Japanese Business Blog - Rudlin Consulting

What Japanese companies can learn from HSBC’s compliance struggles

Descriptions of the difficulties faced by the UK multinational bank HSBC in 2015 reminded me strongly of the challenges faced by Japanese companies which are trying to globalise through acquisition. 2015 should have been the year in which HSBC celebrated 150 years since being founded in Hong Kong by British and Anglo-Indian merchants as a trade finance bank. Unfortunately this was marred by a tax evasion scandal at its Swiss private banking arm.

HSBC acquired a Swiss private bank in 1999, a few years after it acquired Midland Bank, one of the UK’s “Big Four” retail banks. Then in 2003 it acquired Household Finance, a US consumer finance operation. Up until this diversification of the business, HSBC managed its network of operations through a tight knit group of expatriates (all male until 1989) who were generalists, who had been trained like army officers in a Hong Kong “mess” (similar to a Japanese company dormitories), and were therefore trusted enough to be sent around the world to be the “man on the spot”.

This group of generalist managers found it difficult to control businesses that they knew nothing about, in countries they were not familiar with, so local executives from the acquired company were allowed to continue controlling those businesses. Unfortunately the scandal at the Swiss private banking arm was not the only failure of this approach. Two years ago HSBC had to pay a US$1.9bn fine to US authorities for failing to stop the laundering of drug money through its Mexican operation – the banking and financial services company Bital that it acquired in 2002.

If leaving control to local managers is too risky, should Japanese companies who are acquiring overseas subsidiaries continue to try to exert control through Japanese expatriates? This is neither practical, nor the solution. There seems to be a shortage of suitably experienced Japanese managers who can be sent overseas. And like the HSBC expatriates, they are generalists, and will therefore find it hard to understand what is going on in specialist areas of the business in a foreign country.

Without the Japanese expatriate acting as a liaison, conduit and interpreter however, the foreign executives soon find themselves swamped by endless requests for information from the Japan headquarters, supposedly for compliance and risk management purposes. They try to respond to as best they can, but get nothing back in return. It can lead to a sense of not being trusted, and confusion as to the right direction to take.

For HSBC, the solution proposed by many commentators and the CEO himself is to do with having a strong corporate culture and values, and processes for communicating them globally, along with rigorously implemented compliance policies. If this is in place, then a certain degree of autonomy can be given to local managers.

For Japanese companies, where human relationships are so important, to ‘process’ and ‘values’ I would add ‘people’. In future articles I will look in more detail at these three elements and suggest some practical steps to take.

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

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Namae – or name?

As I mentioned in a previous article, the question of how to address Japanese colleagues or customers is almost always raised in our seminars. I explain that it is indeed a complex issue, but surname-san is the default option. It’s polite enough, particularly if you are not Japanese anyway. However, a Japanese junior often addresses a Japanese senior by their job title – kacho (section chief, the first real manager position in a Japanese company) or bucho (general manager) for example and would address a customer with surname-sama or with their job title.

The new egalitarianism

But this is changing in Japan too. When Kozo Takahashi took over as President of Sharp, he insisted, as part of a major culture change – that from now on, all seniors would be addressed as surname-san, rather than by job title plus dono. As I mentioned when I blogged on this, bucho-dono is rather like calling someone Mr General Manager.

Diamond Online reckons this egalitarian trend started as far back as the late 1980s. New companies that were booming then like Recruit had a culture where all were called surname-san. Still, the older more traditional companies to this day keep to the job title system. I frequently ask my Japanese contacts at our clients what their company culture is like, and some say it even depends which department you are in – whether they stick to the tradition or have moved to surname-san. Diamond Online describes how in one financial services company there are 6 layers of titles from branch manager down, and one young staff member was even scolded for calling a colleague deputy chosayaku when he was a full chosayaku. There is no one translation of chosayaku by the way – I have found ‘assistant to section manager’, ‘assistant manager’ and ‘assistant to director’ in various sources. Google Translate translates it literally as ‘investigation officer’, which yet again proves that Google Translate should not be relied upon. Either way, you can see why you would be quite keen to be called “assistant manager” rather than “deputy assistant manager”.

