As I begin my own trek to bridge cultures on my latest professional endeavor, I reached back to my greatest mentor and his writings detailing his experiencing successfully integrating the Toyota Production System (TPS) and Culture in Columbus, IN. Although this is a bit outdated, it is still very relevant in the current environment. I hope you enjoy the perspective of one of the TPS pioneers in the US.
Behind the “Lean” Facade: A discussion of West versus East business cultures
by Max Allway (original 1991 & redrafted in 2009)
It is not uncommon for executives to feel a need to change the structure of their company. To “do something” to positively affect the bottom line. Quite often these same executives, who are sincerely trying to take the right steps to satisfy shareholders, and preserve the future of the company and it’s employees, are caught up in the affliction of near-sightedness. They take on the journey of deploying “Lean” methods throughout their organization without truly understanding what lies beneath the visible façade they saw on the Japan trips, or that the tactical elements they learned from books and some consultants.
This article is meant to start these same leaders thinking about those inherent traits found in a culture that has produced some of the worlds’ most successful/world class companies. This is not meant to say that we should all try to be something we are not. It is intended to point out that if executives in the western world are intending to compete with the best in the world, they must at least be aware of the differences and accept that some attributes are worth considering. Such awareness is essential for those executives and their staffs who intend to embark on the journey of implementing “lean processing” principles in their companies. Such principles extend far beyond the implementation of a “model cell” on the shop floor. These principles drive to the very core of every aspect of leading and managing a business.
The contents of this article are not new. They are based on a compilation of time tested thoughts and experience and are now used in leading companies throughout the world.
If it appears that this article is stereotyping nationalities, that is not the intent. Obviously, there are differences between all of us. There are, however, cultural similarities based on backgrounds and personal traits. We need to understand this and build from there, integrating that which is good for business improvement, and casting off those traits which are not (e.g “near sightedness”).
Personal and Business Integration
Very seldom will you ever refill your own glass in Japan. This serves as a perfect example of interdependence and the desire to serve each other. The pouring of each others’ drinks at a party is seen as an expression of “ninjo” in giri relations. Individuals taking care of one another. “Giri” binds human beings in a dependent relationship.
Humanistic ethics has a strong part in Japan. Shame is more important than blame or guilt. Western culture, by contrast, stresses individual conscience. Additionally,
Far Eastern situations which exhibit personal and business integration include situational priority given to work over family and the realization that the company feels some responsibility for them.
A pleasant custom which overlaps both personal and business life, although this practice is waning, has been that of gift giving. Once given a gift (out of respect or gratitude), it is not expected to receive. I must point out, however, to demonstrate a desire for inclusiveness, it is desirous (critical) to give in return.
“The skills to develop a holistic concept of integration on the one hand (team building and inclusiveness) and on the other hand to desegregate this into details (dissection of the process) indicates … to a great extent, the strength of the Japanese superstructure”. (1)
In contrast to China and Japan, Western society evolved separate institutions with separate spheres of influence. The Church took care of the individuals’ spiritual life, and business took care of their worldly needs.
As professional management slowly evolved during (beginning) the eighteenth and nineteenth century, the modern Western creation required tiers of management and delegation of authority. It took nearly half a century to develop any trust relationship. Eastern institutions paid more attention to social and spiritual means.
Although both Eastern and Western institutions used cohesion and terror (intimidation) in early years, they have mostly moved away from such methods.
Because of the close integration of private, public, and spiritual matters, the best Japanese organizations tended to regard the task of control in the context of the whole person and their needs. (2)
Several years ago, authors Pascale and Athos provided concise explanation when they said: “They (the East) were more sophisticated than the West in utilizing social and spiritual forces for the organization benefit and in accepting the responsibilities for their employees that went with such broad influence.” (3)
When considering the best Japanese approaches to business, it is important to observe that the leader plays the key role in setting the course of the group task and the sensitivity within the horizontal structure.
