Learning from the Japanese: Management in a resource-scarce world

Learning from the Japanese: Management in a resource-scarce world

To meet the challenges of today’s competitive world market, U.S. managers must recognize that the growing scarcity of resources calls for societal and...

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To meet the challenges of today’s competitive world market, U.S. managers must recognize that the growing scarcity of resources calls for societal and organizational changes that are at odds with the entrenched corporate culture.

Learning fvom the Japanese: Management in a Resource-Scarce World

Yale M. Zussman

23

ecause Japanese firms them in the U.S. market better

quality,

are out-competing and elsewhere with

lower prices,

and more inno-

ing stream

of books

ject of Japanese

and articles

management.

the growon the sub-

U.S. business-

vative products, managers of many large U.S. firms have shown an increasing interest

men are reading that will provide

in the managerial practices of their Japanese competitors. Studies of Japanese firms pointed to a distinct advantage in managerial skills, which in turn generates the fascination with what William Ouchi recently called the “Japanese paradigm.” (See Organiza-

to restore the former world supremacy of U.S. business. Considerable detail about the “Japanese system” continues to appear, such as the article by Stephen Marsland and Michael Beer beginning on page 49 in this issue. But whether they follow the studied propositions of Professor Ouchi or the venerable pious platitudes of the sixteenth cen-

tional Dynamics, Spring 1981). When a demand develops, 68

one will rush to satisfy it-witness

some-

these in search of secrets a quick fix, enabling them

Organizational Dynamics, Winter 1983. @ 1983, Ah4ACOM Periodicals Division, American Management Associations. All rights reserved. 0090-2616/83/0016-0068/$02.00/O

tury

samurai

Musashi,

U.S.

managers

are

tion increased,

unlikely writings

to gain much benefit from these because they discuss the observable

group

outcome

of a process

Sea to Kyushu

that is probably

to Japan rather than the factors the process stemmed. Even

if it were

the details

of the Japanese

It does not follow,

managers

cannot

from which

would

however, some

benefit

that system.

can recognize

how and why the system

the way

they should systems sources

take

advantage as Japan

of the Japanese

of U.S.

veloped

system

discuss

re-

great wealth

the

and some of

on the

status

than material cannot

to gather

The value

within

objectives

within

the limita-

bases either fall apart

or undergo

profound

changes. Because all community had to work hard for the society it became

necessary

frequent disputes source distribution. the answer

value

members to survive,

to find a way to prevent over

such

hierarchical

because

issues

system

within

had a built-in

as re-

provided

that system

solution:

with higher status would -which

rather

or rewards.

pursue

be achieved

order

system

the group

people

tions of their resource

conflict ECONOMIC AND BEHAVIORAL FEATURES

to (1) feel

inability

accomplishments

in which

in short

and thus necessystem that de-

the Japanese their

Japanese managerial a three-century-long

system rehistorical

make the decisions

would have to be perceived

as equit-

vironment

of resource

developed

values

their homeland. The Japanese islands have few material resources that could be ex-

tion. These values are still serving in a world

ploited

supply

a high standard

for a large population. tainous,

making

farming

The land difficult,

of living is mounand

it

contains few mineral resources. Frequent earthquakes made the development of a physical infrastructure rather risky until comparatively recent times. One result of these factors: The Japanese turned to the sea early in their history to provide a dependable supplement for their diet. As the popula-

in a

system of justice through inequality. Thus, because they have always lived in an en-

process that the Japanese have used to try to overcome the scarcity of natural resources in

to provide

each

Individuals

able if the system was to last -resulting The present sults from

in

of resources

and (2) rely on success symbols

The

IN JAPANESE HISTORY

of ma-

remained

the scarcity

in the West.

