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Firms urged to develop leaders in global business environment

by Takashi Kitazume

Japanese firms seeking to globalize their operations need to develop leaders who can achieve their missions in a diverse business environment across national borders, experts on human resources development told a recent symposium in Tokyo.

These leaders should come not just from among the ranks of their Japanese employees but worldwide, and the companies need to build an appropriate career development process to recruit, train and retain such talented people, they said.

The scholars and company managers involved in human resources development were speaking at the March 11 symposium organized by the Keizai Koho Center under the theme, “Leader development and leadership in the global business environment.”

“Japan is a career breaker, not a career maker” is a phrase that has been used among Western businessmen for some time but is now heard more frequently, said Reiji Otaki, a professor of the Graduate School of Commerce at Waseda University. “People think being involved with Japan does not add much to their career.”

In a 2008 survey, no Japanese companies were among the top 50 firms at which students in China would want to get jobs, said Otaki, who is also chairman of consulting firm Aon Hewitt Japan Ltd. Many Japanese firms are still very popular among job-seeking youths in Southeast Asia, but they also face increasing competition with local companies that are gaining ground in terms of brand recognition amid the region’s rapid economic growth, he pointed out.

Such a situation must be taken seriously, Otaki noted, because it makes it more difficult for the Japanese companies to recruit Asian talents as candidates for leaders in their global operations.

While Japanese businesses are losing their share of the global market to companies in the fast-growing emerging economies, many big Japanese firms are seeking to globalize their operations. But although these companies are attempting to unify worldwide operations in such fields as product development, manufacturing and financing, many of them tend to leave marketing in the hands of local subsidiaries, Otaki said.

The bigger problem, he said, is human resources development, where the headquarters in Japan often lack sufficient capabilities to manage personnel issues in their overseas units. The HR team in the overseas subsidiaries are mostly preoccupied with day-to-day operations and trouble shooting, with little communication with the headquarters, he noted.

Otaki said as Japanese firms seek to become “global” companies, their traditional ways of dispatching people from the headquarters to the overseas subsidiaries for a period of three to five years on rotation will no longer work.

So far, many companies have sent their employees to the overseas units to act as supervisors or technical trainers for the local staff, but if they are trying to globalize their operations, people sent abroad must be given a clear strategic mission to be accomplished during their tenure, Otaki said.

Such people need to be leaders capable of communicating the firms’ core values and corporate mission to the local staff, he said. They need to be deeply involved in the local operations, and be able to share the knowledge and information gained there with the company’s operations elsewhere, he added.

They need to be recognized as leaders by the local staff — a requirement that is often found lacking among Japanese managers in the overseas units, Otaki said. While a leader in global business needs to have good communication skills, have a good understanding of the local staff and the local society and culture, and be fluent at least in English and hopefully the local language, surveys show that locally-hired workers at Japanese firms’ overseas subsidiaries are frustrated with the lack of communication with the Japanese managers and doubt their managerial skills, he said.

In a survey held in several Southeast Asian countries, about 70 percent of local people responded positively when asked if they wish to be employed by Japanese companies, he said. But about 20 percent of the people who had once worked for Japanese firms say they would never want to be hired again by Japanese firms, he added.

“The local workers expect a lot from the Japanese firms because they make great products and hope to learn the technology, but end up being disappointed once they work for the firms,” Otaki said.

Otaki stressed that Japanese companies, before sending their staff to the overseas units, need to train and develop the people as leaders who can do the job in a global environment. The workers need to acquire globally-compatible leadership skills, and be trained to have a thorough understanding of their own companies and communicate that to the overseas staff, he said.

At the same time, the companies should try to develop talented non-Japanese managers at the overseas units as future leaders in their global operations, Otaki said.

Given their overseas experience, many of such non-Japanese managers already have the potential to become leaders in a global environment, he said. They should be trained either in Japan or at the regional level, and they need to be made to fully understand the company and to commit to its values, he added.

Along with such education and training programs, the companies need to present to the non-Japanese staff a clear career development path that will actually promote them to key positions in the regional or headquarters organization of the firms, Otaki said. This followup process is crucial if the companies want to retain talented non-Japanese workers as their future leaders, he said.

How do big companies in other industrialized economies cope with the issue? For internationally-operating German companies, leadership development is a globally standardized process, which is applied not only at the German headquarters but at all locations worldwide, said Franz Waldenberger, a professor at Tsukuba University Graduate School of Business Sciences.

“The idea is to apply one single process not only to German employees but also to employees abroad,” Waldenberger said. “The goal is to train these people to be effective leaders, not only in their home countries but also when they’re sent abroad.”

A globally-standardized process does not mean it is based on an international standard, but it is a standard made in Germany, the professor said. “It is not aimed at educating and developing people with a global mind-set, but with a company mind-set. You want to have the people understand the company.”

German companies need to have this globally-unified process because their operations are highly internationalized, Waldenberger said. “Many of the big German companies have more than 50 percent of their employees working abroad, so if you want to stay competitive, you must not just focus on the 50 percent you have at home. You must also integrate, educate and develop the 50 percent that work abroad,” he said.

