Japanese Business Blog - Rudlin Consulting

High brand recognition for Japanese companies does not necessarily mean they are well known

When it was first suggested to me that I join Mitsubishi Corporation in the UK, I have to admit I thought it was the car manufacturer, Mitsubishi Motors, despite the fact that I should have known better, having been brought up in Japan and spent a year at a Japanese university.

After a couple of years exporting British chinaware and shoes to Japan for the trading house, I was transferred to Tokyo to work in the building materials sales team. The apartment that my employer found for me had no furniture, as is normal in Japan. So I decided I would buy what I needed at Marui department store, as I had heard they offered credit cards and I did not have enough savings to pay for the necessary bed, sofa and refrigerator.

When I approached the credit card application desk, a look of panic flitted across the clerk’s face – a young, foreign, female was presumably not going to be a good credit risk. I reassured him I could speak Japanese, but he was very concerned whether I could write well enough to fill in the application form.

I took out my Mitsubishi Corporation business card in order to copy down the address, and as soon as he spotted the distinctive three diamond logo, his face lit up. “Mitsubishi Corporation! Can I phone your team leader to check your employment details?” He returned from the call with a huge smile on his face, and tried to make me buy two televisions and a better refrigerator.

The Mitsubishi name worked magic for me once more in my career there. I had stupidly forgotten my passport on a trip to Frankfurt from London. The German border police were not impressed, particularly as I had no other form of ID, not even a driving license or credit card. I suddenly remembered my Mitsubishi security pass.

Again, the atmosphere improved dramatically, and one policeman even tried to make a joke of it – “we will let you through, if you can get us a Shogun!” (as the Pajero sport utility vehicle was known in Europe at the time).

I decided this was not a good moment to explain that Mitsubishi Corporation was not the same company as Mitsubishi Motors, and ruefully remembered how I had made the same mistake myself a few years previously in the job interview. In retrospect, it is intriguing that the Mitsubishi brand instantly evoked trust, even for a German policeman who did not really know what it stood for.

This was twenty years ago, but I suspect this paradox persists for Japanese companies when it comes to recruiting in Europe. There is a generally favourable view of Japanese companies, but nobody is quite sure what they do, and therefore there is a doubt as to whether becoming an employee of a Japanese company is a good career move.

It’s no surprise, therefore, that recently the larger Japanese employers in Europe are indeed putting more effort into broader corporate communications, rather than just product advertising. This is presumably in order to attract the best quality employees.

This article by Pernille Rudlin first appeared in the 10th June 2013 edition of The Nikkei Weekly and also appears in Pernille Rudlin’s book “Shinrai: Japanese Corporate Integrity in a Disintegrating Europe”, available as a paperback and Kindle ebook on Amazon.

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Japanese companies should try treating foreign acquisitions not as lodgers but adopted sons

There has been a 33% drop in the number of overseas acquisitions by Japanese companies in the first quarter of this year compared to the last year. I view this as a temporary blip because of the weakening yen. However, recently announced corporate reshuffles show that senior executives are being asked to step down early if they are perceived to have been responsible for the failure of major overseas acquisitions. So there may be an element of “once bitten, twice shy”.

The most recent quarterly survey of 148 leading Japanese companies by The Nikkei indicates there is still an appetite for acquisition. Of the executives polled, 42.6% said they wanted to acquire companies both domestically and abroad, with North America and Europe being the favoured overseas destinations.

One way these executives could do a better job of acquiring overseas companies is to be conscious of the fact that Japanese companies behave like traditional Japanese families – and adapt their acquisition and integration processes accordingly. For example, Japanese families, even to this day, adopt son-in-laws, who take on the family name and become the heir, especially if there is a family business at stake.

Japanese companies seem reluctant to use the “adopted son-in-law” model for their overseas acquisitions. Sometimes the acquisition is more like a marriage – a long courtship of holding an equity stake in a large foreign company and then a final consummation some years later. And like a marriage, this approach requires effort and commitment on both sides, through thick and thin, to build a new family, with a new set of values and customs.

A more prevalent model seems to be treating the acquired overseas company like a lodger in the house, rather than a member of the family. So long as the lodger behaves, with no loud music late at night, and pays the rent on time, they are left to their own devices.

