Chapter 9. Corporate Culture: the strength of Japan Inc?

Chapter 9. Corporate Culture: the strength of Japan Inc.?

Until recently, the common perception among the international business community was that the Japanese corporate system was one of the major strengths of Japan’s political economy, that the system fostered loyalty among staff, and that the constant effort to integrate staff into the corporate culture secured a stable working environment. The lifetime employment system initiated after the war by large corporations to ensure a stable workforce promoted the image of caring and nurturing employers whose fate was tied to that of their employees. In-house arbitration resolved issues between management and staff. The popular notion of Japanese corporate life is group unity and commitment to hard work to achieve corporate objectives.  Until recently, employees participated in daily exercise routines before starting work and management gave daily pep-talks to inspire commitment to the company. Year-end bonuses are distributed to deserving employees and division directors take staff out drinking regularly at the company’s expense after working hours to encourage good communication and group harmony.

Konosuke Matsushita’s style of corporate management became popular among foreign businesses in the 1980s, particularly in the US even though the methods did not altogether suit Americans employees.

As an engineer, an inventor and founder of Matsushita Industrial Electric Company Ltd. (now Panasonic) Matsushita was intimately involved in all aspects of his company. His treatises on management, productivity, employee development, employee welfare, and guiding enterprises through crises were the bibles for Japanese businesses. Many of the books were published by the Peace and Happiness Through Prosperity (PHP) Institute, which Matsushita founded on November 3, 1946, in order to resuscitate the Japanese psyche crushed by the war. The institute provided a positive environment in which professionals from the public and private sectors could conduct research, collect data on economic trends, engage in business consultation, and create educational programs. As president, Matsushita poured his efforts into the institute and he thrived on a non-stop lecture circuit to preach his methods until his death at the age of ninety-four.

Matsushita established his Institute of Government and Management in 1979. The institute incorporates Matsushita’s personal philosophies and values that were promoted by the PHP.  The Institute’s “Basic Principle” encourages “deep love of our country and our people and the contribution to the peace, happiness and prosperity of all people.” The curriculum includes Zen meditation and the Martial Arts. Former DPJ Prime Minister Yoshihiko Noda (2011-2013) and a number of his cabinet ministers were graduates of the institute.

Prior to entering Sanraku I had considered that I was acclimated to the strictures of the Japanese social system but it was not until I worked in the company that I realized that my acclimatization had been superficial at best. The Japanese social system is a rigid hierarchy, built from group upon group but there is no single group that is directly on top of another. In other words, the structure of the system resembles a pyramid of horizontal groups. First and foremost, the Japanese identify themselves not as individuals or through their occupations but as members of groups, for example, corporations, government and educational institutions, divisions within organizations, societies, and even home towns. When I asked Japanese about their professions they often referred to their employers first. Even university degrees are not as important as the ranking of institutions where the individuals received their degrees. Today only 30 percent of Japanese put themselves before the group.

The Japanese corporate system is a hierarchical structure and the seniority system still prevails in many institutions, especially in the ministries. Although the popular concept among non-Japanese is that corporate structure is a “bottom-up” operation, it is definitely a “top-down” affair. Upper management is usually composed of the oldest members of staff who have devoted their entire careers to the same organization and who delegate daily operations to division managers. The divisions are structured as hierarchies as well. The division managers who assume much of the responsibility of operations within their division will delegate the work to middle management (kacho) who then instruct lower staff who do the leg-work.

Sanraku’s Corporate Culture: true to form

Mercian’s internal structure was hierarchical and human resource management was based on the seniority system with promotion generally unrelated to an employee’s achievement. Sanraku guaranteed lifetime employment and staff received generous welfare benefits. With the exception of the wine division female kacho who had worked in Sanraku for some years there were no other women in management positions. Two women were recruited by the wine division as “wine adviser”’ to receive on-the-job training but it was doubtful that they would be promoted. With the exception of a few external officers, most members of the board were appointed internally.