The author T.P. Rohlen states: “The three general factors of positive motion toward: the leader, solidarity and structure are interrelated in essentially the following manner:
- Positive emotion and working solidarity are mutually beneficial
- Structure as a means of ordering work may also contribute positively, but:
- When structure comes to stand for separation and difference, it is viewed negatively (4)
Horizontal (cross functional) social control plays an important role in group consultation providing an opportunity for reasoning and criticism. After the process is complete, a written statement itemizing the agreement should be drafted. In the actual discussions, the framework for the nature of the social control is developed.
In the Japanese management style, equality between people is considerable. The freedom to disagree with the context of the framework is little. (5) During the consultation period, the practice of “nemawashi” or one-on-one rooting takes place. Informal consensus building gains commitment to a concept. Once decisions have been made, they are frozen to undergo “ringisho”(essentially the stamp of approval). A difficulty sometimes occurs in this process, particularly between Eastern and Western cultures, when situations occur that do not provide the opportunity to give another interpretation or the motivation is twisted. It is relatively common to avoid that conflict in Japanese culture. We must also understand that loyalty and solidarity are heightened by not punishing those who have not conformed to the structure.
A derivative of the above concepts is summed up in the word “ringisei” or the process of decision making by consensus; the study of prudence, circumspection, to knowledge sharing and questioning to prepare colleagues in an effort to avoid idea rejection and feuds. “Ringi” works because of the stresses placed on group orientation, interpersonal relationships, and mutual dependencies. This approach displays striking differences when compared with American individualism.
Rewards and homogeneity are based on agreement and group progress. Importantly, the “ringi” system avoids both individual blame and/or individual credit.
Typically, Americans have been taught the merits of strategy, structure and systems. I think that most of us have fallen prey to this trio. The Japanese utilize this threesome but typically include the “soft S’s” skills, style and staff. (6)
The following insights are of particular importance:
Management Characteristics of Leading Japanese Businesses
- Decision Making: Decision reached by collective process
- Employment: Under most circumstances, lifetime employment has been normal. Retirement normally occurs between 55 and 60 years of age. Salary and position rise according to ability and seniority. Some change is now taking place in this once institutionalized practice
- Labor relations: Most unions – particularly industrial – are enterprise unions rather than trade unions. Labor management relations are generally good
- Investment Capital: Funds for plant and equipment are factored with the ration of borrowed capital larger than owned capital
- Production: Assembly industries concentrate on components ordered from outside the company. In process industries, such as steel companies, some of the incidental work is consigned to specialty companies. All industries have a heavy reliance on imports of raw materials and exports of finished products (primarily due to the lack of natural raw materials.
Business Decision Making Process
As a collective process, the person in charge draws up the original plan in written form, drawing on a myriad of data gathered through a network of information collection methods. That person then obtains the approval of his seniors in ascending order, supervisor to manager to general manager. Additionally, the “ringi” system, as this process is called, encourages the review with officers of related departments and the obtaining of their approval before a final executive decision is made on the plan. Who makes the final decision generally depends on the importance of the subject. Generally the company president will decide on the most important matters, directors on relatively important matters, and department heads on routine matters. Many in the Western business world now know this to be called “Hoshin Kanri” – Pointing the Direction and Controlling the Journey. The intent of Hoshin Kanri is to align the staff for the accomplishment of set goals. Approval is indicated by the person affixing his seal (registered with the government) much the same as American managers affixing their signature.
If the original plan is not approved by one of the individuals concerned, the plan is revised. If the revised plan fails to obtain approval, it is likely to be withdrawn without being shown to higher company officials. It must be pointed out, however, that informal approval is sought of all involved individuals prior to formal proposal of the original plan, thus it is rare for plan withdrawal. The “Kaigi” system of meeting is often held to secure informal approval thus, the plan can be implemented very efficiently.
Some people criticize the ringi system as too formal, but it does have merit. First, it provides a systematic way to involve those people in the decision making process who are most concerned about the outcome. Second, since the plan is reviewed by those most concerned, extremely worthwhile information is gathered. Once this is accomplished, it is unlikely that the required signatures will not be forthcoming.