The disappearing kacho

The term kacho might disappear completely in some companies, Diamond Online asserts in another article. In companies like Sony, which have moved completely away from any kind of seniority based promotion to one based on job roles and competencies, the change has resulted in demotion to “individual contributor” for around half of the 40% of their staff that were previously in management grades. Panasonic is also reviewing its bucho/kacho system and has, in the interests of developing its staff better, decided that managers should have around 7 staff members reporting to them. This is in reaction to having flattened the hierarchy to speed up decision making, only to find that staff development suffered.

My old employer Mitsubishi led the way in the 1980s, by changing the ka (section) and kacho (section chief) system to ‘team’ and ‘team leader’. This was due to the fact that there were too many people in the kacho grade and not enough sections to manage. The resulting dual system – whereby you have a kacho grade but your job role may or may not include managing a team is one that many Japanese companies have since adopted.

Job mobility

Diamond Online reckons whether you stick with the kacho system or get rid of it depends on whether your corporate culture is one where it doesn’t matter if decisions take a long time, so long as no mistakes are made. The kacho system may also have beneficial knowledge sharing and staff development effects. Role and competency based systems are promoted in Japan by foreign consultancies, says Diamond Online, and often adopted by Japanese companies as a way of cutting salaries. It also makes job mobility easier, if you have a better way of measuring your market value.

It would also make international mobility easier (as Hitachi are hoping), if there is a more globally accepted set of job grades and titles. One of my least favourite requests for advice is helping people translate their job titles into Japanese or from Japanese into English. It is a political minefield and can result in yet more meaningless ‘Mr deputy senior assistant director’ type titles, with nobody the wiser as a result. With many caveats therefore, I offer the chart below:

Octopus balls to Tokyo – why it matters where your company is from in Japan

Most countries have rival cities – usually the official capital city versus other cities which consider themselves to be the real business, historical or cultural heart of the country – think London versus Manchester or Birmingham, Berlin versus Dusseldorf or Frankfurt, Rome versus Milan, Madrid versus Barcelona. Japan is no exception and the rivalries go way back into history.

Kyoto used to be the capital of Japan, before Tokyo (or Edo as it was then) began to usurp it in the 17th century. If you ask Japanese people today about Kyoto, they joke that Kyotoites still think Kyoto is the real capital of Japan, and the Emperor is just temporarily visiting Tokyo (he moved there in 1868, when Tokyo became the official capital) – and will return one day.

Tokyo literally means the Eastern Capital and is part of the Kanto region, where the ruling feudal Tokugawa shogunate was based from the 17th century. Kanto means East of the Barrier (usually considered to be the Hakone checkpoint) and Kansai – the region where Osaka, Kobe and Kyoto are based – means the West of the Barrier (originally the Osaka Tollgate).

Before Kyoto’s reign as capital for a 1000 years, Nara (also in the Kansai region) was the capital and seat of the Emperor but is now a quiet backwater, more visited by tourists than business people. Kobe is the other main city in the Kansai region – a port with a strongly cosmopolitan feel and very close to Osaka geographically. Whilst Kyoto remains aloof and quietly superior (and has some very successful high tech companies of its own such as Kyocera and Nidec), the real battle now in business culture is between Osaka and Tokyo.

Osakans see Tokyo as standardizing, dull and full of bureaucrats and view Osaka (which historically had very few samurai but plenty of merchants) as the real money maker, with vastly superior food. Many of Japan’s celebrities, comedians and musicians come from the Kansai region too.

