Japan’s new “job type” system explained

Many Japanese companies such as Hitachi and Fujitsu are introducing a “job-type” (job-gata in Japanese) system. The term “job-type” will not be familiar to Europeans, so we will draw on a series in the Nikkei Business to explain the background to this change.

It’s common practice in Japan to hire full time, permanent staff, usually straight out of university, known as “seishain” with a ‘blank contract’ and no clear definition of the content of the work or the location of employment. Many Japanese commentators call this the “membership type” system, because the new recruit has in effect become a member of a corporate community. I like to use Trompenaars Hampden-Turner’s description of Japanese companies being a “family” company too, even if the founding family are no longer in control.

In contrast to this, the “job type” system is commonly used in Europe and the US, where the company and the individual have a carefully worded employment contract, and the content of the job and remuneration are clearly set out in advance.

	Job type	Membership type
Duties	In principle, duties outside the job description are not undertaken	Boundaries of the role are not clearly defined. Job rotations are common.
Salary	Salary is based on job evaluation/duties	Salary is based on ability and position in a career track, which in turn is based on years of service
Job location	Job location is defined and limited. In principle there is no relocation	Job location and assignment is not defined. Relocation is the norm
Training	for immediate applicability – up to the individual to acquire	long term employment is the precondition, so the company trains the individual.

3 decades of HR reforms

There is plenty of criticism that this is just a repackaging of the much criticised seikashugi or performance based system. Many Japanese companies introduced this after the economic bubble burst in the 1990s but it was seen as simply a cost cutting exercise. Managers started looking for ways to reduce employees’ bonuses, which up until then had mainly been based on company or divisional performance. Nikkei Business notes that the “3 lost decades” in Japan have seen a series of crises followed by changes to HR systems, but somehow the change is watered down and the company reverts to seniority based HR management.

Companies that have introduced the job type system include Mitsubishi Chemical. When they first introduced it in 2017, it was still the manager who made the decision on promoting employees, and as a consequence the seniority element remained. So from October this year they are introducing an open application system, to increase fairness and transparency. Mitsubishi Chemical’s HR Director Nakata Ruriko notes that their workforce is no longer the homogenous group of lifetime employees recruited as graduates. There are more mid career hires and dual income couples, trying to balance child and elderly care. Nakata is introducing choice and the ability to build your own career, to respond to this diversity.

The telecoms company KDDI has skipped trying to negotiate with the labour union to introduce the job type system to current union members and is only introducing it to managers and new graduates from April 2021. There will no longer be the same salary for all new graduate recruits – compensation will depend on skills and internships undertaken before entering the company.

Fujitsu has ended “side by side” cohort based training and a mandatory retirement age. The position of manager will be open to all, but if you do not ask to be a manager, you will not be promoted.

Working from home and relocations

Having a job type system also helps with working from home, as people have more autonomy and clarity on the boundaries to their work. Several Japanese companies are also ending the “tanshin funin” job relocation where the employee (usually male) would be assigned to another location and move there without their family.

From the management side the intentions behind bringing in a job type system depend on the sector, but at least one of three main reasons are usually cited:

the need to bring in people from outside the company who have the skills to support the company with technological innovations such as AI
to counter the constant increase in labour cost brought about by the seniority based system
a unified, globally applicable HR system which will improve internal job mobility across multinational operations

Over half of Japanese employees prefer the job type system

Nikkei Business surveyed over 1100 employees and found that nearly half preferred the job type system, compared to 24% who preferred the membership type system. When asked “do you think you can survive a switch to the job type system?”, 62.4% felt they could. More than 75% of the respondents said they would like to continue to work from home even after the pandemic was over.

But better state support and retraining are needed

The chairman of Rengo, Japan’s Trade Union Confederation, points out that Japanese employees are still very dependent and tied to their companies. If the aim of a job type system is to increase labour mobility, there needs to be more of a state safety net provided than there currently is. Some companies will simply be looking to reduce costs and those employees whose skills are no longer needed will find it very hard to switch to another company if they are no longer satisfied with the pay they receive for the work they do.

Takeda Yoko, a Director at the Mitsubishi Research Institute recommends FLAP as a way to succeed in a job type system – Find the work you want to do, Learn how to do it, Act upon this learning and then Perform – be evaluated and treated correctly.