Employment Characteristics
- The decision to employ people is based on personnel requirements rather than the need to fill a specific job
- When hiring employees, employers generally hire directly out of school. Several of the large corporations, such as Toyota often work at recruiting the cream of the graduates from Keio and Tokyo universities
- Pay is determined by the numbers of years of employment in the company
- Employment is generally for the whole working life of the employee, although some younger Japanese are now moving between companies.
- Each enterprise has only one union. There are always exceptions to these principles, for instance, in some medium to small companies blue collar and white collar workers often enter later in their careers rather than directly out of school.
The concept of “lifetime” employment” offers stability of income, which turns into a feeling of loyalty. This has a tendency to lead to a smooth process of technological innovation.
If there is a disadvantage to the system, it would be a tendency toward employment inflexibility and a lack of stimulus for an employee’s self-development. It is too easy for the high performer to get bogged down in the structure. The contrary point of view is that this may not be all bad if the high performer’s energy can be channeled to create a more cohesive and productive “team”.
Occupational Concepts
Salary and job status are generally linked to seniority. Japanese tradition teaches respect for those who are older. It is thought that ability customarily increases with length of service; therefore, it is felt that the value of the contributions one can make to the business also increases the longer one works for the company. Such a statement is not to be misinterpreted. Ability is important, and those without ability will not rise in the same way as those with ability. Those individuals who show greater ability while working with the team will be promoted to higher positions. Again, more recently, some of these attributes which made Japanese manufacturers (e.g. Toyota) the pride of those aspiring toward “Lean Thinking” have begun to change.
Since it is a fundamental principle of most companies in Japan to view everything connected with employment as long term, rewards are also thought of similarly. Short term achievements alone are not rewarded with other than praise, but results accomplished long term as an effective group member are rewarded.
The waiting game, as some capable employees might think of it, must be endured in exchange for a sense of security and stability.
Since the process is to fill management positions with individuals gradually promoted through the ranks from beginning levels, most senior positions are filled with very knowledgeable people in their late forties and fifties. A major benefit derived from this lineage is stability which allows for long term improvements to be made and sustained.
Pay increases for all employees are made annually based on position, education, and number of years of service with additional consideration given to each individual’s ability and achievements. These yearly increases are progressively added to the employee’s base salary.
Most of the larger companies have four closely interrelated systems in personnel administration: they hire periodically, raise salaries periodically, transfer personnel periodically, and retire people at a fixed age.
Since the 1950’s, the hiring system has followed a pattern geared to the academic year. Each year at the beginning of March, students who leave school from junior and senior high school and graduates from universities are recruited and brought on board in larger companies.
Methods such as described above have helped to assure companies of a relatively cheap source of labor and a source of young workers who are better able to adapt to rapid advances in technology.
As the influx of new workers takes place, a wave of transfers occurs simultaneously. This takes place partially due to promotions, partially to fill vacancies throughout the organizations, and partially to provide room for new employees.
Although the periodic transfers mean frequent job changes for employees, they provide an opportunity for learning and personal development which might lead to promotion.
When hiring new employees, the number of persons is based on the company’s long term personnel plan (including the number of persons expected to retire).
There are two underlying effects to a lifetime employment system. First, firms think in terms of long-term training for employees. Second, it leads them to set wage curves which extend over the working life of the employee. As the worker grows older, supposedly it is easier for him to cope with expenses involved with his life cycle (marrying, raising family, education, house), and assuring him that his income will rise no matter what job he is assigned to. Such a wage curve as this tends to remove employee anxiety and makes him more productive. While most Japanese companies address the salary review question at fixed times, increases do take into consideration the person’s ability and potential.
Since wages and salaries are generally not linked to position, the transfer of employees from job to job occurs relatively easily. Thus, as improvements and technology make personnel transfers necessary, the changes can occur with relative ease.
