Reflecting the evolution of a global
borderless economy, there are more
than 3,000 foreign-owned companies
doing business in Japan. When one
refers to a "foreign-owned company",
it used to mean a subsidiary of either U.S. or
european-based multinationals.
The picture, however, is gradually changing.
Ten years ago, nearly 50 percent of all the
foreign-owned companies were subsidiaries
of U.S. multinationals, followed by european
companies. Asian multinationals (parent
companies in China, India, Korea and other Asian
countries) only had a five percent share.
Now the share of Asian multinationals has
increased to 12.4 percent, meaning that one out
of eight foreign-owned companies in Japan have
an Asian parent.
Moreover, on a marginal side, one out of five
newcomers is an Asian multinational, and the
numbers are steadily increasing.
Hewitt has worked with numerous
multinational companies on business start-up
or mergers and acquisitions (M&A) issues in
the Japanese market for more than 20 years. In
addition, we have significant experience with
helping companies fix their HR issues after
beginning operations in Japan or after having
executed a Japanese M&A.
Three common mistakes
Through this experience, we have found that
many multinationals make three common HR
mistakes.
Please read on if your company has a
business interest in Japan or plans to enter into
the Japanese market.
The first common mistake is not having a HR
strategy. While companies, without exception,
have substantive business plans for starting up in
Japan, it is not always true that companies have
an explicit HR strategy.
We often see no more than an HR mission
statement, philosophies copied from the parent
company, or HR slogans that you can easily find
in a textbook on human resources management.
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What your HR strategy should address
Your HR strategy should include specific direction
and structure. It should include a description of
desired resources, desired culture and behaviors
to support your business. It should also include
descriptions of characteristics of HR policies
and programs to support business plans.
For example, you should ascertain if your
organization has a strategic competitive
position on compensation and benefits. Many
companies just look for a median practice or
simply apply their parent company's target
level.
If it is a start-up situation, the company may
want to have a strongly competitive position
in cash, such as being in the top 25 percent or
even higher in order to attract the best talent,
while taking a conservative position in benefits.
There is significant downside for not
having a good HR strategy. It becomes difficult
to hire the right talent. HR programs and
policies will not work together to facilitate
appropriate behaviors and the contribution
from employees. You will have people believing
in different values in conducting business
and have complex conflict and disharmony in
communication.
Simply put, you will waste money and will
not get what you want to achieve.
U.S. and European multinationals have
an advantage in attracting talent as their
brand names are typically well known. Asian
companies are emerging in business, but their
name and brand are often not well known by
Japanese people.
If you create an ordinary company that
reflects local HR practices with competitive
(such as median) reward, what is the
attractiveness against entrenched Japanese
companies and well-known foreign-owned
companies?
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