.Japanese Management Culture

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Japanese management culture

The culture of Japanese management that is famous in the West is generally limited to Japan's large corporations. These flagships of the Japanese economy provide their workers with excellent salaries, secure employment, and working conditions . These companies and their employees are the business elite of Japan Though not as much for the new generation still a career with such a company is the dream of many young people in Japan but only a select few attain these jobs. Qualification for employment is limited to the few men and women who graduate from the top thirty colleges and universities in Japan
Japanese-style management today

During a discussion in 1969 between Shishido Toshio, then chairman of Nikko Research Center, and Mimura Yohei, former president of Mitsubishi Corporation, when Mimura was asked whether a Japanese-style general trading company was possible in the United States, he said: "Because management in the United States tends too much toward the short term," it would not be possible.59 Planning in Japanese companies often requires a long time from conception to implementation, so that a company of this kind may not conform to the interests of shareholders who expect high dividends quickly. Shishido remarked, considering the essential nature of capitalism, that "the capitalist selects the manager, and unless he increases profits quickly, he will be fired. In Japan, however, capitalism has no capitalists. Nobody imagines the president of Mitsubishi Corporation has been selected by its shareholders. Many companies speak of their social responsibilities, but not of the responsibilities to their shareholders. Personally, I don't think this is a good thing; on the other hand, one could say precisely because this is the way it is in Japan, Japanese companies have achieved prosperity and increases in productivity". Another insight into the Japanese style of management is provided by an incident involving an employee of a commercial firm who, suspected of graft, committed suicide and left a note saying the company was "immortal." A company president indifferent to shareholders and a sacrifice of one's life for the benefit and prestige of one's employer seem especially indicative of a particular Japanese management culture. In Japan, the number of shares held by individual stockholders is extremely small, and for each listed company, an average of 10 institutional shareholders, mainly banking institutions, hold the overwhelming majority of its stocks. It is common for companies to hold each other's stocks. For this reason, Japanese capitalism is often referred to as "trust capitalism" or "nocapitalist" management capitalism. A strong sense of belonging, what might be called enterprise familism, and an intense loyalty within an organization that operates according to quasi-family principles and practices could account for the case of the employee who committed suicide. And he was ashamed of himself for having been suspected of a "lack of virtue." He also adhered to the code of bushido, by which he intended, through his suicide, to morally prosecute those who suspected him. Or, it may have been that his sense of responsibility toward the company caused him to want to
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protect the company's integrity at the cost of his own life. Bushido mandated a manifestation of one's loyalty. In Japanese culture, a person may not speak ill of the dead, and so if a verification of the facts reveals a dishonour, its disclosure would be embarrassing. Perhaps the person committed suicide simply because he was tired of living. If so, suicide is an allurement toward which anyone living in a highly industrialized society may tend to be tempted, and it is a disease inherent in modern civilization. Foreigners (especially Westerners) often find it difficult to understand the psychology and logic of Japanese group formation. That there is competition between groups comes as no surprise, but many are not aware that fierce competition often occurs within them. This sort of unawareness can lead to a misinterpretation of Japanese business management. The impression we Japanese have gained, for example, from textbooks and the popular media of management practices in Europe and the United States often does not coincide with the actual situation. Japanese management is characterized by lifetime employment, a seniority wage system, vague job classifications (which means an unspecified range of responsibilities and power) and groupism. It is generally true that workers select their employers, not their occupations. And this corresponds well with the practice of regular recruitment of new graduates and the training of new employees in the particular business practices within each enterprise. Because the system and individual jobs in one enterprise are incompatible with those of others, there is a tendency created in employees to settle in one company, which justifies the immense educational investment made by the enterprises. The system of seniority wages was originally based on a great value placed on experience and skills and on the assumption that living expenses would be greater for more senior employees, and it became firmly established and widespread in the period of sharp inflation. The lifetime employment system was established in 191(}1920, when the labour movement was active, to secure and pacify a skilled labour force. In parallel with this, unskilled, outside contract workers and temporary workers were recruited, and skilled workers of the key production sectors were deployed from the parent company to its affiliates. This inevitably led to the formation of a dual employment structure. As in the past, technological innovation today is changing the Japanese style of management in various ways. The focus of education and training within the company is shifting from the newly recruited to the middle- and higher-level strata of employees to ensure their adaptation to new technology. The seniority wage system has been combined with a system of wages based on job function, which itself is undergoing revisions amid rapidly progressing technological innovations. Management concepts and practice aim at a continually expanding wealth and growth potential. Technological innovation, however, brings with it fewer job opportunities in the manufacturing sector (because of the mechanization of the production process), and it reduces the office workforce, while it encourages an expansion of the planning, R. & D., and sales divisions. This is referred to as the development of a "software economy." This has been reducing direct employment and diversifying, increasing, and shortening employment periods for indirect employment. For this reason, it is difficult to forecast in which areas the traditional Japanese
style of management will continue or will have to change. One certainty is that, although the priority of where one works rather than what one does will not altogether disappear, the giving of priority to occupational preference will grow stronger. As indirect employment becomes shorter and more irregular, it demands higher wages than direct employment. If necessary, an enterprise will convert indirect employment to direct employment, thus realizing a long-term reduction of wages. This is one aspect of developing software economies, and a possible outcome of this will be the diversification and professionalization of the technical occupations, which in turn will increase social mobility.
History of Japanese-style management

Yasuoka Shigeaki, an economic historian, isolates the following three areas of industry where the Japanese style of management was first established following the changes brought about by the Meiji Restoration. 1. In areas that held an advantage in the beginning. Products such as silk and tea, in other words, many agricultural products became goods for export. (Coal and copper may be included in this group.) 2. Industries and products that had not been affected by the international economy: foodstuffs such as salt, soya-bean paste, soy sauce, and sake; fuels such as coal and charcoal; materials for housing such as straw floor mats and wood; and native clothing. 3. Areas and their goods that were at a disadvantage in the beginning, for example, cotton and wool, which suffered strong external competition. The process was most apparent in this last group, where, in the transition to import substitution and expansion of exports, Japanese-style management became firmly institutionalized. Yasuoka focuses attention on :(1) the role division between investors and management, (2) organizations for engineers, office workers, and plant workers, (3) the employment period, and (4) the wage system. An examination of each item will make clear that there were in existence domestic conditions favourable to converting an internationally disadvantageous position to an advantageous one. When Japanese industry was in its infancy stage, the Japanese market was too small to absorb the increasing domestic production. Japan needed a global market in order to further develop. By creating an export market, Japan was able to structurally transform its economy, thereby granting it access to the technology it needed to develop. The Japanese goal became one of full employment through industrialization. This called for dominating the market in very select product areas. They carefully chose areas in which they
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had the confidence to dominate and concentrated on them rather than diluting their efforts over many areas. A number of tactics were utilized to support this strategy. First of all, the Japanese imported their technology, thus avoiding the risks involved with major R&D expenditures. Instead, they negotiated license agreements to make workable new products. Then the best engineering talent was directed to the plant floor rather than to the product design department, thereby concentrating their ingenuity on high productivity and low cost rather than innovative design. Finally, they strove continuously to improve quality and reliability to the highest possible levels and then beyond; to levels competitors could not or would not supply. Implementation of these tactics was guided by a solid respect for people and the belief that waste must be eliminated (these two areas are discussed in depth below). The Japanese example of success shows that neither massive research and development investment nor abundant natural resources is necessary for sustainable industrial development. For years Japan was well known as an imitator not an innovator as they copied, borrowed, and licensed technology from other countries. By building competence in adapting existing product designs and speeding up the processes the Japanese were able to manufacture superior quality at competitive prices, giving them a distinct advantage in world markets. Japan showed the world that efficient production and quality control methods could overcome transportation cost disadvantages and tariff costs. They proved that cultural differences could be overcome and that the critical cultural points necessary for successful production could be transferred across national boundaries. Japan's success as an economic superpower strongly implied that the West might lose its world dominance as the leader in technology. Emboldened by the success of the Japanese, other Pacific Rim countries began to follow their example, thus accelerating the diffusion of innovative technology through-out the industrial world. Actually, new centers of industrial superiority were created as a result. Japan's success is also an indicator of the importance of quality as a strategic variable. When it looked like Japan could only hope to carve out a niche as a producer of outdated Western goods for the Asian market, Japanese leadership came to the conclusion that it could play a leading role
in global industry by changing its quality image; a change made by producing quality goods for a sustained period of time. The Japanese learned from the price they paid for their reputation for inferior-quality products. They learned that quality reputations are built by producing quality products with a painstaking attention to detail and craftsmanship. They were also willing to make the necessary investment in human resources and technology needed to improve their quality image. Synonymous with the improvement in quality was a profound improvement in Japan's position in global markets. From a weak position in the television market in the 1960s, Japan became the world's largest producer and exporter of household television sets in the world. They are sure to dominate the market for the coming revolution in high-resolution television. They totally dominate the VCR market and are challenging companies such as Intel in the market for largescale integrated circuits. In the early 1960s North American, British, and German motorcycle manufacturers lead the market. Today, Harley-Davidson is the only serious competitor for Japanese made motorcycles. In fact, Harley-Davidson teetered on the brink of nonexistence until wholeheartedly adopting Japanese manufacturing techniques, most notably just-in-time and Total Quality Management. Another example, Xerox, suffered embarrassing market share losses to Japanese manufacturers Canon, Sharp, and Minolta. The emphasis placed on quality by Japanese manufacturers has been continuous since the inspiration derived from the first visit of Dr. W. Edwards Deming. Today, Japan is certainly seen as the worldwide symbol of quality. While Western firms measure quality in parts per thousand (the acceptable quality level or AQL), the leading Japanese manufacturers are achieving defects that are barely measurable, perhaps 3.4 defective parts per million. The Japanese turnaround in quality can clearly be attributed to such variables as worker training, employee involvement, and firm wide delegation of authority and responsibility for quality. A change in attitude and vision on the part of Japanese top management brought quality to the forefront as a strategic mission, one that allowed them to liberate the creative talent and resources necessary for long-term improvement and the eventual mastery of the quality concept.
Key elements of Japanese style of management

Centralized management control

The Japanese have had phenomenal impact on world markets. Many industries, such as electronics, cameras, watches, motorcycles, machine tools, automotive products, shipbuilding, and even some aspects of aerospace are either dominated by Japanese firms or are heavily impacted by them. Many people mistakenly attribute this phenomenon strictly to cultural differences. The vision of dedicated Japanese workers giving their life to the company for substandard wages surely accounts for the difference, they reason. Of course, this view doesn't always square with reality. First, Japanese factories have some of the highest wage structures seen outside the United States. Second, this "Japanese miracle" is also happening outside Japan. Most Japanese automobile manufacturers have successful plants located within the United States; all of them manufacturing quality automobiles utilizing American workers. When Matsushita bought a U.S. television plant in Chicago, they managed to maintain the 1,000 hourly employees while trimming the indirect labor by half. Utilizing the same workers employed by the U.S. firm, Matsushita doubled daily production while improving quality 40-fold. Outside warranty costs fell from $16 million per year to $2 million per year while selling twice as many sets.
Strong head office

Teamwork is one of the rallying cries of the new management. Many of the results have become legendary, like the ultra-successful 1989 launch of the Land Rover Discovery, produced in 27 months, roughly half the time needed for the previously typical British car. Tony Gilroy, the father of the Discovery, was so impressed by the project that he applied the same principles at his new job, chief executive of Perkins Engines, where by 1994 900 project teams were busily at work revolutionising performance. What's new about that? The concept of project-based, self-managed teamworking is is as old as management itself. The mining industry worldwide, for example, could only have developed through the work of project teams under strong leadership: often out on a geographical limb, combating fearsome difficulties of geology and climate, these teams accomplished heroic feats. They had to be self-managed, and they were multi-disciplinary, cross-functional, synchronous all the fashionable elements of today's theory.
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Business strategy:
1) Single product focus 2) Minimize costs of production 3) Maintain consistently high quality output at all factories through standardization of best work practices & procedures 4) Diversify market segments, geographic markets, & production location
Strength and Weakness of Japanese management

Although the Japanese economy seems to have broken free of the long period of stagnation that followed the burst of the so-called bubble economy and to have returned to a path of stable growth, Japans relative economic standing internationally is gradually declining and its presence in the world is weakening. At the same time, the globalization of the world economy is advancing rapidly, with new developments quickly spreading across the globe, and competition for resources is growing ever fiercer among both the developed countries and larger developing countries such as China and India, which are relatively poor in natural resources and currently experiencing rapid growth. In addition, competition for human resources, which play a crucial role in determining the quality and results of every sort of human endeavor, is arising on a global scale. The core corporate characteristics that Japanese companies will require in the 21st century are 1) Leadership capable of bringing about sustained economic growth in East Asia 2) Distinct positioning, achieved through steady and incremental innovation, a bold and straightforward approach, and creative ingenuity so as to ensure that companies can make the most of their existing strengths and maintain their competitive advantage, rather than becoming indistinguishable between America and Europe on the one hand and the emerging nations on the other; and
3) Leadership in technology that contributes in the environmental field. The cornerstones of the new style of Japanese management for realizing the above are 1) Initiatives to strengthen international competitiveness and gaining the confidence of the international community and contributing to the resolution of global issues. 2) building a relationship of trust between executives and employees, and 3) strengthening group orientation and teamwork that encourages creativity; 4) Promoting diversity 5) Maintaining and strengthening the capacity for on-site process innovation
Establishing an environment that promotes competitiveness by 1) Breaking away from the convoy system of extensive collaboration between government and the private sector 2) Responding to competition for resources, and 3) Promoting the establishment and growth of new enterprises, such as start-up businesses.
The important points are raising confidence in management through 1) High ethical standards among executives 2) Management that is more responsive to the expectations of shareholders, and 3) Transparency in governance
Contributing to the resolution of global issues through

