What can we learn from Japanese Management? Part I of III

Businessmen in the United States and Europe know Japanese industry as an important supplier, customer, and competitor. But they should also know it as a teacher. Three important sets of ideas we can learn from Japan are described in this article. They could have a far-reaching impact on the quality of our executive decision making, corporate planning, worker productivity, and management training.

What are the most important concerns of top management? Almost any group of top executives in the United States (or in many other Western nations) would rank the following very high on the list:

  1. Making effective decisions.
  2. Harmonizing employment security with other needs such as productivity, flexibility in labor costs, and acceptance of change in the company.
  3. Developing young professional managers.

In approaching these problem areas, Japanese managers—especially those in business—behave in a strikingly different fashion from U.S. and European managers. The Japanese apply different principles and have developed different approaches and policies to tackle each of these problems. These policies, while not the key to the Japanese “economic miracle,” are certainly major factors in the astonishing rise of Japan in the last 100 years, and especially in Japan’s economic growth and performance in the last 20 years.

It would be folly for managers in the West to imitate these policies. In fact, it would be impossible. Each policy is deeply rooted in Japanese traditions and culture. Each applies to the problems of an industrial society and economy the values and the habits developed far earlier by the retainers of the Japanese clan, by the Zen priests in their monasteries, and by the calligraphers and painters of the great “schools” of Japanese art.

Yet the principles underlying these Japanese practices deserve, I believe, close attention and study by managers in the West. They may point the way to a solution to some of our most pressing problems.

Decisions by ‘Consensus’

If there is one point on which all authorities on Japan are in agreement, it is that Japanese institutions, whether businesses or government agencies, make decisions by “consensus.” The Japanese, we are told, debate a proposed decision throughout the organization until there is agreement on it. And only then do they make the decision.1

This, every experienced U.S. manager will say with a shudder, is not for us, however well it might work for the Japanese. This approach can lead only to indecision or politicking, or at best to an innocuous compromise which offends no one but also solves nothing. And if proof of this were needed, the American might add, the history of President Lyndon B. Johnson’s attempt to obtain a “consensus” would supply it.

Let us consider the experience of Japan. What stands out in Japanese history, as well as in today’s Japanese management behavior, is the capacity for making 180-degree turns—that is, for reaching radical and highly controversial decisions. Let me illustrate:

  1. No country was more receptive to Christianity than sixteenth-century Japan. Indeed, the hope of the Portuguese missionaries that Japan would become the first Christian country outside of Europe was by no means just wishful thinking. Yet the same Japan made a 180-degree turn in the early seventeenth century. Within a few years it completely suppressed Christianity and shut itself off from all foreign influences—indeed, from all contact with the outside world—and stayed that way for 250 years. Then, in the Meiji Restoration of 1867, Japan executed another 180-degree turn and opened itself to the West—something no other non-European country managed to do.
  2. Toyo Rayon, the largest Japanese manufacturer of man-made fibers, made nothing but rayon as late as the mid-1950’s. Then it decided to switch to synthetic fibers. But it did not “phase out” rayon making, as every Western company in a similar situation has done. Instead, it closed its rayon mills overnight, even though, under the Japanese system of employment, it could not lay off a single man.
  3. As late as 1966, when I discussed this matter with officials, the Ministry of International Trade and Industry was adamantly opposed to any Japanese companies going “multinational” and making investments in manufacturing affiliates abroad. But three years later, the same Ministry officials, working for the same conservative government, had turned around completely and were pushing Japanese manufacturing investments abroad!

Focusing on the problem

The key to this apparent contradiction is that the Westerner and the Japanese mean something different when they talk of “making a decision.” With us in the West, all the emphasis is on the answer to the question. Indeed, our books on decision making try to develop systematic approaches to giving an answer. To the Japanese, however, the important element in decision making is defining the question. The important and crucial steps are to decide whether there is a need for a decision and what the decision is about. And it is in this step that the Japanese aim at attaining “consensus.” Indeed, it is this step that, to the Japanese, is the essence of the decision. The answer to the question (what the West considers the decision) follows its definition.

During this process that precedes the decision, no mention is made of what the answer might be. This is done so that people will not be forced to take sides; once they have taken sides, a decision would be a victory for one side and a defeat for the other. Thus the whole process is focused on finding out what the decision is really about, not what the decision should be. Its result is a meeting of the minds that there is (or is not) a need for a change in behavior.

All of this takes a long time, of course. The Westerner dealing with the Japanese is thoroughly frustrated during the process. He does not understand what is going on. He has the feeling that he is being given the runaround. To take a specific example:

It is very hard for a U.S. executive to understand why the Japanese with whom he is negotiating on, say, a license agreement, keep on sending new groups of people every few months who start what the Westerner thinks are “negotiations” as if they had never heard of the subject. One delegation takes copious notes and goes back home, only to be succeeded six weeks later by another team of people from different areas of the company who again act as if they had never heard of the matter under discussion, take copious notes, and go home.

Actually—though few of my Western friends believe it—this is a sign that the Japanese take the matter most seriously. They are trying to involve the people who will have to carry out an eventual agreement in the process of obtaining consensus that a license is indeed needed. Only when all of the people who will have to carry out the agreement have come together on the need to make a decision will the decision be made to go ahead. Only then do “negotiations” really start—and then the Japanese usually move with great speed.

