Management Practices in Japan

Seminar Paper 2004 31 Pages

Business economics - Business Management, Corporate Governance


Table of contents

1. Introduction

2. History and cultural heritage

3. Japanese culture, beliefs and values
3.1. Traditional organisational structure
3.2. Values and their expression in form of language

4. History of management practices

5. Traditional human resource management practices

6. Changes within the society and economy

7. Toyota – example of a Japanese company

8. Changing management practices
8.1. Keiretsu – management on inter firm level
8.2. Management on intra firm level
8.2.1. Life-time employment
8.2.2. Middle aged and older employees in Japanese corporations
8.2.3. Recruitment
8.2.4. Payment systems
8.2.5. Incentives
8.3. Gender related issues

9. Conclusion

10. References

1. Introduction

Japan is known for its successful companies. One might only think about the automobile manufacturer Toyota. To perform successful, a company has to maximise profit. In contrast to Western companies, in Japanese companies, profit is maximised by increasing sales and maximising volume by increasing productivity and efficiency. The question that arises is how could the Japanese increase productivity that much? One possible answer is the Japanese management approach.

For some time now, the characteristics of Japanese management style have been a popular issue, mainly in Europe and in the United States. Have the qualities and values of society and of individual been a reason for Japanese success? Such issues as the business group, the seniority wage system, the lifetime employment system and the periodic recruitment of new graduates have been examined in diverse ways.

A look at the actual operations of Japanese enterprises in Europe and the United States indicates that, there are changes going on concerning Japanese management practices. Japan is an island with almost total ethnic homogeneity, having been unaffected by Western influences for long time. Modern management practices are said to be rooted in the cultural and geographical traditions of the country. Emphasis in recent analysis has been put on how the Japanese management style has arisen and evolved historically, rather than on its typological characteristics. This paper makes the attempt to examine Japanese management characteristics with regard to historical influences, Japanese culture, Japanese social system as well as possible future needs.

Cultural and historical heritage will be presented first followed by a summary of Japanese values on which society is based. After that, management practices with regard to traditional and modern approaches are presented. Meanwhile, changes in management practices are examined.

2. History and cultural heritage

Most of Japanese society is underpinned with the philosophies of a Chinese philosopher, Confucius, dated around 500 BC. The Confucian theories were based on ideas of benevolent action, loyalty and filial piety. This gave rise to a loyalty to the state or the emperor, duty to parents, respect of elders, faith in friendship and it discouraged individualism. These values were upheld in society for hundreds of years.

In 1867/68 the Meiji Restoration took place and Tokyo became Japan’s new capital. The actual political power was transferred from the Tokugawa Bakufu into the hands of a small group of nobles. Meiji was able to convert the entire country of Japan from a feudal state into an industrialized world power in less than half a century. He constructed a modern state, overhauled the social systems and created a new economic structure in which industrialism and the world community as a whole assumed a key role

In order to transform the agrarian economy into a developed industrial one, many Japanese scholars were sent abroad to study Western science and languages, while foreign experts taught in Japan. The government directly supported the prospering of businesses and industries, especially the large and powerful family businesses called zaibatsu. These were heterogeneous companies clustered in a large ie.

After World War II had ended, Japan was devastated. Japan basically lost all the territory acquired after 1894. In 1947, a new constitution went into effect. The emperor lost all political and military power, and was solely made the symbol of the state. Universal suffrage was introduced and human rights were guaranteed. After the Korean War the recovery of Japan's economy flourished. The economic growth resulted in a quick rise of the living standards, changes in society and the stabilization of the ruling position of the Liberal Democratic Party (LDP), throughout the sixties and seventies Japan’s economy continued to expand and to grow at enormous rates. The 1973 oil crisis shocked the Japanese economy which was heavily depended on oil. The reaction was a shift to paper products. The 1980’s were characterized by great uncertainty. The Asian crisis in 1997 struck Japan’s economy hard. Until now, Japan is recovering.

