Episode #244: Japan Must Globalise But Where Are The Global Leaders?

The consumer demographics for Japan are crystal clear. The domestic market is shrinking and will continue to do so into the future. The population is aging, so there are opportunities serving that market today but it is a shrinking market over the long term. Once this baby boomer generation passes then the revenue problems will really hit hard. Basically japan is not a growth market in most sectors. Japanese corporations recognise this and are expanding their operations overseas. Part of this process is the globalisation of these companies, as they realize their staff have to become more global in outlook and capability for the organisation to survive.

Junsuke Usami, a partner at L.E.K Consulting wrote an interesting article on this issue, which was published in the Diamond Harvard Business Review. To have capable Japanese leaders who can run a global business is a reflection of Japan’s difficulty in producing strong leaders in the first place.

He noted four syndromes that prevent Japanese companies from developing strong business leaders. I am going to add my take to explain the four problem areas he has nominated.

Cannot do early promotion for high potentials

Everyone enters the company on April 1st and moves forward on the basis of age and stage, not talent. Seniors rank over juniors and it cannot be the other way around in a seniority based system. No matter how capable the junior staff may be they will not be selected to lead folk older than them. In the old system of lifetime employment, staff knew they would get a chance at one point in the future. That is not felt to be an iron clad guarantee anymore, so the talented are more skeptical than in previous generations. As the young sign up for a free agent era of employment, where there are prepared to walk out the door if they think the grass is greener on the other side, this loss of talent to competitors will be painful. If you have no system to fast track the next generation of global leaders within the company then progress will be glacial, in a world that is moving so quickly it makes your head spin.

Cannot give high potentials stretched challenges to accelerate their growth

Before the economic bubble burst in the late 1980s, Japanese companies had so many levels within their promotion systems. You progressed in tiny increments. This made sure the rate of progress was slow. Access to challenging work was limited. The plus side was that you get coaching on the way up from your boss, so the OJT or On The Job Training system, more or less worked. The collapse of the economy saw many layers cut and everything compressed. The bosses today have to do their own email typing, are terribly time poor because their job scope got much larger and are basically out of the successor coaching business. The jumps are now much larger, the number of positions much fewer, so the difficulty of moving up has become much greater. Bosses are not delegating because they think, “it will be faster if I do it myself”. They are also risk averse to delegate to a subordinate, in case the delegatee makes a mess of it and blows up the boss.

Cannot take risk

This is part and parcel of growing up in Japan. Risk aversion is built into the DNA. People know if they make a mistake it could be career ending. They are so scared of a mistake, they prefer to do nothing and make no decisions, even though both avenues are against the interest of the company. In large companies HR is feared because this is where the collection of all the records of any mistakes made are kept and these are brought out when it is time to consider which of two candidates to choose for the promotion. We are all the product of our mistakes and that is how we learn. By denying people the right to make a mistake, we are holding them back. This has an impact on the range of experiences available to leaders as they rise through the ranks.

Develop only “company professionals” not “management professionals”

Traditionally there have been very few mid-career hires in Japan, so the bonds of those who have joined the company straight out of university are strong. Everyone has shared experiences in the company and groupthink becomes entrenched. Relationships within the company become the way of moving upward rather than through ability. Internal patrons become important and are a substitute for personal capability.

These four syndromes identified by Mr. Usami guarantee that companies won’t create strong leaders. The gap between where companies are in the leadership journey and where they need to be just grows every year. If they were able to stay entirely domestic in their focus then it would work, as it has its own circular logic.

The brave new world outside of Japan can’t accept this construct and this gap is agitating against producing the global leaders the companies need to progress in the 21st century. The talent is there, it is just unable to be properly developed. It is all a bit depressing really and you have to worry about the country’s future if they can’t fix this issue of not being able to produce strong leaders, who can deal with the global challenges facing Japan.