Societies

the key features that make it work. From these details, I will identify the principles that U.S. managers will have to adopt if they are to regain their competitive position. Finally, I will offer some observations likelihood that they will do so.

despite

emphasized

is currently

I will

permitted

recognized

managerial

on

the Inland

in pursuit

was regarded as inevitable sarily tolerable. The value

that

using its resources. In this article, source

de-

it did and how it works,

as effectively

and across

and Shikoku

isolation,

successful

If U.S. managers

be able to implement

that

do that

from studying veloped

of Honshu

ethnic

northward

terial resources. relative

copying

system

derive

the island

Japanese

its territory

As long as the Japanese

possible,

little good. U.S.

unique

the principal

expanded

in which

is believed

scarcity,

appropriate

the Japanese to that situathem well

the material

resource

to be increasingly

limited.

Before the Portuguese arrived on its shore, Japan’s contacts with the outside world were restricted to China and Korea, both of which faced population/resource problems similar to Japan’s The first contact with Western culture came in the middle of the sixteenth century, about the same time that the Japanese completed the conquest of the northern island of Hokaido. These two

69

events

confronted

the Japanese

with

a ser-

ious problem. Contact with the West vealed the possibility of a higher standard living at precisely

the time that they ran out

of easily accessible tain the material that standard

territory

that might con-

resources

of living.

sible solutions

reof

needed

to attain

There are three pos-

to this problem,

and the Jap-

anese have tried each of them. Yale M. Zussman his doctoral

japanese Responses to Scarce Resources

is in the process of finishing

degree in political science at the

Massachusetts

Institute

of Technology.

and raised in the Boston

The first approach Japan tried was to close the country to foreign contact, thereby removing the evidence of higher living standards; people don’t demand things that they don’t know foreigners

exist.

were excluded

the exception Nagasaki.

This strategy,

avoid

Malthusian

quired

fairly

two centuries,

from

of a small

more than simply

tion.

For about

Japan,

trading however,

keeping

foreigners

difficulties,

stringent

In the precontact

means

dore Matthew

science from MIT. His

ance and engineering,

and he spent a summer

with NASA as an international

affairs

“understanding leadership. ”

re-

the French

mission civilatrice,

over popula-

“White

days,

this function

commitment

to

these slogans

have no counterparts

control,

no

abandoned

Perry opened

U.S.

this stratCommo-

Japan to foreign

penetration. Within a generation, Japan became imperialist -that is, it tried the second solution, which involved simply conquering territories from which material resources could be taken. The inhabitants of Japan’s colonial empire exhibited greater bitterness about their plight than did those of the Western empires, precisely because the Japanese never regarded their empire as anything more than a source of material resources for themselves. No matter how one may regard

Man’s

Burden,”

the British

control

after 1854 when

special-

out; to

it also

of population

The Japanese

Muster’s in political

corporate work experience has been in insur-

required

people can maintain adequate population control for very long-so this approach was doomed to failure. egy shortly

both of his previous degrees, a Bachelor’s and a

at

was performed by the samurai and the custom of hara-kiri; but in the absence of a peaceful

Born

he received

ist. The theme of his doctoral dissertation is

with

center

area,

As the demand conquered Manchuria,

“uplift

or even and

for resources

America’s

Christianize,” in Japan.

grew,

Japan

Korea and then expanded into where her behavior soon ran

afoul of the other imperialist powers. World War II made the imperialist option unviable, and that left the Japanese

with no choice but

the current

approach

mercantilist

that

has

worked

so well for them. To survive, Japan had to make optimum use of the one resource it had in abundance-namely, people. People would have to be employed in ways that would enable Japan to buy the material resources required to feed its population and its industry. While these ways were not immediately obvious in the wake of the war, it was obvious that Japanese industrial leaders would have to find them. Japan’s resource position thus gave the Japanese

an unambiguous

and unavoidable

criterion for identifying desirable socio-eco-

from an early age and do not develop expec-

nomic behavior. Any activity that increased exports was good because it added to Japan’s

tations that they will never be able to fulfill. The system also teaches self-discipline that

ability to import food, iron ore, oil, or any-

allows workers to accept their “place” in the

thing else it needed. To secure success in an economy

economic system. Top graduates have access to jobs

based on human resources, three features are

with the Ministry of International

necessary: First, society must concentrate its most efficient workers in the export sectors