3. Japanese culture, beliefs and values

There are may books giving tips how to negotiate with Japanese. The following set of tips is taken from the book “Hidden differences” by Edward T. Hall and Mildred R. Hall:[1]

1. Be patient
2. Take the long-term view
3. Learn the language
4. Respect consensus and compromise
5. Pay great attention to detail.

Susumu Yoshida, who summarized these tips in her paper ”Agenda for Japanese business in the global economy” adds “relax and enjoy”. The following paragraphs attempt to clarify these tips by examining Japanese beliefs and values as well as traditional organisational structure.

3.1. Traditional organisational structure

In general, society, is felt in terms of practical systems and organization. In Japan, these are accepted as something given and self-evident, without clearly questioning their justification in logic or principle, and are perpetuated as things that must be observed, but not innovated, except under very exceptional circumstances.

The starting point is the Japanese family system. It has a structure, very different from that of Western families. In general the family can de divided into three sections: the ancestors, the living and the future generations. The ancestors are further divided into those recently dead and those who are true ancestors. The ancestors take a functional role in family affairs. A shrine often being found in the main room of the house and the family may also celebrate ancestral anniversaries. The role of the unborn is to continue the family line. The head of the living is very important within the family, and he will direct family matters. He will oversee the children, the family marriages and all other family affairs. The younger sons in the family are expected to do all they can to help the family to prosper, this is not restricted to the supply of future generations, but could require anything that the head of the family deems necessary for the family’s survival. This way of considering the past, present and future conveys to the younger members of the family the idea of belonging to something much larger than self.

The Family unit, the ie, played and indeed plays an important role in Japanese society. Despite a large number of influences brought sporadically by immigrants from the continent to Japan, ie did not change much. Ie, the traditional "household” has the nature of an economic unit, highly independent and persisting over generations. Ie has various business dealings with other ie. These relationships are not restricted to buying and selling of goods but include the traditional sending of presents on various occasions, serving to maintain the relationship between the two ie.

The Japanese bilateral kinship system implies almost no records or surveys existing that would help one to comprehend individual generations beyond one's grandfathers and grandmothers. It is not accepted to trace the ancestor’s line back starting with oneself. On the other hand, the history of the ie to which the individual belongs is correspondingly important. It is possible for individuals to leave their family and to become members of another ie. Best example are Japan’s Geishas and Geikos, who leave their family in their early years to become adopted by another greater ie.

The system or organization is given precedence over the individual's personal, creative will: the individual does not create the system; rather, the system creates the individual. Japanese consider hierarchy as natural order. The company one is working for is considered a second family. The management represents father or elder brothers. Employees are seen as children or younger siblings. From this springs the exchange loyalty for life-time employment. That is why firms prefer to train new employees over recruiting experienced individuals from outside companies. Few Japanese feel that their freedom of behavior is restricted by existing systems or organizations; rather, they have always seen behavior conforming to that framework as a natural and desirable way of life.

Procedures for any change in the system, however minor, are usually complex and troublesome. Thus, planning in Japanese companies often requires a long time from conception to implementation. This may not be compliant to the interests of shareholders who expect high dividends quickly. In Japan, the system or organization is not viewed primarily as one possible mean whereby the independent individual may achieve his aims. To the contrary, it is considered that if he/she observes the system and joins in the organization, fulfilling his/her proper role, then achievement of the objective is guaranteed. Emphasis is put on the educational aspect whereby a person gradually accumulates experience within the system or organization, acquiring knowledge, skills, and all kinds of responses while carrying out the role already assigned to her/him. Above all, the importance of status quo as seen in organizations and systems justifies the closeness to preserving the stability of society. Similarly, in the management of systems and organizations, it is considered better wherever possible to rely on precedent, and people try so far as possible to avoid making exceptions or in other ways stepping outside the framework of the system.

