As well as the train business in the UK, the other case study that Takashi Kawamura, former President of Hitachi gives as a model of globalization is the data storage business, which was turned into a “solution” business rather than just selling Hitachi’s hardware. Kawamura says the person responsible for starting this change was the CEO of Hitachi Data Systems in the USA, Jack Domme. The key words which changed the business were “disaster recovery” and Domme hired people who weren’t just salesmen, but engineers, who could listen to customers and make proposals.
As well as having a strong local leader heading the UK train business and HDS, Hitachi’s China elevator business is also headed up by a Chinese President. According to Kawamura, all these businesses have switched to being “solution” oriented, to compete with IBM, Siemens and GE – this could not have been done if they were led by Japanese “sheltering under the umbrella” of Hitachi.
3 of Hitachi’s 13 board members are non-Japanese. The executive officers are still all Japanese but Kawamura thinks this needs to change too, so that non-Japanese are heading up Hitachi’s business divisions. “If our European rail business expands, then it might be better to have a British person heading up our transport systems division. If diversity advances in this way, then there will be much more lively debates and innovation, and it will be easier to undertake structural reform”
Hitachi aims to reach an operating profit of 7% (from the current 4.7%) by FY 2015, to close in on Siemens. “What is needed to be a globally excellent company is speed” says Kawamura.
From 2011, around 1000 young employees are sent out each year to work overseas for a maximum of 3 months. This is 10 times more than previously, and represents about a quarter of each cohort. Kawamura says it is done not just because Hitachi can afford it, but to show that the company is serious about globalization and also to act as a wake up call to the young employees about how much further they have to go in order to speak English or other foreign languages fluently, and to create relationships with local customers.
Around 60% go to developing countries – Kawamura says they have to survive some tough challenges, which in some cases have really changed employees’ mindsets.
There are are also top down diversity initiatives to globalize people, through the governance of the company. In 2012 Kawamura increased the number of external directors from 4 to 7 out of the 13 board members, and raised the number of non-Japanese from 1 to 3 and this year added the first foreign female board director, Cynthia Carroll, formerly of Anglo American.
“This diversity should have an impact on the mindset of our employees, but the other effect is to liven up board meetings. Japanese board meetings usually do not have much debate or discussion – the decisions have already been made at the management committee or operational committee level. And in companies like Hitachi which are very vertical, executives do not comment on other business divisions – they feel they are not qualified to criticise.
So our board meetings have become extremely “frank”, actually I feel beaten up by them – they ask why we have not reached 5% operating profit, why such elite Japanese graduates don’t seem to be very motivated, why we are so mild and not competitive. We use simultaneous interpreters in the board meetings, so the comments come bouncing out at us in real time. It’s not just criticisms, but also new business ideas come out of these meetings – new technologies we should adopt or businesses we should collaborate with. We held one of our board meetings in India, to show we were serious about tripling our business there. We are thinking to hold our board meeting somewhere in the USA this year.
George Barclay, who was CEO of 3M is actually British, and the current CEO is Swedish. Although 3M is an American company, Americans are in the minority on the board. Barclay tells me that’s normal if you want to compete globally”
It will also help with structural reform. Hitachi has just completed a global database of 300,000 personnel. This will be used for unified appraisals and global mobility of staff. Kawamura would like to see more non-Japanese in Japan, in team leader or General Manager positions. Seniority based promotion will probably come to an end.
Kawamura finishes the series by saying that he was too old to be President, which is why he handed over to Nakanishi after a year. He sees the role of Presidency as an agent – if there is proper diversity, then the company and the management will be “smart” and “aggressive” and the President does not even need to be charismatic.
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