CHAPTER ELEVEN

What We Can Learn from Japanese Management

1. Making effective decisions.
2. Harmonizing employment security with labor-cost flexibility, productivity, and acceptance of change.
3. Managing and developing the young managerial and professional employee.

These three areas surely rank high on any list of management concerns.

In each, Japanese management, and especially Japanese business management, behaves in a strikingly different fashion from Western management, American or European. 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 hundred years, and especially in Japan’s economic growth and performance in the last twenty years.

It would be folly for the West to imitate these policies. In fact, it would be impossible. Each is deeply rooted in Japanese traditions and culture. Each, indeed, applies to the problems of an industrial society and economy values and habits developed far earlier by and for the retainers of the Japanese clan and their relationship with their lord, the Zen priests in their monasteries or 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 solutions for some of our most pressing problems.

I

What “Consensus” Means

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

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

But even the most cursory reading of Japanese history, or the most superficial acquaintance with Japanese businesses or government agencies today, shows the opposite to be true in 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 obviously highly controversial decisions.

No country, for instance, 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, in the early seventeenth century, made a 180-degree turn, within a few years completely suppressing Christianity and shutting itself off from all foreign influences—indeed, from all contact with the outside world—for 250 years. Then, some 250 years later, in the Meji Restoration of 1867, Japan executed another such 180-degree turn when it opened itself to the West—again something no other non-European country managed to do.

Or, take some present examples from business and economics. Toyo Rayon, the largest Japanese manufacturer of man-made fibers, made nothing but rayon as late as the midfifties. Then when it decided to switch to synthetic fibers, it did not “phase out” rayon-making, as every Western company in a similar situation has done. It closed its rayon mills overnight, even though, under the Japanese system of employment, it could not lay off a single man.

The Ministry of International Trade and Industry, (MITI), as late as 1966 when I discussed this matter with its officials, was adamantly opposed to any Japanese companies’ going multinational and making investments in manufacturing affiliates abroad. Three years later, by 1969, the same officials in MITI, working for the same conservative government, had turned around completely and were pushing Japanese manufacturing investments abroad.

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” all 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 need for a decision and what the decision is about. And it is in this step that the Japanese aim at attaining consensus. It is, indeed, this step that, to the Japanese, is the essence of the decision. The answer to the question—that is, what the West considers the “decision”—follows.

In this process that precedes the decision, no mention is made of what the answer might be. This is strenuously kept out for an elementary reason. It would force people to take sides; and 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 it should be. Its result is a meeting of the minds that there is, indeed, need for a change in behavior.*

This takes a long time, admittedly. Indeed, the Westerner dealing with the Japanese is thoroughly frustrated during this period. He does not understand what goes on. He has the feeling that he is being given the run-around.

It is very hard, for instance, for an American executive to understand why the Japanese with whom he is negotiating, say, about a license agreement, keep on sending a new group of people every three months who start what the Westerner thinks are “negotiations” as if they had never heard of the subject, take copious notes, and then go back home, only to be succeeded six weeks later by another team of new 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 in turn. Actually, although 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 into the process of obtaining consensus that a license is, indeed, needed. Only when all the people who will have to carry out the agreement have come together on the need to make a decision is the decision made to go ahead. Only then do negotiations really start—and then they usually move with the speed of lightning.

It is only when the whole group has thoroughly understood what the decision is all about, and when everybody knows that a decision is really appropriate, that the Japanese reach the point we mean when we talk of a decision.

However, they no longer call it a “decision”; they call it (and they are right) the “action stage.” At this point top management then refers the decision to what the Japanese experts call “the appropriate people.” Who the “appropriate people” are is a top-management decision. And it determines, in effect, what specific answer to the problem will be worked out. For, naturally, in the course of the discussions leading up to consensus, it has become very clear what basic approaches certain people or certain groups are taking to the problem. Top management, by referring the matter to one or the other, in effect, picks the answer—but an answer which by now will not surprise anybody. This referral to the appropriate people is as crucial as the parallel decision in the American political process which so totally baffles any foreign observer of American government: the decision to which committee or subcommittee of the Congress a certain bill is to be assigned. Again, this decision is not to be found in any of the books on American government and politics; yet, as every American politician knows, it is the crucial step that decides whether the bill is to become law and what form it will take. Similarly in Japan, this top-management decision—not mentioned in any Japanese book on government or business, to my knowledge—decides what the actual answer to the question will be.

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

In the first place, it actually makes for speedy decisions, and, above all, for effective decisions. It might seem like a most time-consuming process. Indeed, it takes much longer in Japan to reach a decision than it takes in the West. But we in the West then spend years on “selling” a decision. We make the decision first and then begin to work on getting people to act on it. And, only too often, as all of us in the West know, either the decision is sabotaged by the organization or, which may be worse, it takes so long to make it truly effective that it has become obsolete, if not indeed wrong, by the time the people in the organization actually make it their own behavior, actually make it operational. The Japanese, by contrast, spend absolutely no time on selling a decision. Everybody has been presold. Also, of course, in their process it has become 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 Japan has learned that the apparent inertia of the “negotiating stage,” with its endless delays and interminable chewing over of the same cud, is followed by a speed of action that leaves him hanging by the ropes. It may take three years to work out that licensing agreement during which there is no discussion of terms, no discussion of what products the Japanese plan to make, no discussion of what knowledge and help they may need. And then, within four weeks, the Japanese are ready to go into production and make demands on their Western partner for data, information, and people which he is totally unprepared to meet. Then it is the Japanese, by the way, who complain, and bitterly, about the “endless delay and procrastination” of the Westerner. For they no more understand our way of making a decision—that is, our way of making the decision first and implementing it later—than we understand the Japanese way which puts making the decision effective before making the decision itself.

