecessor and his predecessor’s predecessor’s mistakes – it was not just about preserving his prestige and his (for a Japanese President surprisingly high) salary. So many Japanese corporate scandals turn out to have roots in previous generations, making it extremely difficult and perilous for successors to do anything about them, as the Japanese people sitting near me at the dinner afterwards pointed out. Secondly, that Kikukawa was able to get all the other directors and employees in the know to collude, not just out of their personal loyalty to him, but their fear that if the fraud was exposed, the consequences of the shame upon them and on Olympus would mean the end not only of their careers but of the company and all its 1000s of employees’ livelihoods.

The fact that Olympus survived is actually a vindication of Woodford’s approach, of public confession and resignations. But he is so insistent on making himself out to be a martyr, abused by “uncle” Kikukawa and threatened by yakuza, who nonetheless loves Japan (he kept insisting), that he rather lost the governance argument in all the embroidery of his story.

I asked him at the dinner afterwards if, rather than be a lone crusader, he had tried to get any of the Olympus directors that he says he knew as friends for 30 years or his other corporate friends in Japan (he was alerted to the fraud by a Japanese senior executive in another company) to advise him what to do, even work with him to get the problem sorted, but he said they all told him to shut up. Actually, I felt a sneaking sympathy towards them by the end of the evening.

Hitachi – we’re not heavy, dull or ugly outside Japan

Hitachi is seen as inward looking, conservative and lacking in commercial sense by business people in Japan, but outside Japan it is seen as a motivating place to work, exciting and cool by employees of Hitachi’s overseas subsidiaries such as Hitachi Rail Europe and Hitachi Data Systems, according to Nikkei Business magazine.

Could this help change Hitachi domestically? Currently Hitachi has over 1000 employees with PhDs working for them in Japan, generating many patents, but this technical strength does not seem to be translating into sales. The improvement in profits is largely due to withdrawing from unprofitable businesses such as mobile phones and LCD screens and also the contributions from social innovation business overseas. It is not due to any ground breaking innovation in products or services. It is also seen as being self centred, and not often forming alliances with other companies.

In the rail business however, Hitachi has taken the biggest share of rolling stock orders through to 2019 in the UK. Hitachi first opened an office in the UK for its rail business in 1999, with just one expatriate staffing it. It is now seen as the most powerful train supplier in Europe, according to an executive from Virgin Trains. It has had to completely overhaul its designs however, to cope with the UK’s old fragile railway bridges. Procurement specs for everything from engines, radiators and pumps were reviewed and the body used as much aluminium as possible to lighten the weight. “We were able to use all the expertise we had developed in Japan” says Koji Wagatsuma of Hitachi Rail Europe. “Hitachi’s strength is not just IT, but that we know the operational side of various industries really well”, says Shinya Mitsudomi, CSO of Hitachi Rail Europe.

The other secret of Hitachi Rail’s success is “true delegation”, says the Nikkei. Instead of relying on history and performance within the company, Hitachi has given responsibility to those who know the market best. There is a big difference between the UK and Japanese rail markets, in that the risks taken by the supplier in bids are much greater. It is necessary to guarantee how many people would be needed to run the system per year, and what the lifecycle cost will be.

Alistair Dormer, the CEO, has clearly been a driving force in Hitachi Rail’s success. He likes to hold regular town hall meetings, where he consistently promotes the company’s mission and vision. Ted Yamada, head of HR at Hitachi Rail Europe says “to hire the best people, it’s not just about the remuneration, but to make sure they can get a feel of the kind of company they are working for.” Not only the CEO but also the chairman of Hitachi in Japan, Hiroaki Nakanishi, is a good story teller. As I repeatedly point out in my training sessions, because most Japanese companies are the “family” type, storytelling and parent figures are far more important in giving direction than targets or strategies or policies or structures.

A further feature that Nikkei Business picks up on, is that Hitachi is beginning to pull together virtual company structures, most notably for Hitachi Data Systems. We were moving towards that when I was at Fujitsu – I think IT companies are probably best suited to this kind of organisation – where services have to be provided globally so it makes sense to have teams and hierarchies which span several regions. It does mean a lot of travel to work well – one Hitachi Data Systems director says he has 56 Japan entry stamps on his American passport. Conversely, Japanese engineers travel regularly to the UK and the US.