1) Research and development on cutting-edge environmentally friendly technologies, products,
and services 2) Improving the environmental performance of developing countries through support for and transfer of Environmental technologies (through CDM, ODA, etc.),
3) Initiatives to reduce emissions of carbon dioxide 4) The elimination of poverty (through ODA, etc.), and 5) Research and development work on medicines for neglected diseases;
Promotion of value-creative CSR, which actively endeavors to resolve issues affecting society. This proposal was compiled with a frame of reference extending about ten years ahead and is intended for currently serving executives and upper level managers who aspire to such positions in the future.
Japans Strengths and Weaknesses Strengths:1. Fundamental ethnic characteristics and characteristics that are beginning to lose their luster The national and ethnic characteristics of the Japanese people were formed over the long history of their country during which there were no large-scale influxes of other ethnic groups. The main ethnic characteristics of the Japanese people that relate directly to corporate activity may be thought of as follows.4 Among the fundamental characteristics that constitute the strengths and advantages of the Japanese people are group orientation/teamwork, harmonious coexistence with nature, flexibility/passivity, industriousness, consistency/persistency, the craftsmans spirit, and consideration for others. Characteristics that are changing or beginning to lose their luster include high ethical standards/sense of morality, loyalty/forbearance, a sense of being contented with ones lot, politeness/honesty, public safety, and modesty/self-restraint. Historical weaknesses of the Japanese include their lack of an international perspective (weakness in diplomacy), a tendency to base decisions on emotional factors, a conformist
mentality/hammering down the nail that sticks out, insufficient selfreliance/independence, and a tendency when faced with challenges to simply hope that things will turn out alright in the end. 2. Japans Strengths Engrained in Corporate Management If we arrange the effects of these strengths and weaknesses on corporate management based on a comparison with America and Europe, the listing of strengths of Japanese companies would include the high ethical standards/sense of morality of executives, management from a long-term perspective, thoroughgoing pursuit of productivity and efficiency in all aspects of business, highly precise implementation based on consensus management, ability to create environmentally friendly technologies and products outstanding skill at exchanging ideas to obtain an integrated whole, strong collaboration with suppliers and affiliated companies, and process innovation. In contrast, the strengths of American and European companies include quick and bold decision-making, mobility and diversity of personnel, a management focus on capital efficiency, communication with stakeholders, clarity of vision, investment in personnel recruitment and training, a flexible social structure, transparency in governance, and a concept of strict adherence to contracts. 3. Perceptions of Executives as Revealed by Questionnaire Responses In a questionnaire survey given to Keizai Doyukai members, the responses to a question about characteristics seen as strengths included industrial prowess with a strong technological grounding, an emphasis on quality and safety, a high level of responsibility among employees in the workplace, a strong sense of loyalty to the company among employees, employees with a uniformly high level of education, an emphasis on long term growth, a sense of balance that prevents one way of thinking from gaining undue influence, the high expectations (discriminating taste) of Japanese consumers, and an5 emphasis on teamwork. Characteristics cited as weaknesses included a management system centered around Japanese nationals, a belief in self-reliance, a reliance on relationships based on trust rather than on contracts, an emphasis on consensus in decision-making, and dependency on the Japanese language for communication (lack of competence in foreign languages). The postwar period of sustained high growth, during which the so-called three sacred pillars of Japanese management the seniority system, lifetime employment, and the system of company unions functioned so effectively, was a time when particular circumstances prevailed and is now past. Nevertheless, many of the questionnaire responses expressed a desire to maintain the good points of that period, with certain conditions attached. In order to achieve continuing economic growth, Japan must retain its national strengths and advantages as much as
possible while quickly reforming itself in areas that do not increase its competitiveness, thereby allowing it to swiftly respond to changes in market needs and the current business environment. Changes in the Business Environment and Issues Confronting Japanese Companies
Changes in the Business Environment

(1) Globalization of the Market Economy Recent events have shown that the impact of financial markets on the real economy cannot be avoided, and that the effects of a crisis in one country or region now immediately impact on other parts of the world. As the economies of the world become ever more interdependent, it is incumbent upon us to prepare for the outbreak of a similar crisis again in the future. However, caution is called for because enacting excessively strict laws and regulations could have the effect of stifling incipient economic activity before it can fully develop. (2) Technological Innovation Just as those creatures that adapt best to changes in their environment survive, innovation involving self-reformation is essential for a company to survive and prosper. In the future the speed of change will continue to increase, so we must be aware that innovation to survive will become more and more necessary as well. (3) The Rise of Emerging Nations As the growth rate in emerging nations such as the BRIC countries (Brazil, Russia, India and China) continues to accelerate, the era in which the United States, Europe, and Japan together accounted for some 80 percent of world GDP is quickly coming to an end. The downward trend in the share of world GDP accounted for by current developed countries and regions is likely to continue into the future. (4) The Population Problem In Japan, where the population is aging rapidly and starting to decrease, risk factors such as a shrinking domestic market and labor shortages are growing at an accelerating pace. Breaking free of systems and modes of thinking that assume ongoing population growth has become an urgent matter. On the other hand, the total world population is expected to continue to grow in the years ahead, and issues such as assuring adequate supplies of food and energy, environmental damage, and poverty will surely grow in importance. The developed countries must take the initiative and work to study and implement appropriate measures with the utmost urgency. (5) Global Environmental Issues
Unmistakable signs of global warming, such as the melting of the polar ice caps, are becoming more and more evident. Humankind must rapidly devise concrete measure to avoid a worst case scenario in which the entire earth suffers a devastating blow to its ecosystems. Advanced countries need to make further efforts to conserve energy and also put in place a more cooperative and comprehensive framework for providing technical assistance and aid to developing countries with the aim of achieving environmental preservation through meaningful cooperation between advanced and developing nations and greater harmony on a global scale. (6) Intensifying Competition for Resources Prices of fossil fuels such as petroleum, natural gas, and coal continue to rise, and competition is likely to become still fiercer for food and mineral resources, such as iron ore and rare metals. At the same time, it is becoming more difficult to recruit high quality human resources. Japan needs to invest in further developing human resources in areas such as advanced manufacturing technology and research and development, while also working actively to attract and foster talented and capable people from overseas.
A New Style of Japanese Management

1. The Realization of Successful Japanese Corporations for the Early 21st Century (1) Leadership in East Asia To ensure its continued prosperity, Japan must achieve ongoing economic growth that at the least does not fall behind that of the advanced nations of North America and Europe. The United States and the EU are realizing population growth and market expansion through the acceptance of outstanding personnel and large numbers of good quality workers from all over the world, in the former case, and the addition of new member countries, in the latter. The strategic path to sustained growth that Japan should prioritize involves working to establish an economic community in East Asia by especially cooperating with ASEAN nations while continuing to take a leadership role in partnership with China and India. There are political issues to be addressed, but these 9 tasks must be addressed as a national agenda and carried out by the government, bureaucracy, and business working together as a team. In particular, the promotion of an Economic Partnership Agreement (EPA) with ASEAN is an extremely urgent issue for Japan. If Japan is able to establish a successful model for a society capable of maintaining continued vitality and prosperity despite an aging and diminishing population, it will serve as an important example for other countries in East Asia. Japanese enterprises have invested heavily in the East Asian region over a long period, particularly in the manufacturing industry. We believe that Japan should work to promote further economic development and strengthen its contribution to the region by building new
collaborative links in the R&D field in the years ahead, while maintaining existing cooperative relationships. (2) Distinct Positioning between America/Europe and Emerging Nations Japanese enterprises must embrace global standards that are essential to doing business in a multinational setting, however diversity needs to be respected and it should be understood that the American way is not necessarily correct by default. The EU ism competing with the United States for supremacy in the setting of global standards in every field, and Japan needs to consider carefully whether unquestioning support for American policies really is the best approach. In addition, Japan has difficulty competing against the United States in the aerospace industry and the professional services field (consulting, investment banking, financial services, legal services, etc.), and against developing countries in the mass production of comparatively simple products using cheap labor. Japan should therefore position itself firmly in the manufacturing field, where the keys to success are steady, incremental, and solid innovation, creative ingenuity, and a bold and straightforward approach. This is a field where the Japanese excel and where other nations are not necessarily advantaged. It is therefore a field where Japan can seek to differentiate itself and to maintain its strength through hard work. Nevertheless, we must remain conscious of the need to maintain our position of competitive advantage through constant innovation in order to combat the risks of copying and leaks of expertise. (3) Leadership in the Environmental Field In the environmental field, Japanese technology is said to be of the highest standard in the world. In the future, competition for natural resources and dealing with global warming will become even more serious issues than they are now, and the excellent10 environmental technologies created in Japanwhere harmony with nature is deep rootedwill become a key source of competitiveness for Japanese companies. In addition, Japan has the potential to contribute to both the economic development and environmental preservation in developing countries through the support and transfer of such technology. Furthermore, Japan can make a contribution to solving environmental problems on a global scale. Achieving this will require a concerted effort, including the setting of high targets based on a global and long-term perspective, the creation of innovative technologies, and the development of alternative sources of energy. At the same time, it is expected that Japan will act as a bridge, helping to promote cooperation and dialogue between advanced and developing countries.
Initiatives to Strengthen International Competitiveness

(1) Areas of Japanese Management to Be Strengthened in the Future Management From a Long-Term Perspective Rather than the top-down model typical in American and European companies, most Japanese companies tend toward an approach in which detailed medium- and long term plans are worked out carefully over time, all affected parties are involved during the process and a heightened sense of participation is generated, and the implementation stage is characterized by a high level of precision. Structural and system reforms within a corporation are necessary to reflect changes in circumstances and the business environment, but drastic reforms that seek to negate aspects grounded in ethnic characteristics are liable to produce more negative than positive results. To enable outstanding personnel to contribute to the company over the long term and thereby to provide value, employees should be encouraged to realize their full potential, with the result being heightened loyalty to the organization. Building a Relationship of Trust between Executives and Employees Many executives still see trade unions as good partners in management. Unions cannot be overlooked as a key factor, if for no other reason than that the quality of the workforce affects the competitiveness of the company. Creating a true win-win situation by building relationships based on cooperation and trust with unions, which11 possess networks that differ from those of corporate executives, can be expected to lead to more effective utilization of personnel. Group Orientation and Teamwork Group orientation and teamworkwhich have been said to be a key strength of Japanese companieswill surely continue to be a driving force behind process innovation, workplace empowerment, high productivity, and the ability to achieve outstanding quality in manufacturing settings and the like. However, in workplaces and occupations that demand creativity and individuality it is necessary to utilize this tendency in a way that does not lead to a conformist mentality that suppresses creativity. (2) Reforming Management Attitudes Establishing a Global Vision In contemporary corporate management it is important to create mechanisms that make it possible to attract outstanding international personnel, to empower each employee to realize their full potential, and to maintain optimum performance. To accomplish this it is necessary to have a clear corporate vision or philosophy and for executives to take the lead in putting it into practice and spreading awareness. The vision or philosophy must encapsulate the ideas and
range of activities that have developed naturally over the course of the companys history and be something that the employees can understand and put into practice. Fostering a Global Mindset in Executives It is impossible for companies to escape the effects of globalization, not only those that have embarked on the internationalization of their operations but also those focusing on the Japanese domestic market as well. For candidates with the future potential for executive positions, it is necessary to provide practical leadership and management experience through stints of at least several years in both North America and Europe. It is also important to work to switch the operations of the Japanese headquarters to English over time and in a planned manner. If this cannot be achieved, corporations will not be possible to attract outstanding foreign employees to the Japanese headquarters where they can be groomed as future executives. Promoting Diversity12 The Japanese are good at assimilating beneficial aspects of other cultures, but they are sometimes not as adept at interacting and negotiating with persons of other ethnicities. Despite this, for Japan as a nation and for its enterprises to develop further, it is a necessity that we be able to deal skillfully with diversification as foreign cultures and people flow into the country. Embracing diversity is important in encouraging innovation. English, the language of international business, is an essential communication tool in becoming a more diverse society or organization. Reform of the English language education system must be undertaken immediately at the national level so that lack of ability in English does not become a greater handicap in the future. Need for Critical Thinking as a Business Practice The Japanese tendency is to naively believe that things will turn out alright in the end whenever faced with challenges , however this is a weakness that needs to be replaced with critical thinkingwhich is already normal business practice in Western corporate society but not generally implemented in Japanese companies. To achieve this, it is necessary to assume that most of the phenomena that occur in business are nothing more than the result of a hypothetical probability and based on that work out emergency measures beforehand. This needs to become the norm for conducting dayto-day operations. (3) Increasing Competitiveness of Products and Services On-site Process Innovation
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The productivity of Japans non-manufacturing industries could be improved markedly by carrying over to non-manufacturing fields the capacity for on-site process innovation that has been refined to a high level in the manufacturing industry. Never flagging process innovation in the workplace has made possible a standard of high quality , highly efficient, and low-cost manufacturing unmatched in other countries, and the historical and cultural strengths of the Japanese people have contributed to this achievement. Another salient characteristic of Japanese manufacturing is the shared consciousness of large companies and their subcontractors that enables them to collaborate in implementing process innovation. Outstanding Skill at Exchanging Ideas to Obtain an Integrated Whole/On-Site Networking/Passion for Quality13 On-site empowermentone of the sources of competitive advantage for Japanese companies is possible because of a combination of Japanese characteristics and strengths such as teamwork, creative ingenuity in the workplace and skill at exchanging ideas to obtain an integrated whole, together with Japanese employment practices grounded in the lifetime employment system. In order to increase competitiveness into the future, the networking of workplace technology must be expanded through measures such as enhanced collaboration with universities and research institutes. In addition, Japanese companies must maintain their passion for quality. Innovation in areas that provide technological breakthroughs and enhanced processing management efficiency is vitally important if Japanese companies are to continue to lead their counterparts in other countries. Thoroughgoing Pursuit of Productivity and Efficiency Many Japanese companies apply to operations other than manufacturing the methods of increasing productivity and efficiency which they first carefully refined and thoroughly implemented on the production floor. American and European enterprises are not necessary all that good at doing the same, and this is an area where Japanese companies may continue to have an advantage in the future. We must not cut corners and must continue to refine their operations. Leveraging Technology to Assist with the Aging and Decreasing Population Japan is a leader in robotics. R&D work on humanoid robots with a variety of features has produced impressive advances. If Japan can lead other countries in the successful practical application of robots as substitutes for human workers in simple tasks and in fields such as support for the elderly and nursing care, it will surely make a difference in the nations ability to deal with the aging and decreasing population and provide enormous business opportunities. (4) Establishing an Environment that Promotes Competitiveness
Breaking Away from the Convoy System of Extensive Collaboration between Government and the Private Sector14 The convoy system involving close collaboration between government and them private sector functioned well during Japans postwar period of high growth, but it now serves as an impediment to strengthening international competiveness. The focus in the years ahead should be on increasing the international competitiveness of individual companies by promoting deregulation and R&D. For their part, companies should resolutely eliminate unfair competitive practices and work to manage their operations independently. The elimination of unfair trade and competition practices will encourage corporate restructuring and increased efficiency, leading eventually to a higher level of international competitiveness for the companies involved and the Japanese economy as a whole. Responding to Competition for Resources To survive future competition for resources, Japan needs to maintain and bolster its economic strength and retain its ability to make purchases even when faced with considerable price hikes. As additional reinforcement, Japan should continue to carry out directional (economic) diplomacy while always keeping the focus on Asia and implement in a planned manner policies to increase competitiveness in the agricultural sector, expand the amount of arable land overseas, strengthen nuclear power generation capacity and secure stocks of uranium, and develop fuel cells for automotive use. To secure an adequate supply of another key resourcetalented human resourcesconsideration needs to be given to a thorough reform of the domestic education system and the extension of universities overseas (especially in Asia). Promoting the Establishment and Growth of New Enterprises, such as Start-Up Businesses In Japan there are few new enterprises such as start-up businesses. The social infrastructure and support in the areas of capital and management guidance to support the establishment of new companies is insufficient, and the business community needs to make efforts to foster a culture that encourages start-ups. It is also necessary to reform attitudes, such as the risk adverseness typical of the Japanese character and the strong tendency toward conformity. Finally, there is a need for a corporate angel tax system targeted at venture capital firms interested in investing in start-up businesses.
Weakness:1. Intimate Relationship Between Government and Business

