Changing Japanese
Management
Johji Satoh
▪Course
Number and Name: 4119 Changing Japanese Management
▪Program/Major:
DBA / General Management
▪Submission
Date: April 22, 2005
▪Date
Course was Started: March 7, 2005
▪Date
Program was Started: October 14, 2003
▪Type of
Course: Original Research and Study
▪Practical
Problem: Presenting A New Japanese Management Model
▪Number
of Words in the Body of the Course Paper: 5,58600
▪Number
of Hours Spent on this Course: 80
▪Advisor:
Dr. Donald Mitchell
▪ Date of Last Edit/Editor: April 215, 2005
/ Laurel Barley
▪ English
Spelling Used: US
▪Permission
to Publish on the Rushmore Website: No
▪Your
Website Address: http://www13.plala.or.jp/grsinc
▪Resources:
Coming Japanese Management by Moriaki Tsuchiya and Yoshinobu Konomi.
▪ Reasons
for taking this course: Because I have a strong interest in developing a new
Japanese management model.
Executive Summary
Of Changing Japanese Management
Japanese management has
been changing, facing economic and environmental changes. Lifetime employment, a seniority system
and family-style management had been very successful before these changes such
as oil crises, higher yen, stock and real estate bubble bursting, incoming
world standards, and American advanced management theories and practices. Such traditional Japanese management
can no longer be effective and top managers must change their business models
to overcome a long depression and sluggish domestic markets. Although Japanese companies have been
making much of the workers’ compensation, they would be asked for greater
efficiency, higher dividends and higher stock prices by aggressive
stockholders. Top managers should
reform their companies to fit into Japanese culture, customs, and
ethnicity. As Japanese have
Wakon-Yosai, the traditional Japanese mind-set, they can change American
advanced management theories into Japanese-style management. As Japanese normally have no
entrepreneurial culture and education, companies should raise the workers to be
entrepreneurs. Japanese companies
are destined by government environmental policies to reduce greenhouse gases,
and good-standing technology-oriented companies should take the lead in
environmental problems and spread their own environmental technologies around
the world. Japanese companies
should reflect on their past failures and aim at the synergy between corporate
profits and social responsibility.
Main Topic
Japanese management has been changing, facing
economic and environmental difficulties such as oil crises, higher yen, and the
bursting of the stock
and real estate bubbles. Facing
the world standards and American advanced management theories and practices,
traditional lifetime employment and a seniority system can no longer be
effective in most Japanese companies, though both still exist in many
companies. So top managers must
change their management models to fit into the new economic and environmental
situation.
1.1Subtopic
Japanese
management has a lot of problems, facing economic and environmental changes
these days. Possible solutions are: changing traditional management styles,
meeting stockholders’ expectationsmaking much of stockholders[L.B1], educating for entrepreneurship, learning from the
past failures in globalization, and reducing agency costs.
1.1.1 Sub-Subtopic
New waves for Japanese
management are: new economy revolution, expanding Chinese and other Asian
markets, the need for environmental solutions, and compliance with the ISO
standards, which should lead to a new Japanese management model.
INTRODUCTION
Japanese management has
been changing recently, facing economic and environmental difficulties such as
oil crises, higher appreciation of the yen, the stock bubble bursting and the
need to reduce greenhouse gas emissions.
Before these changes, most Japanese companies had enjoyed higher
economic growth with Japanese management
systems such as lifetime employment, promotion by seniority, a weak labor union
within the company, family-style management and so forth. Traditionally, Japanese management has
been looking after making much of[L.B2] the
workers instead of stockholders.
Facing such difficulties and advanced American business models, Japanese
management had to change and innovate its business models. In this paper, I examined how Japanese
management developed, changed and where it is heading. I also presented a new Japanese
management model for the future.
