An amazing Japanese management masterclass from a mother with a stroller…

All you have to do is go outside and talk to the average western mother with an economic education on a walk , and until you reach your final destination with a stroller, she will give you a workshop on Japanese management. Here is what I heard on the workshop of mine:

Meaning of Japanese-style management

Japanese-style management is a unique management system found in Japanese companies that uses unique management methods such as lifetime employment, seniority-based wages, so-called “three kinds of sacred treasures” of corporate unions, main bank systems, and cross-shareholdings.

It is said that it was the publication of “Japan as Number One” (1979) by American sociologist Ezra Vogel that triggered the attention of Japanese-style management from all over the world.

Contents and influence of “Japan as number one”

  • In this book, despite the defeat of World War II, Japan became the leading player in the world economy with its unique system and culture, by carefully analyzing the factors that led to the rapid economic growth of Japan after the war and becoming an economic powerhouse.
  • The publication of “Japan as Number One” was one of the triggers for the Japanese to re-evaluate Japan’s unique economy and social system, and even today, it is the golden age of the Japanese economy from high economic growth to the collapse of the bubble economy. Used as a symbolic word

However, after the collapse of the bubble economy, the economic downturn from the early 1990s to the early 2010s, which is called the “lost 20 years,” has reduced the position in the world economy, so the term “Japan as number one” was used. It’s also rare to hear.

Especially in recent years, due to the rapid progress of globalization and changes in culture and values, the Japanese-style management system has been struck by a wave of major changes, and its ideal form and pros and cons have been frequently discussed.

Characteristics of Japanese-style management

Japanese-style management is mainly composed of so-called “three sacred treasures” of “lifetime employment,” “seniority-based wages,” and “intra-company unions .” In particular, it can be said that the employment form peculiar to Japan is a system that is a pillar of Japanese-style management.

In addition, Japanese-style management has unique characteristics that cannot be seen in other countries, not only in terms of employment form, but also in terms of corporate governance methods such as main banks and cross-shareholdings.

Let’s take a closer look at each feature.

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Japanese employment system

Among the “three sacred treasures,” the most distinctive feature of Japanese-style management is the employment system unique to Japan, such as lifetime employment and seniority-based wages .

What is lifetime employment?

Implicit employment form assuming long-term continuous employment until retirement.

As shown in Article 22 “Freedom of Choice of Occupation” of the Constitution of Japan, occupational choice is essentially individual freedom, and a contract or pledge explicitly promises workers long-term continuous employment.

However, in lifetime employment, by giving an incentive to work for the same company for a long period of time, a labor contract is implicitly concluded between workers on the premise of long-term continuous employment.

And it is seniority-based wages that support the lifetime employment. What is seniority wage?

It is a wage system in which wages rise almost linearly with age, and is composed of a special wage system called a “wage system” centered on basic salaries and various allowances.

In Western countries, wages are the price of labor, and the measure of labor is generally based on time or volume.

However, in Japan’s “wage system”, apart from the part paid for labor, there are relatively many parts paid for the ability of the person and the part paid for living security factors, and wages are paid. It has an aspect that is not necessarily the price of labor.

Lifetime employment and seniority are positioned as separate systems in Japanese-style management, but each system is closely related to build a Japanese-style employment system.

Partnerships by company

What is an in-house union?

One of the characteristics often seen in Japanese companies that create labor unions for each company to handle labor-management negotiations.

In Western countries, it is customary to create a labor union for each industry or industry, or for each job such as production or accounting, and it is rare for a company to form a union. However, in Japan, labor-management negotiations are conducted for each company by forming a labor union for each company.

It is believed that this is due to the fact that the “wage system” explained above is in place for each company. If wages are set as compensation for labor, they create a common market value such as job ability, which can be calculated across companies and negotiated between labor and management.

However, in a “wage system” that strongly reflects the individual circumstances of each company, it is difficult to calculate the value for labor across companies, so this peculiarity created a unique system called an in-house union. It has been with.

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Main bank system and cross-shareholding system

In terms of corporate governance, Japan also has characteristics that are not found in other countries. It is a “main bank system” by banks and a “cross-shareholding” between companies.

What is a main bank system?

The company’s capital raising focused on indirect financing by borrowing from a specific (generally one bank) bank rather than direct financing by issuing shares.

By establishing a close relationship with one particular bank and receiving long-term loans, the company has created a unique form of corporate governance with the bank that goes beyond the relationship between the lender and the borrower of funds.

Due to the main bank system, the statements of banks in corporate governance have become so influential that they sometimes go beyond the statements of shareholders and employees and give direct control over management. As a result, banks have become a leader in the post-war business world.

In addition, cross-shareholding between companies is

Two or more companies own each other’s shares

Cross-shareholdings were held with the aim of forming stable shareholders, grouping companies, strengthening business-to-business transactions, and avoiding hostile takeovers. In the long run, it was often used by companies seeking a stable capital position.

