All those studies on Japanese management overlook the one ingredient that makes it all work: Fear.
BACK IN 1972, AS JAPAN WAS WELL along in its drive to dominate the world's economy, Masanori Fujimoto left the green fields of his native Hokkaido to seek his fortune. With a degree in international economics earned at a local university, Fujimoto secured himself a job in Tokyo with Mitsubishi Corp., part of one of Japan's most venerable and powerful industrial groups. Hardworking and intelligent, Fujimoto did well at Mitsubishi, and in 1979 earned his M.B.A. from Stanford University under a company-sponsored scholarship. Now fully fluent in English and acquainted with the latest in American business practices, the lean, handsome executive returned to Japan with all the accountrements necessary for a highly successful career in the elite ranks of Japanese business.
Yet today, Fujimoto, like a growing number of other highly qualified Japanese managers, finds the path to success so clogged as to be virtually impassable. With corporate growth slowing appreciably and a mounting oversupply of qualified executives, giant corporations such as Mitsubishi no longer generate enough executive positions to satisfy ambitious young sarariman.
"We don't have a very good dream anymore," Fujimoto said over lunch in the small apartment he shares with his wife and two children in a quiet Tokyo residential district. "We know that there will probably not be the promotions, the rise in position we expected. It's a gloomy reality."
Fujimoto's pessimism is surprising in a country that has enjoyed so much growth and prosperity. And it is in startling contrast to all the mythology about the Japanese miracle, especially the unique loyalty that is said to flow between the Japanese corporation and its employees.
"It's not really a question of loyalty," explains Fujimoto, who works an average of 60 to 70 hours each week selling large-scale power and electrical systems to North American customers. "The reason you don't go is there is nowhere to go."
"Nowhere," because switching firms or even starting your own company is not a realistic alternative. In the business culture of Japan, bigness denotes status, and changing jobs suggests personal failure. "Here you learn to live the frustration because everything else is too risky," Fujimoto complains. "You are a prisoner of society and the rules that govern your life."
To William G. Ouchi, the UCLA management professor whose book Theory Z has probably done the most to popularize the notion of Japanese managerial supremacy, Fujimoto's frustration is merely the necessary trade-off in a culture that prefers to sacrifice a measure of individual freedom for professional security, to trade personal fulfillment for economic prosperity. "If you want a system that's supportive, it's also likely to be constraining," Ouchi argues.
But others are beginning to wonder if these trade-offs are now leading Japan in the wrong direction -- toward institutional rigidity among corporations, unhealthy competition among workers, and stifled creativity. One such skeptic is Michael L. Jablow, an American who founded an electronics marketing firm in Tokyo. Jablow finds that negative factors now play a far more important role inside Japanese companies than humanistic principles stressed by Japan-boosters like Ouchi. After 15 years of living with the Japanese and competing against their firms, Jablow has come up with his own, somewhat unconventional theory, "Theory F":
"Theory Z-type theories don't talk about how the system actually works," he says. "It is actually fear that moves those managers. There is no tolerance for failure. The penalty for failure is out, finished. It's the powerful motivation."
According to Jablow, the only executives who reach the top of Japanese companies are those who succeed at every step in their careers. "The people who make it in those companies are tough sons of bitches. Their rivals are always willing to give them enough rope to hang themselves. And they better not fail, because there are no second chances." Not in that company. Not in any Japanese company. The choice for an executive who fails, Jablow notes, is either a one-way ticket to oblivion in some remote subsidiary, or early retirement.
JAPAN IS A NATION MEAGER IN natural resources, except for its remarkable and dedicated work force, and since feudal times has thus felt a special need for structure and hierarchy. Only in exceptional times -- most recently during the American occupation -- have large numbers of Japanese individuals been able to break out of fairly well-defined and prescribed societal roles.
It was during the occupation that the remnants of the zaibatsu -- the large corporate grouping that had dominated prewar Japan -- adopted lifetime employment and strict seniority promotions that we have come to think of as uniquely Japanese. The immediate aim was to quell labor unrest and allay the fears of a nation occupied by its former enemies. But partly as a result of such reforms, Japan's economy took off. Annual growth rates reached double-digit levels throughout the 1960s and early '70s. And the reconstituted industrial giants, along with such upstarts as Sony Corp. and Honda Motor Co., were able to create new positions of status and authority for the swelling ranks of sarariman. Impressed with both the successes of these firms and the seeming devotion of their employees, many foreigners began to wonder if Japan had somehow found the ideal system of corporate management.