In fact, the Japanese approach goes to the heart of making effective decisions. This is not what the right answer is, but what right behavior follows from it. It is not derived, as our approach to decision-making is, from mathematics, where the right answer is an end in itself and where Quod Erat Demonstrandum ends the decision-making procedure. It is derived from seeing the decision as a process in which the desired end result is action and behavior on the part of people.

The Japanese method is focused on understanding the problem. It almost guarantees that all the alternatives are being considered. It rivets attention to essentials. It does not permit commitment until there is agreement on “what is the decision all about?” As a result, it 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 it rarely comes up with the right answer to the wrong problem. And that, as all decision-makers have learned, is the really dangerous course, the really irretrievably wrong decision.

Above all, however, the system forces the Japanese to make big decisions. It forces them to make fundamental decisions, not to say radical ones. The system is much too cumbersome to be put to work on minor matters. It takes far too many people far too long to be frittered away on anything but truly important matters leading to true changes in policies and behavior. Small decisions, even if obviously needed, are very often not being made at all in Japan for that reason.

With us it is the small decisions that our process finds easy to make—decisions that do not greatly matter. Anyone who knows Western business or Western government agencies knows that they 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 is to move the water cooler from one end of the hall to the other or whether it is to go out of one’s oldest business makes little emotional difference. One decision takes as much time and generates as much heat as the other. One might as well get something for that agony of change in institutional and managerial behavior. This, however, means that one doesn’t make small and frequent decisions. One makes the big ones. And this is what the Japanese process achieves.

I once watched a Japanese company working through a proposal for a joint venture received from a well-known American firm—a firm, by the way, with whom the Japanese had done business for many years. They did not even start out by discussing the joint venture. They started out with the question, “Do we have to change the basic directions of our business?” As a result, the consensus emerged into a decision to go out of a number of old businesses and start in a number of new technologies and markets, with the joint venture—which was established and has been doing very well—then as one element of a major new strategy. But until the Japanese understood that the decision was really about the direction of the business, and that there was need for a decision, they did not once, among themselves, discuss the desirability of the joint venture or the terms on which it might be set up.

In the West we are moving in the Japanese direction. At least this is what all the “task forces,” “long-range plans,” or “strategies” are trying to accomplish. But in the first place, we do not build into the work of these task forces the “selling” which the Japanese process builds in before the decision. This explains in large measure why so many of the brilliant reports of these task forces or long-range planners never develop into action, but remain plans. At the same time, we expect these task forces or long-range planners to come up with “recommendations,” that is, to commit themselves to one alternative. To the Japanese, however, quite rightly, the most important step is the understanding of the alternatives available. With us, as every observer of the process knows, the task forces or the long-range planners tend to start out with an answer, that is, with a recommendation, and then try to find documentation for it. The Japanese are as opinionated as we are. But because they discipline themselves not to commit themselves to a recommendation until they have fully defined the question, and because they use the system of obtaining consensus to bring out the full range of alternatives, they are far less likely to become prisoners of their preconceived answers than we are likely to be in our decision-making process.

II

Myths and Realities of “Lifetime Employment”

Just as everyone has heard about “consensus” as the basis for Japanese decisions, everyone, in Japan as well as in the West, knows about Japanese “lifetime employment.” And again, most people’s concept of lifetime employment is as much a misunderstanding as the common reading of consensus.

To be sure, most employees in “modern” Japanese business and industry have a guaranteed job, once they have come on the payroll.* While they are on the job, not only do they have virtually complete job security, endangered solely in the event of a severe economic crisis or of bankruptcy of the employer. As a rule, they are also being paid by seniority, with pay doubling about every fifteen years, regardless of job.

But instead of a rigid labor-cost structure, Japan actually has remarkable flexibility in her labor costs and labor force. What no one ever mentioned—and what, I am convinced, most Japanese do not even see themselves—is that the Japanese retirement system (or perhaps it should be called the Japanese nonretirement system) not only makes labor costs more flexible than they are in most countries and most industries of the West. It also harmonizes in a highly ingenious fashion the workers’ need for a guarantee of job and income and the economy’s need for flexible labor costs. Actually most Japanese companies, especially the large ones, lay off a greater proportion of their work force if business slackens than most Western companies are likely or able to do. Yet they can do so in a fashion in which the employees who most need an income are fully protected. The burden of adjustment is taken by those who can afford it and who have alternative incomes to fall back on.

