Contents

List of Tables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . viii

Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ix

Part I Characteristics of the Japanese

Corporation. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Chapter 1 Kaizen and Total Quality Management. . . . . . . . . . . . . 3
Chapter 2 Human Resource Management. . . . . . . . . . . . . . . . . . 13
Chapter 3 Production Management. . . . . . . . . . . . . . . . . . . . . . . 31
Chapter 4 Knowledge Management. . . . . . . . . . . . . . . . . . . . . . . 39

Part II Doing Business With the Japanese . . . . . 53

Chapter 5 Entering the Japanese Market . . . . . . . . . . . . . . . . . . . 55
Chapter 6 Succeeding as a Foreign Manager in a Japanese Firm. . 75
Chapter 7 Intercultural Challenges When Working in Japan . . . . 91
Chapter 8 Selling Your Product to Japanese Customers . . . . . . . 107
Chapter 9 Negotiations With Japanese Business Partners. . . . . . 125

Part III What Can Western Managers

Learn From Japan?. . . . . . . . . . . . . . . . . . . . . 137
Chapter 10 Learning From Japanese Management. . . . . . . . . . . . 139

Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145

Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147

References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151

Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155
 Tables

Table 1.1 Overview of the 5S System . . . . . . . . . . . . . . . . . . . . . . 8

Table 4.1 Knowledge Management in Japan and in the West . . . 41
Table 4.2 New Product Development in Western
Corporations and in Japanese Corporations. . . . . . . . . 48
Table 4.3 Changes Regarding Knowledge Management in
Contemporary Japanese Organizations . . . . . . . . . . . . 50
Table 5.1 Support Organizations for Entering the
Japanese Market. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Table 5.2 Challenges When Attempting to Enter the
Japanese Market. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Table 5.3 Challenges When Looking for a Business
Partner in Japan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Table 5.4 Challenges When Establishing a Subsidiary
in Japan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Table 5.5 Overview of Challenges When Entering
the Japanese Market. . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Table 6.1 Differences Between Japanese and Western
Project Management. . . . . . . . . . . . . . . . . . . . . . . . . . 87
Table 8.1 Networking Organizations for Foreign
Entrepreneurs and Managers in Tokyo. . . . . . . . . . . . 121
Table 9.1 Dos and Don’ts When Negotiating With
the Japanese. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135
 Preface
When I first went to Japan almost 20 years ago, I was a student of inter-
national business. To support my expensive language classes in Tokyo, I
got a job in a Tokyo firm, where I stayed for more than 2 years. This was
my first job, and at that time, I had no comparison with what it would be
like to work in a Western firm.
I loved working in a Japanese firm. People were very friendly and sup-
portive, the enthusiasm of employees for their job and their company
was enormously high, and there was real team spirit. Even after return-
ing to my home country, I continued to work in a Japanese corporation
in Vienna, where I worked at one of Japan’s major broadcasting corpo-
rations. Work was very demanding, but again, the Japanese team was
highly motivated, the atmosphere was family-like, and all employees were
treated with great respect.
It was only at the age of 27 that I first entered a Western firm. This was
the biggest culture shock I have encountered so far. After being socialized
into a Japanese firm for more than 7 years, the Western firm seemed an
aggressive and very uncooperative place. I still remember how shocked I
was to see great competitiveness between employees—something I had
never experienced before. Communication styles were very different as
well: In Western firms, employees seemed to be very careful about what
they said to each other, whereas in Japan, we had no real secrets within
the firm. It took me a few months to recognize the benefits of a Western
workplace in which praise is more individually awarded and I was seen
more as an individual than as a team member.
I enjoyed working in both systems. But I was always, and still am,
amazed how complementary and at the same time how successful both
are. Western business practices focus on individuals and gain competitive
advantages by using their different views, opinions, and ideas as a larger
pool from which to extract ideas that benefit the firm. Japanese organiza-
tions stress group orientation and build their competitive advantages on
merging each group member’s views and attitudes into a larger, new idea.
x Preface