So what does this mean for corporate cultures? Osaka companies often have merchant roots – the joke goes, when you meet an Osakan, you don’t ask “how are you” (ogenki desuka) but “how’s business” (moukarimakka). To which the correct response is “bochi bochi denna” – a wonderfully vague way of giving nothing away, like saying “plodding along nicely thank you”. Osaka companies are brash, tough negotiators and mean with the money. “They’d skin the fleece off a gnat” said one British engineer to me, describing his colleagues in the Osaka HQ of a consumer electronics company.

Tokyo companies are gentlemanly but at the same time highly political. You need to have a good understanding of their organisation, the factions and the individual relationships to understand how to get things done. Mitsui and Mitsubishi, both Tokyo based corporate groups, are distinguished by the saying “Mitsui is people – Mitsubishi is the organisation”. It’s hard sometimes to understand how exactly this is different, but it seems to boil down to the idea that if an individual is powerful enough at a Mitsui group company, they can get things done, whereas at a Mitsubishi group company, the whole organisation has to support an action.

The other main corporate groups, Sumitomo and Itochu, are Kansai based companies. Both have strong “mercantile” roots – Sumitomo in metals trading, hard-nut, conservative and domestically focused and Itochu – strong in fashion and consumer goods, and seen as the more maverick, progressive and international in outlook. The regional cultural differences don’t seem to have been that strong between Sumitomo and Mitsui as various mergers have taken place between their respective member companies, particularly in financial services. However regional cultural differences have definitely had an impact on Astellas Pharma, the product of a merger between Yamanouchi (Tokyo) and Fujisawa (Osaka). Apparently many Fujisawa employees were horrified that Yamanouchi was going to be the dominant partner in the merger. Fujisawa had a strong tradition of innovation and had regarded Yamanouchi as “Mane-nouchi” (Mane = imitation) – a bunch of play-safe Tokyo bureaucrats.

Those who know Japan well will have spotted that there is an important region missing from this analysis – Chubu. Literally and metaphorically this is the midlands of Japan. Just like the Midlands in the UK it is the historic heart of the car industry. Nagoya is the main city, and teased just as Birmingham in the UK is for being ugly and soullessly modern. The area has the last laugh though, as it is the most wealthy in Japan – thanks to the enduring success of Toyota (so mighty their home town was renamed Toyota City) and its corporate group of suppliers such as Denso.

So, where are the top 30 Japanese companies in Europe from?

Kanto/Tokyo based companies:

• Asahi Glass
• Astellas (but Fujisawa originally Osaka)
• Canon
• Daiichi Sankyo
• Fujifilm
• Fujitsu
• Hitachi
• Honda
• Kao Corporation
• Mitsubishi group
• Mitsui group
• Nissan
• Nomura (but was Osaka originally)
• NTT group
• NYK group
• Olympus
• Ricoh
• Sony
• Toshiba

Kansai based companies:
• Horiba (Kyoto)
• Nidec (Kyoto)
• Nippon Sheet Glass (Sumitomo Group)
• Omron (Kyoto)
• Panasonic (Osaka)
• Sharp (Osaka)
• Sumitomo group (Osaka)
• Takeda Pharma (Osaka)

Chubu based companies:
• Denso
• Seiko Epson
• Toyota

Chugoku (Hiroshima etc) based companies:

• Fast Retailing/Uniqlo

Top 30 Japanese companies in Europe 2021

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Hiring Japanese speakers

A while ago I thought that my business had expanded sufficiently that I needed to hire someone to support me. However, after three months of recruiting and interviewing, I admit I failed to recruit anyone.

In reflecting on why I have not been able to hire someone, and what I need to do next, I have realised that I am in danger of falling into the same traps that I have often seen Japanese companies in Europe slide into.

The first trap is being attracted to Japanese speakers without considering their skills and your business’s needs more carefully. It’s easy to find Japanese speakers in the UK – there are between 30,000 to 50,000 Japanese people living in the UK now – many are students or expatriates but there are also residents who have settled here, often married to British people.