Official retirement age in Japan is fifty-five for everyone except a few who, at age forty-five, become members of top management and are not expected to retire at any fixed age. At age fifty-five, so you are being told, the employee, from floor sweeper to department head, “retires.” Traditionally he then gets a severance bonus equal to about two years of full pay.*

Considering that life expectancy in Japan is now fully up to Western standards, so that most employees can expect to live to age seventy or so, this seems wholly inadequate. Yet no one complains about the dire fate of the pensioners. More amazing still, one encounters in every Japanese factory, office, or bank people who cheerfully admit to being quite a bit older than fifty-five and who quite obviously are still working.

The rank-and-file employee, blue-collar or white-collar, ceases to be a permanent employee at age fifty-five and becomes a “temporary” employee. This means, in the first place, that he can be laid off if there is not enough work. But if there is enough work—and of course Japan, these last twenty years, has had an acute labor shortage—he stays on, very often doing the same work as before, side by side with the permanent employee with whom he has been working for many years. But for this work he is now paid at least one-third less than he received when he was a permanent employee.

The rationale of this is fairly simple. The man, the Japanese argue, has something to fall back on: the two-year pension. This, they freely admit, is not enough to keep a man alive for fifteen years or so. But it is usually enough to tide him over a bad spell. And since he no longer has, as a rule, dependent children or parents whom he has to support, his needs should be considerably lower than they were when he was, say, forty and had presumably both children and parents to look after.

If my intent were to describe the Japanese employment system, I would now have to go into a great many rather complicated details, such as the role of the semiannual bonus. But I am concerned only with what we in the West might learn from the Japanese. The main interest of the Japanese system to us, I submit, is the way in which it satisfies two apparently mutually contradictory needs: the need to provide job and income security, and the need for flexible and adaptable labor force and labor costs.

In the West, during the last twenty-five years, more and more employees have achieved income maintenance that may, in many cases, exceed what the Japanese worker gets under lifetime employment. There is, for instance, the Supplementary Employment Compensation of the American mass-production industries which, in effect, guarantees the unionized worker most of his income even in fairly lengthy layoffs. Indeed, it may well be argued that labor costs in American mass-production industries are more rigid than they are in Japan, even though our managements can rapidly adjust the number of men at work to the order flow, in contrast to the Japanese practice of maintaining employment for permanent employees almost independent of business conditions. Increasingly, also, we find in the heavily unionized mass-production industries provision for early retirement such as was written in the fall of 1970 into the contract of the American automobile industry. Still, unionized employees are being laid off according to seniority, with the ones having the least seniority going first. As a result, we still offer the least security of a job and income to the men who need a predictable income the most, the fathers of young families who, of course, also are the ones who still might have older parents to support. And where we have “early retirement,” it means, as a rule, that the worker has to make a decision to retire permanently. Once he has opted for early retirement, he is out and unlikely to be hired back, let alone, at his age, to be hired by another employer. As a result, our labor force—and this is just as true in Great Britain or on the European continent—lacks the feeling of economic and job security which is so outstanding a feature of Japanese society.

In other words, we pay for a high degree of “income maintenance” and have imposed on ourselves a very high degree of rigidity in respect to labor costs. But we get very few of the benefits. Above all, we do not get the psychological security which is so pronounced in Japanese society: the deep conviction of a man of working age that he need not worry about his job and his income. Instead, we have fear—fear of the younger men that they will be laid off first, just when the economic needs of their families are at their peak; fear of the older men that they will lose their jobs in their fifties and then be too old to be hired. In the Japanese system there is confidence, instead, in both age groups—confidence of the younger men that they can look forward to a secure job and steadily rising income while the children are growing up; confidence on the part of the older men that they are still wanted, still useful, but also not a “burden.”

In practice, of course, the Japanese system is no more perfect than any other system. There are plenty of inequities in it; and the treatment of the older people in particular leaves a great deal to be desired, especially in the small workshop industries of preindustrial Japan and in the multitude of small service businesses. But the basic principle which the Japanese have evolved—not by planning rationally, but by applying traditional Japanese concepts of mutual obligation to employment and to labor economics—seems to make more sense and works better than the expensive patchwork we have applied to symptoms of the problem without, however, coming to grips with the problem itself. Economically, it might be said, we have greater “security” in our system; we certainly pay more for it. Yet we have not obtained what the Japanese system produces: the psychological conviction of lifetime employment, that is, of job and income security.

There is today talk, and even a little action, in American industry of “reverse seniority” to protect newly hired blacks, who have little or no seniority, in the event of a layoff. But we might also consider applying reverse seniority to older men past the age of greatest family obligation, now that so many labor contracts provide for “early retirement” after age fifty-five. And the pressure for such early-retirement provisions will predictably rise as the number of young men entering the labor force for the first time goes up sharply in the next few years. Men who have the right to an early-retirement pension may be expected to be laid off first; today their seniority gives them all but absolute job security. By the same token, however, these men might have the right, today normally denied them completely, to come back out of early retirement and be rehired first when employment expands again. Indeed, some such move that strengthens the job security of the younger, married employee with his heavy family burdens might well be the only defense against pressures for absolute job guarantees that could otherwise impose on America the rigid labor costs with which folklore endows the Japanese economy.