Western organizations have a stronger focus on differentiating themselves

from other firms, whereas Japanese firms do not mind reviving ideas that
have been successful in another part of the world.
Both the Western and the Japanese management systems have their
strengths and weaknesses, but they both represent very unique ways of
looking at the world and at business. No wonder that managers in the
East and West develop very different solutions to similar problems. Japa-
nese business practices are not applicable in all Western business chal-
lenges, but they often provide solutions that are very different from those
found in Western firms. But the differences between management in the
East and West often lead to confusion and misunderstandings on both
sides. In my classes, students often ask which management style is bet-
ter, and my answer is always the same: There is no perfect management
system. Both the Western and Japanese systems have their flaws and their
strong points. Depending on the economic situation, they either lead to
success or can lead to failure.
When I set out to become a researcher an international management,
my main goal was to investigate and communicate various ways of man-
aging a firm successfully. Understanding Japanese Management Practices
presents the results of my experience in Japanese firms and my research
on the topic. Today, after working most of my professional career in
Japanese organizations, I still consider Japanese management practices
as very unique and complimentary to Western management practices.
These practices can provide a lot of inspiration to managers and research-
ers outside of Japan and support the development of new solutions to
global management challenges. International managers should therefore
be familiar with both systems in order to develop a strong and diverse
management skill set.
Understanding Japanese Management Practices describes Japan as a
place for business and discusses the management practices that made
Japan famous throughout the business world. It explains the social con-
cepts on which Japanese management is based and its most famous busi-
ness practices. The book covers the major management practices known
in the West and also presents Japanese techniques and facts that so far
have not been discussed in Western media or research. It describes work
life in the Japanese firm and shows what non-Japanese managers need to
 Preface xi

know when doing business with the Japanese. Negotiations with the Japa-
nese and entry into the Japanese market are both discussed, and Japanese
business etiquette is explained. The book closes with a chapter on what
Western managers can learn from Japanese management practices.
Understanding Japanese Management Practices targets managers, stu-
dents of business, and students of Japanese anthropology who are inter-
ested in modern Japanese management and how Japan’s management
practices can be used to increase competitive advantage.

Parissa Haghirian
Sophia University
Tokyo, Japan
April 2010
 Part I

Characteristics of the
Japanese Corporation
 Chapter 1

Kaizen and Total

Quality Management
Japanese companies are known for their customer orientation and their
high-quality products. Efficient business processes therefore play a major
role in Japanese management, and many Japanese management concepts
have been adopted and successfully integrated into Western management
techniques and businesses. The most famous concept in a Japanese firm
is kaizen, or continuous improvement, which is often considered a phi-
losophy and aims at improving and perfecting all management processes
within a firm. Another concept, which has become successful in Western
firms, is the 5S System, which helps organize business and production
processes within the firm.
The high quality with which Japanese products are produced and with
which services are performed are based on business practices that are rec-
ognized outside of Japan. In this arena, the Japanese have developed and
implemented very effective tools for sustaining their competitive quality
advantage. In this chapter, you will learn about the most prominent man-
agement practices in Japan. Upon completion of this chapter, you will

• know what kaizen is and how it can improve all business

processes;
• learn what the 5S System is and how it works;
• learn about the instruments that are used to manage and
sustain quality in Japan.
4 Understanding Japanese Business Practices

