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The effectiveness of management in Japan

We will now give a clear and concrete example of effective governance. The Japanese miracle in economics is incomprehensible to many people. The book “Personnel Management” provides an answer to those who want to learn more about the Land of the Rising Sun and its economic leap. It proves the claim that effective management depends largely on staff.

After the end of World War II, the Japanese economy underwent radical restructuring. Important for its development is the decision of the allies (rather the US government) to lift the ban on the existence of large Japanese companies. Reference: “Comparison between the US and the Japanese management model“, https://mpmu.org/comparison-between-the-us-and-the-japanese-management-model/

This restores the “two-story structure” of the Japanese economy, ie the existence of large and small businesses. Rapid growth begins in important industries such as mechanical engineering, metallurgy, electrical engineering, etc. At the top of each industry is a large company, below it, many smaller ones are in subcontracting with their older sister. Below these are second and even third-tier companies that are in business contact with each other. This is, in short, the skeleton of the Japanese economy vertically.

These groups are called “keiretsu”. Pay in larger companies is better. There, of course, working conditions are at a higher level, leave is greater, there are other preferences. That is why more skilled workers work in large enterprises. Of course, large companies have programs to attract specialists from elite universities and high schools.

There are different categories of staff horizontally: depending on the nature of the rental relationship, they are permanent and non-permanent workers. The latter are mostly women who work about 4-6 hours a day. Seasonal, seconded, as well as students, are temporarily working, something typical for Bulgarian students.

Former permanent workers over the age of 55 are volatile

Former permanent workers over the age of 55 are volatile. Interestingly, women are rarely hired as permanent employees, because it is common for a woman in Japan to work until she gets married and only when her presence at home is not necessary to start working again. Women earn significantly less than men, even when working as permanent workers. Japanese law seeks to address this blatant discrimination through a series of laws.
The opportunity to accumulate large capital in Japan is due to cheap labor. In the 1960s, Japanese workers received 7 times less pay than Americans. Today, the Japanese take more than their American counterparts. One more thing, the Japanese make the most hours in the world. Compared to countries such as the United States and the United Kingdom, Japan works on average about 200 hours more, which is 25 working days if we consider that the working day is 8 hours. Reference: “Lean integration in organizations – a real example”, https://mstsnl.net/lean-integration-in-organizations-example/

Labor disputes are one of the smallest in the world

However, due to strikes or other disturbances, the hours have decreased to the solid figure of 2189 for 1988. But it should be noted that labor disputes are one of the smallest in the world. Some Japanese scholars explain this fact by the presence of a national spirit and consciousness formed under Buddhist and Confucian ideas.

This explanation is strikingly similar to Max Weber’s theory of the birth of industrialization under the influence of Protestant ethics. However, the purposeful activity of the Japanese management towards the creation of a mechanism of company personnel management is more important.
The mechanism is new because the old one (before the war) turned out to be incorrect and incomplete. The management system acquired a complete look in the period 50-60 years of the XX century.

The Japanese companies

It is introduced by all Japanese companies. For comparison, in American companies, the supreme governing body is the general meeting of shareholders and the board of directors. If the detectors have a total of more shares than the others, the general meeting is canceled. In Japan, shareholders rarely part with them, in other words, shareholders are an extremely stable contingent. The controlling stake in a company is usually held by all other companies in the industry – the so-called “shudan”. Based on this reciprocity there is also control over the supreme body.

Japan is characterized by the creation of a core of highly skilled workers with a work ethic and culture-specific to the company. Every company has a long-term strategy focused on the personal development of the “company worker”. The policy of each company is aimed at long-term profit, which will be easier to achieve through the work of “permanent employees”. Usually, senior managers rise from the company, each employee can become president of his company. As a rule, he stays for a maximum of 2-3 terms but builds a development plan for the next 10-20 years. This builds a solid foundation for those who come after him. The guarantee for the company’s prosperity is, of course, profit. To this end, we are working in the long run to achieve it. Every general manager works in this sense. As I noted above, anyone can rise to a senior management position, and their careers are closely monitored. It involves going through all levels of government. Almost all directors of Japanese companies are around 60-65 years old.

Decision-making systems

There are two types of decision-making systems – individual and collective. For the United States and Europe, decisions are often individual, while in Japan, decisions are often collective, called “ring sei.” The decision-making is required of lower-level managers in writing, which can be discussed within the stakeholders. Thus, the staff becomes involved in management decisions. This is undoubtedly a stimulating factor for the workers, and the decisions are timely and adequate. Decisions are not made at special meetings (which would take too long) but are made in a flash without much procrastination. “Ringi sei” is not mandatory. After careful consideration, the president accepts the best project. The management scheme also includes trade unions, whose presence requires a flexible policy towards the human factor in production. Interestingly, each company has its union.

