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Can more flexible workforces solve society’s problems?

Yasuyuki Nambu, CEO of Japan’s Pasona Group, is reframing short-term employment as a means of social benefit.

This interview is part of the Inside the Mind of the CEO series, which explores a wide range of critical decisions faced by chief executives around the world.

The founder and CEO of Pasona Group, Japan’s second-largest provider of temporary staff, has spent his life advocating the idea that a more independent and flexible workforce benefits businesses as well as workers. This was revolutionary talk in Japan in 1976, when Yasuyuki Nambu started his first temporary staffing agency to help housewives reenter the workforce. “Japan Inc.” was famous for its philosophy of lifetime employment, and its businesses were dismissive of what they called non-regular workers. (Japanese employment laws define regular workers (pdf) as those with open-ended, full-time, direct jobs — 35 hours or more per week as wage-earning employees, not contractors, with no defined end date.)

The bias against non-regular workers didn’t stop Nambu, who was in his last year of college studying for a degree in engineering at Kansai University. Forty years later, the makeup of the global workforce has changed, even in Japan. Today, 40 percent of Japanese workers are considered non-regular, four times (pdf) what the percentage was in the early 1990s. Nambu is now running a US$2.5 billion staffing business with offices in 15 countries, including China, Germany, Indonesia, Malaysia, Singapore, South Korea, Thailand, the United States, and Vietnam.

As demographics and technology change the relationship between employers and the employed, Nambu has continued to encourage governments to adapt their laws to help businesses and people benefit from these changes. Equal pay for women, benefits for part-time workers, and flexibility for older workers remain key issues. He describes his corporate mission as providing “solutions to society’s problems.”

In the past decade, Nambu has become particularly concerned about the depopulation of rural areas and Japan’s food security — the country imports 60 percent of its food — and has tied these issues to Pasona’s corporate social responsibility agenda. In 2010, Nambu famously installed an indoor farm, producing organic crops inside Pasona’s headquarters in the middle of Tokyo. In 2017, when the firm opened a new headquarters, the urban farm expanded, adding about 60 animals, including goats, pigs, cows, at least one owl, and even flamingoes.

Pasona’s long-term approach has not pleased all its shareholders, some of whom associate it with  poor short-term financial performance. In late 2017, the Hong Kong–based hedge fund Oasis Management, which has a minority stake in the company, announced it would press for a management buyout of Pasona Group. But Nambu remains committed to his vision. He sat down with s+b, across the road from the farm, to explain why a flexible and more independent workforce should be at the top of the agenda for businesses around the globe.

S+B: What was the driving force for you to start Pasona Group?
When I was a college student, I wanted to create a nonprofit organization to help women workers, but my father advised me that with a nonprofit I couldn’t do as much as with a company. So I started a company to support housewives who wanted to reenter the workforce. This company evolved into Pasona. After giving birth, women often have difficulties finding nursery places, and so they can’t get back to their job. Twenty-five years ago, we tackled this problem. We were the first company in Japan to have an in-house nursery.

In Japan today, anybody willing to work should be able to work, regardless of gender and age — that’s my vision. We need to create jobs for everyone.

S+B: Many in Japan know Pasona as a temporary staffing solution provider. What problems did you have to confront to make this a reality?
One problem we tackled is the so-called 401(k) issue. Twenty years ago, it was not possible for employees to take their benefits with them when they changed jobs because Japanese companies’ focus was to hire one person and have them for life. There was no need for a portable healthcare plan. At Pasona we wanted to tackle this problem, because we wanted more fluidity. We have since imported this more flexible system from the U.S.

S+B: Pasona is a company that sees the potential of older workers. How do you envision adapting the workforce to their needs?
We must make job opportunities for older people. But how? The government sees the workforce in very conservative and traditional terms. The government believes people have to work from 9 to 5:30, from Monday to Friday, then the worker will pay his taxes. For us, the workforce should come first.

“In Japan today, anybody willing to work should be able to work, regardless of gender and age — that’s my vision. We need to create jobs for everyone.”

I think we are moving toward a flexible workforce. Let me give you an example: Many old Japanese people have worked for only one company their entire life. We call it lifetime employment. My idea is different. A person can work for Company A on Mondays, Wednesdays, and Fridays, and Company B on Tuesdays, Thursdays, and Saturdays. This is the kind of flexibility I’d like to see. And this can happen after retirement, too. We offer retired executives the opportunity to become advisors, for example.