Kaizen
Continuous Improvement

In the West, kaizen is the most well-known concept of Japanese manage-

ment. Kaizen is the Japanese term for “continuous improvement.” Kaizen is
neither a single management activity nor a management technique, but it can
be best described as a positive attitude or a philosophy of creating the highest
value and quality for the customer. The main aspect of kaizen is that it is not
about radical and ad-hoc change or turnaround but that it is performed by
making small changes on an everyday basis to improve productivity, safety
for all employees, and business process effectiveness while reducing waste.
The overall goal is to enhance the quality of products and to maximize cost
efficiency and the safety of manufacturing processes. The concept is based
on two principles. First, kaizen is not restricted to a single management dis-
cipline but is considered a part of every single business process. Second, kai-
zen is a continuous process that is supported by all members of a Japanese
organization. Kaizen can therefore be applied to every management process
or operation and in every organization. Every process can be improved and
should be continuously improved.
The philosophy of kaizen was popularized in the West by Masaaki Imai
in his book about kaizen, which created a worldwide interest in the concept.
The term itself is not clearly defined and is often confused with concepts like
the kanban system, total quality management, and just-in-time management.

Small Changes in Every Process

The Japanese concepts of change and improvement differ from Western ideas
on these topics. In a Western firm, change typically refers to “radical” change.
If a business process or a strategy is changed, we prefer to see a real difference
compared to the original situation. A company turnaround or an entirely
new strategy are considered significant changes. Small changes, such as mov-
ing a desk from one part of the room to another to improve communication
between employees, or other similar activities, are not considered very influ-
ential on overall corporate success.
The Japanese have a different attitude toward change. Their ideas of
change and improvement are ubiquitous. Every process and activity can
 Kaizen and Total Quality Management 5

be improved at any time. Even small changes, such as moving a desk, are
considered important because the changes will improve the situation in the
long run. Since Japan is a group-oriented society, any change, adaptation, or
improvement must be discussed with a large number of people. Important
decisions can never be made by just one person. However, group discussions
often do not lead to radical ideas, as too many people are involved and too
many viewpoints must be considered—the more people involved, the more
mass oriented the decision becomes. Radical changes such as drastic downsiz-
ing or adopting a strategy are very difficult to implement in a Japanese firm.
Radical decisions are therefore very rare, and improvements in the Japanese
workplace are often very subtle and would not be considered very significant
from a Western perspective.

Gemba Kaizen and Teian Kaizen

We can distinguish between two types of kaizen: gemba (actual workplace)

kaizen and teian (plan) kaizen. Gemba and teian kaizen both aim to develop
higher production and quality standards. Gemba kaizen is an action-oriented
approach and refers to improvement activities that are performed in the
actual workplace, such as on the shop floor or on the manufacturing line.
Gemba kaizen involves every aspect of everyday work that can be improved.
The focus of gemba kaizen lies in small changes that will modify the overall
success of the company—not necessarily right away but over time.
Gemba kaizen methods are quality circles and suggestion systems. In
quality circles, a specialized team develops and designs ideas concerning
how to improve the company’s performance. Suggestion systems encour-
age employees to submit suggestions for improving work processes and
customer satisfaction.
Teian kaizen, on the other hand, represents a theory-based approach and
refers to strategic improvements that are influenced by top management.
Here, the implementation of new processes and practices play the most dom-
inant role. The overall goals of teian kaizen are improved business and man-
ufacturing practices. The most prominent teian kaizen methods include
total quality control and just-in-time management.1
6 Understanding Japanese BUsiness practices

Kaizen Can Be Applied Anytime and Everywhere

The first step to a kaizen-oriented enterprise is a corporate culture that

motivates employees and rewards them for improving work and busi-
ness processes. Kaizen is a process-oriented approach rather than a result-
oriented one. Kaizen is not just the task of a special group within a company;
employees of all levels, from the CEO down, participate in kaizen activities.
When the kaizen philosophy is applied, every single organizational mem-
ber is responsible for the improvement processes. Another feature of kaizen
is that every process, not only a manufacturing or a service process, can be
improved, which means that kaizen can also be applied in nonmanagerial
situations. For example, if a Westerner wanted to avoid drinking coffee any-
more, he or she would make a radical change in drinking habits, trying to
completely stop consuming coffee from one day to the next. However, this
might not be successful since the body is not accustomed to a lack of caffeine.
This might then affect the mood and work abilities of the person. However,
if the kaizen attitude is applied in this situation, the person might first substi-
tute one cup of green tea for a cup of coffee on the first day. This is a first step
in making the change, and the person still feels well and the body can adjust
to the change in the amount of caffeine consumed. A day or a week later, two
cups of coffee per day are substituted with green tea, and after awhile, switch-
ing entirely to green tea is very easy.
The following sidebar (Implementing Kaizen) describes in which way a
kaizen-oriented attitude can be implemented within Western organizations.