Initially North American and European companies may welcome this approach. They are allowed to continue as before, with plenty of autonomy and not much interference. However, like a lodger, they start to feel isolated from the family activities, and wonder whether they should be looking to move out to better lodgings. Or they may hit financial difficulties and stop paying the rent, at which point the Japanese landlord cracks down hard.

When North American and European companies acquire other companies, some attention is at least nominally paid to the cultural aspects, but the main focus is on integration or imposition of systems, structures, policies and targets. The acquired company is usually left in no doubt as to how they are going to have to adapt to the new parent, well before the ink is dry on the purchase agreement.

If Japanese companies do not feel comfortable with this clinical approach, then a lot more thought needs to go into how exactly their new overseas subsidiary can be a true adopted son and heir – or spouse.

This article by Pernille Rudlin first appeared in the April 22nd 2013 edition of The Nikkei Weekly and also appears in Pernille Rudlin’s new book “Shinrai: Japanese Corporate Integrity in a Disintegrating Europe” which is available as a paperback and Kindle ebook on Amazon.

Europe’s loss of confidence in the food supply chain – can Japan step up?

I used to be able to horrify my British friends by telling them that I have eaten bazashi (horse sashimi) in Japan – they could not believe that I would happily eat horse, and eat it raw. British reactions, however, to the discovery that many readymade burgers and lasagne bought in supermarkets contain horsemeat rather than 100% beef was more about the fear of not knowing what is in our food, rather than disgust at the idea of having inadvertently eaten horse.

Although we don’t eat horsemeat in the UK, we are aware that many of our European neighbours do, and are not as repulsed by the idea as we used to be. What we find really troubling this time is that the supply chains for the food we buy have become so complex that we cannot be sure exactly what the ingredients are and where they have come from.

The British middle classes have become far more interested in good quality, locally sourced food this past decade. Our TV schedules are full of cookery programmes – not quite as many as Japan perhaps – and our restaurants have improved tremendously. Italians and French are famously obsessed by the seasonality and quality of food – but they too have been affected by the horsemeat contamination scandal. In fact the supply chains involved in the scandal seem to go through almost every country in the EU, from the Netherlands to Romania.

Many commentators lay the blame on lower income consumers’ desire to buy food as cheaply as possible, particularly in the current economic climate. The fierce price competition between supermarkets has led to pressures being applied right through the supply chain, and corners being cut in terms of quality checks. Supermarkets have, rightly, refrained from defending themselves by saying they were only trying to provide what consumers want or by blaming suppliers. They realise even the poorest consumer is placing trust in their brand, and does not want to be tricked. So they are taking steps to cut out middlemen between them and the farmers, or to bring meat processing back in house.

Some commentators have pointed out that there are parallels with the US car industry in the 1980s. American car firms were competing on price, so forced their suppliers to cut prices, with a consequent drop in quality. This enabled Japanese car firms, who worked far more collaboratively with their suppliers, to produce high quality vehicles, at reasonable prices, to take market share.

When Japanese car companies entered Europe, they made sure their supply chain followed them in setting up in Europe, or that local suppliers worked as closely with them as their suppliers would in Japan. Japanese car companies have recognised the importance of the brand – it is not just promoting a logo, but whole ethos of responsibility to the customer.

Notably, when there are quality problems, Japanese car firms act as the public face to the customer, apologising and implementing product recalls. The root cause may be a supplier defect, but the supplier is not publicly named. The brand owner takes responsibility for the whole supply chain, and customers do not want to hear the blame being pushed onto someone else.

Japan has had its own food contamination scandals, but on balance, I believe Japanese companies manage their supply chains very well. The test will be how the next wave of Japanese companies in customer facing industries such as retail, airlines and food, who are trying to become global brands, and often buy up European brands in order to do so, will be able to replicate their trusted supply chains successfully in Europe. The beef contamination scandal has put European customers on the alert.

This article by Pernille Rudlin originally appeared in Japanese in the Teikoku Databank News, March 13th, 2013. 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.

The Emperor of Olympus dies, just before the judgement of Olympus

The instigator of the cover up of Olympus’ losses, Toshiro Shimoyama, died aged 89 of pneumonia, just before a suspended sentence was handed down to his successor, Kikukawa. Kikukawa avoided a prison sentence partly in recognition that he inherited, rather than perpetrated, the fraud which was then uncovered by Michael Woodford.