There is a complete account of this process at work—though it does not concern a business decision. The account deals with the decision to go to war against the United States in 1941.2

Undertaking action

When the Japanese reach the point we call a decision, they say they are in the action stage. Now top management refers the decision to what the Japanese call the “appropriate people.” Determination of who these people are is a top management decision. On that decision depends the specific answer to the problem that is to be worked out. For, during the course of the discussions leading up to the consensus, it has become very clear what basic approaches certain people or certain groups would take to the problem. Top management, by referring the question to one group or the other, in effect picks the answer—but an answer which by now will surprise no one.

This referral to the “appropriate people” is as crucial as the parallel decision in the U.S. political process which baffles any foreign observer of American government—the decision as to which committee or subcommittee of the Congress a certain bill is to be assigned. This decision is not to be found in any of the books on U.S. government and politics. Yet, as every American politician knows, it is the crucial step which decides whether the bill is to become law and what form it will take.

Increased effectiveness

What are the advantages of this process? And what can we learn from it?

In the first place, it makes for very effective decisions. While it takes much longer in Japan to reach a decision than it takes in the West, from that point on they do better than we do. After making a decision, we in the West must spend much time “selling” it and getting people to act on it. Only too often, as all of us know, either the decision is sabotaged by the organization or, what may be worse, it takes so long to make the decision truly effective that it becomes obsolete, if not outright wrong, by the time the people in the organization actually make it operational.

The Japanese, by contrast, need to spend absolutely no time on “selling” a decision. Everybody has been presold. Also, their process makes it clear where in the organization a certain answer to a question will be welcomed and where it will be resisted. Therefore, there is plenty of time to work on persuading the dissenters, or on making small concessions to them which will win them over without destroying the integrity of the decision.

Every Westerner who has done business with the Japanese has learned that the apparent inertia of the negotiating stage, with its endless delays and endless discussion of the same points, is followed by a speed of action that leaves him hanging on the ropes. Thus:

It may take three years before a licensing agreement can be reached, during which time there is no discussion of terms, no discussion of what products the Japanese plan to use, no discussion of what knowledge and help they might need. And then, within four weeks, the Japanese are ready to go into production and make demands on their Western partner for information and people which he is totally unprepared to meet.

Now it is the Japanese who complain, and bitterly, about the “endless delay and procrastination” of the Westerner! For they understand our way of making a decision and acting on it no better than we understand their way of considering a decision and acting on it.

The Japanese process is focused on understanding the problem. The desired end result is certain action and behavior on the part of people. This almost guarantees that all the alternatives will be considered. It rivets management attention to essentials. It does not permit commitment until management has decided what the decision is all about. Japanese managers may come up with the wrong answer to the problem (as was the decision to go to war against the United States in 1941), but they rarely come up with the right answer to the wrong problem. And that, as all decision makers learn, is the really dangerous course, the irretrievably wrong decision.

Improved focus

Above all, the system forces the Japanese to make big decisions. It is much too cumbersome to be put to work on minor matters. It takes far too many people far too long to be wasted on anything but truly important matters leading to real changes in policies and behavior. Small decisions, even when obviously needed, are very often not being made at all in Japan for that reason.

With us it is the small decisions which are easy to make—decisions about things that do not greatly matter. Anyone who knows Western business, government agencies, or educational institutions knows that their managers make far too many small decisions as a rule. And nothing, I have learned, causes as much trouble in an organization as a lot of small decisions. Whether the decision concerns moving the water cooler from one end of the hall to the other or phasing out of one’s oldest business makes little emotional difference. One decision takes as much time and generates as much heat as the other!

To contrast the Japanese approach and the Western approach, let me illustrate:

I once watched a Japanese company work through a proposal for a joint venture received from a well-known American company, one with which the Japanese had done business for many years. The Orientals did not even discuss the joint venture at the outset. They started out with the question: “Do we have to change the basic directions of our business?” As a result, a consensus emerged that change was desirable, and management decided to go out of a number of old businesses and start in a number of new technologies and markets; the joint venture was to be one element of a major new strategy. Until the Japanese understood that the decision was really about the direction of the business, and that there was need for a decision on that, they did not once, among themselves, discuss the desirability of the joint venture, or the terms on which it might be set up. It has, by the way, been doing very well since its formation.

In the West we are moving in the Japanese direction. At least, this is what so many “task forces,” “long-range plans,” “strategies,” and other approaches are trying to accomplish. But we do not build into the development of these projects the “selling” which the Japanese process achieves before the decision. This explains in large measure why so many brilliant reports of the task leaders and planners never get beyond the planning stage.

U.S. executives expect task forces and long-range planning groups to come up with recommendations—that is, to commit themselves to one alternative. The groups decide on an answer and then document it. To the Japanese, however, the most important step is understanding the alternatives available. They are as opinionated as we are, but they discipline themselves not to commit themselves to a recommendation until they have fully defined the question and used the process of obtaining consensus to bring out the full range of alternatives. As a result, they are far less likely to become prisoners of their preconceived answers than we are.

Acknowledgement: HBR, March 1971 Issue

In case you missed it, my last post was Respect and Yokai

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