A fundamental concept in Japanese organizations is Uchi-Soto ("Us and Them"). Japanese think of themselves as part of a group. Groups deal with other groups or sub-groups. In contrast to the often promoted overall seek for harmony, competition within the group and with other groups is considered perfectly normal. In dealing with a Japanese group, one has to be aware, that foreigners are always treated as gaijin – outsiders. This term means according to the dictionary foreigner or alien. However, this term has the connotation of “white person”. This “white person” stereotype is deeply embedded in the Japanese psyche and should be taken into account. A clear distinction between members and nonmembers is considered as a mean to ensure the organization's independence and stability. Moreover, members are allotted fixed positions and roles, through which they are expected to contribute in achieving the corporate aims of the organization as a whole.

Another important concept in Japanese life is Honne and Tatemae – substance and form. It also refers to being direct and being diplomatic. Since avoiding conflict and friction is an essential feature to Japanese, the use of diplomatic language is appreciated. The issue of language is further examined later on.

Amae basically means dependence. At any rate, amae is a fundamental characteristic of Japan. Vertical relationships as those between workers and superiors are the most striking example. Amae can be seen in the concept of groupism as well. Groupism originated from agricultural practices where harmonious work was needed more than specialized division of labor. With the rise of the samurai, the acceptance of the group as supreme and the individual’s welfare as relatively unimportant as long as the objectives of the group were realized spread. Values of duty, benevolence and tolerance were created in the samurai class. In the following, they were transformed into the employee’s respect for their managers and the idea of sacrificing individual needs for the sake of the cooperation. The fundamental idea of groupism led to the establishment of zaibatsu.

3.2. Values and their expression in form of language

Japanese consider both human beings and the objects of the natural world as entities on their own. Their relationship is believed, basically, to be more or less equal. They are supposed to exist together in a state of mutual respect. Respect is one of the most important values in the Japanese value system. Respect is experienced through avoiding confrontation and hurting the counterpart.[2] The most important mean of showing mutual respect is language. Especially in negotiations with Western counterparts, different styles in communication can lead to misunderstandings and irritation.

Words are valued little. Feelings are considered to be embodied in things, whereas words can only accompany the expression of sincerity and emotion in general. In speaking diplomatically, what is not said may be more important than what is. Different fixed phrases have a connotation one should know. For instance, saying "That's a little difficult" (Sore wa chotto muzukashii) really means "No way!". "I'll think about it" (Kangaete okimasu) is a declination or refusal.[3] Information is gathered without directly asking for it. Whereas in Western culture expressing, for instance, enthusiasm can influence negotiations positively, speaking with any degree of emotion in business negotiations is seen as a threatening and not worthy of attention. An excuse in advance can prevent the loss of face, if one does not meet the counterpart’s expectations.

Japanese do not use the word “no” in order to minimize friction. They tend to use vague, ambiguous wording, rather than direct expressions of like or dislike. An often cited expression which often creates confusion among foreigner is when a Japanese says: “let’s have dinner together sometime”. While in the Western culture it simply means “let’s have dinner together sometime”, a Japanese might mean “I hope we get along well together” by saying this.[4] The custom of exchanging gifts and giving omiyage (gifts taken when paying a visit or brought back for those at home after some excursion into the outside world) allows the person who gives to express emotions and the recipient to appreciate that feeling and make the appropriate return on the basis of social intercourse. Shikata ga nai means "There's nothing you can do about it", and is often used by Japanese when they face a troubling situation they think they can't change or when they would like to express their dislike about someone trying to change a well-tried system or method.


[1] Cf. Yoshida (1997) p.116

[2] Yoshida (1997), p.116

[3] cf. http://www.thejapanfaq.com/FAQ-Primer.html

[4] cf. http://www.thejapanfaq.com/FAQ-Primer.html


ISBN (eBook)
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Institution / College
University of Tampere
Management Practices Japan Advanced Studies Doing Business Asia



Title: Management Practices in Japan