Lifelong High Performance, the
Japanese–American Way
A few
companies in Tokyo are using U.S. management methods to end the perennial
trade-off between long employee tenures and global competitiveness.
Could
the next big management fashion be a hybrid of Japanese and U.S. styles,
providing the competitiveness of the most successful U.S. companies while still
benefiting from the commitment and loyalty that Japanese companies earn from
their lifelong “salarymen”? A few companies in Tokyo are experimenting with a
prototype approach that, if successful, could be used by companies everywhere
to combine high performance and creativity with a nurturing, community-oriented
business environment.
Japanese
companies are remarkably innovative. They invented the light-emitting diode,
portable music player, bullet train, video tape recorder, compact disc, flash
memory, motion-sensing video game controller, the humanlike robot, and the
Toyota Production System, the original source of lean management. Yet the
prevailing Japanese business culture is one of stability, consensus, and
lifetime employment security. As freewheeling business cultures have risen up
in places like Silicon Valley and parts of China, some Japanese enterprise
leaders are beginning to worry that they are too staid, bureaucratic, and
complacent, perhaps even coddling their employees. They fear they risk being
overtaken by more aggressive newcomers.
“From
early in life,” says Shin Sakane, CEO of the Tokyo startup Seven Dreamers
Laboratories, “we are taught that ‘the nail that is sticking out will be hit
down.’ Consequently, it is very difficult to find people willing to lead.”
Seven
Dreamers places special value on creative leadership because it has staked its
future on continual innovation. The company was originally part of Super Resin,
a fiber-reinforced plastics (FRP) manufacturer then in its 54th year. “Super
Resin is a traditional business-to-business manufacturer, making parts for
electronics companies and car manufacturers,” explains Sakane. “While Seven
Dreamers is also technology oriented, it is mainly aimed at consumers. We
develop products, but we outsource manufacturing.”
In
the mid-1990s, Super Resin began developing carbon-composite FRP materials and
looked for products that could use them profitably. Seven Dreamers became a
vehicle for designing and making those products; it was spun off into a
separate company in 2011. The two companies’ offerings include windmill blades,
satellite technologies, remote-controlled aircraft, and components for Japan’s
Hayabusa spacecraft, the only unpiloted spacecraft to land on an asteroid and
return to Earth with a mineral sample. In late 2016, Seven Dreamers raised more
than US$60 million in venture capital to launch the “laundroid,” a machine that will use artificial
intelligence to recognize fabrics and fold laundry.
Sakane,
who holds a Ph.D. in chemistry and biochemistry from the University of
Delaware, is a member of the family that founded Super Resin’s parent company,
I.S.T. He joined Super Resin in 2008 as president, and was Seven Dreamers’
founding CEO — and a skeptic about the value of Japanese-style group
management.
“If
I have a problem and I ask a team member which solution is best, he or she will
wait for orders on how to go about [solving] it,” Sakane says. “So I decided to
shake things up.” For example, he began promoting employees based on individual
performance, rather than on seniority. This made employees more likely to take
initiative, but it also raised the level of uncertainty; Japanese workers could
no longer be sure of how their career path would progress. “I believe that the
person who has the best qualities, or whose qualities match a certain position,
deserves to get the job or make the promotion,” Sakane says. “We now have
managers in their 20s and 30s, which is very uncommon for Japanese firms.”
At
the same time, Sakane recognized that employees do their best creative work
when they are part of a supportive workplace, relatively free from the fear of
failure or dismissal, with decisions made through consensus. So he set about to
develop a hybrid approach, that would be competitive while ensuring that Seven
Dreamers’ employees felt comfortable and secure. The guarantee of lifetime
employment, pervasive in Japanese companies, is grounded in the broader
culture. People tend to identify as part of a group that may form in university,
go to work at a single company all together, progress up the ranks at a similar
pace, and develop bonds that last through retirement. Japanese employees tend
to feel proud of working for one company their entire life. Even younger
Japanese often say in surveys that they prefer the stability of lifetime
employment to the opportunities of joining a startup where they could advance
more quickly but would take more risks with their career.
The
perceived role of management in that type of system is to drive performance not
through competitiveness and pressure, but through a sense of belonging, almost
as a shepherd drives a flock. “The most important thing for a Japanese company
is to provide stability and job security for employees,” says Parissa Haghirian,
professor of international
management at Tokyo’s Sophia University and author of Understanding
Japanese Management Practices (pdf). “Crucial to the Japanese leader is ensuring the
company, or his or her department, remains a stable and trustworthy unit.
