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Japanese management: a study in stagnation.

Japanese senior managers are sorely ill-prepared -- culturally, educationally, professionally, and psychologically -- for the future.

When Western analysts discuss management in Japan, whether in praise or in criticism, they tend to attribute to Japan an almost supernatural unanimity, a nationally shared vision that looms like a philosophical juggernaut, a Godzilla of the mind.

For instance, in a recent Wall Street Journal essay, Peter Drucker spoke broadly of "the new Japanese strategies...for total control of what now matters...." Karel von Wolferen, the iconoclast of revisionism, renewed in a recent New York Times op-ed piece his charges that the monolithic "leaderless" conspiracy of the Japanese "System," operated by the "world's best administrators," is aimed at "unlimited economic expansion."

These analyses contain many grains of truth and flatter Japan's managerial elite. But they also imply coherence where, in a Western sense, there is a mounting danger of aimless drift.

Western observers are most accurate in their cataloging of Japanese management's highest virtues: respect for government guidance, dedication to company goals, internal consistency, harmony, patience, quality control, etc. In view of the enormous changes in the world economic environment over the last two years, this steadfast adherence to "the Japanese way" is exactly the trouble.

Notwithstanding eulogies from Western admirers, our 40-year-old habits are today the Achilles' heel of Japanese management. If a U.S. executive were as completely unimaginative as I know many Japanese senior executives to be, he would be pegged by his peers as "set in his ways" or even "over the hill." He would be a burden on his company, because in inscrutable Japan, just as in gung-ho America, "old fogies" won't cut it anymore.

I think Western observers find it hard to sense Japan's management stagnation, because they tend to overlook some basic differences between Japanese and Western -- especially American -- executives. We learn differently, we relate differently, and we decide differently. I've been watching, and often refereeing, East/West business bouts for more than 30 years, and again and again, two opposing mind-sets tangle communication.

The Japanese executive is "relational" to the point of "egolessness," whereas the Western executive is individualist to the point of egomania. By "relational," I mean that the Japanese executive habitually subordinates his very self to the "group ego." He believes that self-effacement nurtures consensus. Too often, in fact, consensus is a euphemism for inertia. The executive is liked because he does not attempt to break inertia and lead the group in strange new directions. Even if he achieves senior executive status, he is most revered for being modest, deferential to subordinates, and, in a Western sense, thoroughly "unleaderlike."

In contrast, the Western executive's self-centeredness makes him a forceful leader. But too often it hardens him to human issues that, left unattended, become economic issues. He is proudly insensitive to the consequences of his executive actions. He feels little genuine sense of "participation" in his group and lends no such feeling to others. He becomes an overpaid figurehead atop an excessively bureaucratic organization; his work force goes through the motions for the sake of the paycheck.

Approaches to Management

Moreover, the Japanese executive approaches management intuitively rather than rationally, while the Western executive is too rational.

The nonrational Japanese executive is unfamiliar with strategic thinking and indifferent to planning -- responsibilities which, for four decades of Japanese history, have been matters of government policy rather than corporate initiative. He buries himself in the thought patterns of group acceptance. He works long hours to show his devotion to the group -- mired in the narcosis of routine and blind to goals beyond the male bonding rituals of his corporate brotherhood.

The Western executive, meanwhile, is hip-deep in analyses, matrices, benchmarks, and specialists. He goes by the book rather than by people, and keeps looking for new books to buy. He dwells on plans and neglects execution. His studied air of detachment leaves him lonely at the top and kills his ability to make either intuitive or collaborative business judgments. Without the security blankets of procedure, he is a coward in the face of risk.

What is changing in these profiles today is that American business, because of dramatic events such as the recession of 1991-92 and the end of the Cold War, has a sense of its human problem. There is a growing urgency about finding solutions. Japan, where the economy thrives on foreign currency, where it is popular among business leaders not to admit that the Japanese Economic Miracle is over, has yet to notice -- as I regularly explain to Japanese clients -- that the good old days are over.

Four Directives

Until the 1980s, it was possible for Japanese bureaucrats, led by the Ministry of Finance (MOF) and the Ministry of International Trade & Industry (MITI), to select strategic industries, curry cartels, issue marching orders to conglomerates, and handle all the prickly difficulties of global trade. The Japanese senior executive's job description contained four directives, which should ring familiar to even amateur Japanese watchers:

1) Catch up to America. 2) Do what the government bureaucrats say. 3) Leave the operational decisions to middle management. 4) Focus your own energy on internal (office politics) and domestic (market share) "relational issues."

