JAPANESE MANAGEMENT

Japan Table of Contents

The culture of Japanese management so famous in the West is generally limited to Japan's large corporations. These flagships of the Japanese economy provide their workers with excellent salaries and working conditions and secure employment. These companies and their employees are the business elite of Japan. A career with such a company was the dream of many young people in Japan, but only a select few attain these jobs. Qualification for employment is limited to the men and the few women who graduate from the top thirty colleges and universities in Japan.

Placement and advancement of Japanese workers is heavily based on educational background. Students who do not gain admission to the most highly rated colleges only rarely have the chance to work for a large company. Instead, they have to seek positions in small and medium-sized firms that can not offer comparable benefits and prestige. The quality of one's education and, more important, the college attended, play decisive roles in a person's career.

Few Japanese attend graduate school, and graduate training in business per se is rare. There are only a few business school programs in Japan. Companies provide their own training and show a strong preference for young men who can be trained in the company way. Interest in a person whose attitudes and work habits are shaped outside the company is low. When young men are preparing to graduate from college, they begin the search for a suitable employer. This process has been very difficult: there are only a few positions in the best government ministries, and quite often entry into a good firm is determined by competitive examination. The situation is becoming less competitive, with a gradual decrease in the number of candidates. New workers enter their companies as a group on April 1 each year.

One of the prominent features of Japanese management is the practice of permanent employment (shushin koyo). Permanent employment covers the minority of the work force that work for the major companies. Management trainees, traditionally nearly all of whom were men, are recruited directly from colleges when they graduate in the late winter and, if they survive a six-month probationary period with the company, are expected to stay with the companies for their entire working careers. Employees are not dismissed thereafter on any grounds, except for serious breaches of ethics.

Permanent employees are hired as generalists, not as specialists for specific positions. A new worker is not hired because of any special skill or experience; rather, the individual's intelligence, educational background, and personal attitudes and attributes are closely examined. On entering a Japanese corporation, the new employee will train from six to twelve months in each of the firm's major offices or divisions. Thus, within a few years a young employee will know every facet of company operations, knowledge which allows companies to be more productive.

Another unique aspect of Japanese management is the system of promotion and reward. An important criterion is seniority. Seniority is determined by the year an employee's class enters

the company. Career progression is highly predictable, regulated, and automatic. Compensation for young workers is quite low, but they accept low pay with the understanding that their pay will increase in regular increments and be quite high by retirement. Compensation consists of a wide range of tangible and intangible benefits, including housing assistance, inexpensive vacations, good recreational facilities, and, most important, the availability of low-cost loans for such expenses as housing and a new automobile. Regular pay is often augmented by generous semiannual bonuses. Members of the same graduating class usually start with similar salaries, and salary increases and promotions each year are generally uniform. The purpose is to maintain harmony and avoid stress and jealousy within the group.

Individual evaluation, however, does occur. Early in workers' careers, by age thirty, distinctions are made in pay and job assignments. During the latter part of workers' careers, another weeding takes place, as only the best workers are selected for accelerated advancement into upper management. Those employees who fail to advance are forced to retire from the company in their midto -late fifties. Retirement does not necessarily mean a life of leisure. Poor pension benefits and modest social security means that many people have to continue working after retiring from a career. Many management retirees work for the smaller subsidiaries of the large companies, with another company, or with the large company itself at substantially lower salaries.

A few major corporations in the late 1980s were experimenting with variations of permanent employment and automatic promotion. Some rewarded harder work and higher production with higher raises and more rapid promotions, but most retained the more traditional forms of hiring and advancement. A few companies that experienced serious reverses laid off workers, but such instances were rare.

Another aspect of Japanese management is the company union, which most regular company employees are obliged to join. The worker do not have a separate skill identification outside of the company. Despite federations of unions at the national level, the union does not exist as an entity separate from, or with an adversarial relationship to, the company. The linking of the company with the worker puts severe limits on independent union action, and the worker does not wish to harm the economic wellbeing of the company. Strikes are rare and usually brief.

Japanese managerial style and decision making in large companies emphasizes the flow of information and initiative from the bottom up, making top management a facilitator rather than the source of authority, while middle management is both the impetus for and the shaper of policy. Consensus is stressed as a way of arriving at decisions, and close attention is paid to workers' well-being. Rather than serve as an important decision maker, the ranking officer of a company has the responsibility of maintaining harmony so that employees can work together. A Japanese chief executive officer is a consensus builder.

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The culture of Japanese management that is famous[vague] 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.[citation needed] These companies and their employees are the business elite of Japan.[citation needed] Though not as much for the new generation still a career with such a company is the dream of many young people in Japan,[citation

needed] 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.[citation needed]

Contents

[hide]

1 Recruiting and promotion 2 Company unions 3 Managerial style 4 Smaller companies 5 Japanese women in management 6 See also 7 References

[edit] Recruiting and promotion

Placement and advancement of Japanese workers is heavily based on educational background. Students who do not gain admission to the most highly rated colleges only rarely have the chance to work for a large company. Instead, they have to seek positions in small and medium-sized firms that cannot offer comparable benefits and prestige. The quality of one's education and, more important, the college attended, play decisive roles in a person's career (see Higher education in Japan).

Few Japanese attend graduate school, and graduate training in business per se is rare. There are only a few business school programs in Japan. Companies provide their own training and show a strong preference for young men who can be trained in the company way. Interest in a person whose attitudes and work habits are shaped outside the company is low. When young men are preparing to graduate from college, they begin the search for a suitable employer. This process has been very difficult: there are only a few positions in the best government ministries, and quite often entry into a good firm is determined by competitive examination. The situation is becoming less competitive, with a gradual decrease in the number of candidates. New workers enter their companies as a group on April 1 each year.

One of the prominent features of Japanese management is the practice of permanent employment (終身雇用 shūshin koyō?). Permanent employment covers the minority of the work force that work for the major companies. Management trainees, traditionally nearly all of whom were men, are recruited directly from colleges when they graduate in the late winter and, if they survive a six-month probationary period with the company, are expected to stay with the companies for their entire working careers. Employees are not dismissed thereafter on any grounds, except for serious breaches of ethics.

Permanent employees are hired as generalists, not as specialists for specific positions. A new worker is not hired because of any special skill or experience; rather, the individual's intelligence, educational background, and personal attitudes and attributes are closely examined. On entering a Japanese corporation, the new employee will train from six to twelve months in each of the firm's major offices or divisions. Thus, within a few years a young employee will know every facet of company operations, knowledge which allows companies to be more productive.

Another unique aspect of Japanese management is the system of promotion and reward. An important criterion is seniority. As Timothy Keeley (2001) explains, “nenko joretsu” is the Japanese term for seniority in a Japanese corporation. “Nenko joretsu” is the concept which ties in with shushinkoyo – lifetime employment. In the “nenko jetsu” system of corporate ranking, employees do not receive large pay increases or bonuses for individual “performance.” Instead, seniority or promotion to higher level positions is acquired as one’s peers collectively recognize the performance of that individual being evaluated for upgrade status. Even then, this recognition of the individual takes place as an “unspoken consensus” among the individual’s peers. The mentality of the group “pervades” at the higher levels of the company. Culturally, it is very important for the Japanese to maintain “harmony” of the group of co-workers in which the individual belongs. “Therefore, the promotion of an individual employee cannot be considered in isolation, but in relation to fairness to others in the same group.” Accelerated career progression by an individual can be looked upon by others as “favouritism” toward the individual and “discrimination” towards the remaining employees of the group (p.76-78).

Seniority is determined by the year an employee's class enters the company. Career progression is highly predictable, regulated, and automatic. Compensation for young workers is quite low, but they accept low pay with the understanding that their pay will increase in regular increments and be quite high by retirement. Compensation consists of a wide range of tangible and intangible benefits, including housing assistance, inexpensive vacations, good recreational

facilities, and above all the availability of low-cost loans for such expenses as housing and a new automobile. Regular pay is often augmented by generous semi-annual bonuses. Members of the same graduating class usually start with similar salaries, and salary increases and promotions each year are generally uniform. The purpose is to maintain harmony and avoid stress and jealousy within the group.

Individual evaluation, however, does occur. Early in workers' careers, by age thirty, distinctions are made in pay and job assignments. During the latter part of worker's careers, another weeding takes place, as only the best workers are selected for accelerated advancement into upper management. Those employees who fail to advance are forced to retire from the company in their mid- to late fifties. Retirement does not necessarily mean a life of leisure. Poor pension benefits and modest social security means that many people have to continue working after retiring from a career. Many management retirees work for the smaller subsidiaries of the large companies, with another company, or with the large company itself at substantially lower salaries. (see Elderly people in Japan)

A few major corporations in the late 1980s were experimenting with variations of permanent employment and automatic promotion. Some rewarded harder work and higher production with higher raises and more rapid promotions, but most retained the more traditional forms of hiring and advancement. A few companies that experienced serious reverses laid off workers, but such instances were rare. This changed dramatically with the collapse of the Japanese asset price bubble, when several large Japanese companies went bankrupt and others merely survived struggling. Emergency measures, often only introduced after managers from western countries took over, included larger reductions in the work force of several companies. Since then, the Japanese unemployment rate has been on the rise, even though official figures are still low by international standards.

[edit] Company unions

Another aspect of Japanese management is the company union, which most regular company employees are obliged to join (see Labor unions in Japan). The workers do not have a separate skill identification outside of the company. Despite federations of unions at the national level, the union does not exist as an entity separate from, or with an adversarial relationship to, the company. The linking of the company with the worker puts severe limits on independent union action, and the worker does not wish to harm the economic wellbeing of the company. Strikes are rare and usually brief.

[edit] Managerial style

Japanese managerial style and decision making in large companies emphasizes the flow of information and initiative from the bottom up, making top management a facilitator rather than the source of authority, while middle management is both the impetus for and the shaper of policy. Consensus is stressed as a way of arriving at decisions, and close attention is paid to workers' well-being. Rather than serve as an important decision maker, the ranking officer of a

company has the responsibility of maintaining harmony so that employees can work together. A Japanese chief executive officer is a consensus builder.

The Japanese term "hourensou" refers to important attributes that are said to characterize collaboration and information flow within effective Japanese corporate culture. "genchi genbutsu" refers to "getting your hands dirty", to identify or solve immediate problems and leaders are not exempt from this. Aspects of these principles are often mistaken by western managers for the type of micromanagement that is constant and unprincipled and interferes with processes. In contrast, these principles are used as tools to shepherd processes.

Mohammed Ala and William Cordeiro (1999) describe the Japanese “decision-making” process of “ringiseido.” “Ringiseido” provides the opportunity for equal ranking managers or employees of a group within a company to partake in an individual’s idea. The process adheres to the Japanese cultural desire of “harmony” among people. The physical action of “ringiseido” is referred to as the “ringi decision-making process.” The “ringi decision-making process” fosters an environment of support and agreeance for a decision once a higher ranking manager has reviewed and accepted the recommended decision.

The term of “ringi” has two meanings. The first meaning being of “rin, ‘submitting a proposal to one’s supervisors and receiving their approval,’ and gi meaning ‘deliberations and decisions.’” Corporate “policy” is not clearly defined by the executive leadership of a Japanese company, rather, the managers at all levels below executives must raise decisions to the next level except for “routine decisions.” The process of “ringi decision-making” is conducted through a document called a “ringisho.” The “ringisho” is created and circulated by the individual who created the idea. As the “ringisho” reaches a peer for review, the peer places his or her “personal seal(hanko) rights side up” to agree, “upside down” to disagree, and side ways to indicate being undecided. Once all peers have reviewed the “ringisho” the peers’ manager reviews the “ringisho” and places his or her “hanko” on it. The upper level manager’s “decision is final” and the “ringisho” is sent back to the originator who either initiates the idea or re-evaluates, based on the “hanko” of the upper level manager (p.22-23).

Tony Kippenberger (2002) elaborates on the leadership values that are deeply enrouted in the Japanese business culture. These values were created by Konsuko Matsushita, the prominent deceased entrepreneur of Matsushita’s Electric Company, who cared deeply for the employees of his company as if the employees were family. Matsushita firmly believed that a business as large as his was responsible to help all of society prosper, and not simply for those that owned and ran the company to prosper. In 1933 Matsushita, during the great depression, created seven “guiding principles. . .:

Service to the public – by providing high-quality goods and services at reasonable prices, we contribute to the public’s well-being;

Fairness and honesty – we will be fair and honest in all our business dealings and personal conduct;

Teamwork for the common cause – we will pool abilities, based on manual trust and respect;

Uniting effort for improvement – we will constantly strive to improve our corporate and personal performances;

Courtesy and humility – we will always be cordial and modest and respect the rights and needs of others;

Accordance with natural laws – we will abide by the laws of nature and adjust to the ever-changing conditions around us; and

Gratitude for blessings – we will always be grateful for all the blessings and kindness we have received.”

The “guiding principles” were “remarkable for their time.” The seven principles are used by Matsushita’s company today and serve as principles for other Japanese companies. Because the “guiding principles” are such powerful statements and an extension of the Japanese cultural into business, the principles have been renamed to the “’Seven Spirits of Matsushita’” to honor Matsushita (p.71-72).

[edit] Smaller companies

In smaller companies, an entirely different corporate culture developed. Similar to the Meister system of Germany, new recruits are placed under skilled senior specialists and spend years learning every technique that they have. They are trained to develop deeper understanding of specific areas of skills instead of the broader and less deep training that those in a larger corporation receive. They learn to produce work of higher quality using few simple tools and few or no advanced industrial tools.

[edit] Japanese women in management

As the modern cultures of the world continue to advance, cultural concepts of their past either lose presence or evolve with the modern concepts of the culture. Japan is experiencing such an evolution in regards to women in the workplace and in management roles. While a main reason for this evolution is the adoption of western influence on Japanese society, Japan is being forced to support this evolution because it is grappling with a declining population and lower birth rate which will lead to a smaller workforce. According to “Cloud, or Silver Linings? . . .” published in the Economist (2007), it was reported that in 2006 Japan’s birth rate was 1.32 and has been below 2.1 since the 1970s. A birthrate of 2.1 is necessary to successfully maintain current population numbers of a society. The article described that the OECD has proven there is a “positive correlation between fertility and female employment.” Thus, if an effort is made to support females work ambitions and family desires, then females will be more willing and likely to want to have children and families and not have to sacrifice their career in the process. Japanese officials are not taking this information lightly. During his last year in office, Prime

Minister Junichiro Koizumi (2002-2007), began legislation to foster “financial support for families with young children and an expansion of child-care facilities (p.27).

[edit] See also

Salaryman Category:Japanese business terms

[edit] References

This article incorporates public domain material from websites or documents of the Library of Congress Country Studies. - Japan

Ala, M., Cordeiro, W.P. (1999). Can we learn management techniques form the Japanese ringi process?.

Business Forum, 24 (½), p.22-24.

Cloud or silver linings? – Japan’s changing demography. (2007, July 28). The Economist 384(8539) p.27.

http://www.economist.com.

Keeley, T. D. (2001). International human resource management in Japanese firms: the

greatest challenge. Hampshire, New York: Houndmills Basingstoke Palgrave Macmillan. retrieved from http://www.palgrave.com/home

Kippenberger, T. (2002). Leadership styles. Oxford, United Kingdom: Capstone Publishing.

Retrieved from http://www.capstonepub.com/default.aspx

Woods, G.P. (2005, Oct. 24). Japan’s diversity problem: women are 41% of the work force but command

Few top posts: ‘a waste,’ says Carlos Ghosn. The Wall Street Journal, p.B1. retrieved from www.wsj.com.

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HISTORICAL CONTEXT PROFILE OF TRADITIONAL JAPANESE MANAGEMENT PRACTICES THE RINGI SYSTEM ENTERPRISE UNIONS QUALITY CIRCLES SCIENTIFIC MANAGEMENT PERVASIVENESS OF ENGINEERS NEW DIRECTIONS FURTHER READING:

In the post-World War II era a set of Japanese cultural patterns and managerial practices came to be known collectively as the Japanese management style or Japanese management techniques. Many of these techniques were credited with helping vault the Japanese economy to its status as the world's second largest, behind only the United States, and with making Japanese businesses, particularly in the manufacturing sector, more competitive than their international counterparts. In the wake of Japan's prolonged and arduous struggle with recession throughout much of the 1990s, however, many observers—both inside and outside Japan—have called into question the effectiveness of some traditional Japanese management practices. As a result, at the dawn of the 21st century Japanese management techniques are more than ever in a state of flux, as scholars and business leaders alike reconsider which practices work and which don't.

