Capable young people quit their jobs within three years!

Companies with high growth potential develop not capable staff, but the next generation of leaders. Yasunari Kuno Introduction Japan today faces the issue of a structural personnel shortage due to the declining birthrate and depopulation. We need to devise long-term recruitment strategies to address this change in population. Moreover, not only quantitative but also qualitative changes seem to be occurring: the concept of diligent Japanese personnel is fast becoming a thing of the past as new recruits today tend to quit their jobs. How are we to respond to such a reality? Japan appears to be entering a new era that requires an unprecedented, original management approach. In recent years, more than 30% of new recruits quit their jobs within three years, while at the same time, mid-career personnel tended to change jobs frequently. There is an urgent need, therefore, for Japanese companies to thoroughly analyze the reasons for early resignation or job changes to contrive a new management approach for the

emerging job-change era.

In the midst of this social context, there must be many corporate managers who are at a loss as to what to do. One countermeasure we can readily consider is the formulation of a mechanism designed to lower the high employee turnover rate. More recently in some enterprises, management focus apparently shifted from customer-oriented to employee-oriented because the conventional management approach of customers first implies that employee issues are secondary. Consequently, prospective employees now tend to choose companies that value their employees rather than ones that place primary focus solely on customers. As if to encourage that trend, potential employees are offered an array of attractive job offers. Which approach should be taken, customer satisfaction (CS) or employee satisfaction (ES)? Many enterprises are beginning to recognize the significance of ES. Some companies even proclaim customers second in an effort to boost retention rates. In light of recent personnel shortages, this trend, that is, the formulation of a

mechanism designed to retain new recruits and raise retention rates, may be the natural course of action. Both customers and employees are important Some may argue that unless companies value employees, employees do not value customers. Therefore, employee satisfaction is necessary. However, I dare say that I dont want to have services from those companies that do not give priority to customers. For whom do enterprises exist, for employees or for customers (society)? If the most important management policy changes, depending on the conditions of the labor market, the company is practicing chameleon management. Many corporate managers have lost confidence in themselves and faith in their management styles. High employee turnover rates are indeed a serious issue. However, it is also our responsibility as corporate managers to teach a better way of life to employees. Unless corporate managers actively undertake such education, they will not be successful in cultivating employees capable of taking on leadership roles in the future. The lack of leaders inevitably leads to a shortage of capable managers. Currently, many enterprises face the issues not only of a shortage of middle management, but also a lack of those who wish to become managers. Today, young employees are not interested in managerial jobs, but seek specialized

careers. They think that being a manager requires many responsibilities with little
reward, whereas a specialist can use his/her own discretion with fewer burdens. However, without managers of high caliber, there will be no corporate growth. Specialists can be supplied by outsourcing. Due to the collapse of conventional lifetime employment and seniority systems, the sense of belonging to a company has weakened. It is indeed a tough job to maintain high employee motivation for a long time. This is why a formation of new values or philosophies is required. Unless the questions Why do we work? What is our raison dtre? and What is job satisfaction? are fully answered, salary means compensation for pain for employees. In the end, a company is a place to develop people. The development of people cannot be achieved in a short time. It takes at least three years to get them well grounded in the basics. The truth of the matter is that those young people who quit their jobs after three years or less leave companies without even acquiring the basics.

This book is designed for use in employee training. I strongly recommend that you and your employees discuss each topic of the book face to face. I am sure that such discussions will lead to the discovery of new raison d tre or an approach to work. I am more than happy and honored if this book can be of any service to you in your efforts to enhance communication with your employees. Yasunari Kuno Certified Public Accountant and Chairman and CEO, Jinzai Kaihatsu Co., Ltd., Tokyo Accountant Corporation Group Capable young people quit their jobs within three years! Table of Contents

Chapter 1: Reasons that young people who quit their jobs within three years should not be withheld. 1. The cost of declining birthrate and depopulation trends: Quantitative changes among employees One of the important indicators for viewing business from a long term perspective is demographic dynamics. Demographic dynamics are the sole indicator capable of predicting economy over the next 30 years. For example, due to the declining population, the absolute size of the construction or housing market, particularly in local regions, is likely to shrink. In order for enterprises to survive under such conditions, they will have to narrow the target market and thoroughly differentiate their products from others within the market. Thus, demographic changes give rise to changes in management structure. Currently, enterprises strive to secure young labor force to fill vacancies resulting from the massive retirement of baby boomers. However, reflecting the declining population, securing quality employees has become very difficult and recruitment costs are on the increase. Since it is unlikely that the number of new graduates will increase due to the depopulation, the issue of recruiting quality human resources will grow in significance among enterprises. In the midst of the ever-declining population, should enterprises stick to the recruitment of Japanese personnel or accept foreign personnel or create a system that

does not require the recruitment of foreign personnel? It seems that the time has come for enterprises not to recruit on an ad hoc basis, but to reconsider their organizational structures from a long-term perspective. It is a cold fact that Japans population will continue declining. It is, therefore, high time for enterprises to address a major overhaul of their organizational strategies. (p17) Male, Female 90 years old or older, 0-4 years old 5, 4, 3,2, 1, 0, 0, 1, 2, 3, 4, 5 (unit: million people) 2004 Population by year, sex, and age (5-year interval) Source: Statistical chart of the Ministry of Health, Labour and Welfare 2. Japanese are no longer diligent personnel: Qualitative changes among employees While quantitative changes in population, such as depopulation, can be easily assessed via demographic dynamics, it is also necessary to assess the qualitative changes that have taken place among personnel in recent years. Although it is difficult to assess qualitative changes statistically, trends can be found in the turnover rate of new graduate recruits. According to the Survey on recruitment and turnover trends among new graduates (college graduates) by the Ministry of Health, Labour and Welfare, the turnover rate of new graduates who quit their jobs within three years was 34.7% in 2002 and has since been increasing year by year. Among high school graduate recruits, 48.6% quit their jobs within three years whereas the rate was approximately 70% among junior high school graduate recruits. In my elementary school days when mass employment was still a common practice, Japanese personnel were known as diligent. These cheap and hard-working personnel supported the Japanese manufacturing industry, which in turn drove the economic growth of Japan. In short, it was not only Japanese wages, which were lower than those of European or American personnel, but also the high quality of Japanese personnel that supported the rapid development of Japan. Then, how many diligent personnel are there among todays young people? Are many young people in Harajuku, Shibuya, or Akihabara interested in working in the manufacturing industry as diligent personnel? Partly due to the development of communication media, the culture of young people has become consistent across the

nation. While they wish to get clean, cool jobs, they try to avoid hard or unfashionable jobs. In short, there are no longer diligent personnel, who in the past supported Japans manufacturing industry. 3. The temporary employee market determines the salaries of permanent employees When considering changes in employee work attitudes and quality, a change in work

styles should also be considered. While enterprises reformed personnel costs, which
had remained high after the collapse of the bubble economy, and restructured, they hired temporary and contract employees. As a result, the proportion of non-permanent employees increased, and the temporary labor market rapidly expanded. Temporary and contract employees feature experienced personnel with the adaptable fighting potential, that is, personnel who already have a certain level of experience and skills. Such a change in work styles brought about a drastic change in the wages of permanent employees. The wage levels of temporary employees have a significant impact on the wages of permanent employees, who can be replaced by temporary personnel. In other words, free-market principles began working on the wage levels of the permanent employee market. In the past, the Japanese wage system was based on the seniority system, where the wages of permanent employees automatically increased each year. The system was also characterized by large wage disparities between industries. Even today, large wage disparities exist among managers across different industries. However, the wage levels of permanent employees have recently been determined to some extent by the wages of temporary employees for operations that can be replaced by temporary employees. This is because the practice called Temp to Perm has become popular: Temp to Perm is where temporary personnel are dispatched under the premise that they will be promoted to permanent employees after a certain period of time. In such cases, wages after being promoted to permanent employees are partly based on the wages paid to temporary employees. Generally, a company bears annual costs of approximately 4 million yen per temporary worker for general office work. If a permanent employee is hired at the same cost level, the annual salary will be only around 3 to 3.5 million yen. This is because for a permanent employee, the company must bear a variety of expenses, including social insurance and retirement allowance. The above discussions lead to the fact that if the salaries of permanent employees exist under free-market principles, annual income will not exceed 3.5 million yen

unless they assume responsibilities that cannot be accomplished by temporary personnel. This is a phenomenon that would never have emerged but for the radical expansion of the temporary employee market. 4. Lower Class and Disparity Society: However hard one works, the future remains uncertain and poverty prevails. Along with the expansion of the temporary worker market, the working poor, which means one cannot live in comfort however hard one works, has become a social issue. In particular, the deceptive contracts prevailing in factories pose a serious issue. The Worker Dispatch Law stipulates that companies that accept temporary personnel must confirm that the temporary personnel have social insurance. However, for a service contract, such an obligation is incurred only by temporary staffing agencies and not by the companies that hire temporary personnel. Although temporary staffing agencies are obliged to ensure that temporary personnel under service contracts take out social insurance, except for exemptions, there are many who do not fulfill this obligation, and what is worse, there are malicious dealers who even try to establish a company and dissolve it after a short period of time to evade inspections. What makes the issue more serious is the fact that yielding to the temptation of cheap labor, leading domestic manufacturers have used these agencies despite the awareness of deceptive contracts. Many students who were not hired as permanent employees during the employment ice age were absorbed by these manufacturers as temporary employees, where they experienced that however hard they worked, their lives never became easier. Major companies that sought cheap labor and the temporary staffing agencies that served as intermediaries...In a sense, young people were taken advantage of by them. It can be easily imagined that the discontent of young people with a society that provides no prospects but distrust of companies must be deep-seated. Under such circumstances, young people have come to think that they have to protect themselves, leading to a strong interest in the acquisition of qualifications, skills, and experience. Moreover, the fact that many enterprises adopted a resultsbased system and required employees to take full responsibility for own career plans has accelerated this trend. 5. The more companies show actual work to new graduates through internship programs, the less they join these companies.

Many companies are strongly concerned that new graduate recruits quit so soon. Questionnaires to new recruits who were quitting found the following reasons: What I expected and what I had to do at the company were different. The actual work was not what I intended to pursue. The work does not develop my career in any way. Looking at these results, the companies concluded that mismatches had occurred. In order to avoid further mismatches, they demonstrated actual work to students in advance of recruitment and established an internship system, which provided students with the opportunity to experience actual work as trainees. However, it turned out that the more these companies showed actual work to the trainees, the fewer applied for the work. The companies that were successful with the internship system are those that put on a nice gesture instead of showing actual work. It is understood that mismatches occurred at these companies after the actual recruitment. Then, why do these students who have seen the actual work not apply for the work? The answer is simple: The actual work was something different from what they expected. For career-oriented students, the actual work looks tedious and not useful for career development. 6. What do highly career-oriented students want to become? Then, what do these highly career-oriented students want to become? In a word, they want to become specialists with marketable skills. Today, whether or not one can acquire marketable skills has come to assume a greater significance. Young people who received an education with a strong focus on individuality consider the kind of work that best fits them or the work they will most enjoy doing while engaging in self-searching. As a result, they choose to become specialists who work relatively free at their own discretion. Young peoples pursuit to become specialists is not a problem in itself. However, when such students enter companies, they give rise to the following problems: First, they attach higher priority on themselves than on their companies and consequently decide to change jobs as soon as they find that the current work does not contribute to career development. They do not necessarily want to quit working for their companies, but rather wish to work steadily for a long time or work at their companies until retirement age.

However, they have a dilemma that can only be resolved by leaving the companies. Moreover, todays young people are more stability-oriented than their seniors and tend to choose big companies rather than venture companies. They do not want to take risks. The second problem is that there are fewer young people who want to become managers due to the stronger interest in becoming specialists. If they do not wish to assume managerial posts, their already low sense of loyalty to a company declines even more. This lack of loyalty to the company in turn accelerates resignations. Nor do they take the risk of starting their own companies. The fact that they do not want to become managers is one of the measures they use to protect themselves. 7. People in the middle tier do not want to assume managerial positions: Lack of nextgeneration corporate managers. The present corporate organization can be roughly divided into corporate managers,

managerial staff, specialists, and operators. Since operations do not have to be

conducted by permanent employees, temporary employees are often used. Permanent employees in operations are positioned as would-be specialists or managers. Basically, permanent employees should be developed as future managers or

specialists. However, many young employees today do not wish to become managers.
This is where the major problem lies. Managerial personnel are candidates for the next generation of corporate managers. Unless companies undertake the development of competent managers, there will be no high quality corporate managers in the future. Companies will suffer a lack of leaders in the future unless they create a human resources development mechanism based on the changes in young peoples work attitudes. p27 Corporate Structure Corporate Managers Specialists, Managerial Staff New recruits, Permanent Employees, Temporary Employees, Replaceable Operations

8. Corporate Intentions vs. Employees Intentions

Companies have to seriously consider how to improve retention rates and build organizations that cater to changes in employee work attitudes. Basically, most employees are stability-oriented. Their strong orientation toward career development is a means of protecting themselves and derives from their orientation toward stability. The reasons employees have become so stability-oriented lie in the fact that they have seen the severe restructuring by many companies after the collapse of the economic bubble and that major companies have adopted a results-based system. While these companies claimed that the results-based system inspires employees challenging spirit, it resulted in reduced average salaries and many dropouts because it served to deprive organizations of cooperative relationships and encourage individualism. The results-based system resulted in some winners and many losers. In order to survive in such a competitive environment, employees could not help but compete by acquiring marketable skills. The honest desires of employees, however, lie in working long at one company with a sense of security and making their living more stable. In the past few years, I interviewed approximately 2,000 job applicants, including students and mid-career personnel, and realized anew that people tend to orient in the same direction under the impact of the social environment. Corporate managers who acutely recognized these changes in employee attitudes started to proclaim the policy of employees first based on lifetime employment, to which many of stability-oriented employees were quickly drawn. 9. Should enterprises go back to lifetime employment and seniority systems? The term that nicely combines corporate managers who want to improve retention rates and retain employees as long as possible and employees who seek stability is employees first. However, this is the devils temptation. It is because the current business environment makes it unrealistic to give employees a promise of lifetime, if not permanent, employment or employment until retirement age. It is not an issue of whether the lifetime employment system is good or bad. The system is no longer viable. The lifetime employment system is a business model based on the assumption that the economy will continue ever-increasing growth. Some corporate managers boast: We have a lifetime employment system in place. It only shows, however, their simplistic assumption that their current favorable business performance will continue into the future.

Suppose a new graduate joins a company at the age of 22 and his retirement age is 65, then the company must provide employment for the next 43 years. It is okay for a corporate manager to wish to continue employment, but is it really realistic? A company history of 50 years is no guarantee for the next 50 years. After the collapse of the economic bubble, many long-established companies were forced to close. Moreover, profit rates were relatively low among many of these long-established companies. Corporate managers who offer a guarantee of lifetime employment to employees either are deceiving the employees or have an illusion themselves. The life of a company, which was believed to be 30 years in the past, is now ten years. It has indeed become increasingly shorter over the years. In short, the life of a company is shorter than the period an employee works in a lifetime. Therefore, it is essential for both companies and employees to recognize that the lifetime employment system is a problem and for companies to adopt a realistic approach that supports employee independence and strives to create cooperative conditions. If lifetime employment is offered to employees, excessively dependent employees will be relieved, leading to a temporary reduction in turnover rates. While it works to reduce turnover rates, it also serves to produce many dependent employees, that is, those who cannot work outside their companies. What will become of them when they lose their jobs is clearly exemplified by the restructured former middle management. They are the people who relied on companies under the lifetime employment system. Companies should develop employees who are self-reliant and can work wherever they are, not employees who cannot survive outside their companies. They should not clip employees feathers to make them unable to fly. Rather, they should develop employees that can fly away and live on their own. If companies address the development of employees with a focus on independence, they may leave the companies early to advance their career at different companies. In my opinion, an ideal company is one that encourages job changes, such as Recruit Co., Ltd. (Lifetime Income Maximization Strategy. See page 248). Companies that help employees become independent attract quality personnel. Quality personnel can and do contribute to their companies while they work for the companies. I believe it a better practice for companies to compete with each other in the quality of educational systems designed to support employees independence. This is the idea underlying the management system based on the assumption of employee resignations,

that is, independence. 10. Employees who do not trust their companies Even if employees switch companies, they start with the same routine, replaceable work again at the next company, and consequently, many quit again thinking that they cannot develop their careers through such work. In conclusion, changing jobs while employees are still in their 20s is not good for their own sakes. Changing jobs while still young does not help build a career. What is acquired by quitting jobs early is knowledge that one lacks stress durability. It is sheer nonsense to change jobs at an early stage. It is very difficult, however, to convey this reality to young employees. They do not readily believe corporate managers. Since they do not trust corporate mangers, they take whatever these managers say as self-serving arguments. This is where building trust relationships between corporate managers and employees assume greater significance. While building trust relationships with employees is very useful for companies, they should not adopt the easy way out. In an effort to build trust relationships with employees, corporate managers become strongly inclined to adopt the principle of employees first, but this constitutes the devils temptation for highly stability-oriented employees. The most serious problem inherent in the principle of employees first is that it makes employees rely on companies. Moreover, trust relationships encourage employee dependence on the companies. These negative aspects should be fully understood by both corporate managers and employees. It is not possible for a company to last forever. This is why corporate managers should strive to develop their employees into self-reliant personnel so that they will not end up in the streets in the event of a company bankruptcy. Corporate managers must teach employees not easy-to-understand matters or sweet music to ears, but the plain truths. 11. The mission of companies is to make employees independent. My objective in employee training is to develop and produce human assets that play an active role in society. When parents raise children, they want their children to develop into mature, independent adults. This is because parents will die sooner or later, and children must be able to live on their own. The human life span is limited.

Since parents know they cannot live forever, they wish their children to become independent while they are still alive. The relationships between corporate managers and employees are similar to those between parents and children. The greatest difference, however, lies in the fact that while parents know that their life spans are limited, many corporate managers do not recognize that the life spans of their companies are limited. They somehow have this illusion that their companies will last forever. This is why they often provide an education that encourages employees to rely on their companies instead of training that promotes independence enabling employees to survive in the case of corporate bankruptcy. Childrens independence makes parents happy and lonely. I have a daughter, too. While I want her to grow into an independent woman, I hope she will remain a child and always count on me. To become independent means not to depend on parents. However lonely parents may feel, children will leave them behind and become independent sooner or later. However, this does not necessarily apply to relationships between corporate managers and employees. Corporate managers sometimes let employees remain dependent. This is often found among small and medium-sized enterprises run by proprietors. Such relationships may lead to a failure in business succession and even to corporate bankruptcy. They are sure to produce many dependent employees who will not be useful in other companies, if not bankruptcy. Employees inability to become independent is a result of the arrogance of corporate managers who made the employees reliant on them. Corporate managers should continue to tell the truth to their employees. They should never strive to raise retention rates by letting employees rely on their companies. Corporate managers should focus on the development of those who can play an active role in any company and build an organization that promotes such an approach, not just develop personnel who contribute to their own companies. This is the management system for the emerging job-change era. Chapter 2: What is the prescription most effective for reducing job changes within three years?: How to become the next leader 1. Mind, Skill, and Physique: Change the sense of values right now. The phrase mind, skill, and physique is often used in sumo or other sports. You can

find the phrase framed and hung up in the Kokugikan, Ryogoku, Tokyo. What does it mean? One meaning is that the balance among mind, skill, and physique is important. However, the greatest significance of the phrase is that it shows the priority of these three qualities. For example, sumo wrestlers must have been big children to begin with. They must have won sumo matches or fights with friends, through which the value that one must be big to win sumo matches is formed. Soon, these children become junior high school students and if they belong to a sumo club and improve their skills, they become stronger. Here, another value is formed: to win sumo matches, one needs to have skills in addition to a big body. As long as they remain amateur sumo wrestlers, having these two qualities may be good enough. However, if they want to become professional sumo wrestlers, they will face a severe setback. Different from amateur sumo, professional sumo wrestlers must fight and defeat other wrestlers who are equal to them in physique and skills. When the levels of physique and skills are the same or very close, victory or defeat is determined by the mind level, that is, the inner strength, awareness, and mindset as a professional. At this point, they are forced to totally convert their sense of values: they are required to reverse the order of priorities from physique skill to mind skill physique. This is to make an about-face with regard to the existing sense of values. When amateurs recognize this drastic change in values is the time when they transform themselves into professionals. Only those who can seriously address the mind issues become professionals. 2. Wrong values are instilled during childhood. Lets consider what mind, skill, and physique mean for businesspersons. In childhood, what types of children were viewed as outstanding? Basically, those who had good grades or did well in school were considered outstanding and praised by both parents and teachers. Consequently, children became knowledge-oriented and came to place a high value on entering a prestigious university. At this time, the issue of why they have to study is not seriously addressed or discussed. If a child asks a teacher why he/she has to study arithmetic, the teacher would answer that he/she may not get wrong change when shopping. Since teachers do not have a clear answer to the question or they think children cannot understand the true reason, they make studying

itself a purpose. Doing so is more convenient for them. For those who established, in their childhood, the acquisition of knowledge itself as a purpose, it is very difficult to change the mindset. Knowledge, by nature, is only a means to do something. This is why many students in English conversation class cannot answer the question Why do you study English conversation? By the way, I hear that the Japanese are the only people who take classes in English conversation schools without any sense of purpose. While the focus of values in children who want to become sumo wrestlers shifts from the physique to skill, ordinary children place focus on skill (knowledge and skill) since the physique has no direct relevance for them for the time being. This value system does not change even after theyjoin the workforce, and they continue to place a high value on skill, such as knowledge, skill, and experience. Thus, most people become strongly skill or knowledge-oriented. 3. Address the mind. Mind means a way of life, mindset, principles, philosophy, leadership, and communication skills. In a word, it is human ability. The human ability is the caliber of a person, something invisible and hard to measure. Therefore, we rarely assess or question our own human abilities although we can easily see those of others. On the other hand, we readily know if we lack the skill, such as knowledge, skill, or experience. We humans try to make up for what we lack. We, therefore, strive to enhance knowledge, skill, or experience that we lack. However, those people who know that they lack human ability, leadership, or communication skills and strive to supplement it are very rare. Those who can value these qualities are, as far as I know, true professionals, such as those engaged in corporate management or senior executives, and very small in number. They are highincome earners and have been socially successful over a long period of time. Some may argue that those who have been socially successful can address such themes as human ability and leadership since they have mental and financial leeway. I think this argument is wrong. No one has leeway from the beginning. They achieved social success because they have addressed the mind issues and improved human ability and leadership since the time when they did not have any leeway. 4. Lets apply will (mind) and skill to human asset matrix.