In addition to this, there are around 6000 members of the Japan Exchange and Teaching programme UK alumni association. These are British or other English speaking nationals who have worked in Japan for 1 to 3 years or more, usually in a school or in local government. Most of them fall in love with Japan as a result, and want to pursue careers where they can continue to have contact with Japan and use their Japanese language ability.

The second trap is to hire Japanese people (usually women) and JET alumni into general office administration roles, somewhat vaguely defined, to cover everything from receptionist to HR to translation work. This often leads to frustration on both sides. Japanese women begin to suspect that they are being treated like second class Office Ladies, and when they complain to their British husbands about the overtime or the menial tasks they are asked to do, their husbands often urge them to raise a grievance dispute with their employer.

JET alumni begin to worry that there is no career progression or professional development. Many of them come to me, asking what they should do, and I always advise – find a profession you feel suited to first, like law or accountancy, and then find a way to connect back to Japan.

In both cases, some of the disappointment can be avoided by having a clear job description and a proper contract, and for the Japanese company to be realistic and open about what kind of expectations both parties should have as to how the job can develop. If possible, they should provide or support training where needed, and remember to revise the job description accordingly, as the employee progresses.

So, to take my own medicine, I need to be more clear and focused on the support skills I need, which is primarily invoicing, chasing payments, paying suppliers and some management accounting (forecasting cash flows etc). This does not require a Japanese speaker, fun though it would be to have a like minded person to work with.

This article was originally written in Japanese for Teikoku Databank News, 1st December 2013 edition. It 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.

5 reasons Japanese overseas ventures fail

Around 40% of overseas ventures by Japanese companies result in withdrawal, according to Masato Hikita, director of Headwaters IT consulting company, writing for Diamond business magazine. His clients usually suffer from at least one of the following, he reckons:

No one person with decision making authority

Overseas companies are shocked to hear that Japanese executives don’t actually have executive power. When Japanese companies venture abroad, they usually send the kacho (section chief) out on a scouting expedition, and he talks to people on the ground there who agree that they should collaborate on a project. The local company gets moving quickly, but at this point the Japanese company suddenly grinds to a halt. When asked why, the Japanese company responds that now the bucho (head of department) must visit. And then after that, that the director must visit. At which point the local company wonders why on earth they have to answer the same questions so many times, and decides to start negotiations with someone else.

2. Bringing domestic rivalries overseas

Rather than two Japanese companies fighting to monopolise a market and both end up losing, Hikita recommends that smaller Japanese companies collaborate, particularly in the early phases of raising brand awareness in a new market – for example a joint exhibition stand at a trade fair.

3. Being fooled by a local Japanese “pro”

Just because a Japanese person has lived in another country for 10 years, does not make them an expert in setting up business there. Hikita recommends talking to JETRO or going to local gatherings of Japanese businesspeople to get recommendations.

4. No ‘line in the sand’

According to a Japanese government survey, 90% of Japanese SMEs have not set a bottom line for when they will decide to withdraw from an overseas venture. As Hikita rightly says, from my experience, Japanese companies are happy to make plans for growing a business, but don’t do any planning for what should happen if a business fails. Many say because they have never done something like this before, they don’t know how to judge whether something is a failure. Hikita recommends that nonetheless, through talking to partners and other businesses, some attempt should be made at setting limits, and constantly reviewing status.

5. Overconfidence in the brand

Apparently Japanese companies will assert that the local partner should bear all the costs of marketing, because “we are allowing them to use our brand”. As I’ve mentioned before, a common problem for Japanese companies who are used to everyone in Japan knowing who they are and what they do, without having to make the effort to explain themselves. They are so confident in their brand, they believe they will succeed in the “red ocean” of American and European markets, without realising the true investment required to compete.

Does globalization mean the end of seniority based pay and lifetime employment for Japanese companies?

An HR director at a British multinational recently acquired by a Japanese company told me she was baffled by the response from Japan to her department’s enquiry regarding the company car grade allocation for a group of Japanese expatriate managers being transferred to work in the UK. All they sent back was a list of the managers’ names and their ages, she said.