As a result of a shifting population age group in which fewer young people are available for recruitment, and because of the shifting of the mean age of workers toward the retirement age, new hiring and appraisal techniques have been evaluated. Such methods aim at modifying the wage curve so that peaks occur earlier rather than just prior to retirement.
Not to minimize the importance but with only a brief mention, Japanese labor unions are organized as enterprise unions as opposed to organization by occupation or job. It is also important to note that all employees that have advanced to supervisory jobs as well as the manager ranks were also previously union members. It is characteristic of labor management relations of Japanese companies to work together to create corporate prosperity. When contention exists, it is usually related to distribution of resulted profits.
Our Western business culture is experiencing shifting sands. Economic, social, and competitive pressures are real and show themselves in the form of free markets, the value of the dollar, budgets, environmental sustainability, outsourcing vs. in-sourcing, global competitiveness and many more.
Where do we go from here?
In order to compete in a world economy, American organizations must extend beyond the pure technology mindsets and financial allocations. They must realize that technological innovations and resource allocation are outcomes of human processes.
We must change “who we are as well as what we do”. This does not mean that as Americans we must transform into Toyota style managers. But, as they have done for many years, we should (must) borrow those aspects of Eastern business culture and collate with the best aspects of American practice, use and incorporate those approaches which will strengthen our areas of weakness.
By contrasting two large organizational leaders, Harold Geneen formerly CEO of ITT from 1959 until he retired in 1979, and the founder of Matsushita Electric Company, Mr. Konosuke Matsushita, we find two distinct styles.
Whereas Geneen ran his company by bottom line results closely scrutinized looking for the ever present short term gain, so typical in the U.S., Matsushita tended to look beyond the short term to the good to be derived over the long term.
As reported in great detail by Pascale and Athos in “The Art of Japanese Management” Geneen tended to rule his organization by constant checking, double- checking and “fear” management. Matsushita, on the other hand, utilized a different method called “subordinate goals”. These goals included spiritual or significant meanings and shared values of the people within the organization. These are not bottom line statistical goals but rather the motivators that genuinely “knit together individual and organizational purposes”. (9)
To expound or focus on the “hard” elements a little further, there is an argument to be made for saying that American management has been victimized by self perpetuating stock analysts and investment brokers. There are enormous returns to be gained in these fields. Playing companies and their management against stockholders, and vice versa, has created or been created by (was it the chicken or the egg that came first?) a raft of business schools teaching the merits of the “Hard triangle” of strategy, structure, and systems. Each element is susceptible to analytical, quantitative, systematic investigation and produces strictly logical results. What about the “soft S’s”?
All this translates into a “thinking” environment of educated managers. Isn’t this what our Western culture expects? In fact, isn’t this what our corporations reward?
It appears that Geneen was an example of how many American company executives manage. They revere the practice of regarding people as objects used to achieve a purpose.
Japanese management, with Matsushita serving as an example, showed a tendency “to regard people as objects to be used and subjects to be honored in achieving his or their purposes. (10)
Can there be doubt that the Toyota way makes possible businesses which exist in a greater harmony and which reflect the organization’s cultural values. Can the same be said for most American companies?
A critical difference surfaces which needs to be discussed.
The Toyota executives assume it is their task to attend to more of the needs of the whole person. They believe that only when the needs of the whole person are met within the subculture of the organization (or corporation) can they be optimized for productive work.
Traditionally, Americans have generally envisioned their responsibilities to employees as economic. This narrow thinking has, in a pristine view, translated into thinking of employees as interchangeable parts on an assembly line.
Today, when it suits American management to individualize personnel policies and human resources, we often see feeble attempts to manage human behavior systematically. If this sounds cynical, think about what often takes place during corporate mergers, restructurings, economic hard times, etc.
Human resources management as we know it in the most U.S. corporations, deals with groups of people. Pascale and Athos emphasize this by pointing to hiring practices at G.M. up to the early 1970’s. At that time, thousands of young people were being hired each year with no centralizing thrust to their recruitment and training. Most were hired by the local facility to fill an immediate void. Little attention was given to their marginal secondary or collegiate attainments and managerial potential.