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Japan’s lost three decades – what are the causes?

The 1990s were called the Lost Decade in Japan, and then as the economy seemed to stagnate in the 2000s, it became the Lost Two Decades. Now the Nikkei Business in a recent special series seems to be saying it has been a lost three decades. Turnover and profitability were growing through to around 1990 when the economic bubble burst. Then profits fell – although since 2010 they have been growing again. The total revenues of Japanese companies (excluding financial services) has been static, with only a small bump upwards around 2005-2008.

Nikkei Business says the lack of growth in turnover is the key problem. Even sales overseas, which were meant to be the growth driver, have not shown much of an upward trend. According to Nikkei Business the root causes of this lack of growth are:

low investment (1991 capital investment as a percentage of cashflow was 133%, compared to 82.2% in 2018)
low wages (106.5 in 1990 indexed against 100 in 2015, down to 99.6 in 2019)
low efficiency (return on assets was 4.3% in 1990, down to 3.8% in 2018)

It cites Panasonic as an example of #1. Every time profits rose, Panasonic increased its investment, but every time profits shrank, it cut investment back, since 2001. As for #2, Nikkei Business lists all the major restructurings since 1999 with major Japanese companies, which makes for sobering reading for a country famed for lifetime employment:

1999 – Nissan plan to cut 21,000 from its workforce, closing 5 factories
2008 – Sony announced it would reduced its electronics workforce by 16,000
2009 – Panasonic announced it would cut 15,000 people and 27 factories. Pioneer axed 10,000 jobs.
2010 – All Nippon Airways proposed reducing its workforce by 16,000 as part of its revival plan
2011 – Ricoh announced a mid term plan aiming at reducing its workforce by 10,000
2012 – NEC announced a workforce reduction programme of 10,000 job cuts
2013 – Fujitsu announced it that by axing its semi-conductor business, it would remove 5,000 jobs.
2015 – Toshiba announce it would erduce its workforce by 15,0000
2017 – Mizuho Financial Group announced an administrative work reduction programme targetting 19,000 roles.
2019 – Nissan restructuring to impact 12,500 personnel

The low efficiency seems to be in the service sector, where there has been a lack of economies of scale. The number of Japanese companies with turnover of over Y100bn/$1bn doubled from around 40 to 80 from 1980 to 1991, but has not risen much since – apart from a blip in 2008 – after the birth of Japan Post, and is still heavily manufacturing oriented.

I will cover the analysis and suggestions from the rest of series for how Japan can “wake up” in my next blog posts.

Acquire or be acquired – predictions on the future of Japanese mergers and acquisitions

Japanese companies used to be seen as very reluctant to acquire and merge with other companies, but the record breaking £46bn acquisition, finalised in January 2019, of Irish pharmaceuticals company Shire by Japan’s Takeda may not even be the peak of what has been at least 10 years’ of an overseas spending spree by Japanese companies. Faced with a declining, ageing domestic market, Nikkei Business magazine expects Japanese companies to continue their spending spree in 2019, even if there is not a big ticket purchase like Takeda/Shire.

Autonomous vehicles, Internet of Things and other new technologies are likely to be the focus of future M&A. For example Japan’s tyre maker Bridgestone has acquired the telematics business of Dutch company TomTom. “Tyre companies are also entering the era of CASE (Connected, Autonomous, Sharing Electric)” says Bridgestone’s CEO Masaaki Tsuya. Sensors can be placed in tyres to understand driving conditions, for example.

In the IT sector, NEC has acquired the UK company Northgate Public Services in January 2019 and in December of the previous year acquired Denmark’s KMD Holding and is looking to acquire a stake in India’s Mindtree.

Food and drink companies are also active – Mizkan, Ajinomoto and Asahi Beer have all made acquisitions recently in Europe.

In the financial sector, Nikkei Business speculates that a Japanese company like SMFG or Orix might be interested in acquiring GE’s aircraft leasing business GECAS, headquartered in Ireland – although GE has since denied GECAS is for sale. MUFG might be interested in the US Bank of the West.

Most of the acquisitions of Japanese companies have been by Chinese companies, but Nikkei Business also wonders whether some of the big Western automotive suppliers such as Bosch, Continental, ZF, or Magna might not be interested in acquiring Japanese automotive suppliers.