But even more important as a lesson to be learned from the Japanese is the need to shape benefits to the needs and wants of specific major employee groups. Otherwise they will be only costs rather than benefits. In the West, and especially in the United States in the last thirty years, we have heaped benefit upon benefit to the point where the “fringes” run up to a third of total labor cost in some industries. Yet practically all these benefits have been applied across the board, whether needed by a particular group or not. The one exception I can think of is maternity leaves. But teenage girls, who want to stay only till they find a husband, are made to pay into retirement plans due at age 65. Health insurance, whether Blue Cross or private carrier, does not, as a rule, provide any protection against the costs of illness to an employee out of work, just when he needs such coverage the most. But a majority of the plans provide full benefits to the nonworking dependents of an employed worker even though, with today’s wages, most employees, when fully employed themselves, could well pay for routine illness in their families, despite soaring health-care costs. In fact, underlying our entire approach to benefits—with management and union in complete agreement, for once—is the asinine notion that the work force is homogeneous in its needs and its desires. As a result, we spend fabulous amounts of money on “benefits” which have little meaning for large groups, sometimes even the majority, of employees, and leave unsatisfied genuine needs of other, equally substantial groups. This is in itself a major reason why our benefit plans have produced so little employee satisfaction and psychological security and why an increase in one kind of benefit leads immediately to demands for new and different benefits to “equalize” the benefit position of some other group—the old or the young, the skilled or the unskilled, and so on.

What management and union alike might learn from the Japanese experience is to mold benefit plans so that the same amount of money can provide the maximum, flexibly, in true benefit for different employee groups with different needs and desires according to their stages in life and family cycle. It is this psychological conviction that underlies also what might be an important “secret” of the Japanese economy: cheerful willingness of the employee to accept continuing change in technology and process, and the acceptance of increasing productivity as good for everybody.

There is a great deal written today about the “spirit” of the Japanese factory. But far more important than the company songs workers in big factories sing at the beginning of the day is the fact that Japanese workers show little of the famous resistance to change which is so widespread in the West.

The usual explanation is “national character”—always a suspect explanation. That it may be the wrong one is indicated by the fact that acceptance of change is by no means general throughout Japan. The Japanese National Railways, for instance, suffer from resistance to change fully as much as any other railway system, including the American railroads. But the numerous private railways which crisscross the densely populated areas of Japan seem to be relatively free from it. That the Japanese National Railways are as grossly overstaffed as any nationalized industry in the world may be part of the explanation; the workers know that any change is likely to create redundancy. More important is the fact that the industries in Japan which, like the Japanese National Railways, suffer from resistance to change are also the ones that are organized according to Western concepts of craft and skill. The industries which apply Japanese concepts, as do the private railways, as a rule, do not suffer from resistance to change, even though their employees also know that the company is overstaffed rather than understaffed.

The secret may lie in what the Japanese call “continuous training.” This means, first, that every employee, very often up to and including top managers, keeps on training as a regular part of his job until he retires. This is in sharp contrast to our Western practice where we train a man, as a rule, only when he has to acquire a new skill or move to a new position. Our training is “promotion-focused”; the Japanese training is “performance-focused.” But also the Japanese employee, on all levels, is generally being trained not only in his job but in all the jobs on his job level. The man working as an electrician will automatically attend training sessions in every single skill area in the plant. But so will the man who pushes a broom. Both of them may stay in their respective jobs until they die or retire. In fact, their pay is independent, in large measure, of the job they are doing and is geared primarily to the length of service, so that the highly skilled electrician may well get less money than the floor sweeper. But both are expected to be reasonably proficient in every job in the plant which is, generally speaking, on the same level as their job (which in a plant means all rank-and-file blue-collar jobs, for instance). The accountant in the office is similarly expected to be trained—or to train himself through a multitude of correspondence courses, seminars, or continuation schools available in every big city—in every single one of the professional jobs needed in his company—such as personnel, training, or purchasing. And so it goes all the way to top management.

The president of a fairly large company, who once told me casually that he could not see me on a certain afternoon because he attended his company’s training session in welding—and as a student rather than as an observer or teacher—is, of course, the exception. But the company president who takes a correspondence course in computer programming is fairly common. And the young personnel man does so as a matter of course.

It would need a thick book on Japanese economic and industrial history to explain the origins of this system—although in its present stage it is just about fifty years old and dates back to the labor shortages during and right after World War I. It would take an even thicker book to discuss the advantages, disadvantages, and limitations of the Japanese system; and the limitations are very great, indeed. The young technically trained people, the young scientists and engineers, for example, resent it bitterly and resist it rather successfully. They want to work as scientists and engineers and are by no means delighted when being asked to learn accounting or when being shifted from an engineering job into the personnel department. Also, such highly skilled and highly specialized men as papermakers, running a large paper machine, or department-store buyers are not, as a rule, expected to know other jobs or to be willing to fit into them. But even these specialists continue, as a matter of routine, to perfect themselves in their own specialty, long after any “training” in the West would have ended; indeed, normally, for the rest of their working lives.