The feature finishes with an interview with Hiroaki Nakanishi, who comes up with a few punchy quotes. Asked about the impact of Hitachi putting non-Japanese at the top of various regions, he says it has an instant effect on the mindset of the Japanese employees, who now realise that they have to persuade a foreigner of their ideas, so all the “Japanese only” methods they have used in the past will not work. Consequently, decision making and execution have speeded up. Everything in the value chain from marketing to sales, development to production and after sales service have to be overseas. So it’s not possible for Japanese to be seconded abroad and manage everything. Most of the executives are local, non-Japanese. “Before now, Japanese companies would build a factory overseas, but just transfer manufacturing knowhow, and then when it was completed, the head of manufacturing in Japan would fly over and play lots of golf. That’s just no longer feasible.” Since Jack Domme took over at HDS, objectives have been set for individual employees and decision making has become more transparent. HDS is now well regarded by others as a company which would be an enjoyable challenge to work for. “Starting small and growing big is just fooling yourself – there are no dreams or hope in that. People with ambitions will not join such a company” says Nakanishi. “We are still a Japanese company, and so there will be some parts which are difficult for non-Japanese to understand, so not being Japanese might be a bit of a handicap” but maybe no more than Siemens is a German company, or GE is American, Nakanishi adds.

Shazai and the art of being a corporate shame magnet

I let out a quiet cheer recently when Mitsubishi Materials, a sister company to my old employer Mitsubishi Corporation, started down the road of apologising for using slave labour in WWII. I used to be on the receiving end of campaigns for apologies and compensation from British Prisoners of War (PoWs) when I was in corporate communications at Mitsubishi Corporation and had many debates with my Japanese colleagues on what the right response might be.

Mitsubishi Corporation is a completely different company now in terms of ownership and structure to the Mitsubishi conglomerate during the war. The founding Iwasaki family was, however, not only pro-British, but also Iwasaki Koyata, the President during the war, was liberal and progressive in inclination, and rather bravely (given that other business leaders were assassinated for not being supportive of the militarist coup) spoke out against the war. The view amongst many Mitsubishi people after the war was – it was the government that forced these actions on Mitsubishi then, and it was the government that rightly said sorry and paid compensation to the PoWs afterwards. If there was a need to punish Mitsubishi as well, then the fact that the Iwasaki family and most of the senior managers were removed from their posts and the conglomerate was broken up under the Allied Occupation is surely sufficient.

Why apologise when it is not your fault – and wouldn’t such an apology be meaningless, almost insulting anyway? Actually there is a word in Japanese for apologising when it is not your own personal fault, but some kind of collective acknowledgement of responsibility is needed – hansei. It means reflection on what went wrong, an expression of regret for it having happened – “it shouldn’t have happened” and, most importantly, a commitment to take action to make sure it doesn’t happen again. You can see why successive Japanese prime ministers who weren’t personally involved in the wartime government might have thought this word adequate, as it appears to reiterate Japan’s commitment to remain a pacifist nation.

However equivalent words with the same linguistic roots exist in Chinese and Korean languages and consequently, Chinese and Korean activists do not accept hansei as being strong enough. The problem is it doesn’t contain enough shame. Owabi is a stronger word for “apology”, and contains a character which involves the symbol for “household”. This was the word used by previous Prime Ministers Tomiichi Murayama and Junichiro Koizumi, in addition to “hansei”, when apologising for Japan’s actions during WWII. By saying owabi, you are being remorseful and acknowledging the shame brought upon your group – whether it be your family, company or country.

Whether current Prime Minister Shintaro Abe will or won’t use “owabi” in his speech marking 70 years since the end of WWII has added poignancy, because not only will he be recognising the shame brought upon Japan (which could argue with some justification that at least it didn’t vote for its fascistic government in the 1930s, unlike Germany) but there is a family angle too. Abe is the grandson of Nobusuke Kishi, a Class A War Crimes suspect who was never tried for his part in the Japanese occupation of Manchuria and the use of Chinese forced labour, and went on to become Prime Minister himself in the 1950s.