The human asset matrix is a personnel development model I created. It is a matrix that shows the direction of personnel development based on the two vectors of will (mind) and skill. Most new recruits start from the third quadrant where both will and skill are low. The next leaders in the second quadrant are human resources every company wants to get. They are the would-be executives, and those who have experience as captains of athletic clubs may fall in this category. New recruits will become ace employees in the first quadrant if their development process goes smoothly. However, it is not so easy for employees to reach that level since their interest is not in the will issues as I mentioned in Chapter 1. After the collapse of the bubble economy, many companies restructured. At the same time, these companies demanded that individuals should be responsible for their own career development and should not depend on their companies for it. The restructuring measures were successful and brought drastic increases in profit. However, it also created serious side effects. Employees, who now have no guarantee of lifetime employment and are evaluated under the results-based system, lost the sense of loyalty to their companies and focused instead on improving their skills. It is natural for young employees who grew up in the individuality-focused environment to become skill-oriented. Moreover, they know well that even if they assumed managerial posts in their companies, they could neither acquire skills nor survive restructuring since they are not specialists with marketable skills. Middle management was targeted as victims of restructuring in the past. Current employees have seen their seniors, who had been loyal to and worked hard for their companies, cut off as targets of restructuring measures. It is only natural that no one wants to become a manager. In the midst of such conditions, what should companies do? Employees are interested in their own career development. If they think they cannot further develop their careers at the companies they work for, they simply change jobs. For most employees, the companies they work for are not the companies they most wanted to join to begin with. Now that the lifetime employment system has collapsed, corporate managers cannot expect loyalty to the company anymore. Then, will those employees who are interested in career development succeed with the skill-oriented approach? Actually this is not easy, either. Generally, career development means to acquire knowledge, skill, and experience. It means that employees enter the domain not of aces, but of artisans. Will those

employees, then, succeed as artisans? (p44) Human Asset Matrix Strong, Will Next Leaders (would-be executives), 2nd quadrant Goal, Aces, 1st quadrant Weak 3rd quadrant, New Recruits 4th quadrant, Artisans Strong, Skill Start, Weak p45 If left alone, every employee will become an artisan. Strong, Will, Goal Next Leaders, Aces Weak, New Recruits Artisans, Strong, Skill Becoming artisans Start, Weak p46 Today, particularly in the case of white-collar employees, offices are computerized and most work can be performed by temporary employees. After all, the employees who can survive as white-collar personnel are those in the ace domain who have management ability and leadership and cannot be replaced by temporary employees. Middle management personnel who were forced out of their jobs due to restructuring lacked management ability. While under the soaring economy, employees without management ability or leadership were able to assume managerial positions, in the present, severely competitive environment, it is inevitable that the employees who do not have the abilities required by their companies are cut off. However, there are many employees who have not noticed this reality. True career development means to enter the ace domain. In order to do so, one must have both will (leadership and management ability) and skill (knowledge, skill, and experience).

5. From Learning to Teaching Once employees enter the artisan domain, it is difficult for them to enter the ace domain, the first quadrant mentioned on page 43. Those people who are interested in their own skill development do not take interest in the skill development of others. However, the management ability required of the managerial staff includes the development of subordinates. In short, they should be interested more in the skill development of others than in that of their own. Ones own skill development means to spend time for oneself. On the other hand, to educate subordinates means to spend time for others. Those in managerial positions must be able to spend their precious time, which can be used for their own development, for others. Since childhood, most people have been taught the significance of learning and having the desire to improve and formed the value that these are good or proper things to do. How about the significance of teaching, then? I believe that many do not have the experience of being taught the significance of teaching. Actually, teaching is the best way to learn While it seems at first sight that teaching requires one to sacrifice ones own time, the learning speed eventually becomes faster among those who teach than those who learn. Since the value that learning is good, which was instilled in ones childhood, eventually works to hinder one from becoming a leader, it is necessary to teach employees the significance of teaching at some point. This is not easily done since it requires a drastic change in the value systems of the recipients. This is why the former captains of athletic clubs are popular as would-be executives (next leaders) at the recruitment of new graduates. The students who know the significance of teaching and fostering people and have actually practiced them are very rare. Well-known major companies may be able to recruit many candidates for the next generation of leaders. However, most enterprises need to develop employees in the domain of new recruits into the next generation of leaders based on the aforementioned perspectives. 6. Develop human assets that are useful not for own companies, but at other companies What kind of personnel training is being provided by companies? In general, companies strive to develop human resources in such a way that they can

be used as soon as possible. Consequently, they tend to emphasize knowledge or skill training, leading to not the mind-oriented, but the skill-oriented education. However, from employees points of view, the knowledge and skills that the companies provide them through training are useful only within the companies for whom they work. They then start wondering whether such knowledge and skills are useful for their career development. They look at their seniors and see their own future in them. They concluded that they cannot develop their careers at these companies and decided to change jobs. Nothing can be changed by simply criticizing young peoples job changes within three years. Rather, a new management approach should be contrived that caters to such mindset or trends. Employees are more interested in their own career development than the development of their companies. If thats the case, what companies need to do is to show their employees how they can help develop their careers. What must be noted here is that both companies and employees should give due consideration to what career development specifically involves. Unless companies can tell employees what are the essential qualities required for career development, employees will certainly become skill-oriented and start wishing to do jobs that they have never experienced. Essentially, day-to-day business operations are repetitive and therefore, the stronger the employees skill orientation, the sooner they change their jobs. Such job changes are not beneficial to either of the parties, because true career development involves the acquisition not of knowledge and skills, but of leadership and management ability. If one changes jobs too soon, one will never be able to acquire leadership and management ability. It takes patience to obtain such qualities. Those who quit in the face of difficulties will never succeed. Companies should show their employees long-term career plans and thoroughly focus on leadership and management ability training instead of skill training. In the past, companies provided such training programs to those who newly assumed managerial positions. It was okay under the lifetime employment system, but the present situation requires them to conduct thorough mind training first, before addressing skills. They should strive to develop employees into human resources useful at any companies and let them fly with their own wings instead of enclosing them within own companies. (p50) Strong, Will, Goal Next Leaders, Weak

Aces, Strong Education: Leadership, Management ability, Weak, New Recruits, Strong, Skill, Artisans Start, Weak Companies should show long-term career plans and focus on mind training. 7. True reasons for rejections should be given to job applicants. Since career improvement-oriented employees tend to become skill-oriented, they are short term-oriented, leading to the era where companies have difficulty retaining quality human resources for a long period of time. Self-searching young people on one hand and companies unable to secure quality human resources on the other; unless they meet each other halfway, Japans labor quality will decline and the national strength will weaken. If nothing is done to change the situation, Japanese enterprises will not be able to survive in international society. It is no use crying over lack of endurance among young people. Enterprises are responsible for the generation of individualistic, career-oriented employees to begin with. It was the introduction of the results-based system that has given rise to the individualistic employees with low communication skills who do not cooperate with each other. Employees who repeatedly change jobs are the by-product of the resultsbased system. Then, where should we start to address the issue? Companies should take the first step. While we tend to think of it as a tough job to change the country or society, I think it is actually quite simple. It only takes the will by companies to tell job applicants the true reasons for rejecting them. We tend to give noncommittal answers, such as lack of experience or skills. As a result, those who believed these answers become more skill-oriented than before. Experience and skills of applicants are assessed when screening application materials. At interviews, applicants mindset or values are assessed. However, companies are afraid that telling applicants the true reasons for rejection might sound denying their personalities and hurt their feelings. This is why they lie and give noncommittal answers. Most of the true reasons for rejection are the same. To be brief, they are lack of

communication skills, lack of leadership, and strong self orientation and skill orientation. And there are many such applicants. To tell the true reasons for rejection is the first step to change society. As the saying Birds of a feather flock together goes, people who have the same values gather together. Negativistic people make friends with those who have negative attitudes. On the other hand, different values come together at a job interview: it is the only place in society where different values collide head-on. I strongly recommend that interviewers tell applicants the true reasons for rejection. We should dismiss the idea, It has nothing to do with our company, and start doing what we can for society and to prevent a further decline in the national strength. 8. Teach reasons to work, that is, a way of life. Human beings are the only animal with a purpose for life. That is, they have a philosophy of what to live for. For other animals, living is the purpose of life. With a philosophy, human beings make living the means of life. Without it, they will also make living itself their purpose of life. If living itself becomes the purpose of life, life becomes painful, whereas if living becomes a means of life, life becomes pleasant. In short, without the purpose of life, people aim at low goals and live a life without vision. The most difficult part in employee education is to boost the level of objective setting of each employee. Employees low objectives will not be able to satisfy any customers. How high companies can boost the levels of employees objective setting is a matter of a way of life. Wild carnivores spend most of their waking hours hunting. If there is sufficient prey, they propagate and the population of each species increases. The increase stops at the point where they have to hunt for prey all the time; that is, the population continues increasing until it reaches the state of continuous starvation. Human beings used to live like this. However, a significant turning point came when human beings started raising livestock and farming, which enabled them to store food and brought them some spare time. Whether or not one can have a philosophy of life and enjoy life depends on whether or not one can find some purpose in spare time. Unless one can find the purpose, life will become painful as it is for other animals. Those people whose lives have become painful select a more efficient lifestyle. They do not make efforts unless they have to. They come to seek the pleasure of here and

now and set short-term objectives rather than long-term objectives. They cannot afford to worry about others or be of service to others since living their own lives is as much as they can do. Consequently, they fall into a minimum lifestyle required for sustaining their lives. Why do I work? It is not too much to say that whether or not one can find the true significance of work is the key to happiness. The very essence of employee education, therefore, is to teach a way of life. It is not an easy task to teach a way of life since it may lead to the denial of the other partys way of life. This is why companies have long avoided providing such education and conducted only safe skill training. However, if corporate managers have a lofty vision, I think they should teach a way of life. They should first talk face-to-face with employees and exchange candid opinions. After that, if employees still dont want to work for the companies and quit their jobs, then let them go. Corporate managers and employees must be allies. There is nothing so unfortunate as to work without such relationships. 9. Lifes alternatives are only two: either successful or not. It is important to believe that there are only two types of lives: a life of successful people and another of unsuccessful people. Once you believe that there are only two types, then you can address and investigate what kind of people successful ones are. However, many people think so many men, so many minds, that is, there are as many types of lives as the number of people and start wondering what type of a life best fits them. In other words, they go on a self-searching journey and continue drifting on the ocean of society. Those who go on a self-searching journey will no doubt become members of the lower strata of society. Those who search for a life best fit for themselves are those who cannot adapt to society. It is only a small difference in their mindsets that makes the difference between successful people and unsuccessful people. In one word, successful people are independent whereas unsuccessful people are dependent. Human beings are not independent by nature. Compared to other animals, they are characterized by a longer period for which they need to depend on their parents. Therefore, unless they strive to become independent at some point in their lives, they may end up living for the rest of their lives depending on something or someone else. Dependent people are those who always complain or grumble that nobody helps them with this or that. For example, salary is too low, days off are too few, and superiors do

not appreciate their work. Even senior executives blame bad conditions on present young people, politics, and education. Complaints and discontents of dependent people never end. Even if these dependent people find other jobs, they will find new complaints or discontents at new companies and change their jobs again. Unless they become independent at some point, they will repeat job changes and never be able to break this vicious cycle and become happy. Independent people and dependent people differ considerably in what they pursue. Independent people are the true professional businesspersons. Independent people can maintain independent relationships with organizations and never depend on them. They can have ongoing considerations for what they can offer to customers via their organizations, whereas dependent people consider only what they can get from their organizations. While independent people ask for chances from their companies, dependent people ask for stability, reward, or vacation from them. Independent people are those who can view things from others perspectives. This quality enables them to become leaders with high communication skills. Dependent people tend to have low communication skills since they are trapped in self-centered ideas. They do not voluntarily take leadership roles, but prefer to be followers. When making complaints, they tend to look for like-minded persons. Dependent people are highly contagious and continue deteriorating employees motivation in their organizations. Communication skill is not a quality inherent in particular individuals, but the ability that can be acquired by those who can view things from others perspectives. Those people who have a strong desire for improving themselves or learning, but are self-centered have much interest in their own growth. Consequently, they take a great interest in what they can learn from their workplaces. On the other hand, those who can view things from others perspectives take a greater interest in the development of their subordinates or organizations than in themselves. They can give priority to teaching over their own learning. Those who can teach are leaders and teaching is the best way to learn. Those who are eager to learn take a sole interest in what they can get. They cannot act for their organizations and are picky about jobs. While learning is essentially only a means to give values to others (teaching), they have made itself the purpose. Although a workplace is not a school, they think it is.

 (p59) Type Characteristics Mindset Outcome Pursuit Successful People Independent Leader Teacher Giver Take matters into own hands Resolution of problems Chance Unsuccessful People Dependent Follower Learner Receiver Take matters as others business Job changes Security, Money

Every company wants him/her. Cannot find jobs. At school, learning (receiving) is the purpose in itself. That is why we pay for it. On the other hand, the purpose of working members of society is to teach (give) and they get paid for it. Therefore, those who get salaries and spend their time learning are none other than robbers. Companies must provide thorough leadership training to their employees. The enhancement of mind quality is the way to become successful in ones life. 10. Employee Satisfaction (ES) vs. Customer Satisfaction Some say No employee satisfaction, no customer satisfaction. It means that customer satisfaction cannot be achieved if employees are not satisfied and therefore, employee satisfaction should be addressed first. However, I believe that the ideal approach is No customer satisfaction, no employee satisfaction and this ideal should be rigorously pursued. No employee satisfaction, no customer satisfaction implies that employee satisfaction is more important than customer satisfaction. Why do so many companies fall into such a fallacy? The answer is simple: It is because corporate managers do not have a convincing answer to employees complaint, However satisfied customers are, we still have a hard time. This is why corporate managers focus first on employee satisfaction in an effort to drive enhanced customer satisfaction. After all, these are the companies where the principle of customer first has not taken root as a management principle. If the principle of customer first were truly understood by employees as a management principle, employees would regard the satisfaction of customers as their own happiness and be satisfied with the situation. If corporate managers promote the principle of customer first before the management

principle takes root, employees will rebel. In the face of such opposition, these companies, where the principle of customer first has not been well established, adopt the principle of no employee satisfaction, no customer satisfaction. However, the complaints of employees know no ending and problems emerge one after another. As corporate managers try to solve them as they appear, a whack-a-mole management style is formed. On the other hand, in the companies where management principles are fully understood by employees, employees view customer satisfaction as their own happiness. Thus the principle of no customer satisfaction, no employee satisfaction holds good. In other words, customer satisfaction is the cause and employee satisfaction is only its effect. Since the vector of a company and that of employees are in line in these cases, corporate managers can concentrate on business without worrying about employees. They can fully devote themselves to customers or society and the enhancement of their satisfaction. In these cases, corporate managers do not have to even consider employee satisfaction. 11. If corporate managers work for employees, whom do employees work for? For whom do corporate managers work? Many entrepreneurs often work to gain freedom during the early stages of their business launch. Basically, they work for themselves at the beginning. Then, they come to place a strong focus on customers. This is because unless they give priority to customers, they cannot expect further success. As companies grow, corporate managers come to need the strong centripetal force and start considering for employees. That is, own leadership becomes the most important issue. Chairman emeritus of Kyocera Kazuo Inamori said, Working for employees eventually leads to the contribution to customers and society. This is how a managers mind works and what is called a management principle. Although I have seen many corporate managers who say they work for employees, I have always held a negative view of it. However, as my company recruited more than 100 employees in the last one year, I often found myself focusing more on employees than on customers. As the number of employees increased, I came to work more for employees. There seem two patterns in the philosophy of corporate managers: one that changes

from self first to customer first to employee first and another that returns to customer first again at the end. The problem is that those corporate managers without leadership continue and end up with the employee-oriented approach. The employee-first principle is indeed a very easy-to-accept principle for employees. None of them would deny the corporate managers who work for employees. However, there is always a big pitfall associated with sweet, easy-to-accept words. If corporate managers work for their employees, whom do these employees work for? They will eventually come to work only for themselves. This is how employees make their vector align with that of corporate managers who advocate the employee-first principle. This is a strange phenomenon in light of the original management approach. Corporate managers should not work for employees. If corporate managers have a keen realization that they cannot become fully satisfied with themselves unless customers are satisfied and stick to the customer-first principle, I think that employees will also go back to the customer-first principle. Some may argue that this is sheer idealism. However, management is essentially something that should have and pursue an ideal. If corporate managers set low and easy-to-achieve goals, they will not be able to achieve outstanding management that enables to differentiate their companies from others. It is because management is carried out by people. 12. Management based on the old and new apprentice system In order for corporate managers and employees to share the same goals, they should not maintain the corporate manager-employee relationships. Such relationships will never go beyond the employer-the employed relationships. I think that the ideal relationships between a corporate manager and employees are those of a mentor and apprentices. Even today, there are remains of the old apprentice system in the accounting, lawyer-related, and other industries that require specialized expertise. Mentors and apprentices do not face each other, but pursue the same path (teachings) toward the ultimate goal, that is, they share the same direction or orientation toward the ultimate goal. Mentors mission is to produce apprentices who are greater than themselves, while apprentices goal is to exceed their mentors. Unless they set such goals, the path (teachings) will die down and come to an end.

The relationships of corporate managers and employees will not work this way since in such relationships, corporate managers will remain as those who employ or use and employees as those who are employed or used. The old yet new apprentice system is an ideal approach that should be adopted in the business circles where specialization accelerates. Corporate managers should become mentors of their employees.

Chapter 3: Budgets and objectives are bulky waste if not achieved. 1. It is not easy for people who have accumulated successful experience to change. What we must first realize is that we now face an era where it is more important to consider how to implement strategies and devise an implementation mechanism than to focus on what strategies to develop. There has been considerable discussion on the corporate strategies that should be developed. In fact, many companies spent a considerable amount of time developing strategies. One difficulty these companies face now is that their strategies are not being put into practice as expected. This is apparently due to the fact that it is very difficult to change employee attitudes, which makes it even more difficult to change their behavior. Therefore, the question How can the developed strategies be put into practice? is equivalent in meaning to How can we change employee attitudes and thereby their behavior? The following is a story I experienced as a member of an audit corporation. When auditors visit a client, we first ask for business plans and draft budgets before we actually perform the audit. At one company, I received a thick stack of a business plan, which, together with the business plans of group companies, was almost one meter high. Each year, the staff in the Corporate Planning Division of the company looked very busy preparing the plan. They usually started to develop the plan three months before the date of settlement, at which time the plan must be completed. Since I performed the audit of the company every year, I knew the trouble they all went through during this time of the year. It was indeed hard work. p69 Management Strategies Barrier Business Division, Business Division, Business Division Barrier Employee, Employee, Employee Gradually weakens One day, while I was checking the business plan, I noticed a serious problem. Whereas the business plan was revised every year, employees ways of working or behavior patterns remained unchanged. In the Corporate Planning Division, the

development of the business plan became a purpose in itself, and its implementation and verification were left entirely to the division manager. After the plan had been developed, only numerical results were checked, and the verification of behavioral changes, which indicate the degree of implementation of strategies, was not fully conducted. After all, the business plan was used only twice a year: the first time as material to explain the plan at a board meeting, and the second time when the Corporate Planning Division staff used it as a model to create the business plan for the next year. A similar situation also existed to a greater or lesser extent among other major companies. It is in fact very difficult to disseminate corporate policies and strategies and to ensure their implementation within the lower organization. This is because employees tend to behave not in accordance with the plan created by the Corporate Planning Division, but in accordance with their own past experience and conventional behavior patterns. As an employee, I used to do the same thing. When our corporate manager announced management policies for the year in the New Years speech, I thought I understood the direction of changes the company would take. However, once I went back to my desk and started work, I found myself doing the same thing as before. Not only on that day, but for the following three months or six months, I kept working in the same manner as before. Once in a while I remembered the corporate managers New Years speech and wondered what happened to the policies. I asked my colleagues, Who is responsible for the implementation of the policies? but they did not show any interest in it. At that time, it might have been more important for my colleagues and myself to finish the days work and go home than to think about corporate policies. Even if policies and plans are developed, they will not be implemented unless there is a well-thought out system in place to facilitate the conversion of these plans to specific operations and to prompt a change in behavior among employees. Most of the time, our mind is preoccupied with immediate work. Whether or not one can break conventional work habits and start to work toward long-term objectives is the key to the successful implementation of strategies. Key Points The more success a person experiences in the past, the harder it is to change behavior. It is because ones past successful experience forms values, according to which one behaves.

 The person who has accumulated the most successful experiences in a company is the corporate manager. 2. The basics of management are Plan Do Check (management cycle). Lets go back to the basics of management. Management is a mechanism for efficiently achieving corporate objectives. In order to achieve the objectives, the trialand-error process must be repeated. This trial-and-error process is the management cycle of Plan (P) Do (D) Check (C), and its repetition forms a learning organization. The Plan-Do-Check approach involves a cycle of planning, implementation, and verification. In order to implement this cycle effectively and achieve success, the following two issues must be addressed: the issue associated with planning (P) and that with implementation (D). The first issue is the appropriateness of company plans and strategies. It is important that the strategies are truly appropriate. Companies develop strategies and plans, which they think are appropriate. That is, the appropriateness of their strategies and plans is based on a subjective view. Since their objective appropriateness cannot be verified unless they are implemented, these strategies and plans are only hypotheses. At these companies, the mechanism to verify (C) the hypotheses and reflect the results in the next strategies and plans tends to be weak exactly because they believe that their strategies and plans are appropriate. However, since strategies are only hypotheses for achieving objectives, their appropriateness must be continuously verified through practice. p73 Management Cycle Have appropriate strategies and plans in place Plan (strategies and plans) Check (verification) Are they really appropriate? Have they really been verified? Do (implementation), Have they really been put into practice? Do as planned The second issue involves whether or not employee behavior is in line with company strategies. Many employees tend to act in accordance with past experience and conventional work habits rather than with corporate strategies. It is, therefore, important to ascertain how much of the strategies have been put into practice and

whether or not employee behavior is truly in line with the strategies. From the above discussion, management issues can be roughly divided into two groups: strategic issues and practical issues. These issues also indicate what objectives should be set for personnel development: To develop the next generation of corporate managers (next generation of leaders) who can create proper strategies and the human resources that can take the initiative in putting the strategies into practice, that is, those who can act as leaders. This rough categorization is meaningful in that a complex approach often blinds people from seeing the truth. Key Points The P-D-C cycle is the very basics of management. Successful companies stick to the basics. Unsuccessful companies ignore the basics and claim that the reality and what textbooks say are different. What is most essential is to follow the basics. Easy tactics solve nothing. 3. Smooth operation of the P-D-C cycle makes the organization grow. The repetition of the P-D-C cycle is the only way to create a learning organization. In other words, if the P-D-C cycle is repeated on an ongoing basis, the organization will continue to grow and the true problems (causes) will be resolved. The growth of an organization is driven by the growth of its members. Therefore, if the employees have somehow stopped growing, it constitutes a serious problem for the organization. In reality, however, there are many traps that hinder the smooth repetition of the P-D-C cycle or the growth of employees. Key Points Growth of employees is the sole driving force for the development of a company. The reason that a company does not grow is because its employees are not growing. The reason that a company does not grow is because the corporate manager does not help facilitate employee growth. 4. Reasons why the P-D-C cycle does not work smoothly Lets consider the reasons why the P-D-C cycle does not work smoothly.