Since the Meiji Restoration in 1870s and the subsequent post war development of the nation, Japanese people and businesses have been rallying behind the government for common national interests. Thus the Japanese business/bureaucracy relationship based on agreement on longterm goals that in turn enables them to work our specific problems on the basis of cooperation and consensus. Weakness: It is not always the case that a consensus is frequently possible and some situations that call for prompt decision making are not conducive to extended prior consultation.
2. Cross-Sharing Ownership During the American Occupation in Japan from 1945-1952, they broke up the very large business groups (zaibatsu) for anti-trust reasons. However, in 1952 when the Japanese took over their governance, they eliminated lots of practices implemented by the Americans. The zaibatsu then attempted to re-assemble themselves through cross-shareholdings. The result is that instead of corporate groups where there had once been clear owners in-charge, now most large Japanese companies have become virtually headless members of headless keiretsu groups. Many of the companies shares are held firmly by their own banks that finance their loans, their insurance companies that insure their business, their suppliers, distributors and business partners in the keiretsu and vice versa. They adopted a implicit agreement of "If you support me, I will support you." Weakness: There is a lack of transparency and independent check in the system. The structural defect prevents corporations from making detailed and timely disclosures about their financial problems, prevents board from deciding upon merger and acquisition proposals until it is far too late and has slowed bank write-offs and balance sheet shrinkage in preventing the deterioration of this economic crisis
3. Managerial and Growth-oriented Capitalism but not Shareholder-Dominated Capitalism As mentioned in the cross-sharing ownership section, Japanese corporation got a very high proportion of their capital in the form of bank loans rather than equity. Hence the primary definition of a firm is a community of people, rather than a property of shareholders. This conception shapes business practices. Many of the top management of the corporations have worked their way up the corporate ladder for over 30 years, unlike their American counterparts; they do not have much stake of shares in the company. As such, Japanese corporations are generally more incline towards long-term growth and expansion rather than realising short-term profits. This is evidenced by the low payout ratio of less than 1% on average. Weakness:
Poor cash payout for shareholders. Lack of independent check and review of management on the company. Because the boards are composed almost entirely of internal managers, there is no concept of
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fiduciary responsibility. It is just like a student grading himself, with a perpetual makeup test. 4. Relational Contracting This is sometimes known as "Alliance capitalism", which is a strong patterns of preferential intragroup trading within Japanese business groups. The Japanese firms do not buy at the best possible price from the market; instead they give their contracts to member companies within their same group. The main emphasis of corporations is not on profit growth but a close, stable relationship with other firms to help each other growth. There is an implicit request for "reciprocity" in this relational contracting. Weakness: Relational contracting results in market imperfections. There are misallocation and loss of allocative efficiency. Many inefficient producers are kept out of bankruptcy court by all this give-and-take at the expense of the consuming public. It has detrimental macroeconomic consequences as it makes the Japanese market so difficult to penetrate for competitive foreign products. Japan finds it difficult to correct its trade imbalance with its major trading partners especially the U.S.
This specific pattern of intra and inter-firms trade relationship makes companies less agile in manufacturing and management restructuring in times of difficulties 5. Lifetime Employment Japanese corporation see firms as a community of employees. They see employees as "value creators" and many Japanese work for only one company throughout their life, that is lifelong employment. It is a myth that lifelong employment applies to all Japanese corporations. It is more relevant to the large companies in the keiretsu. And many have argued that lifelong employment for the employees side might not purely be loyalty to the firm, instead it is due to a lack of opportunities to job-hop to another corporation due to the common industry practice. Weakness: As company is resistant to retrenchment, it restrict the companys ability to restructure for cutting labor costs to stay competitive when demand turns down, as shown by the current economic crisis. Lifelong employment might creates complacency and free riding among employees as they might think that they have a long-term future with the company. Thus Japanese companies remedy to this is offering "voluntary early retirement" for employees that consistently perform below par.
6. Hierarchy-Based Promotion and Compensation System The Japanese corporations generally adopt a nenko system, that is promotion and compensation based on seniority. This view is consistent to the belief that corporation is a community, like a biological family that members have to grow through time. A new employee enters the corporation at the bottom of the hierarchy and have to work his way up through many years
later. Promotion and compensation will be given priorities to people who have been around the company for many years, instead of purely based on merits. There is also internal promotion from within the company, rather than going out to recruit a manager to start at the middle. Merits will only be a decisive factor in the case of senior positions that become available towards the middle or and of a managers career. Weakness:
As the life expectancy of Japanese rises, there are pressures from the society for government to raise retirement age. Hence, senior managers might stay in his position for decades and do not step down until he retires at an old age. His subordinates have to wait for a very time before he could get another promotion. And this phenomenon might be frustrating to enterprising young graduates that are aspiring to rise to the top management within the shortest time. Risk of free riding on the senior managers part, as they will be guaranteed of promotion ahead of the younger but more capable juniors
7. Non-Adversarial Management-Union Relations Japanese businesses boasts of its unique non-adversarial management-union relations systems as communitarian and consensus forms the core ideology among Japanese. Everyone is working towards the common interests of the nation, community and corporations. As such, just like a marriage, unions are willing to maintain a harmonious and mutually beneficial relationship with the management. Because employees do not expect to be fired unreasonably, they have little need for industry wide unions and are contented to entrust their negotiating power to company unions. Weaknesses:
Labor might be shortchanged and exploited by their employers.
8. Strong Industrial Association among Japanese Corporations Japan has an impressive array of strong industry associations. There being no conglomerates of any significance in Japan, every firm has what it regards as its "home industry". There is a strong sense of community and cooperation among Japanese firms; even they are close competitors. A good example is the formation of cartels. In times of market saturation, the various competitors will reach an industry agreement to share capacity cuts to prevent prices from plunging; the kind that would probably would have run into antitrust problems in U.S.A. Weakness: Interference and violation of free market policies
Human resource practice in Japan

As a matter of background, the Japanese economy is now recovering from a long period of recession and stagnation. It is a huge economy in world terms, second only in power and size to that of the United States. In many ways, Japans economy is superior to that of the
United States; for example, Japan is the worlds largest creditor nation while the United States is the largest debtor nation. Japan runs a trade surplus while the United States has a deficit, and the savings rate of Japans citizens far surpasses that of the United States. Japan has a population of 130 million people, and its society --- which has been for centuries, and even during the last several decades, closed --- is opening up more and more to foreign commerce. For example, there are many more foreign cars in Japan now than there were just 10 years ago, and hundreds of U.S. and European companies now do business in Japan. Given the size of its market and its economic power, it behooves almost any U.S. business to look seriously at doing business with Japan. For some companies --- those whose products are so unique or who simply do not have the resources to establish a physical presence in Japan --- purely exporting may work. For many others, however, setting up an office in Japan and, of course, recruiting and hiring staff are the best way to go. However, one cannot do this successfully without understanding what the human resources issues and labor laws in Japan are, and how the written and unwritten traditions governing business and employment operate in that country. The purpose of this article is to provide foreign employers with some guidelines on this subject. Recruiting, hiring, firing, termination, out placement, salary, titles, and other basic subjects are covered. LIFETIME EMPLOYMENT Japan is known for lifetime employment with a single company. While this widespread practice is not required by statute, it is taken into account by the courts in deciding particular employment cases. This practice works both ways: a Japanese employee expects to stay for life with one company or family of companies for 30 or 40 years, and the employer expects that employee to remain for his or her working life. Employees are first recruited and hired out of high school or university, depending on the job. Managerial and technical jobs are filled by university graduates. Such an employee can expect to receive a new assignment, by way of on-the-job training, every three-to-five years. In this way, each employee gets to know the company thoroughly and develops a range of experience and responsibilities. Under this system, a company invests a significant amount on training for its employees, knowing this investment will pay off as the employee grows with the company. After a lifetime of work with a company, the employee will receive a lump-sum payment from the employer and retire, usually between the ages of 55 and 65, although those who serve on a companys board of directors are often allowed to serve until age 65. There are, of course, advantages to this system. For example, employees are, in effect, guaranteed known levels of salary as they go along and do not have to worry about being fired. Such a system breeds strong loyalty to ones employer and the employer can safely invest in the employees training and receive increased productivity, without worrying that the employee will leave and take the fruits of such investment (and, perhaps, company information) with him or her. Employees also establish relationships with their colleagues and superiors that can result in good teamwork and stable relationships with other venders. Such a
situation tends to reinforce a sense of good management and harmony within the company and of good citizenship and cooperation within the community and throughout the company. In the recent past, however, Japan has experienced economic recession and stagnation. This has led to some companies going out of business, while others --- especially large ones, including families of companies (keiretsu) --- have downsized, letting employees go, including senior employees. For example, a significant number of senior managers, older than 50, were let go during the recent early 1990s downturn. As a consequence, some Japanese have become less certain about lifetime employment. Some Japanese have even had to change jobs, and others have switched from jobs, even in mid-career. This course of action saved money, because these companies no longer had to pay the higher salaries associated with older workers, and had extra funds with which to pay younger (and less costly) employees. To some extent, during this period of reevaluation, younger employees became favorable viewed: they are more in touch with modern communications technology, current global business practices and, of course, have more energy and ambition and find change easier. However, lateral transition from one company to another is still very difficult in Japan, with the exception of the financial industry (especially banks, insurance companies and investment and brokerage firms). This is because the financial sector had hired many new and mid-career specialists during the 1980s, when the Japanese economy was expanding rapidly. Many of the senior employees released in the 1990s had grown up in a system of lifetime employment and simply did not know what to do after being released. In effect, many of these people, and their experience and knowledge, were lost to the economy. In spite of these unusual developments, in January 1994, Nikkeiren, the Japan Economic Federation, reconfirmed its commitment to this system of lifetime employment in order to maintain the stability of the Japanese work force and maintain a competitive advantage for Japanese industry.
SENIORITY SYSTEM A characteristic of Japanese employment directly related to lifetime employment is the seniority system. Japanese society, its individuals and employers, respect authority and the chain of command. They believe that persons who are promoted and otherwise recognized should be treated with respect and deference. This is reflected throughout Japanese society, where seniority is favored and there is a strong tradition of progression and promotion that comes with seniority and age.
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Employees compete hard, but within the traditional rules of respect, to be promoted and receive greater responsibility. Those who fail may be sent to subsidiaries or sister companies, perhaps in a slightly lower position. This system also supports those who cannot keep up due to illness or other factors outside their control, by giving them easier jobs or window dressing jobs. The Japanese are very uncomfortable when a younger or junior employee is promoted over someone older or with greater seniority. To do so may invite sabotage, or even ostracism from the mainstream. Nevertheless, sometimes, through rarely, a younger or junior person is promoted over the heads of others. More often in such a situation, a younger person of unusual abilities is given greater responsibilities without receiving a title or salary reflecting his or her increased responsibilities. This person will have a competitive advantage when higher positions become available and are formally awarded, after that person has gained more seniority and/or age. However, there is a growing feeling that this traditional, rigid and formalized seniority system is out of place in the modern world. This is especially true in a stagnant and uncertain economy that is becoming more and more subject to the merit-based practices of the global economy. In fact, the senior management of Japanese companies are changing their attitudes on this issue, as evidenced, for example, by a paper released in January 1994 by Nikkeiren, which believes that companies need to focus on an employees skills and achievement, not just on title, age and seniority. In fact, top Japanese executives are challenging several aspects of established views of work in Japan. It is felt that aspects of the current system, such as those described above, interrupt the efficient transfer of labor between companies, and that there should be a more flexible system to allow employees to change jobs more easily. OUTPLACEMENT Outplacement is not widely used in Japan, and before downsizing began in the early 1990s, was virtually unknown. Outright firing or separation created bad morale and was not in accord with Japanese custom. As a result, large Japanese companies or conglomerates looked for ways to avoid firings and yet achieve their management objectives of leaner, more competitive companies. This led to unneeded employees being shifted to affiliate, associate, subsidiary, or parent companies. In general, these employees may receive a better title but probably not as much money. This technique is very effective because in Japan, ones title is very important. With the transfer to other companies, these employees did not lose face and, at the same time, the company involved kept the employees loyalty and did not have to pay the employee a lump-sum retirement amount. This kind of outplacement is known in Japan as Shukko. In addition, today for the first time some traditional Western outplacement firms have surfaced in Japan to help with corporate downsizing. SALARIES In Japan, it is not unusual for an employee to receive his or her salary, including bonus, if any, in 14 equal parts, of which 12 are paid monthly, with two extra payments in June. If a bonus is paid, then the employee receives four extra payments in early December as that bonus. Of
course, if there is no bonus because the employee is new or has not performed adequately in the past six months (the period usually used for this purpose), or the company has not done as well as expected, then there would not be the four extra payments in December, but only 14 payments for the year, including the two extra payments in June. While this system is not universal, it is frequently used and encourages employees to save money for such things as large consumer purchases, childrens education costs, or buying a house. There are variations of this practice from company to company, and from time to time as economic conditions change. In addition to the traditional Japanese system, foreign employees are sometimes paid on a western system of 12 months pay plus a bonus, which is what they are used to at home. When discussing salary with a Japanese employer, it is useful to know the following: For all applicants, focus on the total annual salary, including bonus, not the incremental payments. Remember that bonuses may vary or not be paid based on company performance (particularly the last six months) or employment starting date. Salaries are formally scaled by level and experience. Japanese companies rarely pay a premium for special skills or education (although some have recently started making special payments for these skills). Thus, do not ask for a salary significantly higher than for others with comparable responsibilities, because this will mean not being hired. However, some Japanese companies may pay a higher base salary to a foreigner depending on the foreigner, his or her expertise, and the job. (For a breakout of salary structure, see Exhibit 1.) Japanese companies do not design individual compensation and benefit packages to individual needs. New employees usually join a company in the spring as members of a class, starting with their colleagues at the same time and under the same circumstances and with the same pay and benefits. However, for many companies, the performance part of the bonus may vary from employee to employee, but that is not something that is known in advance. While there are variation industry by industry, companies within the same industry usually pay the same annual salary to new employees who are university graduates. Others are paid more or less the same, based to some extent on age. BENEFITS Benefits generally fall into several categories: housing, transportation, special family allowances, and vacation, sick leave, pension and health benefits. There may be others, of course, and an employees benefits are usually found in the companys work rules or personnel handbook, which also must be submitted to the government. Single employees may be offered dormitory housing, and there may be travel allowances for commuting to and from the office. There may also be special family allowances, rental benefits, expenses for business trips, and allowances for relocation. The amount of each of these kinds of benefits is determined by the employees level in the company (seniority, title responsibilities) or, in some cases, by whether the employee has an ownership position in the company.
Vacation. With respect to annual paid vacation, the length varies, for example, by length of time at the job. So a new employee may accrue 10 days of paid vacation in the first year, after the first six months of probationary employment. For each year thereafter, additional paid vacation is accrued up to a ceiling of 20 days. While there is usually some carryover of annual leave from one year to another, there is usually a limitation. After the ceiling is reached, additional leave is forfeited if not used within the year. Sick leave. Concerning sick leave, policies vary by company. Many companies require a doctors report if an employee is to use more than three days of sick leave. PENSIONS Regarding pensions, there are two basic choices: the National Pension system and Employees Pension Program. National Pension System The National Pension system (Kokumin nenkin) is regulated by the National Pension Law. In this system, all employees between ages 20 and 59 are eligible to participate. Benefits of this pension program are payable when the employee reaches age 59 if such employee has contributed to the fund for at least 25 years. As of April 1, 1995, the monthly premium for participation by an employee is ?11,700 (about $110). The system is financed by a premium tax on the participants and by a government subsidy. After 40 years of participation in the program and retirement at age 65, the full pension will be ?785,500 per year, or about $7,855 (as of April 1, 1995). More information can be obtained by the employee and others by contacting the labor standards inspection office and the public employment security office. Employees Pension Program The Employees Pension Program (Kosei Nenkin) is regulated by the Employee Pension Insurance Law. Employees under age 65 must participate in this program if their employer participates. Benefits and contributions are decided by standard remuneration. The range of monthly standard remuneration (MSR) is between ?92,000 and ?590,000, and there are 30 types of MSR. A simplified calculation of the annual pension benefits is: Average MSR for Whole Career (multiplied by) 7.5/1,000 (multiplied by) the Number of Months as a Contributor The employer and employee share contributions 50/50 in this program, and the employees share is deducted from the companys payroll each month. The monthly contribution is calculated for men by multiplying 145/1,000 and for women by multiplying 4.5/1,000.
HEALTH CARE COVERAGE

