Episode #496: Diversity, Equity & Inclusion Realties In Japan

Fads are a constant in business. Consultants have a field day. They rush around providing companies with ideas on how to ride the new fashion wave. They then have to milk it as hard as possible, because they know it will be soon supplanted by the next fad. Diversity, Equity and Inclusion (DEI) is right up there as the latest fad in Japan. I am not saying that DEI isn’t legitimate or important. What I am saying is that for many companies, this is a patina of legitimacy, a fig leaf, as they seek to show good citizenship rather than a heartfelt belief in the importance of DEI itself. “If others are doing it, then we should be doing it too”, is more the motivation, in many cases in Japan.

The benefits of DEI in the West are numerous. These include faster problem-solving, better decision-making, increased innovation, employee engagement and better financial performance. None of these outcomes have been accepted as relevant in Japan as yet. The scope is also quite different. In the West, we are dealing with generational, gender, ethnic, cultural and religious differences in the melting pots of the world, in particular in the US. In Japan only generational and gender differences are significant.

There are only 2.89 million foreigners living in Japan, who represent 2.3% of the total population, so that is a very small share and the consequent impact is negligible. Japanese are so flexible. They manage to celebrate their children’s 5th and 7th birthdays with a Shinto Ceremony, have a Christian style wedding ceremony at a chapel and be cremated as Buddhists, so their religious tolerance and flexibility is pretty high. Muslims are 0.15% and Christians 1.5% of the population of Japan, so again both religions are basically insignificant. If you think about it, the vast majority of workers in Japan never encounter a foreigner while working.

They do encounter young people joining the workforce and they do encounter women working in larger numbers though. The female employment rate is around 52%. In fact, pre-Covid, the average percentage rate of 15 to 64 years old women in the workforce for the OECD was 65%, whereas in Japan it was 73%. However, 32% of women workers were working 40 hours plus a week and 26% were working between 15-29 hours a week. Seventy percent of male workers worked for 8 hours or more a day, while the same ratio for women was 40%, because often they are employed as part-time workers. Men work ten hours a week more than women in Japan, the highest disparity in the Group Of Seven nations.

Professor Isamu Yamamoto from Keio University did a study of listed companies from 2010 to 2015 and showed that a rise of 0.1% in the ratio of female managerial positions, resulted in an increase of 0.5% in return on assets and 13% in productivity improvement. Additionally, he found that there were notable earnings improvements at companies in Japan where 15% or more managerial positions were held by women. The study concluded, “Productivity improves possibly because the increased chances of promotion (for women) raise their motivation”. However, only 8.6% of Japanese companies have women in managerial positions, despite the Japanese Government’s 30% target, while 45% have no female managers at all. Only 8% of companies have a female president and roughly half of that number took over from their husband when he passed away.

The opportunity is there for Japan to do much more in terms of diversity around embracing the ideas of the younger generation, but company hierarchies are constructed according to age and stage of service in the company. That is, the older you are and the longer you have been there, the more valued is your opinion. Japanese youth are encouraged to heed to Victorian England’s child raising mantra of “seen but not heard”. Organic change around doing more, to structurally embrace the views of the youth, are probably going to take a thousand years to see any major change in Japan.

When we are approached by Japanese companies to do some work in the Diversity, Equity and Inclusion area they are invariably asking us to train the women. The problem with that idea is that women are not impacting the promotion stakes inside companies, as that is the bailiwick of male managers. The men need the training too. There are few role models for women in the leadership area and few appropriate mentors. Internally developed company training is often geared up for a man’s approach to leading, rather than something more universal and applicable for anyone. The numbers of participants in our public training classes are skewed with around 60% to 70% male, because companies are investing in the men, more than the women. This almost ensures that the women will be overlooked for promotion opportunities compared to the men.

The simple strategy though is to focus on numbers. How many more women can we get into leadership positions, to make our firm look like a model citizen. There may be an argument for quotas in the short term, because without them and with only a reliance on organic growth, basically not much has changed in the last few decades. Ultimately, the environment for women to become leaders and for the young to be heard more is about the environment being created inside the company. The latter issue may get solved quite simply, because of the shortage of supply will be forcing companies to do more to retain young talent. Women on the other hand, need a big push from the top, if anything going to change, because the revolution emanating from the bottom will just never happen.