One result of this practice is that improvement of work and process is built into the system. In a typical Japanese training session, there is a trainer. But the real burden of training is on the participants themselves. And the question is always: “What have we learned so we can do the job better?” Most of the participants, in other words, know the job—have, indeed, been doing it for many years. As a result, the new, whether a new tool, a new process, or a new organization of the work, comes out as “self-improvement” week after week, month after month. A Japanese employer who wants to change the process to introduce a new product or a new machine does so in and through the training session. As a result, there is usually no resistance at all, but acceptance. Indeed, Americans in the management of joint ventures in Japan always report that the “bugs” in the new process are usually worked out, or at least identified, before the new goes into operation on the plant floor.

A second benefit from this is a built-in increase in productivity. In the West we train until a learner reaches standard performance. Then we conclude that he has mastered the job and needs new training only when he moves on or when the job itself is being changed. Our “learning curve” reaches the “standard,” after which it stays on a plateau. Not so in Japan; and the Japanese understanding is more realistic, more in tune with all we know about learning. The Japanese, of course, also have a standard and a learning curve leading up to it. Their standard, as a rule, is a good deal lower than the corresponding standards in the West; the productivity norms which have been satisfying most Japanese industries in the past are, by and large, quite low by Western measurements. But the Japanese keep on training. And sooner or later their learning curve starts breaking out of the plateau which we in the West consider permanent. It starts to climb again, not because a man works harder, but because he starts to “work smarter.” In the West we are satisfied if the older worker does not slacken in his productivity. This is a problem, too, in some Japanese industries; young women assembling precision electronics, for instance, reach the peak of their finger dexterity and their visual acuity around age twenty and, after twenty-three or twenty-five, rapidly slow down. (This is one reason why the Japanese electronics industry works hard to find husbands for the girls and to get them out of the factory by the time they are twenty-one or twenty-two.) But by and large the Japanese would say that the older employee is more productive; and their figures would bear this out. With pay based on seniority, the output per yen may be much higher in a plant in which the work force is largely new and young. But output per man-hour is almost invariably a good deal higher in the plant that has the older work population—almost the exact opposite of what we in the West take for granted.

In effect, the Japanese apply to work in business and industry their own traditions. The two great skills of the Samurai, the members of the warrior caste which ruled Japan for three hundred years until 1867, were swordsmanship and calligraphy. Both demand “lifetime training.” In both one keeps on training after one has achieved mastery. And if one does not keep in training, one rapidly loses one’s skill. Similarly the Japanese schools of painting, the Kano school, for instance, which dominated Japanese official art for three hundred years until 1867, taught that even the greatest master spends several hours a day copying, that is, keeps in continuous training. Otherwise, his skill, and above all his creativity, would soon start to go down. And the greatest judo master still goes through the elementary exercises every day—just as, of course, the greatest pianist in the West does his scales daily. “One difference that I find hard to explain to my Western colleagues,” said one of the leading industrial engineers of Japan to me one day,

Continuous training in Japan goes a long way toward preventing the extreme specialization and departmentalization which plague us. There are no craft unions or craft skills in Japanese industry. (The most significant exception is the Japanese National Railways, which imported craft specialization from Great Britain and Germany, together with their steel rails and locomotives, and which are perhaps even more fragmented by craft and jurisdictional lines than American or British railroads are.) Craftsmen, in the early days of Japanese industrialization, flatly refused to work in the new factories, which therefore had to be staffed by youngsters, fresh from the farm, who had no skills and had to be taught whatever they needed to know to do the job. Still, it is not really true, as Japanese official doctrine asserts, that “men are freely moved from job to job within a plant.” A man in a welding shop is likely to stay in a welding shop, and so is the fellow in the next aisle who runs the paint sprays. There is much more individual mobility in office work, and especially for managerial and professional people. A Japanese company will not hesitate to move a young manager from production control into market research, or into the accounting department. Yet the individual departments in the office tend to be rigidly specialized and highly parochial in the defense of their “prerogatives.” The tunnel vision that afflicts many people in Western business is, however, conspicuously absent in Japan. The industrial engineer I quoted earlier insists meticulously on the boundaries between industrial and other engineering or industrial engineering and personnel. He himself never worked in any other function, from the day he graduated from engineering school to the day when, at age fifty-five, he was made president of an affiliated company in his group. Yet he knew the work of every other function. He understood their problems. He knew what they could do for his industrial engineering department and what, in turn, the industrial engineer had to do for them. He is the purest of specialists in his own work, and yet he is a true “generalist” in his knowledge, in his vision, and in the way in which he holds himself responsible for the performance and results of the entire organization.

This he himself attributes to the fact that—as he laughingly admits, very much against his will in the earlier years—he was subjected all along the way to continuous training in all the work going on at his job levels. When he was a junior industrial engineer, he took part in the training sessions of all juniors, whether engineers, accountants, or salesmen, and so on, all the way through until he became a member of top management. And then he joined, voluntarily, a top-management group which met two evenings a week, usually with a discussion leader from the outside, to train itself in the work of top management.

