Japanese Management in Change

The Japanese-style system predominant in the 1980s is no longer discussed in a positive context as Japanese companies are suffering slumping revenues due to the prolonged economic depression. It is widely known that Japanese companies, on the contrary, are being asked to learn the management systems of newly industrialized Asian countries, including China and India. However, it is first necessary to precisely understand the present situation faced by Japanese companies from the perspective of academic research. With this problem consciousness in mind, this introductory chapter discusses the current management system of Japanese companies according to each aspect of management such as management system, business strategy, and organization and human resource management.

Japanese corporate governance has strengthened over the last decade (the perceived development); however, this is only one aspect of this change. Another aspect requires some analysis to determine the essence and reality of Japanese corporate governance. I use the terms “vertical governance” and “horizontal governance” in the analysis for this paper. Vertical governance, which can be summarized as forced CEO discipline, is the dominant perspective of the current global governance debate. Horizontal governance is introduced in this paper and is a concept summarized as voluntary CEO discipline. I argue that horizontal governance has been a salient characteristic of traditional Japanese corporate systems for decades, although it is relatively new in terms of its theoretical perspective. The significant changes in Japanese corporate governance since the late 1990s have the potential to undermine the foundation of horizontal governance of Japanese firms (the unperceived decline). Caution is necessary in assuming that these changes portend improvements in overall Japanese corporate governance.

This chapter has two purposes. The first is to consider why the managers of Japanese companies are reticent about appointing outside directors, despite strong pressure from foreign investors to make such appointments. The second is to empirically examine the relationship between the appointment of outside directors and the performance of Japanese companies that are listed on the First Section of the Tokyo Stock Exchange (TSE). My investigation reveals that the managers of TSE listed companies do not feel the need to appoint outside directors as they are satisfied with the current corporate governance system. This includes a board comprising at least three statutory auditors, of whom more than half are outside auditors, as well as the checks and balances provided by the board of directors. In addition, outside directors are expected to supervise management, but they are not necessarily required to become involved in managerial decision making. Some empirical studies, which analyze U.S. and Japanese companies, show no apparent enhancement of corporate performance by the appointment of outside directors. The results presented in this chapter confirm the findings of these studies and show that there is little likelihood that the appointment of outside directors has any significantly positive effect on corporate performance. This is likely to be a reflection of the above noted fact that managers in TSE listed companies do not necessarily expect outside directors to become involved in managerial decision making.

The analysis of this chapter indicates that a company can be a player in creating the “new public” by showing the collaboration between Japanese companies and the nonprofit sectors, including nonprofit organizations in support activities. Although traditional Japanese companies are community organizations that are closed and scarcely related to the external society, their existing value structure began to sway with the bubble burst and globalization, resulting in the new moves of Japanese companies.

The authors discuss the linkages between characteristics of the Japanese management style and the poor performance of many Japanese companies since the mid-1990s. The authors argue that some characteristics of the Japanese management style are ill-suited to the demands of the global and information economy. To support this argument, the authors analyze key Japanese management practices from four perspectives, the high-context culture, explorative versus exploitative product development, the experiential learning model, and the market sensing component of strategic flexibility. The authors close with suggestions for possible ways for the Japanese company to draft a new Japanese-style management strategy.

This chapter describes the history of the intensifying function of the market principle and growing interest in corporate profit instead of sociality (employee-orientation) when managing Japanese companies during globalization. It states that today’s Japanese companies began to place importance on interorganizational strategy (organization-set strategy) that deals with the relations with subsidiaries, affiliated companies, and customers in addition to the strategy of each company, including product and market strategy and diversification.

This chapter argues the globalization trend influence of the financial market over Japanese companies. It explains specifically that ad hoc measures were repeated in Japan during the time when the American style market was positioned as the “success model” after the bubble burst and that Japanese companies gradually aspired for management that attaches importance to share prices.

The Japanese publishing industry was originally built on a closed, domestic system. International file formats for electronic publishing, EPUB and AZW, developed after the Japan-specific file formats had already been established, and the coexistence of these multiple file formats has complicated the Japanese electronic publishing market. In Japan, the electronic book exchange format that converts formats from one to another has been established to solve the compatibility problem. Although it is hard to evaluate the usefulness of the electronic book exchange format at this stage, the publishing industry needs to respond to globalization while maintaining the diversity found in Japanese culture.

This chapter insists that it is possible to set up new classifications of “utilized non-regular employee” and “limited regular employee” as intermediate labor markets aside from the “regular employee” in the internal labor markets, which is historically recognized in Japanese companies; non-regular employees are recognized in the external labor market. Here, the “limited regular employee” refers to an employee whose employment period is indefinite (with limitations on the working place, type of job, and working hours). The “regular employees” supported Japanese management, but “non-regular employees” are playing a very important role in the management activities of today’s Japanese companies. This chapter indicates the possibility of further classification of “regular employees” instead of generalizing them in one segment.

This paper investigates the changes in performance appraisal in Japanese companies, with a focus on the purpose of appraisals. It begins by critically reviewing existing literature on the purposes of performance appraisal, and then analyzes secondary data on the purposes of appraisal in Japanese companies, emphasizing that the purposes of appraisal should be congruent with Japanese-style management. It then reviews the concepts of performance management (PM) and shows how PM offers a useful framework for analyzing the expansion of the purpose of appraisal in Japanese companies. PM design is currently one of the hottest issues among researchers in the U.S. This paper also involves a case study on the expansion of purposes of appraisal, using the PM framework. Finally, it concludes that the purposes of appraisal in Japanese companies have expanded in a manner that is consistent with changes in Japanese-style management.

This chapter shows the need for a new career framework that assumes a delayered and flat organizational structure and an unstable business environment. Traditional organization and career research investigated the framework of growth and stability in the middle and latter twentieth century. However, a highly unstable global business environment has resulted in company downsizing and delayering. The delayering organizational structure has caused a new relationship between organizations and individuals. We assume that it has led to the career plateauing of middle managers, though few previous studies, especially in Japan, have examined the relationship between the delayered hierarchies and career plateauing. This study surveys this topic and determines which organizational factor and HRM practice can help plateaued managers succeed in Japanese companies.