A Ponzi scheme. Alleged yakuza ties. Accounting scandals. Executive misuse of company funds for gambling. A record-breaking bankruptcy. Callous disregard of public health and safety.
Japanese companies are in the headlines a lot these days. But for all the wrong reasons. While each is unique, there are some common threads running through such recent corporate misadventures as AIJ, Olympus, Daio Paper, Elpida and Tepco: poor corporate governance, lack of transparency, parochialism, groupthink, tunnel vision, excessive deference to authority, indifference to shareholder value, and just plain mismanagement. Whatever the cause, the effect has been a collective black eye for Japanese business.
It is deeply unfair for the image of Japanese companies generally to be tarnished by the acts of a few. The talent, intelligence and integrity of Japanese businesspeople are at least the equal of their counterparts anywhere in the world. And while there is, as with any country, room for improvement, many Japanese businesspeople have strengths that Americans, Europeans, Asians and others would be wise to emulate, including an unyielding work ethic, a heartfelt commitment to customer service, devotion to engineering excellence, and sincere concern for the wellbeing of their employees.
Nevertheless, the sheer number of recent corporate crack-ups, and the failure of many Japanese companies to successfully adapt to the challenges of the 21st century, suggest that Japan’s problems are not caused by just a few “bad apples.” There is something amiss in the state of Japanese business.
Much reporting has focused on poor corporate governance as a root cause of many of Japan’s business woes. The Olympus scandal wouldn’t have occurred, or so the reasoning goes, if the company had had in place a more robust system of checks and balances to prevent management misbehavior, such as having more independent directors — and fewer company lifers and other insiders — on the board.
Stunted business practices have also been said to be behind business failures even without a whiff of scandal. If Elpida had brought new blood into their executive ranks and had seriously considered the advice of outside experts, perhaps they would have seen the writing on the wall and transitioned out of the commodity DRAM business in time to avoid bankruptcy.
Undeniably there is room for reform of Japan’s corporate governance infrastructure. Requiring public companies to have a majority of independent directors on their boards, for example, might lessen the risk of Olympus-style collusion and coverups, bring fresh perspectives to business strategy, and allow companies to make painful decisions and management changes more nimbly.
However, corporate governance reform is not a panacea. After all, corporate scandals and business meltdowns are not unusual at public companies in the United States despite strict securities laws, tough accounting standards, activist shareholders and largely independent boards of directors.
No, merely changing the rules of the game will not have much impact on Japanese business. Real change starts with individuals: gutsy managers who are willing to buck the system and, as the late Steve Jobs said, “think different.” Japanese need not abandon their consensus management approach or adopt ruthless American management practices, but companies would be well-served by having more employees, at all levels of management, who are willing to fight for vitally-needed change.
This is already happening at many Japanese companies. I’ve met any number of executives who are actively challenging ingrained practices, and many more who want to.
Most Japanese managers toil anonymously, known only by their close colleagues and business partners. When they find themselves in the public eye, it’s all too often due to scandal. This can make role models for up-and-coming Japanese salarymen hard to come by.
Japan is fortunate, however, to have one highly successful, forward-looking businessman who has spent his entire career in “full monty” mode: Kosaku Shima, the president of Tecot (formerly Hatsushiba Electric).
Although not well-known overseas, Japanese have been closely following Shima for decades, from his days as a workaholic section chief, through his globe-trotting exploits as a department head and managing director, culminating in his promotion to the president’s chair in 2008. And while Shima and his company are fictional (the work of manga artist Kenshi Hirokane), Tecot/Hatsushiba is recognizable as a large Japanese conglomerate in the mold of Panasonic (Hirokane’s former employer) and Shima as a Japanese salaryman in the best sense of the word: hardworking, humble and sincere. The world Shima inhabits has extra dollops of sex and violence (it is a manga, after all), but otherwise is a reasonable facsimile of our own.
Throughout his storied career, Shima has exhibited many of the traits that Japan so desperately needs today:
In his inaugural speech as president of Hatsushiba, Shima unveiled his guiding principle for the company: “Think global.” And while many Japanese institutions give lip service to globalization, Shima has lived it. For example:
• Shima speaks English and some Chinese. More importantly, he speaks to foreign employees, customers and business partners confidently and forthrightly (even if it means getting pelted by eggs by employees in China!).
