Japanese Business Blog - Rudlin Consulting

France

The clampdown on non-EU immigration by the UK government has been causing plenty of concern amongst the Japanese business community for some time now. As we approach a general election in May 2015, the coalition government is under pressure to explain how it is going to meet its commitment to cut immigration to the UK to tens of thousands. The government can control non-EU immigration, but not the hundreds of thousands of immigrants who come from EU countries to the UK each year, because of the EU commitment to the principle of free movement of labour. This is why Japanese companies are finding it so hard to get visas for their Japanese expatriate staff.

If the UK tries to undermine this principle of the free movement of labour within Europe, the coalition government could even find themselves having to leave the EU, as Angela Merkel has stated. Pro Europeans and most businesspeople in the UK would rather further reforms were made to the EU, which address the causes of pan-European movements of people, but this would mean further harmonisation of business and labour regulations. Anti Europeans are antagonistic towards any imposition of unified regulations and the unions in countries such as France or Germany would resist any reforms which would threaten protection of employment of their members, or reduce state benefits.

For example, it is estimated there are over 300,000 French people living in London, making it the sixth biggest French city in terms of population. The usual explanation for this is that young people have found it hard to get a permanent job or start a business in France. There are more opportunities for them in the UK.

I’ve certainly found, as I have been expanding my business in France this year, that the bureaucracy and barriers to efficiency in France are quite bewildering compared to the UK. For example, in order to sell training courses to a French company, I have to hire an agent who is a registered company in France, and also is an approved training provider. This agent then has to provide all kinds of paperwork to the customer, so they can claim back from a state training fund the training taxes they have contributed. This adds considerable expense and delays to my business.

A Japanese company told me recently that when they tried to acquire a French software company that was about to go bankrupt, the employees decided they would prefer the company go bankrupt even though they would lose their jobs, because then they would have 80% of their salary, benefits and even mortgages paid for the next three years.

I can see that from the French perspective these regulations and taxes can be justified as ways of creating and retaining jobs and ensuring development of skills, but in reality all it has done is deter foreign companies from making any significant investments in France. So despite the visa difficulties, the UK is still the destination of choice in Europe, for businesses and people.

A 2017 update to this article appears here – A second look at France

This article was originally published in Japanese in the 10 December 2014 edition of the Teikoku Databank News. 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.

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Sometimes, the unquenchable thirst for information is hard to swallow

As a home-stay student with a Japanese family, I became used to being asked by my host mother where I was going every time I left the house. If it had been my own family, I would probably have responded “Out!” before leaving as quickly as I could, slamming the door behind me. I was trying to avoid my parents interfering in my plans but I soon realised my Japanese home stay mother didn’t really have a hidden agenda behind her inquiries – she was simply curious, and wanted to show she cared.

In the Japanese corporate world, there are hidden agendas, but the same thirst for “information for information’s sake”, continues. A constant niggle I hear from people who aren’t Japanese who work in Japanese companies is the sheer quantity of questions, often on seemingly irrelevant details, that they have to deal with from their Japanese colleagues.

These non-Japanese staff worry because they fear that their answers might be seen as commitments and they want to sort out the business case or the strategy before they give the full details of a plan. Or, like my teenage self, they are just concerned that there is some kind of ulterior motive.

I sense that Japanese colleagues are frustrated by this – they want to know the details as soon as possible because they need to feed them back into their network in Japan. If they have “overseas” or “global” in their title then they are supposed to be the instant expert on what overseas operations are doing, regardless of how complex the local cultures and markets are. Their knowledge is currency, or “neta” as it is known in Japanese – the inside scoop on how things really are. Japanese people are so used to the idea that in Japanese society nothing is as it really seems, they assume that those who claim to know the real story are the ones with the power and intelligence.

By contrast, many Westerners are surprisingly incurious about the world beyond their immediate sphere. Multinationals run on US lines tend to function on explicit knowledge – distributed through regular updates amongst a select group of global managers, maybe via a weekly phone conference, where predetermined targets are matched against actual figures, and arguments are had about any shortfalls. As a result, US type multinationals send far less headquarters staff out to work in overseas operations than Japanese multinationals, which feel that they need to have a mole in every operation to keep HQ in the loop.