But it’s not only about old workers. In Japan, we have many young people who do irregular work, sometimes a few jobs at the same time. We need to support this type of work, and give them the same payment and fringe benefits as full-time workers, which is not the case now.

S+B: Today only 60 percent of the workforce is in regular employment in Japan, which is a big shift since Pasona began. Do you think that the workforce will change from how it looks now?
Let me use an analogy: In the past, in Japan, large extended families lived together. The head of the family would catch one big fish and everyone would share that fish. Now, more people live alone. If you go to a supermarket, you see fish sliced into small portions for one or two people. Jobs are moving in an analogous direction. Instead of having one big job, an individual may work several smaller jobs at one time. Not only can individuals then work for several different companies, but there are opportunities for more people to work more flexibly. [This reflects] my philosophy as a job creator.

I think many countries face challenges similar to those in Japan: low birth rates and aging societies, with young people struggling to find work. And I think this solution of segmenting employment will work everywhere. Essentially, we are working toward this kind of environment where workers don’t rely on a single company as a job provider. In this system, workers can work for more employers at the same time; that’s the kind of society we want to create.

S+B: Your business model of promoting a flexible workforce has, in effect, disrupted employment patterns in Japan. Do you think this will make things better for the business world?
In the style I have in mind, you don’t need to work in one place to get a job. In this vision, the job comes to you. As long as you are specialized in something and have a skill set that is required by people, you’ll be asked to work on a project. This might be short term, even just a day, or it could be for 10 years. People who have the required skills to get a job done will gather to do a job and leave when the job is done. You can compare it to gathering together customized teams, like in Mission: Impossible.

S+B: PwC’s 21st CEO survey found that many chief executives believe robotics and artificial intelligence will have a disruptive effect on the workforce of the future. What do you think?
Let me start by saying that I’m not an AI expert; I can merely talk from a labor market viewpoint. We used to have many kinds of industries in separate regions. But in the future, this will change. For example, I don’t think we’ll have the same rural–urban divide in employment in the future. With the growing importance of the Internet, there is no longer a need for this division. This speaks to my vision of a more flexible workforce.

A lot of people think automation and AI will take away jobs. But I believe the opposite is happening. They will allow more people to have more time and to spend their time creatively. Technology has always impacted workforce patterns. In the early 1960s, women in Japan were enabled to enter the workforce by technological advancements, such as home appliances. By 2020, AI and the Internet could help the entire workforce to find employment.

S+B: Has your commitment to corporate social responsibility increased your business, or helped your business move forward?
Let me give you an example of how we believe socially responsible business is good for us and for everyone else. We invest in rural areas, making sure that local economies are supported, but also that young people move to rural areas. Moreover, we think it is important to ensure that local companies are getting the profits.

This is what we are doing with the revitalization project on Awaji Island. We have developed a kind of ecosystem of jobs that are not dependent on a corporate headquarters but are sustainable locally. A company based in Tokyo might open a call center in a rural area and that creates employment. But if an economic crisis occurs in Tokyo, or if Tokyo is hit by a natural disaster, this will have a negative impact on the business and might even lead to the closure of the call center.

We take a different approach. We want to help support local ventures, so they operate independently. In Awaji we are taking on the challenge of new job creation in different areas, such as farming and health, and in doing that we are attracting human resources to rural areas. The aim is revitalizing regional industries by bringing together diverse talents so that the local workforce is independent and sustainable. We have recruited about 30 people from 20 countries. They bring their own expertise to tackle issues including food security and health, which are two major challenges.

S+B: What issue is particularly relevant for you in 2018?
Food security. Have you visited our urban farm in the other building of our headquarters? Normally companies listed on the stock market do not do things like this. But we have that farm for a reason: It is to put the important social issue of food security on the agenda.

The EPA [Economic Partnership Agreement] between Europe and Japan resulted in Japan importing cheap products from Europe. Farming in Japan became too expensive, which is not good for Japan’s food security, because it meant Japan needed to import a lot of food. As a job creator, we have the responsibility to make people aware of this, and that’s what we are doing with the farm.

Our goal is to develop local economies as we’re doing on Awaji Island, and support urban farming in inner cities, like our farm in Tokyo. We have already created jobs, and we help feed people in the area. This is a natural expansion of our mission.

For more interviews exploring the critical decisions today’s chief executives face, see Inside the Mind of the CEO.

Author profile:

  • Bobbie van der List is a correspondent for Dutch newspapers and magazines. Based in Tokyo, he specializes in business- and management-related topics.
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