In societies with elements of Shintoism or Buddhism or Confucianism underpinning it, as in Japan, Korea and China, apologizing on behalf of your predecessors or ancestors is hard to do. Not so much out of a sense of unfairness, but because you are visiting shame upon their memory, when they are no longer alive themselves to deal with it, and so the shame will simply be visited upon you and your peers and family. It feels like an unproductive humiliation, to be forced to attack your forebears, whom you were taught to respect.

The more usual pattern in Japan is for the father or elder to apologise for the sins and errors committed by the junior family members. This was seen most recently when Akio Toyoda apologised following the arrest of Julie Hamp, his personal appointment as Toyota’s global corporate communications chief, for illegally importing opiates into Japan. He even referred to her as one of his own children and then apologised for causing consternation to everyone, rather than any breaking of the law. The words used were yet another way of saying sorry – taihen moushiwake gozaimasen – “there is no reasonable explanation/excuse”. With this he became the shame magnet, taking the hit for Toyota not having somehow prevented her from making a mistake.

Universalist Westerners found this apology perplexing. Their view is that she was an idiot for not realising what the law was, or a criminal for deliberately breaking it. She should therefore be punished, and then maybe can rebuild her career after redemption. Universalists believe the rules are the rules and apply to all, without exception, in contrast to particularists, who take each case on its own merits, depending on the relationships of the people involved.

The Judaeo-Christian view as represented in the Old Testament is somewhat confused – both stating that the sins of the fathers will be visited on the third and even the fourth generation, but at the same time making it clear that the person who sinned is the soul that must take responsibility and be punished. Modern Western ethics, while seeing it as unfair that future generations should be punished for past generations’ wrongdoings, also insist that current generations acknowledge the crimes of the past in order not to repeat them.

In this sense, there is a common thread between East and West. Shame and admission of past guilt are both mechanisms for making sure that the sin is not committed or recommitted – because it is not just you, but your sons and daughters who will suffer the consequences.

By choosing to apologise in English, in the USA, Mitsubishi Materials avoided an oriental linguistic and ethical minefield, for the time being. The question of whether or not Mitsubishi Materials should accept shame will undoubtedly come up when, as they have promised, they apologise to Chinese and Korean forced labour survivors. I sense they were able to start with the apology in English as a warm up to this, with coaxing from Yukio Okamoto, a retired diplomat and renowned smooth operator who is now an external director at Mitsubishi Materials. He does not have to worry about the shame brought on his predecessors, as he is not an insider, and he also probably made sure the word “remorse” was used in English. I would imagine he also understood well the Western mentality that it is not about a Buddhist sense of collective shame so much as a Christian individualistic need to confess sins, publicly take the punishment and thereby gain redemption, allowing all to move on. Or as popular psychology would have it, giving the victims a sense of closure, which will make everyone feel better as a result.

Post confession, there is a sense of relief and a way to move on and move forward – and that is why I cheered when I read the coverage of Mitsubishi Materials’ apology – everyone behaved with dignity and sincerity and there was a sense of positivity. The Japanese participants seemed to have overcome the fear that with shame, there is no redemption, it endures, and it affects the whole group.

The worry is that if the shame magnet-father figure is not strong enough, the wider society will keep pressing until a bigger magnet is found. This is currently being played out with Toshiba’s accounting scandal. Despite the top executives resigning, bowing down for a record breaking 15 seconds of shazai (another word for apology, which contains the character for sin or guilt) and using the word owabi, the pressure keeps on. Hardly a day goes by without someone in the media questioning whether the root causes have really been exposed and whether enough has been done to redress them.

When the Nikkei announced its acquisition of the Financial Times, many Westerners commented that the Nikkei gave Olympus too easy a ride for its financial misconduct, unlike the Financial Times’ investigative approach. Compared to Toshiba, Olympus is not as iconic a company in Japan, therefore there was less sense of a wider reaching shame. Toshiba, however, was one of the Denden Kousha ‘family’ (suppliers to NTT when it was part of the ministry of telecommunications) and continues to be very tangled up in government industrial policy – most recently in joint ventures with another shame magnet, TEPCO of Fukushima infamy, acquiring a majority share of US nuclear power company Westinghouse in order to promote Japanese nuclear power capabilities overseas. Hisao Tanaka, the President who led the apologies and resignations, is seen as the fall guy. Even though his predecessors also resigned, the worry is that the shame is not just on Toshiba, but the Japanese political-industrial nexus as a whole. As Mitsubishi Materials has shown, the industrial side of Japan is beginning to find their shoulders are broad enough to take the hit and move on, whether the political side is too, Abe is about to demonstrate.