HISTORICAL CONTEXT

Although Japanese management techniques and economic strategies came to be recognized in Western countries only during the postwar period, their origins are considerably older. Most directly, their origins can be traced to at least the latter part of the 19th century, when a Western influenced modernization program began under the new monarchy created in the 1868 Meiji restoration. In part as a response to the bitter European colonization experiences of its Asian neighbors, the new Japanese government began to open the Japanese economy and society to controlled outside influences in order to stave off any Western conquerors.

Some recognizably modern practices arose during the Meiji period. Even then, when the Japanese economy was still shedding the trappings of feudalism after centuries of closure to foreigners and slow technological development, heavy emphasis was placed on developing domestic imitations of—and innovations on—Western goods, rather than relying on imports. The practice was summarized well under a slogan of the era, "Japanese spirit, Western technology."

This ambition to preserve the character of the Japanese culture and the autonomy of the economy can be seen in 20th-century practices at both the macro- and microeconomic levels. In the national economy it is evidenced by long-standing restrictions (direct and indirect) on imports into Japan and the concomitant trade surplus Japan has maintained for years. At the company level, the same motive helps explain the prevalence of the Japanese keiretsu, the large and complex families of interdependent companies centered around their own banks (e.g., Sumitomo, Hitachi, Mitsubishi). In theory, at least, these firms can avoid "importing" their raw materials, components, or even capital from "foreign" (i.e., unaffiliated) companies by sourcing these goods from within their extensive organizations.

PROFILE OF TRADITIONAL JAPANESE MANAGEMENT PRACTICES

Rooted in these and other historical traditions, some of the other key practices commonly associated with Japanese management techniques include:

in-house training of managers consensual and decentralized decision-making extensive use of quality control methods carefully codified work standards emphasis on creating harmonious relations among workers lifetime employment and seniority-based compensation

It is important to note that these are generalizations according to a conventional formula. There have always been variations, and, as noted above, some aspects of these practices have been increasingly reconsidered in recent years.

MANAGEMENT EDUCATION.

The education of managers in Japan traditionally takes place on a relatively informal basis within firms. The percentage of Japanese chief executives who have attended university is high, similar to that in the United States and Western Europe. However, very few Japanese executives have attended graduate schools compared to their U.S. and European counterparts. In fact, only one Japanese university offers a degree analogous to an MBA, a key credential for managers in the United States.

Formal education for managers is also not well developed at the undergraduate level. Undergraduate education is not viewed by firms as a means of attaining business skills, and firms

base their hiring decisions less on a recruit's knowledge than on general attributes such as character and ambition. Firms do not hire recruits to fill specific occupations. Rather, recruits are expected to be malleable, identifying with the general interests of the firm rather than with their specific role within it. The mentor system is widely used in the early training of management recruits and involves middle-level and senior managers serving as teachers and role models.

The emphasis on in-house education is related to the traditional lifetime employment system, in which management recruits are hired each April following university graduation; they typically would stay with the firm until retirement. The lifetime-employment system makes it probable that a firm will benefit from its investment in training, and also enables the firm to develop long-range plans for training recruits.

Management training is based on regular rotation through a broad range of a firm's operations. Management recruits also frequently begin their careers as ordinary workers on a production line. The pattern of regular rotation enables managers to develop a detailed understanding of a number of varied operations, and thus over time to attain a rich general knowledge of the firm.

Linked with the lifetime-employment system is the emphasis on seniority in compensation and promotion—often over what Americans would take to be "qualifications" for the job. This results in a higher average age and less variation in age among top executives in Japan. Compared to the United States and Europe, for instance, relatively few company presidents are under age 50. This practice is believed to equip Japanese executives with an intricate knowledge about their particular business.

Japanese managers typically take a more long-term interest in their firms than do their American counterparts, partly a result of the lifetime employment and seniority systems. In the United States, managers are typically compensated on the basis of their divisions' performance. This bonus system is not used for Japanese managers, as it is considered detrimental to a long-term perspective and an interest in the firm as a whole.

CAPITAL AND PRIORITIES.

The long-term view of Japanese managers is also based on sources of finance. While American firms rely heavily on capital from the stock markets, Japanese firms tend to rely more heavily on borrowing from banks and generally have much higher debt-to-equity ratios. Consequently, Japanese managers are under less pressure to maximize short-term earnings to please shareholders. By contrast, in the United States there is intense market pressure for companies to meet quarterly earnings expectations—even exceed them—or else face a sell-off of their shares. In general, Japanese firms are more likely to focus on productivity, growth, and market share, whereas U.S. firms are more inclined to concentrate first on profitability.

CORPORATE GOVERNANCE.

While directors from outside the company are common in the United States, they are rare in Japan. The decision-making process in Japanese firms is highly decentralized. In publicly held U.S. corporations, power is concentrated in a board of directors, with each director having one

vote. In Japan, both middle and senior management serve as directors. Japanese directors typically retain production-line responsibilities. For example, in the early 1970s, 14 of Hitachi's 20 directors were engineers. This represents another facet of the strong production orientation of Japanese management.

THE RINGI SYSTEM

The traditional decision-making process in Japanese firms is referred to as the ringi system. The system involves circulating proposals to all managers in the firm who are affected by an impending decision. Proposals are generally initiated by middle managers, though they may also come from top executives. In the latter case, an executive will generally give his idea to his subordinates and let them introduce it. Managers from different departments hold meetings and try to reach an informal consensus on the matter. Only after this consensus is reached will the formal document, or ringi-sho, be circulated for approval by the responsible managers.

The ringi system requires long lead times, and thus is problematic in a crisis. In recent years the focus on speeding up decision making has made this approach unpopular at many firms. Nonetheless, one of its underlying principles remains prevalent. That is, when a decision proves beneficial, the middle-level managers who initially advocated it receive credit; when a decision proves unsuccessful, responsibility is taken by top-level executives. This practice is intended to promote aggressiveness in younger managers.

ENTERPRISE UNIONS

One distinctive characteristic of labor-management relations in Japan is the enterprise union, which is organized around a single plant. Consequently, any given company may have several enterprise unions representing various portions of its workforce. Enterprise unions generally belong to a larger federation, but the balance of power is at the local level. Japanese unions are distinct not only because of their highly decentralized nature, but also because they represent both white-collar and blue-collar workers, with union membership open to managers up to the section chief level. The fact that many upper-level managers have moved up through union ranks and may have even served as union officials highlights the generally less antagonistic relationship between labor and management in Japan. Combined with a relatively narrow income gap between managers and workers and the willingness of manager recruits to work on production lines as part of their training, the open membership policies of Japanese unions contributes to the fairly harmonious interaction between unions and management.

Union membership is generally associated with lifetime employment guarantees. Membership varies widely by firm size, and relatively few workers in firms with fewer than 100 employees receive lifetime employment guarantees. Nonetheless, in large firms the lifetime employment guarantee creates an environment in which workers are less likely to feel threatened by technological change. As a consequence, changes in the production process are likely to be undertaken by management and workers on a cooperative basis. More generally, since semiannual bonuses and annual wage negotiations are based on a firm's competitive strength, workers have a large stake in their firm's long-term success.

QUALITY CIRCLES

The extensive use of quality circles is another distinguishing characteristic of Japanese management. The development of quality circles in Japan in the early 1960s was inspired by the lectures of American statisticians W. Edwards Deming and J.M. Juran, in which they discussed the development of wartime industrial standards in the United States. Noting that American management had typically given line managers and engineers about 85 percent of responsibility for quality control and only 15 percent to workers, Deming and Juran argued that these proportions should be reversed. Production processes should be designed with quality control in mind, they contended, and everyone in the firm, from entry level workers to top management, should be familiar with statistical control techniques and undergo continuing education on quality control. In general, Deming and Juran argued that quality control should focus on prevention, with the ultimate goal being to improve the production process until no defective parts or products are produced. Quality circles were one method of reaching these goals.

In Japan, quality circles consist of groups of about 10 workers who meet weekly, often on their own time. The groups typically include foremen, who usually serve as circle leaders. Quality circles focus on concrete aspects of the operations in which they are directly involved, using tables and graphs to communicate the statistical details of their quality issues. In one common format, problems are categorized by materials, manpower, and machines.

Quality circles provide a means for workers to participate in company affairs and for management to benefit from worker suggestions. Indeed, employee suggestions play an important role in Japanese companies. Two associations, the Japanese Association of Suggestion Systems and the Japan Human Relations Association, were developed to encourage this process. Japanese employee suggestions reportedly create billions of dollars' worth of benefits for companies.

SCIENTIFIC MANAGEMENT

Japanese management techniques have been strongly influenced by the tenets of scientific management. Like quality circles, scientific management originated in the United States, only to be more systematically adopted in Japan. The pioneering figure of scientific management is Frederick Jackson Taylor (1856-1915). Taylor is best known for his time and motion studies of workers as part of an effort to optimize and standardize work efforts, but he also argued for a system of bonuses to reward workers based on productivity. These ideas were implemented by Japanese firms as early as 1908, and a translation of his Principles of Scientific Management sold 2 million copies in Japan.

In the post-World War II years, carefully codified work standards and the use of semiannual bonuses for workers became common practices in Japan. Consistent with the Japanese emphasis on teamwork, bonuses are generally allotted to a work group rather than an individual worker. Scientific management emphasizes the role of management in the production process. This is reflected in the more hands-on approach in Japanese management training, as well as the relatively high share of managers directly involved in the production process.

PERVASIVENESS OF ENGINEERS

As with managers, Japanese industrial engineers are more directly involved with production processes than their counterparts in the United States. In his book The Japanese Industrial System, Charles J. McMillan explained that most Japanese companies make few distinctions between engineers and blue-collar workers, although engineers do tend to earn more. They work closely alongside production workers. In addition, Japan produces up to three times as many engineers a year as the United States. Japan's emphasis on production oriented engineering is consistent with its dominant competitive strategy in the postwar years—indeed, since the Meiji era—of focusing on improving existing products or processes rather than developing completely new ones.

NEW DIRECTIONS

While many of the patterns just described continue unabated at some Japanese companies, a variety of forces have caused them to change, often toward Western practices. Since the 1980s, for example, the predominance of seniority-based raises has been gradually giving way to a Western style regime of merit-based pay. Indeed, as of 1995, three-quarters of Japanese companies surveyed allocated at least some of their reward pay based on skills or achievements as opposed to tenure. And more than a few Japanese companies have attacked seniority more directly, explicitly revising policies to diminish or even eliminate it as a criterion in the compensation structure. This trend may be evidence of a cultural shift from valuing length of service to valuing quality of service.

Also mirroring Western trends, labor union membership in Japan has dropped considerably since the 1970s, falling from 35.4 percent of the workforce in 1970 to just 22.4 percent by 1998, according to figures compiled by the Japanese Ministry of Labor. Union participation remains the highest in large companies (those with 1,000 or more workers), where in 1998 membership was still nearly 57 percent. This share was down from 68 percent in 1987, the first year statistics by company size were kept.

Other traditional Japanese practices appear more enduring, notably lifetime employment. Although Japan's economic troubles have meant that some employees have lost their jobs, a continuing commitment to the principle of lifetime employment seems to remain at many companies and in the society as a whole. Still, younger workers (e.g., those under age 30) are decidedly less loyal to companies than in decades past, and there is growing evidence of a rise in professional identification over corporate identification among workers (i.e., "I'm a tax accountant" instead of "I'm a Toyota worker").

Nonetheless, even at the depths of the Japanese recession during the late 1990s Asian financial crisis, companies went to great lengths to avoid outright layoffs. One of the most common practices instead was to reassign workers, either within the corporate family or to other companies, such as vendors the company does business with. These transfers (known as shukko) could be temporary, in which case the worker is still officially employed by the company that has loaned him or her out, or permanent, where the company essentially finds a new job for the

employee at another company. Employees who were never considered part of the lifetime staff, such as part-time help, usually didn't enjoy such privileges.

Although most agree that Japanese management has been moving in new directions, academics who study Japanese management practices are divided on how profound the shifts in the Japanese business paradigm really are. Indeed, the gamut of opinions has ranged from declaring the death of the Japanese management system to asserting its overarching continuity and strength. A number of observers see a continued convergence with Western practices, but many believe that, as in the past, the adoption of Western principles and practices will never be wholesale, but will blend with prevailing norms and beliefs in Japanese business and the broader culture.

SEE ALSO: Japanese Manufacturing Techniques

FURTHER READING:

Dirks, Daniel, Jean-Francois Huchet, and Thierry Ribault, eds. Japanese Management in the Low Growth Era. Berlin: Springer Verlag, 1999.

Harukiyo, Hasegawa, and Glenn D. Hook. Japanese Business Management. London: Routledge, 1998.

Herbig, Paul, and Laurence Jacobs. "A Historical Perspective of Japanese Innovation." Management Decision, September-October 1997.

McMillan, Charles J. The Japanese Industrial System. 3rd rev. ed. Berlin: De Gruyter, 1996.

Mroczkowski, Tomasz, and Masao Hanaoka. "The End of Japanese Management: How Soon?" Human Resource Planning, September 1998.

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HISTORICAL CONTEXT PROFILE OF TRADITIONAL JAPANESE MANAGEMENT PRACTICES THE RINGI SYSTEM ENTERPRISE UNIONS QUALITY CIRCLES SCIENTIFIC MANAGEMENT PERVASIVENESS OF ENGINEERS NEW DIRECTIONS FURTHER READING:

In the post-World War II era a set of Japanese cultural patterns and managerial practices came to be known collectively as the Japanese management style or Japanese management techniques. Many of these techniques were credited with helping vault the Japanese economy to its status as the world's second largest, behind only the United States, and with making Japanese businesses, particularly in the manufacturing sector, more competitive than their international counterparts. In the wake of Japan's prolonged and arduous struggle with recession throughout much of the 1990s, however, many observers—both inside and outside Japan—have called into question the effectiveness of some traditional Japanese management practices. As a result, at the dawn of the 21st century Japanese management techniques are more than ever in a state of flux, as scholars and business leaders alike reconsider which practices work and which don't.

HISTORICAL CONTEXT

Although Japanese management techniques and economic strategies came to be recognized in Western countries only during the postwar period, their origins are considerably older. Most directly, their origins can be traced to at least the latter part of the 19th century, when a Western influenced modernization program began under the new monarchy created in the 1868 Meiji restoration. In part as a response to the bitter European colonization experiences of its Asian

neighbors, the new Japanese government began to open the Japanese economy and society to controlled outside influences in order to stave off any Western conquerors.

Some recognizably modern practices arose during the Meiji period. Even then, when the Japanese economy was still shedding the trappings of feudalism after centuries of closure to foreigners and slow technological development, heavy emphasis was placed on developing domestic imitations of—and innovations on—Western goods, rather than relying on imports. The practice was summarized well under a slogan of the era, "Japanese spirit, Western technology."

This ambition to preserve the character of the Japanese culture and the autonomy of the economy can be seen in 20th-century practices at both the macro- and microeconomic levels. In the national economy it is evidenced by long-standing restrictions (direct and indirect) on imports into Japan and the concomitant trade surplus Japan has maintained for years. At the company level, the same motive helps explain the prevalence of the Japanese keiretsu, the large and complex families of interdependent companies centered around their own banks (e.g., Sumitomo, Hitachi, Mitsubishi). In theory, at least, these firms can avoid "importing" their raw materials, components, or even capital from "foreign" (i.e., unaffiliated) companies by sourcing these goods from within their extensive organizations.