Besides hiring the consultants from McKinsey and Co., Suzuki made some token gestures such as replacing the morning exercise routine with soft, languid music piped through loudspeakers after lunch. But instead of energizing staff, the music signalled a post-lunch siesta. Also, employees were no longer required to wear uniforms. However, these changes were minimal at best. Even though Mr. Suzuki was trying to modernize HR management methods, he still adhered to corporate tradition. Year- end corporate parties were essential.  Mr. Suzuki organized ice-skating parties at a Prince Hotel, which most of Sanraku’s staff felt obliged to attend.

Although the New Year holiday began on 31 December and ended on 5 January, Sanraku employees were required to arrive at the office on 3 January at 8:30am to hear Suzuki’s formal New Year’s greeting, a tradition in many Japanese corporations. After a few hours of toasting to the New Year with Sanraku sake or whiskey everyone retreated to their homes. Most employees, especially those who had over a one-hour train commute, would have preferred to have spent the day with their families.

The director of the spirits division (Peachtree Fizz) took his division for a week-away at the Sanraku country retreat to build team spirit and loyalty through group training, which included team games and hiking. The staff returned unshaven, exhausted and hoarse from shouting their pledges of loyalty to each other and to the company. Their exhaustion was partially due to late nights of drinking and toasting to each other, which was probably the best part of the retreat. When PeachTree Fizz proved a success the two young staff who invented the drink were presented at a brief ceremony with jackets bearing the PeachTree logo in recognition of their achievement. Although there was the possibility that they received bigger winter bonuses, their endeavor was considered a team effort.

The forays to bars after-hours arranged by the division directors were ostensibly planned to promote team spirit. As a member of the wine division I was obliged to participate in these after-hours excursions and I must admit that, even though I did not socialize with my colleagues on the workplace, my communication with them improved immeasurably during the after-hours bar hopping arranged by our director. Nevertheless, it was evident that the event was a showcase for him to perform before a captive audience at karaoke parlours. He hailed from downtown Tokyo where his father owned a business producing silk rope ties for kimono.

The division would congregate at an Italian restaurant for a good meal toasting with lager, usually Sapporo Black Label, followed by wine. The first destination was a karaoke bar where we dutifully took turns singing. I favoured Japanese pop songs, which delighted my colleagues, who opted for American and British pop songs, especially “All the Lonely People” by the Beatles. The second destination was another karaoke bar for another song fest and more whiskey accompanied by bowls of a potpourri of dried cuddle fish, rice crackers, peanuts and chocolate. The women staff ordered Japanese tea with dried barley because its pale brown hue was similar to whiskey, which they disliked intensely. I managed to excuse myself from going to the third karaoke bar because my last train home departed at midnight.

The Rotation of Staff  

Even though there were four divisions in the same room and about seventy employees, the divisions were entirely separate entities with the directors forging strong relationships with their staff. The rotation of staff was one of the more intriguing aspects I witnessed in all of the institutions where I worked and was one of the most frustrating to observe because individual talent and expertise were wasted due to the corporate structure. When a director received notice that he would be transferred to another division, he prepared himself psychologically by gradually disengaging from his division several months prior to the actual transfer. After moving to the new division, he would no longer communicate regularly with the staff in his former division, even though the division was located in the same room.

The director of the luxury goods division, whose family had owned the Mercian winery before it was purchased by Sanraku, became the deputy director of the wine division a year after I had entered. Realistically, he should have been the director because of his extensive knowledge of the Mercian Winery operations but the hierarchical corporate structure, the deputy director’s age and his relationship with Suzuki dictated his position.

Utilization of Returning staff

I interviewed in 1994 the vice-president of the North American branch of a major trading company. He had previously been seconded to the Chicago branch for three years. When asked why the Japanese struggled to internationalize he addressed the issues experienced by Japanese corporate personnel who were seconded abroad to corporate branches:

The rotating staff, even if they spend five years here, upon landing at Narita Airport, once they go through the doors of Narita, they forget everything they experienced during the last five years. They must be real Japanese. That’s the only way to live in Japan. The only way to live in Japan is to forget everything one has experienced. It is not only true in ordinary Japanese society, but it is also true in Japanese companies, even in my company. No matter how many thousands of workers are sent to no matter how many countries, the Japanese will not develop an international point of view and will not become international. If one considers that the Japanese people live entirely on trade, Japan cannot afford to be isolated.