We in the West emphasize today “continuing education.” This is a concept that is still alien to Japan. As a rule, the man or woman who graduates from the university never sets foot on campus again, never attends a class, never goes back for “retreading.” Normal education in Japan is still seen as preparation for life rather than as life itself. Indeed, Japanese employers, even the large ones including government, do not really want young people who have gone to graduate school. They are “too old” to start at the bottom. And there is no other place to start in Japan. They expect to work as specialists and to be experts rather than submit to training by their employer. Indeed, the resistance to the highly trained specialist is considered by many thoughtful management people in Japan to be a major weakness of Japanese business, and even more of Japanese government. There is little doubt that, in the years to come, continuing education will become far more important in Japan than it now is and that, at the same time, the specialist will have to become far more important as well. But at the same time, Japan’s continuous training has something to teach us. We in the West react to resistance to change and productivity largely along the lines of Mark Twain’s old dictum about the weather. We all complain, but no one does anything. The Japanese at least do something—and with conspicuous success.

Continuous training is not completely unknown in the West. A century ago it was developed by the fledgling Zeiss Works in Germany and applied there to all employees in the plant even though most of them were, of course, highly skilled glass blowers and opticians with many years of craft training behind them. The world leadership of the German optical industry until World War I, if not until World War II, rested in large measure on this policy which saw in high craft skill a foundation for, rather than the end of, learning. With craft jurisdictions in the United States (and even more in Great Britain) frozen in the most rigid and restrictive union contracts, probably this could be done today, however, only in mass-production industries with plant-wide or, at least, department-wide seniority.

But it could be done—and should be done—with the nonunionized, the clerical, supervisory, professional, and managerial employees. But here, where union restrictions cannot be blamed, managements are today busily working at creating departmentalization, specialization, and tunnel vision. To be sure, there is a good deal of continuous training; many companies not only have massive training programs themselves but encourage, through tuition refund, for instance, their younger technical, professional, and managerial people to keep on going to school and to continue their education.

But in all too many cases, the emphasis in these programs is on a man’s becoming more specialized and on not learning the other knowledges, skills, and functions. In most of the training programs I know—and I know quite a few—the emphasis is entirely on the one function in which a young man already works; at most he is being told that “other areas are, of course, important.” But then he is enjoined to learn more in his own field, whether market research or tax accounting or industrial engineering. As a result he soon comes to consider the other areas as so much excess baggage. And when we have to introduce something truly new—the computer is the horrible example—we bring in a whole corps of new specialists, with the predictable result that the newcomers are both ineffectual, since no one knows what they are trying to do, and resented, because they present a threat to everybody. Surely this management-imposed departmentalization and narrowness has been one of the major reasons for the difficulties we are having with the computer, let alone with the computer specialists.

And when it comes to education outside, in evening courses at the local university, for instance (practically all my students tell me that), a young man’s supervisor will push his subordinate into taking more work in his specialty and away from anything else. To be sure, company policies invariably make no such distinction in offering tuition refund; but the supervisor, as a rule, has to approve the young man’s program before the company will pay for it.

The rule should be the opposite: once a young man has acquired the foundations of a specialty, he should be systematically exposed to all the other major areas in the business, whether in his company’s training courses or in continuing education outside. Only in this way can we hope to prevent tomorrow’s professional and managerial people from being as departmentalized, as riven by “jurisdictional demarcations,” as confined in their vision to yesterday as we have encouraged the skilled worker to become.

III

The Care and Feeding of the Young

The House of Mitsui is not only the oldest among the world’s big businesses; it dates back to 1637, half a century before the Bank of England was founded. It also was the largest of the world’s big businesses until the American Occupation split it into individual companies (and today, when these companies have come back together into a fairly close confederation, it may well be again the world’s biggest business). In all its three hundred years of business life, Mitsui never had a single chief executive (the Japanese term is “chief banto,” literally “chief clerk”) who was not an outstanding man and a powerful leader. This accomplishment no other institution can match, to my knowledge; neither the Catholic Church, nor any government, army, navy, business, or university.

If one asks how to explain such an amazing success in executive development and selection, one always gets the same answer:

At first sight, nothing would seem less likely to evolve strong executives than the Japanese system. It would rather seem to be the ideal prescription for developing timid men selected for proven mediocrity and trained “not to rock the boat.” The young men who enter a company’s employ directly from the university—and by and large, this is the only way to get into a company’s management, since hiring from the outside and into upper-level positions is practically unknown—know that they will have a job till they retire, no matter how poorly they perform. Till they are forty-five, that is, for the first quarter-century of their working life, they will be promoted and paid by seniority alone. There seems to be no performance appraisal, nor would there be much point to it when a man can be neither rewarded for performance nor penalized for nonperformance. Superiors do not choose their subordinates; the personnel people make personnel decisions, as a rule, often without consulting the manager to whom a subordinate is being assigned. And it is, or so it seems, unthinkable for a young manager or professional to ask for a transfer, and equally unthinkable for him to quit and go elsewhere.* Indeed, every young managerial and professional employee in Japanese organizations, whether business or government, knows that he is expected to help his colleagues look good rather than stand out himself by brilliance or aggressiveness.

This goes on for twenty to twenty-five years, during which all the emphasis seems to be on conforming, on doing what one is being asked to do, and on showing proper respect and deference.

