Commentary / Japan

Will labor practices in Japan be disrupted?

by Yoko Ishikura

The war for talent is becoming more intense in Japan as the young population is decreasing and the labor market is increasingly a seller’s market. Recruiting good people becomes critical for companies as manpower plays a significant role in staying competitive in today’s business environment.

The hard assets such as plant and equipment have become less important in today’s fast-changing world, where disruptions are taking place in many industries, and the soft assets such as innovation and new business models are increasing in value to the companies. People capable of developing ideas for innovation and implementing new business models are becoming indispensable as they are the source of soft assets. Recruiting and retaining the talented manpower is a must for employers and for the country.

Companies (in particular, people in charge of human resources) try hard to hunt for and secure “good” workers. The naitei-shiki (formal orientation) ceremonies organized by businesses for new recruits at the beginning of October are one attempt in that effort. The naitei is a tentative job offer in the form of a letter that companies give to prospective graduates whom they have decided to hire. It is still unofficial and preliminary in nature, and thus not a legally binding contract. The students can decide not to join the company after they have received it.

The companies hold such ceremonies to provide an opportunity for prospective recruits to meet their peers who may join the firm in the same year, and to welcome the new recruits and make them aware that they are going to be members of the company “family.”

Despite these efforts to secure new hires, the ratio of those who decline job offers after they receive the offer is high (some 60 percent, according to a survey of students) and rising. Companies that saw an increasing portion of their tentative new hires decline their offers this year accounted for more than 30 percent of the total. Even after new hires have formally joined the company, an average of 30 percent of them quit the firms within three years — the ratio has remained at the same level for the past several years.

In addition to securing talent at the time of graduation, the companies have been increasing the number of mid-career hires. In 2019, the ratio of mid-career hires has almost reached 30 percent of the total hires (according to a survey by the Nikkei financial newspaper). This trend indicates that companies are becoming more desperate to hire competent manpower quickly.

It appears that the past approach of companies hiring new workers en masse upon graduation from school and developing them according to the traditional “equal and fair” program for all may be subject to change. Legacy events such as naitei and naitei-shiki ceremonies — symbolizing the rigid labor practice of instilling the spirit of the “equality and togetherness” of the same class joining the company — may be losing importance for both employers and new recruits. In fact, Keidanren (the Japan Business Federation), the nation’s top business lobby, has decided to abolish the guidelines stipulating a uniform recruitment timetable for member companies.

Do these changes indicate that labor practices in Japan will be disrupted in the near future — as they should to respond to the rapidly changing business environment?

Some research paints a disappointing picture of people’s perception toward jobs and employment in this country. A survey this year by Persol Research and Consulting Co. shows that the Japanese workforce has the lowest score among 14 Asia-Pacific countries polled for such criteria as the aspirations of those in nonmanagerial positions to become managers, to be promoted and to become independent and/or start a business of their own.

The young workforce’s level of satisfaction with their job is lower in Japan (at 47.4 percent) than in such countries as the United States (81.8 percent), Germany (80.2 percent), France (75.5 percent), Britain (74.4 percent), Sweden (69.7 percent) and South Korea (53.5 percent), according to a 2018 Cabinet Office survey of youth about attitude toward work.

The 2015 International Social Survey showed that those in Japan who find their job interesting account for some 20 percent of the total, much lower than in countries like the U.S., Germany and Norway, where the ratio exceeded 80 percent. The ratio of workers who feel stress in their workplace is higher in Japan than in other countries.

On the other hand, young workers’ willingness to make extra efforts to learn skills and engage in personal development in Japan is low, according to the Persol survey. This lack of self-motivation is worrisome when contrasted with the growing awareness in many other countries that lifelong learning is a must if one is to adapt to a fast-changing world.

From these survey results, I do not see a strong will on the part of Japanese workers to do something about their current status.

What I have observed recently troubles me even more in relation to HR practices. When Typhon Faxai hit the greater Tokyo area several weeks ago, a decision was made the night before that train services would be halted until at least 8 a.m. the next day. That was a good decision so that people would not have to check the status of commuting trains and worry about what they would have to do.

The following day, a great many people flocked to their train stations around 8 a.m. under the assumption that the trains would resume service around that time. It appeared that many of them felt that they need to go to the office on time to be perceived as a dedicated member of the family. If they did not, their bosses and peers may have thought that they were not serious about their work and/or their dedication was not enough.

That scene told me at least two things. First, many workers do not want to be left out or stand out, and make every effort to remain a perceived member of the group. In other words, they do not want to be different.

Second, their perception of work is to be physically at the office and have face time. They are very limited in their thinking of different ways to get tasks done other than being at the office with others (probably in the presence of their managers). They do not try to seize the opportunity of suspended train services to explore alternative work styles, such as remote work. This shows how limited their imagination and creativity is when it comes to real-life situations, even though they all talk about innovation.

HR departments at many companies reportedly try to encourage employees to design their own careers. But although they advocate “workforce-driven career design,” the ingrained mentality of “everybody together and equal” will not change easily. Those companies will not be able to develop and retain people who can think on their own and take the initiative.

I was hoping that different work styles would emerge in the face of the rapidly declining working-age population and progress in communications technology. But having witnessed the scene of many company employees lining up for trains right after the typhoon, I am not sure if my hope will ever be realized. After all, disruption is made difficult not by technological challenges but by the mind-set of people and their difficulty to set their traditional ways of thinking aside.

Yoko Ishikura is a professor emeritus of Hitotsubashi University and serves as an independent consultant in the area of global strategy, competitiveness and global talent. She is a member of the World Economic Forum’s Expert Network.

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