Declutter and dispose

M&A is also an opportunity for Japan’s keiretsus (conglomerates and company groupings) to do a bit of tidying up. The trendsetter in this has been Hitachi, who have been pursuing a rigorous policy of “selection and focus” in rearranging their business portfolio. Over the past 10 years or so they have sold off Hitachi Global Storage Technologies to Western Digital, Hitachi Logistics to SG Holdings, sold a 27% share in Hitachi Capital to MUFG, sold Hitachi Power Tools and Hitachi Kokusai Electric to KKR and Clarion to Faurecia.

Japanese investors and banks are keeping a watch on Hitachi High Technologies, Hitachi Chemical, Hitachi Automotive Systems, Hitachi Construction Machinery and Hitachi Metals as the next possible candidates. Hitachi Chemical and Hitachi Metals were supposed to be two of the “Three Branches” of Hitachi along with Hitachi Cable, so the idea that they could be sold off would be heresy to some Hitachi old timers. As the Nikkei Business magazine says, Hitachi is trying to compete as a global company, so any business that has no synergy with its “social innovation” vision is likely to be dropped.

Panasonic already sold off its security camera business and foreign funds are eyeing up Panasonic Avionics – an inflight entertainment company – as a likely next candidate. “It has nothing to do with Panasonic’s main business”, one investor commented.

Takeda seems to be preparing to dispose of its consumer healthcare business to help fund its acquisition of Shire, as it has spun off its vitamin drinks and other products into a separate company.

Fujitsu has also been disposing of its hardware businesses – mobile phones, car electronics and PCs and Sony‘s mobile phone business is still struggling, and rumours that it could be sold continue.

Spark surprise

Nikkei Business concludes with some surprise predictions from the experts it spoke to:

Astellas and Daiichi Sankyo merging
Pioneer and JVCKenwood merging
SoftBank acquiring NEC
Fast Retailing acquiring Gap
Google acquiring Recruit
Amazon acquiring 7&i (7-11 convenience store chain)

Unsettling though it may be for the employees concerned, if clarity in the focus and business of Japan’s iconic companies results from these M&As, ultimately it should make for a more confident Japan Inc.

Lessons from the decline of Japanese electronics manufacturing in the UK for the automotive industry

Although around 10,000 manufacturing jobs in Japanese electronics companies in the UK were lost in the 1990s-2000s, about the same number have been added, either created by Hitachi Rail or in the automotive or air conditioning sectors. Japanese electronics companies such as Sony, Fujitsu, Panasonic, NEC, Mitsubishi Electric and Hitachi still all employ thousands of people in the UK.

It is a story of how industrial policy cannot ultimately stop product obsolescence, shifts of manufacturing to cheaper locations or the transformation from mass manufacturing of products to supply chain ecosystems providing solutions and services. Recent investment from Japan in the UK is in services and infrastructure, for the domestic UK market, and at least for now, the EU. But this has meant fewer jobs in the areas that voted Brexit.

Bunging £10s of millions at Nissan to compensate for tariffs was not going to stop these shifts. Over 10% of the 7,000 Nissan employ in the UK are working in design centres, not on the factory floor. Being a gateway to the EU now, even in manufacturing, needs regulatory alignment and free movement of people so suppliers can visit and base themselves at client sites and provide services and ship prototypes around the region.

The shift to electric vehicles means the car companies have to cooperate more than ever with ICT and electronics companies. Many of these ICT and electronics companies have joint European HQs spread across the UK, Netherlands or Germany, with senior management and teams scattered across the region, working virtually or at customer and partner sites. They have also integrated back office and technical support into cheaper locations such as Portugal or Poland.

Some examples of the history of Japanese electronics companies in the UK over the past 30 years:

Fujitsu

Fujitsu is the biggest Japanese employer in the UK with over 8,000 employees, 2,000 down on a few years ago, as it grows delivery and support centres in Portugal, South Africa and India and downsizes in the UK. It acquired 80% of UK’s ICL in 1990 (increasing to 100% 1998). ICL had 2,000 UK employees, 26,000 worldwide, with mainframe and PC factories in Letchworth, Manchester and the Midlands. ICL was born out of 1960s industrial policy – the British government had a 10% stake in it for a while. To this day, Fujitsu provides a lot of government IT infrastructure and services. Its last computer factory in Europe, in Augsburg in Germany, will shut down in 2019, retaining manufacturing in Japan only.

