Ichiro Suzuki
As it has already been known since the days ‘Japanese management’ stormed the corporate world and business school classrooms, one of its key components was employment practices. A good portion of their workforces spent their entire career with one company, which they joined straight out of college at the age of 22 or 23. Then, they moved up the ladder together relatively slowly though some of the ‘classmates’ began to rise faster than others at some point in their career, usually after ten years.
By the turn of the 21st century, however, cracks became visible in this system. When the Japanese economy had suffered a marked downshift in its growth in a rapidly changing environment of globalization and the rise of the Internet, its employment system found it no longer capable of producing people who fit the needs of the 21st century. As Corporate Japan began to take in a greater number of people who were older than 22, they didn’t find it easy to integrate these ‘outsiders’ into the majority of the workforce.
That the vast majority of the workforce enter the company at 22 means that they only have bachelors degree, which is still considered fair enough though a growing number of young men and women go to graduate school outside Japan. Japanese management has championed the system of internal training on its employees, organized by the human resources department, often with an intense focus on on-the-job training. The system worked up to a point, while the Japanese economy boasted of the highest growth rate in the developed world. What was required on HR was cranking out able and homogeneous legion of managers out of the young people recruited straight from college. As the turn of the new century drew near, young managers grew increasingly less interested in committing their career to one employer. In a changing world, workforce of homogeneity rapidly lost sense. Needs for new skills had sprung up in the age of the internet and diversity of workforce gained value. Such overwhelming changes were beyond the ability of HR, which wielded immense power within the organization.
At Corporate Japan, academic credentials have often been regarded lightly and even scorned at times, with their paramount emphasis on OJT. This is an HR version of ‘not-invented-here’ syndrome that is widely believed to have contributed to the sinking of Corporate Japan. A number of Japanese companies have been sending selected young employees to graduate schools overseas, for decorative purposes, without a serious intent on getting something out of what they have learned. A legend on a life insurance company in the late 1980s had it that as soon as a young man returned to Japan with his MBA he was sent to a rural branch office, far away from headquarters, to get him de-Americanized. Even if this was merely a legend, it told what the air was like at Japanese companies’ offices.
In the meantime, business schools have made fierce efforts to keep up with the changing world, trying to provide the business world with young men and women most prepared for the 21st century. Otherwise, B-schools would have lost relevance. Continued demand for graduate management education is a proof that all the costs associated with the education is worth it, both for students and employers. On top of two-year MBA programs, business schools have been providing the business world with education in a variety of formats. One of them is customized executive programs for middle managers that serve specific needs of each corporation. Such programs are in high demand, and present lucrative business opportunities for B-schools. Tax-deductibility of costs associated with such programs makes it appealing to corporations, too. Educating managers in this fashion is beyond the capability of an HR department, and such programs are few and far between in Japan. Though not quantifiable, it is fair to assume that Corporate Japan over the last few decades has decisively got behind in upgrading quality of its people. It affects long-term performances.
MBAs or else, Corporate Japan has a distinct dearth of holders of masters and doctors degrees in the STEM (science, technology, engineering and mathematics) fields. Out of a million population, only 131 Japanese received their Ph.Ds in 2008 as opposed to 222 Americans and 285 Britons, according to Japan’s Ministry of Education and Science. (The data is old but other statistics show that Japan even got further behind other countries since then in the number of doctoral degree recipients. The number is flat in Japan while it was up elsewhere.) Even worse, Corporate Japan hardly has any idea how Ph.Ds should be compensated, in the archaic practices of lifetime employment. Even if they may be integrated into the regular workforce in the STEM areas, most likely they are paid in line with his ‘classmates’ as defined by the year of college graduation. Few premiums are given on their academic credentials, which is.a well established practice at Western multi-national corporations.
Japan’s employment practice has outlived its usefulness already by a few decades. Despite years of languishing Corporate Japan is still in search of the system that fits today’s needs that values specific skills, achievements and diversity. Long embedded culture in the society has made Corporate Japan hesitate to make a quick shift to best practices elsewhere. Nonetheless, they are left with few alternatives to making changes as globalization of workforce progresses and young and talented Japanese do not share the value that belongs to older generations. Even if compensation schemes move to that direction, however, would there be a greater number of people with advanced degrees in Japanese organizations?
About the author: Mr. Suzuki is a retired investment executive based in Tokyo, Japan.
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