The background of the
study is that Japanese companies have strayed into a labyrinth with traditional
and new management styles, and need to innovate to develop newdevelop new management
models. Old Japanese management
styles can no longer work, as companies are facing environmental
changes these days. But I think
American innovative management models are not always effective in Japan because
of the differences in culture, customs, and education. So I have been studying and attempting
to develop a new Japanese management model for the future growth.
Now the problems of
Japanese management are: (1) still being bureaucratic through lifetime
employment and a seniority system, (2) making light of stockholders’ interests,
(3) lack of entrepreneurship, (4) declining technology development, (5) spirit
of samurai (Japanese feudal warrior), (6) failures in globalization, (7) higher
agency costs, (8) lock-step mentality, and (9) vulnerability to a higher yen. Although Japanese management has been
changing, with companies facing environmental changes and American advanced
management theories, it cannot harmonize with traditional management
systems. In this paper, I
investigated these problems, possible solutions and new changes for the future
Japanese management.
The significance of my
study is to show how Japanese management has been changing, and
present a new Japanese management model for the future. Many Japanese companies do not always
succeed in dealing with environmental changes these days. If there were new management models,
top managers could apply them to their own companies. I think Japanese management is now in a transition period
for future growth to deal with new economic and
environmental changes.
The overall research
perspective I used was the qualitative perspective. The research types I used were as follows. Descriptive research with observations
was used to review the
development of Japanese management and problems it holds. Evaluative
research was used in evaluating the effectiveness of the possible solutions and
in developing a new Japanese management model. I then used case study research. Six Japanese management style cases were introduced to show
the present typical Japanese management models. My role is to explain how Japanese management has been
changing and where it is heading.
Most information and data I used are from the Internet, reference
papers, books and actual observations of the outlets. The evaluative researchevaluative
research was followed by a summary and discussion on overall Japanese
management.
The limitations on the
study is that most researches are based on my observations from the actual
companies, books, papers, Internet and other data. My Japanese management model is only a simulation model for
the future company growth. The
viability of the possible solutions and my model depends on each case. Six cases I mentioned are only examples
of the present Japanese management styles, and there may be many other companies that
cannot be categorized in my models.
In this paper, I define
and explain the technical terms, which might be different from general use or a
little difficult to understand.
JIT (Just-In-Time) is the production system that has no extra
backlog. The Kanban system is the
production system, using various cards which indicate the item numbers and
number of parts to be replaced, to smooth the production processes. Both were created by Toyota Motor
Company. TQC (Total Quality
Control) is the voluntary quality control system not just in one section but
throughout the whole company, including the frontline work area. The Kaizen
movement is a continuous improvement movement. Plaza Accord was the agreed-upon dollar
depreciation agreed at the meeting of the
finance ministers and central bank governors from the five advanced countries,
which was held at the Plaza Hotel in New York in 1985. From that time, the yen had been
appreciated dramatically, from 235 yen/dollar to below 150 yen/dollar in
1987. ISO (International
Organization for Standardization) offers the world standard of management such
as quality, environment, workplace safety and
sanitation, information security, and social responsibility. Fractal thinking is a mathematical way
of thinking, which can create any kinds of complicated values through repeating
simple concepts and practices.
BRIEF HISTORY OF JAPANESE
MANAGEMENT
The origin of the
Japanese industry can be traced back to the 18th
century. The Toiya merchants who
had capital lent the materials and tools to the farmers, then bought back the
products they made and sold them to the general public. The Toiya built manufacturing plants
and developed Japanese industries such as textiles, china, paper and pulp,
green tea, and sake (Japanese alcoholic drink made from rice).
In
1868, the political system changed from feudalism to the modern imperial
system, Japanese modernization started and the new Meiji government imported
modern technologies and machines from Europe and America. The government strongly encouraged the
development of new
industries and built public factories, which were soldwere sold cheaply to the
merchant capitalists such as Mitsui, Mitsubishi, Furukawa, Yasuda and
Sumitomo. They grew to become
Zaibatsu, powerful conglomerate groups, and developedand
developed Japanese industries.
