Japan SPOTLIGHT January/February 2016 issue

Japan SPOTLIGHT January/February 2016 issue

COVER STORY: Where is Japanese Management Heading - Evolution or Revolution?
Assessment of Reform of Corporate Governance & Diversity Management
Japanese management, with lifetime employment and a seniority-based salary and promotion system as its core elements, has long been considered central to the success of Japanese business. The cohesiveness of a company developed by such simple management techniques was an engine in enhancing the competitiveness of Japanese companies in the process of catching up with global leaders until about the 1980s. In this process, vitality was more important than creativity, and such cohesiveness helped to create vitality. People around the world became interested in Japanese management techniques as the success story of the Japanese economy spread.

But now that the Japanese economy has matured and no longer needs to catch up with any other, Japanese businesses will need innovation and creativity instead of cohesiveness. They will need to develop on their own more new ideas and strategies to maintain their competitiveness, since they don't have any models to catch up with. New ideas and strategies often come from competition rather than collaboration, when you are pressed to create a distinction from your rivals by a new strategy or a new product in a serious competition for profits. The cohesiveness of a company may no longer be a primary necessity to win the competition for creativity. Rather, diversity will be a key to the creation of new ideas and thus to business success. Japanese companies now face the need to introduce diversity among the members of their management team, such as women and foreigners.

Corporate governance reform in Japan, which is now drawing international attention, would enable a Japanese company to enage in ROE-oriented competition which would lead to greater innovation. Diversity management and corporate governance reform are both recommended and promoted by "Abenomics". So traditional Japanese management now has to tackle these challenges and change by itself. This transformation process of Japanese management, whether it be called evolution or revolution, will draw international attention because conventional Japanese management systems once provoked discussions about the future of global business itself. Corporate governance reform in Japan, and diversity management, two business reforms advocated by Abenomics, are the core factors of this transformation process.