A Very Japanese Company

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Toshimichi Miyashita believes in harmony. If his foreman saw two of a subcontractor's employees fighting, Miyashita would not tolerate it. He would withdraw his business from the subcontractor -- even if both the contractor and the workers involved had served him faithfully for years.

But miyashita's is a very Japanese conception of harmony. He explains that he would never tell the workers or their boss why he was getting rid of them. That, he says, would be too abrupt.

Miyashita is a very successful small businessman. His Misuzu Construction Co. had the highest profit-to-sales ratio of any medium-sized building company in Japan in 1979 and 1980, according to the prestigious Yano Economic Institute. It earned $1,650,000 on sales of $8,700,000 last year.

But Miyashita is more than just a successful entrepreneur. He seems to have succeeded largely by being more "Japanese," in several senses, than his competitors in metropolitan Tokyo's home-building industry.

He has emphasized traditional values of harmony, dependability, hard work, and long-term commitment to the community. He says he would never sell his business; that would leave his employees, customers, banks, and subcontractors in the cold. He brings his white-collar men together regularly for educational meetings. He maintains a company villa in a resort town and has arranged a company trip to Europe next year. He has traveled several times to the United States and Europe to study foreign construction methods, but he says he would never use one Western management tactic: He would never openly fire anyone.

The Japanese concept of harmony does not permit open firings or open acknowledgement of why a relationship has grown unproductive. If two roofers were in a fight, for example, Miyashita would gradually, perhaps over six months, withdraw business from the men's employer. "Building a house requires the cooperation of more than 100 workers in 30 specialties, and any lack of cooperation is a serious problem," Miyashita says. Buddhists believe one is fated to be with one's fellow workers, he asserts, and that therefore one should live peacefully with them.

Miyashita has rarely gone to the lengths of actually withdrawing business from a subcontractor to get rid of some workers. But he has also never laid off any of his regular employees, of which he now has 14.

Miyashita got into the construction business after a house-hunting trip with a friend in the mid-1960s revealed to him that many Tokyo builders were sloppy or dishonest. No one knew how to match a good house with a good site.

At the time, Miyashita was a reporter for the Japanese magazine Zaikai (Financial World). He had graduated from high school near the end of World War II when his family, like nearly everyone else in Japan, had virtually no money. By the time he was 30 he had earned college degrees in law and economics and had joined Zaikai after finding that the great trading companies -- where he really wanted to work -- were facing hard times and hiring few people. He knew he had little chance of entering a really big company after joining Zaikai because giant Japanese companies rarely hire anyone but recent school graduates.

While a sarariiman ("salary man") at Zaikai, Miyashita accumulated money by investing in stocks and real estate and in his spare time studied for and passed an exam certifying him as a tax accountant. Just before his house-hunting excursion, he read an insurance company study predicting that construction would thrive in the coming years. Their incomes were soaring, and the Japanese became discontented with Tokyo's tiny apartments. Miyashita knew traditional single-family home building offers few economies of scale, so small builders would face little competition from giant companies. After discovering how weak the existing companies in the industry were, Miyashita began buying vacant land and hiring workers to build houses. Soon he disregarded the advice of his co-workers at Zaikai and quit to give full time to the business.

Miyashita hid his journalism background, because Japanese builders consider themselves practical men and believe writers are critics rather than doers. He ran into "every conceivable problem" because of his inexperience, but he had a clear idea of the kind of firm he wanted to create: "A customer-oriented, high-quality builder of traditional homes," he says.

The insurance company study was right. There was plenty of opportunity in Japan's housing industry. And that meant that some of the sloppy operators Miyashita found when he surveyed the market in the mid-1960s could survive and prosper. Much of Japan's new housing over the past three decades has been thrown up with poor materials on lots that lacked such necessities as sidewalks to the nearest railroad station.

Miyashita is proud of an integrated strategy worthy of Toyota or Mitsubishi. Before he buys land, he visualizes what kinds of houses will go on it, how they will fit into the neighborhood, and who will buy them at what price. He keeps overhead low, turning off air conditioners when no one is in an office, restricting advertising and promotion to just over 1% of sales, and limiting payments to his lawyer and his outside accountant to $1,300 and $3,500 a year respectively.