In addition to these two pension programs, everyone must have health care coverage under one of three options: National Health Insurance; Employers Health Plan; and Private Health Insurance.
National Health Insurance

Option one, the National Health Insurance (Kokumin kenko hoken), is administered by local governments. The self-employed, or employees of employers that do not offer health benefits, such as small employers with less than five employees, can apply for and obtain coverage under this program, unless they belong to some other private health plan. Approximately 70 percent of medical, dental and prescription drugs are covered under this plan. The employee must pay about 30 percent of clinic or hospital costs. The annual premium is based on the previous years income and individual residents tax payments. For example, the annual premium within the 23 Tokyo wards is calculated as follows: Residents Tax (multiplied by) 1.07 + 16,800 (multiplied by) the Number of Family Members The maximum monthly payment is ?63,000.
Employers Health Plan

Option two, the Employers Health Plan (Shakai hoken), is the option under which most employees are enrolled, by their employers. In this system, the insured employee pays about 10 percent of the cost for medical, dental treatment, and drugs, while the employees dependents are charged about 30 percent of the cost of outpatient services and 20 percent of the costs for inpatient or hospitalization services. In this type of plan, the monthly premium is shared by the employee and employer on a 50/50 basis, with the employees share being deducted from payroll. The monthly premium for the employee is calculated as follows: Monthly premium + Basic Monthly Salary (multiplied by) 85/1,000 The maximum payment per month is ?63,000.
Private Health Insurance

Option three, Private Health Insurance, is carried by some companies. Under this option, a companys employees are enrolled in the private health insurance program rather than in the government program, because the private plan is more flexible and has more options. Many foreign companies in Japan provide for their employees health care through such private insurance, often through the companys central insurance policy. Some foreign insurance companies offer this type of policy. For example, some foreign employees are reluctant to join local health insurance systems because these systems seem to be complicated, and the employees have to fill out many legal documents to receive benefits. Foreign insurance companies offering health care plans can be identified from a listing of foreign companies doing business in Japan or by looking at the Japanese telephone book, especially the yellow pages of the City Source English Telephone Directory. DECISION-NAKING BY CONSENSUS AND JAPANESE CORPORATE PROTOCOL
A Japanese management association recently reported that Japanese managers spend up to 40 percent of their time in conferences and meetings. One major reason is that Japanese companies reach decisions by consensus through involvement and participation at various management levels. Lots of people, such as different levels of managers, the general manager and directors, are involved in the process. Japanese companies are hierarchically structured, with great respect being accorded to supervisors, managers and directors. Mid-career managers (that is, management employees age 40 to 50), may make decisions on routine matters, but not on other matters. Typically, mid-career managers are involved in a group decision making process as one of many participants. They also become mediators between their superiors and their subordinates. In general, a 40-year-old Japanese manager does not have as much experience in making decisions as a 40-year-old Western manager. Consequently, it takes much longer in Japanese companies for a decision to be reached than in an American company, and often there are unnecessary meetings. Also, this practice tends to spawn the passing of paperwork back and forth, and passing the buck without reaching a decision or taking action. Again, mid-career managers are not used to making decisions and do not do so without the prior agreement of their superiors. In negotiations, they do not usually have the authority to decide issues, making it difficult for them to deal with representatives of Western companies. While this system may seem inefficient to a westerner, it does have advantages. For example, the process involves employees from all levels. They get to know each other and each such employee gains experience in dealing with significant issues, hears what his or her supervisors think, and is involved in the decision. This tends to breed loyalty, good relations, and provides employees with valuable experience. In addition, once a decision is made, it is usually a good one and is easier to implement.
RECRUITING
Each year, the major Japanese companies hire groups of new college and university graduates as their new manager employee class. These new graduates get their training on-the-job in Japan, which does not have Western-style business schools. This on-the-job training is consistent with, and grows logically out of the tradition of lifetime employment. Smaller companies try this method as best they can, but must rely on other recruiting and hiring methods as well. Usually, when a company has more than 100 employees, it can begin to successfully use the college and university graduating classes as its preferred method of hiring. Foreign companies use temporary staffing, university recruiting (which is difficult for them), mid-career hiring, overseas Japanese, and expatriates to fill their position. To find such employees, these companies use such techniques as word of mouth, employment agencies, newspaper ads in English and Japanese (for example, publications such as The Japan Times) and executive search firms, both in Japan and elsewhere. In addition to the different management and decision-making styles, as described above, language is also an important factor. Although English is the second language in Japan, few Japanese, including businesspeople, speak fluent English. Because communication and relationships between and among employees and with clients and customers is so important,
fluent Japanese is essential in Japan. Thus, people who cannot speak fluent Japanese are not desirable employees. As a result, foreigners without these language skills are much less likely to be hired by Japanese companies. Women, of course, are less likely to be hired for any kind of responsible positions in Japanese companies, which rarely offer management opportunities to women. Women, including college graduates, are hired as secretaries, and they must have good computer skills. Temporary Staffing Temporary help agencies provide clerical and related staff. The law permits employers to hire such staff for up to one year. At the end of every contract period, up to a maximum of one year, companies can make new contracts with the temporary staff for the next year. The operation of these temporary employment agencies is not unlike similar agencies in the United States. The hiring company may have the option to hire the temporary staff person on a permanent basis after some specifically stated trial period has passed. This may involve, as it does in the United States, paying a fee to the agency. Several such firms cater to foreign companies and provide English-speaking prospects.
University Recruiting
University recruiting is still the most popular method by which large Japanese companies recruit and hire new professional employees, and there is a strong preference among students to join prestigious Japanese firms. University recruiting places companies in head-to head competition with each other, which is especially keen for graduates with engineering and other technical degrees. Many Japanese companies have long been recruiting from these institutions, have alumni from them, and are in an entrenched position when it comes to recruiting at these universities. Such companies usually have one or more employees whose sole task is to recruit from universities and to maintain their contacts there. As might be imagined, there is a strong old boy (and, on occasion, old girl) network among these companies and the universities, based on a lifetime of relationships in business, government (which works closely with industry in Japan), and the professions. A number of companies become identified with particular universities, and will recruit from particular schools even during lean years just to maintain their reputation and contacts there. In addition, it is not unimportant for a new graduate to have some family relationship with a particular company and upcoming graduates also make use of company-sponsored job fairs, university career centers, and the universities alumni group. The company representatives who are recruiting also use these techniques. All of this makes it very difficult for foreign firms to recruit successfully from Japanese universities. According to the American Chamber of Commerce Journals Employment Practice report, 43 percent of American firms recruiting new graduates from university have been doing so far more than 10 years, and 77 percent meet half or more of their recruiting goals, but only 49 percent exceed them.
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The cycle of recruiting begins in the students junior year, at the end of the fall semester. At that time, such students receive recruiting packages from Recruit Co., the biggest recruiting firm in Japan. After looking over the material during the winter, the interested student sends a postcard to companies, in whom they have some interest, asking for more information. Students usually send in about 100 such postcards, and an average of about 25 companies respond. Students may also call and speak with company officials over the phone, especially those who are alumni of that students university, and may sometimes visit a company. Students spend a good deal of time researching various companies, and apply to those that interest them. They also attend forums the company may sponsor in order to learn more about the company and what kinds of jobs may be available in that year, or to find out when the company plans to recruit for new employees. These forums are usually held from April through August. Students who attend these forums and are still interested in employment with the company can make an appointment for an interview and/or take a general test, if the company administers one. Companies invest substantial time and effort in creating these relationships and opportunities. They develop relationships with faculty members, alumni programs, and university managers. Then companies also make charitable cash and in-kind donations to the universities of their choice, as part of developing and maintaining recruiting relationships. The formal recruiting cycle begins in April, with contracts with professors, with the formal selection process taking place between July and November. The student successfully recruited begins work with the employer in the following April. What Japanese companies look for in a student is ambition and self confidence, along with the ability to conform and to complete projects. These qualities are considered far more important than what has been learned in school. Japanese companies provide detailed, and often lifetime, training on the job in everything from the companys history to technical matters. Textbook knowledge, especially for liberal arts students, is not of much interest to employers. In fact, except for foreign companies and big trading companies, Japanese companies do not even require good English skills or working experience, such as part-time jobs or internships, although these can be useful. It should be noted that it is quite difficult for women to get good jobs with Japanese companies. The 1986 Equal Opportunity Law prohibits gender discrimination, and employment advertisements and other literature and information never mention gender. Nevertheless, Japanese companies prefer to hire men rather than women, keeping in mind the lifetime employment system and the substantial amounts such companies invest in training. The result is that men control the companies and the hiring process in Japan. There is a law that regulates all recruiting practices and, for example, prohibits companies from recruiting on campus before July 1st. However, this law is not enforced and, as a result, many companies ignore it. This appears to be particularly true in the case of engineering students, in which case companies send employees to their alma maters to look for promising candidates through interviews with university professors well before July. This process is called Aotagari.
Because all of this leads to fierce competition among students and companies, some companies have recently begun to cancel job offers at the last minute if a better candidate accepts and comes to work. The students respond in kind, of course. They try to get as many job offers as possible and also wait until the last minute to tell a company they are either accepting or turning down an offer. It is important for foreign companies recruiting in Japan to keep all this in mind and to pay close attention to students in whom they are interested. Once a student has signed an employment contract, even before graduation, the employer immediately begins to ask that student to attend meetings, to have dinners and lunches with company managers and officials, and to undertake an internship during the summer. Thus, the earlier a company offers a student a job, the more that company has to worry about the student and whether he or she will change his or her mind and ultimately choose another company. Even though an employment contract is enforceable in Japan, it is possible for a student to successfully cancel such a contract. In addition, Japanese do not like to resort to the courts and feel, probably correctly, that forcing someone to work for them will ultimately not work out.
Mid-Career Hiring
Traditionally in Japan, an employee does not change employers unless there is a problem. A mid-career employment change, called in Japanese chuto saiyo, carries a negative connotation. However, with economic depression and stagnation in Japan, and growing competition with foreign businesses, more companies, including some smaller Japanese companies, are hiring mid-career employees. When such recruiting takes place, more attention is given to the persons abilities and experience than to traditional considerations. In addition, hiring companies do not have to invest so much in training as they do for new graduates. Many foreign companies rely on mid-career hiring among experienced Japanese managers in order to enable these companies to hit the ground running. This is particularly true in start-up situations. While moving to a foreign company is not a high priority among Japanese middle managers, this is not so true in financial services and high technology, and in situations involving innovative products, exciting new design, and research developments. A lateral move often, if not always, means a loss of seniority. A substantial salary increase and/or a prestigious title can be successful lures with which to overcome the hesitancy of Japanese middle managers to switch employers and to enable them to save face. The sources from which to find mid-career employees who may be candidates for lateral moves are the same as in the United State: personal contacts, networking, advertisements and executive search firms, among others. Recommendations from other employees and Japanese contracts are quite important and are highly regarded in Japan. Companies looking to hire such employees should be careful in hiring from related companies, as this can create problems. It is also better to avoid hiring from client companies. The Japanese community reacts to such hiring negatively.
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Hiring Overseas Japanese