Of course this is perfectly understandable once you know about the seniority based pay and benefits system in Japanese companies. In European companies, salaries and benefits are based on the job role – how high up the managerial ladder you are and the content of the job – with very little attention paid to age or length of service.

Most of the Japanese subsidiaries I work with in Europe have salary and welfare schemes that are locally appropriate. However there are several aspects of the Japanese HR system which impact employees in Europe, beyond company car grades for expat managers

One aspect is the culture of lifetime employment and the sense of a duty of care for employees. Many Europeans have noticed that Japanese companies are very reluctant to fire even the most poorly performing employee, whether they are European or Japanese. While Europeans are sympathetic to this compassionate stance, they point out it does make performance management for the rest of the team difficult. If poor performers are still on the team, it is demotivating for the other team members.

The other aspect, which is said to be behind Hitachi’s recent announcement that it will end seniority based pay for managers, is that the uniqueness of the Japanese HR system hinders job mobility across borders. Most non-Japanese multinationals try to have an internal vacancy system, where employees in all countries are able to apply for job openings across the world. This necessitates detailed job descriptions, and a certain level of unified grading, so employees can assess which jobs are likely to be open to them.

Europeans find it very confusing that Japanese expatriates are assigned to their offices without any seeming regard for whether they have the right qualifications, skills or experience for the role.

My hope for Japanese companies is that they will send more of their overseas employees to Japan HQ. I suspect the Hitachi announcement, coming as it does after two years of having built up an international database of their employees, is that they too are hoping a more unified system will allow employees to transfer all around the world and not just from Japan, and that this will be based on competency rather than just personal development needs and whose turn it is.

But I have to say I also hope that Japanese companies, if they follow Hitachi’s suit, do not lose their compassion and loyalty towards their employees as they globalize. Despite all the frustrations it brings, Europeans still prefer the long term security of working for a Japanese company.

(This article was originally written in Japanese for Teikoku Databank News and appears in Pernille Rudlin’s new book “Shinrai: Japanese Corporate Integrity in a Disintegrating Europe” – available as a paperback and Kindle ebook on Amazon.)

Who takes the most paid holidays – Europe and Japan

The announcement in 2015 by the Japanese government that they want to revise the Labour Standards Law to require companies to ensure that workers take their paid leave allowance has attracted a fair amount of attention in European media. Japanese employees are entitled to an average of around 18.5 days a year but typically only take around 9 days.

Japanese employees are admired for the dedication to work shown by the long hours they put in, but many European managers, particularly Germans, worry that overtime is also a sign of poor management, or could lead to health and safety problems if workers do not take time off to “refresh” themselves.

Europeans are much keener than Japanese or Americans to take their full allocation of vacation days. EU legislation mandates that all 28 member countries must by law grant all employees least 4 weeks’ holiday. The implementation of this legislation varies greatly from country to country however.

The French and the Nordic countries are famous in Europe for taking the most holidays. One survey showed that the French take all 30 of the days they are statutorily entitled to (this includes Saturdays). They can add up to a further 22 days of holiday as compensation if they work more than 35 hours a week.

Nordic countries have 25-30 days entitlement, and there is an almost universal summer holiday from early June through to the middle of August when most families disappear to the coast or to an island for the whole of the summer.

In Germany, there is a variation from state to state beyond the statutory minimum of 24 days for workers, because each federal state sets additional public holidays and determines the school vacation periods.

We British like to think of ourselves as the most hardworking of the European nations. Although 28 calendar days are statutorily guaranteed, this can include public holidays. The norm for most companies is to offer 25 days, in addition to the 8 or 9 public holidays. There is a trend now for British companies to offer a menu of employee benefits, which includes the ability to buy and sell days of holiday allowances. Unused holidays can also be carried over to the next year, but there is usually a cap on the number of days.