Suddenly, when a man reaches forty-five, the Day of Reckoning arrives, when the goats are divided from the sheep. A small—a very small—group is picked to become Company Directors, that is, top management; they can then stay on well past any retirement age known in the West, with active top-management people in their eighties by no means a rarity. The rest, that is, from Department Director on down, stay till they are fifty-five, usually with at best one more promotion. Then they are retired; and unlike the case of rank-and-file employees, their retirement is compulsory.†

To an outsider who believes what the Japanese tell him, namely, that this is really the way the system works, it is inconceivable on what basis this crucial decision at age forty-five is made; yet it results in the emergence of the independent and aggressive top managers of Japan’s businesses who have pushed Japanese exports all over the globe and in the space of twenty years have made Japan the third ranking economic power in the world, although at the eve of World War II, Japan was not even among the first dozen.

It is precisely because Japanese managers have lifetime employment and can, as a rule, neither be fired nor moved, and because advancement for the first twenty-five years of a man’s working life is through seniority alone, that the Japanese have made the care and feeding of their young people the first responsibility of top management. The practice goes back at least four hundred years, to the time of Hideyoshi, the military dictator who organized the retainers of the military clans, the Samurai, in tight hereditary castes, with advancement from one to the other officially not permitted. At the same time, the government of the clan had to find able people who could run the clan’s affairs and who had to get opportunities at a very early age and without offending higher ranking but less gifted clan members.

Today, of course, it would be impossible for the chief banto of Mitsui to know personally the young managerial people, as his predecessor did a few generations ago. Even much smaller companies are much too large and have far too many young managerial and professional employees in their ranks. Yet top management is still vitally concerned with them. But it discharges this concern through an informal network of senior middle-management people who act as “godfathers” to the young men during the first ten years of their career in the company.

The Japanese take this system for granted. Indeed, few of them are conscious of it. As far as I can figure out, it has no name, the term “godfather” is mine rather than theirs. But every young managerial employee knows who his godfather is, and so does his boss and the boss’s boss. The godfather is never a young man’s direct superior and, as a rule, not anyone in direct line of authority over the young man or the young man’s department. He is rarely a member of top management and rarely a man who will get into top management. Rather he is picked from among those members of upper middle management who will, when they reach fifty-five, be transferred as top management to a subsidiary or affiliate. In other words, these are people who, having been passed over at age forty-five for the top-management spots in their own company, know that they are not going to make it in their own organization. Therefore, they are not likely to build a faction of their own and to play internal politics. At the same time, these are the most highly respected members of the upper middle-management group, the people who are known, trusted, and looked up to by the entire organization.

How the individual godfather is actually chosen for a young man, whether by formal assignment or by informal understanding, no one seems to know. The one qualification that is usually mentioned is that he be a graduate of the same university from which the individual young man graduated himself: the “old school tie” binds even more tightly in Japan than it ever did in England. (“The Harvard Business School Alumni Association is the only truly Japanese institution outside of Japan,” a Japanese friend of mine often says, only half in jest.) But everybody inside the company knows who the godfather of a given young man is and respects the relationship. During the first ten years or so of a young man’s career, he is expected to be in close touch with his godchild, even though he may have in a large company a hundred such godchildren at any one time. He is expected to know the young man, see him fairly regularly, be available to him for advice and counsel, and in general look after him. He has some functions which godfathers outside of Japan don’t normally have, such as to introduce the young men under his wing to the better bars on the Ginza and to the right bawdyhouses. But learning how to drink in public is one of the important accomplishments the young Japanese executive has to learn. If a young man gets stuck under an incompetent manager and wants to be transferred, the godfather knows where to go and how to do something which officially cannot be done and “is never being done.” Yet nobody will ever know about it. And if the young man has been naughty and needs a good spanking, the godfather will give it to him in private. By the time a young man is thirty, the godfather knows a great deal about him.

It is this godfather who sits down with top management and discusses the young people. Again, this may be completely “informal.” Over the sake cup, the godfather may say quietly, “Nakamura is a good boy and is ready for a challenging assignment,” or “Nakamura is a good chemist, but I don’t think he’ll ever know how to manage people,” or “Nakamura means well and is reliable, but he is no genius and better not be put on anything but routine work.” And when the time comes to make a personnel decision, whom to give what assignment and where to move a man, the personnel people will quietly consult godfather before they make a move.

A personal experience of mine may illustrate how the system works. A few years ago, I found myself, by sheer accident, a temporary godfather.

One of my ablest students in twenty years at New York University’s Graduate Business School was a young Japanese; let me call him Okura. The son of a diplomat, he went to Oxford for his undergraduate work and took the Japanese Foreign Service examination, which he passed with honors. But then he decided to go into business instead, came to our Graduate Business School in New York, and went to work for one of Japan’s big international companies. A few years ago, while I was in Japan, he came to see me. I said, “Okura, how are things going?” He said, “Fine, but I think I may need some help; this is why I have come to see you. Not having gone to school in Japan, I do not really have anyone in my company who feels responsible for me. All our management people have gone to school in Japan. As a result, there is no one in upper management who can tell the personnel people that I am ready for a managerial job in one of our branches abroad. I know they considered me when they filled the last two vacancies in South America, but no one knew whether I wanted to go there, whether I was ready, and altogether what my plans were. I know that you are going to have lunch with our Executive Vice President in a day or two, and, having been my professor, you can speak for me.” I said, “Okura, won’t your Executive Vice President be offended if an outsider interferes?” He said, “Oh, no. On the contrary; he’ll be grateful, I assure you.” And he was right. For when I mentioned Okura’s name to the Executive Vice President, his face lit up and he said, “You know, I was going to ask you to do us a favor and talk to Okura-san about his plans. We think he is ready for a big management assignment abroad, but we have no way of talking to him; none of us went to the same university he went to.” Three months later Okura was posted to head the company’s branch office in a fairly important country in Latin America.