For those German firms, leadership development programs are crucial not only to prepare people for higher positions in the future, but also to retain the talented people by offering an attractive career development process, Waldenberger said. Unlike in Japan, where many companies still manage with the understanding of lifetime employment and loyalty of employees may be higher, employees at a German company will not stay very long “if they think they don’t have a career” with the firm, he said.

Why does a globally-standardized process matter? Waldenberger said the companies want to ensure that the leaders are of the same quality not only in their domestic operation but in Japan, in the United States and elsewhere. Also, if a company has a common leadership development process and people go through it, “then through the process you can spread and share your corporate values,” he said. “This helps to improve cross-border communication and teamwork.”

There will always be a problem when a company tries to standardize its leadership development process — how can one size fit all? “You have different local cultures and different communication styles . . . and you have different education levels,” Waldenberger said.

One solution, he said, is to define what a leader has to do, but not how it has to be done. “If you have a common understanding about the result, then you can locally differentiate the ways how you achieve the results.”

It needs a lot of training and communication to implement the standardized process “and make people understand what you want with this process,” and in doing so the company needs to be open to local feedback and be ready to make adjustments if they do not work out, Waldenberger said. “It’s necessary that you live with inconsistencies and ambiguities. If you push too hard for your global standard, and if it’s not implemented in the hearts of the people at your local subsidiary, then there is the danger that you create double standards,” he said.

The case of Mitsubishi Fuso Truck & Bus Corp., formerly a commercial vehicle unit of Mitsubishi Motors Corp. and now owned 89.29 percent by Germany’s Daimler AG, may best illustrate how the German model of a globally standardized process is being applied, said Shigeki Egami, head of the firm’s human resources and general affairs department.

The changes that took place within the company after it started in the current name in 2003 and as Daimler’s stake has since gradually increased “shows that globalizing your operations are not just about sending your people abroad,” Egami said.

By 2006, the company was fully integrated into the Daimler organization, with the managerial positions changed to be consistent with those of the entire group, he said. “My immediate superior is based in Germany, while I report to the president of Mitsubishi Fuso,” he said.

Managers are evaluated under the group’s standardized process, and Japanese workers are sent to Daimler’s in-house education institution for training, Egami said.

“You work along with the German employees while in Japan, and employees can be deployed to any position around the world,” Egami said. “But it is still rare for the Japanese employees (at Mitsubishi Fuso) to be assigned to the group’s key positions outside of Japan, and it will be a challenge for us to develop the Japanese workers as potential leaders” in the group’s global operations, he said.

In the case of Nomura Holdings Inc., Japan’s largest brokerage group, the 2008 acquisition of parts of the collapsed Lehman Brothers’ operations in Asia, Europe and the Middle East marked a major step in its global business development and also necessitated a change in the group’s human resources strategy, said Hitoshi Yamanishi, chief of Nomura’s Group Human Resources Development Department.

Leader development strategy will not be devised by the HR section alone but will be driven by the firm’s business environment and its strategy, which will be determined by such factors as what services the company will provide to whom and who are its main competitors, Yamanishi said.

Of the group’s main business segments, investment banking is a global operation that requires a global human resources strategy, he said. You cannot survive in the business by focusing on the shrinking Japanese market because the commodity it handles — money — moves across national borders and its customers exist anywhere around the world, he said.

The acquisition of Lehman’s operations substantially increased the Nomura group employees in the U.S., Europe, Middle East and Asia. This and the changing business environment required Nomura to unify its human resources management system globally, whereas previously the personnel matters at the headquarters in Japan and the rest of the world were handled separately, Yamanishi said.

People in leadership positions in its global operations are no longer limited to the Japanese, he said. Of the group’s 53 “senior managing directors” — a position above department chiefs — in the investment banking business, 43 percent are non-Japanese, he noted.

One of the challenges in leadership development in today’s business environment is speed, Yamanishi said.

In a typical Japanese system based on seniority and lifetime employment, the process of selecting leaders from among the employees — promotion to middle managers, to department chiefs, and to board members — takes place over a period of about 30 years, he said. This process must be sped up — and be based on a globally-compatible, fair and transparent scheme, he added.

Sakie Tachibana-Fukushima, president of G&S Global Advisors Inc. and formerly regional managing director for Japan of Korn/Ferry International, the world’s leading executive search firm, said it was only in the past few years that Japanese companies started to seriously consider developing leaders who can do the job in a global environment.

Through her experience in the executive search business, Fukushima said there has been a “mismatch” between many of the Japanese candidates for senior positions at Western-affiliated firms and the needs of the client companies. While the companies were looking for somebody who would serve as “agent for change” in global business operations, many of the Japanese available for recruitment were typical managers in domestic organizations, she said.

What is needed, Fukushima said, are people equipped with professional skills that are relevant not only for the organizations they belong to but in any circumstances — people who can start up things from scratch and solve problems on their own, even in an environment where their past experince may not be of any help.

These requirements, she said, are often in sharp contrast to what typical Japanese companies expected from their employees during the nation’s postwar economic growth. That model is no longer sufficient to deal with today’s globalized and diverse economic environment, she said.