Japan is back and its companies are leading the charge. The process of reinventing corporate Japan continues apace, but does not mean a repudiation of core values. Nearly half a century since James Abegglen put Japanese management on the map with his pioneering study — “The Japanese Factory” (1958) — this leading management consultant and business scholar reminds us of the importance of perspective and questioning the received wisdom.
This is a bullish and insightful take on how Japanese companies are adapting to new challenges and reinvigorating the nation’s economic prospects.
The so-called “Lost Decade” of the 1990s has frequently and misleadingly been portrayed as a time of stagnation when Japan was sliding relentlessly into the abyss. Abegglen disputes this superficial assessment and draws our attention to the myriad ways that companies responded effectively and dramatically to the difficulties that engulfed Japan during this post-”bubble” era. For him, this was a “decade of redesign” when firms restructured, overhauled management practices and refocused their businesses to strengthen balance sheets and boost competitiveness.
Significantly, the author argues that this process did not come at the expense of employees, reflecting the values implicit in the logic of “enterprise as community” based on reciprocal commitment. Managers cut costs, reduced overtime and bonuses and, otherwise, did what was needed to cope with dire straits, but did not abandon the humane values that he believes animate Japanese companies. He writes, “Japan’s high level of competitiveness is achieved without the ‘efficient’ apparatus of mass layoffs and firings and their attendant human cost so commonplace in the U.S.”
Lifetime employment, seniority pay and enterprise unions are fading in importance. In Abegglen’s view, changes in these practices are often overstated but, in some respects, overdue. Unlike many observers, he does not see these as lingering vestiges of an overly rigid system. He points to rising levels of tenure in Japanese corporations as evidence that the employment commitment remains robust.
However, rising tenure also means fewer young workers in the core labor force. The numbers of nonstandard workers employed on fixed contracts and without standard benefits has risen rapidly to nearly a third of the entire workforce. As nonstandard workers, they do not benefit from the paternalistic practices accorded to core workers. These workers on the margin are helping to subsidize the job security of core workers. And, almost none of these peripheral workers move to core jobs.
Whither Japan? Abegglen argues that Japanese companies have largely finished restructuring and regained financial health and competitiveness. With more cash and impending labor shortages, he sees a lessening role for nonstandard workers on fixed contracts with limited benefits and a revival of the full-time employment model and job security. Time will tell. Hopefully, this will benefit the women workers and young Japanese shunted to the labor market periphery over the past decade.
The author is refreshingly candid, writing, “Stupid reporting about Japan is all too common.” He draws on several interesting case studies to make his arguments and to convey a sense of the turmoil and urgency that drove adaptive changes from within firms. The government’s main contribution appears to be in getting out of the way and easing regulations rather than directing from the commanding heights.
Carlos Ghosn, lionized elsewhere as the savior of Nissan, is seen to represent the quick-fix approach, whose failure in the long term is similar to that of Chrysler’s chimera of a renaissance under Lee Iacocca. He also is skeptical about “corporate governance,” pointing out that the U.S. model has many flaws and is not appropriate in Japan. He writes, “U.S. governance built in a system for full realization of the greed of the top few.”
The problems of Japan’s rapidly graying population and anticipated labor shortages are exaggerated. Abegglen believes that a combination of extensive automation, a further shift into services and better integration of women and elderly workers can address labor needs. He firmly opposes mass immigration, arguing that the social and political costs would be “unbearable.” He makes a strong case for improved day care and other social services and corporate policies to enable women to better balance the demands of work and office.
This wide ranging and interesting book is essential reading to understand Japan’s transformation and for those who have been predicting its demise. Abegglen helps us understand the complexities of change and continuity and has written a powerful paean aimed at encouraging readers to appreciate how much has gone right in an era of despair.