(1) Problems associated with planning Upon the completion of a plan, it is important to see whether the developed plan is really verifiable. For example, plans containing only abstract statements or policies are not verifiable to begin with. Such plans do not provide any standards to determine whether operations are conducted in line with the set plans. Without the standards, the field staff can simply say that they are complying with the plans. Specifically, these are the plans with non-specific policies or guidelines, such as promote communitybased sales activities and aim to become a No. 1 service provider in the community. Numerical targets are the only specifics these plans provide. It is important for a plan to give an image of behavioral changes, that is, an image of required actions different from conventional ones. Otherwise, the plan will be unverifiable. Although it may sound simple, the plans of many companies do not meet this simple requirement. Upon developing a plan, reconfirm whether the degree of implementation of strategies is really verifiable. The verification of strategies (=hypotheses) based only on outcomes is not sufficient. Another important point associated with planning is whether or not the viability of the plan is convincing. The degree of such conviction is closely linked to employee motivation. Strategies are simply hypotheses for achieving objectives, and hypotheses cannot be verified unless they are implemented. Unless the viability of the hypotheses is totally convincing to begin with, employees will not even try to implement them. p77 Problems associated with a plan Plan (strategies and plans), Abstract statements, Is it really viable? NG: It is not created verifiable. NG: Not convinced of its attainment. No action. For example, suppose that the numerical objectives stated by superiors are much higher than what employees expected. Employees must flesh out the objectives with strategies and prepare plausible plans. However, are employees truly convinced that their plans are viable? It is often the case that employees submit plausible plans to their superiors without being convinced of their viability just because the deadline has come. Therefore, superiors need to ask their subordinates if they are 100% sure of achieving the plans. If the subordinates answers sound confident, there is no problem. However, if the answer is something like I am not so sure, but I will try my best, it is already clear in the planning phase that the plan is not viable. Superiors should first check the degree of confidence of the subordinates rather than

the contents of their plans. (2) Problems associated with implementation What must be checked at the implementation phase is not how much has been achieved, but whether the strategies have been put into practice to begin with. It is also important to determine whether the implementation of the plans is not solely based on past experience or conventional work habits. (3) Problems associated with verification The next issue is the problems associated with the verification phase. When conducting an analysis of the company budget and performance, it is important to ensure that the companys true problems and causes are identified. If the problems are attributed to external factors, it means the companys own actions are affirmed. Unless the verification process is conducted and analyzed from the perspective of selfresponsibility, actions will never change. Key Points Be sure to check whether the company P-D-C cycle is functioning effectively to avoid attributing unsatisfactory outcomes solely to external factors. pp78-79 Here is a Do-related problem! Do (implementation), Conventional work habits, No trouble, NG: Resorting to past experience and work habits. Plans are actually underway. Here is a Check-related problem! Check (verification), Competitors prices are lower. NG: Attributing problems to external factors. True problems cannot be identified. 5. Are true problems identified in management and business meetings? Lets look at what issues are actually discussed in business meetings and whether the problems identified there constitute the true causes of the outcomes. Business meetings were originally a place where major company strategies were verified. In many companies, budget and performance are analyzed in business meetings. What is important here is whether or not the true problems and causes are identified from such

analyses. In many meetings, the following factors are identified as the causes of not achieving the budget: The economy took a drastic downturn. Since a customers budget was cut off, the delivery was postponed from March to April or later. We had to give up since a competitor offered an incredibly low price quote. Our prices have no chance against the low prices of overseas products, particularly those of Chinese products. These reasons are only an analyses of external factors. While an economic downturn is an external factor and a fact, it can be converted into an internal factor if viewed as our delay in taking action in response to an economic downturn. We should be discussing our own issues that we can deal with not someone elses issues that are beyond our control. p81 Causes of not achieving the budget <Someone elses issues> Bad economic conditions No budgets among customers Competitors low pricing <Own issues> Insufficient customer visits Bad strategies and tactics. Did not develop new customers. Rationalization with external causes, Self-affirmation, Behavior remains unchanged. For example, the true causes of not achieving the budget should be discussed based on the following questions: Did I make enough customer visits? Were our strategies and tactics appropriate? Were our efforts to develop new customers sufficient? Moreover, if sales personnel blame factories or the development division for failing to achieve the budget, the problem becomes someone elses issue for the sales personnel, and their own behavior will never be questioned. It is vital to trace the true causes all

the way to the origin as ones own issue. Key Points It is important to discuss the following themes: What are the true problems of the company? and What are the true challenges? A successful corporate change depends on whether or not employees can address problems as their own issues. 6. What are true problems to begin with? Toyota created a well thought-out mechanism to identify true causes that the company calls the 5W1H Toyota Way. While the ordinary 5W1H approach involves When, Where, Who, What, Why, and How, the 5Ws of the Toyota Way are all Why. The company strives to discover the true problem by thoroughly repeating why five times or more. Only after the true cause is identified do they address how it should be resolved (How). Unless one thinks that a true problem lies not with others, but with oneself, nothing can be changed. Visible problems are mere facts and phenomena. Economic trends, customers budgets, and competitors activities are someone elses issues and someone elses issues are the issues that we cannot resolve by ourselves. It is, therefore, necessary to review whether the problems or causes identified via an analysis of budget and performance are solvable or not. If they are basically unsolvable, they represent superficial causes. The 5W1H Toyota Way is applied as follows: Suppose a factory line is stopped. The direct cause of the stoppage is a lack of component A. The lack of component A is not the true cause of the stoppage, and the next possible cause is poor inventory management for component A. If poor inventory management is the problem, then the next step is to determine whether the problem is related to the mechanism or the operation of inventory management. Thus, if we trace the problem back all the way to the true cause, we can narrow it down to our own issue, which we can control and deal with. Then, the next question to be asked is who should deal with it. If one thinks one is not in charge of it, then it becomes someone elses issue and consequently nothing changes. If the person who noticed the true cause addresses it as an own issue and takes the initiative in resolving it while engaging people in other divisions, it becomes a solvable problem and the change process starts. It is not until one digs deep enough into the true cause as ones

own issue that changes can occur, and this is the time when one starts considering how to solve the problem and develop an appropriate action plan. Last, the most important thing is to take action yourself. Toyota successfully prompts ongoing reforms by sublimating this method of determining the true cause into the organizational climate. p84 Toyota Way, General Company Effect, Own Issue, A factory line stopped. Why? Lack of component A Visible Problems, It has nothing to do with our division. Others issue Why, Poor inventory management, Why? Problem in the mechanism of the inventory management system, Invisible problems, Unsolvable Why? Iceberg Why? Cause, Solvable In order to make the cause a solvable problem, repeat why five times or more. Key Points In general, what one thinks is the cause is not the true cause, but simply a superficial phenomenon. While it is difficult to identify the true cause, solving it is incomparably easier than identifying it. 7. Who needs mind innovation? Whether or not a company can establish an ongoing improvement cycle depends on whether or not a change in mindset can be achieved. Once the true cause is attributed to others (someone elses issue), a persons own behavior is affirmed and remains unchanged. Since our self-defense mechanism is at work all the time, we tend not to pursue causes that would be considered our own fault. It is very difficult to act against our instinct. Our instinct to protect ourselves always turns causes into someone elses issues. In order to continue considering the true cause as our own issue, we must continue turning our thoughts inward. Such a change in mindset is the main theme of mind innovation. When corporate managers intend to reform their companies, they continue

emphasizing to their employees the necessity for change. How do employees respond? In general, no employees would oppose the necessity of corporate reform itself. Rather, they give full consent saying: It is important for a company to make ongoing changes. I strongly agree with the president. People do not disagree about the general, but when it comes to details that have direct relevance to each individual, they tend to think as follows: I already know it well. Our corporate manager has told us about it many times. We are trying our best. While an outcome has yet to come, we have already addressed it. In these situations, they would agree to the reform, but their behavior will not change since they believe that they have already undertaken it and its now underway. The key to successful mind innovation lies in how to fill the awareness gap that exists between corporate managers and employees despite the same orientation. Mind innovation is not to change those who say, I did not know or I did not notice, but to change those who think they know or have already addressed it. The key is how to bring about a true change in behavior in the latter. While constant explanations will help change ignorant people, such an approach is not effective with those who think they already know. They will continue to agree with you, but will never change their behavior. There are many corporate managers who continue the same explanation in this situation without adding a new twist to the approach. It is indeed important to repeat the same thing, but when it comes to changing the mindset of those who think they know, it is more effective to devise a different approach. p88 To change those who think: I know; I am doing my best; I have already addressed it The essential purpose of mind innovation Key Points Mind innovation means to create awareness among ignorant people. Those who think they know are those who do not really know. Those who think that there are many things that they do not know are those who have real growth potential.

8. While improvement is possible, innovation is impossible. There are almost no companies that do not improve at all. Many companies strive to improve and do make some improvement over the years. In the midst of that improvement, they have the illusion that they are improving on an ongoing basis, and many employees become satisfied with gradual improvement. However, such improvement is too slow. Companies should seek not improvement, but innovation. Innovation is something that requires the accomplishment of objectives within a given timeframe. It is not based on the idea of gradual, ongoing improvement, such as TQC. Needless to say, it is important to maintain bottom-up improvement efforts. However, companies should not be satisfied with this or think that the innovation issue has been addressed and is underway. Those who do not fully understand this difference between gradual improvement and innovation need mind innovation. The speed of innovation is determined not by the companys intentions, but through competition with competitors. Key Point Companies and employees must agree upon not the direction of change, but the speed of change. 9. A bad effect has a bad cause. In order to implement mind innovation, it is necessary to develop a keen awareness of existing cause-and-effect relationships. Let me focus on the sales division to discuss the relationships more specifically. I selected the sales division since, under the present situation where products do not sell well, the efficiency of order taking in the sales division often creates a bottleneck for many companies. For companies, the effect is sales or profits and therefore, the causes of sales or profits are what counts. I divided the causes related to sales activities into three categories: quantitative, qualitative, and other causes. Quantitative causes include the frequency of visits to customers, the number of new customers, and the number of interviews with key persons. In essence, it is the ability to take action. On the other hand, qualitative causes can be divided into individual qualities and organizational qualities. Individual qualities are the ability to make proposals and develop sales skills and can be reworded as tactics. Organizational qualities are those related to sales strategies and can be reworded as strategies.

p92 Effect Cause Sales/Profit, Quantity/Quality/Other Quantity, Number of visits, Effective visits Quality, Individual, Ability to make proposals Organization, Sales strategies Other, Own company, Product/Price/Quality, etc. Other companies, Customer/Economy/Competition, etc. Variable Items Invariable Items (excuses) Based on the above discussion, the sales ability can be defined as follows: Sales ability (=outcome) = Quantity Quality Sales ability (=outcome) = Ability to take action (Strategy Tactics) While some managers say that what is important in sales activities is not the ability to take action, but the ability to propose the contents of deals, I think they must be analyzed separately. The causes for the company, other than the sales division, include product strength, development capabilities, quality, price competitiveness, and brand strength. Among the sales staff, there are many who attribute slow sales to low product strength, development capability, or quality, that is, they think that the fault lies with the personnel in the development division. However, it is important that the development capabilities of a company be based not only on its seeds, but also on customer needs. Therefore, the sales force in direct contact with customers should be the source of development. If sales personnel regard identifying customer needs and linking them to product development as part of their role, product strength will become their issue, leading to collaboration with development personnel. The causes associated with other companies are external factors. Specifically, they include customer budgets, the economy, and the activities of competitors. These external factors are used to analyze the external business environment and assess its impact on ones own company: they are used to determine whether the given management environment constitutes an opportunity or a threat to ones own company. However, in reality, many experienced sales personnel who attribute slow sales to

external factors. The problems other than those of ones own company are invariably items that are beyond its control. Companies should not look for the causes of slow sales in these items. Unless they maintain a keen awareness of the items that they can change, it is impossible to develop and implement the next action plan. It is only the variable items that can be acted on. That is, the variable items are what own issues are all about. It is not only the sales personnel who fall into the aforementioned fallacies. The worst of all is that corporate managers think that they have identified and addressed the true problems within their companies. Since anyone can fall into the trap of thinking that they know, it is vital for corporate managers to maintain the attitude of seeking the true problems on an ongoing basis. Very few people can tell the truth to corporate managers. While there are many guides for employees, corporate managers tend to become emperors like the one in The Emperors New Clothes. No one makes a decision thinking it is the wrong decision. It is more important to continue questioning whether it was truly a correct decision. That is, taking a self-abnegation approach is important. It may sometimes result in fickle policies, but sticking to a decision and never changing it is worse. Doing so may lead to an irreparable mistake. Key Points For every effect, there is a cause. For every good effect, there is a good cause, whereas for every bad effect, there is a bad cause. Since all ultimate causes arise from oneself, one can change all effects. The greatest obstacle impeding reform is an approach that seeks causes in something or someone other than oneself. 10. Good effects will come later. When considering cause-and-effect relationships, it is important to take the time lag into consideration. Cause-and-effect relationships without any time lag are readily understandable to anyone. It is easy to act properly in cases where one can readily verify the action that led to a specific result. However, the important cases among cause-and-effect relationships are those where the validity of the cause is not easily verified due to a relatively long time lag. For example, how many salespersons are convinced of and practice the cause-and-effect

relationship that if you study sales by reading many books, you will become a high performance salesperson? Read many books (cause) High performance salesperson (effect) It will take much time and effort to actually verify this causal relationship. However, if one thinks that it requires only the reading of many books to become a high performance salesperson, every person would be a high performance salesperson by now, and one would not bother to do so. In fact, many people do not take the trouble for matters that require lots of work if they are not convinced of the cause-and-effect relationships. Consequently, they remain low performance salespersons. The longer the time lag, the more one needs conviction, beliefs, principles, or a philosophy. This is because it takes time to obtain an effect; consequently, one needs something to support and maintain motivation, and this something is conviction, beliefs, principles, or philosophy. p97 Effect, Effect, Effect Passage of Time Cause Short-term objectives: The cause-and-effect relationships are clear. Conviction, Belief, Principles, Philosophy, Long-term Objective Long-term objectives: Conviction or belief is required since the cause-and-effect relationships are not clear. In fact, many people fall into a behavior pattern centering on short-term objectives rather than long-term objectives. They aim to achieve not the management principles, but the budget for the current fiscal year and make visits to easy-to-approach, existing customers rather than hard-to-develop new customers. Key Point * Unless their own ways of thinking (principles) or ways of life (philosophy) are firmly established, people are easily carried away with routine work. 11. Why is time management necessary? The underlying purpose of time management is to create a mechanism for taking action toward the achievement of long-term objectives. Unless such a mechanism is in

place, we tend to act according not to the significance of matters, but to urgency. We cannot act in accordance with the significance of matters unless we have principles or a philosophy. We cannot verify such themes as how we should live our lives because we live our lives only once and dont have a second chance. Principles or a philosophy is something that supports and drives actions toward unverifiable themes. Therefore, if we dont have them, our actions are bound to be short-sighted in order to obtain immediate results. Lets take a fresh look at the difference between sales and marketing. p99 Urgency, Strong Operations, Claim Handling Weak, Strong, Significance Miscellaneous tasks, Improvement, Principles/Philosophy Principles or philosophy are required to implement matters of significance by priority. The purpose of sales is to obtain immediate results, while marketing creates a mechanism for sales and ultimately makes sales promotions unnecessary. In this sense, sales and marketing are totally conflicting activities. Since sales personnel tend to attach greater importance to the outcome, they become short-sighted and focus more on sales activities than marketing activities. In other words, they center their activities on harvesting, which contributes to the achievement of the budget, rather than sowing, which bears fruit in the future. As a result, the company becomes an organization without growth potential, and sales take a slow downturn. After all, seeking immediate results is the greatest cause of bad effects. In order to gain a long-term perspective, one needs to have beliefs or principles. If employees lack them, they will be anxious about taking action based on a long-term perspective and start doubting whether they can ever achieve the objectives. Such doubts lead them to avoid investing the time in doing things that do not produce immediate results. Consequently, they never take action rationalizing, I dont have time or I know, but Key Points Time management is a mechanism that prevents one from becoming short-sighted and aims to achieve the optimal allocation of the most valuable resourcetime. Books on a bookshelf that one hopes to read some day in the future will never be

read. Ones life is not so long as to be able to achieve something someday in the future. 12. Lets discover bottlenecks! Bottlenecks (true causes) are always found inside. One needs to identify the bottlenecks and be convinced that they are the true causes. The identification of the bottlenecks enables one to narrow down the issues requiring improvement, which in turn clarifies the cause-and-effect relationships, that is, what measures lead to what effects, and facilitates the effort to address improvement issues. When striving to identify bottlenecks, one must remember that seemingly external causes can become internal causes by probing them deeply. However, many employees say they cannot afford to do so because they are too busy handling claims and doing internal operations. They attribute all problems to external causes. However, if they realize that they can make time for the probing by improving their own abilities to handle customers or process operations, they can view bottlenecks as internal causes that exist within themselves. However, the behavior of those who view problems as their own issues does not change so easily because they still think: I recognize it, but its difficult to make time Behavioral change is essential for achieving different outcomes. Successful behavioral change depends on how strong one is convinced, as ones own issue, of the cause of the problem. The order of priorities for troubleshooting varies depending on whether ones recognition of the problem is vague or acute (convinced). Those who do not take action estimate the priority of the problem as low. Therefore, to change behavior, the priority of the problem must be raised. In order to raise the priority, they have to be convinced that it is the true problem (true cause). Those employees who do not change their behavior always have reasons for not doing so. The approach of asking questions is required to eliminate the barriers to selfinnovation by those employees who cannot engage in self-innovation or the self-growth process. Superiors abilities to ask appropriate questions become indispensable. Key Points The reason for not dealing with a problem is not the lack of time, but the low priority assigned to the problem. If the priority is raised, every problem will move toward resolution. The reason the priority of a problem is not raised is because one is not convinced it

is the true cause. Chapter 4: What are the indispensable prerequisites for corporate growth? 1. Can people continue growing? If the Plan-Do-Check cycle functions well, a company becomes a learning organization and continues changing and growing. Since an organization is an aggregate of people, if the people comprising the organization stop growing, it will stop the growth of the organization. When considering the growth of an organization, therefore, due consideration must be given to how people inside the organization grow and what factors stop their further development. A persons growth is a process of absorbing new experiences and new knowledge. If one works on the basis of past experience and knowledge, what one does is not work, but merely a succession of operations. Such a succession of operations does not give rise to the remarkable growth of a person or a drastic change in work habits however long the person may work for a company. In short, the accumulation of experience and knowledge is not proportional to time. For example, there is a great difference in the growth rate between first-year employees and third-year employees. The reason the growth rates of new recruits are higher than those of others is because they incorporate new experiences and knowledge through daily operations at a rate, to some extent, proportional to time. However, what difference does a difference in working years make in experience and knowledge between those who have worked for 25 years and those for 30 years? If these people worked on the basis of their past experience and knowledge, their growth rates will be almost the same whether they worked for 25 years or 30 years (the degree of growth depends on a persons ability). These people are trapped in the state of no growth

despite the increasing number of work years. If you ask salespersons in such a state
why sales are slow, almost none will answer that the fault lies with them. p107 Relationship between years of service and growth Growth The growth rates for new recruits are relatively high since they acquire lots of new knowledge and experience. Person A, Person B, Person C I know how to do this. Its easy. Growth stops if one depends only on past experience

and knowledge. 1 to 5 years, Years of Work In order to continue growing, one needs new experience and knowledge. Most salespeople seek the causes of slow sales in external sources, such as the economy, customer budgets, and low competitor pricing. In short, if the number of people who rely on their past experience and knowledge increases, the growth of the organization itself will stop. After working for five to ten years at a company, one becomes aware that one is good at the job. However, this awareness (illusion) is the very cause of relying on past experience and knowledge. We can strive to obtain knowledge and skills as long as we recognize that we do not have enough. Such efforts continue until we realize that we have acquired skills and knowledge. However, once such a realization is formed, we tend to make little effort for further development. To continue making an effort for good is in a sense an act against our instincts. Therefore, in order to continue to grow, we must keep denying our completeness. In other words, we need to become aware of what we lack, that is, we must be constantly aware of our ignorance. Since the idea of continuous denial of ones completeness is not natural to humans, it must be learned. Knowing ones ignorance (Socrates epistemological self-reflection) and dialectical self-denial are the cardinal rules for the continuous growth of human beings and the best wisdom we received from our predecessors. You might readily answer, I know. Who doesnt know? We all know it, but I dare repeat it because most of us do not practice these valuable teachings of our predecessors, saying, We know, but. We need to openly admit that we have not practiced them and give serious consideration to what we need to do to actually put them into practice. An organization cannot be maintained by a few who know and practice what is essential. Our instincts prevent our growth at the unconscious level, and it is not easy to overcome. What is required of us, therefore, is to share the ideas essential for continuous development of the organization and create a mechanism to implement those ideas. Key Points Most corporate managers are good at making a judgment based on past experience and knowledge, not on new experience and knowledge. Corporate managers who rely solely on past experience and knowledge are people of yesterday.

