At last week’s Industry Leadership lunch hosted by Intellect UK, a Western executive spoke about the differences in Japanese business culture.  Roger Gilbert, CEO of Fujitsu UK and Ireland, said the Japanese approach business in a different way focusing on consensus over collaboration, long term goals over short term results, and continuous operational improvements.  I too have worked with and for Japanese companies and their operations and dedicated workforce are truly impressive.  But, there is a big question whether these practices are suited to today’s culture of innovation and entrepreneurship.

In the aftermath of WWII, industrialised Japan emerged into a world where large factories and a dedicated workforce were the keys to putting people back to work in a land with few natural resources.  Japanese companies promised lifetime employment security to workers who committed themselves to hard work and dedication.  Work hard and the company will take care of you, for life.  Large Japanese enterprises, called Keiretsu, grew to create a highly interlocked system and bureaucratic safety net.

Lifetime employment can be a powerful motivator, as I witnessed as a sales director for Panasonic, one of the largest electronics companies.  Many of my Japanese colleagues spoke fondly of the times they joined the company, lived in company dormitories, and spent late nights working hard and having drinks together before going to bed in the wee hours.  They spent long hours working 10-12 hours a day, six days a week.  Looking at their careers, they identified with working for just one company for the rest of their lives.  At the lunch meeting last week, Fujitsu’s Robert Gilbert confirmed that the org chart in most Japanese companies resembles the age chart with many senior level executives given roles to justify their status rather than their contribution.

However, the recent recession has shaken the foundation of the concept of lifetime employment in Japan.  The unemployment rate rose to a high of 5.6% last August, a level not seen since the last recession and much higher than the historical average of 2%.  The Japanese take pride in an economy that provides full employment, but today the unemployment rolls count 3.5 million people who are questioning whether the promise of lifetime job security is being fulfilled today. 

Unfortunately, the Japanese Keiretsu system had it’s day and is not suited to the dynamics of today’s economy.  The key issue is how workers will respond as they realise like the rest of us that their jobs can be downsized or outsourced and they need to be more self reliant in promoting their careers.  Many will move into more entrepreneurial ventures.  However, the start up culture in Japan still needs to be developed.  A recent Stanford University report showed that venture capital in Japan is $3 billion a year for about 3,000 investments deals annually whereas US investors provide 10 times that amount.

Working in Japan is a wonderful.  The people are a delight to work with and very talented.  The challenge for Japanese business is to reform their employment practices so that talent is encouraged to be self reliant to grow their careers.  This will provide a more dynamic and flexible economy to better respond to changing market conditions and to capture new opportunities.