According to Eiji Furuyama, of the Japan Society for Business Ethics Studies, in his paper “For Whom the Whistle Blows: Olympus Financial Scandal” which I heard him present at the Association of Japanese Business Studies, Shimoyama was known as The Emperor, which gives you some clue as to how difficult it would have been to to expose what he did whilst he was still alive.

Furuyama also predicted that Kikukawa would get at least a partially suspended sentence, as he did not personally benefit from the fraud. Furuyama attended one day of the hearing, and described Kikukawa as surprisingly small in terms of presence, and clearly “a nice guy”. Furuyama has also met Woodford, as have I, and similarly concluded that his motives were good, although Woodford had suspected somebody somewhere was benefitting financially.

Furuyama concluded in his paper that the biggest fraud was Olympus’ – as a “socially responsible, incorporated firm” – decision to trade in speculative and fraudulent financial products in the first place.

Why it matters if Japanese businesspeople are bad at English

The former President of Microsoft Japan, Makoto Naruke, wrote a best seller entitled “90% of Japanese don’t need to speak English” provocatively asserting that learning English was a waste of time and money, no graduate from an international school has succeeded in business, business English conversation is easy and if you’re an idiot, being able to speak English isn’t going to help.

There’s obvious truth in the last point, and Tejun Shin, formerly of Morgan Stanley, now running his own fund and a microfinance not-for-profit Living in Peace doesn’t deny that 90% of Japanese don’t need English in their jobs, but points out in the Nikkei Online(Japanese) that it’s still a big problem that the 10% of Japanese who do need English for their work are pretty awful at English too.

He demolishes various assumptions made that Japanese have nothing to worry about, showing that even amongst 19 Asian countries Japan comes second from bottom after Cambodia on English ability scores and that amongst 15 OECD countries where English is not the native language, Japan is bottom in English ability. Even something that I often assert, that Japanese are better at reading than speaking or writing English, turns out to be wrong.

He gives a couple of excellent reasons that I had not articulated myself for why poor English ability is an issue for Japanese employees.

Firstly, that it will lead to the Galapagosisation of the mind (Galapagos syndrome is often used to describe products which are developed purely for the Japanese market, so like a Galapagos turtle, cannot survive outside that particular environnment). Without input of “world knowledge” – from the internet or TED talks etc – which is inevitably in English, thoughts become entirely inward looking and idea creation incestuous.

Secondly, for leaders in particular, English ability is a must, not only so that they can form alliances with overseas companies to develop business, but also – and this was the real aha moment for me – so that English speaking talent feels comfortable working for them. This is so true – if you are a high flier, you wouldn’t want to work in a company where you have little chance of getting your views heard by the top executives.

Career paths in Japanese companies in Europe

I asked one of the two partners of a local firm of accountants whether he was getting lots of job applications from recently made redundant accountants from the big accounting firms. He said he was, but he had to be careful about hiring such people as his firm cannot offer the career path that the big firms can. “People who are used to big companies get frustrated and quit when they realise there is not much potential for meaningful promotion with us,” he said.

It reminded me of the situation I often see in Japanese companies in Europe. Partly because of the fragmented nature of Europe, unlike the USA, many Japanese companies find the best structure is to have a small office in each country with one or two expatriate Japanese staff in each one. The locally hired staff often have interesting and varied jobs because the small office has to cover a variety of functions and businesses. However there is not much of a vertical structure in terms of people for them to “manage” if they are promoted to a management position.

How, then, should such Japanese companies retain and motivate good quality local staff? The accountancy firm partner said what he did was offer good salaries, excellent benefits and plenty of training. This may not be sufficient to satisfy ambitious people, however, so I have a couple of other suggestions specifically for Japanese companies in Europe.

One is to try to create a pan-European structure so that locally hired staff can have some status within that structure, not just their local one. It may not be possible to have actual job roles like “European Sales Director” but a human network could be created, through pan European meetings and training. Then people can keep in touch afterwards by using an intranet to put their profiles on and exchange information through blogs or wikis. Through getting to know each other and sharing expertise, the high flying staff will begin to gain unofficial status and recognition. People might also become less reluctant about the idea of moving to another location or to take on a “pan European” role, once they know more about other colleagues in other European operations and what they do.