British school summer holidays are much shorter than in Nordic countries and residential children’s camps are not as commonly used in Europe as in the US, so parents do expect to be able to take at least two weeks’ break in the summer time to holiday with their children.

Consequently, if you are running a pan-European company or team, you have to put mechanisms in place for employees in many different countries to book their holidays well in advance, so that there is sufficient staff cover even during peak holiday times. Furthermore, there are concerns now that even when on holiday, conscientious employees are checking their smartphones for work email. Daimler hit the news headlines recently for implementing a system which auto deletes emails during vacation times, to make sure employees relax properly.

(This article was originally written in Japanese for 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 – 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.

The Bubble Gang – what became of my cohort in Japan

In the UK I would be regarded as part of Generation X but in Japan I am in the Bubble Gang, of people aged 45-49 who joined a major Japanese company straight out of university between 1988 and 1992 – at the very end of Japan’s economic “Bubble Era”. I graduated in 1988 but did not join Mitsubishi Corporation until 1990, spending two years at a US PR company first. And actually, because I transferred to Mitsubishi’s Tokyo headquarters in 1992, my company ID number started with 92, and I was therefore regarded as being a member of the 1992 graduate intake, despite my protests.

After a period selling building materials in Japan, I transferred to the HR department, where we tried to set up an international HR system which was intended to make the year of joining less relevant and therefore Japanese traditional seniority based promotion less rigid. This was meant to ensure non-Japanese, mid-career hires had more chance of being promoted appropriately, but twenty years on, elements of the old system still persist in Mitsubishi and elsewhere. I was given the title of manager at the time, but didn’t really manage anything in the Western sense of the word – having no team or budget under my control.

If I had stuck with the company into my late 30s I may well have become a ‘proper’ manager, attaining the kacho (team leader or section chief) grade under the Japanese system, and who knows, ten or so years later maybe even made it to bucho (General Manager – head of a department) as some of my friends from that time have recently done.

Contemplating that future at the age of 33, when so many of my MBA class were already running businesses, put a chill in my soul and I decided to leave Mitsubishi after 9 enjoyable years.

It’s not often you get a chance to see how your career might have panned out if a different choice had been made, but thanks to a special feature in the Nikkei Business magazine on the Bubble Gang, I now have more insight, and it has reassured me that I probably took the right path.

The article sets out the following phases:

Entrance ceremony day 1988-1992

So many new graduates joined – up to a 1000 in some cases – that the company has to hire the Budokan for the entrance ceremony

2-3 years on – Japan’s “Loadsamoney”

A separate envelope full of cash is handed out at bonus time, making a 24 hour working day bearable. Hanakin (Flower Friday – the equivalent of POETS day in the UK) drinking to the small hours, including Y50,000 bottles of champagne and waving Y10,000 notes to flag down taxis

5 years on – the Bubble bursts

It’s a slow burst, from the initial bubble burst in 1990, when asset prices started to plummet, through to 1997, with the Asian financial crisis, and the collapse of Hokkaido Bank, the Long Term Credit Bank of Japan and Yamaichi Securities. Friends start to lose their jobs. The wife wants to go back to her family.

10 years on – no team, but performance based pay introduced

Companies like Fujitsu and Mitsui introduce performance based and potential based pay systems. You start to worry about what level of bonus others in your cohort are getting. Due to a hiring freeze, you don’t have any juniors working for you, so end up having to do admin work yourself.

15 years on – the company recovers, but your pay doesn’t

Thanks to a cheaper yen, exports boom and the company results improve, but your pay level does not. Some of the other high fliers in your cohort make it to kacho, but you don’t. Your daughter, whom you struggled to get into a private high school, seems to have lost her mojo too.

20 years on – the Lehman Shock

Every industry suddenly goes into recession. Elpida Memory enters bankruptcy and Panasonic and Sony are in tatters. You start to envy the old guys with their golden goodbyes and full pensions.

25 years on – what do I do now?

