JAPAN: ARE THE FOUNDATIONS OF JAPANESE MANAGEMENT CRUMBLING? - Life-time employment, promotion through seniority and single-company unions - are the foundations of Japanese management crumbling?

by David Kilburn.
Last Updated: 31 Aug 2010

Life-time employment, promotion through seniority and single-company unions - are the foundations of Japanese management crumbling?

Even in the midst of a recession, shareholders, profitability, operations, or sales are not the first things a Japanese executive mentions when talking about the role of the manager. Not that these are unimportant, but they are areas where nothing can be achieved without attention to something more fundamental - human resources. From a Japanese perspective, this is the core of a manager's job.

'In my view the important roles of the manager in Japan are almost identical to that of his colleagues in the US and UK,' explains Tadaoki Ishikawa, general manager for international public affairs at Toyota Motor Corporation in Tokyo. 'Managers work with their colleagues in the company. Human resources are the important asset of a company and the important role of a manager is to work efficiently with his colleagues. To do that, he must motivate, train, educate, and help each to realise his maximum individual capabilities.

'Our system in Japan is different from that in the US and Europe. When you join a company in Japan, you normally stay there until retirement. So whenever you work with your colleagues, you are doing so on the basis that you will be working together most of your lives. Even as a general manager, I can neither hire nor fire people. The prerogative to restructure the team is generally not one of a manager's rights in Japan - his challenge is to motivate his people to achieve goals, and to help them develop their abilities, and from this the company's performance in other areas results,' adds Ishikawa. 'Our society is more group-oriented than the US or UK, where the focus is more on individual achievement. Japanese management styles and corporate cultures reflect this difference at a fundamental level and are essentially team-oriented.' As a consequence, many decisions reflect a consensus. The manager must lead the team toward this. 'A Japanese manager must have the ability to wait, maybe for a long time. A manager in the US may tell people what he wants done. In Japan, he will drop a hint. It's a bit like tossing small pebbles into a pond. You make a small ripple, and try to help it build up. Though it may take time, the energy builds up. In the same way, a consensus has a great deal of power in helping a Japanese company get results. It may take time to reach a decision, but once made, everyone is behind it, and knows what to do - so implementation is smooth,' Ishikawa explains.

But there is change ahead, though Ishikawa does not share the view that it will be revolutionary. 'We see more people changing their jobs now, and we read many articles in the newspapers about companies restructuring or seeking to reduce their workforce through voluntary retirement. But despite this, we won't see major changes coming quickly.' Even so, managers will need new skills. 'There are two skills which are becoming increasingly important to Japanese managers. The first is English ability. The second is computer literacy.' Toyota exemplifies a conservative Japanese management style at its soundest. It's an approach that has given it the strength to weather the recession better than any of its rivals in Japan. But not everyone shares Ishikawa's point of view.

'The very foundations of Japan's management system are crumbling; there are major changes ahead,' says Yasuhiko Kobayashi, professor of marketing in the Graduate School of Business at Tokyo's Aoyama Gakuin University. The 'foundations' are life-time employment, promotion through seniority, and single-company unions.

While major corporations can still maintain much of the substance of lifetime employment by off-loading excess numbers to subsidiaries or affiliates, few now see this as more than a stopgap solution. Bankruptcies in this lower tier of companies are rising, people are losing jobs on an unaccustomed scale, and unemployment is slowly rising. New graduates want to be promoted on merit not on age or seniority, and are less likely to see themselves staying at the same company for life. Under these growing pressures, trade unions may have to re-invent their role. 'The Japanese decision-making system is in need of reform,' says Kobayashi.

One company that has recognised this is Toshiba, which introduced a new decision-making system as part of its organisational reform last October. The system includes a strategic meeting of top executives - a gathering aimed at helping Toshiba's top brass reach a consensus and discuss priorities in the firm's allocation of resources to recover profitability. Decisions are made by a meeting of directors in charge of four newly established business groups. The authority previously vested in the company president has been largely transferred to Toshiba's directors, who now have the right to approve investment projects for each group.

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