But more recently, the conditions that set the stage for this remarkable economic performance have begun to disappear. While mounting protectionist pressures in such key markets as North America and Europe already have limited new sales, Japanese companies now face intensifying competition from South Korea, Taiwan, and China. In some cases, as in shipbuilding, the new competition and changing market conditions even have caused major bankruptcies or restructurings. Annual growth rates for the economy have fallen to around 5%, and corporate operating profits fell to 1.9% in the early 1980s -- about half of what it was a decade earlier. And with the recent jump in the value of the yen, even the most robust export-oriented industries expect tougher times ahead.
"No country can enjoy prosperity forever," notes Hiroshi Kato, a former official associated with the Ministry of International Trade and Industry (MITI) and now a leading Japanese venture capitalist. "The whole system built on the sacrifices of the sarariman is breaking down. We just can't go out and get the growth we used to. The feeling is that Japan is in the beginnings of a decline."
The sentiment is widespread, especially among young people about to enter the job market. In 1970, 47% of Japanese between the ages of 20 and 24 believed life would get better; 10 years later, according to a government survey, the optimists claimed only 33%. Over the same period, those believing things would actually get worse jumped from 3% to 13%.
Demographic also play a part in this scenario of declining expectations. Just as diminishing growth is curtailing new opportunities, Japanese companies are being inundated by maturing members of Japan's enormous baby-boom generation, many of them trained for high-level jobs. From 1960 to 1970, the number of college students in Japan swelled, and Japan became second only to the United States in the percentage of its college-age population (30%) enrolled in university programs. In 1983, roughly two-thirds of those with college degrees attained the rank of bucho, or division manager, by the age of 54. But a 1985 report just issued by the respected Social Development Research Institute shows that only 17% of the country's college-educated executives will have made the same advancement by the year 2000.
"Foreign scholars like to emphasize the strength of the lifetime-employment situation and the harmony of Japanese companies, but all that is changing now," notes Shin Watanabe, an expert on Japanese employment patterns who served as a researcher for Professor Ouchi. "The demographics are putting the management pyramid on its head and disrupting the system. Theory Z explained the positive aspects of that system. But maybe with the shrinking economy, the negative aspects will begin to assert themselves more."
Americans, of course, face some of these same demographic and economic pressures. But young Americans searching for more interesting or lucrative jobs in business have alternatives to their present jobs -- alternatives that are not readily available to ambitious Japanese.
Small and entrepreneurial businesses, for example, do not provide much of an escape value. Although midsize and smaller companies constitute 99% of all private enterprises and employ 83% of all private-sector employees in Japan, most are small retail operations or subcontracting firms tied by quasi-feudal links to the giant companies. These small companies pay 15% to 20% less than the salaries of larger companies, and rarely offer the same level of health benefits or such perquisites as subsidized housing, vacations, and lavish travel and entertainment accounts. What's more, they don't offer the lifetime-employment guarantee that attracts the most qualified college graduates.
In recent years, some Japanese have looked toward the nation's growing number of technology-oriented venture businesses to develop into companies that would provide alternatives for topflight managers. But over the past 18 months, Japan's much ballyhooed venture-business "boom" has turned to bust. The failure in the past couple of years of such highly regarded technology start-ups as Japan Soft and Hard, Sellac, and Sord (which was sold to Toshiba Corp.) has turned many security-minded Japanese away from entrepreneurial ventures.
Any Japanese executive who contemplates a move out of a giant corporation must also wrestle with one other powerful disincentive: private pensions are tied to company service and subject to severe reductions once someone leaves the company. In a country remarkable for its low social-welfare expenditures, the private pension often means the difference between a comfortable retirement and gradual impoverishment.
"Probably 80% of the senior management people here would like to leave," notes one top manager, now in his early fifties, at one of Japan's largest and most powerful trading companies. "The problem is that there is nowhere to go.You soon realize that your car, your vacations, your expense account, your pension all belong to the company. The way the system works, without the company, the big company, you are nothing."
THIS FEAR OF BEING "NOTHING" outside the confines of the corporation defines the dark side of the Japanese sarariman. Bereft of viable alternatives, even the sophisticated Japanese executive seems compelled to view the company not only as a guarantor of a certain lifestyle but also the ultimate arbiter of his own self-esteem.
