corporate culture

Reform in Corporate Japan: A Demand of Time


Japanese corporate culture - Google Images

Japanese corporate culture – Google Images

Zubair Ahmed*

According to research done by Gartner – a world renowned research firm, Asian countries in general have low  employee output productivity. In other words some people take more time finishing a job and automatically have to do overtime to finish it. Or perhaps some employees exploit the system of overtime payment in order to have a substantial addition to their monthly payroll.

Perhaps most of my readers would raise an eye brow when I say,  the Japanese productivity rate is lowest (for the non-manufacturing industry) among the advanced economies in the world.

Especially in the United Kingdom, France or Germany employees are not expected to have overtime. This stretches them to be better at time management, and therefore increases productivity.

Blue or white color employees in Japan are rightly nick named, “industrious” and they are widely appreciated around the world for this. There are even fairy tale stories about these industrious people around the globe.

But the corporate and management policies inside Japan are to be blamed for Japan’s low performance in terms of employee productivity. Their overtime pay policy encourages many employees to spend more time at their work, and not purely for productivity reasons. In many cases, team spirit and morale plays it’s part to keep employees in the office for a longer time. Japanese corporations need to reform these guidelines to be in line with the global standard – a critical step forwards to being truly global.

Japanese top management often exploits the term “morale” and “loyalty” during salary negotiation or when motivating employees. The foundation of Japan is based on these two attributes. Top management stresses, moral ethics should come before salary expectation or salary increase. Anyone rejecting this concept is considered to be a “social outcast”, and could be viewed as too aggressive. Such behaviour conveys a “non-Japanese ethic” and a disloyalty that is against the very foundation of Japanese values.

In the past 8 years, I have met many amazing Japanese people who are far more talented than what their payroll suggests, but unfortunately they are victims of the policies of corporate Japan.

A friend of mine, Miyauchi Ryo (a pseudo name to maintain his anonymity) is such a victim. Ryo worked for a top Japanese consumer bank for 3 years after graduating from one of the elite public university’s in Sendai. When he tried to negotiate his payroll with his boss, he was told Cinderella stories about “morale” and “loyalty”. His boss advised him not to consult other employees on this matter, as it would damage his co-workers motivation.

Ryo was not someone to be persuaded this way; he soon switched jobs and has since chosen Investment Banking as his career choice. Four years down the line and he is making bonuses that are an envy to the top executives at his earlier bank. Investment Banks valued him accordingly and pay him what he truly deserves.

Japan still lacks far behind it’s Western counterpart,  where you recognise your most talented pool of people with a salary corresponding to their performance.  Ryo was a victim of the system itself , that is so tightly embedded in Japanese society.

Take the example of some of the top earning executives in Japan. Electronics giant, “Sharp” CEO’s yearly compensation is USD 1.3 Million while “Sony” ex CEO Howard makes around USD 9 Million (includes salary and stock option). Mr. Howard’s payroll could increase by further 10 to 20 Million USD, should Sony exceed financial expectations by the end of a given fiscal year. But in the case of “Sharp”, their CEO would not see any further increase in his remuneration package regardless of his company’s performance.

“Sharp” CEO with good reasons, finds himself in an embarrassing situation when he meets the “Sony” boss in a business meeting (Reference: Nikkei Weekly, BBC News, WSJ). This is the direct result of the differences in financial compensation packages between these two companys.

Remuneration packages are meant to reflect one’s productivity, financial output, and performance. This is the general global expectation. When this package varies so much between two business leaders, this sends a wrong signal to the investors about the ability of a particular executive. This is where, Japanese corporations fall behind. Analysts from Nomura Securities predict, this culture could soon diminish Japanese companies ability to attract new talents in future decades.

A Top executive from SMBC tried to justify the issue of “morale” over a global payroll package, “Investment Bank’s pay scale is just crazy and not reflective to their (employees) performance”. Therefore suggesting morale and loyalty has greater value.

The fact behind these differences lies somewhere else. In all global investment banks, the bankers are encouraged to take calculated risks, do challenging work and exercise their own judgment while in Japanese investment banks, bureaucracy from top to bottom slows down the process and kills the creativity of a banker. This creates a big gap between these two types of bankers in the long run.

It is an unjustified allegation that, global investment bankers are simply paid more then they deserve. Given the, productivity and financial return these bankers brings to their respective firms are almost 15 times more than their counterparts in other Asian financial giants (Reference: Price Water Coopers).

Unless corporate Japan changes it’s policies, today or tomorrow there will be an outrage from within, as more and more Japanese people begin to internationalize. It is a time bomb that’s ticking .

This poses a threat of rejection from the hardworking Japanese employees, for which most Japanese companies are not yet prepared for. Binding employees with the shackle of morale and loyalty alone will eventually lose ground against the world of capitalism. As scripted for countries like the United Kingdom, France, Germany or even today’s United States.

A change is needed and it has to begin with us -the young generation (20’s and 30’s) that will guide Japan through the next few decades.

Please let us look at our selves in the mirror and ask this question,”Why should we reform Japan”, if you have the answer, then lets ask, “How could we do that?”

Japan did miracles while restoring itself from the ashes of war in the 1940’s. It is still a envy to the rest of the world. History has repeated itself, and we can do it again!

*Zubair Ahmed is a passionate Skate Boarder who used to Play Poker for a living (3 months), writes from Tokyo, Japan. He is  a Tokyo Based Investment Banker that specializes on Merger and Acquisition, Private Equity and Investment.  Previously he worked in San Francisco, Boston, Manila, Jakarta, Singapore,  Dhaka and Kuala Lampur. Through his entrepreneurial skills  he is focusing on developing services or products which he believes can change millions of lives around the world. He can be reached at tushnim@gmail.com

**Alochonaa.com is not responsible for any factual mistakes (if any) of this analysis. This analysis further is not necessarily representative of Alochonaa.com’s view. We’re happy to facilitate further evidence-based submissions on this topic. Please send us your submission at alochonaa@gmail.com

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