Hitachi

Hitachi used to employ around 1,000 people in its factory in Aberdare, Wales, making cathode ray TVs, video recorders and microwave ovens. It was shut in 2001, blaming low price competition from Asia. Hitachi has since shifted away from consumer products to infrastructure. In the UK it acquired the now stalled Horizon Nuclear Power projects in Wylfa and Oldbury and set up Hitachi Rail in the UK as the global headquarters with a new factory in Newton Aycliffe, employing nearly 2,000 people.

Hitachi employs another 4,000 people in the UK services sector – for example credit and loans company Hitachi Capital, IT consultants Hitachi Vantara and Hitachi Consulting and Vantec, providing logistics for Nissan.

Sony

Sony came to the UK in 1973, and had 2 plants in Pencoed making cathode ray TVs, employing 1,800 by the 1990s. As these started to shut down, Pencoed transformed itself into an innovation centre, developing and producing broadcast and professional equipment, employing 500-600 people.

Sony has been restructuring across Europe recently, consolidating back office functions into cheaper regions. It was still manufacturing DVDs in Enfield in the UK but this was shifted to Austria in 2017/8, reducing capital in UK by over £250m. It still employs nearly 2,000 in its music, home entertainment and interactive businesses in the UK.

Ricoh

Ricoh still has a factory in Telford (and two other plants in UK), employing the same number of people in 2018 as in 1991 – around 700 – but the product range has shifted from faxes to printers and consumables.

Mitsubishi Electric

Mitsubishi Electric acquired Apricot Computers in 1990, with a plant in Glenrothes and R&D in Birmingham, employing 442 in 1991. Glenrothes was shut in 1999, blaming cheap competition in Asia. It still has manufacturing in the UK, employing nearly 1,000 people (many of whom are non-UK EU citizens) in Livingston, at its airconditioning plant.

Panasonic

Panasonic, formerly known as Matsushita, had many plants in UK from 1970s to 1990s, employing 1,621 in Cardiff (TVs, microwaves), 469 in Gwent (electric typewriters, carphones), 160 in Port Talbot (components for TVs, video recorders, microwaves) and 63 in Reading (fax machines). Most Matsushita/Panasonic plants in UK shut down in early 2000s, with production shifting to Eastern Europe. 1 plant remains in Wales, employing 400 people, manufacturing microwave ovens but also conducting R&D into fuel cell technology. Panasonic has acquired Belgian IT company Zetes and Spanish automotive supplier Ficosa recently.

NEC

NEC is also shifting into IT services via European acquisitions. It used to have a semiconductor plant in Livingston (Silicon Glen, remember that?) which employed 1200 by 2001, when it shut down. NEC UK employees now number over 1000 again thanks to the acquisition of Northgate Public Services, in 2018.

Others

Oki Electric were relatively late in shutting down their Cumbernauld printer plant in 2018 – and now all production is in Asia. JVCKenwood shut down their East Kilbride TV/CD player factory in 2008 and shifted production to Poland. Pioneer closed its CD player/TV factory in Wakefield in 2009. Toshiba had a factory in Plymouth, which used to make TVs, video recorders, but is now owned by a US company and makes air conditioners. Sharp (now owned by a Taiwanese company) still has a factory in Wrexham as does Brother.

Size matters when choosing a Japanese company

Whether you’re looking to work for or supply to a Japanese company, size matters. The most obvious reason being, as bank robber Willie Sutton apparently never said, “that’s where the money is”. That’s why we started our Top 30 Japanese Employers rankings – we’ve found them useful in understanding our customer base and the likely concerns of participants in our seminars.

We use the number of employees as a proxy for size rather than turnover or profit, and although there is a degree of correlation between employee numbers globally and in Europe and overall profit, there are some exceptions.

Toyo Keizai have recently listed up the companies* who made the biggest cumulative profit in the past 10 years and it’s absolutely no surprise that Toyota, one of the biggest companies in Japan and #9 amongst Japanese companies in Europe, made a whopping Y11 trillion ($99bn) cumulative profit from 2007 to 2017, far outstripping NTT and NTT Docomo at #2 and #3 who made less than half that amount. NTT and NTT Docomo are not in our Top 30 Japanese companies in Europe, although another group company, NTT Data, is.