PROFILE OF TRADITIONAL JAPANESE MANAGEMENT PRACTICES

Rooted in these and other historical traditions, some of the other key practices commonly associated with Japanese management techniques include:

in-house training of managers consensual and decentralized decision-making extensive use of quality control methods carefully codified work standards emphasis on creating harmonious relations among workers lifetime employment and seniority-based compensation

It is important to note that these are generalizations according to a conventional formula. There have always been variations, and, as noted above, some aspects of these practices have been increasingly reconsidered in recent years.

MANAGEMENT EDUCATION.

The education of managers in Japan traditionally takes place on a relatively informal basis within firms. The percentage of Japanese chief executives who have attended university is high, similar to that in the United States and Western Europe. However, very few Japanese executives have attended graduate schools compared to their U.S. and European counterparts. In fact, only one Japanese university offers a degree analogous to an MBA, a key credential for managers in the United States.

Formal education for managers is also not well developed at the undergraduate level. Undergraduate education is not viewed by firms as a means of attaining business skills, and firms base their hiring decisions less on a recruit's knowledge than on general attributes such as character and ambition. Firms do not hire recruits to fill specific occupations. Rather, recruits are expected to be malleable, identifying with the general interests of the firm rather than with their specific role within it. The mentor system is widely used in the early training of management recruits and involves middle-level and senior managers serving as teachers and role models.

The emphasis on in-house education is related to the traditional lifetime employment system, in which management recruits are hired each April following university graduation; they typically would stay with the firm until retirement. The lifetime-employment system makes it probable that a firm will benefit from its investment in training, and also enables the firm to develop long-range plans for training recruits.

Management training is based on regular rotation through a broad range of a firm's operations. Management recruits also frequently begin their careers as ordinary workers on a production line. The pattern of regular rotation enables managers to develop a detailed understanding of a number of varied operations, and thus over time to attain a rich general knowledge of the firm.

Linked with the lifetime-employment system is the emphasis on seniority in compensation and promotion—often over what Americans would take to be "qualifications" for the job. This results in a higher average age and less variation in age among top executives in Japan. Compared to the United States and Europe, for instance, relatively few company presidents are under age 50. This practice is believed to equip Japanese executives with an intricate knowledge about their particular business.

Japanese managers typically take a more long-term interest in their firms than do their American counterparts, partly a result of the lifetime employment and seniority systems. In the United States, managers are typically compensated on the basis of their divisions' performance. This bonus system is not used for Japanese managers, as it is considered detrimental to a long-term perspective and an interest in the firm as a whole.

CAPITAL AND PRIORITIES.

The long-term view of Japanese managers is also based on sources of finance. While American firms rely heavily on capital from the stock markets, Japanese firms tend to rely more heavily on borrowing from banks and generally have much higher debt-to-equity ratios. Consequently, Japanese managers are under less pressure to maximize short-term earnings to please shareholders. By contrast, in the United States there is intense market pressure for companies to meet quarterly earnings expectations—even exceed them—or else face a sell-off of their shares. In general, Japanese firms are more likely to focus on productivity, growth, and market share, whereas U.S. firms are more inclined to concentrate first on profitability.

CORPORATE GOVERNANCE.

While directors from outside the company are common in the United States, they are rare in Japan. The decision-making process in Japanese firms is highly decentralized. In publicly held U.S. corporations, power is concentrated in a board of directors, with each director having one vote. In Japan, both middle and senior management serve as directors. Japanese directors typically retain production-line responsibilities. For example, in the early 1970s, 14 of Hitachi's 20 directors were engineers. This represents another facet of the strong production orientation of Japanese management.

THE RINGI SYSTEM

The traditional decision-making process in Japanese firms is referred to as the ringi system. The system involves circulating proposals to all managers in the firm who are affected by an impending decision. Proposals are generally initiated by middle managers, though they may also come from top executives. In the latter case, an executive will generally give his idea to his subordinates and let them introduce it. Managers from different departments hold meetings and try to reach an informal consensus on the matter. Only after this consensus is reached will the formal document, or ringi-sho, be circulated for approval by the responsible managers.

The ringi system requires long lead times, and thus is problematic in a crisis. In recent years the focus on speeding up decision making has made this approach unpopular at many firms. Nonetheless, one of its underlying principles remains prevalent. That is, when a decision proves beneficial, the middle-level managers who initially advocated it receive credit; when a decision proves unsuccessful, responsibility is taken by top-level executives. This practice is intended to promote aggressiveness in younger managers.

ENTERPRISE UNIONS

One distinctive characteristic of labor-management relations in Japan is the enterprise union, which is organized around a single plant. Consequently, any given company may have several enterprise unions representing various portions of its workforce. Enterprise unions generally belong to a larger federation, but the balance of power is at the local level. Japanese unions are distinct not only because of their highly decentralized nature, but also because they represent both white-collar and blue-collar workers, with union membership open to managers up to the section chief level. The fact that many upper-level managers have moved up through union ranks and may have even served as union officials highlights the generally less antagonistic relationship between labor and management in Japan. Combined with a relatively narrow income gap between managers and workers and the willingness of manager recruits to work on production lines as part of their training, the open membership policies of Japanese unions contributes to the fairly harmonious interaction between unions and management.

Union membership is generally associated with lifetime employment guarantees. Membership varies widely by firm size, and relatively few workers in firms with fewer than 100 employees receive lifetime employment guarantees. Nonetheless, in large firms the lifetime employment

guarantee creates an environment in which workers are less likely to feel threatened by technological change. As a consequence, changes in the production process are likely to be undertaken by management and workers on a cooperative basis. More generally, since semiannual bonuses and annual wage negotiations are based on a firm's competitive strength, workers have a large stake in their firm's long-term success.

QUALITY CIRCLES

The extensive use of quality circles is another distinguishing characteristic of Japanese management. The development of quality circles in Japan in the early 1960s was inspired by the lectures of American statisticians W. Edwards Deming and J.M. Juran, in which they discussed the development of wartime industrial standards in the United States. Noting that American management had typically given line managers and engineers about 85 percent of responsibility for quality control and only 15 percent to workers, Deming and Juran argued that these proportions should be reversed. Production processes should be designed with quality control in mind, they contended, and everyone in the firm, from entry level workers to top management, should be familiar with statistical control techniques and undergo continuing education on quality control. In general, Deming and Juran argued that quality control should focus on prevention, with the ultimate goal being to improve the production process until no defective parts or products are produced. Quality circles were one method of reaching these goals.

In Japan, quality circles consist of groups of about 10 workers who meet weekly, often on their own time. The groups typically include foremen, who usually serve as circle leaders. Quality circles focus on concrete aspects of the operations in which they are directly involved, using tables and graphs to communicate the statistical details of their quality issues. In one common format, problems are categorized by materials, manpower, and machines.

Quality circles provide a means for workers to participate in company affairs and for management to benefit from worker suggestions. Indeed, employee suggestions play an important role in Japanese companies. Two associations, the Japanese Association of Suggestion Systems and the Japan Human Relations Association, were developed to encourage this process. Japanese employee suggestions reportedly create billions of dollars' worth of benefits for companies.

SCIENTIFIC MANAGEMENT

Japanese management techniques have been strongly influenced by the tenets of scientific management. Like quality circles, scientific management originated in the United States, only to be more systematically adopted in Japan. The pioneering figure of scientific management is Frederick Jackson Taylor (1856-1915). Taylor is best known for his time and motion studies of workers as part of an effort to optimize and standardize work efforts, but he also argued for a system of bonuses to reward workers based on productivity. These ideas were implemented by Japanese firms as early as 1908, and a translation of his Principles of Scientific Management sold 2 million copies in Japan.

In the post-World War II years, carefully codified work standards and the use of semiannual bonuses for workers became common practices in Japan. Consistent with the Japanese emphasis on teamwork, bonuses are generally allotted to a work group rather than an individual worker. Scientific management emphasizes the role of management in the production process. This is reflected in the more hands-on approach in Japanese management training, as well as the relatively high share of managers directly involved in the production process.

PERVASIVENESS OF ENGINEERS

As with managers, Japanese industrial engineers are more directly involved with production processes than their counterparts in the United States. In his book The Japanese Industrial System, Charles J. McMillan explained that most Japanese companies make few distinctions between engineers and blue-collar workers, although engineers do tend to earn more. They work closely alongside production workers. In addition, Japan produces up to three times as many engineers a year as the United States. Japan's emphasis on production oriented engineering is consistent with its dominant competitive strategy in the postwar years—indeed, since the Meiji era—of focusing on improving existing products or processes rather than developing completely new ones.

NEW DIRECTIONS

While many of the patterns just described continue unabated at some Japanese companies, a variety of forces have caused them to change, often toward Western practices. Since the 1980s, for example, the predominance of seniority-based raises has been gradually giving way to a Western style regime of merit-based pay. Indeed, as of 1995, three-quarters of Japanese companies surveyed allocated at least some of their reward pay based on skills or achievements as opposed to tenure. And more than a few Japanese companies have attacked seniority more directly, explicitly revising policies to diminish or even eliminate it as a criterion in the compensation structure. This trend may be evidence of a cultural shift from valuing length of service to valuing quality of service.

Also mirroring Western trends, labor union membership in Japan has dropped considerably since the 1970s, falling from 35.4 percent of the workforce in 1970 to just 22.4 percent by 1998, according to figures compiled by the Japanese Ministry of Labor. Union participation remains the highest in large companies (those with 1,000 or more workers), where in 1998 membership was still nearly 57 percent. This share was down from 68 percent in 1987, the first year statistics by company size were kept.

Other traditional Japanese practices appear more enduring, notably lifetime employment. Although Japan's economic troubles have meant that some employees have lost their jobs, a continuing commitment to the principle of lifetime employment seems to remain at many companies and in the society as a whole. Still, younger workers (e.g., those under age 30) are decidedly less loyal to companies than in decades past, and there is growing evidence of a rise in professional identification over corporate identification among workers (i.e., "I'm a tax accountant" instead of "I'm a Toyota worker").

Nonetheless, even at the depths of the Japanese recession during the late 1990s Asian financial crisis, companies went to great lengths to avoid outright layoffs. One of the most common practices instead was to reassign workers, either within the corporate family or to other companies, such as vendors the company does business with. These transfers (known as shukko) could be temporary, in which case the worker is still officially employed by the company that has loaned him or her out, or permanent, where the company essentially finds a new job for the employee at another company. Employees who were never considered part of the lifetime staff, such as part-time help, usually didn't enjoy such privileges.

Although most agree that Japanese management has been moving in new directions, academics who study Japanese management practices are divided on how profound the shifts in the Japanese business paradigm really are. Indeed, the gamut of opinions has ranged from declaring the death of the Japanese management system to asserting its overarching continuity and strength. A number of observers see a continued convergence with Western practices, but many believe that, as in the past, the adoption of Western principles and practices will never be wholesale, but will blend with prevailing norms and beliefs in Japanese business and the broader culture.

SEE ALSO: Japanese Manufacturing Techniques

FURTHER READING:

Dirks, Daniel, Jean-Francois Huchet, and Thierry Ribault, eds. Japanese Management in the Low Growth Era. Berlin: Springer Verlag, 1999.

Harukiyo, Hasegawa, and Glenn D. Hook. Japanese Business Management. London: Routledge, 1998.

Herbig, Paul, and Laurence Jacobs. "A Historical Perspective of Japanese Innovation." Management Decision, September-October 1997.

McMillan, Charles J. The Japanese Industrial System. 3rd rev. ed. Berlin: De Gruyter, 1996.

Mroczkowski, Tomasz, and Masao Hanaoka. "The End of Japanese Management: How Soon?" Human Resource Planning, September 1998.

Did this raise a question for you?

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The American economy and its leading corporations are so high in the ascendant that the

cult of Japanese management seems increasingly remote. Today's heroes and hero

companies are Bill Gates and Microsoft, Andy Grove and Intel, GE and Jack Welch, etc. Their

management methods, especially those of Silicon Valley, are now drooled over in the

business schools.

Where once books flooded out explaining the mysteries of Japanese marvels, a spate of

titles devoted to the Valley's magicians and magical ways has begun to flow, with titles like

Relentless Growth, Innovation Explosion and Giant-Killers. The latter, an excellent book by

Geoffrey James, has a revealing sub-title: '34 Cutting Edge Management Strategies from the

World's Leading High-tech Companies'.

The giveaway lies in the plethora of strategies. There is no one Silicon Valley formula that

can be bottled and safely imbibed. Grove manages Intel differently from Gates at Microsoft,

and Michael Dell and Eckhard Pfeiffer are well apart at Dell and Compaq. There are common

features, but they flow inevitably from the pressures of rampant competition and ferocious

technological pace.

The free-and-easy, quick-on-the-draw dynamism of the software and hardware leaders must

be imitated by staider industries as global competition really bites. But the Valley's

explosive philosophies make Japan's consensual management seem positively antediluvian.

The cult is, in fact, quite dog-eared. It dates back to at least 1980, when an NBC

documentary ('If Japan Can, Why Can't We') exposed the terrible deficiencies of America's

manufacturers in comparison to the Japanese.

As the latter brushed aside Western competition in industries ranging from copiers to cars,

motorbikes to cameras, supertankers to transistors, embattled Westerners sought an

explanation. Some blamed their defeats on economic and financial skulduggery. The NBC

team, however, gave the main credit to Japanese management in general and the quality

revolution (influenced by an American, W.Edwards Deming) in particular.

Quality circles and then Total Quality Management were enthusiastically adopted by

Western firms and gurus, but had the usual truncated life-cycle of management fashions.

The present troubles of Motorola will be regarded by some as the tombstone of TQM, of

which former chairman Robert Galvin was America's leading exponent. Once as swift as any

top gun in Silicon Valley, Motorola is so late and uncompetitive in the digital phone

revolution that its core mobile business is wobbling badly.

But Japanese management was never built around quality alone. High quality products

flowed from high quality processes which in turn derived from powerful management

philosophies. Kaizen, or continuous improvement, expresses the belief that anything and

everything can be improved. If it can be, it must be: otherwise you are creating muda, or

waste.

Applying the philosophy naturally reduced costs. That might suggest a close similarity to

business process reengineering, which spearheaded the 1980s upsurge of Western

consultants and gurus. But as BPR gurus theselves have confessed, rolling about in

sackcloth and ashes, their techniques produced wonderful savings in payroll and other costs,

but did absolutely nothing to create organic growth.

The Japanese combined their greater cost-effectiveness with a sustained drive for the

largest possible market penetration, founded on high levels of investment, innovation, and

downright ingenuity. The conventional Western approach to long-term strategic planning,

with its three to five-year cycles, mostly failed to match this Eastern thrust. That convention,

though, is among the management pillars being undermined by Silicon Valley.

A fascinating study of electronics leaders by Andersen Consulting found that they plan only

18 to 24 months ahead. Top management lays down an overall 'vision' that establishes

corporate objectives. Within that framework, individual business units are delegated the task

of devising and executing the strategies demanded by the market. Nobody expects the

forecasts to be accurate. Everybody expects flat-out, effective correction of the consequent

errors.

There is a word for this revolutionary strategic approach, but it isn't English. 'Meikiki', which

means 'foresight with discernment', is how the Japanese describe a process which, of

course, they fully understand and apply. None of five other central concepts that Andersen's

found in California are any stranger to Japanese philosophy and practice.

Thus, Western firms still bear many bruises from Japanese moves to 'change the basis of

competition continually' (as with small copiers). That concept is backed up by the search for

'multiple sources of competitive advantage', which is basic to Japanese management. So is

Concept Three, 'organising to achieve new levels of agility'. Toyota, for example, has

revamped its development system so effectively that in 1996-97 new and reworked models

totalled 18, some getting into production a stunning 14 1/2 months after design approval.

That's partly accomplished by Concept Four, taking 'sophisticated collaboration' with

suppliers and customers to new heights. The final high-tech concept, 'focusing on core

capabilities to execute strategy successfully', is another Japanese foundation. It explains

why Hitachi, Matsushita, Sony, Toshiba and NEC still dominate the global electronics

landscape - despite the Intel-led resurgence of American semiconductors.

