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 / First Quarter 1997 / Issue 6(originally published by Booz & Company)


The Art and Practice of Japanese Management

This is no time to go back to the crude Japan worship of the early 80's, with "quality circles," morning calisthenics and thrice-yearly pilgrimages to Toyota City. Japanese companies are too bloated, and too weak at the type of "off the wall" thinking that seems to characterize America's most inventive companies.

But they are clearly learning fast, under the tutelage of men like Mr. Kobayashi, Mr. Makihara and Mr. Ohmae, and there are some things that they do much better than their rivals in the West.

As Westerners have learned in the past, it is always worth keeping at least one eye on the East.

What Japan Can Still Teach the West

Two of the greatest problems facing managers everywhere are cutting costs and managing knowledge. While Western companies have been making the biggest strides in those areas, Japanese managers can still teach them a trick or two.

On the cost-cutting side, Western companies are wearying of re-engineering, downsizing and delayering. So far, Japanese companies have been noticeably more successful than their Western peers at controlling costs without tearing out the innovative heart of a business.

This is not just a matter of having sacked fewer people. Japanese firms have encouraged the entire work force to help in reaching cost-reduction targets. In many companies, the walls are decorated with posters showing progress in cost control. At Topcon, an optical company, for example, the slogan is, "The budget is God."

Similarly, the Japanese reluctance to sack middle managers willy-nilly may also work in their favor. Yes, Japanese firms have often been slow to separate the wheat from the chaff. But in Japanese eyes, the middle manager is not an expendable link in the chain of command but the possessor of a valuable perspective on a company's business. In particular, the middle managers tie together two visions -- the strategic view of senior managers and the detailed operational view of front-line workers.

The other way in which the Japanese can help Western firms -- managing knowledge -- may appear to be an unlikely candidate, given that leadership in so many knowledge-intensive industries, from software to entertainment, belongs to America.

Nevertheless, a new generation of Japanese management thinkers, particularly Ikujiro Nonaka and Hirotaka Takeuchi of Hitotsubashi University, argue that the Japanese still have certain advantages.

Mr. Nonaka and Mr. Takeuchi start by admitting that Western companies are well ahead of the Japanese in managing the sort of formal, explicit knowledge that can be faxed or E-mailed. But, they argue, the Japanese are better at managing tacit knowledge -- the informal occupational lore, which is generated by workers grappling with everyday problems and passed on in cafeterias and at water coolers.

This skill allows companies to tap into the insights of the bulk of their employees, and insures that one man's hunch can become an entire firm's competitive advantage.

The most important trick is to encourage workers to spend as much time as possible together, informally as well as formally. Companies routinely divide workers into teams, often expecting them to stick with the same colleagues for years on end. New recruits work closely with "mentors" or "team leaders," learning far more from them than they do from formal training courses.

After-work drinking sessions and weekend retreats at hotels play an important part in promoting informal understanding. Some companies even talk of "nommunication," a term that joins the Japanese word for drinking (nomu) with communication.(10) Honda and Canon both make frequent use of "brainstorming camps" -- informal meetings in country inns in which project-development teams (and anybody else who wants to contribute) work intensively, but also drink sake, share meals and even bathe together in hot springs.

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