Japanese HRM Analysis and The Lessons of An Effective International HR manager
Japan is a highly complex and dynamic society that has experienced great changes in the past 125 years, with conversion from a feudal state into a modern industrialized nation and an economic superpower (Selmer, 2001). The Japanese have appreciated Western technology, science,
education and politics, while maintaining their unique cultural identity. The collectiveness of Japanese culture has been carried over to the companies, where a job means identifying with a larger entity through which one gains pride and feeling of being part of something significant (Selmer, 2001). Human resource management (HRM) has been argued by many as an important factor in the success of Japanese companies on world markets when it experienced significant economic growth during the 1980s (Pudelko, 2004). With these successions and growth, the implementation of Japanese HRM to other Western countries is highly regarded. However, the Japanese economy after forty years of growth entered a period of sustained economic decrease in the early 1990s, with greater global competition, rigid employment and business systems, and a banking system on the edge of collapse (Benson, 2004). With these events, Japanese HRM has evolved significantly, and is providing lessons for international human resource mangers today.
Japanese HRM has attracted a significant degree of attention from the West over the years. With the relative rise in the economic fortunes of Japanese companies, many have pointed towards the Japanese style of HRM as a source of competitive advantage (Beechler, 1994). It was noted that Japanese organizations put emphasis on human resources which are reflected in three HRM strategies, including an internal labor market, a company philosophy that expresses concerns for employee needs, and focus on cooperation and teamwork in a unique company environment (Beecher, 1994). With these three general Japanese HRM strategies, techniques of open communication, job rotation and internal training, a competitive appraisal system, importance of group work, consultative decision making, and concerns for employees are expressed. Also, Japanese firms use careful screening of job candidates to ensure that the qualifications fit with the value system and corporate culture of the business firm. With Japanese style HRM, there are practices of job rotation, seniority based wages, long-term employment, implicit performance evaluation, hiring of graduates that receive extensive training and socialization into the company, team based employee activities, and a relatively small gap between white-collar and blue-collar workers in terms of benefits, salary and on-the-job perquisites.
A notable characteristic of the economy is the cooperation of manufacturers, suppliers and distributors in closely knit groups called keiretsu. The keiretsu system is the framework of relationships in postwar Japan’s major banks and major firms. Related companies organized around a big bank, such as Mitsui, Mitsubishi, and Sumitomo, who have a large amount of equity in one another and in the banks (Dedoussis, 2001). The keiretsu system has the virtue of maintaining long term business relationships and stability in suppliers and customers. The keiretsu system has the disadvantage of reacting slowly to outside events since the players are partly protected from the external market. However, keiretsu relationships have helped members to share risks while allowing Japan’s large-scale enterprises to achieve considerable insulation from market forces (Dedoussis, 2001). Also, keiretsus can provide significant scale economies, highly incorporated vertical relationships, networking that confines competition, considerable foreign direct investment and important governmental influence. The political power in Japan is in the command of the twenty-one government ministries, which includes the Ministry of International Trade and Industry (MITI) (Keys et al, 1994). The Japanese political elites have played a critical role in choosing, from available local and foreign cultural options, those which are best suited to their needs. The high-growth economy of postwar Japan formed a unique style of capitalism in which managers and employees, rather than shareholders, were the key stakeholders of a company (Mizutani, 2003).
However, Japan’s greatest recession since the post-second world war has stressed relationships among keiretsu members as key firms are forced to end established links with minor companies (Dedoussis, 2001).The breakdown of the keiretsu system of cross-shareholding and favored trading among member corporations of a business group has severely harmed the safety net of supporting the long-term growth strategy of Japanese firms and their ability to protect employees from downside market risks (Selmer, 2001; Gerlach, 1992). Deregulation is another force for change and has made Japanese markets more accessible to competitors, both foreign and domestic. In protected industries such as financial services, distribution and agriculture, there are only a few firms that are prepared for the challenge of competition and uncertainty (Lincoln and Nakata, 1997).
Changes have been made in the cultural aspects of Japanese human resource management. Individual performance and results-oriented performance are replacing group performance and loyalty due to the new criteria for creating salary levels, with the principle of ‘freedom and self-responsibility’ for the ‘independent individual’ (Takashi, 2003; Sanford, 1995). In a survey conducted by PricewaterhouseCoopers Global Human Resource Solutions in the metropolitan Tokyo, it was examined that there has been a movement from a more traditional, collective/company orientation toward more self-orientation (Brislin, 2005). This new development can be seen as one element leading to a major shift in the depths of Japanese corporate society (Takashi, 2003) .The salary systems that link annual compensation to the attainment of company targets are now found in several Japanese firms. These changes in the salary system are in line with the development of the dual-promotion system which is distinguished between management responsibilities and titles on the one hand, and status and pay on the other hand. The aim is to make a transition from time-based promotion to performance-based promotion, an evolution in the Japanese HRM practices.