Given the traditional culture of, and constraints on employment in Japan, foreign companies need to look to nontraditional sources of acquiring top-flight Japanese employees. One such source is Japanese nationals studying and/or living abroad who want to return to Japan, or who have already returned. The number of such Japanese has been growing steadily recently, and they are well trained and highly motivated. Such returnees, many of whom are in their 30s, have, will have, or believe they will have, a difficult time readjusting to the highly formalized Japanese way of doing business. At Japanese companies, foreign ways of doing things may not be welcome. Such persons may thus be attracted by the workplace flexibility, merit-based advancement and continuing international opportunities offered by U.S., European, and other foreign companies doing business in Japan. These factors might be particularly attractive, for example, to women who have had advanced training in the United States and who do not want to subject themselves to the discriminatory way in which Japanese companies conduct business. Accordingly, foreign companies ought to keep these considerations in mind when recruiting or thinking about recruiting Japanese for positions in Japan. These companies should look for such students on American university campuses, particularly at science, engineering, and business schools.
Costs of Hiring Expatriates Versus Locals

In general, the overall cost of living in Tokyo and elsewhere in Japan is very high, and conditions are crowded. The country is one of the most expensive in the world in which to maintain an expatriate. For example, if instead of living in a company dorm, one takes an apartment (one small room), located from one-half hour to an hour outside Tokyo, rents start from $1,000 per month. Purchasing a four-bedroom luxury apartment in the heart of Tokyo costs more than $1,500,000. Tuition at international schools in Japan is more than $15,000 per year. Other components of the overall Japanese cost of living are extremely high, as are taxes. The decision whether to hire expatriates or to hire locally should be made only after a lot of consideration has been given to the pros and cons. This is so, in large part, because the proper selection, orientation training, and support of employees are critical to a firms success in doing business in Japan. TERMINATION Terminating employment in Japan seems more difficult than in the United States, where employment at will for nongovernmental employment, and employment without a written contract is still the governing doctrine. This is true, comparatively speaking, because Japanese law generally requires just cause for dismissal, which is usually not a requirement in the United States. However, in theory, termination in Japan is not as difficult as it seems if the employer is aware of the law and follows its provisions.
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For example, both the employee and employer are free to terminate employment, if no term for such employment has been fixed, by giving 14 days notice without specifying any reason. In the case of employment with stated periodic payments, the parties can terminate, effective the next pay period, if notice is given in the first half of the current pay period. For example, in an employment with stipulated monthly pay periods, the parties would have to give notice of termination in the first half of the current month in order to achieve effective termination at the beginning o f the next monthly period (Civil Code, Art. 627). In the case of employment for a definite period of time, both the employee and employer can terminate that employment during the period of employment only if there is an unavoidable reason (Civil Code, Art. 628). If there is no fixed term of employment, the general rule established by case law is that either party may terminate without advance notice if there is an unavoidable reason.
Structuring An Office In Japan

There are a number of possible legal structures ones business can take in Japan. Below we have outlined some of the advantages/disadvantages of each structure. No new legal structure. Firms doing business by flying back and forth between the United States and Japan can continue to operate as they are doing now, and put in place a new, more seasoned General Manager to work with and oversee their existing Japanese distributors. While this is probably the least expensive option to set up, it does not give the impression that these companies have a long-term commitment to the Japanese market, and so their credibility in Japan will not be high. Representative office. Companies can establish representative offices to promote their activities in Japan. Representative offices are easy to set up (they do not require registration documents, and so forth), and extra costs are minimal. Unfortunately, representative offices are legally limited to promoting ones business, and are not supposed to perform any business transactions such as sales, importing, exporting, shipping, invoicing, and other activities. Branch office. Companies can establish branch offices, which unlike representative offices, can perform the above business functions. A branch office, however, needs to be registered, and certain fees procedure, and paperwork (such as filing the company representative seal, registration of tax and related expense items. And submission of proxy notifications) need to be submitted to get the governmental approval to operate ones business in Japan. In addition, branch offices are generally subject to corporate income tax in Japan. Subsidiary corporation. Another option for doing business in Japan is to establish a subsidiary corporation. This vehicle affords such additional perceived practical advantages as facilitating the arrangement of local financing, attracting local employees, and leasing office space. On the other hand, subsidiaries are more costly to set up with the local Japanese government than are branch offices.
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Subsidiaries also require a minimum capital investment of ?10,000,000. Note, however, that the money required to set up a subsidiary (that is $100,000) is not necessarily the money to be deposited in a bank, but can be used for the subsidiarys operation. Further, it is not money that the company will lose, because after one month, it can revert back to the parent companys bank account. Also, subsidiaries require at least three directors, one of whom is required to live in Japan. Finally, there are more stringent tax consequences with a subsidiary than with a branch office.
GURU OF JAPANESE STYLE OF MANAGEMENT DR. KAORU ISHIKAW

Kaoru Ishikawa wanted to change the way people think about work. He urged managers to resist becoming content with merely improving a product's quality, insisting that quality improvement can always go one step further. His notion of company-wide quality control called for continued customer service. This meant that a customer would continue receiving service even after receiving the product. This service would extend across the company itself in all levels of management, and even beyond the company to the everyday lives of those involved. According to Ishikawa, quality improvement is a continuous process, and it can always be taken one step further. With his cause and effect diagram (also called the "Ishikawa" or "fishbone" diagram) this management leader made significant and specific advancements in quality improvement. With the use of this new diagram, the user can see all possible causes of a result, and hopefully find the root of process imperfections. By pinpointing root problems, this diagram provides quality improvement from the "bottom up." Dr. W. Edwards Deming --one of Isikawa's colleagues -adopted this diagram and used it to teach Total Quality Control in Japan as early as World War II. Both Ishikawa and Deming use this diagram as one the first tools in the quality management process.
Fishbone Chart
The Fishbone Chart is one of the many problem-solving tools created by Dr. Kaoru Ishikawa. Dr. Ishikawa was merely thirty years old when the "little boy" and "fat man" bombs dropped on two of Japan's cities. Working in the Kawasaki shipyards, Dr Ishikawa was also witness to Japan's long road towards recovery and rebuilding which required a lot of hard work coupled with innovation and creativity. At this time, Japan turned to countries more advanced in problem management techniques, like the United States, for ideas and techniques to apply in their specific context. Quickly tossing aside their pre-war prejudices and biases, Japanese businessmen embraced all management concepts developed by the Americans - there was simply no other effective way to reduce their costs and increase their efficiency. From an importer of knowledge and ideas, Japan became an exporter of the same when Dr. Kaoru Ishikawa's inventions and contributions in the management field began to be adopted by management and businesses throughout the world.
Problem Management Diagram

Simply adopting and blindly implementing American management concepts were not enough. They had to be suitably molded and seamlessly blended with the traditional Sogo shosha and Keiretsu business styles, one of whose unique features is collaborative effort expended through small groups of people. This exercise took a lot of churn and simmer. Out of this process have emerged several of the groundbreaking ideas and concepts of Japanese management; and they have taken up a special place in the world of management science today. One such tool in the realm of root cause analysis is Dr. Ishikawa's Fishbone Chart, also known as the Fishbone Diagram , as well as the eponymous Ishikawa Diagram. As with any brilliant idea, the basic foundation of the Fishbone is extremely simple and practical. Used and understood even by non-specialists, the Cause and Effect diagram is used as a team brainstorming tool to provoke, tease and evoke more and more ideas and issues (causes) to be captured that can go into any particular conclusion (effect) being reached. When finished, after a few iterations of analyses, the diagram identifies and explains in a graphical format all the possible causes of a particular effect. All the possible causes are depicted at various levels of detail in connected branches. The level of detail increases as the branch goes outward, which means that an outer branch is a cause of the inner branch that it is attached to. This means that the outermost branches indicate the root causes of the problem.
Creating Fishbone Charts

While drawing the fishbone chart, care is taken to have the inner branches meet a horizontal straight line, called the "spine" of the chart. The statement of the problem - or the effect - is to the right of the spine inside a box, which makes it look like the head of a fish. When finished, the entire map resembles a fishbone. The mandate for the collaborating team, when they sit down across the table to draw the Ishikawa diagram, is to focus on why the problem occurs. There is no effort to look at the history or symptoms of the problem, or anything else that might digress from the intent of the session. When the team comprises members from different departments or functions, each of them provides their own specialist view about why the problem (the "fish-head") occurs. It might be discovered through this brainstorming session that there are causes common across two or more departments or functions. Perhaps that some causes permeate the entire organization. Thus, in one single snapshot, the top management gets to see exactly why the problem is likely to be occurring.
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First, a large writing area is put up in the middle of the room where it's readily visible by everyone. This writing area could be a whiteboard or flipchart or those sticky wall-sized post-its. The fishbone problem solving target situation is defined. All team members need to be very clear about the exact problem. The problem statement is described clearly and succinctly in the fish head portion of the fishbone chart. To set the ball rolling and to ensure logical control over the brainstorming process, the following fundamental blocks are listed to begin with: manpower, machines, methods, materials and environment - in case of a problem related to manufacturing; and equipment, policies, procedures and people - in case the problem facing the team relates to administration and service. Of course, when listing them, it should be clarified that these blocks are suggestive and not exhaustive. These blocks along with any other identified are major branches connecting to the spine. Each member of the team then gets a chance to come up with what they think is the cause of the problem. Per turn, only one cause may be contributed by every member, else they simply "pass" if they can't think of any cause in any particular round.
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Each cause thus identified is then "hung" on the branch of the category that it belongs to. For example, if "Moisture Content" is a major cause, then "Dryer's RPM" is a cause that is hung on to moisture content. In case the cause happens to be the cause of another cause which is already present, then it must be hung on the branch of the latter. For instance, "Materials" is a major branch that goes to the spine of the problem of "Recurrent pipe leakage". "Defective measurement tools" is a branch that connects to materials. "Lack of suppliers" or "Substandard supply of tools" is a cause that hangs on to defective measurement tools. It is also possible that one cause may be placed on several branches.
The brainstorming session ends when a time comes where everybody passes.
Root Cause Analysis The resulting Ishikawa Diagram is then analyzed by the senior management to draw up a plan of action to root out the causal factors, so that the root causes can solved. This is frequently done, by taking the enumerated causes, and measuring their occurrence in various processes. After recording these data for a specific period, the results are examined in a Pareto Chart, wherein the 80/20 rule makes it apparent where to invest the appropriate organizational effort to reduce the unwanted effects so analyzed in this process (or perhaps to increase intended postiive effects). As can be seen above, the Cause and Effect exercise may be seen as the first step toward any quality management effort. Problem-solving techniques continue where this exercise leaves off. An innovation on the Ishikawa fishbone is the "lateral tree", which is supposed to have an edge over the former when it comes to handling more complicated scenarios involving causal branches of several depths. The latter strives to vertically align all items on the same causal level, thus providing more perspective to analysts. The fishbone diagram and collaborative, team-approach were integral components of Dr. Ishikawa's "Company-Wide Quality Control" (CWQC) quality strategy. His Quality Circles (QC) became popular worldwide for the fresh breath that they provided previously stale problem-solving mechanisms. In recognition of his life-long efforts of making "quality" a household word, the American Society for Quality (ASQ) instituted the Ishikawa medal in 1993, an annual award that recognizes leadership in the human side of quality.
Dr. KAORU ISHIKAW CONTROL CHART

Ishikawa also showed the importance of the seven quality tools: control chart, run chart, histogram, scatter diagram, Pareto chart, and flowchart. Additionally, Ishikawa explored the concept of quality circles-- a Japanese philosophy which he drew from obscurity into world wide acceptance. .Ishikawa believed in the importance of support and leadership from top level management. He continually urged top level executives to take quality control courses, knowing that without the support of the management, these programs would ultimately fail. He stressed that it would take firm commitment from the entire hierarchy of employees to reach the company's potential for success. Another area of quality improvement that Ishikawa emphasized
is quality throughout a product's life cycle -- not just during production. Although he believed strongly in creating standards, he felt that standards were like continuous quality improvement programs -- they too should be constantly evaluated and changed. Standards are not the ultimate source of decision making; customer satisfaction is. He wanted managers to consistently meet consumer needs; from these needs, all other decisions should stem. Besides his own developments, Ishikawa drew and expounded on principles from other quality gurus, including those of one man in particular: W. Edwards Deming, creator of the Plan-Do-Check-Act model. Ishikawa expanded Deming's four steps into the following six: Determine goals and targets. Determine methods of reaching goals. Engage in education and training. Implement work. Check the effects of implementation. Take appropriate action.
TOTAL QUALITY MANAGEMENT