2. Past success experiences create the organizational climate. In order for an organization to maintain continuous growth, it needs a mechanism. In this light, Toyota has successfully built the mechanism for its organizational climate. Toyota defines work as follows: <Work = Operations + Kaizen (improvement)>. The <Work = Operations + Kaizen (improvement)> means that the operations themselves are not work. For example, they would say to the assemblers in the factories, Your assembly work is actually just operations. Your true work involves considering how to enhance quality and reduce costs while assembling parts, proposing your ideas to the company, and putting them into practice yourselves. In short, Toyota declares that Kaizen is the true work. While it seems a matter of course, this idea has not been established as the organizational climate in many companies. The organizational climate is built on the slow but steady accumulation of past success experiences. p111 Organizational Climate Success Experience, Success Experience, Success Experience Organizational climate is an accumulation of past success experiences Key Points The key point is how a company achieved its success. An analysis of success is necessary to see whether the companys success has been driven by internal factors, such as Kaizen effort, or external factors, such as economic growth. 3. Abandon the idea that Kaizen is something extra! Why doesnt the climate of ongoing improvement grow among ordinary companies? In ordinary companies, the employees definition of work involves only operations. Needless to say, none of these companies would deny the significance of Kaizen. Every company knows its significance. However, in most cases, Kaizen is positioned as something extra. Even if corporate managers appeal to their employees for Kaizen needs and present specific guidelines, employees will respond as follows: There are not enough people. We have to manage

the current work with such a small number of personnel and are too busy to do it or We dont have time. Even now, we always work late. If employees give such reasons as a lack of people or time, it is the proof that Kaizen is viewed not as an integral part of work, but as something extra. Toyota employees are under stricter cost control rules than other companies. Do you think there are extra people or time in such a company? Do they claim that they cannot engage in Kaizen due to a lack of people or time? p113 Toyota Work = Operations + Kaizen Kaizen is the very essence of work. Ordinary Companies Work = Operations + Im busy with my work (operations). Ill take up the Kaizen issue later. Kaizen There are no extra people or time in any company. What makes Toyota different from other companies is the difference in work mindset. What is essential is whether or not the organizational climate for work is firmly established or whether or not a companys success has been driven by the Kaizen effort. We must first realize that a small difference in mindset makes a great difference. The next theme is how we can break away from a mental structure that stops growth because of a lack of people or time. Key Point If employees give such reasons as a lack of people or time, the company needs structural reform of the organizational climate. 4. Motivation is indispensable for taking new action. There are two factors indispensable for taking new action. One is a trigger for starting new action. The other is motivation, a fundamental driver. High motivation is an important factor in sustaining and enhancing our ability to take action. There are a variety people in a company, including those with high/low ability to take action. The fundamental difference seems to lie in motivation. What counts in the end,

therefore, is a mechanism to raise individual motivation levels. It is not too much to say that a mechanism to put strategies into practice depends on whether or not a mechanism to enhance employee motivation can be built. We will discuss how to raise motivation later. Here, lets look at a trigger that prompts us to take the first step. Before taking action, we always give careful consideration and prepare for the action: Think Action If one must prepare for an action, the one needs time for the preparations. However, such preparations are not readily started because one is too busy to spare the time. Consequently, the preparatory state lasts. Since a new action cannot be initiated if such a state continues, a complete about-face must be made on ones mindset. Action Think When first deciding to take action, one will strive to prepare for it in a short time. Besides, one can think while acting. Corporate managers of financially tight venture companies always think while acting. Moreover, they revise their ideas while acting and reflect the results in their actions. On the other hand, employees of financially well-to-do major companies tend to demand a long preparation period. However, the length of the preparation time is not necessarily proportional to the quality of the outcome. If time constitutes the greatest cost for companies, they need to develop the habit of acting before thinking. Key Points Thinking is not working. Putting ideas into practice is the true work. 5. What is the mechanism that continues to enhance motivation? Essentially, motivation must be enhanced in order to increase the ability to take action. As a way to enhance motivation, I recommend, though it may sound dialectic, that you first increase the ability to take action. This is the aforementioned way to develop the habit of acting before thinking. The improvement in the ability to take action creates a positive spiral structure: it eventually enhances motivation, and the enhanced motivation will in turn become the driving force for new action. This is because acting first works to provide a trigger for new realization. If each employee maintains this spiral structure, it will lead to

continuous growth of the organization, which is the essential quality of a learning organization. Lets look at how this positive spiral structure is formed. First, let us suppose the ability to take action equals the amount of action and then see what effects the changes in the amount of action produce. A positive change in the amount of action, such as the sale of new products or visits to new customers, leads to a change in quality. In other words, changes in the amount of action produce changes in the amount of experience and these changes in the amount of experience give rise to qualitative changes. The difference between first-year employees and second-year employees seems to be simply the difference in the amount of experience, such as what they experienced, whom they met, and what they did. The reason that the amount of experience remains unchanged and, consequently, the degree of growth also remains the same in cases where employees with 25 years of experience continue in the same job for the next five years, seems to be due to the fact that the amount of action did not change. The sale or development of new products or the activities related to new customers gives rise to a change in the quality of people, and this change in quality leads to the further development of these people. The further development of each individual yields results, which form the persons success experience. This success experience then creates confidence, and the confidence develops into a sense of responsibility. This flow enhances motivation and gives rise to the next action. If one realizes a change in motivation, it means that a transformation in the mindset has taken place. This positive spiral structure is the mechanism of mind innovation. p119 Positive Spiral Structure Amount of Action Amount of Experience, Qualitative Change Increase in motivation, Motivation Start of a growth cycle At the time of joining the company Degree of Growth If the positive spiral structure exists and is functioning well across the board, the company is a so-called learning organization. What is most important is to aim to build such an organization.

In this spiral structure, the only visible parts, that is, the parts that can be measured physically, are the changes in the amount of action. The amount of experience, degree of growth, and motivation are all inner issues that cannot be identified from the outside. However, the inner issues, such as the level of motivation, can be measured indirectly by measuring the amount of action and the changes. When considering motivation, one of the inner issues, a mechanism must be in place to verify the amount of action and the changes. Key Points In order to enhance the ability to take action, one needs to first make a habit of acting. A shortcut to bring changes to the essentials is for acting to serve as a trigger. Chapter 5: Employees refuse the results-based system. 1. Is your company truly a special company? So many corporate managers think their companies are very special. When the former CEO of IBM, Lewis Gassner, assumed the post from Nabisco, people made slanderous comments saying, A biscuit maker cannot sell computers. Contrary to such expectations, Mr. Gassner did a marvelous job. Management essentials are the same across all industry types. Anyone can understand that products and customers vary with industry type. However, what must be realized is that it is only products and customers that vary with industry type and that the very essence of management is the same across all industries. I think that only about 5% to 10% of management changes with industry type. However, approximately 90% of corporate managers believe that their companies are something special, something different from others. Particularity is only an excuse for bad performance. I have never met a corporate manager who named particularity as their success factor. Particularity serves as an excuse for a companys non-growth or an external reason for allowing the company to remain at the status quo. Capable corporate managers emphasize differentiators, not their particularity. If you think that your company is special, you should dispel such a fallacy. Doing so is critical since fundamental management reforms cannot be achieved as long as corporate managers think their companies are special.

2. Problems with Cash Flow Management Conventional cash flow management aims to maximize cash flow. Its purpose is the maximization of future cash flow, which became a management purpose in itself. Many people can readily accept this approach since it looks appropriate at first sight. However, such an approach is far from appropriate and, in fact, misses the point. The true purpose of management lies in the achievement of management principles, and the maximization of cash flow is only a means to that end. If profit or cash flow is the end purpose, sooner or later, a distortion will occur in management. In conventional cash flow management, the main issue has been the adjustment of profits among the stakeholders of the company. For example, what is the best way to allocate profits among a corporate manager, employees, and shareholders? If the company tries to allocate more profits to shareholders, the salaries of employees will decrease, and vice versa. Thus, the issue of a conflict of interests among interested parties has been a major topic of discussion. The conventional economic model has assumed that if companies continue making appropriate profits, it will eventually lead to the proper adjustment of profits among all interested parties. In brief, perfect competition based on free labor and stock markets will automatically adjust profits with its divine agency. Cash flow management is an approach that applied the economic model directly to management, and this is the cause of management distortions. p124 Corporate Manager, Employees, Shareholders What is the goal of an enterprise? 3. Cash Flow Management does not solve problems. Viewed from the economic model, the purpose of shareholders is the maximization of corporate value, and to achieve this purpose, the maximization of future cash flow is required. The maximization of corporate value is what not only the shareholders, but also the corporate manager and employees wish to achieve. The economic model concludes, therefore, that profit maximization is the way to make everyone happy. However, this is an approach from an economic view, which, to make the model simple and easy to apply, makes an unrealistic assumption that every person acts rationally. It is, therefore, dangerous to directly apply this theory to real management.

The major shortcoming of this theory is that it makes people susceptible to consequentialism. Although one must focus on good causes in order to obtain good results, the conventional cash flow management models focuses too much on the results, weakening the power to inquire into essential causes. For shareholders, investments once made do not require additional costs. Therefore, the more profit a company generates, the greater the benefit to the shareholders. Therefore, companies pursuit of profit never constitutes a problem for shareholders. p126 Shareholders Interests Profit/Cost Profit Curve (due to zero additional cost) Profit Employee work hours No additional cost for shareholders The longer the working hours of employees, the greater the benefit to shareholders. Employees Interests Profit/Cost Cost Curve, Loss, Profit Curve, Profit Employee work hours In order for employees to obtain greater rewards, they must pay additional costs (provision of labor). Employee rewards (= earnings) = <Base pay (y-intercept) + Performance-based compensation>. However, for employees, increasing profits means that they must provide increasingly more labor. That is, they have to offer their time, and therefore, it constitutes additional costs for them. Since as the profits of the company increase, employees salaries also increase, they first think its a good thing to do, but they soon begin to consider the amount of additional labor they must provide. Employees do not engage in activities that pursue only corporate profits. This is why the maximization of corporate profits cannot be shared between shareholders and employees as the purpose of the company. 4. How much do employees work?

Lets look at whether or not the proper profit adjustment can really be made via the maximization of corporate value alone. Employees work hard if they are rewarded more than the value of the time they invest. However, if the costs of labor they provide exceed the amount of the salary they receive, they reach the point where they think, I dont want to work that much or The game is not worth the candle. Once they reach this point, they will not provide further labor or make further effort even if they are told: Lets work harder. Then, you will get paid more. Thus, the bottleneck (the true cause) lies in the mindset of employees. This mindset affects their behavior, leading to bad results. In short, the mindset or motivation of employees often constitutes a management bottleneck. Unless this bottleneck is resolved, it is impossible to bring about a continuous change in results. p128 Profit/Cost, Profit Curve (reward curve), Loss, Cost Curve (effort curve) Profit, Equilibrium Point, It would be best if the budget were achieved at this point... Working hours Employees can make efforts. I dont want to work that much. The game is not worth the candle. 5. Can the results-oriented system bring out motivation? Lets look at the relationship between the results-oriented system and motivation. One may think that if employee salaries are raised, the area of can make efforts will expand. Yes, thats true. If their salaries are raised, the area of can make efforts will expand and the area of Dont want to work that much becomes smaller, that is, the equilibrium point shifts to the right. However, all other things being equal, an increase in pay decreases company profits and therefore clashes with the interests of shareholders. Moreover, considering a companys limited salary resources, it is impossible to continue raising salaries. While the salary increase may temporarily boost employee motivation, they soon get used to it and go back to their conventional behavior. The results-based system is a mechanism for properly allocating results according to merit, and the increased motivation is only one effect of the system. However, many corporate managers introduce the results-based system primarily to enhance employee motivation and the ability to take action. Consequently, few companies will be able to

enhance employee motivation on an ongoing basis under the system despite a temporary positive effect at the time of introduction. While many corporate managers in the United States receive handsome rewards, there is no correlation between their rewards and their motivation. The reason that no correlation exists between corporate managers motivation and their rewards is because few of them work for money. For those who do not have to work for a living, such reasons as work that one truly wants to do and self-actualization constitute the source of their motivation. This can be also applied, to greater or lesser degrees, to employees. While a clash of interests occurs between shareholders and employees under the results-based pay system, profit adjustment between shareholders and employees can be achieved by adopting a stock option system. Incomparably more stock options are issued in the United States than in Japan. It should be noted, however, that the stock option system is effective only among public companies or those that plan to go public. As a mechanism for reducing the clash of interests between shareholders and employees among nonpublic companies, a method called profit sharing is often applied to bonuses. This is a mechanism similar to that of dividends to shareholders, where the results are allocated not by individual merit, but by corporate or divisional profits. However, since this is a method for allocating results, it should be treated separately from motivation. 6. What incentives are there other than rewards? Employee motivation cannot be controlled simply by increasing or decreasing rewards. Corporate managers must devise means other than rewards to raise employee motivation. This is why the achievement of management principles should be the ultimate purpose. Factors other than rewards to raise motivation include the following: I enjoy my work, I can grow through my work, Im glad that customers are satisfied, and Our companys products contribute to society. These factors, if strong enough, will motivate employees to work harder regardless of the amount of money they receive. It is the same as unsuccessful actors or artists for whom doing what they want to do becomes their raison dtre despite their meager income. Therefore, the crucial issue for corporate managers is how to bring out strong employee motivation, that is, the pleasure of working. Unless companies pursue not the maximization of cash flow, but the achievement of management principles as its ultimate objective and aim to achieve management based

on employees pleasure with working and a challenging spirit, they will sooner or later face their limits. Chapter 6: Organizational Objectives vs. Individual Objectives 1. Organizational strength is determined by the degree of alignment between organizational objectives and individual objectives. The reason that objectives management, which is required for the investigation of cause-and-effect relationships, does not function seems due to the fact that the degree of alignment is low between organizational objectives, company objectives, and individual objectives, employees reasons for working. Lets first look at organizational and individual objectives. Individual objectives are defined as something individuals want to do, not as breakdowns of company objectives. Individuals must have their own objectives (what they want to do or aim to do) that are different from those of others. On the other hand, organizational objectives are the objectives that a company proclaims and include management principles, vision, policies, and budget. Next, lets take a look at the relationship between organizational objectives and individual objectives. The two vectors of organizational objectives and individual objectives determine organizational strength, the strength of a company. This is because organizational strength is defined as the sum of individual and organizational vectors. If the direction of individuals is different from that of the organization, the organizational strength becomes weak. For example, if the organization is a group of people who are not very interested in work and wish to leave the company at five in the evening, it is money that binds the organization and individuals together. In such an organization, the degree of individual contribution to the company is low, leading to weak organizational strength. On the other hand, if the organization comprises people who together started up a venture company, they will work vigorously until late at night. It is because they can do what they want to do within the company. They are not working for money or forced to work overtime. They love to work. This is the ideal situation for organizational strength, where the organizational vector and individual vector are close to or overlap each other.

p135 Alignment of objectives between organization and individuals is indispensable. Organizational Strength Organizational objectives, Individual objectives Maximization of Organizational Strength Organizational objectives, Individual objectives Clearly define organizational and individual objectives and maximize the organizational Strength. Corporate managers must first question whether employees truly enjoy their current work or not. In companies with low organizational strength, employees work only for their salaries and tend to think I dont want to work that much or The game is not worth the candle. They give such plausible reasons as lack of time or people. Therefore, in order to raise organizational strength, it is essential to establish proper alignment between organizational objectives and individual objectives. In order to achieve such an alignment, corporate managers must first present clearly defined organizational objectives. Many corporate managers may claim that they have already presented their organizational objectives. However, such a belief is wrong to begin with. 2. The true organizational objective is to achieve management principles! The ultimate organizational objective is the achievement of management principles. The management principles may be clearly written on a tablet or a piece of paper. However, what most corporate managers actually say is to raise sales or achieve budget targets. The true management principles are the words and actions of the corporate managers. Simply put, management principles are what corporate managers personally want to do. They are not simply words written on a tablet. What they have in their minds comes out as their typical words and actions. They may be able to write down what they dont have on their minds on a piece of paper, but it is impossible to reflect it in their words and actions on an ongoing daily basis. In short, corporate managers must truly realize that management principles that have a decisive impact on employees are not the written words. Those corporate managers who say that they understand it, but cannot put it into practice are the ones who have the least understanding. Employees are only reflecting their corporate managers lack of understanding. After all,

employees reflect what corporate managers say or do. Management principles are the very wishes of corporate managers and cannot be shared across-the-board unless they talk passionately about them. p138 Management Principles (corporate managers values) Reflect the principles in what one says and does every day Words and Actions, Words and Actions, Words and Actions Sharing, Employees Corporate managers must be passionate! Principles are basically not something that can be judged good or bad, but tend to be judged by preference. Therefore, a logical approach to employees is liable to result in a mere rational understanding. It is essential for corporate managers to talk passionately about the principles and appeal to employees emotions. If they appeal to the emotions, they will be able to move employees hearts. We can put into practice without objection what we understood with the heart, not the head. While appealing to employees hearts, corporate managers need to let them ponder what the corporate managers are talking so passionately about. If the principles are not clear, that is, if the corporate identity is not clear, it is important to go back to the foundation spirit of the company. It sometimes happens that one can find what was lost by revisiting the starting point, the initial purpose of starting the company. For example, the management principle of Ezaki Glico Co., Ltd., at the time of its inception was to conduct business to improve peoples physiques through food. At the time of the foundation of the company, people in Japan suffered from poverty, and children were dying of malnutrition. Nutritional support was an urgent issue to save these children. For your reference, the company name Glico derives from the nutrient glycogen. However, management principles change with the times. In the present age of gluttony, the significance of providing nutritional support will soon fade away. It is of course okay to change management principles according to the times, because the organizational objectives are corporate managers passionate thoughts to the society of the age. 3. As an enterprise or as bread-and-butter work?

The organizational objectives can be roughly divided into objectives as bread-andbutter work and objectives as an enterprise. The objectives as bread-and-butter work indicate those cases where corporate managers always talk about increases in profit. If corporate managers keep telling their employees no profit increase, no business succession, the organization has only bread-and-butter objectives. If the organizational objectives are the maximization of profits and the succession of business, the corresponding individual objectives will become working for a living and living itself is the purpose of life. If corporate managers talk only about the achievement of profit targets, individuals will keep thinking only about receiving money from their companies. Consequently, individuals compare the amount of their contribution to their companies with that of their salaries and work only as much as their salaries are worth. This is because, despite the fact that salaries increase as a result of ones contribution to the company, once employees find that their contribution does not make a big difference in their salaries, they stop making further contributions. Moreover, if they work for a living, their private and leisure time becomes important. Consequently, they think they dont want to work that much. It follows, then, that if companies emphasize only the need to increase profits, they will never be able to convey the true meaning of work, the pleasure of working, and the purpose of life to employees. The objectives as an enterprise are those summarized in management principles or philosophy, that is, why do we conduct business? If management principles are clearly defined, they will inspire employees to consider the purpose of their work. If the employees understand the purpose of their work and why they work for their companies, they will find job satisfaction and the purpose of life. If employees achieve job satisfaction and the purpose of life, it means that they now have their own philosophies. If their philosophies are positive in nature, they will be highly motivated. The original meaning of an enterprise is to do business with an intention. Everything else that has no intention, that is, the true objective of business, is bread-and-butter work, whose only purpose is to pursue profits. Philosophies based on bread-and-butter work include Life is meaningless and Life is painful. While it is only human beings that question the purpose of life, all other animals instinctively make living itself the end or the purpose of life. Carnivorous animals at the top of the food chain spend most of their lives looking for prey. If the number of prey individuals increases, the population of carnivorous animals also increases via propagation. This increase continues until they run out of prey. If they run out of the prey, they must continue looking for prey again. In other words,

they are hungry all the time. Do you think we can find the meaning of life under such living conditions? This is nothing but life is painful. Human beings were able to obtain food steadily by raising livestock and farming. Consequently, we came to have spare time to use for something other than working to obtain food. One of the major differences between human beings and animals is that human beings have spare time. To attach some meaning to this spare time means to free ourselves from living like other animals and have a raison dtre as human beings. To teach the meaning of life is an integral part of the role of corporate managers. Post-war education deprived us of the power of thinking and developing proper ideas. What we were taught was simply knowledge and skills. Consequently, we have fallen into a value system that places top priority on knowledge, as exemplified in the academic career-based society. We should recognize that we did not receive an appropriate education in school. If the educational system does not change, then it is only corporate managers who can provide the proper education to members of society. Whether or not corporate managers can teach the proper way of life depends on their principles or philosophies. Corporate managers must reexamine whether or not their principles clearly show why their companies conduct business. Unless such purposes are clearly presented, employees cannot align themselves with their companies to begin with. Let us consider next why organizations exist. p141 Difference between enterprise and bread-and-butter work
Organization What Bread-and-butter Work is the purpose of conducting business? To generate greater profits continuation (survival) Enterprise The purpose of business is clear. Management philosophy principles and Reasons to work are clear. Philosophy and raison dtre of business For a living Living itself is the purpose Individual What is the purpose of work?

The ultimate purpose is the

4. No one can do anything alone.

What is an organization? Why is an organization necessary? Why does it exist? Lets consider what a company is to begin with. Unless we give it serious consideration, a company will become simply a tool to generate profit. Even if someone (corporate manager) wishes to accomplish something, there are many things that cannot be achieved alone. This is why an organization, an aggregate of people, is required. People come together to implement things that are impossible to do alone and make a concerted effort to achieve them. This is an organization. In other words, organizational objectives are management principles (what a corporate manage wants to do), the ultimate purpose of a company. An organization is built to accomplish the management principles through the combined forces of its members. This is the primary raison dtre of an organization. An enterprise is not an organization where shareholders assume top positions, and a corporate manager is secondary. It is an organization initiated by a corporate manager who has some business to carry out and has gathered employees and shareholders who empathize with the managers ideas. The Corporate Law views a company as the property owned by shareholders and a tool to generate profit. However, if it is viewed from the perspective of the organization formation process, its raison dtre is obvious. 5. As long as an organization exists, its ultimate purpose can be pursued semipermanently. An organization has another significant raison dtre. It so happens that a corporate manager cannot achieve his/her objectives in his/her lifetime. While ones lifetime is limited, theoretically, the life of an organization is not limited. It follows that it is possible to continue pursuing ones objectives almost for good by creating an organization. However, if one regards the continuation of an organization as a purpose in itself, it is putting the cart before the horse. An organization is a means to realize ones ultimate objectives. If the survival of an organization is an end in itself, it will lead the organization not to an enterprise, but to a bread-and-butter group. What is most important is the realization of management principles, the companys initial intention. Thus, the way of life of an organization is quite similar to that of an individual. The organization or a company becomes easier to understand by viewing it the same as an individual or a way of life. As a company becomes bigger, the true purpose of its business and the true role or raison dtre of the organization become vague and the

profit generation or the survival of the organization takes over as plausible objectives. However, the original form of an enterprise is a group created under certain organizational purposes where like-minded people come together. It is employees identification with the principles of the organization that give birth to commitment and loyalty to the company. In this sense, working for a company is similar to exchanging cups of sake or pledges of loyalty. This is why the organizational strength and solidarity are so strong among members of an underground community. It is not until corporate managers clearly present their organizational objectives, that is, the purpose with which they manage their companies, that employees can align their objectives with the organizational objectives.

