How the nation manages its workforce and a look at what it could mean for the future.
The year is 1990, Wilson Phillips “Hold On” has topped the charts, German reunification is in full swing, and the Japanese economy is at an all time high. It’s a period in which Japan can economically do no wrong. The island nation’s relative prosperity and meteoric rise on the world stage, while not perfectly analogous, is not dissimilar to present day China. At half the US (253M) population in 1991, Japan (124M) was on track to overtake the States as the new global economic leader. To put this into perspective, at the time;
- The grounds of the Tokyo Imperial Palace were calculated to be worth more than all the land in the entire state of California.
- The Australian government sold their embassy in Minato ward and paid down their national debt.
- 9 out of 10 of the largest banks in the world were Japanese.
- If you dropped a ¥10,000 note anywhere in Ginza, the space below the note was worth more than the note itself.
It stands to reason that the rest of the world was paying attention. What was Japan doing right? How could they capitalize on this success and attempt to translate complex socioeconomic and cultural factors into their own systems of management. Entire books and analyses have been written on the subject, but in the interest of focus — let’s look instead at how Japan was managing this growth at an organizational level and how that style of management has had an impact on the Japan of today.
The psychology of it all
It’s nearly impossible to discuss Japan without discussing risk aversion — an intense avoidance or perceived negative outcome in playing probabilities. Some argue that economic success actually encourages risk taking by insulating the parties involved and promoting confidence through triumph. Interestingly, and seemingly in contrast with this idea, the common sentiment throughout Japan’s economic boom can only be described as “We must be doing something right, let’s keep doing that thing,” this sentiment has contributed heavily to the rigidity in management styles we often see in modern Japanese organizations.
While the bubble itself was fueled primarily by a period of vigorous activity in the equities market, skyrocketing real estate prices, and market speculation, it stands to reason that those managing the outlying economic growth might adapt and evolve with their success — but this seemingly was not, and has not been the case.
This is in stark contrast to today, where both leading and well established theories of management suggest that adaptability is one of, if not the most important, aspect of a firm’s continued success regardless of external conditions. Even in the absolute best of times, habitually successful companies continually evolve through the active analysis of the current market, their position, and relative strengths. Sometimes this evolution is positive, and other times… not so much.
Japanese management theories, a breackdown
While culturally distinct, Japanese management has several key sociological markers that separate it (broadly) from its western contemporaries. Erin Meyer, author of The Culture Map, defines these factors through a variety of lenses including communication, management structure, disagreement strategies, and scheduling. For example, whereas a country like the US tends to be fairly egalitarian, Japan was -and still is — staunchly hierarchical. In broad strokes;
-Rigid timing on tasks
-High context communication
-Low context communication
Without understanding these principles, it’s difficult to conceptualize some of the more fundamental philosophies within Japanese management practices. Practices such as;
At base, it seems like this would be in stark contrast to Japan’s strict social hierarchy, but in reality the two work in synergy. While decisions themselves can only be made at the highest levels, the actual deliberation between tasks ranging from daily minutiae toward larger company directional and strategic decisions are “crowdsourced” in a way — whereby each member can speak openly (at their own level within the company) regarding the merit or detriment of a particular action. Japan’s need for high context communication — meaning that only a part of information is expressed verbally — also lends itself toward the need for companies to aggressively troubleshoot, test, and understand their decisions before implementation. This begs one question: Does the need for consensus create a space for collaborative development, or is it a case of agreeing for the harmony of the project, thus creating a lack of fresh ideas and pushback against higher-ups?
The Ringi system relates to decisions through consensus, but specifically defines the means through which that consensus is reached. Employees at each individual level discuss decisions amongst themselves until reaching a consensus, passing this to the next level of management (ie. employee -> manager -> director -> president).
The resulting decision can then be implemented quickly as the entire company (or relevant parties) are privy to the reasoning involved in the decision itself. This also easily allows the utilization of indirect feedback, through which ideas/concepts will run a gauntlet and be allowed tweaking without causing disharmony among employees/management, etc.
There is a particular focus on stability within the Japanese benefits system. A reliable and liveable pension, consistent high quality health care subsidized through your employer, a bonus system (typically semi-annually), and extremely strong employee protections that nearly guarantee gainful employment for life. In a way, these benefits don’t encourage Japan’s need to move quickly or aggressively in the innovation business realm. Whereas an employee of a less stable system seeks to quickly and immediately navigate toward management, promotions, and advancement, a Japanese employee is much more likely to stay within their purview, follow the structure, and work toward a more traditional path upward.
Yesterday, Today, and Tomorrow
So, can we draw any links between success and management at a country level… the answer is maybe, and probably not in the way you might think.
When comparing Japanese management with the success of the economy of the ’90s, it stands to reason that if management was the primary factor then the Japanese economy would be somewhere between the moon and Mars by now. It’s far more likely an artifact of Japan’s success rather than its cause. It’s more or less clear that Japan’s unique economic situation preceding the bubble was a result of various highly complex factors far beyond something as simple as managerial style.
There is even a strong argument to be made in favor of Japanese management style and its role as a lynchpin in the continued stability and relative strength of the Japanese economy. With continued economic stagnation, decline in population growth, and an increasingly high level of global competition/economic development — Japan has maintained a surprisingly firm grasp on its position as the world’s 3rd largest economy.
Could Japanese management style be a reason that Japan has managed to navigate complex economic contraction and population decline? Certainly — an entire generation of management now exists has only ever experienced a Japanese economy with little, if any, relative growth.
While the future is, of course, unclear, Japan will undoubtedly face numerous trials and challenges as it looks to transition its population and economy. The colloquially termed “Shrinking generation” (ie. generation of managers who have only ever worked to mitigate contraction rather than growth) should certainly concern any company that realizes that for better or worse, it is not 1990 anymore. The world is changing, and it’s best to understand that mitigating contraction and diminishing returns — a strategy with little immediate risk — is risky in that it allows other economies and players to capitalize on current economic conditions more uniquely, and favorably, than Japan.
It’s difficult to say what, if any, impact that Japanese management had on the immediate success of firms within the context of the economic success of the ’80s and early ’90s, but it’s clear that Japanese management continues to play a role in the Japanese economy, and culture, of today.
As Japan’s complex population and demographic changes continue to snowball, management should be an area of key focus for how companies, and Japan as a whole, will adapt its model to its changing/evolving needs. Although there is no one size fits all model toward management, if we are to believe that Japanese management is truly an artifact of success rather than its cause — a theory that current economic conditions suggest to be at least possible. Then looking inward to their own organizational structure is one such way in which Japan may be able to better adapt for future success.
Edits: Theo Sng, Lucy Dayman
Translation: Midori Nakajima