What Japanese management techniques can (or should) be applied by American managers?

What Japanese Management Techniques Can (Or Should) Be Applied by American Managers?

It is ironic that a good deal of Japan's success has its roots in what it learned from the United States. The Japanese did not discover productivity, which was the foundation of our foreign aid program

Some argue that American managers would achieve success similar to that of Japan if they were to adopt Japanese management techniques in their own companies. Others contend that the Japanese corporate setting and its cultural environment are unique, and that techniques that work in Japan are not transferable to American companies. In reality, the degree of difference between American and Japanese management styles is not that wide, since the underlying methods used in Japanese management practices came from the United States. Consequently, the Japanese system can be successfully adopted in U.S. companies, provided allowances are made for the traditional work ethic.

The most successful Japanese management practices are evident in three principle categories: long-term objectives, collective responsibility, and manufacturing concepts. The following will explore each of these areas and identify the most pertinent Japanese management practices that should be adopted by American managers.

Peter Drucker suggests that the real reason for Japanese superiority springs from their focus on long-term objectives. Their organizations are extremely growth-orientated. Approximately 80 percent of large Japanese corporations operate from long-range planning. The long planning horizon is made possible by the use of management practices that include: long-term profitability goals, a strong competitive attitude, vertical grouping, internal growth strategies, lifetime employment, employee training, union relationships, and personnel skill generalization rather than specialization.

Large U.S. institutional investors tend to reject companies that do not show strong performance in such short-term measures as quarterly earnings per share, in Japan the pressure from the shareholder is not so predominant and annual profit is not as important. Japanese corporations borrow most of their money from banks and the banks support the long-term growth of the company. This attitude toward return on investment allows Japanese companies to withstand years of red ink to gain market share or establish a toehold in foreign market arenas. Additionally, the supportive role of the Japanese government helps make the concentration on long-term profitability feasible. Through tax incentives and other assistance programs, government policies are directed toward rewarding the companies that fulfill the goals that support industrial growth and national stability. There is a low level of national resources committed by the government to defense expenditures enabling business to focus its attention on the civilian product market.

The Japanese management practice of converging on long-term profitability would be extremely difficult in the U.S. since our microeconomic short-run concerns tend to overshadow our macroeconomic long-run desires. Other factors include clashes between government and business, and a need for a large defense expenditure for the U.S. to remain a world power. However, with financial arrangements as one of the primary guidelines to the design of operational philosophy of a company, it is pertinent that long-term returns be utilized if U.S. managers are to adopt many of the Japanese management practices. Westinghouse Corporation, for example, expects to wait two years before seeing any results and ten years before the full benefits of its adaptation of Japanese management practices are clear.

Competition among Japanese corporations is very severe. Employees are willing to identify themselves with the company, cohesiveness is very high, and as a result, competitive attitudes towards other companies that produce similar products is strong. In order to provide the lifetime employment system, the companies have to grow and this tends to intensify the competition. American managers have the same, if not a stronger attitude about competition, but it is usually generated from the top down rather than the bottom up. American managers need to instill in their employees a spirit of willingness to participate in company competition rather than striving for individual goals.

Japanese businesses use a lot of vertical grouping. There is a long-term cooperative relationship between the the manufacturer of the final products and parts suppliers. Toyota has 172 companies in its vertical grouping which supply parts only to Toyota. In return, they receive support in financing, training on quality and production control, and general management. The buying manufacturers will inspect the method of quality control but will not inspect the parts. Such a long-term cooperative association allows the parts manufacturers to plan production on a mass basis and improve the quality with lower prices. To counter the competition that U.S. managers face, it would be advantageous to form coalitions with other organizations in the form of complementary relationships.

Japanese companies seldom acquire other companies for diversification; they would rather use internal development or joint venture by contract. The growth of Toyota and Matsushita Electric was achieved through internal development with few acquisitions. American management practice is to grow by acquisitions. Internal development tends to pay more careful attention to the effects of synergy and results in concentration of the company's strength. It also results in severe competition and the application of the "fittest will survive" principle.

Further evidence of the long planning horizon of Japanese management is the tradition of lifetime employment-perhaps the most publicized of Japanese business practices. For example, the average job tenure at Fujitsu is 13 years, while the average job tenure in the United States is 3.6 years. Employees are hired directly from graduation from high school or college and are retained until a mandatory age of 55 (waived for top-level managers). Employees are terminated before normal retirement age only under the most extreme circumstances, such as criminal behavior. Upon retirement, an employee will receive a large severance payment and may be placed in a subsidiary of the parent company.