I have some sympathy with the worries of non-Japanese staff. Information casually shared with Japanese colleagues does have a habit of escalating up the Japanese hierarchy and turning into formalised fact, to be thrown back in the face of the overseas staff when commitments never given are not met. Also, Japanese headquarters staff, who are so used to sharing knowledge in informal ways, fail to share it more explicitly with their overseas colleagues.

Information flows need to be two-way to work. Maybe I should have responded to my home stay mother by asking her what she was doing during the day. She might have been pleased to know I cared.

This article originally appeared in the Nikkei Weekly and also appears in Shinrai: Japanese Corporate Integrity in a Disintegrating Europe, available as a paperback and e-book on Amazon.)

We will transform Takeda into a global company within 5 years

Christophe Weber, President and COO of Japanese pharmaceuticals company Takeda, responds to “7 Questions” in the Nikkei Business magazine:

1. You announced your new strategy in October?

I spent the past 8 months since I joined Takeda [from GlaxoSmithKline] talking to various employees, from which I have reached an understanding of Takeda’s strengths and weaknesses. The strategy is to support Takeda in becoming a global, R&D led company. The structure needs to be changed to become more effective, and to develop global minded human resources.

2. How long is needed for this transformation?

I am expecting it to take 5 years. We will focus the structure on the 4 disease areas of R&D strength in Takeda such as oncology and gastroenterology and also vaccines. We will join up the R&D functions which are distributed across various countries, and strengthen their links to improve their efficiency at the same time , as well as their agility.

3. Doesn’t globalization go against becoming more agile?

It’s true that globalization can cause the organisation to become more complex. However each R&D region will be given responsibility and decision making powers. Sales channels will also be delegated more decision making authority. This should enable them to have a degree of agility and for us to grow as a global company.

4. To be a truly global company, you need to expand in developing markets?

We bought the Swiss company Nycomed in 2011. Nycomed has strong sales channels in Russia, China and Brazil. We will develop these further, to sell drugs that we have been selling in Europe and North America. Developing markets are reforming their healthcare, and this will grow rapidly in the next decade.

5. The majority of your management team come from outside Takeda. Why are so few executives from within Takeda?

I expect to hire people from outside Takeda only when there are no suitable candidates within. If there are too many external hires, it gives the impression that we are not developing our own people sufficiently. Takeda currently lacks people with global experience. We are currently thinking how to develop more globally minded people.

6. You attracted a lot of attention as a foreign executive when you were appointed President in June?

It is still rare for a non-Japanese to run a Japanese company and it is a difficult job. However, when Chairman Hasegawa called me to talk to me about this, I thought it was a challenge I wanted to take up. Mr Hasegawa has a strong will to take on the world. I felt he was a fellow spirit.

7. There was some opposition to you as a foreign President from shareholders?

There were many opinions expressed, and I listened to them with respect. It is to be expected that there will be some negative reactions when a foreigner takes on this big a reform. History will judge whether this reform is correct. I was at my previous company for more than 20 years, so I am different from other foreign CEOs who change companies every few years. I have a similar character to the Japanese in that I value stability.

Japanese management by telepathy and Ninja skills does not work for overseas M&A

The precis below is from an article written by Chieko Matsuda (Executive Director of Booz Allen Hamilton in Japan) for Nikkei Business Online’s “Corporate Governance for Everyone” series, in Japanese, but I felt as I translated it, that it was my own words, so completely do I agree with what she is saying:

Japanese companies often have an “overseas business development unit” to carry out their global M&A. However the mission of this organisation should change depending on the stage reached in expanding overseas. Even if it starts as “business development”, it often turns out that it has to manage the subsidiaries as well. So at the same time as stepping on the accelerator to grow the business, it is supposed to press on the brake, as a shareholder and auditor. When it comes up with solutions to this dilemma, nobody will help the unit out, claiming that “overseas business is your specialist area”, and “nobody speaks English in our unit”

The audit function needs to be strengthened – Japanese companies are far too weak when it comes to risk management with regard to their overseas operations. It is necessary, if expanding overseas, to “control through structure” and review rules, processes and formats. Japanese style management through telepathy will not work for overseas M&A.

