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Homegrown social networks struggle with how to get rid of redundant staff

by Akky Akimoto

Social-network services that once led the domestic Web-industry are now facing a downturn and they are finding that IT companies are not immune to labor toubles.

After shutting down its Beijing and London offices (in June and July respectively), social game network titan Gree also undertook a reorganizational move in its domestic operations too, calling for 200 employees to accept voluntary redundancy.

This game-centric mobile network has been growing amazingly for years, and was aiming at the global market by exporting its successful model of charging for cellphone games. The competition for qualified staff between Gree and its rival Mobage had forced salaries to crazy levels, with Gree announcing in 2012 that they were ready to pay a maximum ¥15 million for talented new grads — as a result many notable university graduates rushed to join them. The number of employees exploded from 174 in 2010 to 1,762 in 2013.

However, Gree’s overseas projects did not reproduce its success in Japan and the transition from feature phones to smartphones allowed independent game apps vendors such as Gungho and Colopl more success, as they can provide games to endusers directly on Apple or Google platforms instead of going through Gree. In the end, Gree announced that 205 employees applied for its resignation program — more than 11 percent of its 1,762 staff. The company’s latest quarterly results on Nov. 11 counted ¥5.2 billion towards this restructuring.

As for Mixi, it has been having its own problems. An anonymous accusation about a so called oidashi-beya (a room where the company bullies employees into voluntarily resigning) broke out on Oct. 23 on the well known blog Hatena Anonymous Diary.

The message, which began with “At this orange social company, big staff redeployment has been silently proceeding over the last few days…,” reported that some workers had suddenly been relocated into a large room with no computers or Internet access available and were prohibited to contact other employees except the ones in the room.

The best known social-networking company with orange as a corporate color is Mixi, but at first, almost no one believed that Mixi would adopt such practices as it is known by for its hospitable corporate culture. The anonymous post was soon erased — but not before it had already made waves online.

The next day (Oct. 24), CNET Japan confirmed that some parts of the story had actually happened according to internal informants. The relocated staff were not cut off from the Internet, but were unable to access the company systems.

Mixi denied that it was not undergoing risutora (from the English word “restructuring” but which mostly means to fire people), but said it was doing regular personnel reshuffling. They confirmed that the reshuffle included moving employees from several divisions to customer service, and that the restricted access to internal services was appropriate to the new job roles. The financial magazine Toyo Keizai reported the news on Nov. 5, taking the incident beyond IT industry news media.

Mixi president Yusuke Asakura repeated the explanations again at the company’s quarterly financial briefing on Nov. 8. The executives upset several industry news reporters by leaving the meeting without the customary informal chat (kakomi-shuzai) with the press. I saw at least three media reports mentioning that it was very different to Mixi’s former style, which always advocated close ties with journalists.

Once, everyone in the Web industry was excited about Mixi, including IT reporters. Mixi’s brash move and poor attitude won’t be good for its future recovery attempts, whether they are new features on Mixi, or new businesses. The negative news on Mixi almost makes the usually-bad-mouthed Gree look like a nice honest company.

Mixi has yet to spend all the money it raised when it listed; 80 percent is still in the bank. Letting investors’ money sleep in the bank like this may be criticized in the United States, but Mixi has been very conservative. The latest results reveal that the banked money is ¥12.2 billion, so Mixi does not really have to worry about going bankrupt any time soon.

Because of this Mixi could have taken a similar tactic with its unwanted staff as Gree, but instead its “non-ristora reorganization” has cost the company a lot in terms of damaging its reputation. Then again, if it had adopted a voluntary early-retirement system like Gree did, it may have actually lost some of its most skilled staff.

Akky Akimoto writes for Asiajin.com, an English/Spanish blog on Japanese web scene. His Twitter account @akky is followed by 120,000 users.