Is hospitality sapping productivity in Japan?

by

Bloomberg

Customers are gods, as a saying goes in Japan, where staffers press buttons for shoppers in department store elevators and hotel porters line up to bow to guests.

While Japan is revered for this hospitality, or omotenashi, all that bowing and scraping may be sapping productivity. So much so that the nation has ranked lowest of the Group of Seven nations by that measure for nearly 30 years.

With Japan facing a labor shortage as the population ages — the jobless rate is at its lowest since the late 1990s and projected to fall further — Prime Minister Shinzo Abe wants to more than double productivity growth in the service sector by 2020. He is targeting the service sector, which makes up about 70 percent of the world’s third-biggest economy, and has failed to embrace technology like Japan’s manufacturers.

“Success in raising the productivity of the service industry depends on whether we can get technology into service companies,” said Hidenobu Tokuda, a senior economist at Mizuho Research Institute Ltd. in Tokyo. “The problem is that service companies tend to be small, and unlike big manufacturers it’s tough for them to afford the initial investment of introducing technology.”

The government hopes that with lower corporate tax rates and consumer prices seen rising, companies will spend on automation. Abe told executives at a gathering of the country’s biggest business lobby last month in Tokyo that “the key to raising productivity is investment.”

A public-private sector panel on productivity last month gave examples of how costs can be cut through innovation while maintaining the level of service that people expect in Japan.

The Taiho Japanese restaurant in Tokyo uses tablet computers to cut out middlemen and place orders directly with fishermen, while the Yumotokan hot springs group has conveyor belts to send food to waiters out of sight of diners in its banquet halls. These technologies are used behind the scenes, while customer-facing service remains intact.

“While omotenashi raises the quality of services, it requires a lot of time and effort,” said Yasuhiro Kiuchi, a senior researcher at the Japan Productivity Center in Tokyo. “It’ll be hard to change this culture, but Japan has the inventiveness to make use of IT or improve efficiencies without customers noticing.”

Japan Airlines Co. defines omotenashi on its website as “a completely selfless approach to receiving guests” in a country where customers are not expected to tip for good service.

“Omotenashi is part of Japanese culture,” Kiuchi said. “Japanese customers demand a very high level of service but we don’t know how it should be paid for.”

Kiyoko Kondo embodies omotenashi. She’s greeted clients at the flagship Mitsukoshi department store in central Tokyo for 35 years and is able to welcome more than 300 regular customers by name.

“I get my reward when people say ‘Thank you,’ ” said 55-year-old Kondo. “It’s not cool to get money for my service.”

Productivity — calculated as gross domestic product per hour worked — was $41.5 in Japan last year, versus more than $50 in all other G-7 nations, according to Organisation for Economic Co-operation and Development data. The U.S. led the pack at $67.4.

The gap is worse in the service sector. Productivity at restaurants and hotels was 26.5 percent of that in the U.S., and about 41.5 percent in the retail and wholesale sector, according to an industry ministry report in 2013.

At a meeting with private and public sector leaders on June 18, Abe said he wanted to spur a “revolution” in service productivity. This panel designated five service sectors — restaurants, hotels, retail, health care and transportation — as having low productivity.

Japan is performing more strongly in areas such as finance and banking, doing better than France and Germany, the ministry report showed.

One sector where Japan’s hospitality is paying dividends is tourism, where, helped by a weaker yen, visitors have nearly doubled since 2013. The nation is ranked first out of 141 countries on its “treatment of customers” by the World Economic Forum, and Abe wants to harness this to boost Japan’s image overseas in the run up to the 2020 Olympics in Tokyo.

The challenge, however, is to monetize this hospitality while maintaining high standards.

“Japanese hotels and restaurants are full of the omotenashi spirit,” Abe said in a March speech. “But good service alone isn’t enough. Good service must be valued and compensated to sustain business.”

This complimentary-service strategy has been embraced by McDonald’s Corp.’s Japan business, where the restaurants’ menus offer a free smile to customers.

“I’m proud that people imagine a smile when they think about McDonald’s,” said Yumi Sato, a-24-year-old part-time worker at a store in Tokyo. “If it was a ¥100 smile, then I wouldn’t be smiling anymore.”

  • ilovetataki

    There is no trade off between quality-service and productivity in Japan. Those who are the face of the company in the eyes of the customer are being paid minimum wage. Where Japanese companies lose productivity is in old practices such as: shuffling staff from one section to the next, and often across the country; dismissing educated and highly skilled female employees once they marry and have a child; promoting unsuitable staff to managerial positions simply to save face, or to move them away from the company headquarters by shipping them out to a subsidiary; ignoring global trends and technological advancements in favor of the same-old practices that propelled Japan’s economy in the 1970s and 1980s, but are outdated and irrelevant today.

  • J.P. Bunny

    Most of this Omotenashi culture is just ego swelling puffery. I’m sure many people feel important because someone has pushed the elevator button, or thanked them profusely for entering the shop, but that’s about all it’s good for. All that bowing and polite language doesn’t make up for the airline seat that was given away, the substandard room instead of the deluxe one that was booked, or some bank teller following an afternoon wasting medieval rule because it’s the way things are done.

    Politeness is fine and greatly appreciated, but not in place of real work being done.

  • skillet

    It was useless, but I really enjoyed it. That that trademark silliness is fun.Makes Japan unique. Kind of like the Good ol USA would not really be the good ol USA without guns. Just like France with its wine and the South with grits and Dixie Flag.

    But it is not just silliness.

    I was pleased to see the Japanese still put pretty girls in front of stores that pantomime perfect form of greeting. It is good that some things have not changed since the 90’s when I was there. Japanese insight into form and life force and its mastery for beauty, strength or efficiency is part of why Japan is the pinnacle of civilization.

    Don’t get rid of culture just for efficiency. If I were in Japan today, I think my first stop would be yasukuni shrine to pray.

    I say that as a Christian.

  • DrHanibalLecter

    “Is hospitality sapping productivity in Japan?”

    Silly question, of course it does. The question is: Do we customers want to pay higher prices for this?
    Or, as we can see more and more in Europe at the moment: Should life be surrendered to one single goal: maximising profit?

  • Yoji

    Importance of omotenashi is in a fine balance and timely accomplishment,
    In term of labor productivity, Japanese hospitality is lower than US
    but, courtesy might be higher than any other countries. We want the
    whole world to know Japanese have abilities of multitasking performance.
    While eating, they learn good manners. Besides that, Manga writers can
    draw pictures and additionally think about stories, We have enough of
    everything. Of course, it is better to raise labor productivity,
    Japanese should understand the difference hospitality and omotenashi.
    Hospitality is definitely business word all over the world and
    omotenashi is cultural one.

  • Toolonggone

    I don’t understand the point of this article. It seems to generalize correlation between good quality service and high productivity based on monetary figures. Does comparatively lower output in Japanese service industries mean they have lower productivity than American counterparts? There is a significant variance in quality service among American firms. Look at Walmart and McDonald. They are widely criticized for labor exploitation and minimum wage–despite their nation-wide business. And Microsoft? They are outsourcing workers from India and China upon limited contract by replacing regular workers for cost-cutting scheme. They have been on the downhill since Bill Gates left.

    It’s just plain silly to connect employee’s courtesy behavior with the statistics.

  • MM

    Are they seriously trying to take credit for the “free smiles” in Japanese McDonalds restaurants? Because that’s been around the in US since the 1960s. Most definitely not omotenashi.

  • J.P. Bunny

    Was there an age when men weren’t men? What were they, iguanas? Yes, awesome song. People marching off to be killed, sent by those who won’t get killed.