For them it is very important the group sticks together, and is protected by
its leader. If a leader can’t protect, he isn’t considered worthy of your
trust. That is why Japanese companies place great emphasis on continuity.”
Because
Seven Dreamers did not incorporate traditional Japanese management practices,
it had to develop a company culture that made its more traditional,
security-oriented employees feel comfortable. For example, the superior status
of age is embedded in the Japanese language. Younger people are expected to
address older people with honorific words. This deeply ingrained etiquette is
considered crucial to any successful business in Japan, but it contradicted the
career paths at Seven Dreamers, where managers were sometimes assigned to lead
teams of people older than themselves. Sakane developed a kind of verbal
template for managers that become a visible sign of his commitment to
traditional employees: Even if they lost status within the company, they could
still be assured that their younger bosses would speak to them with the social
and cultural terms of respect. “Slowly but steadily, we resolved the issue,” he
says, “and found a neutral language to speak.” For Sakane, it was a crucial
lesson: The application of foreign ideas about managing a company needs to go
hand in hand with an appreciation of fundamental Japanese values.
Another
domain where Seven Dreamers bridged differences was in the ringi decision-making
process, which says that all people who are potentially affected by an action
need to be involved in the decision. “Let’s say I want to implement a new
procedure,” says Haghirian. “I create a document on paper, and it needs
the hanko — a personalized stamp, like a Western signature —
of each person who is related to the project. If they don’t agree to sign, we
must reconsider the decision, changing it in some detail, until every single
member agrees on the final outcome. This is a circular process, in which all
voices are heard. Eventually, they come to a conclusion which is acceptable to
the majority.”
In
the West, this is known as consensus decision making, and it is often
criticized for its slow, bureaucratic nature — and for the groupthink, risk
aversion, and slow responses associated with it. But in Japan, as Haghirian
notes, it has the effect of fostering a strong commitment that leads to better
results. “Once a decision is made,” she says, “and the group knows what kind of
direction they want to go [in], they act quickly and they become very
successful. It doesn’t only nurture a good relationship between workers; it
also provides much-needed involvement of employees with the long-term goals
they are working toward.”
Here
again, Seven Dreamers developed its own form of the ringi system — an online
version, Sakane explains. There are no paper documents to slow down the
process, and the company uses the method only for big budget decisions.
Some
executives, including some who have come to Japan from the U.S., see a more
brusque U.S. management style as a necessary corrective to the Japanese
culture. For example, Buster Brown, a Texas-born executive who was president of
Manpower Japan between 2014 and 2016, used U.S. cultural tropes as a way to
promote efficiency and autonomous leadership. “In the West, eccentricity and
outspokenness can give you good leverage; they can help you progress in your
career,” he says. “Therefore, you will find many people who are willing to lead
in the United States. This explains why Japanese companies in a state of crisis
will often look for Western leaders.”
Japanese
companies will probably continue to incorporate Western managerial ideas. This
will help them hire more talented engineers, including those from outside
Japan. It will give them a more meritocratic system, in which managers still
feel protected overall, but have a chance to move up the ladder on the basis of
performance.
But
what about U.S. companies? Could they benefit from a more communal, collegial,
Japanese-influenced culture? The last time the two nations extensively
intermingled their management approaches was in the 1980s and early 1990s, when
experts such as W. Edwards Deming, Joseph Juran, and Richard Pascale seemed to
have found a remedy for the U.S. malaise of short-term thinking. Many Western
companies changed their ways accordingly, which meant that the United States’
“prevailing system of management,” as Deming called it, became significantly
more participative, quality oriented, and ready to treat all employees as
assets to be cultivated. Without Japanese management, one could argue, many of
the practices common in well-managed companies today would never have taken
hold.
This time, the
momentum is moving in the other direction. Japanese companies, under fire, are
beginning to change some of their long-standing ways. “In times of peace,
Japanese continuity is preferred,” Haghirian says. “The group takes precedence
over the individual. But in times of crisis, you may need a strong leader to make
effective decisions.” If Japanese companies resolve this paradox — if they
become more innovative and decisive, while providing a tangible commitment to
their loyal employees — they may provide a model that will spread around the
world.
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