Business

Through Keidanren role, Hiroaki Nakanishi looks to ditch dated aspects of Japan's corporate culture

by Kanako Takahara

Staff Writer

As Japan’s biggest business lobby, Keidanren represents the interests of more than 1,300 member companies and its executives include some of the nation’s top business leaders.

But at the same time, the 72-year-old organization, also known as the Japan Business Federation, reflects the most traditional — and at times outdated — aspects of the country’s corporate culture.

In June last year a local daily pointed out that its chairman, Hiroaki Nakanishi, and 18 vice chairmen were all male, Japanese, over 60 and had never switched jobs in their entire career. It was also reported that Nakanishi was the first chairman to use a computer at his office and use email to communicate with staff members.

Will Keidanren’s “old guard” be able to spearhead moves to make the nation’s male-dominated, seniority-oriented corporate culture more inclusive to foreign nationals, women and so-called job hoppers — a crucial endeavor amid a severe labor shortage? Many people have doubts.

But Nakanishi says they can, and acknowledges that they must.

“Corporate leaders have a strong awareness that they need to change their employment practices” such as seniority-based pay and hiring new graduates during a fixed time period, Nakanishi, 72, said in a recent interview.

In September, Nakanishi, who assumed his post in May, shocked business leaders when he proposed abolishing a guideline that stipulates a fixed time frame for firms to recruit university students.

The move would affect students joining companies from spring 2021. Under the current guideline, which has been in place for over 60 years, Keidanren member companies begin holding job orientation sessions every March for third-year students. They then start their screening processes, which includes interviews in June.

By abolishing the guideline, which isn’t followed by nonmember companies, firms would be able to hire students at any time during the year — a benefit for applicants from overseas. Critics, however, are concerned that it could lead to a more drawn-out job hunt for students.

So far, Nakanishi has refused to budge.

And he envisions not simply doing away with the guideline but overhauling some of the nation’s outdated employment practices, in part to lure talented foreign workers.

“Hiring young students in a fixed period, training them under what is similar to an apprentice system … these all worked during rapid economic growth” from the early 1950s to the early 1970s, he said. “But that isn’t working any more.”

As global competition to lure highly skilled engineers intensifies, Nakanishi, who also serves as chairman of Hitachi Ltd., realizes that Japanese companies will struggle to attract foreign talent if they retain current practices.

With an eye toward the intensifying competition for top talent, Hitachi introduced a job system whereby foreign workers are offered the same position in Japan as the job they already have overseas.

“For instance, an accounting manager in India will be offered the same position in Japan and the same compensation level” as their current role, he said, adding that the actual amount of pay may differ depending on the country where they are working.

One of the drivers behind the change was the globalization of Japanese companies in the last decade or so, he says.

Before that, companies used to export products manufactured domestically. But following the global financial crisis in 2008, companies started giving more authority to overseas branches to cater to local needs, Nakanishi said, which created a need for talented local workers.

Each industry in each country has its own employment practices, Nakanishi points out, but what makes Japan stand out is that most of the companies across various industries have a similar employment system.

“When I was younger, I used to think the old practices would change more quickly,” he admitted.

As much as he has been irritated by the speed of changes to Japan’s corporate culture, Nakanishi says there are many positive aspects that should be kept.

“Japanese companies sell not only products but the services that go with them,” Nakanishi said. “The high morale of workers and employers in creating something together … that is an attraction” when foreign companies conduct business with Japanese firms.

The chairman recalls an instance when a Japanese company purchased a foreign business overseas and one of the workers expressed his relief that his company was bought by a trustworthy Japanese firm.

“There is a sense that employers and employees should prosper together,” Nakanishi said.

As the first Keidanren chairman from Hitachi, Nakanishi is considered a reformist and a business heavyweight who is able to take a stronger stance when dealing with the administration of Prime Minister Shinzo Abe compared to his predecessor, Sadayuki Sakakibara.

But the chairman, who is expected to serve two terms for a total of four years, claims the organization’s relationship with the government shouldn’t be confrontational.

“For issues that could change the fundamentals (of the economy), the government and the business industry should cooperate with each other,” he said.

Under his reign as Hitachi president, the electronics giant recovered from a record net loss of ¥787.3 billion in fiscal 2008 to post profits two years later.

A fluent English speaker, Nakanishi has a master’s degree in computer engineering from Stanford University and has abundant experience working overseas, having headed Hitachi’s North America and Europe offices.

“He is one of the rare examples (of a Keidanren chairman) who has worked under foreign executives and served as a manager for foreign employees,” said a Keidanren official who welcomes the positive change Nakanishi has brought to the organization. The official asked not to be named.

As the leader of the nation’s top business lobby, the Keidanren chairman believes that where there is a challenge, there is an opportunity. Nakanishi says the challenges the nation is facing — including its graying population, ballooning social welfare costs and labor shortage — can be an advantage. In November, Keidanren released a “Society 5.0” policy proposal that aims to make Japan the world leader in resolving such chronic societal problems through its use of the “internet of things,” artificial intelligence, robots and other digital technologies like blockchain.

For example, Nakanishi says, Japan could create a database for all government-held medical records — something only nations with universal health care can do.

“If medical data can be analyzed on a large scale, there may be ways to prevent lifestyle-related disease,” Nakanishi said. “That could dramatically reduce medical bills.

“The plan is to resolve problems not only within the industry but the entire society as well,” he said. “It’s a great opportunity for Japan to prevail.”

Other countries are making similar proposals.

Germany’s Industry 4.0 initiative focuses on using advanced technologies in manufacturing, aviation, logistics and software development, while China’s state-led industrial policy, Made in China 2025, aims to dominate global high-tech manufacturing.

“Japan is an isolated island nation and a relatively homogeneous society with a language of its own,” he said. “It’s paramount that Japan be able to send a clear message. There is a high expectation from other Asian countries in that respect,” Nakanishi said.

Nakanishi often finds himself talking about corporate culture, the need to abolish outdated employment practices and the business lobby’s role in pushing the nation to cash in on new technology.

But behind these initiatives is Nakanishi’s passion for business, his pure belief that a company is a place with the potential for the fruits of one’s curiosity and imagination to become reality.

“It’s an exciting place,” he said, adding that there’s no place like a company that allows individuals to engage in what fascinates them. “For younger workers, companies should be a place where they can pursue their curiosity,” he said. “As a business leader, my mission is to make sure such an environment is safeguarded.”

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