Palgrave Macmillan Asian Business Series Series Editor: Rosalie Tung Japanese Management for a Globalized World The Strength of the Lean, Trusting and Outward-Looking Firm Satoko Watanabe Palgrave Macmillan Asian Business Series Series Editor Rosalie Tung Beedie School of Business Simon Fraser University Burnaby, BC, Canada The Palgrave Macmillan Asian Business Series publishes theoretical and empirical studies that contribute forward-looking social perspectives on the study of management issues not just in Asia, but by implication else- where. The series specifically aims at the development of new frontiers in the scope, themes and methods of business and management studies in Asia, a region which is seen as key to studies of modern management, organization, strategies, human resources and technologies. The series invites practitioners, policy-makers and academic researchers to join us at the cutting edge of constructive perspectives on Asian management, seeking to contribute towards the development of civil societies in Asia and further a field. More information about this series at http://www.palgrave.com/gp/series/14420 Satoko Watanabe Japanese Management for a Globalized World The Strength of the Lean, Trusting and Outward-Looking Firm Satoko Watanabe Research and Development Initiative Chuo University Tokyo, Japan Palgrave Macmillan Asian Business Series ISBN 978-981-10-7789-0 ISBN 978-981-10-7790-6 (eBook) https://doi.org/10.1007/978-981-10-7790-6 Library of Congress Control Number: 2017964583 © The Editor(s) (if applicable) and The Author(s), under exclusive licence to Springer Nature Singapore Pte Ltd., part of Springer Nature 2018 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, express or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. Printed on acid-free paper This Palgrave Macmillan imprint is published by the registered company Springer Nature Singapore Pte Ltd. part of Springer Nature The registered company address is: 152 Beach Road, #21-01/04 Gateway East, Singapore 189721, Singapore P reface Global interest in Japanese management reached its height during Japan’s high-growth years and then faded as the Japanese economy stag- nated in the early 1990s. Recently, however, amid growing concern that corporate management has put too much emphasis on Anglo-Saxon free- market liberalism, economists and management specialists in the United States, Europe, and Asia have once again begun to look at the positive aspects of Japanese corporate management. This book provides a comprehensive analysis of the changes that have taken place in the systems and practices of Japanese management over the last quarter century, identifies the positive and useful attributes that ought to be maintained, and clarifies the behavioral principles that form the groundwork of their strengths. Observing the changes in the business environment brought about by the forces of intensifying globalization, the book presents a highly effective management model that builds on the superior aspects of Japanese-style management while overcoming its weaknesses. It is a multilayered human-resource management model that combines the mutually complementary aspects of the Japanese and Anglo-Saxon systems, incorporating the strengths of both. This hybrid model is aimed at increasing workplace motivation, promoting the creation of new value, and enhancing performance and can be used successfully in many countries around the world. My discussion, based on data and case examples taken from surveys and interviews I had conducted at companies in Japan and other countries in recent years, draws on theoretical frameworks and v vi PREFACE methodologies from sociology, psychology, and economics along with the concepts that have been developed in the field of management science. The content of the book may be summarized as follows. Chapter 1 looks at the changes in the employment environment and the competitive pressures of globalization that are profoundly connected to these changes. They are the most significant factors that have given rise to the aforementioned renewed interest in Japanese management. Levels of workplace motivation have shown a downward trend in many countries over the past several decades. The analysis of empirical evidence of global trends on motivation, presented in this chapter, shows that the trend is closely related to changes in the employment situation brought about by structural changes in the global economy. These changes in the business environment form the backdrop in the search for effective alter- natives to management models exceedingly market-principle-oriented that have become increasingly influential worldwide. The merits of Japanese-style management, which emphasizes the human side of the organization, are again drawing attention. Chapters 2 and 3 trace the changes in Japanese management systems over the last quarter century, analyze the current situation, and assess the future directions they will take. How has management in Japanese companies changed during the dramatic upheavals of the last twenty-five years, from the collapse of the bubble economy in 1990 and the pro- longed recession that followed, through the global economic crisis trig- gered by the Lehmann Brothers collapse in 2008? What did Japanese companies learn during this time? Chapters 2 and 3 investigate this pro- cess, examine the current state of Japanese-style management, and give a view of what it will be like in the future. Chapter 2 looks at person- nel and employment systems and the internal decision-making structure of Japanese companies. Chapter 3 analyzes uniquely Japanese systems of intercorporate networks centered on “keiretsu” and corporate govern- ance practices. Chapter 4 