Overtime and oversight2
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The document discusses organizational challenges facing Japanese companies as their traditional employment model changes. It outlines shifts in recruitment toward more temporary workers, changes in pay structures, and newer performance management systems. Current challenges include talent shortages, retention of younger workers who change jobs more, excessive overtime, implementing oversight systems, developing management skills, and managing knowledge transfer as communication changes. These challenges may impact overseas operations of Japanese firms if not addressed.
Overtime and oversight2
- 1. Overtime and Oversight: The Organisational Challenges Facing Japanese Companies Pernille Rudlin Rudlin Consulting/Japan Intercultural Consulting Japan Discussion Group October 12th 2007
- 2. Agenda The classic Japanese employment model Changes in the 1990s-2007 Change 1: Recruitment Change 2: Pay Change 3: Performance management Current challenges Challenge 1: Recruitment Challenge 2: Retention Challenge 3: Overtime Challenge 4: Oversight Challenge 5: Management ability Challenge 6: Knowledge Management Conclusion & impact on overseas operations
- 3. The classic model Lifetime employment, seniority based promotion and pay Control through apprenticeship and ‘shame’ rather than checks and procedures and threat of firing Trust staff who are seishain, lifetime employees, to act in the company’s best interests. Ignore the rest.
- 4. 120 100 Trust 80 US 60 UK Japan 40 20 0 0 5 10 15 20 25 Number of years in the company
- 5. 1. Changes to recruitment -1990s to 2007 2004 amendment of Temporary Staffing Services Law Non-regular workers (hi seiki koyou) increased from 20% of labour force (64m) in 1990 to 1/3 today Net café nanmin = 5,400 according to one survey, either in 50s or 30s, 60% male Freeters – 2m? 5m? – getting older NEETS – 620,000 (static, slight decline)
- 6. Labour force 34 32 30 Percentage 28 Hi-seishain/non- regular 26 24 22 20 1994 1999 2004
- 7. 2. Changes to pay - 1990s to 2007 Making bonus discretionary, introducing performance based pay, clamping down on overtime claims 9 straight years of decline in average annual wage (females and manufacturing sector hardest hit)
- 8. Changes to pay - 1990s to 2007 Number of employees with annual wage of < ¥3m rose 1.2% 2007, > ¥10m rose 0.2% Households on welfare 1.08m, up 3.3% on previous year (2005) – elderly 44%, handicapped 37%, single mothers 9% More than 19m below poverty line?
- 9. 3. Changes to performance management - 1990s to 2007 New performance management systems introduced in most companies c.1995 80% of companies now have a “seika-shugi” performance based HR system Took 3 to 4 years to have positive impact on performance of most companies Many companies now “reviewing” their performance management systems
- 10. Challenges
- 11. Challenge #1. Recruitment -Talent shortage 1.89 vacancies for every new graduate or post graduate in March 2007 Set to be 2.14 vacancies for every new graduate and post graduate March 2008 Employers not happy with quality of current graduate intake
- 12. Recruitment - solutions Recruit overseas? Recruit mid-career, mid-term? Better utilisation of female workforce? Recruit Freeters One survey result: 90% of male Freeters, 74% of females would like to gain seishain status Another survey shows that 75% of male Freeters 18-29 in Tokyo in 2001 tried to become salaried, but in 2006 only 50% did. 75% successful in 2001, 59% 2006 (Japan Institute for Labor Policy & Training)
- 13. Recruitment – signs of change Toyota union admitted 4,000 contract workers with at least one year of service at 12 domestic factories – intends to call on management to improve their conditions and give opportunity to become permanent employees Complaint filed against Canon by temporary workers Uniqlo, NTT planning to convert temporary workers to permanent