The other way Japanese companies can motivate their ambitious staff is to give them opportunities to improve their status within their profession. This might not seem to the Japanese management as being much of an issue. Many Japanese employees feel they have enough status professionally because their company is so well known and respected in Japan. But often such companies are not at all famous outside of Japan. The kind of opportunities I have in mind are, for example, joining professional associations, gaining professional qualifications, speaking at conferences, writing articles for trade journals etc.

If Japanese companies can support their locally hired staff in gaining recognition and respect inside and outside their companies, they may have more success in retaining motivated, ambitious employees.

The original version of this article was published in Japanese in the Teikoku Databank News and can also be found in “Shinrai: Japanese Corporate Integrity in a Disintegrating Europe” available as a paperback and Kindle ebook on Amazon.

Teams and orchestras

Shinko Hanaoka, the Japanese cellist, spoke today to the Jiji Press Top Seminar. I’d just been talking to a Japanese ex-colleague about European and Japanese attitudes to teams, so her description of the differences between Japanese and British orchestras struck a chord. Apparently in Japan, when there is a vacancy in an orchestra, applications are invited and there is an initial selection based on the applications. Those selected are called for audition and the person who plays the best in the audition is selected. The UK system is similar, up to the point of the audition, but apparently several people are shortlisted after the audition and then called, randomly and without much warning, to play in concerts, as part of a trial period, which can go on for years. They are compensated the same way a contract musician is paid, but they are under scrutiny not just for their ability to play, but their sociability, flexibility etc. In other words whether they fit into the team.

I suppose in the Japanese orchestra case, there is an assumption that it goes without saying that the new member will make every effort to fit in the team. It’s the training every child receives from kindergarten onwards. However, Hanaoka herself admitted she found the Japanese orchestra “gyoukai” (industry, trade, profession) very oppressive and full of rules and expectations about how she should behave.

She wasn’t totally positive about the British method either – as clearly selection based on personal characteristics rather than musical ability is liable to prejudice and political considerations. She confessed she did sometimes use the excuse of being a foreigner to get out of some of the more “gyoukai” like aspects of the British musical scene. (The “freedom of a foreign life” as I have noted previously)

Even once she succeeded in the trial period, she found it impossible to get the Royal Philharmonic to do the necessary to get her a visa, so had to continue her studies in order to qualify for a student visa, and then finally permanent residency. She said it was unsurprising that she was one of very few foreigners in the orchestra, in contrast to continental European or American orchestras.

A further point she made, familiar to anyone with Japanese customers, is that Japanese audiences are way more fussy than British ones. “Maniacs” she said (meaning maniacal in the depth of their knowledge, rather than nuts), whereas British audiences mostly just wanted to enjoy themselves and were far more casual.

Getting to know the Japanese customer

The party trick of a president of a Japanese engineering company I knew was to recite off by heart all the birthdays, universities and family details of his key clients. To him this was a critical part of the long term business relationships he had built up with his clients – something his father, who founded the company – had also done.

This may not be so unusual even for a Western salesman, particularly these days with LinkedIn and Facebook providing so much detail on individuals. I sense, however, that Western companies who supply to Japanese companies are nowhere near equal to Japanese suppliers in their intimate understanding of the Japanese client company as a living entity – its history and its personalities.

Japanese suppliers have an ‘unfair’ advantage in that there is so much published (in Japanese) about Japanese business. Not only are there all the daily and weekly publications of the Nikkei group, to which this newspaper belongs, but, if I can be allowed to mention it, other rival business magazines and daily specialist newspapers. The attention of younger generations may be shifting to digital media, but Japan still has one of the highest readerships of newspapers and magazines in the world.

Japanese blue chips are still so much part of people’s daily lives as lifetime employers, providers of benefits such as accommodation and even spouses – as well as defining one’s status in society – that very few Japanese companies need to worry about what their levels of “brand awareness” are amongst the Japanese populace.

Outside Japan it is entirely different of course. All too often the name is familiar, but when asked exactly what the company provides, the average non-Japanese consumer hesitates. Many Japanese companies are aware that they have a name recognition problem overseas, but are not sure what to do about it and it is often not in their nature, or the nature of their executives to trumpet themselves loudly, especially not in English.

As a result, if you want to supply to a Japanese company inside or outside Japan, you need to understand that the Japanese company does not see the need to explain itself or does not know how to explain itself. It somehow expects you to know. The fact that you are reading this newspaper is a start, but you may also wish to make it a daily habit to search the English version of Nikkei.com as well for customer names and competitor names.