Contrast this approach with that of Toyota, etc. There you will find excessive corporate attention paid to selection, training and development of both Japanese and foreign future executives. These differences are major and of critical importance.
The real subject that needs to be addressed is how can we know what to do differently? Pascale and Athos touched on the answer when they described the essence of Japanese success in the human resource area. First, the Japanese accept ambiguity, uncertainty, and imperfection as much more of a given in organization life. Consequently, their staffing policies and skills at dealing with people in aggregates (as well as with one another) work from entirely different premises than do ours. Second, the Japanese see themselves as far more interdependent.
In order to facilitate organizational functioning, Toyota is prepared to make far greater investments in their people and develop the skill necessary to be effective with others.
Conversely, in corporate life the independent individual (as in the U.S.) tends to be more concerned with power and self reliance to “get ahead”. This ambition is often overly displayed in the crude aggressiveness or office politics, callously disregarding co-worker consequences. Too many American executives believe in tough action styles. Again, an excellent explanation given by Pascale and Athos when they state: “Because internalizing anger exacts a personal cost, the expedient course is to pass it on. Instead of one person’s feeling angry about a problem, a half dozen get afflicted. The anger consumed in interpersonal friction might have been channeled more productively into solving the problem.” (11)
While the Toyota manager is also aware of power, he isn’t as preoccupied with personal power or as fearful of losing a portion of it. Through the life time employment practice, the Toyota employee builds a broad based network of relationships from which the manager draws his power. At approximately age 42-45, the Japanese manager (if he is so inclined) begins to feel severe competition as he begins to position himself to become division general manager, director or managing director. To attain these levels, he will have made substantive contributions toward company goals, maintained loyalty of those mentored and be skilled at interpersonal relations. Toyota managers have a tendency to focus on the initiative, constantly moving responsibility and subsequent accountability toward those closest to the problem and associated information. By embracing this policy, stressing not only results and satisfaction, we would experience the development of the people who produced the results. Simultaneously, we would send a message to those who may be observing.
Pascale and Athos described Carlson’s approach well when they said: “He did not insist on tight control with overlapping spheres of information centered on himself. Rather, he sought to be informed without unleashing divisive forces among subordinates”. (12)
Much can be learned from management as practiced by Ed Carlson and others like him, including many of the Japanese corporate leaders.
Another consideration is that of structure. Structure is important in an organization; it is equally important to avoid over structuring to the point of becoming stagnant.
A leader can function as though he is first amongst equals and accomplish the organizational goals. Things to consider: (13)
- People organization
- Treating people as respected and trusted individuals.
- Help employees (associates) understand your platform.
- Visible management: Allocation of time for informed discussion with people at all levels and emphasis on detail and open communication (nothing is worse for morale than rumors and suspicion). Critically important is to convey a genuine respect for people, their different jobs and their cultures. A caution – as a team evolves it takes on it’s own identity and can dilute top management authority. Be prepared for this and learn how to turn it into a strength.
- Decentralization: Dual lines of authority and competition between operating units help develop management. Remember the Toyota decision making process of nemawashi and ringisei.
- Base touching: Sounding people out at various levels to determine if the plan makes sense. If disagreements arise, sell the concepts rather than demand compliance. You may get compliance without the support which may be necessary later.
- A drive for Information: A gathering of facts is important, but to get the key people in agreement on what the facts mean and how to utilize the knowledge gained from them is most important.
- Participative planning and control: The originator of projections must be responsible for them. Control systems must be focussed on key indicators and kept simple. Carlson would focus on profitability and productivity, (passengers boarded or cargo loaded per employee hour). Eliyahu Goldratt, author of “The Goal”, would emphasize minimum inventories (assets), minimum expenses, and increasing throughput. These practices again are very similar and familiar to Japanese businesses like Toyota. Planning participants raise points of contention in an atmosphere in which peers try as a team to resolve differences. Variances are noted to management’s attention in a report process.