Sharp seems to be on its last legs, Toshiba is hit by an accounting scandal. Is my company OK? Drinking with old friends, there are more grey hairs and wheezing than before. Even your highflier friend has applied for early retirement. Younger colleagues are looking at you, still only a kacho, coldly. Should I stay or start my own business or change companies?

The feature then looks at the fate of one man at Sharp. He is called to a seminar by a department called “People Making”, which appears to him to be a firing squad. They show him a chart of the pay offs available to people of his age under the voluntary retirement scheme. He then has a meeting with his General Manager, who tells him to stay. His colleague of the same age is not so lucky, and is told that as there isn’t a job for him, he should contact the employment agencies who are both under contract to Sharp to assist with re-employment, elsewhere.

It seems to be a repeat of the mid 1990s, when HR departments used similar tactics to get rid of the bulge of post war baby boomers, who joined companies in the late 1970s. Apparently the Bubble Gang are the biggest cohort in most companies, comprising 1/6 of the total employees, but only 1/3 have made it to kacho or bucho level.

In response to this, over 60% of companies surveyed by the Nikkei have reviewed their seniority based pay system or introduced voluntary early retirement schemes. Conversely, 59% of the Bubble Gang, the highest percentage of all the cohorts, feel their company has betrayed them – either because they were not promoted as expected or their pay level is not as they hoped. However the vast majority want to continue working for their company, at least for the time being. No surprise really, because you have to wonder how easy it is going to be for someone who has worked for the same company for 25 years to find a job elsewhere.

Branding without egotism

Another survey on the top 100 global brands has just come out, and yet again Japanese brands are not punching their weight, considering the size of their revenues and the Japanese economy. How you measure brand value is of course a contentious point. It’s often an attempt to quantify how much it would cost to buy the brand, based on some kind of residual figure from the value of the company – having subtracted all the other assets – as well as qualitative research on customer evaluations.

Some of the Japanese corporate names missing from the list would come nearer the top if only Japanese customers were surveyed. But even then, I’m guessing the monetary value that could be attached to the brand would still not be as high as for some Western companies, due to the fact that Japanese companies don’t focus so much on profitability, or even “branding”.

Discussions about brand with Japanese executives seem to indicate that they see a “brand” as mostly about advertising and visible forms of identity such as logo and image.

To compete on a global basis, Japanese companies need to understand better what Western customers expect from a strong brand. But there is a danger as well in becoming too focused on brand, to the extent that it becomes a form of egotism, and prevents collaboration.

It’s been over 15 years since NTT DoCoMo Inc launched its i-mode service, putting Japan far ahead of any other nation, even the US, in terms of customers using sophisticated mobile phones to purchase applications and content on the internet. The rest of the world wondered ho to replicate Japan’s success, and many speculated this could never be reproduced outside of Japan because of some kind of special cultural characteristics of Japanese consumers and society. Now, looking at the global success of the iPhone and other mobile technologies, there is no doubt that consumers across the world will buy applications and content for their phones, given the opportunity.

My view is that took the rest of the world so long to catch up because non-Japanese network providers and mobile phone handset manufacturers were so busy protecting the profitability of their brands, that they were unable to replicate the mutually beneficial supply chain ecosystem that DoCoMo built up in Japan.

When I went to Japan in 2002, assisting a British mobile phone application developer, DoCoMo refused to take the credit for a particular image recognition application that it was offering, saying they were only a network provider, and we should talk to the application developers. The application developers said they just provided applications for whatever features handset manufacturers were incorporating. The handset manufacturers said they were simply humble suppliers to the network operators.

Now, with the advent of cloud computing, and an increasingly networked society, Japanese companies are wondering how to compete against the likes of U.S. online titans like Amazon and Google. Strengthening their global brands will help, but they should not lose sight of the fact that a key element of many Japanese companies’ brands is their ability to collaborate, without egotism.

This article originally appeared in the Nikkei Weekly