To meet the workforce needs of the supply and demand cycle, the Japanese use the participation of women in the labor force to buffer the lifetime employment of men. Women are hired as temporary or part-time workers and are released when when product or service demand decreases. The system works well in Japan, because 94 percent of the population over 30 years old is married. In this way, the majority of women receive financial security in one form or another.

The lifetime employment system produces an employee with a high degree of loyalty to the company. Acceptance of the management practice in its fullest concept does not seem very likely in the United States. Economic and social chaos would exist if women were used as a disposable workforce, especially when only 13 percent of the population live in conjugal units. Rather, Dr. Ouchi of UCLA advocates in his Type Z (Modified American) management style, a blend of short-term employment, as exhibited in the Type A (American) management style, and lifetime employment, as used in the Type J (Japanese) style, to yield long-term employment as the best compromise for use in U.S. business.

An extension of the Japanese management practice of lifetime employment is the practice of executive investment in employee training and development. The Japanese are willing to spend big on training in order to get a competent, flexible, and highly motivated workforce. The training system consists of training for new recruits, training for each functional skill, and training for promotion to a higher hierarchical level. Because of lifetime employment, people are not as individualistically competitive, are more willing to communicate, and help with on-the-job training.

An example of commitment to training in American took place at Nissan's truck manufacturing plant in Tennessee. Out of a total capital expenditure of $500 million, $56 million was spent on training, with almost $30 million of that for training of technicians alone. If American management wants to put the skill back into the job so workers are completely responsible for their share of the finished product, investment in employee training and development is a necessity.

Union relationships and management practices toward those relationships are important to long-term objectives. Unions in Japan are organized within the company rather than designed around the crafts. Foreign observers often characterize Japanese enterprise unions as docile organizations that comply with management's wishes. Actually, they are far from compliant and are totally autonomous and financially independent. In Japan, strikes usually last one or two days at the most. Applying Japanese management practices toward unions has already met opposition in the United States. When Sanyo Mfg. Co. took over a nearly bankrupt television set manufacturing plant in Arkansas in 1977, it was already unionized. By 1982 the use of Japanese management practices changed the workforce from 500 dispirited workers to 2,200 highly motivated employees. The transition included a strike by the IUE in 1979 which lasted for several months. However, the patience of Japanese management toward unions prevailed when the union went to top management and settled the strike.

Also attractive to U.S. managers to help meet long-term objectives is the Japanese practice of non-specialized career paths. In Japan the employee is placed in continuous job rotation. While this results in employees having less specialized expertise, it also means that someone in one department of a company is always familiar with any other department. The effect is a high degree of cooperation and coordination between various departments, and an organization-wide viewpoint among the company's managers. If American managers expect to increase the long-term productivity and quality of their operations, emphasis on having employees become generalists rather than specialists is a requirement.

Japanese management shuns individual accountability and credit in favor of collective or group responsibility and rewards. The fundamental management practices that underlie collective responsibility include: emphasis on soft S's (staff, skills, and style), participative management, and a holistic concern for employees.

McKinsey and Company developed a management model built around seven variables of S's. American managers typically utilize the more impersonal and institutional variables known as the hard S's-strategy, structure, and systems. Japanese managers concentrate more on the soft S's, dealing more with human values and interpersonal issues-staff (the concern for having the right sort of people to do the work), skills (training and developing people to do the work), and style (the way management handles subordinates, peers, and superiors). A result of the soft S's is a better communication pattern highlighted by making the most of ambiguity, indirection, subtle cues, trust, interdependence, and implicit messages. In contrast, the U.S. managerial norm is a forced communication model that strives for complete openness, explicitness, and direction to minimize ambiguity and uncertainty. More emphasis placed on the soft S's by American managers can help to attain the results obtained by Japanese management.

The second management practice the Japanese use to develop collective responsibility is participative management. The two basic elements of Japanese participative management are collective decision-making and quality circles. Each is rooted in the Japanese cultural traditions emphasizing interdependence, collaboration, and cooperation.

The strength of collective decision-making, sometimes called bottom-up management or interfunctionality, lies in its deliberateness and in the involvement of all those who will be responsible for the implementation of decisions. It creates a hard-working, orderly work force which, when combined with a high degree of goal congruence between employer and employee, produces cohesive, disciplined work groups dedicated to high productivity and superior quality. Collective decision-making developed in Japan because of the difficulties of the Japanese language, which is considered to be a cultural weakness. Reading a Japanese newspaper requires knowledge of 2,000 fanzi, each symbol having several meanings and pronunciations.

The second widely known element of participative management is the use of quality control circles, more commonly known as quality circles. In practice, there are many variations of quality circles, but nearly all are structured as a relatively small group of employees who meet to discuss and develop solutions for work problems relating to quality, productivity, or cost. The notion that workers voluntarily organize themselves into autonomous QC groups and meet on their own time is a myth. Most operate within clearly defined limits with the company carefully coordinating the group's activities, setting targets, controlling group size and training members.