The like prowess of Toyota in automobiles drew the admiring comment from a local

professor that 'Toyota's real strength resides in its ability to learn...The company's practices

are constantly changing, even though its basic principles remain unchanged'. The state-of-

the-art in American management theory promotes the 'learning company', basic and

undying values, and change management. Here, too, the Japanese model rides again - or

rather, keeps on riding.

One of the model's key components is the Toyota Production System, which, says Fortune

magazine, depends for its success on 'highly experienced managers working unselfishly with

a motivated, well-trained work force'. It took a genius named Taiichi Ohno to realise that

production depended on people, not just machines. It's taken Western rivals decades (some

aren't there yet) to adopt TPS practices like allowing workers to stop the assembly line when

they spot a problem.

For all the genuine advances made by Western manufacturers, many have failed to match

the best Japanese, not through technical inadequacy, but because their people management

is inferior. As shown by the obscene rewards now paid to CEOs, in America above all,

Western management is still heavily top-down - though that's changing. For example, self-

managed teams are among many 'human resources' initiatives being both promoted and

used - but they, too, are Japanese familiars.

The pervasive error of the cult of Japanese management was to suppose that it was

fundamentally Japanese. After all, Western consultants have been earning fat fees for years

from eliminating waste, promoting change management, installing teamwork, preaching

about the high returns on innovation, and so on. Western gurus, too, have long been

preaching the virtues of what the Japanese practise: collaborative, collegiate, people-based

management that extends beyond the borders of the corporation and aims at long-term

pay-offs.

The Financial Times was recently pleased to discover (destroying a persistent myth) that

only 7% of Britain's 100 biggest companies felt hampered in 'taking the correct long-term

strategy' by the attitudes of institutional investors. But how many of those companies

actually are pursuing long-term strategies, let alone correct ones? The laggards can still

learn urgent strategic and management lessons from that toughest of global challengers:

the Japanese company outside Japan.

Japanese Management Philosophy and Techniques Nihonteki Keiei, or Japanese-style management, has become a popular phrase in the West. It refers to what people see as substantially different between Japanese management techniques and those widely practised in the West (Whitehill, 1991). The differences often cited are: lifetime employment, job rotation, promotion-based seniority, group consensus, just in time, quality circles, Kaizen, and the suggestion system. Most of these techniques have become well known across the world. However, a successful implemen tation by Western firms requires a critical understanding of their basic principles and operations, while some of the elements need to be critically assessed in the light of the structural problems of the Japanese economy since 1989.

Lifetime Employment (Shushinkoyo) The main objective of offering lifetime employment or a job for life is to provide workers with a sense of security and identity. Once recruited, lifetime employees become mem bers of the corporate family, which will have to take care of them for their entire career. The corporation promises to provide them with employment for life along with cheap housing, health plans, pensions, education, and recreation facilities for their families in return for loyalty and commitment. Such a system, it was strongly believed, would assist the corporation in building and maintaining a strong sense of belonging among the workforce, increase harmonious relationships, and reduce staff turnover. In Japan, groupism or the total commitment and identification to the group is a treasured cultural value. It starts at an early age and is known as kazokushugi or very close family. Japanese familalism is a basic value underlying many aspects of lifetime employment (Whitehill, 1992: 53–4).

Lifetime employment is usually offered to full-time male employees. These are

hired directly from high schools or universities and are expected to stay with the company for a lifelong period. The recruitment and selection procedures for candidates who are being considered for lifetime employment are more complex that those used in recruitment forstandard employment. In addition to the standard collection of documentation from each applicant, such as personal curriculum vitae, technical skills, official family registry record, physical examination report, and letters of recommendation, the Japanese firm assembles information related to political orientation, family background, finances, home ownership, and general characteristics and abilities of potential candidates (Chen, 1995:18 . In some cases, private investigators are sent to the applicant's neighbourhood to check on the truthfulness of the applicant's claims, on his general lifestyle, and to talk with friends and shopkeepers to make sure this individual is worthy of employment (Whitehill, 1992: 137).

When forced to cut the number of lifetime employees, such as witnessed recently during the recession following the Asian crisis, Japanese firms usually encourage early retirement. Management engages in what is known as ‘shoulder-tapping’ (kata-takaki) by urging senior individuals to resign voluntarily. Another option often used is the lending of these employees to other companies or sending them to a subsidiary or subcontractor, often with a more prestigious title but harder work and less pay (Whitehill, 1992: 132). Shukko is the Japanese term for transferring staff to other companies (subsidiaries and suppliers). This option has two forms: Zaiseki Shukko ‘where staff are temporarily trans ferred to the other companies but retain their employee status in the company’ and ‘Iseki Shukko where staff are actually released by one company to be employed by the other company’ (Kenkyujo, 1995). Surplus workers could also be sent home ‘on call’ and still get paid about 60 per cent of their base pay for a fixed period of time. In all these cases the expectation is that such workers will return to their earlier position when conditions improve.

Commitment to the security of lifetime jobs has significantly declined in Japan since the recession. Japanese corporate executives are increasingly acknowledging that they have ‘to make a break with the past to survive in the next century’ (Nishumuro, 2000). Matsushita, the epitome of traditional Japanese management, has recently introduced short-term contracts to attract young graduates. The old lifetime system was enshrined in the pay system and amounted to iron links that chained employees to their employer. Workers could not leave because rises were limited during their employment until they reached their mid-fifties when they received a huge lump sum. Under the new system of short contracts, wages can be drawn from this fund each month. It is up to the workers to decide whether they invest it in a private pension scheme, use it to improve their skills, or spend it. According to Atsushi Murayama, personnel director at Matsushita Electric, this new system was introduced because they realized that, under the old system, people were loyal to the company even after they lost interest in their actual work. They did not want a half-hearted workforce. They want their workers to stay with them because they share a common interest with the company. This, they believe, would create a more active and conscious loyalty among their staff. Of the 800 graduates recruited each year since the introduction of the new system, 40 per cent of the graduates have already taken this option (Nishumuro, 2000; see also the Matsushita case study in Part IV).

Subcontracting, and the reliance on part-timers is also increasing in Japan. Part-time workers do not receive any social insurance, pension, union rights, or paid holidays. They help reduce labour costs and provide needed flexibility when there

are seasonal fluctu ations. Temporary contract employees (rinjiko), who work full-time for limited periods,are another pool of so-called non-ordinary workers available to Japanese companies. These individuals are usually not recruited on the open market but are sent from sub contractors and subsidiaries. Low wages, unskilled work, and lack of union protection are all characteristics of such temporary employment status. When business slackens, these temporary workers are the first to go (Whitehill, 1992: 143). This change in the employ ment system is now causing serious social unrest among the Japanese. Because large firms used to take care of their employees, there is very little state aid for those who are losing their jobs. Many are having great difficulties keeping their dignity in a culture where redundancy is still equated with incompetence and laziness. Managers who have recently lost their jobs are choosing to become homeless rather than losing face with their families (Bubble Trouble, BBC, 2000). Recruit, one of Japan's leading personnel and information technology businesses has recently introduced a novel approach (for Japan) to take the pain out of downsizing.

Taking the ‘Ouch’ Out of Restructuring: Recruit in Japan It is no secret that Japanese companies—no matter how pressing the need for staff cuts-are loathe to retrench workers. Recruit has managed to achieve the same result without pain by introducing the IO system.

‘IO is a name that symbolises the constellation Jupiter’, says Sonoe Shimizu, a public relations officer at Recruit. Just as the Jupiter constellation is known for its independence, the IO concept was developed to symbolize the position's independent spirit. People who take up the IO pos ition are hired on a contract basis and are allowed to follow their own job schedules. In addition, they must make clear contributions to the company's development and are chosen for their special skills. IO workers, however, do not receive housing or transport allowances and are not entitled to the bi-annual bonuses.

In addition to the IO concept, Recruit has also devised Opt and Fellow positions as part of its new management system. The Fellow carries the highest status and is coveted for its high salary, though bonuses are not included. The Fellow is chosen on the basis of his or her exceptional performance. The position is not easy to attain. There are only five Fellows in the company. One Fellow is Japan's famous female marathon runner Yuko Arimori, a former Recruit employee. She quit the company and was re-employed on contract as a Fellow. ‘As long as she keeps winning her races, she provides an excellent example of a Fellow because she puts the spotlight on Recruit’, says Shimizu. Arimori runs with a large Recruit banner stitched onto her T-shirt.

The Opt system, on the other hand, is designed for Recruit employees who are not satisfied with their jobs and want to resign and start new projects of their own. These people are given a US$90,000 golden handshake from the company. Since the Opt system was introduced, more than 100 employees have taken the option, and as Shimizu explains, the Opt scheme has trimmed excess staff, helping the company in its restructuring efforts. As a result, Recruit's 5,000 personnel, including its 1,200 part-time workers, will have to prove themselves by what they can offer to the company rather than their loyalty, a big move from the traditional hallmarks of old Japan: loyalty and seniority.

Source: Taken from S. Kaukuchi, ‘Problems and Pills—The Soft Touch’, Asian Business, 1 Dec. 1999.

Job Rotation Japanese firms are often regarded as a dojo, a training place where one practises the martial arts of life (Whitehill, 1992: 162). Job rotation is valued as the best means of increasing the motivation of the workers, improving their performance, and thus achiev ing better efficiency and productivity. During the first ten years, the employee is put on a job rotation scheme. Under this scheme, management trainees are expected to learn and acquire considerable expertise in a number of areas of the firm. Those identified as poten tial top management candidates are rotated through key departments on a regular sched ule to increase the breadth of their knowledge and experience (Keys et al, 199 . After ten years, the first real threshold is reached and the employee may be promoted to kakari cho (sub-section chief) or kacho (section chief). The third threshold is reached after a total of twenty years or more of employment-perhaps at about age 45. It is at this time that promotion may be made to jicho (deputy department head) or directly to bucho (depart ment head). Those individuals who have built up impressive records of accomplishment through the years, at about age 52–5 will be promoted to a directorship (Whitehill, 1992: 163–4). Job rotation, it is argued, enables companies to create a well-rounded company man and allows the senior manager trained in this manner to understand the company as a holistic system. Additionally, since knowledge and skills are shared among all the workers, the company's dependence or reliance on a few highly specialized workers can be minimized. It may also be argued that workers, under such a scheme, are constantly learning and acquiring new skills. The drawback of such a system, however, is the poten tial de-skilling of the workforce itself. Workers may be gaining new expertise in various fields, but these are often limited to the company's specific operations and production techniques and may not be valuable for employment elsewhere. Thus, workers' chances for a career move outside the firm become seriously restricted.

Promotion Based on Seniority Traditionally, Japanese society has a hierarchical structure. This is a direct effect of Con fucianism, which describes the natural order of human relations as hierarchical. Accord ing to Confucianism, one of the most important values is respect for elders. In business environments, seniority within a group is determined more by age and length of service than by individual skill or initiative. The words kohai (junior) and sempai (senior) are used to express hierarchical relationships in both business and education. The word doryo (equal) is seldom used in business circles, because the Japanese often find it difficult to work in a personal situation without clearly defined levels of junior-senior roles (Hinkelman, 1994: 164–165).

Entering employees are usually paid a standard base rate with no great difference related to company size. Added to the base rate is overtime pay earned by ordinary employees for work beyond the normal working week or at night or during holidays. In addition, a position allowance is typically paid to employees holding formal supervisory posts in the firm. Additional work-related allowances paid each month may include those for special assignments and skills. Special assignments include overseas positions and other temporary assignments of a non-recurring nature. In addition to the basic pay, overtime, there is also a wide variety of allowances designed to meet individual personal needs. Each person's total situation will influence the amount of his income. The number of family members, his housing needs, the distance from his home to the plant, and other person-centred factors are given consideration. This leads to the payment of special allowances depending upon individual needs. These person-centred allowances are not related to the work performed, and include family allowance,

housing allowance, com muting allowance, and allowance for non-absences. But there are many others, with several companies reporting the payment of a ‘dating allowance’ for single, young, male employees in need. Japanese employees also receive bonuses twice a year, in December and in July, in addition to their monthly compensation. The amount of the employee's bonus is determined, at least in theory, by overall corporate profitability. This is a discreet means of rewarding outstanding individuals without compromising the seniority-based wage system. The annual amount of the bonus can average the equivalent of between four and five months' pay. These provide a somewhat flexible link with overall organiza tional performance and thus provide motivation for group and individual efforts to improve market share and profitability. From management's point of view, it is really a deferred wage payment, which provides a substantial amount of ‘free’ working capital for the company. Also the bonus is, of course, a flexible cost item that can be reduced in difficult times without cutting the total labour force (Whitehill, 1992: 179). Other benefits and services include many recreational, educational, and cultural programmes, excursions, seaside and mountain resorts, as well as nursery and child-care facilites.

Today, Japanese management's primary emphasis upon length of service in promotion is under the greatest pressure. While seniority and years of service are still a component of wage/salary calculations, many Japanese companies are making determined efforts to eliminate the seniority principle completely. They have become increasingly aware of the dysfunction of reward systems based on seniority and have been gradually introducing merit as a factor in pay rises. Merit ratings nowadays are increasingly being used in conjunction with a seniority coefficient to calculate rises. Seventy-five per cent of Japa nese companies are now administering pay by competency (Mroczkowski and Hanaoka, 199 . Many companies are shifting to a policy called noryokushugi kanri, or ability-based management, with a greater emphasis being placed upon such meritorious criteria as personal trust of colleagues, knowledge and skills, practical experience, contribution to productivity increases, and sense of responsibility. At Mazda, for example, the traditional respect for age was first challenged in 1996 following its take-over by Ford by the appointment of the youngest-ever Japanese director below the age of 45. Older managers felt resentful and found it very difficult to report to a younger director, thus jeopardizing their incentive and pride in working hard (Nishumuro, 2000).

Japanese Decision-Making Process (Ringi) Harmony and peace are the pre-eminent concerns of Japanese society. These have had a direct effect on Japanese decision-making. The ringi system of decision-making is one of the most important features of Japanese management (Fukuda, 1988: 65). (Rin means submitting a proposal and requesting a decision, and gi denotes deliberations and actual decisions.) The ringi system comprises two methods: nemawashi and ringi seido. Nemawashi refers to dealing with the roots of trees. In Japanese gardening, the transplanting of a tree requires much skill and meticulous effort. Business decision-making involves a similar process, with careful attention being given to the preliminary stages of the process (Chen, 1995: 184). Nemawashi is thus the practice of preliminary and informal sounding out of employees' ideas about a proposed course of action or project. Nemawashi also implies the activities that take place below ground level and describes the nature of the sounding out, in which contacted persons remain anonymous and feel free to talk about their ideas. Ringi seido, as opposed to nemawashi, is a commonly used formal procedure of manage ment by group consensus. A ringisho is a proposal that originates in a section, and is forwarded to all relevant sections on the same level, the section heads, the managers, the directors, and eventually

the president of the company. Upon receiving the ringisho, each will make comments on a sheet attached to the back of the proposal. The decision will be made by top management based on the comments from all people involved in the pro cess. The purpose of this roundabout way of making decisions is to eliminate dissension, as many are given a chance to change a decision before it is actually made.

Thus under a ringi system, the Japanese think an issue over thoroughly, define the question, put it all down on paper, and pay immense attention to all aspects of nema washi. And because the views of many are sought, with consensus management and group consciousness, the decision is likely to be sounder and later implementation made easier because it has already been pre-sold and employees are committed. Consequently, when the proposal reaches the president he can, in theory, pass it back and say: this is your idea, get on and implement it. With this collective method miscalculations are rare and it suits the Japanese sense of values. It also helps to boost morale, generate harmony, and strengthen loyalty and cohesion among staff. Group decisions tend to be bolder than those made by individuals and better represent a long-term view (Waters, 1991: 36). Another main advantage of the Japanese form of decision-making is that employees at lower levels can initiate proposals or work out plans, which are then transferred upward to higher levels of management. The power lies in the joint responsibility of all employees for the successful implementation of the new idea since they have all been involved in the process. Also the infusion of many different individuals in the decision making process tends to reduce the danger of a decision being manipulated by certain individuals (Chen, 1995: 187).

