Japanese bosses: From Walkman to hollow men

Japan’s lack of bold business leaders

Nov 4th 2010 | TOKYO

The pre-iPod generation

THE Walkman changed the way people listened to music, especially on the go. Introduced by Sony in 1979, the portable cassette-tape player is finally being discontinued in the Japanese market. The device will remain in production in China and sold in some other places, although Sony will not say how many it still sells or why it bothers to make Walkmans at all in the age of the iPod and smartphone.
Whoever buys them, the numbers are unlikely to add much to the more than 220m Walkman cassette-players already sold. Yet this pioneering product was almost never made in the first place. Sony’s co-founder, Akio Morita, had to battle with his own engineers and executives who argued that a tape-player without a recording function would never work. “Everybody gave me a hard time,” Morita wrote in his memoirs in 1986. In the end, though, the boss had his way.
Such determination from a business leader is unlikely in today’s Japan. Founder-presidents like Morita, who died in 1999, hold immense power. But their successors, called salaryman-shacho (or “hired-hand presidents”), do not. This makes it difficult for Japanese bosses to be leaders rather than just figureheads.
“The salaryman-shacho is one of the biggest reasons why the Japanese economy went down. They don’t take responsibility,” thunders Tadashi Yanai, the founder and boss of Fast Retailing, Japan’s largest clothing retailer and operator of the Uniqlo chain of stores. Mr Yanai, who is reckoned to be Japan’s richest man, worth around $9 billion, is not alone in his view. Japanese managers lack “assertiveness, vigour, energy and resolve”, says Kazuo Inamori, the 78-year-old founder of Kyocera, one of the country’s biggest producers of electronics parts.
One problem is that in a consensus-based culture—with the ideal of lifetime employment, and promotions and compensation based more on seniority than performance—few bosses have a free hand, or even an interest, in forging a brash path. Such bosses are implicitly expected to keep things as they are and owe their position to so many internal colleagues that thorough corporate overhauls are almost impossible. Hence, when Toyota needed to take radical steps to rejuvenate the company in 2009, it named the founder’s grandson as president, hoping it would put a bold pair of hands on the steering wheel.
The leadership deficit translates into poor corporate performance. Japanese firms’ return on equity has long been less than half that of American and European companies. Since 1996 the number of Japanese companies among the world’s leading 50 firms by sales in sectors like manufacturing, retail, banking and health care has fallen by half or more. If the leaders of Japanese firms were able to make just basic improvements—increasing average sales growth from 2% to 5%, lifting earnings from 4.5% to 7% and boosting capital efficiency by 10%—the capitalisation of Japan’s sickly stockmarket could triple from its current level, says Bain, a consultancy, in a recent study.
Yet bold leadership is rarely appreciated. In June Naoto Kan, Japan’s prime minister, scolded Carlos Ghosn, the boss of the Renault-Nissan alliance, for firing workers—even though Mr Ghosn rescued Nissan from bankruptcy and transformed the company. It also took an outsider to push through change at Sony, where Sir Howard Stringer, a British-born businessman, became boss in 2005. It has taken him years to shoulder stodgy executives aside. This year Sony returned to making money and in the three months to September 30th reported net profits of ¥31.1 billion ($385m), having made a net loss of ¥26.3 billion a year earlier. Sony needed shaking up. Despite creating the market for portable music with the Walkman, it largely missed the shift to digital music-players.

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