However NTT and NTT Docomo never made a loss, whereas Toyota did go into the red – with a loss of $.8.6bn in 2008/9. Honda, who has had a tough time in Europe (and is #23 in our rankings), has also never made a loss, and accumulated a $36bn profit over the decade. Nissan, who made a loss but was famously turned round by Carlos Ghosn, is 10th largest in Europe in our rankings and has the 6th largest cumulative profit.

I was surprised to see my old employer Mitsubishi Corporation at #5, as they too had some rough patches particularly with losses in the commodity side, but clearly overall the Japanese trading companies have been very profitable, despite their death being heralded every decade – Mitsui is at #9, Itochu at #11, Sumitomo Corp at #14 and Marubeni at #21.

Unsurprisingly, almost none of the Japanese electronics companies feature in the top 30, apart from Canon at #10 and Mitsubishi Electric at #25. Other industries in the top 50 most profitable are automotive (Denso, Bridgestone) and pharmaceutical (Takeda, Astellas) related, and also heavily domestic businesses such as telecommunications (KDDI, SoftBank as well as NTT mentioned above), rail and retail (7&I, Fast Retailing).

Two of the largest Japanese companies in Europe – Fujitsu and Hitachi – are at #69 and #70 – Hitachi’s cumulative profit was heavily dented by the historic loss of $8bn in 2008/9. The largest company in the Europe and Africa region – Sumitomo Electric Industries (due to its labour intensive automotive manufacturing operations) is at #38, with a $6bn cumulative profit.

*Excludes banks, insurance and other financial services companies

The story of Japanese companies in the UK continues to be the story of the UK economy overall in 2016

The number of people employed in the UK by the biggest Japanese companies in the UK rose by around 1% to 76,103 in 2016 – representing over half of the 140,000 or so the Japanese Embassy to the UK estimates are employed overall in the UK by Japanese companies.

Just as 80% of the UK economy is services, so too with Japanese companies in the UK. Although Nissan, Toyota and Honda attract most of the headlines thanks to Brexit – understandably as they represent around 15,000 of the 76,000 jobs – the vast majority of the rest are in the services sector.

Even Sony has only one small factory left in the UK, making high end audio visual equipment and employing less than 100 people. The rest of 3000 or so jobs are in Sony Interactive Entertainment, music and film & TV or in marketing.

Fujitsu is still the biggest Japanese employer in the UK but the gap with Nissan at #2 is narrowing, as Fujitsu have reduced their headcount by over 15% in the past year or so. Although Fujitsu is still seen as an IT & telecomms manufacturer in Japan, in the UK it is largely an IT services company.

Trading company Itochu may be a surprise at #3, but this is largely due to its ownership of tyre fitting chain KwikFit.

The Hitachi group of companies (#7) has grown by 17% over the year – thanks in part to expansion at Hitachi Rail and Horizon Nuclear Power – but the bulk of its employees continue to be at consumer loans company Hitachi Capital.

Dentsu Aegis Network, part of the Dentsu advertising agency, has continued to acquire across the UK and Europe, resulting in a 21% increase in headcount. Other notable increases thanks to acquisitions include Mitsui Sumitomo & Aioi Nissay Dowa acquiring Lloyds underwriters Amlin and of course Softbank, a new entrant to the top 30, with its acquisition of ARM.

The story of Japanese companies in the UK continues to be the story of the UK economy overall – a trend which will no doubt continue in 2017, with Japanese banks already strengthening and relocating to their other European Union based operations, or threatening to do so.

Customised reports, profiles and other research on the Top 30 largest Japanese companies in Europe, Middle East and Africa are available – please contact pernillerudlinrudlinconsultingcom for further details.

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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

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

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

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

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

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

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

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

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

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

The most popular location for a European HQ

I’ve just been updating our Customer Relationship Management (CRM) database of Japanese companies and their suppliers in Europe. I recently shifted the database to a new cloud-based provider, which enables me to cross reference our customer data with social networking sites such as LinkedIn – a very popular business networking site across Europe and the USA. The way our new CRM interface works has also forced me to focus much more on how our Japanese corporate clients are organising their operations across Europe, including where they have placed their headquarters.

