Management

3 pillars

  • Social contract between the firm and employee - a commitment to work as a community to achieve economic security for all.
  • Seniority system: Until they reach age 45, they will be promoted and paid by seniority and by seniority alone. Then suddenly, when a man reaches 45, the Day of Reckoning arrives, when the goats are separated from the sheep.
  • Single trade union organization.

Decision making

Consensus - “The Japanese, we are told, debate a proposed decision throughout the organization until there is agreement on it. And only then do they make the decision. … Above all, the system forces the Japanese to make big decisions. It is much too cumbersome to be put to work on minor matters. It takes far too many people far too long to be wasted on anything but truly important matters leading to real changes in policies and behavior. … What stands out in Japanese history, as well as in today’s Japanese management behavior, is the capacity for making 180-degree turns—that is, for reaching radical and highly controversial decisions.” HBR

Employment system

Permanent vs temporary

  • “To be sure, most employees in “modern” Japanese business and industry have a guaranteed job once they are on the payroll. While they are on the job, they have practically complete job security which is endangered only in the event of a severe economic crisis or of bankruptcy of the employer. They also are paid on the basis of seniority, as a rule, with pay doubling about every 15 years, regardless of the type of job.” HBR
  • “Even in the “modern” industries there is a slowly shrinking, but substantial (perhaps 20%), body of employees who, by unilateral management decision, are considered “temporary” and remain in that category for many years. … Women are almost always considered “temporary” rather than “permanent” employees;so they are exempted from the benefits. In most “traditional” Japanese businesses, such as workshop industries producing lacquer, pottery, and silk, workers are hired and paid by the hour.”

Retirement into temporary positions

  • “Official retirement in Japan is at age 55—for everyone except a few who, at age 45, become members of top management and are not expected to retire at any fixed age. At age 55, it is said, the employee, whether he is a floor sweeper or a department head, “retires.” Traditionally, he then gets a severance bonus equal to about two years of full pay. … The rank-and-file blue-collar or white-collar employee ceases to be a permanent employee at age 55 and becomes a “temporary” worker. This means that he can be laid off if there is not enough work. But if there is enough work … he stays on, very often doing the same work as before, side by side with the “permanent” employee with whom he has been working for many years. But for this work he now gets at least one third less than he got when he was a “permanent” employee.”
    • “The rationale of this situation is fairly simple. As the Japanese see it, the man has something to fall back on when he retires—the two-year pension. This, they freely admit, is not enough to keep a man alive for 15 years or so. But it is usually enough to tide him over a bad spell. And since he no longer has, as a rule, dependent children or parents whom he has to support, his needs should be considerably lower than they were when he was, say, 40 and probably had both children and parents to look after.”

Benefits

  • " it satisfies two apparently mutually contradictory needs: (a) job and income security, and (b) flexible, adaptable labor forces and labor costs. "
  • “It is the psychological conviction of job and income security that underlies what might be the most important “secret” of the Japanese economy: cheerful willingness on the part of employees to accept continuing changes in technology and processes, and to regard increasing productivity as good for everybody.”

Training

  • “Continuous training: The secret may lie in what the Japanese call “continuous training.” This means, first, that every employee, very often up to and including top managers, keeps on training as a regular part of his job until he retires. .. the Japanese employee is, for the most part, trained not only in his job but in all the jobs at his job level, however, low or high that level is.”

Pros and cons

  • “For example, the young, technically trained people—scientists and engineers-resent it bitterly and resist it rather well. They want to work as scientists and engineers and are by no means delighted when asked to learn accounting or when shifted from an engineering job into the personnel department.”
  • “A Japanese employer who wants to introduce a new product or machine does so in and through the training session. As a result, there is usually no resistance at all to the change, but acceptance of it. … “bugs” in a new process are usually worked out, or at least identified, before it goes into operation on the plant floor. "
  • “But the Japanese keep on training. And sooner or later, their “learning curve” starts breaking above the plateau which we in the West consider permanent. It starts to climb again, not because a man works harder, but because he starts to work “smarter.””

Mentoring

  • Managerial godfathers: " every young managerial employee knows who his godfather is, and so do his boss and the boss’s boss. … He is expected to know the young man, see him fairly regularly, be available to him for advice and counsel, and, in general, look after him. .. The godfather sits with the top management and discusses the young people.”
  • “In other words, godfathers are people who know, having been passed over at age 45 for the top management spots, that they are not going to “make it” in their own organizations. Therefore, they are not likely to build factions of their own or to play internal politics.”
  • " the godfather function is not a separate job, is not a part of personnel work, and is not entrusted to specialists, but is discharged by experienced, respected, and successful management people."
  • “A supervisor tries to hang on to a good man and not let him go. He will not say, “You have learned all there is to learn in this place.” He will not say, “You are doing all right, but you really don’t belong here.” He will not ask a young man, “Where do you want to go? What kind of work do you want to do? How can I help you to get there?””

Operational innovations

  • Point and call system YT.

Staffing, appraisal

  • “Superiors do not choose their subordinates: the personnel people make personnel decisions, as a rule, often without consulting the manager to whom a subordinate is being assigned. "
  • “This process goes on for 20 to 25 years, during which all the emphasis seems to be on conforming, on doing what one is being asked to do, and on showing proper respect and deference. Then suddenly, when a man reaches 45, the Day of Reckoning arrives, when the goats are separated from the sheep. A very small group of candidates is picked to become “company directors”—that is, top management. They can stay in management well past any retirement age known in the West”