The use of the Japanese management practice of participative management has had only mixed results where it has been tried in the United States and has sometimes been a divisive instead of a cohesive force between workers and supervisors. One of the major criticisms of the consensus-style management is that it is too time-consuming. Participative management should be introduced into American small business rather than big business. With fewer managers and employees, the time constraint would be diminished.

The last Japanese management practice that develops collective responsibility is a holistic concern for people. The company is involved with its employees not only on the job but beyond the workday as well. Much of the employee's family life, recreational activity, etc., involves the company and fellow employees. The company feels an obligation toward the employee's long-term welfare. This further develops the commitment of the employee to the company. If American managers were to develop a holistic concern for its employees, traditional societal supports of neighborhoods, families, and hometowns could be reinforced and some of the pressures on U.S. society could be relieved to help increase productivity.

In terms of manufacturing concepts, Japanese management has developed a strategy that has transformed its image from a period when "made in Japan" meant poor quality, to being the standard for quality in manufacturing worldwide. The predominant factors leading to this successful accomplishment include just-in-time production systems and the concept of "zero defects."

Just-in-time management control, or Kanban, involves a system of repetitive lotless manufacturing. Parts or subassemblies are completed just in time to go onto the next process. Purchased parts are delivered just-in-time for use in the manufacturing process. This has been accomplished by reducing the setup cost and thereby adjusting the economic lot size downward. This system is far superior to the Material Requirements Planning and Economic Order Quantity methods currently in use in the United States. While this management practice has not been fully achieved in the United States, Kawasaki has been able to reduce its production to a level load without inventory buildup in its Lincoln, Nebraska plant. Adjustments in leisurely railroad delivery schedules, improperly designed unloading and storage facilities, impractical plant locations, and problems with suppliers will be necessary in U.S. companies' efforts to switch from traditional, fat "just-in-case" inventories to the much slimmer just-in-time method.

A second management practice which would be a monumental achievement for American managers is the concept of "zero defects." In Japan there is a remarkable absence of crisis management in the plant and excellent equipment maintenance. The Japanese are never satisfied with the quality of their products-even when the defect rate is at an unbelievable one percent; nor are they satisfied as long as any defect exists in the manufacturing operation.

As Japan faces stronger competition from South Korea and Taiwan and its people become more exposed to Western culture, adjustments in the management practices currently being used will be necessary. This will give American managers time to uncover and implement many of the successful Japanese management practices in an effort to regain the market share that Japan has captured in the United States. American managers need to concentrate on long-term objectives, collective responsibility, and manufacturing concepts.

Further Reading

Bickerstaffe, George. "The Mixed Scorecard of Japanese Management Abroad," INternational Management, July 1, 983. Cathey, Paul. "Just How Different Are American and Japanese Managing Styles?," Iron Age, June 25, 1982. Cathey, Paul . "Japanese Managers Find Best Way to Direct U.S. Workers," Iron Age, May 21, 1984. Dillon, Linda S "Adopting Japanese Management: Some Cultural Stumbling Blocks," Personnel, July/August 1983. Garzony, L. G. "A Perspective on Japanese Manufacturing Success 1950-1985," Industrial Management, September/October 1981. Hall, James L. and Leidecker, Joel K., and Posner, Barry Z. "Will Your Workers Sing the Company Song?" Training and Development Journal, July 1984. Jain, Hem C. "Japanese Management: Setting the Record Straight," Management Review, March 1984. Keys, J. BErnard and Miller, Thomas R. "The Japanese Management Theory Jungle," Academy of management Review, Vol. 9 No. 2, 1984. Kono, Toyohito. "Japanese Management Philosophy: Can it be Exported?," Long Range Planning, June 1982. McGovern, Thomas. "Why Japan's Management Styles May Not Fit Here," Nation's Business, August 1983. Nadler, Leonard. "What Japan Learned form the U.S.-That We Forgot to Remember," California Management Review, Summer 1984. Namiki, Nobuaki and Sethi, S. Prakash and Swanson, Carl L. "The Decline of the Japanese System of Management," California Management Review, Summer 1984. Schonberger, Richard J. "The Transfer of Japanese Manufacturing Management Approaches to U.S. Industry," Academy of Management Review, Vol. 7 No. 3, 1984. Sonfield, Matthew C. "Can Japanese Management Techniques be Applied to American Small Business?," Journal of Small Business Management, July 1984.

Ronald Sheldon and Brian Kleiner are with the department of management at California State University, Fullerton.