Zaibatsu groups formed Sogo-Shosha (a general trading company), one of
the typical Japanese management models.
They are still powerful business leaders in Japan, although they were
once disorganized disestablished as the
promoters of the war by GHQ after the World War II.
With the democratization
after the War, the modern government encouraged the development of new
industries and protected big companies in order to catch up with and eventually
outstrip European and American technologies. As The Boston Consulting Group pointed out, The Bank of
Japan, Japan’s central bank, provided the necessary money supply for the city
banks to lend venture companies for long terms in order to enable them to grow
them big enough to be protected from foreign competition. In the 1960s, Japan enjoyed high
economic growth of over 10% per annum due to hard work and the importation of
technology from America. At this
stage, the culture of hard work, lifetime employment, a seniority system and
family-style management had already been created. Workers were generally supposed to have a sense of loyalty
and work with the same company until retirement age.
Japanese people
traditionally have a spirit of Wakon-Yosai, a Japanese mind-set with foreign
talents. They introduced European
and American technologies and know-how, and integrated them into their own
Japanese technologies. At first,
everything was an imitation of European and American technology or products,
but frontline workers and engineers gradually developed their own products and
technologies. I suppose that
Japanese management has been created through these long processes combining
with traditional culture, customs and education. The modern Japanese Management techniques, such as TQC, JIT
and Kanban systems, the Kaizen movement and the introduction of robots, are
all consequences of these
processes.
Modern Japanese companies experienced economic
difficulties such as oil crises, higher yen and the bursting of the stock
bubble. The traditional style of
Japanese management had to change if businesses were to overcame these
difficulties. Facing the oil
crises in the early 1970s, many technology-oriented companies developed energy
conservation technologies and they did not need as much oil as before. Facing the higher yen after the Plaza
Accord in 1985, many export-oriented manufacturing companies stopped exporting
and transferred their production sections to foreign countries. When the stock and real estate prices
dropped in 1987, Japanese companies experienced severe depressions or
stagflations. Most companies restructured their
inefficient departments and fired many workers, contravening the lifetime
employment system. Severe
depression continued and many small and mid-sized manufacturing companies, real
estate companies, securities firms and even banks went bankrupt. Introducing American advanced
management theories, most Japanese companies changed their management styles
from the traditional Japanese management, but the American style did not always fit into
the Japanese culture. Now many
companies have introduced the ISO standards and ways of controlling quality,
environment, and workplace safety and sanitation.
PROBLEMS OF JAPANESE
MANAGEMENT
The most
characteristic Japanese management styles are lifetime employment, promotion by
seniority, and family-style management.
Although the original styles have been changing, they still remain in
many Japanese companies. Without
such systems, Japanese workers cannot live because they do not have entrepreneurial
education and the Japanese labor market is not always fluid. Facing severe depressions, top managers
have been introducing American advanced management techniques such as
restructuring, reengineering and an ability-oriented promotion system. However, unemployment has been
increasing, as it has in countries like Europe and America. Companies themselves have not been
energized because top managers repeat restructuring, the workers seem to be
threatened to be fired with redundancy and lack
loyalty, and therefore the Japanese economy as a whole is not good. Japanese workers still need some kind
of lifetime employment and stability.
So many top managers feel the sense of responsibility to retain the
bureaucratic lifetime employment, though the seniority
system has gone. The
ability-oriented promotion system and competition within the companies may
destroy the family-style management system. Overall, company management may not be doing well.
Japanese management has traditionally made much
of the workers’ compensations and
did not meet thestockholders’ expectations because the stockholders’ meeting
was formalized and there are no aggressive stockholders. Facing economic changes, such as
introducing world accounting standards and American M&A practices, Japanese
companies must make much of have more regard for
stockholders’ interests. Focusing
on workers’ compensations has the merits of
building workers’ loyalty, which leads tocompanies’ long-term growth, but the
demerits of higher agency costs and therefore bad short-term financial results,
which would cause conflicts between workers and stockholders. Unless top managers enhance stockholder
values and/or dividend payment, stockholders’ might
take legal actions to
demand compensations and/or fire the top managers, might
occur, and the company can could
become be the target of M&A by
stronger companies. So the
Japanese companies are expecting to resolve conflicts between workers and
stockholders.