Some would argue, however that consensus in the Japanese decision-making system is not a virtue, but a weakness since, traditionally, Japanese are led to believe that there is always one right answer to a question and that authority should not be challenged (Nishumuro, 2000). Another flaw with the system is that it can be a slow, cumbersome process. Too many meetings are held, with many unnecessary questions and suggestions raised, thus delaying business decisions, which often require a swift response. By the time a decision is reached, the deal may already have been clinched by competitors. Spontan eity, personal initiative, and entrepreneurial spirit are thus automatically eliminated from the process.

Just in time (JIT) Just in time (JIT) is a Japanese management philosophy which has been applied in prac tice since the early 1970s in many Japanese manufacturing organizations. It was first developed and perfected by Tai-chi Ohno, Toyota vice-president. The concept is that one should supply parts, as they are needed. The main objective is to meet consumers' demand with minimum delays. Tai-chi Ohno drew the original inspiration from the operational logic of the American supermarket, where empty shelf space or gaps consti tuted the ‘trigger mechanism’ for shop assistants to replace products (De Gruyter, 1989: 211–1 . JIT gained extended support during the 1973 oil embargo and the increasing shortage of other natural resources, and was later adopted by many other organizations.

Today, JIT has evolved from being a method of reducing inventory levels within Japa nese shipyards into a management philosophy containing a body of knowledge and encompassing a comprehensive set of manufacturing principles and techniques. A bene fit associated with JIT manufacturing is that the system has the capacity, when properly adapted to the organization, to strengthen the organization's competitiveness in the market-place substantially, by reducing waste and improving product quality and effi ciency of production. JIT can also be

used as a means of obtaining the highest levels of usage out of the limited resources available. Furthermore, JIT allows companies to filter out waste in the production process, improve upon quality, and satisfy consumer demands in an efficient and reliable manner. Finally, JIT principles and objectives are universal. They can be applied and adapted to a diversity of organizations within indus tries that differ greatly from one another. JIT helps to increase the organization's ability to compete with rival firms and remain competitive over the long run. Organizational com petitiveness is enhanced through the use of JIT since it allows organizations to develop an optimal process for manufacturing their products. JIT can offer organizations a competi tive advantage which can take the form of offering consumers higher quality products than those offered by rival firms, or providing a superior service, or developing a superior means of production which allows the organization to become increasingly efficient or productive. JIT, thus, would be most suitable for application in organizations that need to respond quickly to changes within the environment and are willing and able to adjust their manufacturing processes to the changes in order to remain competitive (Suzaki, 1987).

However, in order for JIT management to work and be profitable, it must be fully adapted to the organization. Since every organization is unique in its production pro cesses and the goals it aims to achieve, and taking into consideration the different stages of development within the organization, the goals of JIT may be useful in assisting the organization to define, direct, and prepare for implementation. There exist short and long-term goals, which include the following:

Identifying and responding to consumer needs. This goal will assist the organization in focusing on what is demanded by customers and required of production. The funda mental purpose of the organization is to produce products which its customers want, therefore, developing a manufacturing process which produces quality products will ensure the organization's viability. Aiming for the optimal quality/cost relationship. Achieving quality should not be done to the point where it does not pay off for the organization. Therefore, emphasis should be placed on developing a manufacturing process that aims for zero defects. This may seem like an unrealistic goal; however, it is much less costly to the firm in the long run as it eliminates redundant functions such as inspection, rework and the production of defective products. Eliminating unnecessary wastes. These are wastes that do not add value to the product. Different categories of waste are identified, some of which are more concern in the waste elimination processes than others. Aiming for the development of trusting relationships between the suppliers. Also, rela tionships with just a few or even one supplier, if possible, should be focused upon. This will assist in the reaction of a more efficient company in terms of inventory and materials, timeliness of deliveries and reassurance that the materials will be available when required. Designing the plant for maximum efficiency and ease of manufacturing. This involves the use of machinery and labour that are absolutely essential to the manufacturing process. Adopting the Japanese work ethic of aiming for continuous improvement even though high standards are already being achieved. This will ensure that the organization remains competitive by continually striving for means of fulfilling consumer demand. (Cheng and Podolsky, 1996: 11) Finally, JIT is a long-term process which cannot be implemented in a short period of time, nor can its rewards be realized overnight. It took Toyota ten years to perfect the JIT technique within its plants. Other limitations might be related to

the loss of safety stocks, which usually act as a buffer for companies to fall back on to offset inaccurate demand forecasts. Loss of individual autonomy is also often reported as well as the greater amount of stress and pressure placed upon the worker to perform, and the resistance of the workforce to change.

Total Quality Control Total quality control (TQC) was initially developed by Professor William Deming of New York University, but was not popular in the USA. The Japanese adopted it as a way to revive their war-torn economy and considered quality and productivity as one and the same. In the TQC concept, quality by inspection, scrapping, and reworking are unaccept able. The corrective measure must be built into the entire productive process. Each indi vidual employee is exhorted to try his utmost to guarantee the total quality of his own products and also to help improve the overall quality of the company's product (Cheng and Podolsky, 1996: 206).

In the West, TQC is often understood as part of separate QC activities and it has often been thought to be a job only for quality control engineers. By contrast in Japan, TQC is a movement centred on the improvement of managerial performance at all levels includ ing quality assurance, cost reduction, meeting production quotas, meeting delivery schedules, new product development, productivity improvement, supplier management and safety. More recently TQC has come to include marketing, sales, and service as well. TQC also deals with such crucial management concerns as organizational development, cross-functional management, policy deployment, and quality deployment. In other words, Japanese managers have been using TQC as a tool for improving overall performance (Masaaki, 1986:14). The ‘quality’ refers to improvement in all of these areas. Japanese managers have found that seeking improvement for improvement's sake is the surest way to strengthen their companies' overall competitiveness with the belief that ‘If you take care of the quality, the profits will take care of themselves’. TQC related activities in Japan are thus conducted with the customers' needs in mind. A core element of the total quality control concept is the use of quality circles.

Quality Circles (QC) To understand the role QCs have played in Japan's history, one must first understand the concept of quality as it applies to the Japanese and the rest of the world. After the Second World War, the Japanese were faced with limited resources and a need to regain economic security. Elsewhere the focus was on mass inspection and the Americans exported their expertise to the Japanese who were ready and willing to learn. Western companies began to adopt the idea in the 1970s. Although these functioned in the same way as for the Japanese, North American firms often referred to them as ‘employee participation groups’ or ‘focus groups’ or simply quality circles, with many organizations developing their own customized name (for an illustration, refer to the case study on Rover in the UK in Part IV).

Quality circles are small groups of employees doing similar or related work, which meet regularly to identify, analyse, and solve product-quality and production problems, and to improve general operations. Quality circles also deal with issues like personal training, job enrichment, and leadership development. Participating employees are encouraged to make suggestions, which are put into a handy box and examined by specialists. If these suggestions prove to be appropriate, they will be put into practice and the originators of the accepted proposals will receive some sort of reward (Cheng and Podolsky, 1996:206). There is no unified formula for scheduling and for payment of participants. If the meet ings take place during

normal working hours, no additional payment is offered, for par ticipation is so high that even long meetings after work do not provide overtime pay. Membership in the quality circles is usually voluntary for all members (Werther et al., 1990). Training is provided to the members of each group to assist with problem-solving. Group members, through consensus, select problems for consideration by the QC. Employees are given freedom to choose and select potential problems, as through this process they are more likely to be motivated to find a solution and remain within the group.

The success of a QC requires a leader, coordinator, facilitator, and other members who function together to achieve objectives. The objectives of the circle are to identify and solve quality problems and improve processes within their immediate area or work cell. All the circle members receive training related to problem-solving skills. Meetings between members occur at least once a week. The identification of a problem and formu lation of a solution then allows the circle members to present their ideas to managementwho must then provide the circle members with authorization to implement the sugges tion. Approximately 80 per cent of a circle's suggestions are in most cases accepted by management. Failure to accept a suggestion requires management to offer valuable feed back, in order to ensure the continuing success of the quality circles. The leader, coordin ator, and the facilitator each play a unique role in the function of the QC. The QC leader assumes a key position in the success of the QC, which depends upon how well the leader is able to promote group problem-solving success while the circle's coordinator assumes the responsibility of administrative duties and supervises the facilitator. The circle's facili tator is responsible for coordinating and directing the activities of the circle members, maintaining documentation, training circle members, providing the link between management and the circle, monitoring and assessing programmes, and facilitating communication (Ross and Ross, 1982).

QCs do not provide quick-fix solutions to all organizational problems but the potential benefits an organization can experience through their use outweigh the costs. Some of the benefits include:

1.increased employee commitment through participation and consensus decision making; 2.increased sense of employee ownership and control; 3.a mechanism to realize employee potential; 4.improved communication between employees; 5.increased motivation and employee morale; and 6.effective means of training (Werther et al., 1990). Common costs and problems associated with the implementation of QCs are (Ross and Ross, 1982 and Werther et al. 1990):

1.cost of training employees; 2.union concerns. Unions may express some reservations to management regarding the implementation of QCs and their use. Objections may include the following: the use of the QC as a means of eventually eliminating the union; increasing productivity levels to the point where this will produce adverse effects on the workforce and reduce the size of the workforce through increased productivity levels; 3.resistance to change. The implementation of QCs represents a change to the established work methods. Resistance is likely to be directed at management from superiors and employees. Common concerns frequently address the increased level of responibility of workers and reduced supervisory control; 4.failure with previous attempts to increase the level of employee involvement.

Success with QC implementation requires a positive attitude, commitment from all involved, and a well-defined plan of action; 5.failure to provide sufficient training to members of the circles. This will result in incorrectly identifying cause, effect, and formulation of solutions; 6.lack of management support. Circle members need management support from provi sion of the necessary tools for problem-solving to feedback on suggestions; 7.setting unrealistic expectations for the QC. The most effective approach to managing QCs is to allow them necessary time to develop and grow on their own. Expecting too much too soon will result in a group of frustrated and defeated employees; 8.failure to establish specific, quantitative measures. To assist in the problem-solving process, the following techniques are often used:

Brainstorming Brainstorming can be defined as a group of people using their collective imaginative power to create ideas and solutions. The objective of the regular meetings of the QC members is to identify problems and develop solutions. The process demands participa tion by all group members to avoid being guided by the opinion of a select few. Although this represents the ideal practice, in actuality, there will always be some group members who are hesitant to offer their suggestions. The actions of members can be directed towards creating an open and positive environment, which encourages participation. Members should:

1. offer encouragement on a consistent basis; 2. attempt to generate as many ideas as possible without being judgemental; 3. foster a positive attitude towards suggestions; 4. attempt to make everyone feel welcome and involved in the process (Cheng and Podolsky, 1996: 173). The Silent Idea-Generation Process The silent idea-generation process can be used to identify problems, inadequacies in training, and so on. The process commences with a group of employees, managers, or superiors who privately list on a piece of paper possible causes of problems or solutions. The ideas are then shared with the group without being criticized or judged, until each person within the group passes or runs out of ideas. Clarification of ideas occurs and group participants vote on the five ideas deemed to be the most important. This process is often regarded as superior to brainstorming as it tends to encourage all members to develop ideas through the sessions.

The Five Whys This can be applied to any problem to determine its real cause. The underlying purpose of asking why five times is to avoid attributing a false cause to the problem. The tendency for most people is to assign the first symptom or cause identified to be the root of the problem, whereas there may be several causes or symptoms.

Pareto Charts Pareto charts assist in problem identification and analysis of the percentage of each cause that contributes to the problem. The method of constructing a Pareto chart involves the following steps:

1. Collect data for a specified period of time for the causes or defect identified. 2. The data is then categorized as it relates to each cause or defect identified. 3. Construct the graph: (a) draw the horizontal X axis, then two vertical Y axes, one on the left and one on

the right;

(b) place the causes or defect categories along the X axis, starting from the left in order of largest to smallest;

(c) place the number of occurrences for each cause or defect on the left Y axis; and

(d) place percentages on the right Y axis.

1. Plot the data in bars of equal width. 2. Study the graph to understand the relationship between the cause categories and percentages. Other techniques include the use of histograms, check sheets, and flip-charts (Japanese Human Relations Association, 198 .

The assumed values and benefits of QCs spread quickly from Japan to the Western advanced political economies. However, the outputs from this replication varied greatly from place to place, even though the underlying objective remained the same. The adop tion of QCs in Land Rover in 1998 is a good example of frustrated ambitions (see case study, ‘Quality Circles at Land Rover: The UK Experience’ in Part IV).

The Concept of Kaizen After a day-long discussion on the Kaizen concept William Manly, senior vice-president of the Cabot Corporation, said: I thought they had two major religions in Japan: Bud dhism and Shintoism. Now I find they have a third: Kaizen' (quoted in Masaaki, 1986: 40). Kaizen is one of the most important concepts in Japanese management and the main key to Japanese competitive success. It constitutes the basic philosophical underpinning for the best in Japanese management. Japanese managers devote at least 50 per cent of their attention to Kaizen. Normally the driving forces for competition are price, quality, and service. In Japan today, Japanese companies are even now competing in introducing better and faster Kaizen programmes (Masaaki, 1986: 16). Once the Kaizen movement has been started, there is no way to reverse the trend. Kaizen is an ongoing process.

Kaizen is generic and can be applied to every aspect of everybody's activities. The Kaizen philosophy assumes that our way of life—be it our working life, or social life, or our home life-deserves to be constantly improved. In any business, an employee's work is based on existing standards, either explicit or implicit, imposed by management. Maintenance refers to maintaining such standards through training and discipline. By contrast, improvement refers to improving the standards. Improving standards means establishing higher standards. Improvement can thus be broken down into Kaizen and innovation. Kaizen signifies small improvements made in the status quo as a result of ongoing efforts while innovation involves a drastic improvement in the status quo as a result of a large investment in new technology and/or equipment (Masaaki, 1986: 16). Kaizen also means ongoing improvement involving everyone—top management, managers, and workers.Underlying the Kaizen strategy is the recognition that management must seek to satisfy the customer and serve customer needs if it is to stay in business and make a profit. Improvements in such areas as quality, cost, and scheduling (meeting volume and delivery requirements) are essential. Kaizen is thus a customer-driven strategy for improvement leading ultimately to customer satisfaction.

Kaizen is also people oriented and is directed at people's efforts. This contrasts sharply with the result oriented thinking of most Western managers where the individual's con tribution is valued only for its concrete results. Kaizen does not necessarily require sophis ticated techniques or state-of-the art technology. Often all that is needed is common sense. It does not necessarily call for a large investment to implement it. However, it does call for a great deal of continuous effort and commitment. Unlike innovation, which is technology and money oriented, Kaizen is people oriented and calls for a substantial management commitment of time and effort, rather than capital (Masaaki, 1986: 24–7). Thus investing in Kaizen means investing in people. Kaizen and the Japanese ‘suggestion system’ work in concert. An important aspect of the suggestion system is that each sug gestion, once implemented, leads to a revised standard. Through the suggestions, employees can participate in Kaizen in the workplace and play a vital role in upgrading standards.

Suggestions System-Japanese Style The suggestion system was brought to Japan by Training Within Industries (TWI) and the US Air Force. In addition, many Japanese executives who visited the USA straight after the war learned about the suggestion system and started it at their companies. Whereas the American style stressed the suggestion's economic benefits and provided financial incentives, the Japanese style stressed the morale-boosting benefits of positive employee participation. Although the suggestion scheme was transferred from the West, the phe nomenal success of the Japanese suggestion system is in its transfer from being a mode, merely waiting for suggestions, to an active programme for educating personnel concern ing all aspects of the plan (Whitehill, 1992: 236). In addition, a major factor contributing to the success of the suggestion system in Japan, is that generally speaking Japanese managers have more leeway in implementing employee suggestions than their Western counterparts do. Japanese managers are willing to go along with a change if it contributes to any one of the following goals: making the job easier, removing drudgery from the job, removing nuisance from the job, making the job safer, making the job more productive, improving product quality, saving time and cost. This is in sharp contrast to the Western manager's almost exclusive concern with the cost of the change and its economic payback (Masaaki, 1986: 114). Also, most Japanese companies which have a suggestion system, incorporate incentives into it: whenever a suggestion yields savings, manage ment provides rewards in proportion to the savings realized. Such rewards are paid both for suggestions made by individuals and those made by groups such as QC circles.