In order to design the structure in detail, it is necessary to decide on the direction. What the company should not do, and what it should preserve. If this is left vague, then it will lead to a sense that “we have no idea what the parent company is thinking”.

The top priority therefore is to set the corporate mission and values. What are we trying to do, how will we do it, which way are we facing – it is control through corporate culture as well as through structure.

The corporate vision needs to be concrete, and something that can be translated in an understandable way into many languages. It should be a base for making decisions – to go left or right – not just pretty words.

If the corporate vision and culture is not secure, then it is difficult for diversity to take root. WIthout diversity, the company will not be competitive. A homogenous workforce was efficient for labour intensive production, but we are now in an era of competition of ideas and innovation. New ideas and innovation require a diverse workforce, and what will unite a diverse workforce is common corporate culture and vision.

It is of course partly up to the top management to communicate this corporate culture and vision, but middle management must also be able to use it within their teams. It can’t just be about “reading the air” in the traditional Japanese Ninja way. What do you do if there is a claim from a customer? It cannot be resolved through kiai (“fighting spirit”) and konjou (“guts”). Wouldn’t it be convenient if you had a touchstone, for when there was a problem to be solved?

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

Japanese corporate governance should follow the German, not Anglo Saxon model

Ulrike Schaede (Professor of Japanese Business at the Graduate School of International Relations and Pacific Studies at the University of California, San Diego) urges Japanese companies to follow the German rather than US corporate governance model in her latest article for the Nikkei Online. She suspects that the target of 8% minimum ROE for Japan’s listed companies, as proposed in August of this year by the Ito Review for the Ministry of Economy, Trade and Industry, was set with reference to the US average of around 15% ROE. While supporting an improvement in ROE for Japanese corporates, she argues that comparing ROE in two such different economies is like comparing the ‘moon to a turtle’.

Similarly she argues that dividend payout ratios (usually criticised for being way too low for Japanese companies) cannot be meaningfully compared across industries, let alone across countries.

In fact Japan’s commercial law, dating from the 19th century, was based and German and French laws. The German chairman of the executive committee is similar to the Japanese President of a company – the legal representative of a company. Their decision making powers are far more limited than the American CEO. Over 50% of American CEOS are also the chairman of the board, but this dual post has come under heavy criticism recently.

In Germany, it is illegal for an executive to be both the chairman of the executive committee and also on the board of directors, unlike in Japan and the USA. Furthermore, if the company has more than 2000 employees, there must be a representative of the company union on the board.

Schaede also thinks the frequency of board meetings in Japan – every month – is a problem, if external directors who need to travel long distances to get to them, are to be able to attend. She recommends meeting quarterly, but for a full day rather than just 3 hours and that the strategy of the company, rather than reports on past events should be discussed.

Such reforms would allow Japan to set a new style of corporate governance in Asia, she believes. But if the main driver for reforming corporate governance is to attract foreign shareholders or keep them happy, it seems to me, from my recent conversation with a woman who invests funds on behalf of high net worth individuals, that the US model is the one most investors judge by. She has never invested in Japanese companies, because the dividend pay out is too low. She’s not interested becoming a shareholder in stakeholder oriented companies.

Overseas experience and Japan’s elite, past and present

When I started working at Mitsubishi Corporation in London, I was intrigued by the fact that Mitsubishi had first opened the office there as early as 1915. Most British people, if they have thought about it at all, would assume Japanese companies did not establish themselves in the UK until well after World War Two. In fact it turned out Mitsubishi Corporation was a relative late comer to London amongst the sogo shosha (Japanese trading companies), although the Iwasaki founding family had links with the UK from long before 1915.