Implementing Kaizen
• Encourage a corporate culture in which new ideas are
rewarded and employees are interested in improvements.
• Promote shared responsibility; all employees, from top manage-
ment down, are responsible for improving business processes.
• Stress that even small processes can be improved.
• Remember that starting with a small step (e.g., one cup
of green tea a day) lowers resistance to change and helps
employees to adjust to new ideas.
• Hold regular reflection meetings about the regular progress
in which improvements are discussed and promoted.
 Kaizen and Total Quality Management 7

The 5S System
Another famous management practice related to gemba kaizen is the 5S
System. The “5S” refers to five key words all starting with an “S” in Jap-
anese. The words describe how a workplace or production process can
be effectively organized. The 5S System consists of five stages of a pro-
duction process, which are seiri (sort), seiton (set in order), seiso (clean),
seiketsu (systematize), and shitsuke (standardize). The words combined do
not really make up a system but a set of guidelines regarding how to
improve a business or production process, or any kind of standardized
process, and maintain lasting, high-quality performance.
In the first stage, seiri, all tools and materials used in the work pro-
cess are taken care of. Seiri refers to tidiness and structured organization.
During the seiri process, all materials and tools are sorted, and only the
necessary ones are kept for continued use. Everything else is stored or
discarded. This process leads to fewer hazards and less clutter that might
interfere with productive work.
Stage 2, seiton, refers to straightening and orderliness. In this phase,
all the materials and tools chosen for the production process are orga-
nized. The focus is on the need for an orderly workplace. Even though
the translation appears to indicate something similar to “sweeping,”
the intent is to arrange the tools, equipment, and parts in a manner
that promotes workflow. It has to be systematic. For example, tools and
equipment should be kept where they will be used (i.e., in order to
straighten the flow path), and the process should be arranged in an
order that maximizes efficiency. There should be a place for everything,
and everything should be in its place—this is also known as “demarca-
tion and labeling of place.”
Stage 3, seiso, stands for sweeping and cleanliness. It means to clean all
items used at work (e.g., all materials used during a manufacturing pro-
cess). The workplace, for example, has to be clean and tidy all the time. At
the end of each shift, a work area is cleaned up and everything is restored
to its place. This makes it easy to know what goes where and to have con-
fidence that everything is where it should be. The key point is that main-
taining cleanliness should be part of daily work—not an occasional activity
that is initiated only when things get too messy.
8 Understanding Japanese Business Practices

Phase 4, seiketsu, translates as “standards.” Seiketsu refers to making

all the cleaning, control, and improvement processes a regular activity in
the workplace, allowing for control and consistency. Basic housekeeping
standards apply everywhere in the facility. Everyone knows exactly what
his or her responsibilities are. Housekeeping duties are part of regular
work routines.
Phase 5, shitsuke, means “sustaining discipline.” It also refers to stan-
dardizing and sustaining the process to support long-term kaizen goals
and to maintaining and reviewing standards. Once the previous four
phases have been established, they become the new way of operating the
organization. Maintaining a focus on this new way of operating is essen-
tial, and a gradual decline back to the old ways of operating should not be
allowed. But if an issue arises about improvements in working, a new way
of doing things, or a new requirement concerning output, it usually leads
to a review of the first four commandments.
In a Japanese context, a sixth phase, “safety,” is sometimes added.
Purists, however, argue that adding this phase is unnecessary since cor-
rectly following 5S will result in a safe work environment. Often, how-
ever, a poorly conceived and designed 5S process can result in increases
in workplace hazards when employees attempt to maintain cleanliness at
the expense of ensuring that safety standards are adequately followed.2 In
Table 1.1, we can see an overview of the 5S System.