After Sanraku purchased Markham Vineyards in 1988, a male employee in the wine division, who had entered the company several years earlier, was chosen for secondment to the winery for two years with his wife and child. During that period he studied the winery’s daily operations, and assisted in the refurbishment of the plant, the replanting of the vineyard and the finances. Importantly, he engaged with various ethnic groups living in the Napa Valley while improving his English. It was an invaluable experience not to be wasted when he returned to corporate headquarters.

Upon his return he visited the wine division and other divisions where he received a warm welcome. He returned a week later after he had settled his family. Although he commuted daily to the office, he remained idle at his desk without assignment. The same routine continued for three weeks before he was transferred to another division where his responsibilities were only superficially related to his training in the Napa Valley. It was an unfortunate waste of knowledge-transfer and a waste of human resources.

Generally, the effective utilization of experience is not considered. I was appalled at the waste of the expertise of a recently retired gentleman who was made an “advisor.” He visited the division frequently to speak with the staff. He was very knowledgeable about wine, about how trading companies survived after the war dealing on the black market, and about the distribution system. However, the number of visits gradually decreased due to the reorganization of the company. For whatever reasons, perhaps his age, he was no longer considered as useful as an advisor and staff gradually isolated themselves from him. Although he appeared to accept it, he must have felt a degree of humiliation.

Getting to Know You

Most of the smokers preferred smoking in the tea room rather than at their desks. Even though female staff preferred to smoke separately, I deliberately pretended to smoke in the tea room in order to speak with the old timers. Initially they were shy but after a while they warmed up. When I asked them if they enjoyed their working environment they invariably answered, “Human relationships can be stressful,” reflecting the ongoing struggle to control behavior in order to preserve group unity and harmony.

Although the rigidity of the system could be stifling, discouraging personal development, some employees were satisfied. However, others expressed the desire to have the option of migrating to another company but they were reticent to make the move because they would be forced to start again as new staff members at the bottom of the ladder in the new corporation and accept a much lower salary, regardless of their maturity and the skills that they had accumulated while working for their former employer. They also inferred that the companies to which they were applying might be suspicious and question their motives for leaving a company mid-career and their willingness to take the risk. There might also be issues of loyalty to a new employer and technology-transfer. Another concern was that the employee’s company might be informed about their application to other companies because of the connections between the corporations through interlocking directors and equity.

A year passed before the young secretary in the luxury goods division invited me to dinner with her family who lived in Tokyo. She had been reluctant to invite me because she thought that I was more affluent and better educated and, therefore, of a different class from her family. She and her brother were single and still lived with their parents in a three-room flat in an old apartment complex. Rents in Tokyo at the time were exorbitant because of the real estate bubble but the woman’s father wanted to remain in the city to be closer to his work.

Her mother prepared a delicious meal which she served in the same room where the family also slept. I was also eating my meals on the floor in my flat which was about as narrow as a cat’s forehead (neko no hitai kurai semai). If the girl had known my situation she would have invited me to her home sooner. The secretary’s parents had never engaged with a Westerner before but we had a lovely evening chatting about all things Japanese, including Japanese sweets. Since I received no invitations from other staff, I assumed that their perception of my background was unfortunately similar to the secretary’s.

An Invitation from the Boss

Mr. Suzuki invited me and the wine division for dinner at his home located in Denenchofu, an affluent district in Tokyo in the autumn of 1989 to thank us for our work. It was a gesture I deeply appreciated. Mr. Suzuki answered the door and, showing us into his living room to low tables where the food was to be served, he told us that his wife was in the kitchen preparing the meal. But the director whispered to me that most likely the Suzuki’s cook was in charge. Mr. Suzuki was a gracious host. While we were sipping the cocktails he prepared and served, Mrs. Suzuki entered the room to welcome us. She was very attractive and relatively younger than her husband.  An avid golfer, she played golf almost daily, which was a very expensive hobby in Japan. Mr. Suzuki served the meal on ceramic ware which Mrs. Suzuki had made. Since the director and Mr. Suzuki had been colleagues at Ajinomoto, the conversation was relaxed. Mrs. Suzuki spoke glowingly about her trips to San Francisco.