The Realist Idealist

An article found in this week’s Economist, “Take a leaf out of his book,” presents a candid message to Japanese executives: it’s time to break with the past if you don’t want to break your company!

The article points out that in Japan certain cultural characteristics such as humility, loyalty, respect and consensus, which are seemingly positive, may be holding back Japanese businesses.

The results of such ideals include the following:

• Lack of women in leadership positions
• Long work hours
• Dependent, risk averse managers
• Promotion on the basis of age rather than merit

All of the above discourages dynamic leadership and innovation. The group decision-making and the communal sharing of risks and rewards is not keeping pace with the needs and desires of the ever-evolving workforce (represented by the overwhelming excitement surrounding Kosaku Shima of Hatsushiba Goyo Holdings – a fictional, new age Japanese businessman) and reverence surrounding a traditionally male dominated workplace is cutting the talent pool in half.

In Japan, women make up 40.5 percent of the labor force, and women between the ages of 15 and 64 have a labor force participation rate of 48.5 percent despite active laws, which prohibit wage discrimination against women. In 2002, female workers on average earned only 66.5 percent of average male earnings, which is a result of a “two-track” personnel administration system found in most larger companies under which new hires are put into one of two categories: the managerial track that includes those engaged in planning and decision making jobs and have the potential to become top executives and the general track that includes employees engaged in general office work. This is all despite the fact that corporations with a high percentage of women in leadership have consistently seen higher returns on equity.

If Japanese businesses want to attract top talent and see higher returns, they must begin to ride on the coat tails of top Japanese companies (Toyota, Canon, Nintendo) that have placed diversity and innovation at the core of their business strategy.