How did Japan go from being one of the world’s economic powerhouses to an economy plagued by negative inflation, a weak currency, and strangling debt? The seeds of Japan’s current problems were sown back at the end of the 20th century. Stock prices were booming. Land and housing costs were through the roof. Japan seemed to have a production process that was the envy of every country worldwide: Company Wide Quality Control, better known in the U.S. as Total Quality Management (TQM). Just when everything seemed to be going their way, the economic bubble burst, and the country and its economy have yet to recover. There had been warning signs of problems ahead, and leaders chose to ignore the warnings. The crushing debt issues due to overvalued assets, stagflation, and insurmountable cost structures have plagued Japan for over 20 years. One of the “untouchables” in this current morass was the tenet of lifetime employment. Considered the norm in many U.S. companies, the idea of working for a single company during a person’s working career was abandoned in the 1960s and 1970s. A company pension that would also provide a monthly payment during retirement was abandoned. With few exceptions, U.S. employees had to figure out how to pay for their retirement on their own. This quid pro quo between employers and employees in Japan is an integral part of the problem with lifetime employment. This issue was brought back to my attention in a LinkedIn post by Paron S entitled “Adapting to the End of Lifetime Employment in Japan.”
Twenty-plus years ago, I served as Director of International Human Resources for what was then Anheuser-Busch. We engaged with Kirin Brewery to form a joint venture in Japan. Among the many lessons I learned from that project was that Japan had two business systems. One involved working for a traditional Japanese company where people were hired straight from the college campus with the expectation that they would spend their career with that one company. The other system is typical of all other multi-national and global companies. In this second system, people joined and left companies based on the opportunities presented, and tenure was theoretically performance-based. The systems were so different that you had to choose one or the other off the college campus. Upon selecting a company, you were choosing your path for the entirety of your career. There was no moving from one system to the other.
While writing about this current challenge in Japan, I thought about what might have been a similar problem the U.S. faced and resolved successfully. I considered a segment of the economy, a large global company. We are not talking about the U.S. economy but a large global company. The principles can be applied to any company’s economic system. Louis Gerstner, who took over a failing IBM, came to mind. He wrote a book about his experiences called Who Says Elephants Can’t Dance? What are the parallels between IBM’s problems and what Japan is facing? Are there things that Japan can take from IBM that will allow them to break out of this cycle? It may mean that what made Japan strong at one time, lifetime employment, needs a paradigm shift. Gerstner mentioned three priorities as he attempted to turn around IBM: 1) reduce costs, 2) raise cash by selling assets, and 3) change the culture. The first two items are self-evident, except for what and how much to sell. Changing the culture will be the big challenge in Japan. The tenets of the Burke Learning Agility construct may provide part of the way forward. One of the cultural beliefs in Japanese society is that “the nail that stands up must be hammered down.” This makes it extremely difficult for individual opinions to be heard and considered.
In Burke’s Learning Agility approach, there are nine dimensions characteristic of someone who is learning agile. We know that people who are more learning agile can better deal with new, unfamiliar, or ambiguous situations. One of the learning agility dimensions that is measured by the Burke Learning Agility Assessment® is Flexibility. This involves changing the framework with which you look at a problem. Changing culture means changing the status quo, which may mean changing the current framework. Gerstner pointed out that in the past, managers were presiding; now, he needed them to act. Gerstner said he wanted no more obsessive perfectionism and studying things to death. In general, leaders in Japanese lifetime employment companies are good at standardization and imitation but not innovation.
Lifetime employment companies will have to find ways to reframe the way things are and establish a vision of the new normal. Gerstner was clear that he needed to hire leaders who were unlike the current leaders. The nine dimensions measured on the Burke Learning Agility Assessment are: 1) Flexibility; 2) Speed; 3) Experimenting; 4) Collaborating; 5) Performance Risk-Taking; 6) Interpersonal Risk-Taking; 7) Feedback Seeking; 8) Information Gathering; 9) Reflecting. Most of these dimensions would not be found in or supported in a Japanese lifetime employment company. Gerstner talked about rewarding risk-taking. Burke measures Performance and Interpersonal Risk-Taking. This means moving out of your comfort zone as an individual and as an organization, being the “nail that stands up.” This means speaking up and potentially having a different point of view from the prevailing one.
An issue that surfaced in the Kirin/Bud Japan joint venture I mentioned earlier, was how to evaluate performance. One of our objectives was to make this joint venture the combined best practices of two incredibly successful companies. These companies represented Japan’s current struggle between a pay-for-performance multi-national company and a Japanese lifetime employment company. On the Budweiser (Anheuser-Busch) side, we advocated for managers to set objectives, give individual feedback over the performance year, and provide each person a rating indicative of their performance and contribution. The assumption was that some people would get a high rating, some a low rating, and most people would be in the middle. Ultimately, the manager would evaluate the information, make a judgment, and determine a rating. Rewards, salary increases, and bonuses would be a function of those ratings. The Kirin people were in agreement on setting objectives and evaluating performance. The big difference was that their proposed evaluation system was formula-driven. They believed no judgments should be involved. The formula alone should determine the outcome.
As I think about the debates we had, we were reflecting on the stalemate Japan is facing. They can’t afford to stay with the status quo of lifetime employment. They can’t reimagine a new normal with their current leaders. However, the paradigm must change. In Burke’s parlance, Flexibility must be used to create different frameworks defining Japan’s new private sector. Like IBM, new leaders will be required to develop new businesses. These new leaders will need to move quickly (Speed is a dimension of Learning Agility). Leaders will need to take risks, on the “work side” and the “people side.” These new leaders will need to hire people who will seek feedback about individual performance and not just the group’s performance. Challenging assumptions and experimenting but failing fast will be imperative. Virtually all these capabilities can be measured with the Burke Learning Agility Assessment. This could give people at all levels the content for everyday conversations and a way to measure their progress. Habits and systems from the past can’t be adapted; they need to be rebuilt. Norms and existing assumptions must be challenged and evaluated against a pay-for-performance system. This change can be accomplished in Japan. It will be hard. People and companies will fail along the way. Inherent in the Burke Learning Agility approach is not if you fail, but when you do, what you do next.
About the Author
David Hoff is the COO and EVP of Leadership Development for E.A.S.I-Consult®. E.A.S.I-Consult works with Fortune 500 companies, government agencies, and mid-sized corporations to provide customized Talent Management solutions. E.A.S.I-Consult’s specialties include leadership assessment, online pre-employment testing, survey research, competency modeling, leadership development, executive coaching, 360-degree feedback, online structured interviews, and EEO hiring advisement. The company is a leader in the field of providing accurate information about people through professional assessment. To learn more about E.A.S.I-Consult, visit www.easiconsult.com, email ContactUs@easiconsult.com or call 800.922.EASI.