Everyone has had experiences of poor quality when dealing with business organizations. These experiences might involve an airline that has lost a passengers luggage, a dry cleaner that has left clothes wrinkled or stained, poor course offerings and scheduling at your college, a purchased product that is Seminar On JAPANESE STYLE OF MANAGEMENT Page 37
damaged or broken, or a pizza delivery service that is often late or delivers the wrong order. The experience of poor quality is exacerbated when employees of the company either are not empowered to correct quality inadequacies or do not seem willing to do so. We have all encountered service employees who do not seem to care. The consequences of such an attitude are lost customers and opportunities for competitors to take advantage of the market need. Successful companies understand the powerful impact customer-dened quality can have on business. For this reason many competitive rms continually increase their quality standards. For example, both the Ford Motor Company and the Honda Motor Company have recently announced that they are making customer satisfaction their number one priority. The slow economy of 2003 impacted sales in the auto industry. Both rms believe that the way to rebound is through improvements in quality, and each has outlined specic changes to their operations. Ford is focusing on tightening already strict standards in their production process and implementing a quality program called Six-Sigma. Honda, on the other hand, is focused on improving customer-driven product design. Although both rms have been leaders in implementing high quality standards, they believe that customer satisfaction is still what matters most. In this chapter you will learn that making quality a priority means putting customer needs rst. It means meeting and exceeding customer expectations by involving everyone in the organization through an integrated effort. Total quality management (TQM) is an integrated organizational effort designed to improve quality at every level. In this chapter you will learn about the philosophy of TQM, its impact on organizations, and its impact on your life. You will learn that TQM is about meeting quality expectations as dened by the customer; this is called customer-dened quality. However, dening quality is not as easy as it may seem, because different people have different ideas of what constitutes high quality. Lets begin by looking at different ways in which quality can be dened.
DEFINATION QUALITY
The denition of quality depends on the role of the people dening it. Mostconsumers have a difcult time dening quality, but they know it when they see it. For example, although you probably have an opinion as to which manufacturer of athletic shoes provides the highest quality, it would probably be difcult for you to dene your quality standard in precise terms. Also, your friends may have different opinions regarding which athletic shoes are of highest quality. The difculty in dening quality exists regardless of product, and this is true for both manufacturing and service organizations. Think about how difcult it may be to dene quality for products such as airline services, child day-care facilities, college classes, or even OM textbooks. Further complicating the issue is that the meaning of quality haschanged over time.Today, there is no single universal denition of quality. Some people view quality asperformance to standards. Others view it as meeting the customers needs or satisfying the customer. Lets look at some of the more common denitions of quality.
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Conformance to specications measures how well the product or service meets the targets and tolerances determined by its designers. For example, the dimensions of a machine part may be specied by its design engineers as 3 05 inches. This would mean that the target dimension is 3 inches but the dimensions can vary between 2.95 and 3.05 inches. Similarly, the wait for hotel. room service may be specied as 20 minutes, but there may be an acceptable delay of an additional 10 minutes. Also, consider the amount of light delivered by a 60 watt light bulb. If the bulb delivers 50 watts it does not conform to specications. As these examples illustrate, conformance to specication is directly measurable, though it may not be directly related to the consumers idea of quality. Fitness for use focuses on how well the product performs its intended function or use. For example, a Mercedes Benz and a Jeep Cherokee both meet a tness for use denition if one considers transportation as the intended function. However, if the denition becomes more specic and assumes that the intended use is for transportation on mountain roads and carrying shing gear, the Jeep Cherokee has a greater tness for use. You can also see that tness for use is a user-based denition in that it is intended to meet the needs of a specic usergroup. Value for price paid is a denition of quality that consumers often use for product or service usefulness. This is the only denition that combines economicswith consumer criteria; it assumes that the denition of quality is price sensitive. For example, suppose that you wish to sign up for a personal nance seminar and discover that the same class is being taught at two different colleges at signicantly different tuition rates. If you take the less expensive seminar, you will feel that you have received greater value for the price. Support services provided are often how the quality of a product or service is judged. Quality does not apply only to the product or service itself; it also applies to the people, processes, and organizational environment associated with it. For example, the quality of a university is judged not only by the quality of staffand course offerings, but also by the efciency and accuracy of processing paperwork Psychological criteria is a subjective denition that focuses on the judgmental evaluation of what constitutes product or service quality. Different factors contribute to the evaluation, such as the atmosphere of the environment or the perceived prestige of the product. For example, a hospital patient may receive average health care, but a very friendly staff may leave the impression of high quality. Similarly, we commonly associate certain products with excellence because of their reputation; Rolex watches and Mercedes-Benz automobiles are examples.
EVOLUTION OF TOTAL QUALITY MANAGEMENT

The concept of quality has existed for many years, though its meaning has changed and evolved over time. In the early twentieth century, quality management meant inspecting products to ensure that they Seminar On JAPANESE STYLE OF MANAGEMENT Page 39
met specications. In the 1940s, during World War II, quality became more statistical in nature. Statistical sampling techniques were used to evaluate quality, and quality control charts were used to monitor the production process. In the 1960s, with the help of so-called quality gurus, the concept took on a broader meaning. Quality began to be viewed as something that encompassed the entire organization, not only the production process. Since all functions were responsible for product quality and all shared the costs of poor quality, quality was seen as a concept that affected the entire organization. The meaning of quality for businesses changed dramatically in the late 1970s. Before then quality was still viewed as something that needed to be inspected and corrected. However, in the 1970s and 1980s many U.S. industries lost market share to foreign competition. In the auto industry, manufacturers such as Toyota and Honda became major players. In the consumer goods market, companies such as Toshiba and Sony led the way. These foreign competitors were producing lower-priced products with considerably higher quality. To survive, companies had to make major changes in their quality programs. Manyhired consultants and instituted quality training programs for their employees. A new concept of quality was emerging. One result is that quality began to have a strategic meaning. Today, successful companies understand that quality provides a competitive advantage. They put the customer rst and dene quality as meeting or exceeding
CUSTOMER EXPECTATION
Since the 1970s, competition based on quality has grown in importance and has generated tremendous interest, concern, and enthusiasm. Companies in every line of business are focusing on improving quality in order to be more competitive. In many industries quality excellence has become a standard for doing business. Companies that do not meet this standard simply will not survive. As you will see later in the chapter, the importance of quality is demonstrated by national quality awards and quality certications that are coveted by businesses. The term used for todays new concept of quality is total quality management orTQM. It presents a timeline of the old and new concepts of quality. You can see that the old concept is reactive, designed to correct quality problems after they occur. The new concept is proactive, designed to build quality into the product and process design. Next, we look at the individuals who have shaped our understanding of quality.
FEATURES OF TOTAL QUALITY MANAGEMENT

CUSTOMER FOCUS
The rst, and overriding, feature of TQM is the companys focus on its customers. Quality is dened as meeting or exceeding customer expectations. The goal is to rst identify and then meet customer needs. TQM recognizes that a perfectly produced product has little value if it is not what the customer wants. Therefore, we can say that quality is customer driven. However, it is not always easy to determine what the customer wants, because tastes and preferences change. Also, customer expectations often vary from Seminar On JAPANESE STYLE OF MANAGEMENT Page 40
one customer to the next. For example, in the auto industry trends change relatively quickly, from small cars to sports utility vehicles and back to small cars. The same is true in the retail industry, where styles and fashion are short lived. Companies need to continually gather information by means of focus groups, market surveys, and customer interviews in order to stay in tune with what customers want. They must always remember that they would not be in business if it were not for their customers.
CONTINUES IMPROVEMENT
Another concept of the TQM philosophy is the focus on continuous improvement. Traditional systems operated on the assumption that once a company achieved a certain level of quality, it was successful and needed no further improvements. We tend to think of improvement in terms of plateaus that are to be achieved, such aspassing a certification test or reducing the number of defects to a certain level. Traditionally, change for American managers involves large magnitudes, such as major organizational restructuring. The Japanese, on the other hand, believe that the best and most lasting changes come from gradual improvements. To use an analogy, they believe that it is better to take frequent small doses of medicine than to take one large dose. Continuous improvement, called kaizen by the Japanese, requires that the company continually strive to be better through learning and problem solving. Because we can never achieve perfection, we must always evaluate our performance and take measures to improve it. Now lets look at two approaches that can help companies with continuous improvement: the plan do study act (PDSA) cycle and benchmarking
THE-PLAN-DO-STUDY-ACT CYCLE
The plan do study act (PDSA) cycle describes the activities a company needs to perform in order to incorporate continuous improvement in its operation. This cycle, shown in Figure 5-6 is also referred to as the She swhart cycle or the Deming wheel. The circular nature of this cycle shows that continuous improvement is a never-ending process. Lets look at the specic steps in thecycle. Plan The rst step in the PDSA cycle is to plan. Managers must evaluate the current process and make plans based on any problems they nd. They need to document all current procedures, collect data, and identify problems. This information should then be studied and used to develop a plan for improvement as well as specic measures to evaluate performance. Do The next step in the cycle is implementing the plan (do). During the implementation process managers should document all changes made and collect data for evaluation. Study The third step is to study the data collected in the previous phase. The data are evaluated to see whether the plan is achieving the goals established in the plan phase. Act The last phase of the cycle is to act on the basis of the results of the rst three phases. The best way to accomplish this is to communicate the results to other members in the company and then implement the new procedure if it has been successful. Note that this is a cycle; the next step is to plan again. After we have acted, we need to continue evaluating the process, planning, and repeating the cycle again.
BENCHMARKING
Another way companies implement continuous improvement is by studying business practices of companies considered best in class. This is called benchmarking. The ability to learn and study how others do things is an important part of continuous improvement. The benchmark company does not have to be in the same business, as long as it excels at something that the company doing the study wishes to emulate. For example, many companies have used Lands End to benchmark catalog distribution and order lling, because Lands End is considered a leader in this area. Similarly, many companies have used American Express to benchmark conict resolution.
EMPLOYEE EMPOWERMENT
Part of the TQM philosophy is to empower all employees to seek out quality problems and correct them. With the old concept of quality, employees were afraid to identify problems for fear that they would be reprimanded. Often poor quality was passed on to someone else, in order to make it someone elses problem. The new concept of quality, TQM, provides incentives for employees to identify quality problems. Employees are rewarded for uncovering quality problems, not punished. In TQM, the role of employees is very different from what it was in traditional systems. Workers are empowered to make decisions relative to quality in the production process. They are considered a vital element of the effort to achieve high quality. Their contributions are highly valued, and their suggestions are implemented. In order to perform this function, employees are given continual and extensive training in quality measurement tools. To further stress the role of employees in quality, TQM differentiates between external and internal customers. External customers are those that purchase the companys goods and services. Internal customers are employees of the organization who receive goods or services from others in the company. For example, the packaging department of an organization is an internal customer of the assembly department. Just as a defective item would not be passed to an external customer, a defective item should not be passed to an internal customer.
USE OF QUALITY TOOLS

You can see that TQM places a great deal of responsibility on all workers. If employees are to identify and correct quality problems, they need proper training. They need to understand how to assess quality by using a variety of quality control tools, how to interpret ndings, and how to correct problems. In this section we look at seven different quality tools. These are often called the seven tools of quality control. They are easy to understand, yet extremely useful in identifying and analyzing quality problems. Sometimes workers use only one tool at a time, but often a combination of tools is most helpful.
PRODUCT DESIGN
Quality Function Deployment A critical aspect of building quality into a product is to ensure that the product design meets customer expectations. This typically is not as easy as it seems. Customers often speak in everyday language. For example, a product can be described as attractive, strong, or safe. However, these terms can have very different meaning to different customers. What one person considers to be strong, another may not. To produce a product that customers want, we need to translate customers Seminar On JAPANESE STYLE OF MANAGEMENT Page 42
everyday language into specic technical requirements. However, this can often be difcult. A useful tool for translating the voice of the customer into specic technical requirements is quality function deployment (QFD). Quality function deployment is also useful in enhancing communication between different functions, such as marketing, operations, and engineering QFD enables us to view the relationships among the variables involved in the design of a product, such as technical versus customer requirements. This can help us analyze the big picture for example, by running tests to see how changes in certain technical requirements of the product affect customer requirements. An example is an automobile manufacturer evaluating how changes in materials affect customer safety requirements. This type of analysis can be very benecial in developing a product design that meets customer needs, yet does not create unnecessary technical requirements for production. QFD begins by identifying important customer requirements, which typically come from the marketing department. These requirements are numerically scored based on their importance, and scores are translated into specic product characteristics. Evaluations are then made of how the product compares with its main competitors relative to the identied characteristics. Finally, specic goals are set to address the identied problems. The resulting matrix looks like a picture of a house and is often called the house of quality. Next we will consider the example of manufacturing a backpack to show how we would use QFD. We will start with a relationship matrix that ties customer requirements to product characteristics
PROCESS MANAGEMENT
According to TQM a quality product comes from a quality process. This means that quality should be built into the process. Quality at the source is the belief that it is far better to uncover the source of quality problems and correct it than to discard defective items after production. If the source of the problem is not corrected, the problem will continue. For example, if you are baking cookies you might nd that some of the cookies are burned. Simply throwing away the burned cookies will not correct the problem. You will continue to have burned cookies and will lose money when you throw them away. It will be far more effective to see where the problem is and correct it. For example, the temperature setting may be too high; the pan may be curved, placing some cookies closer to the heating element; or the oven may not be distributing heat evenly. Quality at the source exemplies the difference between the old and new concepts of quality . The old concept focused on inspecting goods after they were produced or after a particular stage of production. If an inspection revealed defects, the defective products were either discarded or sent back for reworking. All this cost the company money, and these costs were passed on to the customer. The new concept of quality focuses on identifying quality problems at the source and correcting them.
MANAGING SUPPLIER QUALITY

TQM extends the concept of quality to a companys suppliers. Traditionally, companies tended to have numerous suppliers that engaged in competitive price bidding. When materials arrived, an inspection was performed to check their quality. TQM views this practice as contributing to poor quality and wasted time and cost. The philosophy of TQM extends the concept of quality to suppliers and ensures that they engage in the same quality practices. If suppliers meet preset quality standards, materials do not have to be inspected upon arrival. Today, many companies have a representative residing at their suppliers location, thereby involving the supplier in every stage from product design to nal production. Seminar On JAPANESE STYLE OF MANAGEMENT Page 43
JUST IN TIME
The primary goal for the company is customer's satisfaction and if company can not reach perfection in this area then all the processes are worthless. All parts of the value chain and everything in the enterprise must be healthy for realization of competitive business processes. If the company wants strong and longlasting value chain all the links within the chain must be prepared to overpass all existing problems. One of the most important links inside that value chain is definitely logistics. Logistics is concerned with the physical distribution and storage of products and services. During the 20 th century several approaches of implementation of logistics were developed. Surely, one the most famous and most important logistics concept is the Just-In-Time concept. The following text will help readers to understand basics of JIT, at least I hope so. Value chain and Logistics network (Supply chain) The value chain was described and popularized by Michael Porter (1985) in hisbestseller, Competitive Advantage: Creating and Sustaining Superior Performance. The value chain describes the full range of activities that are required to bring a product from its conception to its end use. These generic valueadding activities are divided in two major groups. The "primary activities" include: inbound logistics, operations (production), outbound logistics, sales and marketing, and service (maintenance). The "support activities" include: administrative infrastructure management, human resources management, R&D, and procurement. The goal of these activities is to offer the customer a level of value that exceeds the cost of the activities, thereby resulting in the profit margin. The costs and value drivers are identified for each value activity. The value chain framework quickly made its way to the forefront of management thought as a powerful analysis tool for strategic planning. The concept has been extended beyond individual organizations. It can apply to whole supply chains (logistics networks). The delivery of a mix of products and services to the end customer will mobilize different economic actors, each managing its own value chain. The industry-wide synchronized interactions of those local value chains create an extended value chain, sometimes global in extent. Logistics network, supply chain or supply network is a coordinated system of organizations, people, activities, information and resources involved in moving a product or service in physical or virtual manner from supplier to customer. The entities of a supply chain (Figure 1) typically consist of manufacturers, service providers, distributors, sales channels (e.g. retail, ecommerce) and consumers (end customers). Supply chain activities transform raw materials and components into a finished product that is delivered to the end customer. There is a variety of models of supply 3 chain, addressing the upstream and downstream sides. The primary objective of supply chain management is to fulfil customer demands through the most efficient use of resources, including distribution capacity, inventory and labour. Logistics network has a far wider meaning than just goods delivery and channel distribution system. It is the total flow of materials, information and cash, from the suppliers' suppliers, right through an enterprise to the customers' customers. The flows of materials and cash are opposite, but information needs be visible throughout to give control over what is happening in the chain.
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ABOUT JUST IN TIME