The suggestion system, the Japanese way, has a span of five to ten years. It involves three stages. In the first stage, management makes every effort to help the workers pro vide suggestions, no matter how primitive, for the betterment of the worker's job and the workshop. This stage is usually used to help the workers look at the way they are doing their jobs. In the second stage, management stresses employees' education so those employees can provide better suggestions. In order for the workers to provide better suggestions, they should be equipped to analyse problems and the environment. This requires education. Finally, in the third stage, after the workers have become both inter ested and educated, management starts to be concerned with the economic impact of the suggestions (Masaaki, 1986:113–14). Workers, under a suggestion system, are expected to make daily suggestions for improvement in Japanese companies (Keys et al., 1998: 131). The Toyota suggestion system, for example, produces a legendary 47.7 suggestions per employee per year (Young, 1992). The success of the Toyota suggestion system is more understandable when the company's

internal suggestion response procedures are exam ined. Every suggestion receives a response within 24 hours from the employee's direct supervisor. Suggestions of merit are rewarded with medals or with membership of a Gold Idea Club. The most important proof of the success of this programme is the percentage of suggestions implemented. In 1986 Toyota reached an implementation rate of 96 per cent of the suggestions submitted, a percentage that is indicative not only of the higher calibre of suggestions but also of the sincerity and commitment of management to using them (Chang et al, 1992). In a recent interview Toyota Motor Chairman Eiji Toyota said: ‘one of the features of the Japanese workers is that they use their brains as well as their hands. Our workers provide 1.5 million suggestions a year, and 95% of them are put to practical use. There is an almost tangible concern for improvement in the air at Toyota’ (Masaaki, 1986: 14–15).

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techniques.html#ixzz1VzZ9ZiEN5S The Japanese Management Philosophy

Introduction5S is a system to reduce waste and optimize productivity through maintaining an orderly workplace and using visual cues to achieve more consistent operational results. Implementation of this method “cleans up” and organizes the workplace basically in its existing configuration, and it is typically the first lean method which organizations implement.

The 5S pillars, Sort (Seiri), Set in Order (Seiton), Shine (Seiso), Standardize (Seiketsu), and Sustain (Shitsuke), provide a methodology for organizing, cleaning, developing, and sustaining a productive work environment. In the daily work of a company, routines that maintain organization and orderliness are essential to a smooth and efficient flow of activities. This lean method encourages workers to improve their working conditions and helps them to learn to reduce waste, unplanned downtime, and in-process inventory.

A typical 5S implementation would result in significant reductions in the square footage of space needed for existing operations. It also would result in the organization of tools and materials into labeled and color coded storage locations, as well as “kits” that contain just what is needed to perform a task. 5S provides the foundation on which other lean methods, such as TPM, cellular manufacturing, just-in-time production, and six sigma can be introduced.

Method and Implementation Approach5S is a cyclical methodology: sort, set in order, shine, standardize, sustain the cycle. This results in continuous improvement.

The 5S Pillars

SortSort, the first S, focuses on eliminating unnecessary items from the workplace that are not needed for current production operations. An effective visual method to identify these unneeded items is called “red tagging”, which involves evaluating the necessity of each item in a work area and dealing with it appropriately. A red tag is placed on all items that are not important for operations or that are not in the proper location or quantity. Once the red tag items are identified, these items are then moved to a central holding area for subsequent disposal, recycling, or reassignment. Organizations often find that sorting enables them to reclaim valuable floor space and eliminate such things as broken tools, scrap, and excess raw material.

Set In OrderSet In Order focuses on creating efficient and effective storage methods to arrange items so that they are easy to use and to label them so that they are easy to find and put away. Set in Order can only be implemented once the first pillar, Sort, has cleared the work area of unneeded items. Strategies for effective Set In Order include painting floors, affixing labels and placards to designate proper storage locations and methods, outlining work areas and locations, and installing modular shelving and cabinets.

ShineOnce the clutter that has been clogging the work areas is eliminated and remaining items are organized, the next step is to thoroughly clean the work area. Daily follow-up cleaning is necessary to sustain this improvement. Working in a clean environment enables workers to notice malfunctions in equipment such as leaks, vibrations, breakages, and misalignments. These changes, if left unattended, could lead to equipment failure and loss of production. Organizations often establish Shine targets, assignments, methods, and tools before beginning the shine pillar.

StandardizeOnce the first three 5S’s have been implemented, the next pillar is to standardize the best practices in the work area. Standardize, the method to maintain the first three pillars, creates a consistent approach with which tasks and procedures are done. The three steps in this process are assigning 5S (Sort, Set in Order, Shine) job responsibilities, integrating 5S duties into regular work duties, and checking on the maintenance of 5S. Some of the tools used in standardizing the 5S procedures are: job cycle charts, visual cues (e.g., signs, placards, display scoreboards), scheduling of “five-minute” 5S periods, and check lists. The second part of Standardize is

prevention – preventing accumulation of unneeded items, preventing procedures from breaking down, and preventing equipment and materials from getting dirty.

SustainSustain, making a habit of properly maintaining correct procedures, is often the most difficult S to implement and achieve. Changing entrenched behaviors can be difficult, and the tendency is often to return to the status quo and the comfort zone of the “old way” of doing things. Sustain focuses on defining a new status quo and standard of work place organization. Without the Sustain pillar the achievements of the other pillars will not last long. Tools for sustaining 5S include signs and posters, newsletters, pocket manuals, team and management check-ins, performance reviews, and department tours. Organizations typically seek to reinforce 5S messages in multiple formats until it becomes “the way things are done.”

Proper discipline keeps the 5S circle in motion.

Implications for Environmental Performance

Potential Benefits: Painting the machines and the equipment light colors and cleaning the windows, often done under the Shine pillar, decreases energy needs associated with lighting.Painting and cleaning makes it easier for workers to notice spills or leaks quickly, thereby decreasing spill response. This can significantly reduce waste generation from spills and clean-up.The removal of obstacles and the marking of main thoroughfares decreases the potential of accidents that could lead to spills and associated hazardous waste generation (e.g., spilled material, absorbent pads and clean up materials).Regular cleaning, as part of the Shine pillar, decreases the accumulation of cuttings, shavings, dirt, and other substances that can contaminate production processes and result in defects. Reduction in defects has significant environmental benefits (e.g., avoided materials, wastes, and energy needed to produce the defective output; avoided need to dispose of defective output).5S implementation can significant reduce the square footage needed for operations by organizing and disposing of unused equipment and supplies. Less storage space decreases energy needed to heat and light the space.Organizing equipment, parts, and materials so they are easy to find can significantly reduce unneeded consumption. Employees are more likely to finish one batch of chemicals or materials before opening or ordering more, resulting in less chemicals or materials expiring and needing disposal.5S visual cues (e.g., signs, placards, scoreboards, laminated procedures in workstations) can be used to raise employee understanding of proper waste handling and management procedures, as well as workplace hazards and appropriate emergency response procedures. 5S techniques can be used to improve labeling of hazardous materials and wastes. In addition, environmental procedures often are separate from operating procedures, and they are not easily accessible to the workstation. 5S implementation often result is easy to read, laminated procedures located in workstations. Integration with 5S visual cues and operating procedures can improve employee environmental management.Potential Shortcomings: Regularly painting and cleaning machines and equipment could lead to increased use of paints and cleaning supplies. Paints and cleaning supplies may contain solvents and/or chemicals that can result in air emissions or increased waste generation.Disposing of unneeded equipment and supplies creates a short-term surge in waste generation. In some

cases, there may be unlabeled wastes that could be hazardous. Failure to involve environmental

personnel in waste handling could result in some wastes being disposed improperly or inA Historical Review of Japanese ManagementTheories: The Search for a General Theory ofJapanese ManagementMasaki HayashiDepartment of Commerce, Chuo University, 742-1 Higashi Nakano, Hachioji, Tokyo, JapanE-mail: hmasaki@tamacc.chuo-u.ac.jpJapanese management theories have not developed into a general theory ofJapanese management, that is, a theory drawn from the ‘mutual mediation’ ofhistorical and theoretical studies of local business management. One reason for thisis a focus on specifically Japanese traits within its system of management, fromcultural aspects embedded within business to issues of the financial system,relations with government, kigyoshudan and keiretsu, industrial relations andlabour management and management methods such as production control. Nostudy has yet addressed general theoretical issues regarding Japanese management,and this is reinforced by the recent specialization and fragmentation in managementstudies. Given the broad scale of the development of industry andmanagement in Japan, it is unsurprising that individual areas should receivepriority. Nonetheless, individual areas are in a relationship of mutual mediationwith the development of a general theory, and thus we cannot disregard theimportance of the latter. This article reviews historically existing Japanesemanagement theories, classifying them into four approaches, and considers thepossibility of developing a general theory of Japanese management through themutual mediation of historical and theoretical studies, as well as of individualmanagement studies and studies of general theory.Asian Business & Management (2002) 1, 1–19. DOI: 10.1057/palgrave.abm.9200016Keywords: Japanese management theories; Japan-type management theory; generaltheory of Japanese management; general theory of business management; generaltheory of individual areasIntroductionThis article seeks to review and examine theories of Japanese management andto demonstrate the potential for the development of a general theory ofJapanese management, based upon the mediation of historical and theoreticalresearch of existing studies of individual management fields in Japan.While Japanese business management studies may logically be classified intohistorical and theoretical research, both of which are complementary, a generalABM. 9200016 CH/SWARNA 1–19Asian Business & Management, 2002, 1, (&&)r 2002 Palgrave Macmillan Ltd 1472-4782/02 $15.00www.palgrave-journals.com/abm

theory of business management may be established via their mutual mediation(Mouri, 1977). A ‘general theory of business management’ in this case,depending on research approach and object, might be called a ‘generalmanagement theory of Japan’ or a ‘general theory of Japanese businessmanagement’. Hereafter, it will be useful for our understanding of Japanesemanagement to distinguish the ‘general theory of business management’ from‘a Japanese management theory’. Of course, research development through themutual mediation of historical and theoretical research is applicable not onlyto Japanese, but also to US, German or other local styles of businessmanagement. Therefore, any general theory of Japanese business managementmay be said, like general theories of other countries, to form one school withina wider general theory of management.However, in reality, studies on Japanese management have not always beenconducted through the ‘mutual mediation’ of historical and theoretical

research. Moreover, conventionally, while there has been much discussion ofwhat is specifically Japanese about Japanese business management (ie‘peculiarity research’), there has been extremely little attention paid to whatmanagement is in Japanese business (ie mutual mediation of historical andtheoretical research).In order to be able to discuss even what is specifically Japanese aboutJapanese business management, we are forced to consider what management isin Japanese business. From such an approach, advocates of a Japanesemanagement theory will usually construct their own definition of whatJapanese business management is. Whereas one advocate might focus on thecultural characteristics of Japanese companies, another might draw attentionto industrial groups or keiretsu, to financial systems, relations withgovernment, or methods of management such as industrial relations andlabour management, production control, or managerial decision-making andorganizations. This is how numerous Japanese management theories haveevolved.1Such being the case, despite the observations of the late ProfessorMouri over 20 years ago, Japanese management theory has not yetarrived at a general theory of business management — that is a definitegeneral theory of Japanese business management developed via the mutualmediation of historical and theoretical research into Japanese management.Conversely, this implies that subdivisions and specializations of studieshave developed alongside new research fields. Studies in individual fieldshave therefore naturally taken precedence over the formation of ageneral theory. However, as the development of specific studies andthe formation of a general theory may be related through the mutualmediation process, we cannot maintain that there is no need for the formationof a general theory.ABM. 9200016 CH/SWARNA 1–19Masaki HayashiA Historical Review of Japanese Management Theories2Asian Business & Management 2002 1

Development of Japanese Management TheoriesLet us begin by putting into rough chronological order existing studies ofJapanese management.Until the 1960s, ‘Japanese management’ was primarily used in the sense of aspecifically Japanese model, characterized by such concepts as ‘lifetimeemployment’, ‘seniority wage system’ and enterprise unions (Abegglen, 1958;OECD, 1973) and management by collective principle (Hazama, 1963; Nakane,1967; Tsuda, 1976; Iwata, 1977; OECD, 1978). This trend continues even todayas a socio-cultural approach to Japanese management.The 1970s saw the appearance of research showing similar systems andorganizations to be extant in the US and various European countries (Dore,1973; Koike, 1977). Research also flourished in the area of Japanese labourmanagement and industrial relations (Hasegawa, 1971, 1974; Izumi, 1974;Kimoto, 1976). The actual state of automation and labour in factoriesprovided a further focus for dedicated research (Ishida, 1970, 1981; Sakamoto,1974), and a critical economic approach to business management (Ishida andOhashi, 1978) was proposed as a more systematic approach to the study oflabour and its management in contemporary business affairs.2

In addition, during the 1970s, research on the social responsibility ofcompanies, with particular reference to issues such as pollution and researchrelated to corporate ownership and management control, attracted widespreadattention. When the Japan Society of Business Administration chose ‘Issues ofPollution and Theories of Business Management’ (Japan Society of Business

Management, 1973) as its conference theme for 1971, interest in investigatingthe social responsibilities of companies and corporate ownership (ibid., 1975)grew. Furthermore, with the appearance of research into the formation ofmanagerial control through institutional ownership of stocks in large Japanesecompanies (Mito et al., 1973), studies on issues of ownership, control andmanagement in corporations, in relation to a structural analysis of Japanesecapitalism, have evolved (Noguchi et al., 1973; Iwata and Takahashi, 1974).The theory of ‘corporate capitalism’ (Okumura, 1975), which is based on themutual ownership of stocks by corporate bodies, and studies on ‘enterprisegroups’ with banks and general trading companies at their core, and their rolein business management (Okumura, 1978; Noguchi, 1979) generated enhancedinterest in research into the managerial structure of Japanese companies.These various forms of research provided the basis for Japanese managementstudies, which in the 1980s clearly broadened in scope from a focus onlabour management and practices to embracing comprehensive individualfields of research on business management, such as R&D, production,purchase, sales, finance and business analysis. Moreover, this gave rise tostructural analysis of corporate control by management and enterprise groupsABM. 9200016 CH/SWARNA 1–19Masaki HayashiA Historical Review of Japanese Management Theories3Asian Business & Management 2002 1