As Japanese companies have been through upheavals since the economic bubble burst in 1990 and the Asian banking crisis in 1997, some understanding of who merged with whom and where the power consequently lies (again, second nature to most Japanese suppliers) needs to be grasped.

It would also be a mistake to imagine that all Japanese companies are alike in their overseas operations. If they expanded overseas by acquisition, they may behave just like a local customer, and the purchasing manager may well be non-Japanese. However, at some point, the Japanese corporate culture will kick in, and identifying those moments when the Japanese way of doing things has taken hold will be key to avoiding unnecessary frustration and misunderstanding.

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”

More thoughts on Olympus – the role of the press in Japan and the West

I went to see Michael Woodford, former CEO and President of Olympus Corp, talk at the Daiwa Anglo-Japanese Foundation last month. It was packed out with a mix of Japanese residents and British Japan specialists. Woodford gave a rivetting, very intense and emotional account of his experiences at Olympus, repeatedly emphasising that he loved Japan, and wished no harm to Japan or Olympus by what he did.

I have posted previously on some aspects of this case but what struck me this time – and also now I have read some chapters of his book in English, to add to what I have read in his book in Japanese – was how he was so surprised that the Japanese press stayed silent after the Facta magazine articles originally broke the story. He was almost expecting the media to come to his rescue, by busting open the cover-up and thereby forcing the Japanese executives to account for themselves, without Woodford himself having to confront them.

I suppose this would be the case in the West, but to anyone who knows how the Japanese press works (and I recommend my friend Jochen Legewie’s booklet on this subject if you do want to know more), it was completely unsurprising that they closed ranks and stayed quiet.

After all, Shigeo Abe, the publisher and editor of Facta, is a Nikkei exile (who was banished to the UK by the Nikkei when his attempt to expose Yamaichi Securities’ problems failed), outside of the press club system, and easy to dismiss as just another sokaiya or anti establishment grudge bearer.

Whistle blowing in Japan – some thoughts on the Olympus Case

A significant factor that affects corporate governance in Japanese companies, particularly when it comes to whistle-blowing, is the sempai/kohai (senior/junior) dynamic. These relationships are particularly prevalent in large Japanese companies that retain lifetime employment systems.

Typically, when a Japanese graduate joins a domestic blue-chip firm fresh out of school, he or she will already have acquired a few sempai – literally, “person in front” – who are senior to them in the company hierarchy. There is also an implication, it seems to me, that a kohai comes from or has ended up in the same place as the sempai.

So these sempai may include the person who recruited the graduate on campus, and therefore hails from the same university, or the person who the graduate first shadows in their new team. Or perhaps it could be someone in another part of the company who is linked to the graduate via shared family, friends or neighborhood. Sempai often become mentors, and even more often, strong factions develop among sempai and kohai in a particular department or business unit.

Executive-level appointments are usually negotiated through factional horse-trading and strong sponsorship from sempai. Conversely, it can be very hard to remove someone or shunt them out of the way in the organization, however incompetent, if they have a strong faction backing them.

Strong ties of loyalty and also obligation therefore join sempai and kohai together, cemented over the roughly 30-year career life span of each employee.

It is thus easy to see why it’s so hard for anyone to blow the whistle on corporate malpractice, or even to point out damaging mistakes. In general, Japanese and other Asian cultures avoid causing other people in their group to publicly lose face; causing a sempai to lose face is almost unthinkable. When it does happen, you can be sure there has been irreparable damage to the sempai/kohai relationship and an emotionally explosive situation has developed.

In this world, it’s tough to be a professional services firm – such as a management consultancy, law firm or auditor – advising from the outside. You may diagnose problems that are clearly damaging and need to be fixed according to your professional code of practice, but you will be warned by the client that you are in danger of fraying the delicate web of intra-company relationships with your prescriptions.

I have even heard of one young auditor who was told by a client that if he refused to sign off on an audit because of a long-standing misrepresentation on the books, then he was going against his own sempai in his auditing firm. In the past, the sempai had happily signed off on the discrepancies.

Taking a stand as a matter of principle, or in the pursuit of what you believe to be the truth, is a hugely brave – some would say downright stupid – thing to do when it harms the people you are completely dependent on.

This article originally appeared in the 31st October 2011 edition of the Nikkei Weekly