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

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

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

4 root causes of scandals at the genba

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

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

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

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

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

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

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

The importance of developing generalists

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

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

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