I was reminded of these links thanks to a recent talk by Dr Ohnuma Shinichi, professor of Experimental Ophthalmology at University College London (UCL) to Japanese business people in London, where he showed slide after slide of the names of the Japanese future elite who studied at UCL in the Meiji era, starting with the 14 students from the Satsuma clan in 1865, through to Iwasaki Toshiya, who studied Chemistry at UCL in 1901.

Dr Ohnuma was showing us these slides to remind us of how the founders of the modern Japanese state and business had fearlessly travelled and lived abroad, and there was a keen discussion afterwards as to how this spirit of adventure could be revived amongst young Japanese people now.

One of Dr Ohnuma’s suggestions was that Japanese companies should demonstrate that there is a positive advantage to have worked abroad, and to ensure there are proper roles for their employees with overseas experience to fulfil when they return.

At Mitsubishi Corporation it was an unwritten rule that top executives have overseas experience, and as a consequence, most new graduates join Mitsubishi Corporation and other trading companies in the expectation that they will be posted abroad. I realise however, that for other major Japanese companies, whose origins are more domestically oriented, it would be rather hard to implement this rule straight away, when in most cases hardly any of their current executives have overseas experience.

Smaller companies may have more scope to put such criteria in place however. The leaders of such companies can set the tone themselves, just as Sony’s Morita Akio did in 1963, when he controversially relocated himself and his family to New York, in order to understand the US market better.

It is surely no coincidence that the current President of Sony, Hirai Kazuo, lived abroad as a child and worked for Sony overseas. Despite Naruke Makoto (ex President of Microsoft Japan)’s assertion that nobody has ever succeeded who went to international school, Hirai did indeed go to the American School in Tokyo.

Sony may be having its problems right now, but I truly hope it succeeds in its revival plans, and proves that the spirit of entrepreneurism, openness to the world outside Japan and adaptability to change of its founder can live on, if the founder himself has set the tone correctly by his own actions.

(This article was originally published in Japanese, for 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.)

My book on the history of Mitsubishi Corporation in London since 1915 is now available in digital Kindle format (link to amazon.co.uk)

Europe could really use a dose of Japanese-style customer service

I have to admit that I always suffer from reverse culture shock when I return to the UK after business trips to Japan. Arriving at Heathrow Airport I find my shoulders hunching up, ready to face the fact the inevitable headaches and the fact that at best I may get some cheery but incompetent service – and at worst, downright hostility – from the people delivering my “transportation experience”.

I know from the training seminars I do for Japanese expatriates who are working in Europe that they too put “bad customer service” near the top of the list of things they find most challenging about living here. In Japan you become used to a consistently high level of competence in customer service, delivered politely and gently, with immediate and unreserved apology should things go wrong. Most British people, even if they have never visited Japan, will agree that customer service standards are poor in the UK. Other Europeans, on hearing our criticisms, will usually add, “Try my country – it’s even worse!” European service is uneven in quality, often delivered with a bad attitude and when things go wrong, you get excuses rather than a straightforward apology.

The question Japanese expatriates ask – and the question I often ask myself, is – “why?” Why is customer service so bad in Europe, and if most people agree it is not satisfactory, why isn’t anything done about it?

I have been doing some research on the differences in Japanese and British corporate cultures recently, and I’ve realised that the key features I have identified can also be used to explain the different customer service outcomes. For example the corporate mission of British and Japanese companies and their historical roots has led to more “stakeholder” companies in Japan compared to more “shareholder” type of companies in the UK. This in turn has had an impact on the employees’ sense of belonging to a corporate group and collective responsibility.

Some of the more traditional – some might say “outdated” – aspects of Japanese companies also impact customer service. These would include seniority based promotion, with its roots in Confucian acceptance of unequal power in society and the obligations that go with different ranks, alongside respect for elders and higher ranked people. And although status is unequal, Japanese companies do not have a huge differential between the pay of the senior executives compared to the junior ranks, unlike British service companies where the junior person is notoriously badly paid and chief executives earn millions of pounds.

Finally, even in service sector companies in Japan there is the gembashugi factor or a focus on the actual place where the work is done. Senior managers should have worked their way up the organisation and be prepared to go out onto the shopfloor. There is even a kind of monozukuri or craftsmanship – pride in the physical aspects of delivering service well.

