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PREREADING EXERCISE Discuss the following questions in class before reading the case. 1. In your opinion, what are the reasons for the Japanese “economic miracle” that has occurred since World War II? 2. Many Japanese companies have become extremely successful in international business during the past twenty years. Which Japanese firms and products are well known in your country? In your opinion, why have these Japanese products been so successful? 3. The Japanese style of management has received considerable attention lately because of the success of the Japanese in doing business overseas.
What do you know about Japanese management techniques? 4. How would you describe the system of management that is widely used in your country? Case 6 THE MORIOKA MANUFACTURING INTRODUCTION During the 1970s and 1980s, worldwide attention has focused on the successes of Japanese firms doing business in the United States, Europe, and elsewhere. Nissan, Toyota, Honda, NEC, Sanyo, Panasonic, and numerous other Japanese brand names have become household words throughout the world.
Only two or three decades ago, the largest and most successful international firms came almost exclusively from the United States and Western Europe. How have the Japanese attained such an impressive position in world markets? As we have already seen in “The U. S. Auto Industry Case,” the Japanese auto manufacturers are currently exceeding their American and European competitors in labor productivity and in reducing production costs. In addition, in many industries the quality of Japanese products is perceived to be better than that of firms from other countries.
Companies that want to compete successfully against the Japanese will need to achieve similar results in their own business activities. The purpose of this case is to focus attention on the issue of labor productivity, using the Japanese model as a basis for the discussion. Japanese-style management has been widely analyzed, from its emphasis on long-term employment to its concept of consultative decision making. The central issue in all of the analyses is that Japanese firms appear to pay more attention to human resources (i. e. the people who work in the firm) than do firms from other countries. Among the policies used by Japanese firms for human- resource management are these four key elements: 1. long-term employment, 2. slow performance evaluation and promotion, 3. generalist career paths, and 4. consultative decision making. Since World War II, large industrial corporations in Japan have followed a practice of hiring their employees and managers directly from high school or college, then keeping them employed throughout their careers within the same firm.
Very little mobility exists between companies, since Japanese society has come to expect that a person will remain with the same employer until retirement. A very positive aspect of this practice is that it provides job stability for everyone in the firm, so that individuals tend to identify their own interests more with the company, which must perform well if their jobs are to be protected. Also, the company can justify expenditures on the training of employees, knowing that they will remain and offer benefits to the company from their increased skills.
The negative aspect (from a Western point of view) is that few socially acceptable choices exist for someone who wishes to change companies during a career, regardless of the reason. By giving careful evaluation to each employee and manager, Japanese firms demonstrate a sense of caring for the person. Also, by promoting managers through the ranks of management very slowly, the firm conveys to all that long-term performance is what counts. Even after the long initial period, ranks tend to be equal among people with similar seniority, though tasks and compensation become differentiated according to performance.
People “save face” by maintaining equal rank with others in their cohort through the years, even while the firm can be managed capably by assigning the key decisions to those who demonstrate the greatest ability to handle them. A third characteristic of Japanese human-resource management is the use of a generalist career path. That is, Japanese workers and managers are trained in one area of specialization when they join the firm, then rotated among assignments and specializations during their careers so that everyone learns several job skills.
Someone hired as a financial analyst may be shifted into the personnel department after four or five years, and then into government-business relations after that. A worker who spends all or most of his time on an assembly line may be moved into repair work and subsequently into another type of assembly-line activity. This policy enhances the flexibility of the firm, because people can be shifted from job to job. It also enables the firm to operate more efficiently by imparting more skills to managers and workers.
Thus, no one becomes overspecialized, and everyone spends some time in areas outside of the initial area of specialization, although a worker or manager may return to a preferred specialty after spending time working in other areas. Finally (in this brief sketch), Japanese firms use a system of consultative decision making, which attempts to pass information about important company activities from the top managers all the way down to the lowest-ranking workers.
In particular, decisions that will affect people in any area of the firm are discussed with those people before the decision is made, so that the affected workers and managers can voice their opinions and concerns before a problem arises. (For example, an auto company will distribute information about a proposed new assembly line, so that workers affected by the change will be able to see its impact on them and discuss it with their superiors before the change is made. Because top managers have been rotated through several functional areas of the company, they tend to understand the concerns of people at lower levels and to be responsive to them. Because all employees involved in the decision have the opportunity to raise concerns about potential problems, the firm can avoid errors that otherwise would occur. Ultimately, top management must take responsibility for decisions, so this process does not imply that everyone has equal say in decision making.