Chapter 7: Qualitative Objectives vs. Quantitative Objectives 1. Organizational objectives can be divided further into two objective types. If the organizational objectives, which are organized into a hierarchy with management principles as the overriding concept, are broken down, one finds that they comprise qualitative objectives and quantitative objectives. While qualitative objectives are the objectives that can be expressed in words, quantitative objectives are expressed in figures. For example, objectives, such as the maximization of customer satisfaction and aiming to become the only one, are qualitative objectives, whereas sales, profits, market share, and budgets are quantitative objectives. Lets look at the relationship between these two types of organizational objectives. Qualitative objectives are the breakdown of management principles, such as vision and policies, and represent what a company should be. While management principles or philosophy lack concreteness since they represent the underlying ideas, vision (future image, perspective) must be something that can be envisaged, seen, and imagined. Moreover, it should be able to attract people when imagined to serve as the effective centripetal force. Thus, qualitative objectives (objectives that represent what the company wants to be) are the concepts overriding the quantitative objectives (numerical targets) as the figure shows. In short, qualitative objectives are more important than quantitative objectives. However, even if qualitative objectives can be imagined in a specific manner, the degree of achievement cannot be measured clearly. In order to measure the degree of achievement as specifically as possible, progress in achieving qualitative objectives is converted into figures, based on which quantitative objectives are developed. When making a profit plan for a given fiscal year, desired profit is first determined, then fixed costs are added, and finally sales covering all of these are determined. These numerical targets are derived from the desired ROA (return on asset), ROE (return on equity), and analyses of competitors. This process may seem to appear that figures have priority, but it is only a technical method to develop a profit plan and in no way means that profit is the most dominant concept. p149 Management Philosophy Objectives that represent what the company wants to be/Vision Qualitative Objectives/Basically, qualitative objectives are more important than

quantitative objectives. Numerical targets to measure the degree of achievement of qualitative objectives/ Quantitative Objectives Strategy Plan Operations (implementation) If numerical targets override qualitative objectives, management principles cannot be converted into operations. When viewed from the perspective of shareholders, the stakeholders of a company, it may be profits that they demand of the company. However, corporate managers need to talk passionately about what true management should be to shareholders as well. Conceding the demands of shareholders who place top priority on share prices will lead corporate managers to become shortsighted, which will eventually disable them for building a mechanism to continuously generate profits. Shareholders have a means to collect their investments, that is, selling off their shares, and can always look for other companies whose businesses match their policies. On the other hand, if corporate managers need to raise capital, they must clearly present their policies and gather shareholders who agree with their corporate vision. In any case, corporate managers should not let the opinions of short-term minded shareholders influence their management. Corporate managers should realize anew that they should pursue management principles, vision, and qualitative objectives, which are at the top of the pyramid (see Figure in the previous page). It is often the case that even if qualitative objectives are proclaimed, it is quantitative objectives, such as the budget, that actually control employee behavior. If a companys overriding concepts are not vision or qualitative objectives, but figures, then there is a high barrier within the company to the achievement of management principles. This is because if the overriding concepts are figures, individual objectives will link not with the ways to live as an enterprise, but with bread-and-butter work. 2. What is the relationship between qualitative objectives and quantitative objectives? Lets take a look at the relationship between qualitative objectives and quantitative objectives. Upon considering the relationship, I would like to start with a business structure.

Every enterprise has customers and provides some value to them through products and services. In return for this value, enterprises receive sales or profits from customers. To give value to customers means to make some contribution to them. The value for customers is determined as qualitative objectives and the magnitude of the value, that is, profit or sales estimates, is specified as quantitative objectives in the budget. Thus, the amount of value offered to customers and the amount of profits obtained

from customers are equivalent. In short, what is given is what is taken. According to
business administration, transactions are basically based on the exchange of

equivalents.
<Theory> amount given = amount taken However, many employees have a different definition. They believe the amount given (to customers) exceeds the amount taken. <Employees Idea> amount given > amount taken We offer enough value to customers, but cannot generate enough profits due to the bad external environment. The profit rate is rapidly declining due to the low price of overseas products. Many people think that they cannot increase profits despite hard work due to external factors. However, such a mindset hinders them from making further reform since they believe they have already made every effort. In other words, corporate managers can easily determine the degree of the driving force of reform among employees just by asking them about the amount given and the amount taken. Among the first and second-year employees, there are many who answer that the amount taken is greater than the amount given. <New Recruits Idea> amount given < amount taken They think: Although I have many things yet to learn, I receive much profit from customers, thanks to my seniors efforts. Since these people are aware that their degree of contribution or amount of giving is not enough, there is much room for further growth or reform. p153 What is given is what is taken (exchange of equivalents) Give, Cause (contribution) (principles = qualitative objectives) Own Company, Goods/Services, Customers

equal to Sales/Profit Take, Effect (results) (budget = quantitative objectives) Profit is only a tool to measure the value given. What is important is to realize that the amount of value given and the amount of profit taken are basically equivalent and that one cannot receive more than what one gives. Thus, it can be said that the current amount of profit is indeed the amount of value the company is giving. Even if corporate managers think that they give much value to customers, it is only a subjective idea. In other words, it is not possible for a company to directly measure the amount of value it is giving. The amount or magnitude of value given is determined by customers, which can be measured by the amount of profit. In short, profit can be defined as a tool to measure the amount of value given. Therefore, if a company thinks the amount of profit obtained is insufficient, then there is a problem with the companys giving activities. It is only after companies understand and accept this viewpoint that they find room for improvement. Then, what is the purpose of business, to give or to take? Generally, an enterprise is defined as an organization established for the purpose of profit making. According to this definition, the purpose of an enterprise is to earn profits. Then, which direction do management principles represent, giving or taking? Many of the existing management principles proclaim the provision of value to society. That is, management principles represent a vector on the part of givers. Management principles are the purpose of business itself. It follows, then, that what is obtained is simply a consequence of giving. For companies, profits are something that should be used to further pursue the purpose of their businesses. In other words, profits are used for the continuation of a company required for the ongoing provision of value to customers and the reinvestment required to provide even greater value to them. If a company has no difficulty with survival and no need for reinvestment, then profit can be returned to shareholders through dividends or by buying back its own stock. Those who regard the purpose of business as taking are those who pursue not causes, but results. While causes are not visible, results are visible, and we are inclined to pursue what is visible. However, once taking becomes our purpose, we tend to pursue the efficiency of taking. In order to take in an efficient manner, we strive to obtain the maximum effect out of minimum giving. The more one thinks of efficient ways of taking, the less one thinks of ways of giving, and the less frequently one takes

new actions. Consequently, the amount of giving decreases, which will eventually be reflected in the outcome as a decrease in the amount of taking. The reason for the decrease in the amount of taking is exactly because of the actions for taking. If we focus only on the ongoing provision of value to society, it will give rise to activities to develop new products and new customers. Such activities toward the market, in turn, bring profits. Therefore, if companies wish to obtain profits, they should focus only on giving on an ongoing basis. 3. Why must budget targets be achieved? The sales volume budget and profit budget can be defined as the estimates of the amount of value that companies are willing to give to customers. The high budget targets, therefore, should be understood as the expression of the companys wish not to gain more profits, but to provide greater value or enhance its contribution to society. This is why budget targets should be achieved. If companies strive to generate more profits, it will only lead employees to the point where they think they do not want to work that much. If companies ask them to increase profits for the survival of the companies, employees will think that they do not want to work for such unattractive companies any more. Corporate managers should, therefore, explain their budgets as something that represents priceless value that attracts and fascinates employees. Budgets embody the corporate vision translated into reality. Although the degree of achievement of qualitative objectives or management principles, such as the vision, is hard to measure, it can be done by converting them into quantitative objectives. Thus, qualitative objectives are the true breakdown of management principles, leading to long-term employee motivation. These objectives make employees aware of the social and contributive nature of their activities: they start considering what message or contribution they provide to society. On the contrary, if only quantitative objectives are highlighted, employees become quota-minded. The overemphasis on survival of oneself or a company only leads to short-term motivation, though it may promote the results-based system. Among the companies where qualitative objectives conflict with quantitative objectives, there are many cases where qualitative objectives have become nominal policies while quantitative objectives actual controlling their operations and where corporate missions have all been forgotten. In such companies, it is impossible to enhance employee motivation over a long period of time.

If the profit size is viewed as the magnitude of value provided to society, the greater the profit, the more the company has contributed to society. For example, companies like Toyota whose consolidated net income exceeds one trillion yen can be said to have made a social contribution equivalent to the amount of their net income. However, there are many deficit-ridden companies in society. Is there any raison dtre for these companies? If their deficits are caused by a drastic decline in market price due to intensified competition, it means that there are many companies that supply similar products, that is, excess supply. If the deficit-ridden companies disappear from society, what impact will it have on society? Their employees and families may be put on the street. However, from a societal point of view, even if these companies have disappeared, there are many other companies that can provide similar products. This is exactly why product prices have fallen. If I venture a remark, bankruptcies of companies constitute no loss in a competitive society. It is a basic principle of capitalism and an efficient way of allocating limited resources. Bankruptcies are the consequence of companies having been unable to contribute to society. Corporate managers pursue contribution and determine profit budgets to increase the amount of profit. The size of the profit budget depends on the degree of contribution that a corporate manager wishes to make to society. The achievement of budget targets is not for oneself or a company, but for customers and society. 4. Management that leverages ones strengths: Methods of effective differentiation The raison dtre of enterprises is to contribute to society, whereas the bread-andbutter work is done for oneself and ones family. These two should be clearly differentiated. In order to be an enterprise, a greater contribution is required. Then, what is required in order to make much more contribution? In order for an enterprise to contribute to customers and society more than competitors, it needs to contribute via its own strengths. This is the most efficient method of contribution. If an enterprise strives to contribute via its weaknesses, it will certainly be defeated by competitors. In order to contribute via its strengths, it is critical for the enterprise to know its own strengths. Corporate managers tend to think they know much about their own companies, but it is often the case that they know more about their companies weaknesses than strengths. This is why the themes for management improvement often involve the elimination of weaknesses. Corporate managers should fully recognize that differentiation strategies can be adopted only if

they are based on the companys strengths. An analysis of the current state should be conducted from such a perspective. The basic purpose of the analysis is to identify strengths to give shape to differentiation strategies and to concentrate management resources on the identified strengths. This is because management resources (people, goods, money) of a company are limited, and the limited resources restrict the scope of corporate strategies. The best way to efficiently allocate limited resources to achieve maximum effects is to concentrate on strengths. p160 Management Resources, People, Goods, Money Selection & Concentration, Selection & Concentration Analysis of the current state, Own Company, Strength, Strength What the enterprise intends to do, Contribution, Give, Take, Results Customers Allocate resources efficiently on company strengths 5. Individuals who draw on their own strong points: Effective methods of contribution Lets look at the relationship between contribution (cause) and results (effect) by extending it to include individuals and customers customers (hereinafter referred to as the clients customers). First, companies clients generally have their own customers. The ultimate value of the products that companies provide to their clients is determined by the clients customers. Contribution to the clients with whom companies have direct dealings is evaluated by how much the clients can contribute to their customers. If companies are not earning sufficient profits, it means that their clients are not earning sufficient profits because they cannot contribute to their customers via the products they purchased from the companies. Contribution to clients should be considered as supporting the clients contribution to their customers. Social contribution is not a familiar term for employees. However, if the clients customers are defined as society, that is, <clients customers = society>, then they come to realize how important it is to make proposals to society and understand why so many companies proclaim social contribution in their management principles. Although the term social contribution sounds significant, it becomes more familiar if society is defined as the clients customers.

Next, lets look at individuals contribution to their company. It is important to simply recognize that the amount of ones salary paid according to the payment by the results system by a company is determined by the degree of ones contribution to the company. Many employees think that although they contribute substantially to the company, they dont get paid enough since the company does not evaluate them properly. It is said that more than half of employees are not satisfied with the existing evaluation systems. If employees think that they dont get paid enough for their contribution to the company, the degree of their contribution to the company gradually declines. This is not beneficial for either the company or the employees. Needless to say, companies are obliged to evaluate employees properly and give feedback. However, what is important is for employees to realize that to think everything according to losses and gains will not lead to their further development. Contribution to the company means to contribute to society at large via the company. Many employees think that successful people are those who obtain lots of money or wealth from society. However, what is visible is only a consequence. The true definition of a successful person is a person who provides much added value to society. If employees seek results first, then they cannot focus on the causes, such as the provision of value or the contribution to society, resulting in less gain. They should concentrate not on the idea that their contribution to the company is not fully reflected in their salaries, but on the idea that they are contributing to society. Such a mindset will eventually bring forth much fruit. Some may think that their corporate managers are not honest and do not allocate results appropriately. However, if one can truly make a key contribution to customers and society, the company will not want to lose such an employee. There could be a time lag, but the company will eventually allocate a fair share to the employee according to the degree of contribution. With true ability, one can accomplish greater achievements after leaving a dishonest company. If one cannot accomplish greater achievements after leaving the company, then that was the real ability. In order for enterprises to contribute to their customers in an efficient manner, it is essential for them to leverage their own strengths. Similarly, in order for individuals to efficiently contribute to their companies and customers, they should engage in work that brings out their strengths. One cannot make a full contribution via ones weak points. Just as enterprises know more about their weaknesses than their strengths, it is often the case that individuals know more about their weak points than about their strong points. It is very important for individuals to know their strengths. Companies should also give due consideration to individual career plans and appoint employees to

positions where they can utilize their strengths. p163 Efficiency, Strong points = strengths, Apply ones strong points to work Potential, Ability, Oneself Contribution to the company, Give, Take, Results-based payment, Salary Own Company Contribution to customers, Give, Take, Results, Profits Customers Contribution to society, Give, Take Clients Customer Individuals should aim to support clients customers. 6. How can we tap into individuals true strengths? While management resources are the restricting factor for an enterprise, it is ability that restricts an individuals potential. Since it is difficult to accurately measure individuals abilities or potential, companies need to know ways to assess them indirectly rather than ways to measure them directly. In ones life, one must have experienced periods of high and low motivation and made various achievements. At the recruitment interviews of my company, I often ask interviewees what are they the most proud of in their past experience. I can tell how much effort they have made in the past through their answers to this question. While many interviewees say at the interviews that they will commit themselves to work, it is not easy for those who have not given their best efforts to attain something in the past to spare no effort to work in the future. I think that the possibility is very low for those who did not achieve anything to be proud of before they became 20 to achieve something great in the future. Whether it is studies or sports, it does not matter to what they dedicated their best efforts. The results one obtained in return for an all-out

effort form the persons potential abilities. However, there are many people who lose motivation after taking a job. These are the people who cannot take advantage of their potential abilities in their current jobs. If there are many people in a company who have great potential abilities that have not been fully leveraged, companies need a method to manage and enhance motivation. Companies must devise a mechanism for motivation management that enables them to identify the areas that enhance employee motivation without requiring them to drastically transform their values. Chapter 8: What is motivation? 1. Two factors that affect motivation Lets take a look at ways to manage motivation. First of all, I would like to discuss the true nature of motivation. Motivation can be roughly divided into two categories. One is inner motivation that comes from within. The other is the motivation inspired by external factors. The more important of the two is inner motivation. It includes motivation arising from what one wants to do, efforts to realize ones dream, wishes, a sense of mission, and principles. This type of motivation is stable and very strong. On the other hand, motivation inspired by external factors includes wages, salaries, and workplace atmosphere and environment. Compared to inner motivation, motivation from an external origin is unstable and subject to change. It does not remain strong over a long period of time. There is a common misunderstanding among both corporate managers and employees: Corporate managers believe motivation is something they give to their employees, and employees think motivation is something given by their companies. In an effort to enhance employee motivation, many corporate managers change their personnel evaluation systems. Employees also attribute their low motivation to the inappropriate evaluation systems. However, even if corporate managers repeatedly improve their evaluation systems, the underlying problem cannot be solved. Corporate managers should understand that the primary purpose of an evaluation system is to allocate compensation according to the degree of contribution, and its effect on motivation is only temporary. Therefore, even if corporate managers change the evaluation systems to enhance employee motivation, their motivation will be right back to the starting point after a temporary increase. What corporate managers must focus on is employees inner motivation. Essentially,

such motivation is what corporate managers should bring out. They should continue to ask employees questions about what they really want to do, why they work for the company, what the meaning of work is, and what the purpose of life is; strive to bring out employees answers to these questions; help them form correct values; and thereby enhance inner motivation. We humans spare no effort or time to do what we truly want to do. However, for something we are forced to do, we respond with discontent, dissatisfaction, and excuses for not acting. It is the role of corporate managers to bring out what employees truly want to do. If corporate managers think they can change employee motivation by introducing easy measures like a results-oriented system, it is their mindset that needs to be changed first. p169 Motivation High and stable motivation, Inner Factors, Dream, What one truly wants to do The best way to sustain motivation is to find what one truly wants to do. 2. As proficiency improves, motivation declines? Lets take a look at how employee motivation changes after joining a company through the relationship between proficiency (years of work) and motivation. Our motivation is closely associated with proficiency. While employee motivation level right after joining a company, for example that of first to third-year employees, is very high, it becomes really low after five to fifteen years. This is because these employees assume that they are doing their best. After years of work, they are now competent at what is expected of them and are assigned important tasks. However, if the desired results are not obtained, they tend to attribute it to external causes, such as economic conditions or unreasonably high objectives, since they believe that they are doing their best. Moreover, they come to think that the company and superiors are not providing sufficient support. Due to such a mindset, their motivation tends to decline to a great extent. This is because they stop making further efforts at the moment when they think they are doing their best. In particular, it becomes rare for them to strive to develop themselves through reading and studying. By the time they become 40 or older, employees come to work matter-of-factly Factors, External Factors, Welfare, Unstable and easy-to-change motivation, Workplace environment, short-lived motivation, Wages/Salaries

without having any illusions about their work, and their criticism of superiors and the company that they had in their 30s grow grows weak. This is because they realize that the company is the only place they can work. Thus, around this time, their motivation is noncommittal, sometimes high and sometimes low: When they think they have to take the initiative, their motivation is high whereas when they feel they are not getting sufficient support from the company, their motivation is low. p172 Relationship between Proficiency and Motivation Motivation, High, People who need mind innovation (Im doing my best/I know), Only when they have the mindset of a corporate manager. Proficiency Low, High Motivation, High, Low, Unstable, High Years of work, First three years, 3 10 years, 10 20 years, More than 20 years Most employees finish their lives as office workers with a noncommittal level of motivation. However, those who experienced mind innovation during their lives as office workers can come to have the mindset of a corporate manager. The essential nature of the mindset of a corporate manager lies in a realization that everything is my own issue. Those who came to this realization will make an ongoing effort to solve issues. Such people can maintain motivation at a stable, high level. According to my own experience, those people who have the true mindset of a corporate manager are unfortunately only about 5% or less of the entire staff. This percentage is equivalent to that of staff members who assume leadership within a company. There are many employees who think, I dont have to worry about it because Im not in a position to take responsibility. However, the corporate manager mindset is not something one obtains after one becomes a corporate manager: One becomes a corporate manager because one has attained the corporate manager mindset. Those who need mind innovation are not new recruits, but those who have worked some years and regard themselves as competent workers or assume that they are doing their best. The longer the period employees work for a company, the higher their work proficiency. However, motivation basically works to the contrary. When I was an office worker, I used to think that I worked hard, and it was the company that should be blamed for bad results; I complained about the company with my colleagues. Basically, it is natural for motivation to decline. This is exactly why we need a mechanism to

enhance it. 3. Strive to become a superior who can teach the pleasure of work How do we feel when we work? Those who enjoy working can restore energy quickly even if they are physically tired. Since they enjoy working, they can maintain a high level of motivation. On the other hand, those who complain about occupational fatigue or no time are those who basically do not enjoy working. They should try to find the true reasons for not enjoying work. Many people have a negative mindset and feel that their salaries do not correspond to their hard work or that they are forced to work hard. If they dont enjoy the current work, they should look for work that they can enjoy. If they think their salaries are too low, they should join another company that pays more or start up a venture themselves. Then, they would argue back that they cannot find jobs they enjoy or starting up a venture is too risky. In short, what they are doing is crying for the moon. However, they dont realize it, and their victim mentality increases. Those who have not found work that they enjoy must find ways to enjoy their current work. Those who have not found their true vocation should regard their current jobs as their vocation. If they regard their current jobs as their vocation, they will stop complaining. In other words, maintaining a positive mindset is the way to solve all problems and become happy. However the situation may be, everything will move toward a solution by having a proactive mindset. There is no other way. One must understand, however, that the pleasure of working is ex post facto in nature. For example, when people first join a company, how many of them enter their first-choice company that they really wanted to work for or get the jobs they really wanted? Only a small number can join the top enterprises that they really wanted to join. Although most interviewees say they want to enter the company at the job interview, it is in fact not their first-choice company. In short, those who enjoy working from the very beginning are very few in number. Superiors are required to transform their subordinates into those who enjoy working. The key role of managers is to transform subordinates into those who find true pleasure in their work. However, if superiors themselves do not enjoy their own work, all they can do is to give instructions or orders to their subordinates. They can teach how to do some tasks, but never the pleasure of working. At Watami, a Japanese style pub, it is the role of the store manager to teach the pleasure of working to his/her subordinates. At a pub in particular, many employees

are part-time workers whose purpose is basically to earn money. Since they work part time for money, they do not strive to provide quality services to customers from the beginning. However, since pubs are a service business, those offering low service quality will not survive long. Therefore, the role of store managers is crucial. Store managers need to explain passionately about what this particular work involves to ensure the proper awareness and understanding of the purpose of the work by all employees. They need to keep telling their employees that the true purpose of their work is not just to serve alcohol or food, but to provide a place where customers can have a good time and that their rewards lie in regarding customer satisfaction as their own joy. Influenced by a managers passion, part-time workers who started working for money will come to work pleasantly and enjoy serving customers. Managers who supervise others must be able to enjoy working themselves. They play a role as missionaries for management principles, who talk passionately about the true meaning of work with their subordinates. However, there are many managers who cannot fulfill this role. If managers have a victim mentality and complain about their companies to subordinates, it will serve only to increase the number of subordinates who cannot enjoy work. Complaints about the company should be directed to superiors, not to subordinates. While complaining to subordinates generates only harmful effects, complaining to superiors constitutes the first step in improvement. 4. One must have a work philosophy. When the economy was soaring, the work philosophy was not a major issue. It was a time when the management environment was stable for most enterprises and when the provision of products via mass production had a great impact on the corporate climate. For enterprises, the best practice was to maintain the success pattern of that time. Consequently, there was a workplace atmosphere that it was best to obey the companys instructions and not to do differently from others, which is well expressed in the sayings The nail that sticks out will get pounded down and Treasure conformity and the three principles of office workers Do not be late for work. Do not be absent from work. Do not work. Since the market was stable, the priority for companies was to supply products in a stable manner. Stable recruitment is required for the stable supply of products. Consequently and inevitably, lifetime employment and the seniority system were adopted. Moreover, enterprises did not require employees to have a special ability or originality in ordinary times. Consequently, those who could handle emergencies well

were evaluated highly. Since the high performance of most companies was largely due to the strong market, they could not evaluate individuals according to performance, leading to personnel evaluations based on individuals potential capabilities. However, since it is difficult to measure potential capabilities, personnel were eventually evaluated by their educational background. Thus, the lifetime employment system, the seniority system, and an academic-career based society are all inevitable offspring of the management environment of that time. In such a context, employees did not have to have a philosophy. However, after the collapse of the bubble economy, we entered the age of oversupply. Companies naturally became unable to maintain the lifetime employment system and restructuring took place to rebuild a supply system corresponding to the demand size. Moreover, due to the diversification of market needs, the lifecycle of products became shorter, and the production system shifted from mass production to high-mix low volume production. Consequently, corporate managers became unable to cater to customer needs through their ideas alone and began to demand that individual employees become the driving force in the development of new products by tapping into customer needs. In short, companies began to seek people with unique ideas and who acted differently from others, leading to the complete collapse of the seniority system. In addition, the personnel evaluation method also shifted from capability-based evaluation to performance-based evaluation, leading to the collapse of the academic career-based society. The collapse of the lifetime employment system led to a decline in employees sense of belonging to the company. However, the need to belong to something is human nature. Employees are no exception and want to belong to their company, but now that the lifetime employment system collapsed, for those with low performance who naturally receive low evaluations, securing their current jobs is at stake. The decline in the sense of belonging to the company leads to a decline in attitude or motivation, resulting in complaints about or dissatisfaction with the company. In order to change such an attitude, employees need to firmly establish their own personality and identity. In other words, they need to have solid principles, beliefs, and a work philosophy and belong to their own ideas. They need to develop the awareness as professionals and have clear purposes other than salaries for why they work for this particular company. If motivation is declining, it means one has no work philosophy. In such cases, one needs to belong to oneself, compare ones philosophy with various management principles, and find and work for a company that provides the most desirable place for employment.