There have also been changes to careers, recruitment and long-term employment. Formal management and supervisory training is gradually replacing informal on-the-job training (Selmer, 2001). There have also been other changes in Japanese management practices including cutbacks in bonuses and overtime payments. However, the significant characteristics of Japanese management, such as lifetime employment and the seniority system, appear to be resistant from change. The importance of long-term employment is to allow Japanese firms to apply technological innovation, which is facilitated and supported by the long term cultivation of employee skills through cross training (Drucker, 1981). However, due to the developments, retrenchments are now included in restructuring plans of Japanese firms. The seniority system is also an issue as there are not enough positions available to accommodate employees following the economic decline during the years. Long-term employment promotes harmonious action and a sense of unity with a positive effect combined with Japan’s cultural background, as close human relationships are formed and community awareness increases when workers are employed over long periods (Baba, 2004). If employees are uncertain whether they may be laid off or not, labor relations become unstable and cooperative relationships are difficult to establish. In societies like Japan, in which a culture of encouraging cooperation has developed, a synergistic effect works through long-term employment and major benefits can be expected (Baba, 2004).
The issue of the continued existence of unique Japanese human resources management practices has regained attention as Japanese firms feel the impact of the country’s economic battles. The perspective that Japanese management is fading does not appear to be completely unsupported as few of the human resources management practices have escaped change. Firms are decreasing the number of new recruits with structural shifts evident in recruitment as there is a growing emphasis on hiring experienced employees with specialist skills rather than inexperienced graduates from top universities. Also, external recruitment is increasing among employees indicating the removal of internal promotion, which is a development in Japanese HRM.
Evolution has also taken place in areas of labor relations. In the past, Japanese enterprise based unions (kigyo-nai kumiai) have had a positive outlook in respect to salary negotiations with preference on job security for their members (Selmer, 2001). These unions would assure supportive behavior by their members, in exchange for proper behavior by companies and with the integration of the firms’ training, wage setting, and redundancy systems. Also, firms could depend on the role of planned business as a last option, if the union did not commit to its side of the agreement. This has now changed as there is a simultaneous breakdown of the traditional trade unions, business associations and keiretsu networks.
Presently, there is much doubt as to whether either side will remain in the relationship. Middle managers are now the targets of de-layering processes who feel a growing need to defend their concerns (Selmer, 2001). In contrast, the Trade Union Law in Japan only identifies unions as representing the interests of the employers, and more groups may form inside the companies to defend the interest of the center white-collar employees and their long employment contract. The system of company based unions may be harshly destabilized if such groups extend outside companies to become horizontal regional or national white-collar unions. With this, non-union employee representation may also pose a threat to the traditional enterprise-based unions. However, Japanese firms have dedicated much effort into developing a system of participation in their management techniques by using non-union representation practices resourcefully and effectively to form and develop employee representation in decision making (Selmer, 2001). There are two types of employee associations with almost one-third that are voice-oriented organizations, and the remaining two-thirds that focus on recreational activities (Sato, 1997). The voice-oriented employee associations regularly converse industrial planning and working conditions with management, and managers typically value their functions of comprehensive and communicating views of employees. Also Japanese labor relations may be affected by many changing environmental forces such as the internationalization of the economy, the rapidly aging population, the acceleration of technological innovations, and changes in the values of the younger generation (Selmer, 2001). These are some developments in the evolution of human resources in Japan in terms of labor relations today.
With all the developments emerged through the evolution of Japanese HRM, the lessons that have been provided to International HR managers are valuable. As Japanese HR practices are highly regarded and often taken as a reason for outstanding success in their economy, the true effect and implication of these practices is often debated when implementing the same strategies in Western countries. For an international HR manager, there are certain aspects that must be considered in order to be successful. Managers need to take into consideration the differences in culture. For example, Japanese managers make an active commitment to preserve harmony and there is a high emphasis placed on group work. However, due to the changes in Japanese HRM, managers must be aware of the shift towards a more individualist behavior. Although the reaction of Japanese and Western firms to economic difficulty may appear similar in some respects, Japanese firms appreciate considerable flexibility in the management of human resources due to a more favorable environment (Clardy, 2003). International HR managers should also consider the impact of governments and labor relations when making decisions. It can be seen with Japan that the effect of these elements has greatly impacted the process of human resource management in the country as unions have changed their methods of action.
The evolution of HRM practices in Japan has been seen to be quite extensive. Since the recession, there have been gradual changes in the cultural behaviors displayed by Japanese employees. Japanese employees have moved from a traditional and collective orientation toward more individualistic and self-orientation. Although special characteristics of Japanese HRM, such as lifetime employment and the seniority system, are somewhat resistant to change, there have been developments in the recruitment practices as preference is now given to individuals with experience, rather then the norm of molding graduates. Also, there has been a breakdown in the union and labor relations, with an emergence of non-union threats and division of support systems. For an International human resource manager, it is beneficial to take into considerations the lessons established by the evolution of Japanese HRM as it offers a greater quantity of information and scope into the global HR operations of Japanese firms. Also, it provides an interesting and more universal assessment of the challenges involved in managing cross-culturally and the importance of successful diversity management. These are some of the elements that make an effective international human resources manager and provide a competitive advantage.
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