Industry and the Bank of Japan, which are the top-ranking institutions

Trade and

in the economy

because they coordinate planning by the ma-

and exclude low-productivity workers from these sectors. Second, the payoff structure

jor industrial groups. Second-rung graduates

for these workers must clearly reward pro-

are recruited for the banks within each of the

ductive behavior

industrial

and punish unproductive

groups,

while

third-rung

grad-

behavior; there is no room for sentimentality when survival is on the line. Finally, those

tion business in these groups. High-school

selected to run the system must have the

graduates are channeled into factory work

ability to understand how the system works

for the export trade, while those with lesser

uates become the managers in the produc-

and must be willing to take the steps neces-

academic credentials

sary to keep it working, even if that requires

that

some personal sacrifice. As detailed in Mars-

agriculture. Because Japan must succeed by producing goods that are better and/or cheaper than those of its competitors, there really is no alternative to directing the most

land and Beer, the Japanese paradigm can be seen to incorporate all three of these features, though not without cost. The Japanese system channels the most productive workers into the export sector through a rather elaborate system of examinations. The testing discussed by Mars-

do only

are relegated to firms

domestic

business

and

to

capable workers into export industries and excluding the less capable workers. As a result, Japan’s export industries are highly productive, while its nonexport sectors are de-

land and Beer begins with admission to nursery school and continues through the university. Top jobs are available only to the

prived of quality workers and thus lag far

top graduates of the top universities. In turn,

creased borrowing ability of the larger firms,

a student must have done well at a favored high school to get into a top university. At-

which do the majority of Japan’s exporting, add to these firms’ ability to recruit the best

tendance at the right nursery school can thus

three-year-olds attend drill sessions so they will do well on the nursery school admission

people available. Smaller firms cannot compete for top people, which is exactly the way the Japanese have to have it. The productivity differences that result are hardly surprising. Without question, any country that

test, and eight-year-olds may commit harakiri after failing to be admitted to the right third-grade class. In addition to its utility for selection purposes, this system instills a strong sense of one’s worth to society. Those who will be considered less valuable know it

can channel its ‘best” workers into a particular industry will have an advantage in that industry. Japan has done this with its export industries, with the result that these firms have been able to achieve considerable success in international trade.

become a prerequisite for success in life. As a result, parents spend heavily to have their

behind in productivity.

The prestige and in-

73

How the System Adapts and Workers React The

pressure

does

not

end when

but its implications

The prospects

other job of comparable tially nil because form of resignation as an admission recruited

as

standing

separation,

are

outcasts

and burdens

on their

in the bank

that provides

reason to be

concerned

about that success. In addition to knowing

the conse-

quences rewards

for failure, workers also know the available for being cooperative and As discussed

in Marsland

once.

consists

a base wage and a bonus

social

that can be substantial

families

of both

had a good year.

be-

pends

in effect, betrayed the trust people have placed in them

on

worker’s than

the

pay structure

if the company

position

success

in the

on the particular

company

contribution

compulsory retirement at age fifty-five-except that individuals high in the pecking order to senior

positions

ers share a common

interest

on merit -so

merely

dethe

rather attrib-

in the firm’s suc-

process having

and

thus all work-

derive additional that they were

their jobs by a rigorous

with

has

The size of the bonus

company’s

cess. Workers from knowing

access

and

complicated

utable to any given employee;

have

fi-

success - yet another

by permitting them to have jobs on the front lines of Japan’s economic struggle. Then, too, Japanese workers face

may

em-

Beer, the rather

only

who lose their jobs become

most

keep their per-

employer’s

productive.