Japanese companies need to pull up younger burdock roots if they really want to grow globally

Along with “tako tsubo” (octopus pot), another Japanese concept “gobou nuki” (plucking out burdock roots) used in HR has been deemed harmful to corporate Japan’s global prospects.

The term has been used frequently in the Japanese media recently, according to Masahiro Kotosaka, an ex McKinsey consultant now at Ritsumeikan University. In a recent article in Nikkei Business Online he points out that the recent appointments as President of Takuya Hirano at Microsoft Japan, Tatsuo Yasunaga at Mitsui & Co, Koji Arima at Denso, Tatsuya Tanaka at Fujitsu and Takahiro Hachigo at Honda have all been described as plucking burdock roots, as they are in their 40s or 50s, younger than normal for Presidents in corporate Japan. The average age of Japanese Presidents was 62 in 2014 (up from 61 in 2013), around 10 years higher than the global average.

The older age is of course partly explained by the continuation of seniority based pay and promotion in Japan – although Panasonic, Sony and Hitachi have all recently announced they are abolishing or looking to abolish this system.

The average age in Japan for a “kacho” (section head, the first managerial position in Japanese companies) is 38.6 and 44 for a “bucho” (department head, or General Manager) according to Recruitworks. In India, China or Thailand, the average is 9 years lower for kacho and 10 years lower for bucho. Even the US average is 5 years lower for both positions.

Kotosaka asserts that Japanese companies need to start pulling out younger burdock roots, people who might be future executives, and making sure they have early leadership experience. If this does not happen, the younger generations of Japanese will soon feel a big gap with their overseas peers.

Already Kotosaka has heard (as I have) from Japanese companies that they feel the utilisation of non-Japanese or external executives has increased and the presence of Japanese executives has faded.

The most notable example is of course Christophe Weber, President of Takeda Pharma, and his team of 16 executives, of whom 8 are non-Japanese and have come from outside the company and two are non-Japanese who joined through being executives in a Takeda acquisition. Weber had his first leadership experience at the age of 29 when he became a country manager at GSK. Carlos Ghosn of Nissan also became head of a factory at the age of 27.

My former employer Mitsubishi Corporation is mentioned as an honourable exception to the lack of experience given to juniors, along with gaishi (foreign owned) consulting companies and private equity firms. For such companies, people are the main asset, and it’s true I suppose that trading companies such as Mitsubishi that have now moved more towards acquisitions rather than trading, do afford ample opportunity for younger Japanese to take up management positions abroad. In practice though, I have seen many instances where the acquisition is left to manage itself, and the Japanese expat director mostly stays in the regional headquarters, processing paperwork to send back to Japan HQ, rather than hands on managing the business.

Japanese companies demand too much perfection

Okada Hyogo, senior manager at Microsoft in Singapore, sports what is known in Japanese as the ‘Regent style’ hairdo – apparently named after Regent Street in London, but usually known in the UK as a DA. He is photographed with his quiff, leather jacket and sunglasses for a recent interview with Diamond Online. He has written various articles for the magazine, including one entitled ‘60% is good enough’. The impact of Microsoft on his thinking is clear, in the way he recommends Japanese companies also adopt the “patch” mentality he saw in software development. “Aim for what is feasible, not the best”, was his lesson from his time working for Accenture in the USA.

He echoes a point I often make in my seminars about the Japanese pursuit of perfectionism, which is that the 80/20 rule kicks in when it comes to costs of making an effort. It can take 80% of effort, resources and time to achieve the final 10 or 20% to reach 100% perfection.

This might work in Japan where it is normal to work through the night to achieve “the best” but of course this kind of behaviour is not so well accepted outside of Japan. As Okada says, in some cultures a person who works late is regarded as someone who is not self disciplined. “They have a much stronger sense of priorities than the Japanese do.”

“Japanese are lacking individual ‘core values’. At Microsoft we have 6 core values upon which we base our daily work. They are ‘Willingness to take on big challenges’,’Integrity’, ‘Openness’, ‘Constructive self criticism’, ‘Accountability’ and ‘Passion’.” Akiyama Susumu, the interviewer and President of Principle Consulting Group responds that it helps to define your own core values if you interact with people who are different to you.