Japanese education has generally been giving
much attention to creativity and entrepreneurship. Students have tended to enter companies that enjoyed good
standing, and
want to enjoy lifetime employment.
Facing American entrepreneur practices, most Japanese cannot soon become
entrepreneurs because of education and culture. Within Japanese culture, it is difficult for an entrepreneur
who has failed once to become a
winner. Most Japanese still need
lifetime employment.
Japanese workers lose
sight of markets or changing customer needs. Products and technologies they once developed are obsolete,
and cost effective products are coming from emerging countries. Domestic markets are maturing and
shrinking because of the decrease and rapid aging of the population. Frontline workers and engineers can no
longer catch up with what customers need.
Many top managers have no sense of globalization. They are losing sight of each market’s
need. Many Japanese companies
failed in their globalization.
When the Japanese economy faced the higher yen of over 100 yen/dollar,
many Japanese export-oriented companies built manufacturing plants in foreign
countries and the domestic economy and labor markets become depressed. In developing Asian countries, they
called Japanese economic
animals or yellow Yankees.
Japanese managers did not understand the local cultures and markets.
Many Japanese mangers
have the samurai spirit, Japanese feudal warrior mind-set. Such spirits may influence company
policies. Many company presidents arepresidents are tyrannical
leaders. Many companies promote on
actual achievement. Some
companies, such as supermarkets and electric appliance stores, may have hara-kiri sales
(selling below the wholesale price).
These phenomena or actions are from the samurai spirit, which many
Japanese may have at the bottom of their heart. The power of the samurai depends on his sword, intelligence,
intuition, fame, leadership, mobilization power, economic power, geographical
advantage, and luck. Japanese
managers may be preparing for hara-kiri death (suicide) like samurai, if the
companies become bankrupt because of their own failures. From the standpoint of managerial
actions, such managers with samurai spirits may not be desirable, but actually
exist in Japanese companies.
In general, Japanese
companies have higher fixed costs compared to American and European
good-standing companies, including personnel costs, because they have been making
much of focusing on workers’ compensations, instead of
stockholders’ value. Lifetime
employment, the seniority system and other compensation programs have increased
personnel costs. Besides, Japanese
companies depended on huge amounts of long-term debt
loans from their main bank. So the agency costs of managing the
companies have been higher than European and American companies. That means lower efficiency in their
management and therefore lower stock prices.
Japanese people have a
lock-step mentality and fewer superiority complexes to than
other similar people. In
developing new products and technologies, developers with a lock-step mentality
may compete with rival companies, but may not achieve superior
results. Japanese companies tend
to follow their competitors’
actions. For instance, if one
company moves production offshore, the rival company may do so.
Finally, the coming
higher yen would make Japanese companies weaker because of the export-oriented
structure of the Japanese economy.
Traditionally, Japanese manufacturing companies have imported materials
and energy sources, and exported processed products. So the higher yen would weaken the competitive advantage of
export companies. Many
companies would transfer their production abroad and the domestic economy would
slow down. Although they would do
better with learning effects know
that they have learned from the past failures, offshore production alignment
and domestic restructuring are necessary.
New problems, such as conflicts between foreign and Japanese workers,
and increasing domestic unemployment, might occur.
POSSIBLE SOLUTIONS
For now, most
companies cannot afford lifetime employment and the traditional seniority
system, as they are facing economic and environmental changes such as severe
depressions, a higher yen, and downsizing trends. But most Japanese workers still need stability, like
lifetime employment. Some
companies have a combination of the merit and seniority systems, and the others
have ability-oriented promotion or a merit system instead of the seniority
system. So labor markets and
recruiting systems of the companies must be flexible. Japanese people must understand the ability-oriented system
and learn entrepreneurship.