One can be

Workers

cause they have, that the Japanese

in the

or being fired, is viewed school-leaver

Because

of loyalty,

nancing for their employer, the return on their savings is dependent in part on their

are essen-

whether

away to cover their 25 years

retirement.

as an-act

for getting an-

of inadequacy. a

of

so

sonal accounts

rarely mentioned. Loss of a job in Japan can be a personal disaster as well as a serious social disgrace.

enough

or

ployees,

an indi-

vidual gets a job. The system of lifetime employment, discussed by Marsland and Beer, is fairly well known,

squirrel

satisfaction selected for that is based

the job is a re-

lower-ranking institutions. Those Japanese who reach age fifty-five have a life expec-

ward-and

tancy of over eighty; therefore, in the absence of any social security system, workers

important part in Japanese survival. The quality circle concept mentioned in most re-

cannot afford money-earning

views of the Japanese system works by encouraging workers to share their skills and

to lose any years that

of the 30 to 35 enable them to

from knowing

that they play an

“Japanese who reach age fifty-five have a life expectancy of over eighty; therefore, in /he absence of any social security system, workers cannot afford to lose any of the 30 to 3 5 72

money-eauning years

,

.

. ‘I

ideas with one another status/prestige in increasing

and to thereby

status and, not incidentally, higher

wages

know

value

its ability

its employees. employer

to pay

Workers

will provide

job

throughout their careers, thus guartheir human capitalthat is, their

to the company.

of the way, and

to

that their

training anteeing

derive

for having been instrumental the firm’s success, its size, its

they

workers

behavior

plated.

The

punishments to that

need when

to engage change

in ob-

is contem-

combination

of rewards

leads workers

to link their fate

of their

beneficial

out

need not fear change,

no longer

structive

With this worry

employers,

with

and

anese manufacturers because

consumers

imported

goods

Japanese

workers

in their home are conditioned that

compete

can

markets to resist

with

produce.

goods Pressing

Japan to open its markets to goods that compete with nonexport sector products threatens

the consensus

concentrate the export

drive Japanese business,

that allows Japan to

its most productive workers in sector. U.S. agriculture could agriculture

completely

but this would

out of

force the Japanese

to find work for these displaced

low-produc-

tivity

If other do-

workers

in other sectors.

mestic sectors were exposed

to foreign

com-

petition, low-productivity workers would force their way into the export sector-a

mutually

results.

The system’s third feature is the selection of managers who are sensitive to the need to make optimal use of employees.

move leading to lower productivity, lower quality, and lower exports. The Japanese would then have little choice but to return to

Managers are carefully screened to exclude the self-centered and callous and to identify

imperialism, of us.

those operate training

who

have

the attitudes

the system and repeated

philosophy

necessary

as enunciated

by top managers

and as practiced by one’s own superiors teaches the skills and methods that make the system

work.

Only

after many

years,

when

one has convinced one’s superiors that one has internalized the firm’s philosophy and has acquired the requisite skills, is an individual people.

given

the responsibility

Between

the

of managing

educational

gauntlet

and the psychological scrutiny, those chosen to be managers in Japan are characterized by both ability and positive attitudes toward workers. Managerial duties are not viewed as an opportunity to enrich oneself at the workers’ expense. One last comment about Japan should be made here. Export surpluses are a psychological as well as an economic necessity for the Japanese. As a result, tariff and other barriers add little protection for Jap-

for all

It should be pointed out, before to a discussion of the roots of U.S.

to

effectively. Lengthy exposure to the firm’s

with dire consequences

turning

economic problems, that the reason a given policy or practice works may have nothing whatever

to do with why it was adopted.

It

is doubtful that the Japanese ever consciously thought through their resource fate and its implications for structuring their economy and society to overcome

this problem.

It was

their good fortune to have happened onto a system that was well suited to their resource endowment first,

and the times.

the Japanese

have

By getting

had

there

the luxury

of

working into the system, a luxury that those who follow will not enjoy. To compete with Japan, other countries are going to have to think through the implications of the current global resource and trade situation. A plan will be necessary to make other countries more competitive, but these plans will require changes with vast distributional consequences. Accordingly, we should expect very

powerful

resistance

-not

just

to the

73

changes,

but to the concept

resistance

is already

AMERICA:

A

of planning.