(Chuo University Corporate Research Institute, 1982; Fujii and Maruyama,1985).This broadening of research in Japanese management was also apparentoverseas, which in turn fired further research in Japan. Various studies werepublished in quick succession, bringing about what may be termed a veritableJapanese management boom abroad. The early 1980s saw such works as:Theory Z, suggesting how American business could meet the Japanesechallenge, based upon a comparative study of the organizational principlesof US and Japanese companies (Ouchi et al., 1981); Japan Inc. theory(Johnson, 1982), according to which administrative guidance from such bodiesas MITI provides the very key to Japan’s post-war revival; and research intothe Toyota Production System, with its superior competitiveness in cost,quality and delivery time (Schonberger, 1982; Monden, 1983). In the later1980s, there appeared assessments of the effectiveness of the Japaneseproduction system as a means of recovering business competitiveness inadvanced industrialized Western nations (Dertouzos et al., 1989; Roos et al.,1990; Coriat, 1991). Therefore, with Japanese companies making increasinginroads abroad, observations that Japanese management would need fundamentalchange (Porter, 1985) attracted little attention at that time.Along with the overseas acclaim for Japanese management came attentionon its universality, or applicability in other countries. Among these werestudies positing universality as founded upon the invisible assets of the culturalbackground to Japanese management (Yasumuro, 1987; Kagono, 1989). Therewere also studies that found similar universality (economic rationality) in thepersonnel, organization, corporate objectives, management systems and otherfeatures making up Japanese management and inter-corporate systems, such aslong-standing transaction practices and business connections (Abo, 1988;Keizai Kikakucho, 1990). Although the theory of Japanese management asapplicable abroad was generally termed the theory of ‘universality’, itssubstance was at best perceived in terms of its potential for internationalutilization, and it was less an examination of the context of businessmanagement and social science. Perhaps because the 1990s recession forcedthe Japanese management issue into a back seat, such discussions were not

pursued further and the dichotomy between the ‘universality’ and ‘specificity’theories (which emphasize ‘specificity’, that is, backwardness, of Japanesemanagement) continued.Going into the 1990s, with the strong recovery of the US corporations aftertheir 1980s restructuring, a complete about-turn brought refreshed attention tonew management theories from America, such as theories of ‘competitivestrategy’, ‘reengineering’, ‘core competences’ business management, ‘humanresource management’, ‘knowledge management’ and ‘virtual corporation’.Although such studies are collectively known as the American theory ofABM. 9200016 CH/SWARNA 1–19Masaki HayashiA Historical Review of Japanese Management Theories4Asian Business & Management 2002 1

business management,3 the fact that Japanese management systems (inparticular, the Toyota production system) provided the inspiration for some ofit means that a significant relationship with the Japanese theory of businessmanagement cannot be ignored. However, regarding the tendency that theuniversality theories of Japanese management which evolved during the 1980spositing convergence with the new American theories of management, we needto identify what kind of relevance exists between them and to understand thehistorical and theoretical background which helped generate the new Americantheories.On the other hand, from the standpoint of specificity theory, much criticalresearch on the actual state of labour management and industrial relations inJapanese companies in Japan and overseas has appeared (Kimoto, 1991), aswell as the development of international debates (Maruyama, 1992, 1993; Katoand Stephen, 1993). Studies on female labour in Japanese companies were alsoconducted in relation to Japanese management theory; these became acharacteristic of this period (Fujii, 1995; Watanabe, 1995). Much of thiscritical research focused on personnel and labour management systems andidentified characteristics of labour problems and industrial relations. That is,much emphasis was put on exploring Japanese specificity, and some advocatesconsider these as characteristics of Japanese management systems as a whole.Conversely, others showed little interest in linking such characteristics to thewhole system, and hence less interest in the formation of a general theory ofbusiness management. Indeed, while there were some theoretical studies ofmanagerial institutions which linked the influence of American managementon that of Japan as a Japanese-style Americanization (Hasegawa, 1971, 1989),there have been no adequate institutional studies of the transfer of Japanesemanagement (‘Japanization’ of foreign management systems) since the late1980s. Instead, it would seem that theoretical approaches to labour managementand industrial relations as part of business management have beendowngraded since the 1980s.However, numerous studies have been conducted on the impacts of microelectronicsupon management and labour. Although the historical andtheoretical study of technology and automation (Munakata, 1989), thepolarization theory of labour skills (Murata, 1993) and the theory ofintellectual skills (Koike, 1991), as well as studies of industrial systems(Nohara and Fujita, 1988; Nomura, 1993; Saruta, 1995; Ishida et al., 1997),theories on technology, labour and management in big businesses (Koyama,1985; Yasui, 1986; Miyuki, 1997) and human resource management theory(Futagami, 1996; Shima, 2000) have attracted attention, there has been nosignificant study of such issues based upon the mutual mediation of historicaland theoretical approaches. There has been less work towards the formation ofa general theory of labour management in business, and even less research on

ABM. 9200016 CH/SWARNA 1–19Masaki HayashiA Historical Review of Japanese Management Theories5Asian Business & Management 2002 1

how to locate such a study within a general theory of business management. Assuch elements as technology, labour, labour management and industrialrelations are important components of Japanese management systems, theyconstitute important research topics and areas that cannot be overlooked. Theissue is how the two theories, the general theory of labour management andthat of business management, should be integrated.In addition, studies of medium-sized and small enterprises, starting out fromthe traditional ‘dual structure’ theory between big businesses and SMEs, andpassing through ‘medium enterprise’ theory (Nakamura, 1964), and the‘hierarchical structure of inter-firm relations’ theory (Chuo UniversityEconomic Research Institute, 1976), found prominence in the 1990s in atheory of ‘inter-firm relations’ (Asanuma, 1997; Shimada, 1998). Moreover,with the deepening concern for global environmental issues, from around 1990the issue of social responsibility in business has also attracted the attention ofacademics and business associations (Shinohara, 1991; Nikkeiren, 1995).These studies influenced theories of Japanese management. The subjects ofstudy shifted in each specialized and subdivided field from being focused onJapanese-ness in Japanese management to studies focusing on the substance ofmanagement systems, enquiring what constitutes a management (individualand general) system as regards purchasing, R&D, production, marketing andinformation systems. It may be said that the study of management systems,that is Japanese management theory, was developed and the widespread use ofnotions like ‘Nihongata Keiei’ (Japan-style management) reflects this shift inresearch subjects and the progress of research (Itami, 1987; Yoshida, 1996;Sakamoto, 1999).Considered in this way, it may be necessary to look more closely at theconcept of ‘Japanese-ness’ as used in ‘Japanese management’. That is to say,conventionally there have been two main interpretations of ‘Japanese’. Thefirst is Japanese in the sense of a specific Japanese style (in system or itsattributes), which is non-existent abroad. The second is Japanese as used in thesense of Japan-style management methods and practices, where similar notionswith similar functions (ie goals) do exist abroad, but in different forms — or,conversely, are similar in form, but with different functions. These studies on‘Japan-style management’ aim at finding a ‘conceptual model’ for a specificperiod — such as the periods of high or low growth — extracted for thepurpose of international comparison. With the increased internationalizationof business activities, there has been a further rise in interest in these studies.Set against this, the present author seeks to highlight a third usage of theconcept of Japanese-ness, not covered by the above two definitions. Someresults of the historical and theoretical study of business management whichbecame globally known from around the 1990s have attracted internationalattention — as they concerned the business management of JapaneseABM. 9200016 CH/SWARNA 1–19Masaki HayashiA Historical Review of Japanese Management Theories6Asian Business & Management 2002 1

companies, this management was termed Japanese management and relatedresearch was known as the Japanese business management theory.4

The Present State of Japanese Management TheoriesIn the present climate of heightened globalization in corporate activities andnetworking of information systems, the meaning of Japanese management has

again been called into question. Current studies on Japanese managementwithin Japan can be broadly classified into the following approaches.Cultural and sociological study of Japanese managementThe logic of Japanese business management may not be explained in terms ofthe principle of profit maximization, but rather by the ‘logic of organization’ ofJapanese society. Leading on from this, there is a tendency to believe thatJapanese management can be sufficiently characterized in terms of componentsthat reflect the logic of Japanese society — the logic of cultural theory orsociology. Such notions as Japanese management changing from ‘corporatefamily-ism’, based on groupism, to ‘corporate welfarism’ following World WarII (Hazama, 1963), or of Japanese management not only having an economicfunction, but also constituting a ‘community of living’ able to meet thedemands of politics, society and culture (Tsuda, 1976, 1977) are examples ofthis. The assertion that it is the psychological characteristics of Japanese peopleand the concomitant social relations that form the ‘basis of the organizationalprinciple of Japanese management’ (Iwata, 1977), moreover, uses the term‘basis’ in the sense of ‘subjective conditions’.In addition, in an approach that regards the cultural characteristics of theJapanese people and their society as the foundation of Japanese management,studies of social aspects, like the imperial and family systems, may also beincluded (Mito, 1991; Iwao, 1992). Their contribution to the exploration of thespecific nature of Japanese management cannot be neglected.Insofar as Japanese management is business management, the crucial factoris whether or not the logic of groupism and the logic of vertical society areconsistent with economic rationality. This is because, Japanese managementbeing corporate management, the principle of profit maximization as a guidingprinciple and criterion of management evaluation can be neither ignored nordiminished. However, in the opinions formed from these cultural theories andsociological/psychological studies, it is not always clear how this relates to thecapitalist principle of profit maximization, even if the ‘logic of organization’ ofJapanese society — such notions as groupism as the basis of Japanesemanagement — is clear. For example, although the cultural background to theABM. 9200016 CH/SWARNA 1–19Masaki HayashiA Historical Review of Japanese Management Theories7Asian Business & Management 2002 1

system of seniority or life-time employment may be explained, such notions aswhether these concepts are consistent with or contradictory to the corporateprinciple of profit maximization, or which should be given priority, remainunclear, as indeed does the matter of what relationship a company’s logic oforganization bears to the principle of profit maximization, even where theabove cultural aspects are consistent or contradictory.In the 1990s, although regarded as an extension of existing studies ofJapanese management, the type of study that discusses severance andcontinuity with post-war reforms as a momentum and source of change inthe social system unique to Japan (Hazama, 1963; Tsuda, 1976, 1977) began todecline, while the study of behavioural principles common to Japanesethroughout the pre- and post-war periods and the study of organizationalprinciples functioning throughout all Japanese groups, organizations andenterprises began to develop.For example, there were studies which showed that the groupism at the heartof Japanese management does not demonstrate the ‘remains of feudalism’indicative of backwardness, but reflects ‘one characteristic of Japan’s nationalculture’ (Odaka, 1984); or that, far from being broken in the post-war reforms,the logic of organization in Japan is a ‘family logic’ in existence both before

and after the war, as demonstrated by the theoretical and historical researchthat took into account comparisons with European countries (Mito, 1991,1994).On the other hand, attention has been given to studies showing the valueideals at the heart of Japanese management to be something that cannot beexplained in terms of Western concepts of individualism or groupism, but as‘contextualism’, aiming at a ‘mutually beneficial/symbiotic’ social system forhuman beings (Hamaguchi, 1982, 1998). Two studies gained particularprominence. Tao (1997) posited the ‘company man’, the individual overlydevoted to their company, since the behavioural traits of Japanese businessmencannot be explained in terms of Simon’s notion of the rational ‘administrativeman’, which itself derived from Bernard’s ‘equilibrium theory of organization’.Hazama (1996), meanwhile, had looked at Japan’s post-war economic progressin terms of the Japanese perception of labour during that period, a labourethos that differed from traditional work ethics and was more recognizable inan international sense. Two types of ethos, he argued, had thus emerged — thelabour ethos of ‘corporate warrior’ among those who had experienced the warand that of the ‘company man’ among the post-war ‘baby boom’ generation.These studies provide a somewhat affirmative evaluation of the outlook onlabour and logic of organization of the Japanese, not only as something thatcannot be evaluated in terms of the criteria of ‘development’ or ‘backwardness’borne of Western standard values, but as something that can and should becomparable with internationally common criteria. Nonetheless, there stillABM. 9200016 CH/SWARNA 1–19Masaki HayashiA Historical Review of Japanese Management Theories8Asian Business & Management 2002 1

remain studies that emphasize the backwardness of the Japanese social systemas it used to be (Iwao, 1992; Watanabe, 1990; Wolferen, 1989).Studies on the internationality of Japanese managementWith the increase in overseas operations of Japanese companies, attentionhas been given to studies that analyse the extent of potential utilization forevery sub-system constituting the Japanese management system. Namely,Japanese management and production systems are divided into workorganization (and its operation and management), production control,participative consciousness, employment environment, parts procurementand parent–subsidiary company relations, wherein the former three arevirtually able to ‘apply’ Japanese methods at the local site, while thelatter three require modification in order to ‘adapt’ to local methods(Abo, 1988; Ichimura, 1988). Added to this are the aforementionedWhite Paper on Economics (1990 version) and the theory of ‘human-ware’(Shimada, 1988).In contrast to the first research approach, which explains the characteristicsof Japanese management directly via the traits of Japanese society or theJapanese themselves, and contains inconsistencies in that identical organizationaland cultural factors in corporate management are used to explain thecounter concepts of specificity and universality, the second research approachhas succeeded in presenting numerous factual documents that must be takeninto consideration. Since the emergence of this approach, it is argued that anydiscussion of specificity or universality theory requires data to be convincing,thus bringing about a development in research quality.Furthermore, since the mid-1980s, there have been more cases using subsystems(even if sometimes divorced from Japanese industrial relations andJapanese culture) of Japanese management, such as JIT(just-i n-time) system,multi-skilled workforce system and quality control circles, as rationalization of

management in foreign companies (‘Mediative Japanization’) (Ackroyd andBurell, 1988). However, studies warning that in Britain, where managementsystems are not easily separated from cultural background, the introduction ofJapanese management methods in order to revive British industry (‘PermeatedJapanization’) will somehow negatively affect British society (Oliver andWilkinson, 1988, 1992) have attracted attention within Japan itself. Evensupposing that the utilization of Japanese management systems in foreigncompanies is sometimes partially based on misunderstandings, it provides agreater scope for the potential utilization of Japanese management systems andthey have provided suitable fresh material for research into Japanesemanagement.ABM. 9200016 CH/SWARNA 1–19Masaki HayashiA Historical Review of Japanese Management Theories9Asian Business & Management 2002 1

Japan-type management theory — theories of limits and reformsThis approach analyses the concrete problems of Japanese managementsystems and identifies their characteristics and directions for reforms.To begin with, one punctilious manager wrote a paper entitled ‘Japan-typemanagement is dangerous’, and argued that although Japanese companies haveuntil now achieved profit at the expense of their stakeholders, in order to coexistwith foreign industrialized nations such as those of Europe and NorthAmerica, systems that can only survive at the sacrifice of others must bereformed at the level of both idea and practice (Morita, 1992). Following thiscame such bodies as the Federation of Economic Organizations (Keidanren)and the Japan Committee for Economic Development (Keizai Doyukai). Forexample, the Japan Federation of Employers’ Associations (Nikkeiren)published a Report (Nikkeiren, 1995) announcing the need for concretereforms in many systems such as employment, personnel, pay and corporatewelfare, while maintaining ‘universal ideas’ of ‘respect for human beings’ and‘long-term oriented management’. In their report they proposed to abolish anumber of ‘guaranteed’ aspects of employment and replace them with varioussystems based on the ‘principle of result and performance’, in accordance withthe ‘idea of respect for human beings’, regarded by Nikkeiren as a ‘universalprinciple’.In support of the Nikkeiren Report, Yoshida (1996) concluded that asJapanese management is made up of a closed system on the outside andsubmissive ‘company men’ within the company, ‘not only is the individualsacrificed to the company, but a company with only ‘‘company men’’ loses itsvitality and before long will fall into decline’, stressing that the solution lies inthe need to make the labour market flexible. However, there is no mention ofthe nature of any new labour system and no reference made to theresponsibility of the employers who created the submissive ‘company men’.It is natural that labour market flexibility should be criticized as magnifyingwage differentials and employment discrimination (regular vs. non-regularemployees, men vs. women, etc.) that existed previously and that an increase intemporary workers will lead to employment instability. If such flexibility is a‘universal’ common to market economies, then it is necessary to ask what‘universality’ actually constitutes. Economic rationality does not necessarilymean social legitimacy.Studies critical of the Nikkeiren Report have attracted attention, arguingthat the introduction of the ‘principle of result and performance’ will meaneven greater competition among workers, with a further sophistication of theindividually oriented merit system which had already changed from around the1970s, with the aim of enhancing competition for the opportunity of education

and promotion (Kimoto, 1998; Makino, 1998).ABM. 9200016 CH/SWARNA 1–19Masaki HayashiA Historical Review of Japanese Management Theories10Asian Business & Management 2002 1