Japanese culture must also change, to become more tolerant of failures
and losing.
Japanese managers will be
obliged to focus on stockholders’ value because of European and American
practices, capital market development, and to defend the company from M&A
bids and lawsuits by stockholders.
After the stock bubble burst in 1987, most Japanese companies stopped
holding many stocks as a result of cross shareholding with their business
partners, which was a characteristic of traditional Japanese management. Facing the world accounting standard
and American advanced management theories, Japanese companies must change their
management to compete against the world’s blue-chip companies. That is, Japanese top managers must
endeavor to have good short-term financial results, pay higher dividends, and
therefore achieve higher stock prices, which means major changes to traditional
Japanese management.
Japanese education must be changed to adopt
entrepreneurship and creativity.
Japanese culture must also change to become generous
to tolerant of failure. Both takes time
to get visible results. So in the
short term, consultants and successful entrepreneurs should galvanize the
frontline workers and engineers because the famous Japanese success stories of
Toyota, Matsushita, and Honda all started from the frontline mechanics. Lack of creativity education may be
covered by the frontline work experiences. Innovations may come from creative ideas, trial and error,
or frontline experiences.
Japanese samurai souls may never disappear from
Japanese minds because most Japanese have grown up watching the samurai TV
shows. The remedy is to harness
the spirit to get the best results.
For example, top managers may show strong leadership like samurais to
fight against rival companies by introducing new products and technologies. Top managers with the samurai mind-set
can beat the lock-step mentality of the workers and defeat the
competitors. Without such
leadership, no evolution would occur within their companies. Workers can have the sense of devotion
to their companies like samurais.
Japanese companies once failed in their
globalization, when they faced over 100yen/dollar. They built manufacturing plants in foreign countries and the
Japanese management style caused friction, while the domestic economy was in a severe
depression. Now the Japanese
economy is still export-oriented and has huge trade surpluses, which have been
a cause of political friction between the U.S. and Japan. So Japanese companies should only
superintend and give technical assistance to their foreign operations. They should hire local managers and
workers, and contribute to the local economy. They should know what local people need and respect the local
way of working. In the domestic
economy, industry leaders must raise entrepreneurs and encourage innovations to
break through the depression of the coming rise in the yen. The government should deregulate the
trade policy and encourage importing more from abroad.
Compared with American and European blue-chip
companies, Japanese companies have had higher agency costs because of lifetime
employment, a seniority system, workers’ compensation programs, and huge
amounts of long-term debt to the banks.
Many Japanese companies have higher fixed costs and lower
efficiency. So top managers must
change the cost structure and pursue higher efficiency in their management
strategies. Such agency costs must
be decreased to respond to expectations by stockholders. Japanese companies should change the
old management styles to fit the new economic and environmental
situations. That is, they should
reform the lifetime employment, seniority system, and other workers’
compensation programs. They should
change the capital structure by reducing long-term debt; instead, they may
finance from the capital markets.
For instance, they can write warrant and/or convertible bonds with less
interest payments and no reimbursement.
They may write stock options for workers’ compensation.
SIX JAPANESE MANAGEMENT
MODELS
There are six Japanese management models that have
recently been successful. They are
new and old businesses that are typical in Japan. Although there may be many unique small businesses, most other
businesses could be categorized in these types or imitations of foreign
companies.
(1)New
Economy Internet Conglomerates:
This type of business is
managed by young charismatic entrepreneurs who succeeded in the Internet
business. They expanded and
diversified their businesses through M&As and became conglomerates. They have been changing the old economy
businesses that they acquired into new economy ones through the Internet,
e-mail, mobile and other advanced IT technologies. Softbank, Rakuten and Livedoor are the good examples of this
type of management model. They are
growing to become Japan’s new economy leaders. Many other small Internet companies may follow a similar
trajectory.