- Suport for senior executives: To avoid stagnation, a few companies like Toyota rotate middle and upper management. This provides the necessary exposure to take a more generalist outlook. In companies like Toyota it is also common to see a mixture of pressure and praise which develops loyalty. These companies have found that a manager can be informal, hard driving and interested in employees without being chummy or patronizing. People generally want to be treated as colleagues.
While all of the above are important for success, mutually as important is the vision and ability of the leader to pursue the corporate goals. His style and impact on others must combine with the company’s strategy, structure and systems. People, other than the leader, assess an executive’s person, role, behavior, and skills to formulate opinions on his style. It is important for the executive to remember this.
In the United States, when situations are unsettled or ambiguous, there is a strong inclination to clear up that situation. This can often be the response in Japan as well, but the clearing up process tends to follow a path of flowing with the situation until the questions are answered. They realize that life is filled with ambiguity and imperfection. They realize that exerted emotion due to situation ambiguity can lead to wasted effort. For the Japanese it makes more sense to approach the problems of ambiguity as conditions to be reduced as the opportunities present themselves. Quite often a distinction needs to be made between having enough data to decide versus having enough data to proceed. American businessmen tend to like everything in black and white/yes and no distinctions. The Japanese are astute enough to realize that the world is also full of many shades of gray. When negotiating, the differences are often emphasized. The American negotiator will often drive for discussion closure while the Japanese negotiator will more likely inch toward a suitable resolution that can be lived with in the current period to position for the future.
It is much like the ancient Samari warrior who develops his strategy of battle, visualizing every move and counter move before going to battle. Each victory is a step toward career success. Rarely does a Japanese move for total acceptance of a discussion or exchange but would rather examine different perspectives. This approach leads to avoidance of confrontation. It does, however, tend to take more time in the decision making process. The result generally is more attention paid to detail resolution while preparing for plan execution.
While we hear a great deal about the Japanese wanting to “save face” or avoiding public embarrassment, we have been duped into believing that in the United States to be sensitive to blunt or overly critical communication is not macho. Such action is construed to be weak. The Japanese are more apt to realize that in the long run more can be accomplished by diplomatic conversational exchange. The results generally lead from a half good idea to one which is gradually refined and improved upon until mutual satisfaction can be derived. Quite often a bonding of human relationships takes place from which new developments can propel. Human relationships in Japanese culture are generally protected and nurtured. They usually are not sacrificed for personal gain or efficiency as is often evident in the United States. Japanese companies facilitate more interpersonal activity among workers both at work and at company sponsored socials or recreational programs. Some companies like Toyota offer resort type facilities for employee use to facilitate cohesiveness.
Western management conditions both its business and employees to insist upon an arms length agreement. Support generally will not be forthcoming from the corporate structure (there are exceptions), but must be looked for in family, friends and other outside sources.
Numerous case studies spell out the trials and tribulations of incumbent executives who attempt to move their companies from one era to another. Quite often these efforts are marked with failure. Why? Culture changes come hard and failure often comes from ill formed advice or from inability to deal with resistance. A good leader will have a grasp of anticipating the future and what threats lie in store for the organization, even if everything appears to be going well presently. Old cultures die hard, however, and most often new ideas are not appreciated nor is the potential future threat recognized. Generally it is only after a painful and difficult period which brushes the organization with disaster, that the readiness to accept new concepts emerges. Only then will the then current leader be permitted to work with acceptance by the organization to implement steps evolving a new organizational culture. It is unfortunate, but experience has shown that all too often in the Western world much of our management still follows an old practice of “if it’s not broke, don’t fix it”. Worse yet is the practice of quick fixes in order to meet the monthly or quarterly goals without awareness of the longer lasting effects on the people, the expenditures, the equipment, the overall business. By comparison, in the best run companies, you would be more apt to find a search for cures to the problems and a meshing of cross-functional concepts to weave and integrated, consensus “cure”. Such an approach, it could be argued, would perhaps avert the business disasters promulgated by shortsightedness and power egos.
From The Desk Of A Common Sensei 