Japanese Management Overseas: Dilemma and Challenges

Toshihiko KINOSHITA (Professor, Wasede University)

Foreign employees tend to complain about Japanese managers by asking why they hold meetings constantly and endlessly without making any decision, why they do not express their own opinions at such meetings, why they work so much, always beyond normal work hours, or why they disregard their private life and neglect their family members. No, these are not just the complaints that we used to hear a couple of decades ago. These are what I did hear myself a couple of "weeks" ago from a group of foreign employees, a little less than twenty, working at Japanese companies in Europe. More seriously, what I learned this time, and on some other recent occasions, does not seem to be an isolated incident, but rather a widely observed phenomenon not only in Asia (quite often in China with more newly established Japanese-affiliated companies), but also in the U.S. and European countries even today. There are some exceptions including some of Japan's "excellent companies," but the number of such exceptions is negligibly small.

We Japanese, including myself, wish to believe that Japanese companies would have undergone evolutionary, if not revolutionary, change to adapt to globalization by modifying Japanese-style management practices and improving cross-cultural communication skills in order to expand their business to the outside world. In fact, more and more companies are earning revenues and profits from their overseas operations, and Japanese business appears to be quite successful in terms of exports and foreign direct investments. Then, why this lack of improvements in managing foreign employees overseas for more than a couple of decades? Is this affecting or beginning to affect the performance of Japanese companies overseas negatively? If so, would improvements in this area yield very high returns in Japan's global business?

As is often pointed out, conflicts between Japanese style of decision-making, communication and human resource management on one hand and strong pressure to adopt international standards for various management practices on the other are now quite visible both at home and overseas, as business relations and activities have become quite complicated in today's economic conditions. Unlike within Japan, these conflicts could not be concealed or ignored overseas too long, because foreign employees, especially highly talented ones, would not be as obedient as typical Japanese employees, and might well either speak out or leave their company. In a majority of cases, however, Japanese managers at foreign branches or subsidiaries are given neither clearly defined authorities nor enough training in dealing with cross-cultural management issues effectively, thus leaving various problems unresolved for many years, even for a couple of decades.

Despite these managerial problems, many Japanese companies have been operating and expanding their business overseas rather successfully, especially in the traditional manufacturing sectors, where technology and productivity in production are dominant factors for success at home and abroad. Furthermore, in manufacturing it is blue-collar workers who are crucial in production technology transfers, where Japanese companies seem to be doing better than their American and European counterparts. Most of the problems are happening in dealing with white collar workers, especially locally hired managerial personnel.

Actually, Japanese business is well known for its inefficiency in services including finance, and generally quite weak in international competitiveness in the service sector in general, precisely because of some inherent weaknesses in managing white collar personnel to improve business performance in such areas (with an additional and related reason being that Japanese-style services are not easy to be rationalized and digitized with IT). As Japan is being caught up by developing economies in manufacturing and forced to look to more sophisticated services in global business, there are fewer and fewer Japanese companies visible and competitive, compared to the U.S., European, and even some Asian businesses, in the world economy. Therefore, warning signs from overseas operations should seriously be taken by Japanese business to detect some fundamental problems in their management practices from the global viewpoint.

It should be clear that Japanese business must be more transparent and accountable in the roles and responsibilities of its managers and employees and also in day-to-day decision making and communication. This should begin at home, and then naturally apply to overseas operations. Needless to say, such transparency and accountability are needed in the roles and responsibilities of overseas branches and subsidiaries and their relations to the corporate headquarters in Japan (instead of the current trend of increasing control over local branches and subsidiaries by corporate headquarters due to strengthening internal governance). These are preconditions for adoption of locally hired managers to lead local operations successfully.

Furthermore, we need to do the following: (1) More comprehensive preparations and training are needed for Japanese managerial personnel selected to be sent overseas and likely to be such candidates regarding local socio-economic conditions and cross-cultural management. Also foreign employees, especially management personnel, who should be given opportunities to visit Japan to see and learn how things are done effectively in Japan's business environment. (2) It is quite important for Japanese business to foster good, trusting relations with locally hired managerial personnel, and accelerate their promotions, all the way to the top level, if possible. (3) Top executives at the headquarters, rather than lower-level managers, must examine these problems themselves and take their own initiative in solving them. Although the number is still very small, there are some companies that are doing well on the above three counts (for example, by setting up an "overseas personnel training center" in some cases), leading to successful overseas operations.

As a nation as a whole, Japan needs to do more to reinvent itself for its own survival in a rapidly globalization world. We need act now, before it becomes too late, in view of the fact that there exist numerous adverse factors emerging, possibly leading to the worsening of the situation surrounding Japan in the near future, such as general decline in work ethics, communication skills, technical ability, and other qualifications on the part of younger generations.