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Wednesday, July 31, 2002

The U.S.-Japan management roundabout


What goes round, comes round. In the 1950s and '60s, U.S. experts warned Japanese businessmen that they had to get rid of their feudalistic management systems if they were to go ahead.

Then when Japan was booming in the '80s and the United States was still in slump, we were told how Japan's people-oriented management systems were much superior to ruthless U.S. hire and fire management.

Then in the '90s, when the U.S. was booming and Japan was in slump, we were told how U.S. management with its tight-fisted emphasis on profits and share-holder gains was much superior to sloppy, sentimental Japanese management.

Now, with some U.S. firms in spectacular trouble, we are getting back to where we started. Hiroshi Okuda, head of Nippon Keidanren, has told the media that the collapse of these enterprises proves how Japan's emphasis on "heart" management is preferable to materialistic U.S. management.

Japan-watchers seem prone to get caught up in absolutes. If Japan seems weak in some area -- university education, the bureaucracy, attitudes toward women or minorities -- that proves the total inferiority of the Japanese system.

If Japan seems efficient in some area -- train services, manufacturing, lack of crime -- this proves the total superiority of the system.

In fact, and as in most cultural comparisons, the pluses and minuses operate in tandem. Some intangible double helix seems to guarantee that the merits of a particular system will invariably be matched by demerits, and vice versa. Japan's instinctively groupist, practical/emotional ethic is no exception.

Because the Japanese pay such exaggerated attention to details (I have just come back from a Japanese organized tour of the U.S. and I know), the trains run on time and their factory quality-control is excellent. But the same preoccupation with details makes for high-cost service industries and policies that lack strategy.

Japan's emphasis on the human factor leads to low crime rates and an attractive politeness in relationships. But the same emphasis lets gangsters thrive and makes for shoddy intellectuals. And so on.

In any case, if Japan today remains in a slump, that has little to do with inefficient management systems. Rather it is due to the Japanese weakness in economic policymaking.

As in the bubble era, the planners seem quite unable to dig below the surface to find basic causes -- in this case the reasons for the extraordinarily high level of consumer saving that is killing demand in this still strong economy. Instead, they concentrate on ephemeral issues like the need for "structural reform."

To give credit, though, the Japanese do at least realize that there are areas where their ethic is inadequate. They like to use our criticisms to correct their minuses, even if at times they overcorrect and end up with some of our minuses. We do not see the same humility in the West vis-a-vis Japan.

The exception was the curious infatuation with Japanese-style enterprise management that swept the U.S. in the 1980s. Best sellers told us how Japan's superior management systems were the result of thousands of years of communal rice-growing, Confucianism, Zen Buddhism or whatever.

But some also pointed out how many of the better U.S. firms in the '50s and '60s -- General Motors with its tight seniority systems, in-house training and anti-individualism; IBM with its company song, attention to personnel management and tight company culture -- also had had excellent "Japanese style" management.

The U.S. had no tradition of rice-growing, Confucianism, Buddhism or whatever. The puzzle was left up in the air.

Few seemed to realize that Americans in those days, like most other peoples of north European culture, had, like Japan, retained elements of their former village/feudal groupist ethic. The more rationalistic, individualistic ethic we take for granted today only came later.

Indeed, lingering elements of a naturally groupist ethic can still be found outside the big cities in the West. This is why Japanese management systems have succeeded so well in the more rural areas of the U.S. and Great Britain.

If Japanese management today has problems in Japan, it is because of the breakdown of traditional mores that imposed a more rigidly groupist approach.

More scope for individualism makes sense. But realization that as human beings we all instinctively prefer to relate closely to each other, and can do well in small groups, is a major reason for the success of more familial styles of management found in some Silicon Valley startups today.

In larger U.S. companies, the ideal seems to be some mix of individual incentives and efforts to create an emotional corporate loyalty. Things only begin to fall apart when excessive individualism and greed take control, as we see in the abuse of stock options.

The Enron case in the U.S. was a particularly bad example, as Okuda was right to point out. But the WorldCom and other IT disasters were more a matter of unfettered laissez faire -- another negative byproduct of Western rationalism -- forcing rival companies into gross overbidding and overborrowing as they tried frantically to gain the large economies promised by early starts and takeovers creating dominant market share.

Here, too, Japan's fuddy-duddy, paternalistic efforts to regulate market share could prove to be more enlightened than most assume.

Gregory Clark is honorary president of Tama University.


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