p179 The Age of Soaring Economy Lifetime Employment Seniority System Strong sense of belonging to the company After the Collapse of the Bubble Economy The collapse of the lifetime employment system New values and philosophy are required Weak sense of belonging to the company If one finds that ones own principles and philosophy are superior to those of most companies and believes that one can provide higher value to society, it is high time for one to start a business. If one does so according to ones principles and philosophy, everything will go well. Drucker calls such employees knowledge workers and urges employees to transform themselves from blue-collar workers into knowledge workers. In order to do so, it is essential for one to have an awareness as a professional. It is only after one becomes a worker who cannot be replaced by others that one can become a knowledge worker. Once one becomes a knowledge worker, one can maintain a high level of motivation. Ones attitude will not decline due to others issues. One will no longer complain about the company. Corporate managers should continue explaining their management principles to these knowledge workers to enhance the centripetal force of their organizations. 5. Motivation declines in the latter half of the summer vacation? Lets look at the relationship between motivation and time. Time management is an integral part of maintaining motivation. By way of example, I would like to take a look at changes in my motivation during the summer vacation in my elementary school days. Lets suppose the summer vacation is for about 40 days from July 21 to August 31. The Bon festival (Buddhist festival for the dead) is held about in the middle of the summer vacation. At the beginning of the summer vacation, I felt like I could do anything and everything during the coming 40 days. I was able to maintain a high level of motivation, particularly in July. However, my motivation drastically declined

after the Bon festival because I clearly realized then that my vacation was half over. The humdrum life I had in the first 20 days seemed to suggest how the rest of the vacation would be like. While at the beginning of the summer vacation, I expected to have much fun and excitement, but all I had every day was long tedious hours. I was disgusted thinking the rest of my summer vacation would be as boring as the first half. Around August 20, I even longed to go back to the school that I hated so much. At the end of summer vacation, I just let time pass by. Nothing exciting happened. My motivation declined rapidly over time. This was how my life went if I spent 40 days without a specific plan. However, when I selected some themes for the summer vacation and became involved in them, such as making handicrafts, I was able to maintain a high level of motivation. If a relatively long time limit is given and one has no time management plan, motivation will decline over time. 6. Time Management of Ones Life The 40 days of the summer vacation can be extended to and replaced by the 80 years of a persons life. Since life is given only once, it is impossible for us to know in advance how motivation changes during our lifetime. However, if one looks at changes in motivation during the summer vacation, one can simulate changes in motivation during the period of 80 years. For example, suppose that one starts working at the age of 20, passes the middle point at the age of 40, and retires from work at the age of 60. In the beginning, one believes in ones potential and works vigorously driven by high motivation. However, when one becomes older than 40, a turning point, one begins to miss the good old days. This decline in attitude is essentially different from a decline in motivation that decreases as ones proficiency increases. The reason that motivation declines as proficiency increase is because one tends to think of most issues not as ones own business, but as someone elses business. However, the decline in attitude after the age of 40 occurs due to the fact that one begins to reflect on ones past, particularly the contributions or achievements made in the past, and sees what to or not to expect in the future. Around this time, one cannot help but miss the good old days because one cannot believe in ones potential any more. This has a serious impact or damage on the person. One falls into a negative mindset that thats the way life goes. In my elementary school days, an old man around 60 years old used to preach to me, Study hard while youre young. Otherwise, you will become a man like me. Then he

always added, I am too old to start all over again, but you are still young. It is sad to see a person who has regrets about life. I strongly felt at that time that I dont want to have regrets at least over my life. When people approach the age of 60, they come to realize the true significance of efforts and the meaning of life. It is not until their time is gone that they realize it. It can be said that those parents who are really eager about the education of their children are those who regret that they did not study hard in the past. Since they came to a realization that education is important, they want to convey it to others. However, anyone can realize whats important after having lost it. When I was still an elementary school boy, I used to think, I want to become an old man as soon as possible since an old man does not have to study at school or work hard for a company like my father. One day, at the dinner table, my grandmother said, Im an entirely useless person, but you have to support me. It is such a pity to become a useless person. I must have felt something about what she said because I still remember her words and the scene so vividly. I did not understand what she said at that time, but I understand it now. It is not until one becomes useless that one realizes the significance of being useful. Only after one becomes ill does one realize the importance of health. Only after one loses something important does one realize what is truly important. Many people become involved in volunteer activities after retirement. They want to be useful to others. Anyone can come to such a realization when the end of life approaches. The significance of life lies in being useful to others. However, we dont realize it when we are still able to make great contributions to others or work vigorously. It is too late to realize it after you become unable to work. The sooner the realization, the better your life will be.

Chapter 9: Call for Mind Innovation 1. How to become a person who can provide value to society Not many people agree with my definition that the significance of life lies in ones usefulness to others. However, successful people are those who are society-oriented and can provide value to society. Unless one has a keen interest in society, one cannot be accepted by the public for a long period of time. Although we tend to focus on the results and view successful people as persons who take wealth and assets from society, this is not true. They have provided society with value equivalent to what they received from society. In order to become a person accepted by society, one needs to become society-oriented and work on society. However, we are self-centered by nature. To live for others is against our instinct. The instinct of self-preservation forces us to live for ourselves and refuses to let us live for others. Success, therefore, is an act against human instinct. To seek results, such as wealth, is a selfish, instinctive act. People fail exactly because they follow their instincts and seek results. Ordinary people cannot act against instinct, and this is why most people do not succeed. Then, how can we foster an orientation for society in ourselves? One of the ways to foster a society-oriented attitude is to enhance ones sense of belonging. While we humans are self-centered by nature, we can have selfless love for, for example, our families. Selfless love means to give and expect nothing in return, which suggests that we have something other than ourselves to belong to and to cherish this something we belong to as dearly as ourselves. One can foster a society-oriented attitude in oneself by expanding ones sense of belonging in this way. For example, when our alma mater wins a sports game, we often feel as if we ourselves won the game. The stronger our sense of belonging to a particular group, the stronger our vicarious experience. p189 From self-centered to society-centered Self, Society Society, Self Self/Society Self-centered, Society-centered, Identification If we can extend our sense of belonging to our hometown or local community, we can

enhance our love for the community. Those people who have a genuine desire to become local politicians can be said to be highly society-oriented. Moreover, if one loves Japan and thinks one belongs to the country, one will have a genuine desire to contribute to the country. If one belongs to the world and loves the earth, one will naturally become society-oriented. If one becomes society-oriented and has a sense of belonging to society, one will soon identify oneself with society and be liberated from the instinct of selfcenteredness. It is also important to love oneself in order to achieve such mind innovation. If one truly loves oneself, one can develop proper pride and strive to keep our promises. The more one loves oneself, the more one wants to pursue far-reaching objectives. This is because one does not want to admit that one cannot achieve such objectives. In order to develop a society-oriented attitude, one must first reflect upon oneself, reexamine ones strong points, and develop those strengths to the fullest. Soon, one will want to make a contribution by leveraging the strong points. 2. Aim at a goal or build a way? Some people set objectives or goals to maintain a high level of motivation. As they work toward the goals, their motivation rises radically and they sometimes achieve big success. However, life is, in a sense, long. For example, those who aimed to enter a university lose sight of their goal after being admitted. At many university preparatory high schools, they let students set the goal of passing the university entrance exam, but fail to teach how to live after entering university. Consequently, most students fold their tired wings to rest for a while. Goal-setting inevitably leads us to becoming results-oriented. While we can realize a sense of achievement when we accomplish the goal, we cannot fully enjoy the process. Moreover, since every time we attain a goal, we need to find and set a new goal, we gradually grow tired. Consequently, we sometimes take a nap like the hare (in the Tortoise and the Hare) and find, like Urashima Taro, that many years have passed while we slept. Since it is troublesome to set many goals, some people may set one, almost lifelong goal, such as to become an executive of the company. However, such a goal will lead to considerable strain and a sense of failure if one does not accomplish it. This is why excellent executives who lost the race to win the position of president often leave the company. We need to figure out a method that helps to maintain a high level of motivation until the end of ones life. It is to set a way, not a goal. A way is a path to follow, such

as in judo, kendo, flower arrangement, and tea ceremony. We are inclined to think that we are competent workers and that we know about our work and quit making further effort. However, if you were a famous master of tea ceremony, would you think that you know everything about tea ceremony or you have mastered it? However famous they become, those who pursue a way will never think they have mastered or completed the way during their lifetime. This is because they know that the moment they think they have mastered the way, they start going downhill. Thus, if one can change ones mindset from pursuing a goal to pursuing a way, one can continue learning for the rest of ones life. In other words, one can obtain an awareness of ignorance, a prerequisite for ones growth. If one sets a way, then one can achieve happiness from the process. Milestones can be set when instantaneous force is required, which will serve as short-term goals. All one needs to know is what way to set. In my case, I pursue the management way based on the way of human beings. p192 Goal Setting Happiness lies in the achievement of goals. Goal? Goal? Goal? After a goal is achieved, one cannot proceed unless one sets a new goal. Way Setting Happiness lies in the process. Milestone, Milestone, Milestone, Milestone Since there is no goal for the way, one can enjoy the process itself. 3. Elimination of the boundary dividing life and death: Develop ones own outlook on life and death If the significance of ones life is defined as usefulness to others, it may happen that ones attitude ultimately declines because the period that one can be of service to others decreases over time. The next theme is, therefore, whether or not one can maintain a positive attitude until one dies. The reason my grandmother lamented that she was of no service to others and all she could do was eat was because she tried to contribute to others physically. However, her words were embedded in my memory and proved to be useful in forming my

philosophy. Moreover, its usefulness spreads further as I share her words with others. This type of usefulness transcends time and space. My grandmother lamented because she regarded usefulness as something provided by her physical body. In the case of athletes, the period that they can be on the active list is very short. The period of their lives after retirement is much longer. If they think they can contribute to others only while they are active players, they end up missing the good and old days. On the other hand, if they regard coaching their juniors and disseminating sports in society as the contributions they can make, then they can continue to contribute. The means of social contribution can be divided into two types: physical means and mental means. As we grow old, we deteriorate physically and become unable to make a contribution that requires physical activities. On the other hand, the contribution via mental means, such as conveying a mindset or a perspective, enables us to continue to contribute to others regardless of our age. Some people like Socrates, Plato, and Confucius continue to contribute to society beyond time and space. In management, the contribution via mental means is to nurture and leave people. When one can contribute via physical means, one should contribute by making the most of ones body and view ones death as a starting point for a contribution via mental means. Thus, one no longer has to grieve that one has little time left to live. Contribution via mental means has the potential for eternal contribution that goes beyond ones lifetime. If we take this view, we can have a clear idea about what we should do during our lifetime and maintain a high level of motivation even if our body deteriorates over time. I think that a person dies twice: The first time is physical, and the second time is when one fades from the memory of others. What is important is that ones contributions are handed down to future generations as proper values even if ones name fades from memory. This is the continuation of the soul. Philosophy means to have an outlook on life and death. Only after we view death proactively can we understand the significance of life. By considering death, we can come to realize that our time is limited and how significant it is to nurture and leave people in the limited timeframe. p195 Live proactively by eliminating the boundary between life and death Seeker, Way Life, Even after ones death, one can influence others by ones way of life. After death Physical contribution, Death, Mental contribution, Complete mental contribution

4. What counts most is to have the objective that one truly wants to achieve. Lets change the viewpoint and take a look at the pattern of successful people. If you read books written by successful corporate managers, you will find there is a certain pattern to them. For example, Sakichi Toyoda, despite his parents strong opposition and repudiation of him, continued his attempts to create an automatic loom driven by his strong passion. Yamato Transport Co., Ltd., which was originally a transport company targeting corporate clients, had a dead-end relationship with Mitsukoshi Ltd., its major client led by the former president Shigeru Okada. Masao Ogura, the then president of Yamato, broke new ground and built a brand new market driven by his passion for the creation of a person-to-person market. Thus, the primary characteristic of successful corporate managers is that they have a clear objective that they want to achieve. Their second characteristic is that they have a strong passion, intention, and sense of mission. The third characteristic, a consequence of the first two characteristics, is that they continue acting in pursuit of their objectives. While they face difficulties many times, they do not view these difficulties or repeated setbacks as failures. They think to stop acting in pursuit of their objectives is the true failure. Their strong passion and intention prompt them to continue their ongoing efforts. This is the basic pattern of successful people. It looks so simple that anyone can be successful. However, the most important point is whether or not one has an objective that one truly wants to achieve. If one can find it, passion and a sense of mission will follow, which in turn serves as the driving force for action. p198 Characteristics of successful people 1. Have a clear objective that they want to achieve 2. Have the passion, intention, and a sense of mission 3. Continue acting in pursuit of the objective Characteristics of ordinary people 1. Have objectives that they have to achieve 2. Lack a sense of mission and responsibility 3. They know, but cant act. The clear objectives that many people have are not those that they truly want to

achieve, but those they think they have to achieve. Employees must have relatively clear objectives. However, they need to review which type of objectives they have. The objectives that must be achieved do not generate passion or a sense of mission. Therefore, if things do not go well, they easily suffer a setback. Since the objectives to be achieved are basically the objectives that one does not want to address, one tends to put them off until just before the deadline and make an excuse that one does not have enough time or people to work on them. When I was an elementary school boy, I had both types of objectives, those that I had to achieve and others that I wanted to achieve. Those I had to achieve were homework. I rarely finished my homework right after I got home from school. I usually finished it before I went to bed and sometimes I did it in the morning before I went to school. The objectives that I wanted to achieve were to hang out with my friends and watch my favorite TV programs. These were given top priority. Since higher priority is given to the objectives that one wants to achieve, one makes time for them. On the contrary, since low priority is given to the objectives that one must achieve, one runs out of time for them. Then, how can we find the objectives at work that we truly want to achieve? I have a friend who works for Toyota as an engineer. Since his childhood, he has always been a talented person, but lacked self-direction. Therefore, he entered Toyota based on the idea If you need shelter, choose a big tree. His boss has kept asking him what it is that he really wants to do. Unless one has the mind of a corporate manger or the objectives that one truly wants to achieve, one cannot become a manager at Toyota. His problem is that he cannot find what he really wants to do. While it is easy to lead those who can find or have objectives that they really want to achieve, it is tough to help those who do not know what they truly want to do and find their true objectives. How can we help them find what they truly want to do? 5. How to find the objective one truly wants to achieve How can one find the objectives one truly wants to achieve? The desire to contribute to others is not a human instinct. Therefore, many people cannot readily accept such an idea. We need to devise a way to explain the idea effectively so that they can accept it easily. The effective way to make it easier to accept is to explain it according to human instinct. Drucker paraphrases it as by what one wants to be recognized. Human beings have a desire to be recognized by others. This is called the desire for recognition, which is a human instinct. In short, all we need to do to help find the

objectives one truly wants to achieve is to tap into this desire. For example, if one wants to be recognized by customers, one must contribute to them and eventually one is able to do so. However, there is a pitfall: one tends to seek results first, such as recognition by superiors or the company, money, and success. One must first focus on the cause, that is, customers and regard the recognition by the company as the effect. In other words, one must wish very strongly to be recognized by customers. p. 201 Which way of life do you choose? Wants to be recognized by others (desire for recognition)By what one wants to be recognized? Select the objective one wants to achieve Wants to be recognized by customers (bring out ones instinct) Effort customer, customer, customer Result, Pleasure, One enjoys ones work. Wants to have an easy life Objectives are given Reason: I must do it. Instinct: I do not want to do that much. Conflict between reason and instinct. Instinct cannot be defeated. Result, One cannot have an easy life. Working for a living is painful. The next theme is what one wants to contribute. Once one has a strong desire to make a contribution, one can make ongoing efforts toward it. At this stage, all one needs to do is to select a contribution theme. The objective that one truly wants to achieve becomes just a matter of selection. Upon selecting, one should choose an objective that can make the most of ones strong points. However, unless one has a very strong desire to make a contribution, one ends up seeking an easy life, which is also an instinctive desire. In short, unless one strongly wishes to be recognized by others, another instinct takes over the desire for recognition, disabling one from working to fulfill the desire. In fact, many successful people had a strong desire to be recognized by their mothers. Hideyo Noguchi and Edison are good examples. If I might venture an opinion, since the desire to be recognized by ones mother is stronger among males than females, there are more successful males than females. If one can successfully tap into ones desire for recognition, it can become a source of great energy. Even if corporate managers continue asking the employee who has already selected an easy life what he/she wants to do at the company, they will never be able to find the

objective that the employee wants to achieve. This is because the employee has already selected the ultimate objective of an easy life. Once a person selects an easy life as the ultimate goal, the person is left with the objectives to achieve. However, since such objectives are not those that he/she really wants to achieve, the instinct of selfpreservation I dont want to do that much takes over. The conflict between I must do it and I dont want to do it is, so to speak, a battle between reason and instinct. One is trapped in an inexplicable maze and unless a radical mind innovation occurs, one can never solve the situation. At least until entering a university, we should have selected making an effort. However, before we knew it, we came to select an easy life. While the efforts we had made until entering university were for ourselves, the efforts to contribute to society are for others. These two types of efforts are completely different in nature. It is clear that the students during the Meiji period studied for the purpose of contributing to people. Today, however, the purpose of going to university is to enter a major company. I wonder if the principles or philosophy of university founders have not been handed down to the present generation. 6. What happens if one works for a living? If one selects an easy life if possible, one will end up being unable to lead an easy life. It is because work becomes a means for a living and wages become compensation for pains. In other words, one must bear hardship to gain a living. Sooner or later, one starts complaining about the company one works for. One starts to view oneself as a victim of the companys exploitation and work becomes something that the company forces them to do. Many quit their jobs due to pent-up discontent with the company. However, those left the company experience the same thing at another company. They will repeat a job change unless they realize that the problem lies in themselves or its their own issue. Only those who have made an effort to contribute to society can enjoy life. 7. The Battle of Instinct vs. Instinct The conflict between I must do it and I dont want to do that much is a battle between reason and instinct. In such a battle, sometimes reason wins and other times instinct wins. Thus, if reason and instinct fight with each other, motivation will fluctuate. This is what happens to ordinary people. In such cases, however, one often

gives in to instinct. While human instinct works even during sleep, reason functions only when it is deliberately addressed. However reasonable one may be, there comes a time when instinct wins over reason. It follows, then, we should not fight such a battle. The way to win all battles is to let instincts fight each other. That is, have the desire for recognition, I want to be recognized by others, fight against the desire for selfpreservation, I do not want to do that much. Since reason and instinct are essentially different in nature, they will fight forever. On the other hand, since an instinct and another instinct are of the same nature, one can give priority to either of the two. If one continues telling ones desire for recognition to ones consciousness, the desire for recognition will win all battles. Once such a situation is achieved, work will become a pleasure. p205 Effective Wants to be recognized by others vs. I dont want to do that much. Instinct Instinct Win and lose Instinct Reason I dont want to do that much vs. I must do it. The effective way is to let instincts fight with each other. 8. The Tortoise and the Hare What do you learn from the well-known Aesops fable The Tortoise and the Hare? When I ponder over the true nature of life (philosophy), I often remember the fables I heard as a child. Most fables carry life lessons. I think the essence of this story lies not simply in the significance of making an ongoing effort, but also in the significance of knowing that one is a tortoise. The decided difference between the tortoise and the hare is a difference in their ability. The hare is overwhelmingly faster at running than the tortoise. In other words, it is critical for one to know first that one lacks the ability. The results of the first test I took as a high school student showed that I was in 110th position among 405 students. Although it was a preparatory high school in the countryside, I was shocked to see my grades, which were significantly lower than those I received in my junior high school. I studied hard for the next examination, but the results were worse, I was 132nd. I realized my ability was not as high as I thought. This position was a reality. From the

results, I also learned that there are many people who have higher ability than I do and that I need some strategies to defeat these talented people. After all, the greatness of the tortoise lies not only in its unceasing endeavors, but also in its high strategy. If the tortoise had competed with the hare in a 100-meter race, the hare would have won a complete victory. In a 100-meter race, there was no time for the hare to take a nap. It is ability that determines the results in such a race. However, the tortoise challenged the hare to a long-distance race, that is, to the foot of the mountain in the distance. It was the tortoise who determined the distance. The tortoise knew that a competent animal is often lazy and was convinced of its victory on the assumption that the hare would take a nap in a long-distance race due to its selfconceit. In short, one needs not only effort, but also strategy in ones life, from which the following equation can be formulated: Result = Ability Effort Strategy While the ability is an inborn talent and we cannot choose it ourselves, we can acquire and select effort and strategy by ourselves. According to the Art of War by Sun Zi, one should first know oneself, that is, ones ability, talent, war potential, and management resources and then develop strategies that can cover a lack of any of these elements. The Battle of Okehazama by Oda Nobunaga is a good example: He made up for his small military force with a good strategy. Most people are not blessed with outstanding inborn talent. They need to weather difficulties via their effort and strategies. Unfortunately, however, they are not aware that they are tortoises. Consequently, they choose a hares way of life despite the fact that they are tortoises. They lead a lazy life without any strategies despite their inability. Such a lifestyle will never lead to success or happiness. When developing strategies, it is important to view them from a long-term perspective. The longer the perspective, the greater the variety of strategies and the chance of winning whereas the shorter the perspective, the greater the precedence of ability over strategies. Life is not a 100-meter race, but a marathon. We must first realize that we are tortoises and cut our way through difficulties with persistent efforts and strategies (way of life or philosophy). When I was certified as an accountant and entered an auditing firm, I found so many high-caliber people around me. They were much greater than those I found when I entered a high school. I would not be able to win if I squarely competed with them. Fortunately, however, many of those high-caliber people tend to be jacks-of-all-trades and masters of none exactly because they are good at almost everything. It is more difficult for these clever people to have a long-term perspective than less clever people.