Just in Time (JIT) production is a manufacturing philosophy which eliminates waste associated with time, labour, and storage space. Basics of the concept are that the company produces only what is needed, when it is needed and in the quantity that is needed. The company produces only what the customer requests, to actual orders, not to forecast. JIT can also be defined as producing the necessary units, with the required quality, in the necessary quantities, at the last safe moment. It means that company can manage with their own resources and allocate them very easily
HISTORY AND PHILOSOPHY

Problems before JIT system were that companies can not properly calculate their material flows. Also, there were problems with warehouses because there were situations that in one moment warehouses are full with stocks, and in other they are almost empty. Because of these problems it was really difficult for engineers and managers to deal with logistics. JIT, however, is not new. The technique was first used by the Ford Motor Company during 1920s, but the technique was subsequently adopted and publicised by Toyota Motor Corporation of Japan as part of its Toyota production System (TPS). In 1954 Japanese giant Toyota implemented this concept in order to reduce wasteful overstocking in car production. Just-in-time (JIT) inventory systems are not just a simple method that a company has to buy in to; it has a whole philosophy that the company must follow. The ideas in this philosophy come from many different disciplines including; statistics, industrial engineering, production management and behavioural science. In the JIT inventory philosophy there are views with respect to how inventory is looked upon, what it says about the management within the company, and the main principle behind JIT. Firstly, inventory is seen as incurring costs instead of adding value, contrary to traditional thinking. Under the philosophy, businesses are encouraged to eliminate 5 inventory that doesnt add value to the product. Secondly, it sees inventory as a sign of poor management as it is simply there to hide problems within the production system. These problems include backlogs at work centres, lack of flexibility for employees and equipment, and inadequate capacity among other things. In short, the just-in-time inventory system is all about having the right material, at the right time, at the right place, and in the exact amount.
BENEFITS AND PROBLEMS

Benefits that JIT concept can provide to the company are huge and very diverse. The main benefits of JIT are listed below: 1. Reduced set up times in warehouse - the company in this case can focuses on other processes that might need improvement; 2. Improved flows of goods in/through/out warehouse - employees will be able to process goods faster;
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3. Employees who possess multi-skills are utilized more efficiently - the company can use workers in situations when they are needed, when there is a shortage of workers and a high demand for a particular product; 4. Better consistency of scheduling and consistency of employee work hours - if there is no demand for a product at the time, workers dont have to be working. This can save the company money by not having to pay workers for a job not completed or could have them focus on other jobs around the warehouse that would not necessarily be done on a normal day; 5. Increased emphasis on supplier relationships - having a trusting supplier relationship is important for the company because it is possible to rely on goods being there when they are needed; 6. Supplies continue around the clock keeping workers productive and businesses focused on turnover employees will work hard to meet the company goals.
There are several problems which are connected within JIT concept. Maybe the major problem with JIT operation is that it leaves the supplier and downstream consumers open to supply shocks. With shipments coming in sometimes several times per day, the company is especially susceptible to an interruption in the flow. For that reason, some companies are careful to use two or more suppliers for most of theirs assemblies. The hidden costs are present and they include labour union leverage, problems with flexible manufacturing systems (FMS), problems developing for the flexible workforce, difficulties with supplying commodities using JIT, increased expenses for suppliers Implementation of JIT concept
We can observe implementation of the JIT concept as a process which must be taken seriously. How a company will implement the JIT concept depends on many factors. For example, if a company has more than 100.000 workers and production in different places, then the implementation of JIT needs to be done in interaction with all departments. It is obvious that for large companies more time will be spent. On the other hand, smaller companies have the opportunity to implement the JIT concept much faster because their organization structure is not so complicated. But it does not mean that smaller companies are better in JIT implementation. There are several general guideline steps for easier JIT implementation. First of all, top management must accept idea of the JIT. Without their permission it is not possible to move on with the whole process. They are responsible for ensuring financial resources for the project. Perhaps the most difficult thing for engineers is to convince managers that the company under consideration really needs implementation of the JIT concept in order to improve business processes. Convincing managers to allow evaluation of JIT is not only a problem that comes from human. Second step for a company is success which is connected with the fact that employees also have to understand significance of the new concept. Very important in this step is to explain to workers that JIT is not some kind of bad monster and not something unimportant for their work. It is desirable to hold a series of training sessions to familiarize employees with the fundamentals of the JIT concept. When we Seminar On JAPANESE STYLE OF MANAGEMENT Page 46
succeed once to explain to our human resources the importance of the new concept and if they become cognizant about it, now it is possible to continue. The third step would be the setup of ERP (Enterprise Resource Planning). ERP is a system which integrates all data and processes of an organization into a single unified system. It is impossible nowadays to run successful production without strong support of an information system. So, it means that ERP requests the software and hardware systems with a secure and huge data base which is able to collect all information about resources. With a centralized data base it is much easier to manage all enterprise resources. It is especially important for logistics because, logistics can be considered as a tool for getting resources, likeproducts , services, and people, where they are needed and when they are desired.If the ERP system is well established, the next step would be to test our own system. Now all preconditions of the JIT implementation are considered and we are trying to figure out: are there any difficulties to start with implementation. In this step one question comes up: "Is the system ready for JIT implementation?". When the answer is NO, it is recommendable to go back and do changes. If the answer is YES, everything is prepared for the implementation process. Apropos the technical and physical parts of the implementation, maybe the most important thing which is worth of mentioning is that during the process the organization must not rush. The last step is testing and control. For successful existence and developing of the JIT system there must be continuous control. Without control things can sway from the right direction.
Corporate Social Responsibility in Japan

Trend and issue surrounding CSR in Japan
Current circumstance surrounding CSR activities in Japan Gradually the CSR activities in Japan are shifting from conventional activities to more strategic activities from the companies perspective. Hereby conventional activities mean the socially obligated activities for companies such as complying law and regulations, adapting ethical standards and international norms, establishing corporate governance system in order to protect the various stakeholders rights from abuse of corporate power. On the other hand, strategic activities mean the CSR activities which closely relate with profit making business activities. Some CSR activities directly contribute to cost saving or sales increase. For example, reduction of energy consumptions at the factories by means of innovative production system benefits to both environment in terms of reduction of greenhouse gas emissions and corporate in terms of cost reduction. Under the harsh business environment, not all companies but many companies in Japan are now reconsidering their CSR activities. Until so far, the most of companies are passive for CSR, but from now on, they become more proactive for CSR. Admired companies in terms of CSR
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In May 2009, the CSR ranking in Japan was announced by Toyo Keizai, one of the prestigious business magazines in Japan. According to this ranking, SHARP is ranked at the first place. Then TOYOTA and Panasonic follow it respectively. The other highly ranked companies are renowned manufactures, except NTT docomo, the largest mobile phone carrier in Japan. This ranking evaluates listed companies in Japan except financial institutions in terms of the employment, environment, corporate governance & sociality and financial aspects: profitability, security and scale. The top ranked SHARP earned the highest point in the environment aspect. It regards solar battery business as its one of core businesses and acquires ISO 14001 for 3 its all business locations which include business offices and subsidiary offices as well as factories. Furthermore, it supports more than 500 environmental education classes with non governmental organizations for elementary school students. TOYOTA, the second highest ranking company is famous about hybrid car PRIUS. Recently PRIUS becomes so popular enough to be an icon of ecology. Like those cases, currently, Ecology is the most important key word for the CSR activities in Japan. Even harsh economic and business environment, these top ranked companies are eager to invest and develop the environmental friendly products. They regard innovation for environmental technology is necessary not only for CSR, but also for its business success. In addition to the product innovation, environment load reduction is also important. From the CSR perspective, environmental load reduction such as reduction of greenhouse gas emissions contributes to protection of earth environment. Simultaneously, from the business perspective, environmental load reduction contributes to cost saving. As a simple example, reducing packages and wrappings for products makes the company possible to achieve reduction of greenhouse gas emissions as well as cost reduction. Traditionally, Japanese consumers or buyers put importance on the product quality. Such excess consciousness of quality aspects tends to entail excess packages and wrappings by the producers and sellers. However, recently, the consumer perception for these excess packages shifts from as evidence of enrichment of the product quality to waste of money and unfriendly for environment. Therefore, such change of circumstance becomes an opportunity for the companies which intend to work for CSR. Not all companies, but some leading Japanese companies realize it, and they cultivate both companies and social benefit simultaneously. Until so far, the most of companies recognize CSR as necessary burden for business, but gradually such recognition is changing toward CSR as a driver to increase corporate value through brand development, cost reduction and technology innovation. 4 The policy of Japanese government also accelerates this new trend of CSR. In 1997, Japan committed emission reduction under the Kyoto Protocol, and the companies have been well conscious and constantly reduced their greenhouse gas emissions. Under the economic crisis which started from September 2008, however, this governmental approach became more aggressive. Japanese Seminar On JAPANESE STYLE OF MANAGEMENT Page 48
government has already started to reduce the taxes for ecological products which contribute to the reduction of greenhouse gas emission as a part of economic stimulus policy. For example, since April 2009, low emission vehicles such as hybrid cars and low-fuel consumption cars are the subjects of lowering tax rates which offers the 50-100% of car purchasing related taxes. This policy intends penetration of ecological vehicles and stimulation of domestic automobile demand. Another example is the Eco-Point for consumer durable electronics, such as flat TVs, refrigerators and air conditioners. The consumer who buys the subjected eco-home electronics products, he/she can get Eco-Point which counts 3,000 36,000 points depending on the product. This Eco-Point will be redeemable for the further eco products purchases or convertible for other merchandise vouchers. This policy is conducted for the purpose of promoting the global warming countermeasure, the diffusion of digital TV broadcasts and economic revitalization. Combined with those current economic policies, the companies are interested in the ecology related CSR. Consumer attitude for CSR activities In October 2006, Nomura research institute ltd. conducted a consumer opinion survey which focused on how the CSR activities affect to consumers purchasing intentions. According to the survey result which consists 14,400 Japanese respondents who are from teens to 60s, both men and women, most of people have good brand image for the companies which are positively work for the CSR activities, and want to buy the products and services from those companies. On the other hands, people perceives the companies which do not sincerely work for the CSR activities as bad 5 image of brands, and tend to avoid purchasing those products and services if they have alternative products and services.
Among the various types of CSR activities, CSR activities which closely relate to safety and customer care positively affect consumer purchasing decision and brand image. Followed by the safety and customer care, environment, corporate governance, local community involvement, employee relations, business success, supplier relations and shareholder relation are ordered respectively in terms of the magnitude of impact to consumer attitude. At present, after two and a half years from this survey, it is assumed that the consumer attitude became more sensitive for CSR. Because many corporate scandals related to safety and customer care were happened in Japan during past two to three years. Under such circumstance, companies can not afford to be NOT interested in CSR.
Current issue of Japanese company surrounding CSR

Currently most of Japanese companies are aware of the importance of CSR, but still many companies struggle to find how to deal with CSR. Only leading CSR companies have realized the real meaning and
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benefits from CSR. Rest of companies still have following questions; Why does our company need CSR? What should our company do as CSR? What is achievement goal of CSR? Not few companies are committing to some kind of CSR activities such as local community volunteer, forestation and reduction of greenhouse gas emission. Also most of them publish CSR reports or environmental reports annually. However, they are not comfortable with status quo. Especially, the person who is in charge of the CSR department is quite anxious and worried about his/her companys CSR. Although, importance of CSR is proclaimed in the public, in the reality, CSR activities are put aside of the main business and center of company. Thus, CSR department of the company confronts limitation of its budget and resources. Under the current downturn of the economy, this issue became more common. Top management 6 publicly expresses his/her interest in CSR, however the actual involvement is not so heavy as it is expressed. Only a few leading companies have the CSR committee which top management are constantly involved and makes decision for its CSR activities. Furthermore, for the people of CSR department, there are many things to do in order to follow the new rules and standards of CSR. Current social requirements become big pressures and burdens for them. This is the reality and those are the actual concerns for many Japanese companies surrounding CSR. Those companies need clear direction and concept of CSR, when they aim to achieve both social and corporate benefits from their CSR activities.
The concept of Strategic CSR