Cross-shareholding was a commonly used method during the economic growth period because it emphasized stable relationships without excessive management intervention between companies and claims for shareholder interests . However, during the economic downturn, there were some movements to resolve the situation, as it would lead to the deterioration of the financial situation due to the stock market crash.

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Successful points of Japanese-style management

Unique Japanese-style management has been a factor that brings great profits to companies, especially from the period of high economic growth to the bursting of the bubble economy. Ezra Vogel’s “Japan as Number One” (1979) argues that the factors behind the success of Japanese-style management are as follows.

Can you make management decisions from a long-term perspective?

In Japanese-style management, the ratio of indirect finance by borrowing from banks is very high, and stocks can build a stable capital structure by holding stocks between companies.

Therefore, managers are less likely to be required to achieve short-term results than Western countries, and can make management decisions from a long-term perspective.

Pursuit of knowledge as a group

Ezra Vogel cites the pursuit of knowledge as a group as the biggest factor in Japanese-style management. For example, as shown in the following, greed on the knowledge the pursuit of Japanese that are tied to corporate competitiveness has been pointed out.

A common idea among leaders is how important it is to constantly collect information and knowledge that may one day be useful to the organization’s future.

It can be considered that this feature was developed because the employment contract between the company and the worker is premised on long-term continuation, and the wage system does not emphasize the compensation for labor that requires short-term and direct knowledge.

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Employee work and self-esteem

In addition, Ezra Vogel gives the greatest praise to the Japanese for their diligence and loyalty to the organization .

Also holds true of “knowledge pursued as a group”, it says just because there is a loyalty to the Japanese-specific diligence and organization .

In Japanese companies, employees are well aware that their status and career advancement are not guaranteed by special technology, so they are willing to do various chores and are new for the future of the company. Seriously tackle the introduction of technology.

In other words, the long-term learning is emphasized because long-term status is guaranteed by the lifetime employment system and seniority system, and at the same time, loyalty to the company is always high.

Issues of Japanese-style management

Ezra Vogel praises Japanese-style management as “an effective modern organization that can successfully meet the demands of the latter half of the 20th century” .

However, after the long-term stagnation of the Japanese economy after the collapse of the bubble economy, it has been pointed out in various places that Japanese-style management is by no means a universal management system . Specifically, the following points have been pointed out as problems with Japanese-style management.

Slow response to changes in the environment

Due to economic globalization and the rapid development of the information society, the speed of industrial change is much faster than in the latter half of the 20th century. Therefore, in an era that changes from moment to moment, whether or not the necessary technology and knowledge can be acquired quickly is a problem that is directly linked to the competitiveness of a company.

However, in Japanese-style management

  • The acquisition of the knowledge necessary to increase competitiveness depends on education within the company, and the acquisition of that knowledge is also from a long-term perspective.
  • Therefore, it is not possible to respond to rapid changes in the environment.

Many problems such as have come to be seen.

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Labor market fixation

Long-term continuous employment also causes the labor market to become rigid. Economist Kazuo Yoshida states, “It is wasteful to have a labor force attached to a specific company . “

When there is a major structural change in the economy

  • If an excessive labor force is fixed in an industry that should decline, the new industry will not be able to acquire a labor force and its development will be hindered.
  • In addition, it is a great risk for workers to change jobs to other companies if they acquire the unique job abilities of the company to which it is difficult to calculate the market value.

Birth of Japanese-style management

There are various theories as to how Japanese-style management was born, but the main hypotheses are as follows.

  1. The theory that the origin is the commercial culture of the Edo period
  2. The theory that the process of modernization in the Meiji and Taisho eras is the origin
  3. The theory that the process of the Pacific War is considered to be the origin
  4. The theory that the origin is postwar reform
  5. The theory that the origin is the period of high economic miracle

The hypotheses (1), (2), and (3) are hypotheses that focus on Japanese elements (nationality and historicality) and try to explain Japanese-style management. On the other hand, ④ and ⑤ are hypotheses that attempted to explain Japanese-style management, focusing on changes in the economic system triggered by economic reforms by the United States after the war.

Both are convincing hypotheses, but in any case, it is unlikely that one element is the origin of Japanese-style management, and management that incorporates various factors other than the market economy is Japanese-style. It is reasonable to think of it as a management system .

***

In recent years, there have been studies pointing out the problems and issues of Japanese-style management, but few studies praise Japanese-style management.

The change in tone was triggered by the long economic downturn from the early 1990s to the early 2010s, called the “lost 20 years” after the collapse of the bubble economy .

In addition, due to the obsolescence of the Japanese-style management system due to economic globalization and changes in the values ​​of workers, it can be said that there is almost no movement to promote conventional Japanese-style management.

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Yes they make sense, the mothers with strollers, Japanese management is more reproductive than ever..

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