Japan’s Leadership Challenges in Globalization
Part 2: Turning Globalization Opportunities to Deliver Results
White Papers | February, 2015
Globalization in today’s market means dealing with diversity and rapid changes in different regions and countries around the world. And we asked the question: how are global enterprises handling diversity for successful business deployment in such an environment?
In our first white paper, “Japan’s Leadership Challenges in Globalization - Part 1: The Race is on for Japanese Global Leaders,” DHR International (DHR) identified a number of challenges in recruiting and fostering global leaders through our interviews with corporate executives. For example, many companies are committed to globalizing their business management as top priority and more companies are responding flexibly to such issues as recruiting and development of leaders.
In the past, most Japanese companies used to send Japanese employees who joined the headquarters as new graduates, and have been trained as future executives, to their overseas offices as expatriates. Now it is not always the case. More Japanese companies hire outside talents locally at overseas locations as needed, or recruit mid-career talents at the headquarters as global business leaders and send them overseas. These are the first leadership challenges for Japanese companies to deploy business globally. Success of their global business depends on those talents.
Given that recruiting leaders is a gateway to global strategies, what is the next step to leverage this opportunity? Globalization and diversity are inseparable. How can diversity be turned into a driving force for globalization? With diversity and inclusion as keywords, we will try to identify some hints and tips for successful globalization through our interviews.
Overcoming Japanese Style Mentality
“Let’s compare the differences between the mentality of Japanese companies and that of multinational corporations.” During our interview with a former head of human resources at a multinational financial institution, Mr. E prepared the “Mentality Chart” to explain why Japanese companies have difficulties in globalization. “There is a significant difference in terms of approaches. Working with the same language and sharing the same culture, a team in a Japanese company can deliver decent and reasonable ideas on the table. Members do research, make a plan minutely and prepare a reliable manufacturing system. Although they think they are trying to follow the global specifications, during the thorough review process, what started as an innovative idea will gradually turn into a compromising one, resulting in unattractive products and missing the market demand. Why do Japanese companies repeat this again and again? I think Japanese mentality has a disadvantage in competing in a globally competitive environment.”
Mr. E continues. “Japanese companies are good at delivering more than average results continuously within the prescribed framework. However, we live in a rapidly changing environment. The result of the game dramatically changes with the advent of new technologies and with different approaches. Many Japanese companies have found themselves way behind as a result of only following the traditional Japanese way. The talents whom companies recruited will be discouraged by such circumstances and will leave Japanese companies.”
Diversity is the driving force for innovation. In fact, many multinational corporations put emphasis on diversity and use it as part of their strategies. Mr. E explained about multinational corporations which organize teams, focusing on competence and ability, regardless of gender or race. “Many western companies have succeeded in turning diversity into driving force. The reason is that each individual has his/her unique cultural background in multinational corporations. They are forced to organize a mixed team of employees with different cultural background even for handling home country demands. In fact, forming a team is not an easy task; however, once successfully formed, it can absorb shocks of arrows shot from different angles (different opinions and ideas) and can bounce them back. Corporate culture based on competence and ability is prevalent in such corporations. That’s what enables this to happen.”
Mr. F, the head of HR of a foreign financial institution in Japan, has worked in HR for several foreign and Japanese companies for almost 20 years after graduating from university in the US. He thinks the same way as Mr. E and recommends taking actions to overcome an uneasy feeling to handle diversity.
“Interesting thing with Japanese companies is that they try to create the definition of “global talent” and try to prepare a manual. For example, a person who has more than such and such scores in TOEIC or who has more than such and such years of working experience in foreign countries, etc. They are very studious and have knowledge on new strategies and approaches. When something new is proposed to them, they tend to just review it and do not take further action. Or they try to find out reasons why they cannot do so, judging from their experiences. While they are trying to make a perfect product, other players are playing the game in a completely new dimension. Be released from Japanese mentality. Overcome conventions and language barriers.”
Although they know they should change their introverted way of thinking, saying is one thing, doing another. They may be at a loss to what to do. In the next chapter, we would like to introduce two successful cases of companies that overcame Japanese mentality by identifying a set of values as a multinational corporation, putting them as their core philosophy and never deviate from them.
Turning Globalization Opportunities to Deliver Results
Case Study 1: LIXIL Group’s immediate action enables to overcome Japanese mentality
We had an opportunity to interview Mr. Yosuke Yagi, director and vice president responsible for HR and administration of LIXIL Group, a major Japanese company that manufactures and sells building materials and housing equipment as well as related services. He had just come back from an overseas trip with his family. He emphasized that immediate, spontaneous action is important for a Japanese company to conquer Japanese mentality.