The simple world view was never intended to be permanent. However, it succeeded brilliantly -- fueled by the faithful productivity of Japan's blue-collar work force. And so the system persisted -- until today, when it is bumping up against a blue-collar force that is both smaller and less willing to stretch itself to the limit for management.

Moreover, Japan Inc. faces serious resistance from other nations, many of them strapped with hard times, that resent the prosperity of the Japanese. Meanwhile, the ministries are losing their power to orchestrate a growing community of uncooperative Japanese companies, adventurous foreign companies poking into Japan, and mistrustful foreign governments that have lost their sympathy for war-ravaged Japan.

Japanese management needs to find a new model to emulate, one that will transcend two generations of successful parochialism. However, bolstered by the praise and envy of the West, they are inclined to assume that "it ain't broke and don't need fixin'." As a class, Japanese senior managers are sorely ill-prepared -- culturally, educationally, professionally, and psychologically -- for the future.

The Place-Based Society

Among the historic habits to which we Japanese point with pride is our passion for equality. This is significant in understanding our present management dilemma. Even during feudal rule, there was a leveling impulse in Japanese society. In the Tokugawa shogunate, for example, the local daimyo, or governors, were regularly forced to uproot their households and reside for a year in the distant capital, Edo (now Tokyo). Besides humbling the daimyo, this practice depleted their treasuries and dispersed their wealth. Moreover, this mingling of daimyo and shogun formed closer bonds than most feudal lords elsewhere shared with their kings. The familial, or relational, tendency among modern Japanese executives was born in the court of Edo.

Today, the Japanese value such fraternal equality far more than individualism. The relational executive and his "in crowd" emerge from a pervasively maternal culture. The Japanese male is molded, cajoled, and guided through a lock-step education by his mother, who passes him on to a permissive university system -- in which he cannot fail -- which passes him into the corporation, which is womb-like, lock-step, and even more fail-safe than the university. Japan, like a mother, loves all her sons equally and provides for their every need. Habitually, the Japanese aver that our island is too small for people to be independent. The operative term is interdependence, in a "place-based" society. Where we are is more important than who we are.

In the West, the individual "makes his mark" in society. In Japan, the individual subsumes himself into an intermediary group, to which he assigns his ego. Through its "group ego," the group (whether it is a bunch of senior citizens on a bus tour or a keiretsu composed of 1,000 corporations) "makes its mark" on society.

The Relational Manager

The corporate group ego's manifestation is the "relational manager." He prides himself on social skills, keeping peace among his subordinates, his superiors, and his peers throughout the industry. He chats well, dines well, drinks socially, and golfs doggedly. He shares credit for every triumph and takes ritual responsibility for every setback. He never puts on airs or sets himself apart as a "leader."

Most Japanese managers don't yet realize that they must undertake a fundamental re-education in order to survive in a world where business alliances are no longer based on mom, family, kinship, nationality, or racial homogeneity. The next generation of Japanese managers must immediately confront the consequences of their upbringing:

The typical Japanese senior manager does not instinctively precede action with reason. In one of my school textbooks, I remember a passage that compared American thought with Japanese thought. It said that the American thinks of where to go, then walks. The Japanese starts walking, then thinks about where to go. As a corollary, I can add now that the Japanese is told to start walking and then asks where he's supposed to go. This formula appears repeatedly in Japanese literature and pedagogy. It is immortalized in proverbs such as, "Truth is found through action."

As illustration of this profound American/Japanese dissonance, consider the beginnings of two wars. The Gulf War of 1990-1991 was initiated in a typically American "look before you leap" pattern. First, the United States massed its forces and issued warnings, then softened the enemy with air raids. Then, before committing ground forces, the United States paused again, assessed the damages, and studied the enemy's weakest points.

By comparison, the Japanese entry into World War was a roller-coaster, started without permission by a gang of junior officers somewhere in China and then propelled by momentum. In a book called The Real Reason Japan Lost the War, Professor Ikujiro Nonaka explained that the defining metaphor of Japan's war effort was the human wave attack. The generals who sent their soldiers over the top did little battlefield reconnaissance and almost no assessment of enemy strength. They laid out no strategy. They simply worked the infantry up into a patriotic frenzy, told them to seize as much ground as they could, set them loose, and hoped for the best.

The same metaphor fits the Japanese economic assault of the last 40 years. Japan applied enormous troop strength, national selflessness, willing deprivation, and a ravenous hunger to seize as much territory (market share) as possible. The assault went off without the need for corporate generals to think first, move strategically, or lead.