My conclusions are not entirely scientific, as my own business is based in the UK and therefore biased towards UK based Japanese companies, but it does seem that the UK is the most popular base for European headquarters of Japanese companies. Of the 96 European headquarter companies I have identified in my database, 53 are in the UK, 24 in Germany, 10 in the Netherlands, 5 in Belgium, 2 in France, 1 in Switzerland and 1 in Poland.

Of course there are many Japanese companies who do not have a European headquarters, but the trend among those who have been in Europe for a longer period is unmistakably towards consolidating across Europe in terms of functional areas such as purchasing or HR or finance. This seems to be to the benefit of the UK, which is the undoubted European if not world capital of professional services – with many globally capable financial, marketing, legal, consulting and HR firms in London.

The UK has long been a favourite destination for Japanese foreign direct investment, for various reasons ranging from the English language, to golf to the UK’s open economy. Germany has also been very popular, particularly with Japanese engineering companies who feel an affinity with German process orientation and risk aversion, as well as having historical ties such as Fujitsu with Siemens or Denso with Bosch. The North Rhine Westphalia region was particularly active since the 1960s in encouraging Japanese companies to set up there, although Sony decided initially to set up in Berlin, largely, it was rumoured, because of Norio Ohga’s love of the Berlin Philharmonic.

More recently, the Netherlands became popular because of the tax advantages offered, and also, along with Belgium, was an obvious logistical centre for Europe. Lately, however, there seems to be a shift of these headquarters to the UK. Canon has moved from the Netherlands to Uxbridge, near London. Denso and Bosch recently announced their break up, and although Denso continues to be headquartered in the Netherlands, there seem to be several senior managers with European roles based in the UK. Fujitsu and Siemens parted ways in 2009, with the Fujitsu European operations being split between Continental Europe, the Nordics, and UK and Ireland.

Sony sold its Berlin headquarter building in 2008 and is currently in the process of consolidating its sales and marketing across Europe, to be based in Weybridge, a few kilometres south west of London. However, it seems to be shifting towards a “virtual” European structure, with shared HR services now set up in Turkey, and individual senior executives with European remits being based in whatever location they prefer. This pattern has also become evident in other IT and telecoms companies such as NTT Data.

Even this virtual European company structure seems to benefit the UK the most, as senior executives of all nationalities are can be found in, or seem relatively happy to relocate to, London and its suburbs. With more than 40% of London’s population were born outside the UK, London has truly become a global capital and a place to develop global careers.

This article by Pernille Rudlin originally appeared in Japanese in the 10th April 2013 edition of 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.

“White hands, yellow hands” – the early days of IBM Japan

Takeo Shiina became president of IBM Japan in 1974, at the age of 45. He joined IBM Japan just after studying in the US in 1953. “In those days, gaishi (foreign owned companies) were seen as bad. A major newspaper wrote a series called “White hands, yellow hands” basically saying white handed gaishi were “dirty” and that they would disrupt the markets in Japan, make lots of money and take it all back to the US.

“The Ministry of International Trade & Industry also did all they could to support domestic computer manufacturers. They passed a special law so that the amount of tax that IBM Japan paid every year was recycled into supporting Fujitsu, NEC and Hitachi.”

Shiina took the brave decision to study in the US, after graduating from Keio University because his father had also studied abroad, in Germany, and so he was not afraid of becoming a foreign student. As for joining IBM, the auditor of his father’s company knew the President of IBM Japan and suggested it to him, He trained at the IBM plant in Canada and was shocked when he returned to Japan, to find that IBM Japan’s main office was in the middle of a bomb site. The factory was also just an old Japanese house, with a strong smell of a cesspit toilet as you walked through the door.

Shiina became head of the factory at the age of 32 and started a new site up as well as inadvertently offering the first ever online system to a steel factory. He assumed that IBM must be doing that sort of thing in Europe and the USA, but actually it turned out there was nothing to copy.

The contract was also tricky, in terms of persuading IBM HQ in the USA to accept it. Due to a mistranslation of “this is no problem in Japan” as “in Japanese this is no problem” IBM HQ finally accepted it, as noone could read the original Japanese anyway.

Shiina is proud that IBM Japan is now seen as a desirable company to work for, particularly in terms of opportunities for women, and having performance based pay. His interview with the Nikkei Online, the basis of this precis, is illustrated by his calligraphy which reads “Building a new country – young people, women, regions, foreigners”.

Last updated by Pernille Rudlin at 2022-12-09.

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