Each company connects its long-term goals with the interests of the company. Initially, Japanese companies had strategies for hiring new permanent workers. Each candidate was carefully researched long before being appointed. An interview follows, in which the candidate’s personality, family, health, general culture, and the type of work he aspires to be examined. The close connection between the employee and the company is through his future career. In general, the worker changes several types of work and by the age of 15, he already has 2-3 professions, which may not even be related to his previous training.

Internal labor market in the company

This creates an internal labor market in the company. The associate’s career is directly related to the principle of “lifetime rent”. Each worker goes through a system of ranks and ranks. For example, Sony develops 3 main activities: sales and marketing; production; technology, and research. Each worker can rise in all three directions if he meets the relevant requirements. The scheme is similar for other companies. What they all have in common is that every beginner starts from the lowest place with the lowest salary. In the beginning, the employee undergoes a training course in administrative and technological practice, while further improving the skills of the employee.

This course is mandatory in compliance with the relevant period during which the student must “stay”

This course is mandatory in compliance with the relevant period during which the student must “stay”. Production associates have the lowest rank, which corresponds to their secondary education. But everyone has the opportunity to rise in the hierarchy of the company. This only happens when the person applying for a position meets strict requirements. The procedure is as follows: within one year of the deadline for promotion, the employee applies. It is approved or not based on an assessment by the immediate supervisor. This is followed by an independent conformity assessment. Those who have exceptional opportunities do not wait for 1 year but must pass a special exam plus the traditional test of compliance.

The assessment is determined by two people – the immediate supervisor and a representative of the personnel department. The assessment is by no means biased because it is formed by 2 independent sources. Naturally, with the increase of the rank, the remuneration also increases. It increases reciprocally with the increase of the length of service in the company. If the worker moves to another company, the worker starts from scratch. That is why every worker strives to work in one company, and the opportunity to rise in the hierarchy makes him diligent and conscientious in his work. Competitions are announced for the vacancies, in which everyone can participate if they meet the relevant conditions.

This automatically leads to additional self-improvement and increased efficiency of workers. It is significant how companies additionally encourage their employees by creating temporary groups to solve specific problems. As the group is temporary, there are almost no bureaucratic obstacles, the task is the same for everyone, which in turn allows for free expression of abilities, thus encouraging the internal stimulation of competition between members of the group. This undoubtedly leads to professional growth as conflicts are almost ruled out as the group is temporary and people are from different departments.

Let’s go back to the initial training course. It aims primarily at the employee’s self-confidence, sense of responsibility, practical skills and habits and even improving his physical fitness. This is followed by on-the-job training – this allows for the mentioned promotion or rotation of the job. Most mastered professions make the associate able to practically manage or replace if necessary his colleagues.

The training program is divided into 6 levels:

  • 1. Acquisition of basic skills and knowledge; Reference: Knowledge Management Model, BusinessPad.org
  • 2. Substantive understanding of the type of assigned work;
  • 3. Understanding in the highest degree / in details / of the work plus the ability to eliminate problems;
  • 4. In case of unforeseen problems to develop the necessary plan;
  • 5. Opportunity for improvement and efficiency of production;
  • 6. Ability to anticipate prospects and their proper connection with the results of work.

In Honda, a worker with the rank of foreman or manager is in charge at the 5th level and a senior technologist at the 6th level. Training can also take place, not in the workplace itself, but the level in both places is at an exceptional level, even better than the university level. The training is regulated and noted in the relevant documentation by the respective manager.

The connection of the interests of the staff with the long-term goals of the company is increased by the “system of internal social security”. The most important thing is to provide housing for permanent workers. For this purpose, companies provide long-term low-interest loans or place people in dormitories. Japanese companies scare away health insurance, spend money on big family holidays, own sports facilities, places to rest, etc.

A Japanese deposit development company has its cemetery. “This helps to build the belief among workers that they are one,” said the head of the company.
This interference of workers with the interests of the company is of general social importance. Attracting employees to the long-term prospects of the company is through 3 types of participation:

  • 1. System for participation in the ownership of the company – providing shares;
  • 2 System for participation in the management of the company;
  • 3 Profit-sharing system. All workers receive a bonus – a six-month bonus. There are also separate cash incentives.

