Japanese Management Techniques and Their Impact on Western Management

1. Introduction

When we think of Japan, we think of a highly industrialized and technologized society. We think of global enterprises such as Toyota, Mitsubishi and Sony. We think of crowded subways in the mega-city Tokyo bringing commuters to their workplace in sleek skyscrapers. We think of a completely different culture and ideology in terms of interpersonal and professional interaction.

But this picture meets only for the last few decades. Before the 1950s, Japan's economy was more or less isolated from the rest of the world and mostly driven by its agricultural sector. In 1955, over 40 percent of Japan's workforce were employed in the sectors agriculture, forestry and fishing.

From 1939 to 1945, Japan was involved in the Second World War. When Japan surrendered on September 2, 1945, the country was totally devastated. Almost all larger cities, the transportation systems and the industries were destroyed or even severely damaged. At this point in time, Japan was as far away from being an economic global player as one could imagine. But this should change utterly in the following years.

The true rise of Japan's economy, up to the third largest of the world, begun after the Second World War when Japan experienced a post-war economic miracle comparable with that of Germany. Between 1953 and 1965, Japan's Gross Domestic Product grew with an average of 9 percent a year. This development led to a GDP of more than $ 90 billion in 1965. In the following fifteen years, the Japanese economy managed it to raise its GDP by more than ten times to astounding $ 1,064 billion in 1980.

The world was fascinated by the incredible performance of the Japanese economy and was wondering how this economic miracle was even possible. Western managers asked themselves: "What are the drivers and factors of this success - how can we adopt them or at least learn from them?"

In this paper I will elucidate two important management techniques and standards which helped Japan's industrial tycoons to become world leaders in their segments. Furthermore, I will show how the knowledge about these techniques changed Western companies' management strategies and operational procedures.

2. Cultural Aspects

The following chapter will give one a brief glimpse of the Japanese culture. The chapter is meant to help one understand out of which intercultural context the management techniques come from.

One of the most important values of the Japanese is discipline. The family plays an important role in teaching this value to the children. Other important values are devotion and the feeling of belonging to a group or community. Japanese employees for example identify themselves very intensely with the company they are working for. They work diligently for the superior success of "their company" which is even more important than their own. For example, if one meets a businessman from Japan introducing himself one will recognize that he always states the name of his company first, then his own one.

Furthermore, education is very important in Asian cultures and especially in Japan. Some 94 percent of the Japanese are being educated until they are 18 years of age and more than 36 percent are able to gain higher education (1990). Studies, conducted in 2007, showed that Japanese pupils are in the top four of the world in the fields math and science. The high educational training standard of Japanese children plays an important role for the Japanese success at the world markets.

The three "golden pillars" in Japan's industrial culture are enterprise unions, seniority remuneration and life-time employment. Therefore, Japanese companies allow the establishment of union structures, are willing to reward belonging and loyalty to the company and "promise" to provide a life-time employment in the enterprise. These values show that not only the employee is deeply engaged in the relationship to its company but also the enterprise itself.

Employee's solidarity towards their job and their company is also expressed by their perception to the term working time. For a Japanese employee the working time is the time needed to do the job. In contrast, European and American employees regard working time as the time during they have to be present in office. This time should be as short as possible in order to allow them to have time to do things they really like.

3.Keiretsus

3.1 The Japanese Conglomerates

An important factor of Japan's economic success after Second World War were the so called Keiretsus (系列= Keiretsu = series, systems). A Keiretsu is defined through an amalgamation of several legally independent enterprises to a unifying conglomerate in order to create cross-company values and synergy effects. The core of a Keiretsu is usually given by a bank, an industrial corporation and a trade company. The companies interact together very closely with the purpose to achieve a mutual policy. The policy and business goals of the Keiretsu are set by the management of the companies in regular meetings.

The mutual management strategy of the Keiretsu aims always towards a maximum integration between the collaborating enterprises. There are different management techniques used to achieve this objective. The most important one is the exchange of personnel on companies' upper management level. These secondments shall link the different boards of the companies in order to plane the varying standpoints and attitudes towards a unified fundamental direction and ideology of the Keiretsu. It also gives security to the different boards, knowing that there are own people at the related companies' boards which inform them about hidden events or internal disputes in the related enterprises.

The integration within the Keiretsu is furthermore intensified through internal loan granting which allows the related companies to gain interest advantages and better conditions than they would get if they had to finance themselves at regular money markets. Thus, the house bank of the Keiretsu is always accurately informed about the financial situation of the related companies in the conglomerate. That allows to identify financial opportunities, cross-company advantages as well as credit default risks immediately.

The financial integration is an important factor within the integration strategy of the Keiretsu. This becomes very clear if one takes a glimpse of the distributed shares and shareholders: Keirestu members always hold shares across the partner enterprises. This leads to a mutual interest of economic success between the companies.

The third and most visible instrument of integration