In the West, where relationships are far less formal, the godfather as a source of information on the young people may not be important. But we need, just as much as the Japanese—if not more so—the senior manager who serves as a human contact, a human listener, a guide for the young people during the first ten years or so in business. Perhaps the greatest complaint of the young people in the large organization today is that there is nobody who listens to them, nobody who tries to find out who they are and what they are doing, nobody who is their godfather. The idea which one finds in all our management books that the first-line supervisor can actually fill this role is simply nonsense. The first-line supervisor has to get the work out. All the sermons that the “supervisor’s first job is human relations” won’t make it so. Above all, a supervisor will, of necessity, hang on to a good man, rather than let him go. He will not say, “You have learned all there is to learn in this place.” He will not say, “You are doing all right, but you really don’t belong here.” He will not ask a young man, “And where do you want to go, what kind of work do you want to do, and how can I help you to get there?” In fact, the supervisor is almost bound to consider any hint of a desire to change or to transfer on the part of a young and able managerial and professional subordinate a direct criticism and an attack on himself. As a result, the young managerial and professional people in American business and industry (but also in Europe) “vote with their feet.” They quit and go elsewhere. The absence of the human contact, the guide, the counsel, the listener, is a main reason for our heavy turnover among young educated employees. Whenever one talks with them, one hears, “The company is all right, but I have nobody to talk to.” Or, “The company is all right, but I am in the wrong spot and can’t get out of it.” “I need someone to tell me what I am doing right and what I am doing wrong, and where I really belong, but there isn’t anybody in my company to whom I can go.” They do not need a psychologist. They need a human relationship that is job-focused and work-focused but still available to the individual, accessible to the individual, and concerned with the individual. And that the Japanese—precisely because of the impersonal formality of their rigid system—have had to supply a long time ago. Because they cannot admit officially that this system exists, they have set it up the right way. For it is clearly the strength of their system that this godfather function is not a separate job, is not a part of personnel work, and is not entrusted to “specialists,” but, on the contrary, is discharged by experienced, respected, and successful management people.

But it is not only the young people in the American or European company who need a point of human contact, a counselor, a “guide for the perplexed.” Today senior managers need even more to establish communications to them from the young. The influx of the young, educated people is only beginning, for it is only now that the combined effect of the postwar “baby boom” and of the “educational explosion” is beginning to hit the management ranks. From now on, for ten years or so, the number of young entrants into technical, professional, and managerial work (i.e., of young men and women with a higher degree) will be very much larger than it has been so far when the college-educated still came largely from relatively low-birth years. The babies of the first really high-birth year, 1950, will be graduating from college in the very early 1970’s. And however little we really know about the young, we do know that they are different—in their expectations, their experiences, their knowledge of the world, and their needs.

In a number of companies, especially a few large ones, with which I have been working these last few years, the attempt has been made to have senior executives meet, fairly regularly, with younger men, outside of office hours and without respecting lines of function or authority. In these sessions the senior man does not make a speech, does not “communicate.” Rather he asks: “And what do you have to tell me—about your work, about your plans for yourselves and this company, about our opportunities and our problems?” These meetings have not always been easy going. But the young people, though at first highly suspicious of being patronized, after a while came to look forward to these meetings, indeed, to clamor for them. The real beneficiaries, however, have been the senior executives. The godfather concept of the Japanese may be too paternalistic for us in the West; it may even be too paternalistic for the young Japanese. But that the young managerial and professional people should be the special concern of senior men is an idea which we might well use, especially in this age of the “generation gap” and of the change from a manual work force to a highly educated knowledge work force.

Any Japanese executive who has read this piece will protest that I grossly oversimplify, let alone that I omitted most of the salient features of Japanese management. Any Western student of Japan who has read so far will accuse me of being uncritical. But my purpose in this article was not to give a scholarly analysis of Japanese management or even to attempt an explanation of Japan’s managerial performance. I am fully aware of the many frustrations of the young manager in Japan, and altogether of the tremendous tensions in Japanese economy and society created by the Japanese economic achievement—tensions which are so great as to make me highly skeptical about all those current predictions that the “twenty-first century will be Japan’s century.” (Indeed, if I were a Japanese, this prediction would scare me out of my wits.)

Whether anyone can learn from other people’s mistakes is doubtful. But surely one can learn from other people’s successes. The Japanese policies discussed here are certainly not “The Key” to Japan’s achievement; but they are major factors in it. They are equally not “The Answer” to the problems of the West. But, I submit, they contain answers to some of our most pressing problems, help for some of our most urgent needs; and they point to directions we might wisely explore. It would, indeed, be folly to imitate the Japanese; but we might well try to emulate them.

First published in the Harvard Business Review, March/April, 1971.