(1)Convenience
Stores:
The management style of
convenience stores, which came from the U.S ,hasU.S,
has been very successful in Japan, which came from the
U.S.
Ito-Yokado, a Japanese superstore group, introduced the convenience
store business and its franchise system from the Southland Corporation, and set
up Seven-Eleven Japan. It is the
small grocery and miscellaneous good store, and open 24 hours. It changes the business model to fit
the Japanese life styles and has had great successes in Japan. Its franchise system has been expanding
throughout the country and is now expanding into other Asian countries. Its greatest managerial innovation is
called Tanpin-Kanri, which is a system that distinguishes goods in high demand
from goods in little or no demand through using the POS (Point-of-Sales)
system. Many other groups followed
Seven-Eleven Japan, set up similar franchise systems and introduced
Tanpin-Kanri. Now the Tanpin-Kanri
system is one of the typical Japanese management styles and is expanding in
Asian countries.
(1)Old
Type Technology-Oriented Companies:
The most famous Japanese
companies, such as Toyota, Sony, Panasonic, Honda and Canon, are categorized in
this type. They have long been
industry leaders and are still representatives of Japanese businesses. Innovations are always going on within
their companies, but their businesses are typical old
economy ones. They must change
their management models to fit into the new economy and continue to grow in the
future. One arena in which they
are now taking leadership is environmental technologies. Most technology-oriented good-standing
companies in Japan have their own environmental policies and have been
achieving huge energy and greenhouse gas reductions through their own
innovative technologies. They must
become widespread throughout the world.
(4)
Local Small and Mid-size Parts Companies:
This type of companies
has a higher level of artisan skills than huge blue-chip manufacturing
companies. Artisans receive orders
from huge manufacturing companies, and produce auto-parts, electronic devices,
precision parts or plate and cast metals.
For instance, huge auto manufacturing companies such as Toyota, Honda
and Nissan retain lots of parts companies that have artisan skills. Such parts companies are called
Keiretsu or grouping subsidiaries.
They sustain the Japanese economy at the base of various industries.
(5)Sogo-Shosha:
They are huge general
trading companies peculiar to Japan.
They were developed from Zaibatsu groups. They form a huge group of subsidiaries, which engage in
varieties of businesses. They add
value through planning, producing new businesses, providing know-how,
investing, trading and supporting varieties of businesses. Normally, they do not have their own
factories, but help to promote manufacturing companies to succeed. They dispatch excellent manpower to
supporting companies.
They deal with varieties of items such as food,
metals, energy sources, logistics, automobiles, airplanes, ships, iron and
steel, nursing care, and other commodities. Mitsui, Mitsubishi, and Sumitomo are three major
Sogo-Shoshas. They are the typical
Japanese global business companies.
(5)Uniqlo
Model:
The First Retailing Co.,
Ltd. developed a new Japanese brand named Uniqlo. It provides quality casual wear for men and women of all ages
at lower prices. Uniqlo created a Japanese
life style of comfortable clothing.
Uniqlo clothes are produced in the company’s own Chinese factories and
sold in Japan, other Asian countries, and the U.K. Cheap labor and low cost operation in China make it possible
to sell Uniqlo at cheap prices.
Besides, it now has over 630 retail shops in Japan that offer good
services in response to each customer need. This style of business is a new Japanese business
model. Uniqlo can be a leading
casual wear brand in Japan and is now attempting to become a world brand. Many Japanese manufacturing companies
have been transferring their production to China and selling the finished
products worldwide. This style of
management is a typical Japanese manufacturing company business model, which
evolved into the Uniqlo model.
ECONOMIC AND
ENVIRONMENTAL CHANGES
Recent economic and environmental changes
surrounding Japan are: new economy revolution, development of Chinese and other
Asian markets, diminishing domestic market as a result of the dwindling
birthrate and a growing proportion of elderly people, and reduction of
greenhouse gases.