Table 1.1. Overview of the 5S System

5S system Activity
seiri (sort) Materials and parts used in the production process are sorted
and the unused parts are stored at another place.
seiton (set in order) Parts chosen are put in order and organized; things are kept
tidy and in a certain order.
seiso (clean) In this stage, all parts, as well as the workplace, are cleaned.
seiketsu (systematize) All processes become regular activities at the workplace in
order to guarantee consistency and reliability in quality and
results.
shitsuke (standardize) The first four Ss become the new way of operating the
production process. In the fifth stage, all processes developed
in the first four stages are standardized and communicated to
all employees in order to support kaizen goals.
 Kaizen and Total Quality Management 9

Total Quality Management, Japanese Style

Japanese consumers are obsessed with quality and do not accept any prod-
uct defects. In the case of a product defect, the product will be returned,
but the Japanese customer is lost forever. To avoid any problems with
quality, decades ago, Japanese corporations started improving and refin-
ing their production management processes (see jidôka in chapter 3) and
also implemented a number of instruments for controlling and sustaining
quality at the highest level.
Quality, however, plays an important role in all the other business pro-
cesses as well. Here again, as with the kaizen approach, the quality idea is
relevant at every level and stage. Total quality control is implemented in all
phases of the manufacturing and work processes, and it is not simply result
oriented. While working employees are constantly expected to check and
improve the quality of work, mistakes must be reported or fixed as soon as
they are found. Japanese firms apply a number of interesting tools to lever-
age their employees’ creativity and ideas and to make sure that their prod-
ucts and services are produced at the highest level. The most prominent
tools are described in the following sections.

Quality Circles

The concept of quality circles is based on the idea that the interaction
between different members of a group is more productive than several
individual ideas. A Japanese quality circle is a small group, usually con-
sisting of 8 to 10 people from the same work area, who are voluntarily
involved in studying and solving product-quality problems. The prob-
lems they deal with are either problems that need improvement that the
members find important or problems that the company assigns to them
to solve. In her book The Accidental Office Lady, Laura Kriska describes
her time as an American working for a well-known Japanese carmaker.
At the time, women working in an office had to wear uniforms, while
men did not. After complaining about this, Kriska was told to form a
quality circle and present suggestions for improvement. A group formed
and collected data on costs, motivation, and other factors, and after a
few months, the results, which suggested that the uniform rule should
10 Understanding Japanese Business Practices

be abandoned, were presented to the top management. The presentation

was convincing, and the company changed its policy.
This example shows that every area of the workplace is a target for
possible improvements and that a group-oriented solution is preferred.
When developing solutions within the quality circle, the well-being of all
company members is of the highest importance and should be consid-
ered at all costs. Training plays an important role in quality circles. The
circle leader is first trained by the senior management and then devotes
a remarkable amount of time and energy to disseminating statistical
knowledge and other related expertise to his or her subordinates (during
the normal work time or in their spare time). The consequence is more
worker participation and positive group dynamics, as every member is
equipped with the relevant knowledge and skills and can freely commu-
nicate his or her ideas.
Thus, the existence of quality circles significantly improves product
quality as well as productivity. Also, however, individual suggestions must
not be neglected. Suggestions given by circle members strongly stimulate
innovation in Japanese firms, and members are encouraged to register
patents in case the group discussion leads to inventions or new products.