As for being able to speak English, Okada believes it’s not enough by itself – an open and forward looking mindset is needed. “You need to be interested in the other person, and be prepared to engage in discussion.” Akiyama says it’s tempting to become silent if someone else in the meeting speaks better English than you do”. Okada responds that he got over his own English complex when his boss said “you already speak English. What’s important is knowing what you want to say, and how you want to progress the discussion.” Okada’s recommendation, to those who are not confident about their English is to get to a meeting 10 minutes early and greet the other participants as they arrive with “nice to meet you!” or “Good morning!” – that way you get warmed up for communicating and also you ensure that you have a presence at the meeting.

Even in teleconferences he recommends getting a question in early like “when can I expect to finish this meeting?” as a warm up, otherwise you end up not saying anything. For presentations he uses physical warm ups like a few squat thrusts and also practicing his “Rs”.

Another tip for meetings is to get near the whiteboard and offer to write up the agenda and minutes on it. “That way you look intelligent and hardworking!”

He also recommends saying “Let me finish” and using your hands to signal this. “Japanese tend to preface their requests too much”.

He finishes by saying that Japanese companies don’t have a very good image in Singapore as employers, and this has an effect on the brand too. Japanese employers are seen as only promoting Japanese people, and demanding a lot of unpaid overtime. Products have too many unnecessary features which only appeal to Japanese, rather as Japanese companies unthinkingly promote uniquely Japanese ways of working – such as chourei (daily morning team meetings). There is not one Japanese company in the Singapore Top 100 employers chosen by students.

Power harassment in foreign owned companies in Japan – “irresponsible egotism”?

‘Power harassment’ is a term that has been coined in Japan, in English (as ‘pawahara’ for short), to describe the kind of psychological bullying that may happen to junior staff in Japanese companies, primarily because they do not have the protection of a clear job description that outlines their duties and working hours.

Consequently, you would not expect to find it in Western owned companies (known in Japan as gaishi) where there is supposed to be a clearer set of expectations, job descriptions and performance based evaluations.

According to Diamond Online, however, there are cases of power harassment in foreign owned companies in Japan. Diamond journalist Norifumi Yoshida interviews a 50 year old IT manager, Mr A, who left his foreign owned finance company through power harassment arising from being caught in a battle between a Japanese and an American executive officer (director).

Mr A joined the finance company at the age of 45, having worked for four other foreign owned companies in the past. The first few years went by without incident, but then he found himself the target of attack by the Japanese director. Apparently this director had failed in his original intention to become an actor and was bullied by the troupe he had entered. Then thanks to his politician father’s connections he was able to join a financial services company, but was teased there too for having reached middle age without any competencies and left that too. Again through his father’s connections he found a post in the foreign owned company. Through assiduous sycophancy he managed to jump from team leader to director without going through the usual route of General Manager (GM).

Mr A was GM of the IT department and reported into an American director so should not have had to cross paths with the failed actor, who was responsible for 15 staff in PR, HR and General Affairs. However there were overlaps between the departments, so whenever Mr A’s work affected the payroll or accounting systems, the failed actor would complain in front of everyone that he had not been informed and Mr A was ‘out of order’. In fact Mr A was just doing what he was told by his American boss, but clearly the American boss had not gained consensus from the failed actor.

The American boss was more concerned with doing what he had been asked to do by the President of the company. When Mr A was scolded, 10 or more times a week, for 20 minutes at a time in front of 30 or so employees, and made to apologise, for petty things he had no recollection of doing such as not greeting the director properly, he did not intervene.

The American director probably wanted a quiet life says Mr A, and not to fight with the ‘pawahara machine’ as the Japanese director was known. The Japanese director was on good terms with the President, and was widely thought to be in line for promotion to managing director/board director in a few years, says Mr A.

The President was a Chinese American, who had been brought in by a foreign venture capital company to restructure the company. Mr A says he did not intervene because he preferred to back the winning horse when there was trouble and Mr A’s boss was somewhat of a yes man to him, and probably hoped to get on the board himself.