- 14. Recruitment – signs of change NEC, Fujitsu to employ 1000s of foreign software developers Tensions surrounding integration of immigrant workers’ families, ‘trainees’
- 16. Challenge #2. Retention 1.15 Millions 1.1 1.05 25-34 year olds who left 1 job within the last year 0.95 0.9 Soumusho Labour Survey 98 00 02 04 06 19 20 20 20 20
- 17. 2. Retention Do you intend to stay with your present employer until your retirement date? (Nikkei BP Consulting survey 2006) Yes Yes No No Don't know Don't know Don't have a Don't have retirement date retirement date 20-29 year-olds 30-39 year olds
- 18. Challenge #3 Overtime Average full time employee worked 2,141.2 hours in 2006, up from 2,028 hours in 2005 Government prepared a revision to the Labor Standards Law to increase overtime pay and a new White Collar Exemption bill Keidanren want exemption cutoff to be employees earning > ¥4m annual income – thought to represent ¥11.6 trillion in overtime pay that would not be paid
- 19. Challenge #3 Overtime Some companies are switching lights off, air conditioning off after 10pm etc Government inspections have forced back payments Overtime hours worked in manufacturing sector dropped 1.8% to 15.8 hours for second consecutive month (Oct 07) Overtime pay increased 1.2% for first time in 2 months (Oct 07)
- 20. Challenge # 4 Oversight Japanese Sarbanes Oxley – naibu tosei, in force from April 2008 Processes and systems throughout the company must be documented, tested and signed off
- 21. Oversight - solutions Hire in overseas experts (securities house) Outsource to professional services company (car manufacturer) Integrate systems & processes from acquired overseas company (glass manufacturer) Japanese staff do it in-house (bank)
- 22. Challenge #5 Management ability Seika shugi helped cut pay rolls in 1990s, but challenge now is talent management (right person for the job, demotion, fair appraisals) “Are you effectively guiding subordinates?” No = 56.9%, yes 43% “Are your superiors effectively guiding you?” No= 54.4%, yes = 45.3% (Nikkei survey 2006)
- 23. Management ability Percentage of each age cohort in management positions has declined over past 15 years Average number of staff reporting to a manager has declined over past 15 years (from 15.5 to 13.5)
- 24. Management ability 60 50 Percentage 40 30 Have sufficient skills and expertise 20 10 0 18- 25- 30- 35- 40- 45- 50- 55- Working Person Survey 24 29 34 39 44 49 54 59 2004 RecruitWorks Age Institute
- 25. Training investment 2.5 2.4 2.3 2.2 Percentage Training as 2.1 percentage of payroll costs 2 1.9 1.8 1.7 1.6 1.5 76 85 95 79 88 98 73 82 91 02 19 19 19 19 19 19 19 19 19 20 Ministry of Health, Labour & Age Welfare report
- 26. Challenge #6 Knowledge management Rising workload E-mail/mobiles replacing face to face communication Performance management causing internal competition Result: Decline in OJT Less face to face communication Refusal to share knowledge, to protect self
- 27. Conclusion 1 “Most Japanese companies seem to be conforming to the accelerating wave of economic globalization. However whether it is R&D, manufacturing or sales, they are remarkably behind in terms of ‘people and organisation’” Three key words are “trust”, “knowledge” and “motivation” (Hay Consulting Japan)
- 28. Overtime Performance management Recruitment Knowledge Management Management ability Oversight Retention
- 29. 120 100 Trust 80 US 60 UK Japan 40 20 0 0 5 10 15 20 25 Number of years in the company
- 30. Conclusion 2 – impact on overseas operations of Japanese companies Japanese multinationals operating in Britain have more autonomy, less oversight from head office than US etc multinationals – because more Japanese in management positions Invest less in training, less HQ based training More informal in the way information moves around the company This will have to change? (Study by Paul Edwards, Tony Edwards, Anthony Ferner, Paul Marginson and Olga Tregaskis , 2007)
Editor's Notes
- #26: Of children at hone, 59% are seishain, 45.9% (multiple answers OK) are part timers/contract staff or doing nothing (12.1%)