analyzes the management principles that form the foun- dation of Japanese corporations’ strengths and identifies the ideas and principles of behavior that deserve to be preserved. In Japan, it argues, the organizational principles and the structures of social relationships that originated in the traditional ie family system went beyond the level of the actual family unit and were transferred into modern corporations, PREFACE vii and that the trust cultivated and reproduced in this process was accu- mulated as “social capital.” This Japanese-style social capital that com- bines the collectivism characteristic of the traditional community and the rationalism characteristic of modern organizations gave Japanese corpo- rations a solid foundation and helped them to develop. Looking at several specific examples, Chapter 4 focuses on four par- ticular strengths of Japanese management born of Japanese-style social capital: (1) trust and the norms of reciprocity, (2) a human relations approach that satisfies employees’ social needs, (3) egalitarianism and on-site management that emphasizes the experience and input of work- ers on-site, and (4) innovations created by enduring R&D projects and long-term commitment. It shows how these qualities have helped fortify Japanese companies today. Chapter 5 discusses the transferability and adaptability of Japanese- style management to overseas operations. This chapter focuses on automakers that have transplanted Japanese production and management methods into their overseas operations, analyzing the management of overseas subsidiaries particularly with regard to lean production meth- ods that are at the core of Japanese-style manufacturing. In spite of the keen interest shown in these systems by organizational scholars and the public, not much work has been done on the human aspects of the pro- duction floor—how employees work on a daily basis, their attitudes to working in teams, the way they feel about the wider organization, and how they produce high-quality products. Looking at these aspects of the workplace, this chapter elucidates the way lean production has been suc- cessfully functioning as a sustainable system in the overseas operations of Japanese firms. Chapter 6 analyzes the motivation patterns of the major position groups within the organization and presents the hybrid human resource management model most effective for each group. Since the factor having the greatest impact on motivation patterns is the position held within the organization, as has been shown by past research, motiva- tion patterns and work-related values are analyzed for four major posi- tion groups: (1) executives, (2) gold-collar employees (managers, professionals, entrepreneurs, consultants, etc.), (3) blue-collar, cleri- cal, and service employees (permanent employees), and (4) blue-collar, clerical, and service employees (nonpermanent employees). The hybrid model presented on the basis of this analysis combines the mutu- ally complementary aspects of the Japanese and Anglo-Saxon styles of viii PREFACE management to make the most of the strength of both. Although the two styles are often thought to be diametrically opposed, the proposed hybrid system, incorporating effective practices from both, can be suc- cessfully applied in many countries of the world. This book maintains the comparative perspective throughout, com- paring the management systems of Japan and the West. It shows how Western and Japanese corporations can overcome their respective short- comings and learn from mutually different systems for further improve- ment of their management. It further discusses what Western managers, academics, and human-resource professionals can learn from Japanese practices as well as what Japanese companies should learn from Western practices in order to improve their management. Here I would like to thank the people who have helped me in the preparation of this book. I am particularly indebted to Anthony Giddens, Michael Useem, Parissa Haghirian, Mari Sako, Hajime Ohta, Arthur Francis, and the late Joji Watanuki for their invaluable support and insightful comments. I take this opportunity to express my deepest grati- tude to them all. Acknowledgements are also due to the many manag- ers, team leaders, and employees at companies in Japan, Europe, and the United States, who helped me in the research for this book by readily accepting my interviews and responding to them generously, or by allow- ing me to conduct employee surveys. I further wish to extend my sincere gratitude to the editors at Palgrave Macmillan, Jacob Dreyer, and Liz Barlow, Head of Business and Management, for their professionalism, efficiency, and responsiveness. The editorial assistant Anushangi Weerakoon was very responsive and helpful. I am also grateful to the reviewers for their encouraging com- ments and valuable suggestions. Finally, special thanks go to Masataka Watanabe for his generous cooperation and many constructive comments he provided throughout the course of the entire project. Tokyo, Japan Satoko Watanabe c ontents 1 The Competitive Pressures of Globalization and the Motivation Crisis 1 Stresses and Strains in the Business World 1 The Motivation Crisis 4 Increased Expectations and Workplace Reality 9 Conclusion 10 2 Japanese Management: Changes and Survivals 15 What Is Japanese Management? 16 Organizational Management: Ideal Types and Current Practice 21 Performance-Based Management 34 Operational Measures to Improve Japanese-Style Personnel Management 46 3 Intercorporate Networks and Corporate Governance: The Present and Future 59 The Diversity of Capitalism and Comparative Institutional Analysis 60 The Fate of the Keiretsu 72 Corporate Governance 82 Conclusion 92 ix