Some leading companies in Japan recently tackle the Strategic CSR : the CSR which can contribute to both social and business benefits. For the company, the strategic CSR is a part of business activity and its activities embed on ordinal business process and value chain. Hence, the strategic CSR activity can affect positively to corporate bottom line, profit. The strategic CSR is not only fundamental CSR activities such as compliances, corporate governance and social contribution activities, but also business related activities which address social issue and improvement of social welfare on top of business concept. Another aspect of the strategic CSR is value creation activities, not risk control activities. In this context, there will be a lot of opportunities for the companies and social entities such as NGO to work together in order to increase the benefit for both society and company. In order to make it, it is essential that the interests for both company and society must be aligned. If it aligned, the results of the relationship between company and society would become not zero-sum, but win-win.
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On the other way to say, the strategic CSR is neither volunteer activity nor non profit 7 activity; rather profit making business activity. Nomura Research Institute, Ltd considers that the corporate CSR activities are composed of three types of CSR activities: Zone I, Zone II, and Zone III. The zone I consists with the collective activities that are related to the corporate ethics and compliance. This zone is necessary CSR activities required from society for the companies. So called corporate citizenship, corporate governance and compliance related activities are categorized in this zone. For example, the company contributes fund raising to the social improvement such as better education for deprived children and environmental protection. If this contribution only intended to the social benefit, this can be classified in the Zone I. However, this contribution is intended middle to long term return for the company, this can be classified in the Zone II. The difference between those is the corporate strategic intent whether the money and efforts of company for CSR are regarded as an investment of future business. Shiseido, leading cosmetic manufacturer in Japan, holds the free of charge beauty advice seminars 3,600 times per year for senior or disable women. The women who attend in this activity are encouraged their minds in beauty and sociality, and also are evoked the importance of cosmetic as a woman. Therefore, for Shiseido, this activity is voluntary activity and cost. But if the women who have once lost an interest for make up would return to the market as customers, this turns to contribute to business. The Zone III is the strategic CSR: social innovation through business activities. Different from the Zone II, by definition, Zone III activities must be inside business and company must have strategic intent which both society and company make profit based on the win-win relationship. Obviously, not all companies are doing this type of CSR, but the leading CSR companies try to accommodate their business model to this Zone III. This Zone III, the strategic CSR, is not only to be limited domestically, but more on globally. When the company develops the business globally, firstly the company exports 8 its existing products or business models to the oversea markets. If the company develops its own strategic CSR business model, it also can be export to the global market, especially emerging market in the developing counties. Those markets are called the base of pyramid (denoted by BOP) market. Since the most of Japanese domestic market is already matured and difficult to find growth opportunity for the most of the Japanese companies, those BOP market has been currently targeted as the next potentials for the business growth by them. Then, the next question is how can the company enter those BOP market? When see the BOP market, there are many social issues and causes. If company can resolve such issues and causes, the company can penetrate into the market and make business. For example, Unilever, European food and fast moving goods giant, addressed the poverty in Indian rural communities through the Shakti project which is an initiative of making women entrepreneurs as rural direct-to-consumer retailers. This project achieves to create socially independent women for India and also to build cheap distribution channel for the company. Currently, some of Japanese companies are try to establish this type of win-win relationship in the BOP market. Seminar On JAPANESE STYLE OF MANAGEMENT Page 51
Once company realized these three types of CSR activities, then the next step is total CSR management which controls a good balance of three zones CSR activities. The company should monitor current CSR activities with the lens of strategic CSR structure, and reevaluate those activities in terms of both social and corporate benefit. Based on the annual evaluation, the company must re-allocate its resources for CSR like the financial portfolio management. Strategic CSR case; Club Tourism Co. Club Tourism is a mid-sized travel agency which has a unique membership program. It has total 140 billion yen(Around 1 billion euro ) tour sales and has around 2,000 employees in Japan. Every month, the company publishes member magazine, and entrusts its distribution to certain customers called echo staffs who undertake the job 9 at a cheaper rate than any other agent. There are more than 10 thousand customers who proactively participate in its business by distributing magazines to millions of households in Japan. Why so many customers are willing to take part in its business in spite of the low wages they receive? The answer is in the companys mission of supporting self-realization of senior citizens. The Club Tourism encourages customer participation in order to offer a new way of life for seniors. Most retirees have little connection with local community and are eager to seek one for enjoying the rest of their lives. The Club Tourisms distribution business is attractive to these seniors as a good opportunity for regional communication as well as a moderate exercise for health. Their motivation is not on the money, but on the social meanings which echo staff role brings to their life. The Club Tourism could succeed in enhancing customer loyalty as well as improving business efficiency, because customers, who are in empathy with company mission, felt more than happy to support its business. Alike to echo staff, some senior customers work for the Club Tourism as the fellow friendly staff who is semi-professional tour conductor. The customer who has work experience in the certain professional field such as school teacher turns a guide of tours. This type of engagement costs cheaper than the ordinal tour guide, but is more knowledgeable for the specific field and easy to access from the other customers because of the closer generation. Of course, the company sells socially beneficial travels directly as well. The mountain clean up tour is one of the examples. The mountain group climbers buy the tour and go to the mountain in order to clean the mountain up as a tour. This travel provides the opportunity for the customers who want to participate in the some voluntary activity but dont know how to participate. Another example is the rural festival support tours. In rural areas in Japan, in most of the case, the population is declining but there are many historical sites and traditions which are already diminished in the urban area. These are good tourism assets for Club Tourism for tour planning, and 10 especially the local festivals are the most suitable intangible assets for both the tourist and local people. By producing the tours for those areas and festivals, tourists enjoy precious experience, the local tradition is conserved, and moreover the local Seminar On JAPANESE STYLE OF MANAGEMENT Page 52
economy is revitalized through the festival. These examples of tours are contributed to the regional society and customer experience as well as company business. This type of business can be categorized in Zone III, the strategic CSR, and the business model is not only for enhancing corporate value, but also for enhancing companys social value, which brings the benefit to the society. By focusing on social value, company can enhance business efficiency as well as enhancing brand value.
Transition of CSR initiative in Japan

The concept of CSR has been developed since 2002, and currently the third stage of the CSR transition in Japan. Combined with the ecology and environmental consciousness, the companies try to seize the new opportunities through the strategic CSR activities even in the economic downturn. The followings are the historical transition of CSR activities in Japan. Phase 0; Mecenat and philanthropy Since the 1990s, Japanese companies constantly spent money for social contribution activities as mecenat or philanthropy. Especially, thanks to the bubble economy in early 90s, historical high of average spending per company for the social contribution counted up to 525 million yen. In the early 2000s, the spending decreased because of the IT bubble burst, but it was still 376 million yen. This money was mainly spent for the cultural programs such as classic concerts and art works. In these periods, the companies considered that some proportion of corporate profits from business activities must return to society. However, how to return 11 the profit was not carefully considered. Therefore, simply spending some money forsociety was regarded as one of evidence of good company. Phase 1; Stakeholder relations Around 2002, after the IT bubble economy was blasted, Japanese companies started to reconsider their spending for philanthropic activities. They started to consider about stakeholders especially shareholders. Traditionally, Japanese companies put importance mostly on employees, but, at this time, many companies had started to realize shareholders by the influence of American way of management. As a result, the purpose of the spending for social contribution was reconsidered. Many Japanese companies set up the CSR department in the company, reviewed and verified the meaning or purpose of the previous CSR related or like activities. After that, they established their own basic CSR policy and started to publish their CSR report which describes the policy and their CSR activities. The main purpose of those was one of stakeholder relationships. Phase 2; Compliance and corporate governance During 2000 -2005, many corporate scandals were happened in Japan, and therefore companies built visible governance structure as a part of CSR. Of course, one of big influence was Enron scandal in US, but since Japanese companies were also weak management in terms of compliance and corporate governance, many companies needed to rebuild its internal control system. Seminar On JAPANESE STYLE OF MANAGEMENT Page 53
The mess disasters due to the lack of corporate governance were seriously perceived by the top managements of companies. For example, in case of a well-known milk product manufacturer was forced to withdraw from the main business because of boycott movement for its products. The executives of an auto manufacturer were arrested and the company made a huge loss by the attempts of concealment of recalls. The other scandals were happened in another food manufacture, life insurance 12 companies and more. As the consequence, these companies were penalized by law and market. In order to avoid above mentioned incidents, Japanese companies documented their internal rules and trained their employees, and restructured corporate governance system which made the clear distribution of authority and responsibility on their organization. As such, the major focus of CSR until recently was the internal risk management. Phase 3; Strategic CSR Panasonic kerosene fan heater recall incident was happen in 2007 when many companies were eager to implement the governance systems. Although the recalled heaters were sold almost two decades and were more than 150,000 units in the market, Panasonic made extensive efforts to collect the malfunctioning heaters. The all employees were committed the collection and spent over 30 billion yen. This extensive and responsible effort, by turn, has resulted as big admiration for the company and improvement of its brand image. Since then Panasonic became a one of model of CSR. This case became one of model case of CSR, which triggers the current shift for new CSR momentum that CSR must contribute to both business and society. The CSR oriented business can increase the top-line, or the CSR procurement can reduce the cost, or the CSR activities can enhance the brand are current new understanding for CSR. Hence, the integration of business activities and CSR activities is gradually becoming one of new challenges for the companies. Case of strategic CSR in INAX INAX is a manufacturer of sanitary wears and housing products such as toilets, kitchens and prefabricated bath. The INAX proclaims that the company will reduce greenhouse gas emission 80% less until 2050 in its environmental policy. This target sounds ridiculous, because the amount of reduction is huge but targeted duration is too 13 long. However, the company seriously works for this policy in order to achieve the targets. First, the INAX has established a new department in charge of this policy. The department is named as Sustainable Innovation department. The role of the department consists of three elements; CSR, environmental control and R&D. The company considered the technological innovation is essential in order to achieve the goal, and therefore the department acquired the engineers from existing internal laboratory. Now they are tackling to the new technology development for the reduction of greenhouse gas emission as well as other CSR activities and current environmental control. Seminar On JAPANESE STYLE OF MANAGEMENT Page 54
Second, the INAX is now reviewing its whole value chain with the sustainable lens. INAX realizes many activities and opportunity which can make INAX sustainable and eco-friendly company, on its business process. For example, its ECO 6 toilets directly contribute to reduce water usages. Comparing to the ordinal toilet, the ECO 6 toilets use 60% less water and those are good for both environment and users. The innovative ECO 6 hits in the market and bolsters the company top-line. Another example is ECO center which is the recycling factory of wastes of house refurbishments. The disposal of wastes is usually at house owners expense, but when the owners buy INAX products and refurbishments are done by INAX, INAX takes care of the wastes recycling. This attracts eco-conscious house owners and contributes INAXs sales and brand image. Journey toward the strategic CSR CSR has been evolving under the business circumstance and currently heads to the new concept of CSR: the strategic CSR. The most of business people regards meaning of CSR as one of obligation, but from now on, it should be recognized as a source of competitive advantage which contributes to the business growth. The things to do as CSR are simply contributions for society from the current view, but those should 14,be a business with society and should co-create value for both society and companies. The achievement goal of CSR is to improve or protect corporate reputation, but it should be maximize both profit of company and benefit of society under the win-win relations.
CASE STUDY The Empty Soap Box

One of the most memorable case studies on Japanese management was the case of the empty soap box, which happened in one of Japan's biggest cosmetics companies. The company receive a complaint that a consumer had bought a soap box that was empty.
Immediately the authorities isolated the problem to the assembly line, which transported all the
packaged boxes of soap to the delivery department. For some reason, one soap box went through the assembly line empty.
Management asked its engineers to solve the problem. Post-haste, the engineers worked hard to devise an X-ray machine with high- resolution monitors manned by two people to watch all the soap boxes that passed through the line to make sure they were not empty.
No doubt, they worked hard and they worked fast but they spent whoopee amount to do so. But when a workman was posed with the same problem, did not get into complications of X-rays, etc but instead came out with another solution. He bought a strong industrial electric fan and pointed it at the assembly line. He switched the fan on, and as each soap box passed the fan, it simply blew the empty boxes out of the line.
Moral of the story: Always look for simple solutions. Devise the simplest possible solution that solves the problem. So, learn to focus on solutions not on problems. "If you look at what you do not have in life, you don't have anything; if you look at what you have in life, you have everything.
BIBLIOGRAPHY:-
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INAX Corporation : http://global.inax.co.jp/ (ECO6 related page: http://www.eco6.jp/top.html) (INAX environmental policy: http://global.inax.co.jp/corporate/environ_policy.html ) Panasonic Corporation. : http://panasonic.co.jp/index.html (Recall related page: http://panasonic.co.jp/ha/info/important/heating/index.htm ) Club Tourism International Inc. : http://www.club-t.com/ Ministry of Land, Infrastructure, Transport and Tourism: http://www.mlit.go.jp/jidosha/jidosha_fr1_000005.html Ministry of Economy, Trade and Industry: http://www.env.go.jp/policy/ep_kaden/index.html Shiseido Company, Limited. CSR: http://www.shiseido.co.jp/e/csr/index.htm

www.siemens.com/answers www.BonsaiInspirations.com www.SAS.com www.ebnonline.com
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Japanese management culture

Japanese-style management today

History of Japanese-style management

Seminar On JAPANESE STYLE OF MANAGEMENT

Key elements of Japanese style of management

Centralized management control

Strong head office

Seminar On JAPANESE STYLE OF MANAGEMENT

Strength and Weakness of Japanese management

Contributing to the resolution of global issues through

Changes in the Business Environment

A New Style of Japanese Management

Initiatives to Strengthen International Competitiveness

Seminar On JAPANESE STYLE OF MANAGEMENT

Weakness:1. Intimate Relationship Between Government and Business

Seminar On JAPANESE STYLE OF MANAGEMENT

Labor might be shortchanged and exploited by their employers.

Human resource practice in Japan

Seminar On JAPANESE STYLE OF MANAGEMENT

HEALTH CARE COVERAGE

National Health Insurance

Employers Health Plan

Private Health Insurance

Seminar On JAPANESE STYLE OF MANAGEMENT

Seminar On JAPANESE STYLE OF MANAGEMENT

Hiring Overseas Japanese

Costs of Hiring Expatriates Versus Locals

Seminar On JAPANESE STYLE OF MANAGEMENT

Structuring An Office In Japan

Seminar On JAPANESE STYLE OF MANAGEMENT

GURU OF JAPANESE STYLE OF MANAGEMENT DR. KAORU ISHIKAW

Problem Management Diagram

Creating Fishbone Charts

Seminar On JAPANESE STYLE OF MANAGEMENT

Seminar On JAPANESE STYLE OF MANAGEMENT

Dr. KAORU ISHIKAW CONTROL CHART

TOTAL QUALITY MANAGEMENT

Seminar On JAPANESE STYLE OF MANAGEMENT

EVOLUTION OF TOTAL QUALITY MANAGEMENT

FEATURES OF TOTAL QUALITY MANAGEMENT

USE OF QUALITY TOOLS

MANAGING SUPPLIER QUALITY

Seminar On JAPANESE STYLE OF MANAGEMENT

ABOUT JUST IN TIME

HISTORY AND PHILOSOPHY

BENEFITS AND PROBLEMS

Seminar On JAPANESE STYLE OF MANAGEMENT

Corporate Social Responsibility in Japan

Seminar On JAPANESE STYLE OF MANAGEMENT

Current issue of Japanese company surrounding CSR

Seminar On JAPANESE STYLE OF MANAGEMENT

The concept of Strategic CSR

Seminar On JAPANESE STYLE OF MANAGEMENT

Transition of CSR initiative in Japan

CASE STUDY The Empty Soap Box

Seminar On JAPANESE STYLE OF MANAGEMENT

Seminar On JAPANESE STYLE OF MANAGEMENT

Seminar On JAPANESE STYLE OF MANAGEMENT

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