"Executives in the big companies tend to forget the rest of the world exists," notes Makiyo Mizobuchi, executive director of Recruit Jinzai Center Co., one of Japan's leading job-placement agencies. "He sees the company as everything. He ignores reality and just works. He forgets his family, loses his identity in the corporation."
But the chance to really make your mark in the Japanese corporation is limited. The career of a Japanese executive, to borrow a phrase of Thomas Hobbes's, seems "nasty, brutish, and short." With a promotion system tied slavishly to seniority and most large-corporation retirements set at age 55, the Japanese executive at best has only 15 years to gain power and position. He also knows that if he falls down in any way, there are hordes of often more technically qualified young executives bucking for the same promotions.
Take the case of a top executive at a major Japanese electronics firm. Bright and hard-driving, a graduate of one of Japan's finest universities, he had spent nearly a decade establishing his then-obscure division as the maker of peripheral equipment for computers. Eventually he became convinced that the company needed to expand its computer line in order to survive. Although the new products were initially a market success, by the early 1980s the company, like scores of American businesses, ran into a brick wall called IBM. Sales plummeted, and the onetime star now found himself forced into what amounted to an early retirement. It didn't matter that he had built the division from scratch.As one source close to the company noted, there was bad news, and somebody had to be blamed.
A mistake like that puts an executive on what recruiter Mizobuchi calls a "trail of suffering." From then on, he is passed over for promotion, utterly trapped. The most pathetic are given functionless jobs until retirement. These madogiwa-zoku, or "window-side managers," can be seen in almost any Japanese corporate office, reading newspapers at their empty desks, stoically wiling away the hours.
Another common fate for those kacho ("section managers") passed over for top posts at the major corporations is a transfer to one of the parent corporation's host of small, affiliated companies. On the surface, this sometimes can be presented as a promotion. In reality, however, such transfers may involve pay cuts, and an even more severe cut in power and prestige. Contrary to much ballyhooed notions about consensus decision making, power within large Japanese corporations is highly concentrated at the top.
"To go to a subsidiary is not considered a real promotion. It's really a sham," explains Keiske Yawata, a 27-year veteran of NEC Corp., one of Japan's top electronics firms."The NEC parent company is a very modern battleship. The executives at headquarters are on the bridge directing everyone. The rest of the company is down in the engine room."
Yawata, now 51, was one of the lucky ones. Faced with the option of such a "promotion," he chose instead to leave NEC altogether, calling on the contacts and experience he gained while serving as head of NEC's California subsidiary. He is now president of LSI Logic Co., owned largely by an American semiconductor firm. He was able to break the bonds that tie by embracing the American way of business.
Few Japanese executives have such options. Teruo Nakajima, for instance, has spent over 20 years at Bokusui Sangyo S.A., a Tokyo trading firm, serving in various distant locales. Yet although Nakajima wonders if he'll ever rise above his current modest position at Bokusui, for him the idea of switching firms is utterly impractical.
"Japan is basically a village society. The unity of the group and the tendency to exclude outsiders are both very strong," he explains. "Even if I were to join a small company as president, I would fail because I would be a gaijin ("foreigner") to the people there. I couldn't get them to work efficiently."
Trapped by these realities, Nakajima feels there are few alternatives to spending the rest of his career at Bokusui. Displaying gaman, the traditional Japanese virtue of suffering without complaint, he characteristically considers his greatest challenge to be maintaining his level of enthusiasm. "I am torn between two impulses," Nakajima confesses. "I want to work hard and be ambitious, but I realize the reward may not be there. As a result, I am like a bull without horns. My ambition and aggression have been taken away from me. I am trying to stay on the road toward the destination, but I fear I may be old before I get there."
It could be worse. At Nissan Motor Co., 13-year veteran Toshiharu Takemoto has been a model employee who has served in such unfavored locations as Libya. Takemoto waits anxiously for his promotion to kacho, but so far all Nissan has offered is another transfer. "It makes you sort of angry," he says as he contemplates the excitement and challenge of spending next year in South Africa.
There is one group of Japanese employees, however, that have shown a greater willingness to leave their positions for opportunities elsewhere. Unlike generalists like Takemoto and Mitsubishi's Fujimoto, engineers have skills that are crucial to the long-range future of many companies. And many young engineers, especially those who came to maturity in the confrontational days of the 1960s and '70s, are now willing to take a chance and leverage those special skills into the personal mobility and rapid advancement denied to so many others in the baby-boom generation.