Mechanisms for linking the goals of production with the interests of the staff. Each company creates “quality control groups” -GKK. It is made up of people from the production itself. The group is managed by the unit manager. In solving the problems, a separate head of the specific problem is appointed, who researches and develops it. Separately, the members of the group take a course to gather information on the issues. The group is in constant contact with others. At conferences that can be at the national level, the best are awarded prizes. Each GKK strives to become a constant generator of innovation in the workplace. That’s why production in Japan is so impressive.

In addition, advisory committees are being set up to assist the GCC in solving complex technical tasks. Thus, in addition to the educational level of the members of the group, the production habits, the connection between the people improves, the creative work is activated. The activity of GKK further increases not only the quality but also the quantity of produced products.

“Informal groups” also play and integrate into the Japanese type of personnel management system. They involve associates who meet outside working hours in cafes, clubs, and public places. Here, disputes are settled, trust is created, and the climate in the workplace and with experiences of a non-working nature is generally improved.

Every company has systems for evaluating the results of the employee’s work. Evaluations are often of two types: 1. Evaluation by the immediate supervisor, the personnel department, and the administrative management of the form. The work results are evaluated – the volume of work, quality, and a special paragraph for performing optional activities. It also assesses the attitude towards official duties – work discipline, group work, activity, and independence. Striving for development and growth – self-development, the effectiveness of the activity, and finally the specific manifestations and results. This is how the company pays great attention to each of its wards, it appreciates his individuality, allows him to develop, takes care of his household problems. In addition, the worker makes his self-assessment.

This is the feedback between a subordinate and a superior, from which the latter receives a direct idea of ​​the goals set by his subordinate. The assessment is given twice a year. For the first time, the decisions regarding the evaluation affect the amount of the remuneration, if there are relevant achievements above the desired ones, a bonus is given. For the second time, the issue of the regular annual increase is raised.

All training programs are paid for by the companies

Other activities such as meetings, creation, the printing of programs and materials, recording of results are carried out by the personnel department. Here, considerable attention is paid to each worker, his professional growth is monitored, etc. All this is noted in the relevant forms and maps. The process of work in the department itself is in the direction of continuous improvement. The department employs a team of professionals – psychologists, sociologists, etc., who further analyze and process the data, having the right to freely comment and draw conclusions. The evaluation activity of each associate is strictly regulated. It is divided into two stages – a one-month evaluation of the employee begins in April. It is given separately to each assistant foreman. He meets with everyone and in a business, conversation discusses the activities of subordinates.

According to him and the administrative management, the respective semi-annual premium is formed. The relevant map is also filled in, where it is assessed how the employee has coped with the training. The second stage somewhat repeats the first but begins in mid-autumn. The final assessment is corrected by the personnel department and the administrative management and influences the receipt of the award. The second assessment also determines the annual salary increase.

Evaluation creates dynamics in the company

Evaluation creates dynamics in the company. It has a great influence on personnel management. The assessment itself is the result of several independent factors, which makes it extremely objective. Wage formation is a free and dynamic mechanism. Each company has its strategies for determining remuneration, but it has many common features with other companies. Wages in Japan are usually formed of two main parts – the standard salary and overtime pay. Take Toshiba, for example. She pays remuneration according to the following scheme: basic payment and payment for readjustment, for housing, harmful, payment for family support.

The Japanese way of managing staff

The Japanese way of managing staff is constantly evolving and improving. The first is the introduction of automation in the data processing. This trend marks the beginning of the “information revolution”. Another area is the so-called “factory automation” – the introduction of machines with digital software devices connected by a common system and controlled by computers.

There is a new personnel management strategy. These are qualitative changes in the organization of enterprises and industry. It is planned to break up the large companies into controlled production centers. This will eliminate the “pyramidal nature” of the production organization. The new production units will be connected by a horizontal connection – this will avoid attracting the best employees from the same company and will open up opportunities for smaller companies. Each unit will have a maximum of three levels of government, which will automatically affect bureaucratic control. Workers will be attracted freely, so the logic of forming a “company man” will be replaced. The Japanese management is still going to develop the production of goods of individual and national character.

If we proceed from the views of psychology, it will be seen that every action requires motivation. The power of Japanese personnel management lies primarily in a non-trivial, individualistic approach to motivation. The need was achieved after the Japanese worker still works more than 25 days compared to those who compete with them. Of course, it should be noted the focus on the development of leading industries in the economy such as mechanical engineering / in all its sub-sectors /, electronics, software, and hardware.

By Robert Brown

Robert Brown is a longtime manager of a technology organization and author of a management book. In his spare time, Mr. Brown helps students get a better education by helping to publish free study materials.

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