Genchi Genbutsu (Go and See)

Genchi genbutsu, a Japanese term translated into English as “go and see
for yourself,” has revolutionized Japanese firms and their business prac-
tices. This phrase enforces a simple but effective policy where employers
immerse themselves in their company’s daily operations by experiencing
a production site or business section for themselves. Genchi genbutsu
is used to train young employees who are entering the company right
after graduating from a university to let them experience the work and
learn it from scratch. Many Japanese companies have a strong focus on
stability and prefer their workforce to remain constant for many years,
sometimes even a lifetime (see chapter 2). They usually take 1 or 2 years
to train their employees and socialize them in the firm. In most cases, this
happens also by genchi genbutsu. A new recruit entering a Japanese sales
department will accompany a more experienced sales manager for up to
2 years before visiting a customer alone for the first time. This allows him
to learn the business from a more experienced person; to become familiar
 Kaizen and Total Quality Management 11

with the customers, their likes, and their dislikes; and to become accus-
tomed to the business. After being socialized in this manner, employees
feel more relaxed doing their jobs and show greater motivation.
Genchi genbutsu is also used in cooperation with job rotation, which
is still very popular in the Japanese firm (see chapter 2). Many Japanese
employees are moved to a new department every 2 to 3 years to ensure
that they know all aspects of the business. In their new assignment, they
learn each task by doing it from scratch. Japanese top managers who
mostly “grew up” in only one firm have often worked in almost all parts
of their company and really “know every corner of the firm.” This is
one reason why Japanese firms feel uncomfortable hiring top managers
from other firms or industries. The tacit and personal knowledge that
can be acquired by genchi genbutsu is considered priceless and makes all
employees experts in all aspects of their business over time.
The hands-on approach of genchi genbutsu is also used to improve
processes and solve problems. “Let us go back to the gemba, or the shop
floor, and look for solutions there,” is a Japanese slogan when there is a
problem that needs to be solved and the solution is not visible right away.

Reflection Meetings

Another tool for improving quality at a constant level is the reflection

meeting, called hanseikai, which is held after projects, events, or any task
that is performed by a group. A hanseikai is a very traditional way of
reflecting on a project and implementing changes for future performance.
In this meeting, the task is very carefully discussed by all team mem-
bers, and possible improvements are developed during this discussion.
A Japanese task is not finished until the hanseikai is over. A hanseikai
usually consists of three components. In the first step, all team members
analyze the task and compare the initial project plan to the actual perfor-
mance. Following the first step, the performance of each team member is
discussed, and they reflect on their own performance and make sugges-
tions on how they could improve it next time. Finally, there is a feedback
round in which the group discusses the particular aspects that could be
improved and that need to be considered in future projects.
Since a hanseikai can last a few hours, it is held right after the end of
a task, when memory is still fresh and all members have ideas about how
12 Understanding Japanese Business Practices

to improve the processes in the future. They recognize the company’s

weaknesses, and they must be responsible for changing and fixing those
weaknesses. A hanseikai is a management tool that is deeply embedded in
Japanese culture.

Summary
• Kaizen is the most prominent Japanese management practice.
It refers to continuous improvement and the idea that any
managerial process can be perfected. Kaizen is not so much a
detailed management practice but a philosophy that should
be lived and implemented by every member of a Japanese
firm, from the top management to the shop floor. The idea
of kaizen does not include radical changes, such as job cuts,
but mostly consists of small changes, often on a daily basis,
and is based on constant communication with other group
members.
• The 5S system is system consisting of five concepts that
begin with the letter “S” in Japanese: seiri (sort), seiton (set
in order), seiso (clean), seiketsu (systematize), and shitsuke
(standardize). The 5S system is an organizational system for
production processes.
• Quality circles are a means of quality management in the Japanese
firm. They support employees in contributing their own ideas.
• Genchi genbutsu refers to inspection at the level of the shop
floor. In doing this, Japanese employees can find solutions for
problems at the actual place where they occur.
• After a project or an event, Japanese business people usually hold
a reflection meeting called hanseikai. In a hanseikai, the perfor-
mance is evaluated, and points of improvement are discussed.