• He has spent much of his career at Hatsushiba’s offices around the world, including China, America and India, unlike many Japanese managers today who shy away from foreign postings.
• Also in contrast to the practice of many Japanese companies, Shima has willingly delegated significant responsibilities to foreign managers (at least those located at overseas subsidiaries)
• He recognizes the primacy of foreign markets to Tecot’s future and is shifting R&D to products that will be more attractive to overseas customers, even if it means they are less finely tuned to the idiosyncratic demands of the Japanese market. (Just say no to Galapagos!)
• He has an American love child (another case of Shima going above and beyond the call of duty).
Shima recognizes that, with a shrinking population, Japanese business must aggressively look overseas for new markets.
By Japanese standards, Shima is an unusually bold and decisive manager. While he works assiduously to solicit feedback from his colleagues and tries to reach consensus, he does not allow the process to paralyze him. Ultimately, Shima is willing to exercise his authority and be individually accountable for his decisions.
For instance, as one of his first acts as president, Shima initiated a global rebranding effort and, after enlisting the support of the company’s executives and rank-and-file employees, he personally and swiftly made the final decision on the direction of the company. Shima-san was also quick to use his contacts with the Chinese mafia to help get his business partner’s child freed from kidnappers (admittedly perhaps not the wisest move, at least outside the world of pen and brush).
One of the biggest complaints I hear from my own foreign clients about dealing with large Japanese companies (especially those without a living founder) is their slow, opaque and headless approach to decision-making. Anecdotally at least, it is an important reason why foreign companies are passing over Japan for business opportunities in South Korea and other countries with more agile, profit-oriented business cultures.
With confident, bold leadership, Japanese companies can streamline their decision-making process without abandoning all of the traditional, consensus-oriented attributes of Japanese business culture.
Easier said than done? Sure. But Shima can help show the way.
Defying the status quo
Shima loves Tecot but he does not live in the past. He realizes that the company will need to make major, painful changes to its traditional Japanese ways of doing business if it is to survive and prosper.
Heretically, he has decried Japan’s perfectionist monozukuri manufacturing culture as an impediment to success in foreign markets, in stark contrast to Korean companies, which have focused more on what consumers actually want.
He has expressed support for a more incentive-based employee compensation system in order to attract and retain top talent and prevent poaching by foreign competitors.
He has been more willing than many Japanese executives to implement workforce reductions (at least for contract employees) to improve the company’s competitiveness. As Shima put it, it is no use preserving these jobs in the short-term if it leads to the company’s collapse; in that case, all is lost (moto mo ko mo nai). Time (and Hirokane’s pen) will tell how successful Shima is with these and other challenges to the status quo.
Japanese organizations — political, educational, business, criminal, etc. — are often riven with factions. Faction members tend to be driven by loyalty to their own group, even when detrimental to the larger organization. This makes factions counterproductive, even destructive, forces. Factionalism is not unique to Japan, but factions here seem to be particularly virulent, persistent and potent.
To his everlasting credit, Shima rejected factionalism early. When he was approached to join one of the main factions at Hatsushiba, he refused and it very nearly ended his career.
Shima has always put the interests of the company as a whole ahead of the interests of any particular group or himself. It was a hard road for Shima (and, of course, is even harder in the world of flesh and blood), but the right one.
. . . but nobody’s perfect
Kosaku Shima has his flaws. He is, at heart, an organization man and would not be well-suited for a career in a more entrepreneurial environment.
He has depended heavily on women for his success but has done little to encourage the promotion of women to important positions in the company.
He does not seem to care much about shareholders (or at least does not place them at the top of the pyramid of corporate stakeholders, unlike the United States). And his personal life is a mess.
Nevertheless, there is much in Shima-san’s character and approach to business for Japanese (and foreign) businesspeople to admire, and emulate.
Few “Shima-sans” in real Japanese companies end up on top. Many may find their climb up the corporate ladder stall. But lower-ranking managers with the mettle to forcefully advocate for change may ultimately have a more positive impact on their companies than more timid, go-along-to-get-along top executives.
For the sake of their companies and Japan, salarymen could do worse than asking themselves at every important decision point: What would Kosaku Shima do?
Glenn Newman (email@example.com) is an attorney and former long-term resident of — and frequent business traveler to — Japan. Light Gist offers a humorous take on life in Japan on the last Tuesday of the month. Send comments on this issue to firstname.lastname@example.org