What is your impression of Japan?
With robots that will soon be in every household, a fashion scene that is religiously followed, and a model of customer service that has become the template for the world, many see Japan as a country ahead of its time. Yet, with a culture of systemic unpaid overtime and a gender gap rating behind places such as Sri Lanka and Indonesia, some would argue for the exact opposite.
As a kid brought up on heavy doses of Dragon Ball Z and Nintendo 64, I have always been drawn to the culture of Japan. But as I come to learn about the unlikely issues that plague the country, I knew that it was a place I had to visit. In this three-part blog, I will talk about a few themes that was most interesting to me during my exchange term at Tokyo’s Hitotsubashi University.
Part 1. The Business Culture (Seniority System)
One of the biggest problems facing Prime Minister Shinzō Abe today is a stagnant economy that no number of arrows is going to fix. With powerhouse brands like Sharp and Sony dwindling into a shell of their former selves, is there anything Abe can do to reverse the downward spiral? He is desperate to find a solution, but he is quickly running out of time.
The lackluster impact of Abe’s policies is a validation that the core of Japan’s economic woes is not an economic one. Instead, the issue they face is much closer to home – an outdated business culture that predates the Second World War. To understand why businesses are so reluctant to change, we have to look at how the country behaved since the war. How does a resource-starved and nuclear-bombed nation rebound to become the third largest economy in the whole world?
Much can be attributed to its culture of lifetime employment and the keiretsu system (a series of independent companies operating as a conglomerate). Ranks within a company were determined strictly by a seniority system, and every employee knows their role in the hierarchy.
And that is still true today. One detail that fascinated me during my exchange was that when my friends were job-hunting, they were applying for companies and not specific positions. This kind of dedication to a single employer ensured the stability and consistency that propelled Japanese businesses ahead of its competitors, leading to a boom between the 1940s and the 1990s.
At the time, many observers dubbed Japan as the leader in industrial policy and product design. In hindsight, it was both a blessing and a curse. Reliance on this form of governance is well-suited for the manufacturing economy Japan once was, but it does not provide the flexibility required for today’s business landscape. Managers need to take a new look at their corporate structure and be open to adopting new practices from supply chain management to human resources.
This is no easy task. I don’t foresee managers today turning 180 degrees on business practices that they’ve followed for the last 40 years, but there is still hope for the next generation. If Abe’s government is serious about change (and can stomach a divisive nation), they need to loosen the country’s immigration control and create an environment attractive for foreign professionals.
No amount of quantitative easing will change how people think. Defibrillating Japan’s economy will take a combination of western influence and a more modern education. Businesses will need to develop a merit-based system that encourages employees to work productive hours rather than long ones. The seniority system also needs to be scraped altogether. A system of yes-men will not contribute to any meaningful change.
This is a temporary stimulus. In the long run, Japan’s businesses will need to rely on their university students as the new generation of leaders. There is definitely a need for an overhaul of the system. The limited number of professors I met were all very old-school and content with reciting slides after slides of text. I am sure of their good intentions, but old dogs simply cannot learn new tricks.
Without a doubt, this will lead to a huge backlash from the traditional thinkers of Japan. But with South-East Asia’s economy projected to overtake Japan’s by 2025, it is painfully apparent that the current system is obsolete. If drastic measures are not taken soon, Japan, in due time, will follow the footsteps of its dying brands and fade into the distant memory as a once dominant player.