Perhaps, if the key elements in Japanese service excellence can be identified and made explicit, customer service can be Japan’s next big export industry?

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”

Why Japanese minimalism does not apply to Japanese management

Following on from her article on why Germans work less hours than Japanese employees, Professor Ulrike Schaede takes a look in a second article at the need for a German “golden middle path” in Japanese management style. She describes how Germans who know that the Bauhaus minimalist architectural style was influenced by Japanese minimalism are surprised by how Japanese presentations are so overcomplicated, or there are so many Japanese people on a team, who don’t seem to have clear roles and responsibilities, and how many meetings seem to be needed to make a decision.

In terms of the right balance on team numbers she cites Amazon’s 2 pizza rule – that team members should be no greater than 5 or 6, the number that can be fed adequately by 2 (American size) pizzas. Individual responsibilities should be made clear, in order to improve a sense of ownership and motivation. It has certainly been our experience at Japan Intercultural Consulting in facilitating cross cultural sessions for teams which are multi-site (eg the Netherlands, Japan and USA) that the Europeans in particular know that teams are not going to function effectively if roles are not clearly defined. The American “just do it” attitude and the Japanese “all pull together” approach do not work across borders.

As for too many meetings, she jokes that Japanese salarymen eat too much spinach – horenso in Japanese. We often talk about horenso in our Japan Intercultural Consulting training sessions – it’s a mnemonic for HOkoku-RENraku-SOdan – reporting, updating and discussing, meaning “keep everyone in the loop”. It’s true that it can lead to a lot of meetings – but in my opinion is also a basis for thinking about the kind of processes that might be needed to keep risk averse Japanese colleagues and customers happy. Often the hokoku/report is not done via a meeting but as a one pager of bullet points about what happened once a week, for example.

But as Schaede points out, Japanese want to feel that everyone has been involved in a decision – she recommends that it is made more explicit which discussions everyone needs to be involved in and which decisions could be settled in smaller meetings. A detailed agenda is also helpful, to keep meetings short and to the point.

She also makes a plea, as a university professor, for ‘less is more’ in terms of lecture load. Japanese students are notorious for not studying very hard once they get to university, but as she points out, they are expected to attend many more seminars and lectures than their Western counterparts. As a result, lecturers have a lot of their time taken up with preparing lectures, when in fact they could be spending that time on individual student needs, thereby perhaps encouraging more self study.

Schede has also noticed something that many foreigners new to Japan find it hard to get used to – “overcommunication” – the way there are constant announcements tor remind you not to leave things on trains or that the end of the escalator is coming, or that a lift is going up. She claims not to mind this herself, saying it is a legacy of Japan’s wonderful customer service, to make customers feel looked after.

Her final contrast on “less is more” is between the minimalist business cards of Japan’s traditional elite – often showing the name only, and an increasing trend amongst the newer elite in Japan of having multiple cards, with different websites, email addresses and job titles.

So how many meetings, slides, lectures, team members and reports are enough, if cutting completely is going too far? Professor Schaede says she often says to her students that their work could easily be cut by 10% and up to 20% if they try, and that this would sharpen their point, without losing much.

Neuroplasticity – rewire your brain to learn Japanese?

Europeans often ask me if it is worth trying to learn Japanese. I usually say yes, but that it is important to have realistic expectations. One lesson a week, if you are not living in Japan, is not going to lead to anything like fluency. However it will be intellectually interesting, because Japanese is a beautiful language, is quite unlike any Greek or Latin based language and learning it may teach you a bit about Japanese culture.

I was very lucky to have lived in Japan at the ideal point to become fluent in another language – in early childhood. Once you hit your teenage years, learning another language becomes increasingly difficult, because your brain has become hard wired with your mother tongue. I have known some people become fluent in Japanese in adulthood, but this was usually because they took the total immersion route – living in Japan for a year or so and minimising contact with other English speaking foreigners.