Economies and industries have been
changing since the advent of the Internet. New Internet companies appeared here and there and changed
the business models worldwide.
It’s a revolution because it has changed all the ways of doing business
and also people’s lifestyles. In
addition, it has created huge wealth for people around the world. In Japan, a lot of Internet companies
have appeared and have changed the whole economy. Most old economy companies must change their business models
through using the Internet, e-mail, mobile devices and other IT
technologies. Without these
business model changes, the old economy companies may not be able to survive.
Recent development of the Chinese economy
has been remarkable, after the introduction of capitalism into its
economy. As you know, the
potential Chinese consumer market is the biggest in the world and China has
comparative advantages in natural resources, cheap labor and low cost business
operations. The Chinese economy is
expected to grow at the rate of over 8% per annum for the next five years. Many Japanese companies have been
finding their way into China and have been trying to get the advantages. Other Asian countries, such as India
and Indonesia, could be the next targets of Japanese companies because they
have the next huge potential markets and they may need Japanese technologies
and financial support to develop their own economies and industries while
Japanese domestic markets have been diminishing because of the population
decrease, aging society and mature economy. Japanese companies must change their strategies for the
mature markets.
Finally, Japanese companies are required
by the government to reduce greenhouse gases. Most technology-oriented blue-chip companies have developed
their own environmental technologies and reduced greenhouse gas emissions. They are trying to develop better
environmental technologies, recycling and energy conservation systems. This necessity will last forever
because, without such efforts, abnormal weather conditions could threaten the
survival of mankind.
NEW WAVES FOR FUTURE
JAPANESE MANAGEMENT
Facing the economic and environmental
changes, Japanese management has been changing recently. New economy companies are growing
locally and old economy ones are changing their business styles by introducing
the Internet, e-mail, and mobile devices.
Local economies have recently been activated through the Internet. For example, local specialty goods such
as organic vegetables, marine foods, and specialty Japanese cakes have been
selling very well through the Internet.
Talking of the Chinese business, most
blue-chip Japanese companies and even local small and mid-size companies have
been making their ways into Chinese markets. It is like a fashion in the business world, and China has
the potentials to meet their demands. There are 1.3 billion people in China
and its consumer market is over 10 times that of the Japanese market and 5
times the size of the American one.
The Chinese economy is now the most actively growing economy in the
world, so Japanese managers must learn how to capture the Chinese market.
Environmental issues are the special
concerns of Japanese companies.
The government adopted the protocol at Kyoto International Conference
in1997 in order to reduce the greenhouse gases by 6%, compared with the 1990
year standard, between 2008 and the end of 2012, which means 14% from now
because there was another 8% increase between 1990and the near past. So the Japanese companies, even small
companies, must reduce their greenhouse gas emissions through their own
efforts. Every company in Japan
will be asked to accept and implement the Kyoto Protocol. That is one of the major concerns
of Japanese management.
Many companies in Japan have been
introducing the ISO9001 for quality management and ISO14001 for environmental
management. New waves from ISO are
OHSAS for labor safety and sanitation management, ISMS for information security
management, and CSR for social responsibility management. These standards and ways of management
can be the basic company policies, but they do not constitute adequate
strategies for the Japanese companies to win in the competitive markets. Each company must have its own
strategies and tools, based on the ISO standards.
A NEW JAPANESE MANAGEMENT
MODEL
Considering
the history, culture, ethnicity, recent economic and environmental changes, and
new waves of Japanese management, I want to propose a new Japanese management
model.