The government causes Miyashita few problems -- he spends less than an hour a week dealing with it. The Tokyo metropolitan government is required to act on building permit requests in developed areas within 20 days. In undeveloped areas, where sewers, new roads, and parks are required, a permit takes from six months to a year.

Dealing with banks can require more diplomacy than dealing with the government. Misuzu Construction works with six different banks because it is "politically" helpful to have a bank in each area where it is building homes.Good ties with the banks have helped Miyashita buy land so the company can benefit from its soaring price. (Plots an hour away from the center of Tokyo cost as much as $100 a square foot.)

Miyashita depends on Japanese-style relationships with his personnel and deep knowledge of the latest construction techniques to help him keep capital moving. It takes Misuzu Construction 45 to 50 days to build a house, and Miyashita adheres strictly to deadlines. None of his workers belongs to a union. (Few Japanese construction workers do.) But Miyashita says he gives his subcontractors enough money to pay their men 10% to 15% above the industry adverage, while his office men receive 20% above the industry average. Mr. Tamura, one of his construction supervisors, earns $24,000 a year including most benefits. That doesn't include the money Miyashita puts aside for Tamura's lump-sum retirement allowance. After 30 years of service, Tamura will get $130,000 -- at least three times what most small Japanese companies pay.

Despite the good pay, it took Miyashita 10 years to assemble a team of subcontract carpenters and other tradesmen with whom he is satisfied. His white-collar employees and supervisors work directly for him, but all the tradesmen employed at the construction sites work for subcontractors, most of whom depend on him for all their business.

The subcontract workers participate in some company benefits: Many have signed up for the company trip to Europe next year, for instance. But Miyashita notes that paying the subcontractors cash rather than salary and benefits keeps them aware of their dependence on him. His carpenters have now been with him for an average of 10 years each -- a length of employment very rare among subcontract workers "even in Japan," he emphasizes.

The only workers who don't fit into the long-term employment scheme are the three women who work in the company's office. Japanese women are not loyal to their companies as in the United States, Miyashita says. Many work until they marry, then retire from the work force. Misuzu Construction's women are rarely included in company decision-making. "They're happy not to have to attend meetings," Miyashita adds with a laugh.

Miyashita says he works about nine hours a day, six days a week, and his employees work about the same amount. His passion is golf; he plays about 70 times a year. His lifetime memberships at five golf courses have a market value of about $175,000. He still pays $25 each time he plays.

Miyashita tries to eat dinner at home at least three or four times a week. He has two sons, Shinichi, 22, and Michitaka, 15, and one daughter, Emi, 19. Shinichi is a senior at Keio University in Tokyo, and is not interested in taking over his father's business. Toshimichi's younger brother, Akira (at 45, eight years younger than Toshimichi), is currently second in command at Misuzu Construction.

The houses that Misuzu Construction builds are representative of new houses in metropolitan Tokyo: far from the center of town, a mixture of rare beauty and questionable taste, and a bit more than half the size of the average new house in an American metropolitan area. They seem to meet the demands of their market.

They are also expensive. Miyashita now has on the market a 1,00-square-foot house on a 1,400-square-foot plot in a good neighborhood about an hour from the center of Tokyo by train. The cost: $280,000. His average house is about 20 minutes farther from the center of town and sells for about half that price, he says. A house built on a client's own land can cost as little as $56,000.

Inside, the buyer gets enough old-fashioned Japanese artisanship to demonstrate that Japan's traditional crafts are not merely alive, but thriving. A Misuzu brochure bears the slogan: "Traditional technology reborn in the modern era."

The smell of rice-straw tatami mats, which cover the floor, mixes with that of finely crafted exposed woodwork in many of the rooms, creating a sense of serenity. Miyashita calls this environment and the art that creates it kareru, which literally means "the turning of leaves in autumn."

Miyashita points to a joint to show that it is perfectly smooth. "In the United States, joints are frequently sloppy, with a lot of air space," he says. In Japan, it is felt that homes are made up of many small things, and that if the small things are done well, the house is probably well built.

Miyashita suggests American builders should learn from Japanese kareru. "If a specialized builder were to make small houses of very high quality, that builder might find a substantial market," he says.

"Do you mean building a Toyota instead of a Chrysler?" he is asked.

Before the interpreter can translate, Miyashita breaks into a laugh and says, "Hai (Yes.)"