The typical Japanese manager cannot evaluate himself critically as a means to check his inertia, change his course, or assimilate into a world beyond his group. He measures himself not according to abstract or external values but against his group's values. Some Western executives, under pressure, concede the preeminence of values outside the corporation, even the business community. For most Japanese executives, this sort of ethical outreach is exceptional, as we've seen recently in the Japanese financial industry.

While spreading their tentacles throughout the world, financial giants such as Daiwa and Nomura maintained a network of in-crowd "special favors" that included inside trading, blatant stock manipulation, and money laundering for organized crime. These spawned the "scandals" of 1991, which forced the Ministry of Finance to punish a host of securities companies. Significantly, however, in the wake of the MOF's purgative sanctions, there is scant evidence that most executives within the financial industry understand what -- if anything -- they did wrong.

The Japanese executive has trouble thinking strategically. Nowadays, as the once-infallible ministries -- MOF and MITI -- find themselves flummoxed by world events, by the aging of Japan's strategic industry base (steel, shipbuilding, automobiles, etc.), and by irreversible trends toward fragmentation and dispersion in Japanese corporations, Japan's strategic brain is faltering like an old Univac whose vacuum tubes are sputtering out.

Consequently, companies that can no longer operate by ministry guidelines

revert to old habits, namely, market share madness. Pursuing market share is the traditional pastime of the corporate group ego. It is a group activity in which the competing groups -- other Japanese companies -- have the same mission and operate under identical traditions. This all-in-the-family mentality has become so ingrained that it shows up even when Japanese companies "go international." Toyota and Nissan, for example, have long established production facilities and marketing organizations in the United States. But their persistent competitive attention is focused not on outstripping the Big Three American auto makers, as one might logically assume, but on beating each other.

Consider also the sudden rush of Japanese electronics companies into the U.S. film industry. First, JVC, with little practical experience as a film producer, set up a new production company with Hollywood film producer Lawrence Gordon. In a matter of months, Sony trumped JVC by buying Columbia Pictures -- at enormous cost. Then Matsushita joined the Tinseltown parade by snatching up MCA. Each of these companies justified immense and risky investments in a volatile industry by insisting that their hardware manufacturing operations need a software twin. This arguable business precept was, in fact, a belated rationalization to cover the irresistible drive to "keep up with the Joneses."

The Japanese manager has little grasp of creativity. There are myriad examples of this deficiency in Japanese management -- which originates in group ego. As every Western reporter learns on his first day in Japan, the creative individual here is "the nail that sticks up." Creativity threatens equality.

Among the clearest victims of our aversion to innovation is the Japanese chemical industry. As a mass producer of commodities, the Japanese chemical industry is among the world's leaders. But as a skunk works, Japan stinks -- trailing a host of much-less-prosperous countries in the development of new compounds and processes.

The Japanese manager does not speak the international language of business -- English. This would be no mortal sin if Japanese managers acknowledged the importance of coherent English and made sincere efforts to be clearly understood, either by mastering the language or by seeking superb translation assistance. But Japanese managers, in fact, reinforce their club ties by speaking in oblique Japanese that becomes evasive English, and by ostracizing those few members of the management elite who go out of their way to communicate clearly with foreign business associates.

Japan's current Prime Minister, Kiichi Miyazawa, has always been one of Japan's most gifted and fluent statesmen -- a master of foreign affairs and idiomatic English. His best qualities as an internationalist, however, are exactly what have kept him from Japan's leadership until recently, and which hamstring him as Prime Minister. Virtually every Japanese political analyst agrees that Miyazawa would be more powerful "if only he didn't speak English so well."

Certainly, the above list does not apply to every Japanese executive. Leaders such as Soichiro Honda, who daringly infused foreign facilities with local components and personnel, are a telling exception. In general, however, there is little evidence today that Japanese senior management sees its parochialism as a problem.

More Than Slogans

The major change in overall direction for Japanese industry seems to be a matter of slogans -- from "Catch Up!" to "Globalize!" Japanese companies are moving offshore, close to sales points and local labor. The problem with the new motto is that it is not, and cannot be, coordinated by government agencies. This new crusade must be thought out, strategized, and implemented on a company-to-company basis. And this is virgin ground for Japanese management.