First of all, Japanese
companies should include entrepreneurship education within their companies. Instead of lifetime employment,
companies should raise their workers as entrepreneurs. The workers can be independent after 10
or more years of work experience gained within their companies. The companies will financially and
technically support the independent workers. Some consulting companies and Sogo-Shosha may have this
system, but most other good-standing companies do not yet have any such
system. Facing the diminishing
domestic market and new economy revolution, most Japanese companies should
scale down their domestic businesses and downsize their headquarters and other
operative functions. The old
economy companies must change their businesses into new economy ones. Japanese managers must pursue
efficiency through agency costs reductions in areas such as personnel costs,
interest payment, and other operational wastes. For example, even retail shops may not need outlet stores;
instead, they can operate through the Internet.
Secondly, Japanese companies should
actively invade enter Asian markets
because their markets are huge and Asian countries still need Japanese
technologies and financial supports.
Japanese managers must respect their cultures and ways of doing
businesses, taking advantages of the learning effects from the past
failures. This time Japanese
companies must include environmental programs to reduce the greenhouse gas
emissions.
Thirdly, Japanese managers should take
the lead in product development.
Without strong leadership and support from top management, disruptive
innovations may never occur because they need to capture the market needs,
which takes a combination of excellent developers, time and money. Only innovative products and
technologies can revive the sluggish Japanese markets.
Finally, Japanese managers must attack
environmental issues of the world.
Most technology-oriented blue-chip companies in Japan have developed
their own environmental technologies.
They should lead in resolving the environmental problems through
technical guidance for undeveloped and/or developing countries. Japanese companies that make their ways
in foreign countries should have the duty to contribute to help
solveing
environmental problems through offering advice and technologies.
If these things were considered and
implemented by Japanese companies, their futures would be brighter and a new
management style might appear in each company. I hope this model can lead Japanese companies into better
future growth.
SUMMARIZING AND
DISCUSSING THE RESULTS
Conventional
Japanese management, such as lifetime employment, a seniority system and
long-term debt to the main bank, no longer fits in the current economic and
environmental situation in Japan.
But many old economy companies practice paternalistic management. From the standpoint of stockholders,
both directors and workers might exploit the company’s assets through lifetime
employment and the seniority system.
According to the research by Labor Policy Research & Training
Institute of Japan, 78% and 67% of Japanese workers want lifetime employment
and the seniority system respectively, which means Japanese workers want
stability. Facing the world
standard and American advanced management theories and practices, Japanese
management must change their business models to meet the world standard but
they must also meet Japanese culture, traditions, and customs. If Wakon-Yosai is the ordinary Japanese
mind-set, they can do it like the Japanese did in the past. For example, Japanese companies should
have their own cafeteria-style compensation plans, restructuring and
reengineering, like friendly M&A.
Long ago
Hewlett-Packard developed its own management model, HP way, which was similar
to a Japanese management style.
The characteristics of the HP way are: respecting the worker (no layoff)
system, open door policy, MBO (Management By Objectives), MBWA (Management By
Wandering Around; a discussion system), and making much of creativity and
flexibility. The HP way has been
very successful and can be a good model for a new Japanese Management system.
Toyota
has been practicing Kaizen every day, which is the Toyota culture. Matsushita has a philosophy of reforms
from the frontline. Both may lead
to innovations from the viewpoint of fractal thinking. Although top managers of many stalled
Japanese companies have been losing sight of the frontline reforms and changing
market needs, they can recover from the stalled situation by changing their
business models.
If
family-style management is a characteristic Japanese management style, Japanese
companies can raise their workers to become entrepreneurs like parents do their
children. They have only to
install this policy in their management policy to change their lifetime
employment and seniority culture and meet the demands of aggressive stockholders. The ultimate goal of management is to
become more efficient in every section within the companies, enhancing the
quality of each function.
To meet
all stakeholders’ expectations, new Japanese management must include social
responsibility management such as environmental policies, philanthropic
programs, compliance, and good corporate citizenship. Although the ISO standards provide such ways of management,
they do not always have enough strategies. Japanese companies should develop their own management
models united with or beyond the ISO standards to win the battles against
global competitors and ensure strong future growth.
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