“One of LIXIL’s issues was that only a few employees took paid leave. Our employees are all industrious, professional, have strong sense of responsibility and loyal to the company. Such homogeneous corporate culture has been cultivated in a very Japanese organization. Such culture was a valuable asset when we were in the process of growing in the Japanese market. One of the indexes showing industriousness, rate of paid leave taken, is in the order of 30% at LIXIL. How can we improve the rate?”
It is quite simple. President Yoshiaki Fujimori and other executives, including Mr. Yagi, took the initiative to take paid leave so that all employees can also take paid leave freely. At LIXIL the rate has been dramatically increasing during the past two years.
Mr. Yagi mentioned various good effects of taking a holiday away from his company. “You can relax yourself with someone close to you. In addition, if you travel, you can find out what is fashionable in the destination or you can enjoy hobbies and studying during holidays. Holidays give you a chance to recharge your batteries. It is nice to learn a new foreign language, make new friends and find out new hobbies. These self-enlightenment will eventually lead to future career development and have positive effects on your work. You cannot respond to the global market only with the point of view that has been built up in a homogeneous in-house environment in Japanese companies. I want all of our employees to take paid leave and use holidays for self-enlightenment.”
Another driving force to overcome Japanese organization and mentality at LIXIL is diversity. “Everybody uses LIXIL products at home. Leaders responsible for design, marketing and sales should not be male-dominated. LIXIL Group is named as NADESHIKO BRAND* this year.” LIXIL is committed to utilizing female leaders aggressively to develop products that are easy to use and loved by customers by reflecting female point of view,” Mr. Yagi added. Taking paid leave and diversity are seemingly two completely different topics. However, taking paid leave helps an individual to acquire diversity, while diversity helps an organization to grow.
*Nadeshiko is a name of pink flower that has come to symbolize feminine strength and empowerment in Japan. NADESHIKO BRAND is an initiative by Ministry of Economy, Trade and Industry (METI) and Tokyo Stock Exchange to select enterprises that encourage women’s career success.
Case Study 2: IKEA Japan’s mindset overcomes Japanese mentality
Here we will focus on global HR system of a foreign capital company and the results. IKEA Japan, selling design furniture and housewares in eight national stores was named to the Diversity Management Selection 100 2013, a distinction sponsored by the Ministry of Economy, Trade and Industry.
This program recognizes companies that succeeded in increasing corporate value through diversity management. Female managers account for approximately 43 percent of all employees of IKEA Japan, with employees from 21 countries working there. The company sends employees trained in Japan to Korea. Active utilization of diversified human resources is the reason for recognition.
We interviewed Ms. Reika Izumikawa, the head of the HR at IKEA Japan, focusing on the secret of successful human resource management of a global company. She emphasized “Inclusion”. Inclusion refers to creation of diversity in an organization, acceptance and active utilization of diversity by the organization. IKEA Japan goes above and beyond with its concept of inclusion.
Ms. Izumikawa emphasized that the most important thing to implement inclusion is the mindset of the management every day. “Everybody in an organization must be given an opportunity to participate in and contributing to business. Putting the right men and women in the right places in terms of experience, skills and way of thinking is the priority. The nail that sticks out should not get banged down. Whether he/she takes the initiative to implement these or not is the criteria to evaluate quality of a leader at IKEA. And that is the qualification IKEA seeks from a leader,” she continued.
Utilization of diversified human resources is deep rooted in IKEA’s culture. The company has a job posting system called “Open IKEA” and every employee in the world can see it. Recently a position of a store manager in Japan has been posted in “Open IKEA”. Approximately 30 employees applied for the position and all of them went through interviews in Japan.
“It is important to be able to deliver opinions and ideas equally, regardless of titles and positions, to promote diversity and inclusion in a true sense. It requires trustworthiness among people concerned. Then you will be able to see individual competence and ability. Creation of an environment where individual competence and ability are mutually utilized is a step toward to implementing inclusion.”
Today diversity has become a social demand that a company must respond to and demonstrate its effort. Some companies may feel they are under pressure and have no choice but to take actions on diversity. If they proceed in recruiting mid-career talents from outside and promoting inclusion of female managers because they feel they are forced to do so, without any roadmap to achieve business goals, they will never be successful. As a result, those companies are not able to include employees and the management will come to feel that diversity is a pain.
Implementation of diversity may not be an easy process in the beginning. However, Japanese companies should not be spending too much time just thinking about it. Taking action is the first step forward on diversity and would result in a feeling of mutual understanding and acceptance. Once diversified and employees share the same feeling, then Japanese companies can move forward to achieve their global business goals. Diversity does not mean everything, but it can be a driving force for globalization. Continuous promotion of diversity as part of business management strategies will surely generate competitiveness in Japanese companies.
In this paper we examined Japanese mentality in global business management and the role of diversity in Japanese companies. We plan to address the following subjects in the future issues of this white paper.
- What are the common traits among successful global leaders?
- Effective use of local talents in overseas locations of Japanese companies
- Onboarding of mid-career talents at Japanese companies