Once in a while, however, there are exceptional people in the world of management, who are hares, but act like tortoises. If you ever meet such people, you should never compete with them: Discretion is the better part of valor. You should change the market or take niche market strategies. In any case, you should not compete head-on with them. 9. The Ant and the Grasshopper The fable The Ant and the Grasshopper also carries an important life lesson. However, it is also true that people do not want to be the ant due to the pains involved in the ants lifestyle even if they understand the importance of the ants diligence. This is because they associate the pleasure of working with the grasshopper and the pains of working with the ant. Which would you choose? There are similar sayings: Live a short, rich life and Live a long, frugal life. If the story of the ant and the grasshopper is applied to the sayings, the grasshopper is the one that lives a short but full, rich life, and the ant is the one that lives a long, frugal life. There may be those who first chose the lifestyle of the grasshopper, but changed later to live a long, frugal life. While the grasshopper conjures up the image of enjoying work, the phrase a short, rich life suggests a short lifetime. Since every human being wishes to live a long life, they do not want to choose the lifestyle of a short, rich life that emphasizes a short life. Y-CUBE president Yoshio Yasuda said in his book, While we cannot choose whether we can live long or short, we can choose to live a full, rich life or a frugal life. This is true. If so, then we cannot but choose a full, rich life. Since God alone knows whether we can live long or not, we should concentrate on living a full, rich life. President Miki Watanabe of Watami Co., Ltd., expresses the same idea to live a life with a density twice as high as that of ordinary people. This allows people to enjoy their lives twice as much as ordinary people. People say that when one dies, what one regrets is not what one did, but the fact that one did not achieve anything in life. I think that imagining the end of our lives will thicken the density of our lives. We dont need to actually die to gain the realization. President Masayoshi Son of Softbank Corporation once said that he views a quarter as one year. That is, one year for ordinary people means four years for him. He may live a life with a density four times as high as that of ordinary people. A manager of a pub puts up a framed mission statement on the wall that said, Enjoy today as well and enjoy even more tomorrow. Ordinary people would think that they want to enjoy today. However, that mission statement says today as well, which

implies that they enjoyed yesterday, too. Moreover, they can enjoy even more tomorrow. I noticed one very important point here. If we live like this statement, the day we die is the happiest day of our lives. I thought this was the best way of life since one does not regret anything over time or become afraid of death.

Chapter 10: The Day when One becomes a True Leader 1. Management and leadership are the two wheels of business administration Success in both employee education and management reform depends ultimately on leadership. When we face managerial difficulties, we tend to question our methods. To question methods means to regard the problem as someone elses issue. There are also many people who do not question the methods, but examine the problem only from a management perspective. If a problem cannot be solved via management, the true cause lies in leadership. Ones own leadership should be questioned first. Upon implementing any initiatives, the critical component is not what to say, but who says it. Why was President Carlos Ghosn of Nissan Motor Co., Ltd., successful in management reform? He did nothing special in terms of management. He implemented nothing more than what should be done from a management point of view. The difference was his leadership. In terms of leadership, he achieved what nobody had ever been able to accomplish before. Management and leadership are the two wheels of business administration. While management is visible, leadership is invisible. We often focus on the visible and neglect our own issues, that is, our own leadership. p215 Two Wheels of Business Administration Management, Leadership What to say, Who says it Business administration comprises two areas. Problems cannot be solved with only a managerial approach. 2. Whether or not objectives can be achieved is a leadership issue. Lets take a look at what leadership means. There are people who easily give up on the idea of becoming a leader due to a lack of charisma, which they think is an indispensable quality of a leader. However, this is wrong. Anyone can become a leader. One becomes a leader the moment one becomes aware of being a leader. A leader is not an executive post or something associated with it, nor is a president necessarily the leader of a company. In some cases, the chairperson assumes the leadership of a company. Not all presidents can become leaders, because while a leader implies the state of assuming leadership, an executive post is only a position.

We are all categorized into either leaders or followers. A leader is a person who leads others while a follower is a person who is led by others. One can decide for oneself which one wants to be. Needless to say, it is better to determine ones own way of life for oneself. Unless one decides it for oneself, it will be decided by someone else. The meaning of a leader is self-evident: It is a person who leads others. In order to lead others, a leader must first communicate the destination. To clearly show the destination means to set value, such as principles or vision. Vision should be something that can be specifically imagined. It should also be something exciting when imagined, because vision has the maximum potential for attracting people. Next, leaders must share the value with the people around them. A leader needs to talk passionately about the vision to employees and share it with them. In order to share it with them, the leader must appeal to their emotions and move their hearts. Last, a leader must implement vision management. Vision management means to realize the vision as objectives. However, whether or not the vision can be ultimately realized depends on leadership. p217 Three qualities required of a leader 1. Value Setting Capable of establishing an exciting vision that can be specifically imagined 2. Value Sharing Talks passionately about the value and shares it with employees 3. Value Realization Implements vision management that leads others toward the realization of the value. Leader means a person who leads others. 3. The story of an alpinist who, moved by emotion, lost his life Although anyone can be a leader, many people who read books on successful corporate managers, which emphasize only their good points and outstanding qualities, tend to think they are not eligible to become leaders. However, it is important to recognize that true leaders have many behind-the-scenes characteristics. The novel Koko-no Hito (lofty alpinist) by Jiro Nitta (Shinchosha Publishing Co., Ltd.) tells the story of a famous alpinist (Buntaro Kato) who lost his life in the

mountains. The direct cause of death was that he climbed a mountain with his friend, for once in his life, in response to a request from his friend. Consequently, the friend, who was less skilled at climbing less than Kato, held him back, and both lost their lives. What caused their deaths? Is it attributable to the friend with fewer climbing skills or the alpinist who, moved by emotion, accompanied his friend? The fundamental problem lies in the fact that the alpinist took his friend with him, that is, a miscalculation by a leader who was moved by emotion. Corporate managers (leaders) can be compared to alpinists accompanying people with various levels of climbing skills. They cannot have a team comprising only highcaliber members. Among these people, what decisions do leaders face? Lets discuss it in comparison to the alpinists. In order to achieve the ultimate goal, a leader needs to take members to a safe place as fast as possible. Otherwise, the risk of an accident increases due to sudden changes in weather or the fast approach of night. However, what happens if one member cannot keep up with the others? He/she will ask to rest and criticize a leader who does not accede to the request. Soon, other members will sympathize with one complaining. In such a situation, what should the leader do? At present, I am the leader of a company. I am expected to take care of those who may fall behind the others. However, I cannot afford to look back, because if I stop moving forward, I may expose all members to the danger of accidents and death. My love for employees is directed not only to the 73 current members (as of 2005), but also to the several hundred new recruits. I am obliged to give opportunities to future employees just as I did for current members. This is my mission. Therefore, I cannot but continue moving forward. Sub leaders or colleagues should take care of those who fall behind. Employees may regard a leader like me as coldhearted. Love of a leader is directed never to individuals, but to all members. Therefore, a leader may have to make harsh decisions, such as discarding the person lagging behind when the safety of others is at stake. Such a decision can be made only by the leader, not by a sub leader or other members. Suppose that a leader, moved by emotion, decides to rest and does not discard the person falling behind. If the leader has a capable sub leader, the sub leader will criticize the leader for poor judgment, saying, A leader who exposes all members to danger is unfit to be a leader. Here, the sub leader is required to make an important decision. It is to discard the leader. The sub leader must leave behind the leader, who was moved by emotion, and the member who fell behind. In other words, the leader must be replaced. I will continue moving forward as a true leader. However, our physical strength grows weaker as we grow old, and the time will come when we are unable to lead the

team with passion alone. The replacement of a leader is inevitable. 4. If you dont like it, quit the company! When I was working for an auditing firm, there was a strong leader, who was appointed general manager at a young age. When I entered the firm as a new recruit, he was HR general manager. At that time, Japan was in a recession, and the firm was under pressure to reengineer its organizational structure. One of the reengineering attempts he implemented was to integrate the division of Japanese language typists and that of English language typists. While today, we can type documents using a word processor, at that time, all reports to be submitted to our clients were typed by typists. If even one tiny typo was found in a document, retyping of the entire document was required. Moreover, English language typists were required to type everything correctly even if there were misspellings in the original documents, which means that high proficiency was required. However, times have changed, and today, thanks to the word processor, text revisions are easy to make and misspellings are corrected automatically. In light of such a situation, the HR general manager announced the integration of the Japanese and English language typist divisions. To this announcement, however, skillful English language typists voiced strong opposition. Since they were proud, skilled workers, they could not accept working with young, unskilled typists. The general manager said to these opposing typists as follows, If you dont like it, quit the company. What he said circulated immediately around the office, and everybody thought he was a coldhearted person. As a young worker, I was also dismayed to hear that and thought that he was the type of person who easily discards people. Almost all of the English language typists left the company in response to what he said. They must have run out of patience with a company that appointed such a coldhearted person as general manager, someone who does not care about the employees and does not accept employee proposals. The typists must have quit the company feeling: Bad cess to the company. What happened to the auditing firm after so many English language typists left? While there was a little confusion in the beginning, normal operations soon resumed. Many staff members supported the remaining unskilled, former Japanese language typists after the frightening women (at least to the young auditing staff) left the company. Although I do understand how English language typists came to think that it was the company that should be held responsible for this trouble, I think they must

have noticed the change in the times after they left the company. How did you feel about what the general manager said? Did you sympathize with his seemingly offensive language or with the English language typists who left the company? It is all up to you which way of life you choose. What you are now is the consequence of your past choices. Whether you become a leader or a follower is a consequence of the choices you make. I can now understand the general managers distress and his decision. It is when one comes to understand the distress of a leader and the significance of making difficult decisions that one is ready to become a leader. You should remember, though, that a leader is a person resented by others. 5. Corporate managers who discarded outside vendors The first time I read a book on Konosuke Matsushita, I was impressed by his greatness. However, now, I can read between the lines and understand his distress as a person and the pain and bitterness of managing people. Konosuke Matsushita, a great corporate manager, was resented by many people as he managed the company according to the principle of customer first. His mission was to continue providing cheaper and better products to customers. To this end, he boldly discarded outside vendors who did not comply with his mission. The outside vendors also have employees and their families. If Matsushita is one of their major clients, Matsushitas discontinuation of business with them will lead to their bankruptcy. However, discarding outside vendors is in fact in compliance with corporate principles. Corporate managers wish for the happiness of the majority, and this wish is never directed to specific individuals. The same applies to employees. While Konosuke Matsushita continued the lifetime employment system, his successors were not able to maintain it. If they had maintained it, however, they would have lost everything. At times, leaders have to be coldhearted. When people are happy, leaders should not be happy, because they should focus on working out ways to avoid the coming risks. Nor should they grieve when people are sad, because they should concentrate on contriving countermeasures. 6. The Positive and the Negative: Leaders behind-the-scenes characteristics Both would-be leaders and would-be followers need to know what being a leader means. Books on leaders describe only positive characteristics. However, leaders are

not super human. Leaders have good points and bad points or the front and back, positive and negative. The stronger the front is highlighted, the darker the back becomes. For example, leaders who attract people can also become those who manipulate people. If leaders use their positive characteristics properly, they will become good leaders. However, if they use them improperly or give free rein to their negative characteristics, they may become destructive leaders like Hitler. Whether one becomes a good or bad leader depends not on ones ability, but on how one uses it. Simply put, everything depends on the objectives one sets. The behind-the-scenes characteristics of many good leaders include the following: 1. Sometimes they seem coldhearted. 2. Consequently, they are resented by others. 3. They often chop and change or do not keep their word. Not that leaders do not keep their word, they cannot keep it. The role of leaders is to continue making the best decisions in response to the changing management environment. Many employees are often at the mercy of a corporate managers sudden shifts in what was said, and some fiercely criticize inconsistent conduct. However, leaders should not be afraid to change what they said. This is because if they insist on keeping their word, it may sometimes lead to a negative impact on management. The seemingly frequent changes leaders make often represent consistency to the management policy: they may represent responses to environmental changes. If one seeks the true cause of frequent changes, one will be able to understand that the changes were sound decisions. 4. They look proud. Leaders must lead their organizations with passion. To this end, they sometimes need to inspire employees. For some people, the vision they present to employees may sound like empty words. However, leaders know that they have to inspire themselves because they know that once their passion dies, everything may burn out in an instant. When leaders lose their passion, the organizations will collapse all at once. Strong leadership, therefore, may sometimes look proud. 7. Anyone can become a leader. Many people think that they are not cut out to be leaders. However, anyone can become a leader. One becomes a leader the moment one becomes aware that one is a leader. The behind-the-scenes characteristics of leaders show that they are ordinary people.

While people tend to think that a fine character and charisma are what it takes to become a leader, this is not true. Needless to say, it is much better if a leader is a person of fine character. However, if such a quality is a prerequisite to become a leader, no one would become a leader. The requirements to become a leader are as follows: (1) has a vision; (2) shares the vision with others; and (3) demonstrates leadership to realize the vision. Anyone can become a leader if one can fulfill these three requirements. Charisma or dignity is not required. A person of bad character can become a leader. The character, dignity, and style all change and begin to take proper shape as one practices leadership. Therefore, why not develop the awareness that you are a leader and assume a leadership role in your company? 8. What does it take to become a new leader in Asia? It seems that the low birth rate and depopulation in Japan will accelerate in the future. In the midst of such a social context, we are required to transform ourselves from Japanese companies to Asian companies. Among the present Asian economies, China shows the most rapid growth. However, I think that India will eventually exceed China and become a major economic power in Asia. If that happens, the issue of language will assume greater importance. For China, the United States and Japan are on equal terms in that we both do not speak Chinese. However, India is different. It is an English-speaking country, which implies that the Western countries have an overwhelming advantage over Japan. In fact, while the United States makes the most of India to outsource services, Japan has not been able to do so because of the language barrier. We should enhance not only our identity as Japanese, but also our awareness as Asians and a leader in Asia. In this light, we need to thoroughly review the English education system in order to develop world-class human resources. In addition, we should become a country that produces world-class leaders by implementing leadership education. Unless we set these as our ultimate objectives, we will be left behind in the international community. 9. When a company goes bankrupt: Everything that has a beginning has an end. Masato Sasaki, an aikido master and the founder of Shinmeijuku, once said, Something unexpected always happens in life. Thats the way life goes. I heard that many corporate managers were saved by this phrase. Through my work, I have spent

many hours with corporate managers whose companies were on the verge of going bankrupt. While I wish for the growth of every company, not all companies can grow and develop as they wish. Everything that has a beginning has an end. Human beings who were born are destined to die. Similarly, if a company is founded, its end will come eventually. In most cases, the end of a company comes when its social mission has run out. Many corporate managers, who strived to continue their businesses in the belief that the growth of the company was good and bankruptcy was bad, panicked in the face of bankruptcy and took out high interest loans without any prospect of paying the money back. Some even committed suicide when their companies actually went bankrupt. The cause of such a tragedy is that corporate managers pursued only growth and the survival of their companies. Either the front or back, or the positive or negative is not enough to be successful. One must be ready to accept everything. Even if a company ends, the social mission as a person continues. The true end comes when one gives up everything, which has no direct relevance to bankruptcy. Even if ones company does not exist anymore, one still has a mission to complete during the rest of ones life. I believe this is what the management way is all about. Those who can accept everything positively are true leaders. Column: An employees comment that saved the management crisis The third to sixth sections of this chapter (pp. 218229) are quoted from the four messages (Qualities required of a leader) I wrote to 73 employees (as of 2005). I received feedback about these messages from all of the employees and would like to introduce one of them below: Response to The Story of an Alpinist: Qualities Required of a Leader by Hidetoshi Hoshino If a man raises 100 sheep and one of the 100 sheep go astray, doesnt he leave the 99 in the mountains and seek that which is gone astray? This is what first came to mind when I read the message. To me, the ideal leader is the person who answers yes to the question. I would like to study under such a leader exactly because I believe that leader will go look for the one lost sheep, and if I ever become a leader, I would like to be such a leader. I think that the relationship between

a corporate manager or a leader and employees should be like the one between the man and the sheep. This idea came to mind because the message seemed incompatible with my idea at first sight. Does the message really deny my image of an ideal leader? That is, would a true leader elucidate that a leader is a person who does not get involved with the trouble, confusion, or suffering of employees? My answer is no. Most probably, the message is the effusion of the authors resolution and the pains involved in coming to the resolution. If we take the following phrases at face value, there seems to be a significant discrepancy between the message and my image of an ideal leader: My love is not directed to the current 73 employees, and Love of a leader will never be directed to individuals. However, does a leader who does not love the followers have to determine that he/she must be cold-hearted when discarding members to begin with? I think that a true leader is a person who, led by knowledge, carries out the intentions or resolutions while distressing oneself between emotion and intention. Therefore, Chairman Toshifumi Suzuki of Seven-Eleven Japan Co., Ltd., says, I dont go and check the stores. If I do, I will become attached to the salespeople, which in turn will hinder me from implementing reforms, does not completely fit my image of an ideal leader since he does not squarely face the aforementioned distress between emotion and intention. I think that a true leader does have a warm heart to go to seek the sheep that have gone astray. However, the important point is who the sheep are for the leader. It is a person who shares the leaders principles and strives to embody them. If such a person is confused and suffers, the true leader will go to look for him/her. In this sense, it was inevitable that the English language typists, who were unable to objectively look at the changing times and the consequent changes in their work and who insisted only on their selfish demands, were discarded. They were not sheep to begin with. It cannot be helped that those who cannot share the fundamental principles of a company leave the company. Those who share and practice the principles and yet undergo suffering are bound to be located. If a leader discards those who share and practice the principles and yet undergo suffering, it is time to replace the leader or graduate because we have exceeded the leader.

I remember that when I read the feedback, I could not hold back my tears. At that time, our company was expanding rapidly, from six to 73 staff members in just one year, and I even declared to make it 1,000. At the same time, however, a sense of impending crisis built up in me that the organization was about to fall apart. The companys management system could not catch up with the rapid expansion. It was only natural that staff members began voicing dissatisfaction. While they expected much from me, I intentionally did not fulfill these expectations because they involved themes that a good leader should not fulfill alone, but should let employees address. In the midst of such a situation, I summarized a leaders suffering into four messages and communicated them to employees. Mr. Hoshinos feedback about these messages covers everything I wanted to say. Moreover, later he told me that he wrote it while giving due consideration to staff members who may get upset by reading the messages. I intentionally wrote upsetting messages to create chaos among the staff. Without chaos, there would have been no heated discussions. This feedback served to open up a way to the solution to the greatest management crisis we had since the inception of our company. At that time, Mr. Hoshino passed the second examination for the certified public accountants while working and joined the auditing firm I used to work for. I sincerely thank him for saving our company during the crisis and wish him greater success as a certified public accountant. Epilogue Shuhari The word Shuhari is believed to be derived from Johakyu, a teaching of Noh founder Zeami. Johakyu was completed into Shuhari by Fuhaku Kawakami, the founder of the Fuhaku school of tea ceremony, in the Edo period.

Shu means to follow the form, the teachings of the master, and learn it
wholeheartedly and without doubts.

Ha means to create originality by refining the acquired form and is the next stage
following the Shu.

Ri means to further sublimate the form into the techniques and establish a new
original way. This is the final stage of the way. Which of the above three stages is most important? During the Shu stage, one undergoes tough training of repeated basics and aspires to go on to the next stage.

Since many young people value individuality and pursue originality, they become anxious to move on to the stages of Ha and Ri to find their own lifestyles. However, I think the most important stage among Shu, Ha, and Ri is Shu. The Ha and Ri stages are only the extension of Shu. In other words, they are not the stages that one consciously pursues, but those that can be naturally achieved or sublimated through the repetition of the basics. There are proverbs, such as Perseverance prevails and Patience and application will carry us through. In the world of shakuhachi, people say, It takes three years to learn how to shake ones neck. As we can see from these sayings, it takes at least three years to acquire the basic form during the Shu stage. The same applies to the world of business. While the title of this book is Capable Young People Quit Their Jobs Within Three

Years, the true intention of the book is not to encourage young people to change jobs. It
means young people should put up with their jobs at least for three years. After three years of patience, they will come to understand what the pleasure of work is all about. Then, they will be able to deepen, not quit, their work. There is a word katayaburi (a person who breaks away from the conventional form). Those who can become katayaburi are those who have acquired the form to begin with. If a person who has not yet acquired the form acts against the form, he/she will end up with no form. If you are experiencing hard times, it means that you are growing.