In this way, Japan-type management theory is studied not only as a generalmanagement system, but rather as an individual system of management,namely Japan-type personnel and labour management, Japan-type managementorganization, a Japan-type production system, Japan-type managementinformation system, and so on. This approach can be divided into one whichdiscusses the universality and specificity of Japanese-type management andanother which aims at the formation of a new general theory of managementbased upon these Japan-type management studies. The latter leads to a fourthapproach (Tona, 1993; Suzuki, 1994; Okubayashi and Shomura, 1994; Akashiand Ueda, 1995; Sakamoto, 1998).Towards a general theory of individual management studiesSome academics have attempted to create a new general theory of businessmanagement based on the study of Japanese management.One is the theory of organizational knowledge creation, which is based uponthe rudiments of the creation of organizational knowledge using the conceptsof ‘tacit knowledge’ and ‘explicit knowledge’ (Nonaka and Takeuchi, 1996).Porter evaluated this as a ‘true frontier of management theory’ emerging fromJapan (Nonaka and Takeuchi, 1996). Another set comprises studies whichdemonstrate theoretically that, with the competitive predominance establishedby Japanese companies in the 1980s being forced to shift emphasis fromsomething based merely on production technology to something based on‘product development ability’, new management methods of product developmentwere diffused globally, which nonetheless continued to manifest Japanesecharacteristics (Fujimoto and Clark, 1993; Nobeoka, 1996; Enkawa andAdachi, 1997). A third set is composed of studies seeking to provide theoreticalelucidation of excellent information systems, consisting of information systemsvia information technology and information systems via human beings —systems aiming to confer high added value to production, preservation of theglobal environment and work satisfaction to employees. These explore howsuch a system might continue and flourish under a capitalist market economy(Shimada et al., 1996). In another approach, Kokuryo gave a theoretical modelfor management systems in an age of computer networking, from the premisethat the structural reform of Japanese companies has gone from ‘enclosed-type’to ‘open-type’ management (Kokuryo, 1995, 1998). Also, studies on corporateownership, control and management have developed in the direction ofinternational comparisons of corporate governance (Uetake and Nakata,1999). In particular, historical examination of the conditions in which varioustypes of corporate governance emerged in Japan, US, Britain, Germany andFrance, and studies which provide a theoretical consideration of the varioustypes of reform bills or proposals concerning Japan-type corporate governanceABM. 9200016 CH/SWARNA 1–19Masaki HayashiA Historical Review of Japanese Management Theories11Asian Business & Management 2002 1

have drawn attention, based upon perspectives critical of views regarding theUS model as the international standard (Kikuchi and Hirata, 2000). Thesetheories seek to build a theory of global management suitable in an era ofglobal networking.From Japanese Management Theories to a General Theory of JapaneseBusiness Management

Is there any possibility that these approaches might develop into a generaltheory of Japanese business management based upon the mutual mediation ofhistorical and theoretical research?Although the cultural and sociological approach has brought rewards in theevaluation of the relevance of Japanese people or society in the study ofbusiness organization, insofar as they explain the characteristics of managementsystems directly via human behavioural traits or societal characteristics,they fail to explore the aspect of enterprise as capital and inevitably limit theirstudies of business management.While it cannot be denied that certain characteristics of management systemsreflect traits of Japanese behaviour and society, if it is not explained in thecontext of profitability, as demanded by enterprises as a function of capital, wecannot say that it elucidates the characteristics of enterprise or managementsystems. This is because, although the enterprise or management system is acomponent of and prescribed by the social system, it also has its own principles— revealing the need for identifying the characteristics of enterprise ormanagement systems (Hayashi, 1995). Therefore, a theme of future researchwill be how to integrate this capital aspect of enterprise into the research resultsof this approach.The second approach is the study of the internationality of businessmanagement as represented by the theory of ‘universality’ and the ‘hybrid’theory of ‘application’ and ‘adaptation’. The contribution of this approach liesin the fact that it has developed the study of management into that ofinternational transfer and methods thereof, which previously had been limitedto the sociological study of foreign cultural exchange.These ‘hybrid’ theories have been highly regarded for their clarification ofthe way in which specific management systems are ‘applied’ in societies ofdifferent cultures. How research methods can be developed in future remainsan important factor in this approach. However, the school is lacking in itsanalysis of the intentions (objective) of management, and thus misses anessential aspect of management. In the future, it is expected to develop theapproach in terms of management intention (objective), long- and short-termmanagerial objectives and corporate strategy as a whole. The analysis of whatABM. 9200016 CH/SWARNA 1–19Masaki HayashiA Historical Review of Japanese Management Theories12Asian Business & Management 2002 1

sub-system of Japanese management can be ‘applied’ (function effectively) towhat managerial objectives, why it should be so and how its reality should beunderstood, will not be achieved only through the study of the society andculture that accepts that management; it is more possible when we analysemanagement ‘intention’. Up to now, there has been almost no work on thispoint. Recently, one investigation has included ‘corporate strategy’ in itssurvey items (Okamoto, 2000), but it is still not possible to clarify ‘intention’simply by the measurement of results obtained through ‘application’ and‘adaptation’.In the area of international transplants (or ‘transfers’) of corporatemanagement methods, studies aiming to ‘construct a general theory ofmanagement methods’ should be evaluated in consideration of not only thetransfer of Japanese management abroad but also such transfer into Japanfrom elsewhere as well as transfer of management methods among Westerncountries (Kawakami, 2000; Takahashi et al., 2000).The third approach lies in ‘Japan-type’ management theories which, whileassuming international comparisons (Kagono et al., 1981), seek to draw out aconcrete ‘type’, namely a ‘conceptual model’. We are in an age which upholds

American management theory and methods; new management theories such as‘competitive advantage strategy’, ‘re-engineering’, ‘virtual management’ and‘knowledge management’ are propagated under the dynamics of globalizationand the IT(informa tion technology) revolution. In this context, Japan-typemanagement may be seen as a convergence towards American-type, which isapparently regarded as the global standard. However, the reality is not thatsimple. It appears that way because American-style corporate governance isassumed as an ultimate model. It is necessary to form a ‘symbiotic’ governancewhich consists not only of stockholders, but also employees, local residents,consumers and business dealers (Kazama, 1996). The reasons are as follows:(1) Even within the US, there is a rise in criticism of corporate governanceexclusively by stockholders.(2) The destruction of the global environment has reached such a point thatit poses a direct threat to humanity. In the process of achieving environmentalmanagement, we cannot ignore the existence of other types of managementsuch as those in Germany or Japan, and it is vitally necessary to fostermeasures that take the characteristics of a country or region into consideration(Sasaki, 1997; Suzuki, 1999).(3) The characteristics of a country or particular region will also be takeninto consideration in the form of realizing the humanization of labour in theworkplace.With the development of regional economic zones such as North America,EU and Asia, studies looking to elucidate the associated issues of ‘light andABM. 9200016 CH/SWARNA 1–19Masaki HayashiA Historical Review of Japanese Management Theories13Asian Business & Management 2002 1

darkness’, ‘prosperity and poverty’ and ‘development, evolution and stagnation’further gain in importance. Therefore, along with the study of Americanand German styles the significance of identifying a Japanese type gain inimportance in the context of globalization and the ITrevolut ion. However, thisresearch approach, which until now has simply idealized the American modelas a global standard or, conversely, has been confined to emphasizing oreducing types by country, cannot be taken as an integrated study of historicaland theoretical research.Although the studies in the fourth approach have been restricted toindividual fields of research such as theories of corporate governance, intercorporaterelations, human resource management, R&D and corporateinformation systems, within these boundaries they aim to develop mutualmediation of historical and theoretical research, that is they seek to create ageneral theory of individual management fields.Quite a large number of management theories since the 1990s can beconsidered to have emerged from studies of Japanese management systems. Inthe past, theories of F. W. Taylor’s scientific management, divisionalorganization structure, and management and organization strategy of multinationalcorporations grew and developed out of studies of Americancorporations. At the present time, dating from around 1990, many studiesincluding lean production methods, re-engineering, knowledge managementand supply-chain management have taken their cue from research on Japanesecorporations. However, they are not studies of Japanese management itself.They do not, to say the least, form a ‘mutual mediation of historical andtheoretical research’ (ie a general theory of Japanese business management) ofthe management of Japanese corporations. That is, even if they are finding thatemerge from studies of the business management methods of Japanesecorporations, they do not constitute a general theory of Japanese business

management. Rather, they are notions that emerge from studies of what shouldbe learned from the business management of Japanese corporations in order toenhance the competitiveness of American corporations. The approach remainsstrictly a method of management rationalization for American corporations.This phenomenon is not limited to American corporations — or indeed toindustrialized nations — but is a common type of study that advocates thepositive utilization of managerial elements able to enhance competitiveness inany given country. Such studies may form a new research approach as a theoryof the evolution of business management methods, based on internationalstudies of business management methods.In this way, corporations in various foreign countries study Japanesebusiness management with the aim of enhancing their own competitiveness,and strive for the rationalization of their own management systems. Thisprocess may lead — and in part has already led — to the evolution of businessABM. 9200016 CH/SWARNA 1–19Masaki HayashiA Historical Review of Japanese Management Theories14Asian Business & Management 2002 1

management methods. Yet even in this case most are general theories ofindividual fields, by no means constituting a general theory of businessmanagement as a mutual mediation of historical and theoretical research ofeach country. Nonetheless, we cannot deny the possibility of constructing ageneral theory of business management by unifying such general theories ofindividual fields with a certain principle of integration.May a similar thing not also apply to the future prospects of the generaltheories of individual fields in Japan, such as theories on inter-corporaterelations or organization? Consequently, the significance of the study ofJapanese management lies not in finding specificity or the discovery of a Japantypemanagement phenomenon, but rather in the establishment of a generaltheory of management, by assimilating the results of management studies ofeach country. This might elucidate the ‘effectiveness’ as well as ‘limit’ of ageneral theory of each country, thus making a contribution to the study ofmanagement in general. Even if this aims to be a general theory of businessmanagement, insofar as it is conducted through studies on the businessmanagement of Japanese corporations, it may be called a ‘general theory ofJapanese business management’.ConclusionAs we move into the century, we are able to see how the approaches outlinedabove will develop both individually and as a whole. More specifically, we canexpect that general theories of individual fields — such as theories of humanresource management, production and information systems, plus theories ofcorporate governance, organization and environmental management — willbecome integrated, through the historical and theoretical study of Japanesecorporations operating in international markets. Surveying the 21st centurytoday means surveying the construction of a general theory of Japanesebusiness management, while reviewing theories of Japanese management.Nevertheless, in view of all that has been said, even if a general theory ofbusiness management may be formed through the mutual mediation ofhistorical and theoretical research, in reality — assuming a continuationof subdivision and specialization in historical (positivist) research — thefurther historical research advances, the more difficult will be the formation ofa general theory. Consequently, the problem lies in how general theories ofindividual fields may be integrated into a general theory of businessmanagement. Is there some principle by which the two may be integrated?We regard corporate ‘profitability’ to be such a principle, and it should be

inherent in any general theory. It is, however, regulated by the interests of thevarious stakeholders of the company and thus has developed as a principle ofABM. 9200016 CH/SWARNA 1–19Masaki HayashiA Historical Review of Japanese Management Theories15Asian Business & Management 2002 1

‘coordinated profitability’. Although corporate profitability is a criterion forthe evaluation of corporate activities, the criterion itself may change throughthe process of the development of the enterprise and society. It is one thatfollows the development of the company and society itself (Mouri, 1973; Iwao,1974). With continued subdivision and specialization of historical (positivist)research, it is this principle of coordinated profitability that will serve as acatalyst to integrate various general individual theories of management andcreate a general theory of management.The development of management studies in the 21st century cannot beachieved without the development of historical and theoretical research invarious individual fields of management. Also, the study of individualmanagement fields can only develop more systematically when it is linked toa general theory of management. It is no easy matter to integrate research onindividual fields of business management into a general theory of businessmanagement — it remains, however, an essential theme for us to pursue.Notes1 The significance of studies (ie historical research) focusing upon these individual fields ofmanagement should not of course be underestimated.2 This may be considered as a general theory of business labour and its management, and industrialrelations.3 For the purpose of this paper, it is the American school of general theory of management.4 For example, it is corporate management which loses Japanese specificity any longer as a result of

the progress in its internationalization. lost opportunities for reclamation or recycling.

THE ART OF JAPANESE MANAGEMENT: APPLICATIONS FOR SAUDI ORGANIZATIONS 

  

Japan is one of the leading countries in the industrialized world. Japan seems to have achieved this status due to the application of innovative managerial practices at all levels of management while maintaining its cultural inheritance relatively intact.  

 

The purpose of this article is to advance our understanding of ourselves by comparing us to Japan. As a Saudi’s we do not encourage direct copying of their techniques or even their management and cultural philosophy. 

 

We want to look at the Japanese as if they were a special kind of mirror one which might allow us to see ourselves in some new ways that may suggest directions for careful change. 

 

Japanese Management: Strategic Prospective 

In recent years, several factors have contributed to enormous strides the Japanese have made economically. Careful examination of evidence reveals that the following eight factors have contributed especially to this success.  

 

Cooperation between government and business:

Japan’s government steers firms in the proper strategic direction, toward areas in which potential profit appear highest. Tax incentive, subsides, import quotas and other trade barriers, and research and development funding are used to this end. 

 

By comparing this factor to Saudi Government we can find that Saudi Government steers the business in Saudi Arabia exactly the same as the Japanese Government did, for this reason there is strong cooperation between Saudi government and business.   

 

Cooperation between labor and business:

The confrontation that characterizes the interaction of labor and business in most of Arab counties is largely absent in Japan. 

 

Management style:

Employee participation in decision making, recognition of employees’ performance and human needs, and employee job security have clearly contributed to Japanese successes. 

Saudi Managers typically give little consideration to these factors, but they are being given increasing emphasis by Saudi firms eager to become more competitive. 

 

Management development and education:

Japanese managers continually receive training on how to manage, especially with respect to interpersonal relationships. Most of Saudi companies in contrast, invest relatively little in such endeavors. 

 

Strategic Management:

Japanese managers take the strategic view. Their marketing actions, production actions, personnel actions reflect a concern for long-run viability of the firm. They usually stress market share more profit, for example believing that, in long run, market share will lead to profits. This attitude contrasts with Saudi management objectives, which often emphasize short-run result such as annual profit. Because Japanese managers know their firm will be competitive in ten (10) years and that they will still be employed by these firms they are willing to sacrifice now for future success. Japanese strategies focus on knowledge-based strategies, alliances-based strategies, productivity-based strategies, and combination of strategies aimed at achieving market share. 

 

Quality control:

Statistical analysis is employed at every stage of production or service process to measure the quality of inputs, to make certain that the process is operating as it should, and to measure the quality of outputs. 

 

Kaizan:

The Japanese pursue Kaizen, or continuous improvement, in every aspect of their organizations. This adds tremendously to the ability to provide newer, better quality products and services at lower cost. 

  

Political savvy:

The Japanese have astutely manipulated the political environment, making some laws favor their interests, making sure that regulations don’t hurt them, buying politicians and federal employees and so on. This policy is identical to Saudi Government policy. 

    

What Makes Japanese Firms Successful? 

The Japanese success result from a complex interaction of macro and micro variables involving government, capital, labor, and technology. 

 

In addition, factors such as a highly educated work force, favorable government policy, and a highly saving rate are important. 

 

Most of Japanese business executives believe that cultural factors are the predominant cause of Japanese business success. 

 

In the highly competitive Japanese economy, the individual corporation attempts to establish a “winner‘s competitive cycle” which begins with growth. The Japanese companies believe they must grow faster than their competitors; they must increase their market share to keep volume of business growing faster than that of competitors. This in turn depend on a higher rate of investment, which take many forms, including: 

 

Price cutting

Capacity expansion

Advertising

Product development  

   

The individual Japanese firm carries out this strategy within the framework suggested above. Failure to do this leads ultimately to failure in the Japanese system, as would in most capitalist economies. 

 

U.S. analysts also attribute Japan’s success to protecting its markets from other foreign firms. It is clear from an analysis of Japanese business/government relations that a few (10 to 20) very powerful men run Japan, and that political favor control many business opportunities. The Japanese are also lax on societal control of and play by different rules, and a powerful organized crime element there often significantly influences government and business decisions . 

 

The Japanese are building a new economic power base across Asia and Pacific. Furthermore, the limited reduction in the trade deficit of the USA makes it likely that Japan’s financial strength relative to other nations will continue to grow. 

 

Finally, the Japanese are already beginning to move to move to dominate key technologies for the 21st century, including super conductivity, biotechnology, and microelectronics,  and they are taking great pains to improve their research capability. 

 

So all of the above support the western analogy, the Japanese economy has proven to be a phoenix, rising from the ashes of the World War II to unparalleled heights