Signs of trouble are already apparent. Most American/Japanese joint ventures in steel, rubber, and automobiles are either unprofitable or barely breaking even. After three years of owning Firestone, for example, Japanese tire and rubber giant Bridgestone, according to news reports, lost $500 million in its U.S. and European operations. It achieved overall profitability in 1991 only by virtue of selling land in Japan valued at $200 million. Nippon Mining, purchaser of Gould Corp. in 1988, is expected to show $100 million in 1991 losses from its U.S. subsidiary.

The pattern is consistent. Japanese management won't let go. The family has to stick together, even when its members are 8,000 miles apart! Tactical business decisions, which must be made in Tokyo, come too slowly. Problems soluble in a day persist for weeks while everyone waits for "consensus." Meanwhile, nobody bothers to learn the territory. The most comical example of the cultural dissonance between Japanese managers and a foreign operation was the Pebble Beach debacle, when the Japanese discovered that the American devotion to fairness wouldn't permit them to sell in-crowd golf club memberships as high as $750,000 each.

A Kick in the Pants

The steps Japanese management must take to solve the intrinsic problems that now prevent adaptation to a global economy are extensive but feasible. While I paint this rather dark portrait of the Japanese manager, I am stubbornly optimistic because of the extraordinary Japanese record for sudden change overnight. The "Meiji Restoration" more than a century ago was just such a lightning modernization. Even swifter was Japan's embrace of the U.S. Occupation and its vast program of political and economic reforms, in 1945. Kick us in the pants and we can do almost anything. Japan's next kick in the pants, when it hits, must incorporate three management imperatives: recognition, rationality, and innovation.

Recognition of the problem is the simplest step. Some Japanese business leaders, such as Sony's Akio Morita in a much-discussed article in Bungei Shunju, have admitted the narrowness of focus that has afflicted Japanese management and the need to grow up into a much bigger world. Japanese managers must, as a group, perceive their own crisis of imagination.

Rationality must replace cozy conformity among Japanese managers. Before continuing global expansion, the Japanese must adopt a more international -- that is to say, more rational -- approach to strategy and administration. We must stop pointing with pride to systems, such as our appalling distribution system, that are inscrutable and "uniquely Japanese." Simultaneously, every company must stop looking to Japan Inc. for guidance.

The key to independent corporate vision is professional management. Managers must be chosen and promoted for their demonstrated skills and measurable accomplishments -- rather than, as now, for their social talents and cheerleading ability. Drinking, schmoozing, and golf can no longer be keys to corporate success.

Japanese management must streamline its white-collar productivity with the same rigor that it has traditionally applied to the blue-collar realm. Too many people in the office are now doing too few tasks too many times.

Innovation, traditionally an import to Japan, must become a local product. Crucial to the change is that Japanese management cease "Japanizing" Western technologies and products to fit a Japanese mode. The "copy cat" mentality has run its course.

This effort, of course, presupposes that Japan will develop its capacity for creativity. We have to stop regarding "Cup-Noodle" (adapted from Chinese noodles) and Nintendo games (adapted from Atari in America) as Japanese inventions. To spark real innovation, managers must look downward in the organization -- without cultural blinders, platitudes, and prejudices -- to identify and set loose the creative thinkers within the company. Japanese employees must be encouraged in the novel conviction that thinking for yourself is not just good but mandatory.

The Challenge: Survival

Much like the architects of the Cold War military-industrial complex -- now in disarray -- the players in Japan's government-industrial complex face a challenge for nothing less than economic survival.

With one difference: The Cold War lasted 45 years before it crumbled and the leaders of the Free and Communist Worlds figured out, albeit reluctantly, that they must drastically alter their most challenged dogmas. By contrast, Japan's "in crowd" has been entrenched for a thousand years, and very few of its hereditary leaders display even an inkling that big adjustments are critical to the future. This is not a crisis of talent or resources, but of will. As the world knows, Japan has the right stuff to catch up quickly. But first, we have to take it out of mothballs.

Yoshimichi Yamashita is Vice President of Arthur D. Little Inc. (USA) and President of Arthur D. Little (Japan) Inc. Through his long experience in top management of Japanese manufacturing companies, he has gained a knowledge of the essence of Japanese business structure, characteristics of Japanese industries, government-industry relations, and behavior of Japanese business systems. He is a graduate of the University of Tokyo. This article is adapted from his new book, The Next Generation, being published in Japanese by Diamond Publishing Co.
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Title Annotation:Accessing the Japanese Market
Author:Yamashita, Yoshimichi
Publication:Directors & Boards
Date:Sep 22, 1992
Previous Article:Competing in Japan.
Next Article:A turning point for Japan Inc.

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