My Personal Theory The tortoise lives ten thousand years. 1. Strategy of Chairperson and Representative Director: What work should corporate managers engage in? There are times when corporate managers must give serious consideration to the work of a corporate manager. Briefly, the work of corporate managers is to manage a business. Then, what is management? This is a very difficult topic. However, unless corporate managers address the topic, they will become sales managers, plant managers, or development managers. That is, they abandon management and start doing the work of employees. I was greatly impressed with the idea of Chairperson Masahiro Origuchi of the Goodwill Group, Inc. Chairperson Origuchi assumed the chairpersonship from the very beginning of the company when there were only about five employees. His first act was to clearly distinguish between the role of chairperson and CEO (chief executive officer) and that of president and COO (chief operating officer). Following his example, I assumed the position of chairperson and CEO from the beginning of my company. Then, what kind of work should CEOs engage in? The work of the CEO in my company involves the development of corporate principles, management philosophy, and vision, the formulation of basic strategies to achieve them, and personnel education to disseminate them among employees. Since the development of principles, vision, and basic strategies requires only thinking, the actual physical work of the CEO centers on personnel education. Dividing the roles of a corporate manager between a CEO and a COO frees the corporate manager from most of the routine work and lets him/her concentrate on key corporate issues. This method is very effective. The method also serves as an effective measure for the issue of business succession. Many owner managers seriously consider the issue of business succession only after turning 60. However, since I had seen many business succession failures through my work as an accountant, I planned for business succession when I established the company. The last task of corporate managers is business succession. In order to implement business succession successfully, I strongly recommend that corporate managers start planning for business succession right from the beginning. I also recommend that they determine their retirement age as corporate managersin my case, its 60at the beginning and then publicly announce it. This public announcement of retirement age is the method practiced by President Miki Watanabe

of the Watami Group. If we try to determine our retirement age after we get old, we may miss the right time due to a desire to maintain the current social position or further business development. No one can stop owner managers. Consequently, they become the harmful old and invite the collapse of their companies. Owner managers should discipline themselves with a keen awareness that they are in the position of the emperor in the story of the Emperors New Clothes. After I reach 60, I would like to work as an ordinary consultant again. After all, an angler starts with carp fishing and ends with carp fishing. 2. Strategy of hiring inexperienced people: You can tell at the beginning who has high growth potential. I once seriously considered whether a corporate manager was also an educator. My conclusion was that while it was a corporate managers role to educate employees, he/she was not an educator. Corporate managers are managers. While educators serve students, corporate managers serve customers. Educators must provide thorough education to students without producing dropouts. Education is an end in itself for educators. On the other hand, corporate managers must focus on customers. Personnel education is one means to satisfy customers. If corporate managers continue focusing on personnel education for fear of producing employee dropouts, it may constitute a breach of customer trust. Conversely, corporate managers must sometimes discard employees for cause. The time will come when corporate managers quality as leaders is tested. Some may think that staff dismissal is a ruthless act. However, if corporate managers try to save everyone, they will lose everything. I think that the role of corporate managers is to sow seeds in a field, water them, and continue taking care of them. However, not all seeds sprout and bear fruit. However closely they take care of the seeds, they will not sprout if they are rotten. Then, what kind of seeds should corporate managers sow? Here is what I call recruitment strategy. At our company, we attach particular importance to recruitment. Education is not almighty. The recognition of the limits of education is important: it is arrogance on the part of corporate managers to think that they can educate anyone. Although we attach particular importance to recruitment, we basically open the door to many inexperienced people. This is because we believe that those who have consideration for customers, not knowledge, skill, or experience, are those who

will eventually be successful. While I am eager to give such people a chance, I do not employ self-centered persons however experienced they may be. The more experienced the applicants, the more strictly I evaluate them. This is because, just like imprinting in the newly hatched, people tend to think that the methods of the company they first worked for are the most fundamental ways to work. The greater a persons experience, the more anxious and uncomfortable that person feels about accepting new ways. For enterprises that intend to break new ground in the industry, experienced employees sometimes become the counter force to reform. MK TAXI in Kyoto is a good example: in an effort to thoroughly innovate the conventional method of providing services, the company made it a rule not to employ experienced taxi drivers. We humans tend to take the easy way out. For enterprises that aim high, it would be safer to avoid employing the complacent experienced. Many corporate managers, however, tend to think that experienced workers possess adaptable fighting potential that requires no further training. This constitutes negligence on the part of corporate managers. Corporate managers should remember that education is an integral part of their role. 3. Strategy to maximize lifetime income: Do not stick to high starting salaries. There are companies that offer high starting salaries and those with low starting salaries. Which is better or what characterizes each type of companies? Generally, companies seek good human resources. Consequently, corporate managers are tempted to set the starting salaries high. However, if they set the starting salaries high, they will not be able to determine if new recruits wish to join their companies for the sake of money or for the sake of the companies. Conversely, if corporate managers set the starting salaries low, good candidates will not apply to the companies unless these companies have unique, attractive features. Corporate managers must emphasize their companies appealing points to applicants. In order to encourage them to join the companies despite low starting salaries, corporate managers must convince them that the companies have high growth potential and that they will be able to become highly paid professionals by clearly showing them the career opportunities available at the companies. Such efforts will also serve to align new recruits vector with that of the company, facilitating the sharing of company management principles and vision. On the other hand, it takes work to align the vector of new recruits who joined the company for high starting salaries and attractive welfare programs with that of the company through education. Corporate managers who conduct easy recruitment will

have to pay for it later. At our company, we basically recruit those who want to be independent in the future. Those who wish to be independent have the spirit of inquiry and are eager to learn and work. Some corporate managers think that letting employees they have nurtured become independent is a loss to their companies. I have a totally different idea. Recruit Co., Ltd. is a good example. Recruit produced and sent out many great former Recruit workers into society, many of whom have become corporate managers or top executives. Despite the risk of losing capable employees, companies with many employees who have the potential to become independent can eventually grow more than companies with many employees without that potential. Naturally, these people with high potential make sufficient contribution to their companies while they work for them as employees. If a company wants to sell high value-added products to customers, the sales price is naturally higher than that of competitors. This is why salespersons need to explain the reason for the high price to customers to ensure understanding and acceptance. This is called proposal-based sales. However, incapable salespersons often claim that their products do not sell well because of the high price without committing themselves to proposal-based sales activities. Similarly, corporate managers who wish to secure good human resources often try to attract applicants with high salaries and good welfare or housing programs and forget to emphasize the most important, true value of their companies. As an example, the starting salaries of trainee cooks working at authentic French restaurants are lower than those working at family restaurant chains. However, those who wish to improve their skills and become independent in the future would choose to work at authentic French restaurants despite the lower salaries. Thus, in an effort to recruit people who best fit our company, we set the starting salaries lower than those of competitors and focused on thoroughly explaining why our employees lifetime incomes will be higher than others. 4. Incremental Brand Strategy: Credo Card for Customers Following the example of the Ritz-Carlton Hotel, we adopted the credo card system. Our credo card called Promise to Customers is a name card-size card that our staff must carry to convey the companys philosophy to our customers. The value of a brand cannot be enhanced overnight. It is something customers gradually recognize through the companys services. Although many people misunderstand that a brands value can be enhanced by advertising and other promotional activities, it essentially does not

improve via such means. I believe the value of a brand is enhanced when the company effectively conveys its underlying corporate philosophy and provides surprise and excitement to customers through products and services. The reason Apples iPod became a blockbuster is not only because of its high quality, but also because people were impressed by Apples philosophy of producing innovative products, which was successfully communicated to customers via the iPod. Consequently, customers were attracted to Apple as a company and have become loyal supporters. Communication of corporate philosophy is somewhat similar to religious activities. If I venture a remark, employees who are obliged to convey the corporate philosophy play, in a sense, the role of missionaries. On our credo card, our management principles and action guidelines are written. While in general, the management principle of a company is expressed in one word, our management principle is one and one-half pages long on A4 paper. This is because we believe our principle cannot be expressed in just one word. Our management principle comprises the following four parts: (1) Why do we work? (2) What is given is what is taken (3) What is success? and (4) Grateful mind. This management philosophy is the summary of the purposes of our employee training guidelines containing over 100, A4 pages. Aiming to thoroughly disseminate the management principle among employees, the credo starts with the reasons to work because it leads to the formation of a personal philosophy. Next, employees learn the basic principles regarding customer orientation. Here the emphasis is more on giving than taking. The third success is defined not as obtaining wealth, but as giving value. The last, grateful mind, is a state of mind really difficult to experience or attain because the spirit of genuine service and gratitude can be fully realized only after one has achieved some social success. Many first-class corporate managers often use the term gratitude. In fact, when one attains that state of mind, ones business grows more than ever. However, people think that grateful mind is simply ones public stance, not the true intention. The state of gratitude is in a sense a state of enlightenment. Even if we cannot attain that state, it is important to strive to understand it. To tell the truth, this book is a revised version of our companys employee training guidelines. It is a summary of the essentials of employee training I conducted for clients as a management consultant. Our employees are asked to read the guidelines, write comments before they enter our company, and read their comments in front of an audience on the first day they become an employee of our company. The theme of their comments should be not on the points they agree with, but on the points they disagree with. Since the points they agree with are what have already been incorporated in

their mind, it is no use to discuss them. They are, therefore, encouraged to thoroughly discuss the points they disagree with. As the proverb Strike while the iron is still hot says, we strive to upgrade new recruits mindsets and ways of life through thorough discussions. We believe that not only summarizing our management principles into the credo, but also communicating them to clients will deepen employees understanding of the principles and encourage them to put the principles into practice. 5. Strategy of Differentiation via Morning Training: One and one-half hours every morning. At our company, we conduct a morning training session every day for one and a half hours from eight to half past nine. The reason we have such a long morning meeting is a long story! When I established my own office, I had to work long hours, which was inconceivable when I was an office worker. During my office worker days, I did not have to work overtime so often and was able to go home relatively early almost every day. After I became independent, I had to do everything alone and worked all day long and on weekends. However, after I put my business on track, I started enjoying my freedom. If I drank too much with my colleagues the previous evening, I went to work late in the morning. If I had no special appointments in the morning, I went to work around ten in the morning. If a corporate manager works in such a manner, employees do not observe work rules. They also began to start working late in the morning. One day, one of our clients invited me to their year-end party. I took two other staff members with me to the party. At the party, I was surprised to find that the clients employees in their 20s were so capable and mature. My staff members compared poorly in everything from greetings to courtesy. I felt very ashamed of myself since the difference in the quality of employees is the difference in the quality of corporate managers. I was forced to realize my immaturity as a corporate manager. Around that time, all that I required of my employees was good work as accountants. What I had was the spirit of an artisan. I lacked awareness as a corporate manager. I decided to follow my clients method of personnel education, which included a 15minute training session every morning. Before introducing this training session to our company, I had to make one resolution: if I grew tired of the morning session over a few months and quit doing it, the employees would never trust me again. So, I asked myself if I could continue the morning session for the next 30 years, and finally made the firm

resolution that if I started it, I would never quit until I die. Upon introducing the morning training session, I also changed the work rules. I moved up the work start time from nine to eight thirty. However, once we started having the morning training session, we found that we could not finish in 30 minutes. It took a good hour. One staff member proposed then that the first 30 minutes should be spent in voluntary training only by employees. Consequently, the current one and one-half hour training system was established, where the first 30 minutes was spent in voluntary training only by employees, and the remaining one hour was for the corporate training session conducted by me. The morning training session is divided into parts. The voluntary training session includes the following: First is Fierce Tiger Training, where every member takes turns shouting out his/her own objectives while others chant encouragement saying, Not enough, not enough. While we tend to resist when others force us to do something, shouting out the objectives that we have set ourselves allows us to convince ourselves and put them into practice. Next is Greeting Practice. This is similar to the practice conducted in pubs. Such a practice is not common in the accounting industry, leading to the production of artisans. Companies with employees who cannot exercise due courtesy to people are definitely companies that provide bad service. Greetings are the basis of every relationship. There are surprisingly many people who do not understand the significance of greetings, but I think that those who cannot respect the basics will not be able to grow further. The third is the One-minute Speech, where employees introduce the improvements they made the day before. Every other day, employees make a three-minute speech instead of a one-minute speech, where they introduce exciting or moving experiences they had and receive feedback from listeners. Speakers are supposed to talk not about what they want to talk about but about what moves the listeners or what the listeners want to hear. This daily speech practice is effective in enhancing employees presentation ability to a great extent. Serving also to improve communication among employees, the daily training session brings many positive results, which make it worth doing even if we have to cut down on work time. While there are some corporate managers who claim that they do not have time for training, employee training is possible if they start early in the morning. If they cannot do it, the true problem lies not in a lack of time, but in a lack of leadership. 6. Strategy of Tokichiro Kinoshita: With what do we move or impress customers? What moves customers? First-class work will certainly move them, but it takes many

years for one to be able to do first-class work. However, employees are required to move clients even if they do not have sufficient ability. Even young employees must do so. We call the method, by which the inexperienced young employees can obtain a favorable opinion from clients, the Strategy of Tokichiro Kinoshita. It is critical for us to consider what constitutes the sandals that we must warm. Since young employees do not have sufficient experience to compete with competitors on planning ability, they must focus on accuracy and speed. When I was an employee at an accounting firm, I thoroughly stuck to speed. For an accounting office, accuracy is a must. Accuracy should not be overlooked in order to improve speed. On the other hand, those whose speed decreases in an effort to enhance accuracy are definitely incapable workers. In other words, when one is an office worker, one should focus solely on speed after securing accuracy. Specifically, employees must make it a rule to answer clients questions immediately. In order to be able to answer any questions, they must always study hard. They will become more diligent learners than those who think they can always answer questions later. In case employees cannot answer a question immediately, they must investigate and answer it within the same day. They should never postpone the answer until the following day. Clients are asking because they want the answer right now. One must realize that the longer the time lag, the less valuable the answer. If there is a time lag, clients will investigate and find the answer on their own. In this age of information, specialists who are slow to answer questions are useless. Moreover, employees must set a time limit for a task earlier than the deadline. If employees focus on jobs that require speed while they are still in their 20s, it will improve their technical capabilities dramatically. In order for young employees to be recognized by clients or their superiors, they must do jobs that require speed. In order to increase work speed, they need to analyze the work structure. That is, they should review the completed work and reconsider different ways to organize it. It is a common practice to start a next task right after one finishes one task. However, a review of the completed task will dramatically accelerate the speed of the next task. 7. Theory of Potato Seeds: Growth and Methods of Profit Sharing I was born and brought up in a farm family, and my elder brother is the eleventh in the line of farmers. I am a farmers son to the very marrow of my bones. When I was an elementary schoolboy, my mother used to tell me that I should never eat potato seeds. I still vividly remember this lesson. Then, why should we not eat potato seeds? For

persimmons, fruit for eating and seeds for planting are separate. That is, even if you eat the fruit, you will be left with the seeds to be planted next year. However, for potatoes, the edible part and the seeds are the same. In order to plant more potato seeds next year, farmers must decide not to eat them this year. However, if farmers starve, they eat the potato seeds they saved for next year. Consequently, they have no potato seeds left and must buy potato seeds from other farmers. Since they do not have enough money to buy them, they borrow money from wealthy farmers with their fields as collateral. However, those farmers who were so poor that they could not help but eat even the potato seeds have no prospect of paying back the money. Consequently, their fields are taken away, and they become tenants who do not have their own fields. On the other hand, those farmers who bore their hunger and saved many potato seeds can harvest a larger amount of potatoes the following season. They will be eventually able to expand their production and fields. This story taught me a lesson that whether or not one can combat with ones hunger for the future in times of difficulty for food determines the outcome. While the difference in outcome of becoming a wealthy farmer or a tenant is great, the difference in cause is very small. When I established the current company, I naturally did not have enough capital. Small companies that have nothing to offer as collateral cannot depend on banks. The only way to achieve rapid growth is to secure a high profit rate and reinvest retained earnings. However, if the retained earnings ratio is increased, the ratio of profit sharing among employees decreases. I told the story of potato seeds to employees. Some must have thought that it was a corporate managers sophistry. However, if we continue growing while generating sufficient revenues, profit sharing for employees can be done in the future. There are not many people who can invest in the coming year when they do not have much to eat at present. This is why so many people become tenants. Do not eat potato seeds. My mother imparted the valuable wisdom of farmers to me. The wisdom can be applied not only to agriculture, but also to management. 8. Decision to transform from bread-and-butter work to an enterprise: When my wife left the company In July 1998, I established a certified public accounting office, the forerunner of the current company. In the beginning, my wife had no intention of helping me run the office. However, she could not stand seeing me work day and night and started helping me with my work. Since my wife was one of my colleagues in the tax division of the

auditing firm I used to work for, she is better at practical tax affairs than I am. She undertook all tax-related operations right after establishment of the CPA office. However, from the employees viewpoint, having my wife and me in the same office must have been confusing. There must have been occasions when they were at a loss as to whose opinions to follow. For the first one to two years when we were trying to put the business on track, it was worthwhile for us to work together. However, after the office had developed to some extent, we clashed with each other on many issues almost every day. While I wanted to further expand my business, she could not see any point in it. The more employees I hired, the more her work increased and the less time she could spend with the children. The issue became very serious when I employed a large number of inexperienced workers. For her, it was a wild scheme for an accounting office to employ inexperienced workers who did not possess adaptable fighting potential. As I did not stop the expansion strategy, her anger reached a peak, and she left the office in November 2005. I had relied on her too much. I should have let her become a full-time mother much earlier. As of November 2005, our daughter was in the third grade. She was at a susceptible age and needed her mothers loving care. The only consolation was that the timing of her leaving the office was not too late. She now commits herself wholeheartedly to our daughter as a full-time mother. After she left the office, the orientation of the office became consistent and stable. At the same time, my family also began to settle. Although I once seriously considered getting a divorce, it also gave me an opportunity to realize that I cannot manage the company without the support of my family. The situation was exactly the same as the one depicted in the book Confessions of

Successful People by Masanori Kanda (Kodansha Ltd.). Many corporate managers in

venture companies make the same mistake and face the crisis of a family breakdown. It seems that they are tested as human beings in a weak area outside their work. It may be a best practice, if possible, not to have family members work in the same office from the beginning. On the other hand, when an entrepreneur starts a business, the only support is from the family. This is why one relies too much on ones family and aggravates the situation. When an organization transforms from an organization engaging in bread-and-butter work to an enterprise, the organizational structure also needs to be transformed to one corresponding to an enterprise. 9. Attack vs. Defense: Times to be pirates vs. times to be agricultural people

In his book For Entrepreneurs Only: Success Strategies for Anyone Starting or

Growing a Business (Eiji Press Inc.), Wilson Harrell, the former Inc. publisher, says
that there are times when entrepreneurs must become pirates and times when they need to become agricultural people. However, since many entrepreneurs have a brain structure different from that of ordinary people, such as ADD (attention deficit disorder) and ADHD (attention deficit hyperactivity disorder), it is very difficult for them to stop being pirates, which eventually leads them to ruin. I think I also have ADHD. When the industrial counselor of our company told me that I might have ADHD, I read books on it and found that I had every symptom of ADHD. In elementary school, my teacher used to make me stand in the hallway since I could not sit still (hyperactivity) or made noise in class. I almost always forgot to do my homework or bring a school lunch bag (a bag containing an apron and other things required for serving school lunch) (attention deficit disorder). People say that entrepreneurs often have ADHD because, once decided, they quit a company immediately and start up a company to realize their own ideas. People with ADHD have the brain structure of hunting people who cannot help acting immediately. However, it is worth noting here that many criminals who commit murders on impulse also have ADHD. The impulse that prevents people from controlling their own behavior can inspire people, if directed properly, to become entrepreneurs that serve society, but if it is directed improperly, it will produce criminals. Entrepreneurs with ADHD, therefore, must have a keen awareness of their underlying destructive impulse. On the other hand, these entrepreneurs find great pleasure in giving shape to their business ideas. They love to start something new. This is why despite the fact that I first established a CPA firm, I expanded it to include outsourcing and recruitment businesses and established Hong Kong and Shanghai offices. In the future, I wish to establish companies across Asia, including India. I am a pirate indeed. The pirate-type entrepreneurs have a strong urge to start something new. If they continue fulfilling the urge, they will throw their companies into confusion and end up ruining themselves. I never realized that a pirates blood runs in my veins. It is when entrepreneurs transform themselves from pirates to agricultural people that their companies start true growth as enterprises. To this end, they need not only to launch new businesses, but also to monitor the growth and profitability of existing businesses on an ongoing basis. They must focus more on putting their existing businesses on track than on starting new businesses. The behavior pattern of President Son of Softbank Corporation demonstrates that he is one of the pirates. In order not to end up as a pirate, attention must be paid to profit rates and market share, the

important indicators of corporate growth. In my case, I set the target of the Groups ordinary profit rates at 30%. While an increase in sales serves as the indicator of an increase in market share, profit rates serve as an indicator of productivity and efficiency. One must strike a balance between the two. 10. A Way of Life as a Corporate Manager Is being a corporate manager a tough job or a pleasant job? I often meet corporate managers who think it is a tough job. Probably they intentionally say the opposite so that they can keep the best part to themselves. If they answered that it is a pleasant job, everybody would want to become a corporate manager. Therefore, corporate managers team up to lie so that they can have the best part. If, however, one truly thinks that its a tough job, he/she is not fit for a corporate manager. There is no other job in the world as pleasant as being a corporate manager. I was born into a farm family as the second boy. The term tawake in Japanese means a stupid person. It is derived from the homophone tawake (which means to divide a rice field). If parents love their children so much that they divide a rice field evenly among them, that is, distribute their property to children other than the oldest son, each child will receive such a small portion of the field that none will be able to survive as a farmer. Therefore, only a stupid person divides the rice field to give a portion to children other than the oldest son. Among farmers, there is a strict rule that property should not be distributed to children other than the oldest son, the patriarch of the family. Since I was the second son in my family, I was expected to become independent from the very beginning. My brother, who is nine years older than I am became a part-time farmer, that is, a farmer and a public servant at the town hall. My father used to tell me that I should work at an agricultural cooperative. I kind of panicked at his expectation, because in the country, only elites can become workers in an agricultural cooperative or a town hall. However, one day, I realized that I was free to do anything since I was the second son in the family. If I were the oldest son, I would be able to inherit the family property but would be bound to become a farmer. I then chose a career as a certified public accountant. My parents used to tell me that I am not cut out for business since I grew up in a farmers family. I myself thought that I was not a businessman type. However, when I came up with the idea of being independent, I got so anxious to do so that I quit the auditing firm immediately and established my own office. Although I did not consider whether I was fit for a corporate

manager or not at that time, I had the strong belief that I could offer better services to clients if I were a corporate manager. The best part of becoming independent was that I did not have superiors any more. I was free to do anything without consulting superiors. This was the moment I obtained my freedom. People say that anyone can become an employee with no title or a president. This is because one does not have to move up the corporate ladder to become a president. All one needs to do is to start a business. It is more difficult to become a section chief or a manager since one must be promoted by being recognized by superiors. Being a corporate manager (entrepreneur) is truly a great way of life. There is no other job that enables us to actually feel and experience the meaning of our lives. I sincerely hope that there will be more entrepreneurs in Japan, who will contribute and lead society.