New Leaders Forum

Can Japan Firms Woo Foreigners?

Japanese firms are increasingly looking overseas for new markets. But can they woo foreign talent?

Japanese companies, increasingly shifting overseas to offset a shrinking domestic market, are taking the first steps to hire foreigners after long resisting even modest changes to their uniform workplace culture.

But they are now confronting the question about just how drastic that change should be. Many Japanese companies say they want foreign workers, but few so far have been willing to overhaul the system – with unequal pay and few opportunities for promotions – that once dissuaded foreigners from joining in the first place.

Greater diversity will likely help corporations overseas, boosting their attractiveness to foreign investors and easing transitions after mergers and acquisitions. Such moves, though, would also upend a corporate culture steeped in diligence and dutiful pride that many Japanese companies still see as a key part of their traditional success.

“If Japanese companies want the best talent, they have to give up the Japanese comfort zone entirely,” says Takaaki Umezawa, partner and managing director at A.T. Kearney in Tokyo.

Many companies have never had strong enough reasons to do business overseas. But the soaring yen and slimmer domestic profits prompted major manufacturers to build new plants in emerging economies. It also allowed for a record number of mergers and acquisitions, as Japanese companies, already armed with abundant savings, took advantage of their purchasing power.

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A poll last year conducted by a Tokyo-based staffing agency suggested more than 80 percent of Japanese companies want more foreigners. But only 10 percent of them said they were willing to hire foreigners without Japanese language ability.

A separate study suggested that Japanese companies, long viewed among foreigners as an unpromising choice, face obstacles in persuading new recruits. Chinese, for example, were found in one study to prefer working for Western companies, which offer better compensation packages and more chances for promotion.

“We are at a disadvantage unless we show them attractive incentives to work for us,” says Takaaki Nishii, the general manager of human resources at Japan’s food giant Ajinomoto, which operates in 26 countries.

For decades now, Japanese companies have been moving abroad, but they did so largely without altering their style of operating. They asked foreign workers to fit into the classic Japanese “salaryman” mold, with an emphasis on long hours and fealty to bosses. They asked foreigners to speak in Japanese and learn the Japanese decision-making process, which relies heavily on non-verbal cues. Few made it to the management level.

But some companies have started to abandon the traditional approach. Fast Retailing Co., Ltd., which owns Asia’s biggest fashion chain, Uniqlo, is hiring more foreigners than Japanese. Last March, English was poised to become the company’s official language.

Yet most are still on the fence about wholesale changes. Aspiring to be the global top 10 food company by 2016, Ajinomoto plans to give 50 percent of its board seats at 93 overseas group companies, but not at its Tokyo headquarters. One of Japan’s oldest trading giants, Mitsui & Co. LTD., tells its foreign workers they have chances to rise, but they have no tangible targets to increase the number of management positions, only 7 percent of which are currently held by foreigners.

“It’s not easy for anybody to learn our way of business overnight, which we’ve created for more than 100 years,” says Hironobu Ishikawa, Mitsui’s general manager of human resources.

The stakes are high.  If companies are too cautious, their Asian rivals will outcompete Japan’s top earners. China has already supplanted Japan as the world’s second-largest economy. South Korea, similar to Japan’s geo-economic fundamentals, beat Japan in a recent global index as it has been aggressively creating an environment for allowing much smoother movement of goods, people, capital and ideas.

“The defeat of top Japanese companies in the global market will plunge Japan more deeply into recession,” Umezawa says.

For now, companies are targeting a more attainable goal to hire foreign students with a great understanding of Japanese culture.

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Representatives from 30 well-known Japanese companies attended a recent job fair hosted by Pasona, a staffing agency. Their mission was to attract students from emerging economies in which they are trying to establish bases. Some 700 students toured company booths, and listened to recruiters emphasize, in Japanese, that they welcome diversity.

Following the Japanese tradition, students wore immaculate black suits. They had fresh haircuts. They used perfect keigo, or Japanese honorific expressions, when they talked to recruiters. At one booth, a Chinese worker at Japanese electronics giant NEC was giving a presentation to several Chinese; they spoke Japanese.

“Look at how they bow and holds their coats,” Hidetoshi Harada, a manager at Nabtesco, said as he surveyed the scene. “They are more Japanese than Japanese students.”