Yoshida comments that most Japanese would think Americans are open minded, frank and fair, but in his experience “Americans who come to work in Japan can often be rather cold and dry – egoists, to put the worst slant on it – in some ways almost scarily so”. Mr A says he has experienced plenty of upstanding American bosses in his career, but there is definitely a tendency towards egoism and a lack of compassion. “Many of my Japanese friends tell me Europeans are better. I think Japan was a bit brainwashed about America these past 60-70 years but now we have suddenly woken up.”

“Just being able to speak English is not going to be enough for Japanese people to succeed in a globalizing world” says Yoshida. “There are more wily foxes amongst Americans than amongst Japanese. Japanese are too trusting of people and do not know to be suspicious.”

Mr A points the finger at the executives of the company having no understanding of how to look after or create a structure that looks after mid career hires. “They have no sense of responsibility to the people below them, and just insult those employees who leave by saying that they ‘weren’t collaborative’ or ‘she was more suited to housework’ That way they can justify their own management style, if they say it was the fault of the people who leave. Performance based systems (seikashugi) are just a tatemae (a front) for an irresponsible egotism.”

Clearly Mr A is still very traumatised by his experience – still refusing to go anywhere near his old employer. To me, it seems less about whether the company is foreign owned or some difference in character between Americans or Japanese. I certainly recognise those kinds of selfish management behaviours, but usually they are kept in control by HR systems which result in negative consequences for those bosses who do not make efforts to develop a supportive environment for their employees. Western bosses often have employee engagement, retention and training and development targets as part of their annual evaluations. Also HR departments usually conduct exit interviews with staff who resign, to make sure there is not a major problem that had not been aired before. I suspect the foreign financial services company was actually too old-fashioned Japanese, not too American, in not having those mechanisms in place for its own management team. But as it was the ‘pawahara machine’ that was heading up HR, maybe that’s not surprising.

The two-way role of the Japanese expatriate employee

A French manager complained to us recently that when he attends meetings of the European management team (mostly Japanese expatriates based in the Netherlands, where the European headquarters is), he finds out that the decisions have already been made, without his input.

This is a comment we have received frequently over the past 12 years of working with Japanese companies in Europe. I hoped the situation would have improved, as Japanese affiliates localise, and more Europeans are in senior positions, but what seems to have happened is that the communication gap between the senior Europeans and the remaining Japanese expatriates has actually widened, and the senior Europeans feel very cut off from any decision making that happens in Japan headquarters.

I recommend to the European managers a three step plan to improve relations and communications: 1. People, 2. Process and 3. Particulars. For ‘People’, they need to build relationships with Japanese colleagues, in Europe and in Japan headquarters. There are obstacles to this – travel expense and rapid rotation of Japanese expatriates. But mutual trust is necessary if Europeans are to be including in the nemawashi process.

By ‘Process’, I mean the nemawashi (decision making) process needs to be made more explicit and transparent and the purpose of meetings (information exchange or discussion or decisions) needs to be clarified. And for ‘Particulars’, the European managers need understand the kind of detail and data needed to reassure risk averse executives in Japan.

But this is only half the picture. The Japanese expatriates must accept that their job is not simply to report back to Japan headquarters what is happening in the European subsidiaries. They need to communicate the Japan headquarters’ corporate culture, decisions and strategy, and find ways to get European staff feel involved and have a sense of belonging to the wider company.

For Japanese expatriate staff I recommend 1. Debate, 2.Distil and 3.Disseminate. Europeans love to debate – it makes them feel valued, and it is an opportunity to convince them of the direction the company must take, by explaining the background and logic to what is coming out of Japan.

‘Distil’ means to be clear, precise and concise about what the strategy, corporate culture or decision is. It must be “actionable” – so it can be the touchstone for deciding how to act in a business situation.

‘Disseminate’ means to take practical steps to make sure that the strategy, corporate culture or decision is communicated to all parts of the European network. This may need to be through cascading information through the correct chains of command if the company is a traditional hierarchical Continental European organisation. Or it could be through workshops, to enable people to have a sense of ownership, and understand how the strategy or corporate culture applies to their daily work. Or it could be through more meetings – but hopefully this time, if ‘debate’ and ‘distillation’ have already happened, the meeting attendees will feel more involved and accepting of the outcomes.

This article originally appeared in Japanese in the Teikoku Databank News

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.

Category: Management and Leadership