Nissan CEO Carlos Ghosn shows problem with Japanese corporate culture

But the scandals are not only a shock to Japanese consumers, they mark Japan’s reputation as a reliable, quality-oriented manufacturer and trading partner. Japanese corporate structures offer some explanation of the events.

In most Western companies, employees are hired with a detailed employment contract and only do what is agreed upon in the contract. In Japan, employees are hired without a job description and can be assigned any task.

Since there is no division of labor in most Japanese companies, all employees can be transferred within a day to a new department or even a new location. Companies generally have employees who change departments every two years. This job rotation allows members of the company to know the basic functions in each part of the company, so that by the time they become senior managers, they really know the company inside and out.

However, this often means that many Japanese companies are short of specialists, as most managers have had little time to learn about particular business processes. And they’re often not up to date when it comes to emerging business topics, such as compliance, diversity management, or digitization.

Lifetime employment

Japanese companies offer jobs for life and they expect employees to stay with them until retirement. In fact, many Japanese people are hired by their companies right after graduation and stay with their company for their entire working life. But a life spent in the same company with the same colleagues makes it difficult to raise concerns and question existing processes. Even on boards of directors, we mostly find Japanese managers who only know one company and have spent decades working there. Often, new international standards are recognized very late or not at all.

In addition, new recruits are trained in each department by older members, or sempai, who are both role models and informal leaders. This creates a strong bond between employees, but having such tight-knit units and strict hierarchies makes it difficult for new ideas to flourish.

Labor law

Japanese labor law makes it difficult to fire full-time employees. They can stay with the same company until retirement and enjoy full protection by law as long as they are fully dedicated to the business and rotate throughout the company for the first 10 years. of their career.

Many Japanese employees do not question internal processes because they cannot compare to the processes of old workplaces or other companies. The system of a company by life creates a strong bond between the employee and the company and makes it difficult for the employees to question or criticize the internal processes, even if they perceive them as bad or contrary to the company. ethics.

And after?

Now that confidence in Japanese companies has been deeply shaken, it is evident that Japan needs to strengthen its regulations on corporate governance.

The government has already taken some first steps. As of 2015, Japanese boards are expected to have two outside directors. Although the code itself is not legally binding, companies must declare why they are not complying with it, which prompts them to do so. The government hopes that the diversification of traditional councils will lead to more innovative decision-making among council members.

Changes in Japanese society will also have an effect on Japanese companies. Japan is currently facing a very serious labor shortage due to population decline. The unemployment rate is at an all-time high of 2.3%, and companies see recruiting as their biggest future challenge.

The Japanese government responded to this population decline by relaxing immigration laws and facilitating the entry of international managers into Japanese companies. These international employees can bring more international perspectives, as well as implement new procedures in traditional Japanese companies to make them more competitive on a global scale. In the years to come, they could also influence the attitude towards compliance and safety standards.

In addition, whistleblowing has become more common in Japan in recent years. Numerous scandals in recent months have posed security risks for the Japanese population, so more employees have started reporting them to authorities.

The Nissan scandal is a wake-up call for Japanese companies to rethink their processes and put in place effective compliance management processes. We will see what they get out of it.

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