Take the case of engineer Hisato Gotoh. An 18-year veteran of Oki Denki Kogyo, one of Japan's largest electronics firms, Gotoh fell into a conflict with superiors over the need to develop new products for the growing market for custom-designed chips. Oki's corporate bureaucracy, accustomed to such large-scale commodity products as the standard memory chips, resisted. "The problem was the old guys on top," recalls the 38-year-old engineer. "To succeed in this market you have to move quickly. But Oki is big and too slow. They didn't change."
After prolonged arguments with his wife, who thought him insane to consider leaving a good job at an established firm, Gotoh finally quit Oki in 1984, and signed on with Keiske Yawata's LSI Logic. He is now very happy to be working in an American-style company. But Gotoh remains deeply concerned about the ability of Japan's large, Theory F-style electronics giants to compete.
"If they hope to be leaders in technology, they need some radical changes at the big companies," the blunt, powerfully built Gotoh believes. "They'll have to kill off everyone over 50 and make all the guys in their forties kacho, bucho, even vice-president I just fear it may be too late for them to change."
JAPANESE COMPANIES ARE UNLIKEly to implement Gotoh's radical proposal, but many analysts and corporate managers share his concerns about the ability of their nation's management culture to meet the economic challenges of the future. Increasingly, the focus of this concern is the new generation of college graduates, known widely as shirake sedai, or "reactionless generation," who seem to lack both the loyalty ethos of the over-40 generation and the nonconformity of the baby boomers. Aware of the difficulty of advancement and the problems of the fledgling venture businesses, these young Japanese have simply lowered their expectations and decided to play along with the system.
"The baby boomers were antiestablishment but also very creative," says Masayoshi Suzuki, director of the Socio-Economic Studies and Business Planning Department at Nomura Research Institute, Japan's leading think tank. "In this younger generation, you have no sense of rebellion to give them drive. They just want to work for the big companies and take it easy."
Even Japan's top corporate executives are disturbed about a generation that seems to have displaced fear with apathy. Faced with increasing competition from Korea, Taiwan, and other emerging Asian countries in mass-manufactured commodities, these managers realize that their companies cannot rely on the organizational skills associated with low-cost manufacturing, but must rely instead on the creative abilities of their employees. "This whole generation can execute, but they can't come up with new solutions and ideas," notes one disgusted Japanese electronics executive. "They are just like goldfish. They open their mouths and you feed them information."
Ironically, this "goldfish" generation has entered the job market with what would appear to be impressive credentials. More than one-third of these under-30 Japanese have gone on to college, and as a group they have outscored their American counterparts in such crucial fields as mathematics and science. Yet the very educational system that has made these youths such proficient test-takers also may have dampened their ability to think on their own. "We have been squeezing out the creativity from a whole generation," complains NRI's Suzuki about Japan's regimented educational system.
Not only has creativity suffered, but once these young people enter the company, they seem worn out by the brutal competition of schooling and examinations. Unlike earlier generations of Japanese, they share little enthusiasm for their work. A recent survey revealed that 15% to 20% of all workers under 40 lacked any real commitment toward their firms -- an attitude that may be commonplace in Western cultures but is shocking in Japan.
"All this loyalty stuff is basically garbage," believes 27-year-old Hideo Kikuchi, who recently quit a job with the prestigious Mitsui & Co. trading firm and joined Baring Far East Securities, a British investment firm. "As I see it, I am not interested in working for the company but for myself."
Although most younger workers lack Kikuchi's courage in changing jobs, his attitude toward work signifies a trend that disturbs many thoughtful Japanese executives. To them, the most crucial element in Japan's economic miracle has been the pride and selflessness of the Japanese employee, from the lowliest assembler to the most senior executive. Those winning qualities derive, as many have noted, from the age-old Japanese sense of loyalty. But they also derive from fear -- fear that has increasingly given way to frustration and resentment.
"I am proud of Japan's success, but why should I work hard if there's so little reward and no hope of promotion?" asks Mizuhisa Noguchi, a 28-year executive at Nichimen Corp., one of Japan's leading trading firms. "Maybe I'd like to go off and do something more interesting, but the opportunities are so small on the outside. We are stuck. The way things are, it seems like our dreams can never be realized."