It is the conscious effort to create communication from bottom to top and top to bottom in the firm, and the fact that this information flow enables managers to make better decisions, that is so crucial here. Other aspects of Japanese human-resource management could be noted, but those already discussed give a good idea of the basic differences between those firms and their competitors from other countries. One of the major subjects of discussion by managers in the United States during the past few years has been the possibility of transferring some of the Japanese style to U.
S. firms. Are people from different countries and cultures similar enough that Japanese practices can be used elsewhere? An illustration of these issues follows. THE CASE The Morioka Manufacturing Company (also known as 2M) is a fairly typical large Japanese corporation that makes abrasives for automobile and industrial clutches, grinding and sanding machines, and specialized polishing equipment. In 1985 the company had about a 70 percent market share in Japan, and had gained almost 25 percent shares in most Western European countries and in North America.
Total worldwide sales were over 250 billion yen in 1984. 2M has been evaluating a proposal to acquire a factory formerly operated by Bendix Corporation in California. The factory produced industrial clutches, which Bendix sold a variety of companies for use in industrial machinery. Because the factory shut down only last year, almost half of the 300 workers formerly employed there would be available to work for 2M. Mr. Yoshi Hajima, the director of 2M’s International Division, was wondering about the advisability of investing in the United States at all.
He knew that the political pressure on Japan to import more U. S. goods and to invest in the United States to provide more American jobs was strong and most likely would continue through the rest of the decade. 2M could face limitations on its exports to the U. S. market at any time. Since that market now provided about 40 percent of the company’s worldwide sales, maintaining U. S. business was critical. The Bendix factory was not completely outmoded, but it would require substantial investment to upgrade the machinery. The location in California was not a problem for U.
S. sales because of the excellent transportation system in the United States. In fact, there was only one negative aspect of the whole idea: Hajima had seen various studies that showed an enormous productivity gap between output per worker in Japan and in the United States. He was not excited about the prospect of dealing with the Americans, even though there was no current threat of a union fight (that is, an effort by workers to organize a union to demand better treatment by management). Other Japanese firms had successfully invested in the U. S. arket, though very few of them had achieved anything near the productivity levels of their Japanese operations. Hajima was most concerned about the need to establish a positive, enjoyable atmosphere in the workplace. He had grown up in such an environment, and he felt complete loyalty to the company that had supported him. He wondered if the U. S. workers, with their average annual turnover rate of almost 10 percent in the chemical industry, could possibly achieve a harmonious relationship with managers and staff that would lead to some degree of company loyalty at 2M in California.
He was somewhat encouraged by the telephone conversation he had with a friend at Mitsui’s office in San Francisco. The friend had found that the American workers at Mitsui were generally very happy to try many of the Japanese practices, and indeed turnover there was much lower than in comparable U. S. firms. Still, Mr. Hajima was skeptical. Perhaps the largest difference between the Americans and the Japanese workers with whom Hajima was familiar was the American social preference for rugged individualists versus the Japanese emphasis on commitment to the team (or company) and group achievement.
He did not think that the Americans would readily join company-sponsored social groups or do group exercises before work, as in Japan. Though quality circles had shown some promise of acceptance and positive results in American firms, Mr. Hajima did not believe that this was enough to generate the needed level of commitment to the firm. With only a fair understanding of English, he felt quite uncomfortable in trying to assess the situation and reach a decision. COMPREHENSION QUESTIONS Discuss the following questions, using your background knowledge and the information you have obtained from reading the case. . Explain the Japanese practice of long-term employment. What are the benefits to the company and to the employee? 2. Discuss the process of promotion within a Japanese firm. 3. What is a generalist career path? What are the advantages of this policy? 4. Explain the Japanese system of consultative decision making. 5. What does the 2M Company produce? Describe the market share and total sales of the company for 1984. 6. What proposal is the Morioka Manufacturing Company currently considering? For what reasons is it evaluating the proposal?