Recent research has shown that in fact our brains can be “rewired”. This idea is known as “neuroplasticity” and can be observed in people who recover from brain injury – unconsciously or through training, they rewire their neural circuits in order to reacquire the functions lost by the damage. Rewiring their brain is what the adults who became fluent in Japanese were doing by totally immersing themselves in the Japanese language.

Neuroplasticity also has major implications for our national cultural identities. It used to be thought that your cultural values were immutably set in early childhood. In my training sessions I point out to people that this is not racism – I am not saying people are born with a particular set of values.

However it does seem that our brains are sculpted during childhood so that we do end up with different brains from culture to culture. Scientists have found that East Asian brains respond differently from the brains of Westerners to visual stimuli and that native English speakers and native Chinese speakers use different parts of the brain to do the same simple arithmetic.

Far from reinforcing racism, neuroplasticity implies that our brains can be reshaped, regardless of where we were brought up as children. So prolonged exposure to another culture may actually reshape the way a brain learns, thinks, decides and decodes. It may also explain the phenomenon I described in a previous article, that British or Japanese people who have lived abroad for a long time feel like foreigners when they return to their countries of birth, even if they spent their entire childhood in their mother country.

The society you are living in does have the power to reshape the way you think. So if you are not British by nationality, but have lived in the UK for a while, and find that you tut to yourself when people jump queues, or say sorry when someone else has bumped into you or find yourself giving long, complicated explanations for why you are late, it may be that you have lived long enough in the UK to have rewired your brain!

Japanese leaders need more confidence in a Japanese style globalization

Many of our Japanese client companies are embarking on global initiatives, in marketing or human resources, and consciously involving overseas employees in them. It’s great to see positive, forward thinking even in these difficult times, but comments I have been getting from the Europeans involved in these initiatives have been puzzling me.

Normally, discussions in our European training sessions about decision making in Japanese companies revolve around nemawashi (literally, going around the roots of a tree) a consensus based, largely bottom up, decision making system common in Japanese companies. This decision making process may be an entirely bottom up initiative, or triggered by a vague top down directive.

Consensus based decision making is not uniquely Japanese of course. In Europe, plenty of national and corporate cultures prefer some kind of consensus based approach, instead of top down imposition. However, when the Europeans involved in the global initiatives have tried to get a consensus based dialogue going with Japan, they instead been met with passivity from their Japanese counterparts.

One British director told me that he had suggested to his Japanese team that they come up with a proposal for a new workflow. Because they looked puzzled, he scribbled on a whiteboard very roughly what he had in mind. To his concern, the final proposal simply replicated his rough sketch. “When I put ideas to teams in Europe that I have led, I expect them to push back. After all, they often know far better than I do what can or can’t be done”.

Another British manager proposed a series of discussion sessions with Japanese marketing staff, to give feedback into a new brand strategy, only to be met with a request that the European team “just tell us what to put in the advertising”.

This could of course be due to a reluctance to have open confrontation, particularly in English. But I also sense an attitude that because the initiatives are “global” and come dressed in English “marketing” and “strategy” terminology unfamiliar to Japanese people, the Japanese employees feel it is not their area of expertise, so they should just let the “Western” side of the team take the lead.

Yet this is precisely what these European managers are trying to avoid. They want to take an approach to creating strategy which is culturally sensitive. After all, “global” these days does not mean just the West, but China, India and elsewhere. The European managers were rather hoping their Japanese colleagues would have a better cultural understanding of how to incorporate the Asian operations into the initiatives than they did.

How then could the Japanese employees engage in a dialogue in a way that does not make them feel uncomfortable? I would suggest the “coaching” style, which comes naturally to many Japanese people I have worked with. This means that instead of openly stating a disagreement, the listener asks questions which help the presenter to see the problems in their proposal themselves, rather than be told what is wrong.

Overall though, Japanese managers should have more confidence in themselves as leaders of a Japanese style globalization, which may, let us hope, work rather better than Western style globalization has so far.

This article originally appeared in the Nikkei Weekly and also appears in “Shinrai: Japanese Corporate Integrity in a Disintegrating Europe” available as a paperback and Kindle ebook on Amazon.