This

observable.

point

out that the rapid

made in the United laissez-faire

By contrast

LAND OF PLENTY

with Japan,

of abundance. vast

forests

worlds

The first settlers teaming

with

most prolific

population

America game

American

spread into the worlds

resource

to the opportunity

afforded

by

mistakes

than to any inherent

abundance

to make

advantage

of

discovered

was also an era of incredible

beside

of which was passed on to people who lacked the power to resist. Of course, if one of the

the

As the

civilization

entrepreneurs

best farm land, comthat provided

water and transportation

for the agricultural

There

owes more

the philosophy.

plete with a river system surplus.

progress the era of

was a land

fishing grounds.

increased,

economic

States during

was never any serious

both

that people could live well in this land. For those so incompetent that they couldn’t suc-

was

sist has grown

as described

those

taken

he

or

she to re-

in the last cen-

in Lester

during

the cost

The ability

substantially

Zero Sum Society. Today, contemplate taking risks

progress

waste,

successful,

did not share the rewards. tury,

doubt

The era of rapid

Thurow’s

The

individuals comparable

who to

the nineteenth

century

ceed elsewhere, there was always California and the gold fields. A land with a rainbow

realize that they will have to share in the cost

from sea to shining

This is much

U.S. industry environment

and parcel

sea.

where

thus developed

efficiency

in an

in the use of

out the benefits

ily motivated

less appealing than

having

had to be only as efficient

human

tors, and these competitors

because

the tide of immi-

grants provided an effectively limitless supply of labor. Workers who would not do things

the way bosses

be replaced. With vantages, economic States

was basically

wanted

could

simply

all these resource adsuccess in the United guaranteed,

regardless

of the competence of U.S. managers. This is probably a good place

to

others

bear

the

costs while they lay claim to all the benefits. Because U.S. managers historically

material resources was not especially important. The same attitude pervaded the use of resources

if they succeed. to the pecuniar-

be especially

efficient,

as their competidid not have to

being wasteful

rarely

presented a problem. Doing things the way one wanted, even if there were better ways at hand,

was a privilege

managers

because

ing abundant

enjoyed

by U.S.

of their advantage

access

to material

in hav-

resources.

The “not invented here” syndrome tessentially U.S. phenomenon.

is a quin-

Two examples

this mat-

will bring

ter into sharp focus. The first is the introduction of the basic oxygen furnace into the steel industry. This process, also known as the Linz-Donawitz process, was developed just after World War II in Austria, a country that had a material resource position similar

74

to that of Japan. The process involves lower capital and operating costs, produces higher-quality steel, and is well suited for long runs and bulk producers. These features would lead one to believe that U.S. steel-

makers,

who

supplied

the worlds

larized

largest

steel consumers, the U.S. auto industry, would jump at the opportunity to adopt this

trol.

process.

ployed That

didn’t

Steel executives counterparts be

held

prove

realized

to be the case.

that they and their

at other U.S. steelmakers responsible

losses that would of the value

for

the

book

by Western

of old steel mills. As any busi-

U.S.

books

because

value

resulted

were

a “sunk

cisions

on incorrect

upshot

was that

process

very slowly,

firms

waiting

become

older

superfluous

the system

and invited

it to them.

They adopted

Recognizing

a

personal

works

because

several control

defeat

on the superior

plain

weaponry,

may

quality

were more

of

impressed

Deming

to ex-

it and spent

years working it into their qualitysystems so that, today, Japanese

goods are of top quality. Remember when “Made in Japan” meant that the product was poorly

made?

stock steel

that would

once the newer

was on line. Today,

have been based

felt the need to

whose

with

had their old capital the war.) Japanese

down

no other automaker

the

lifetimes

in the

to adopt

for their cars. They saw no need

it. The Japanese,

American

already

insistence

and trucks,

introduced

as much

closed

of tanks

for old mills to

(often

World

had

The

good thing, however, the Japanese introduced the process rather quickly. (This is not merely evidence of their often cited ad-

firms

who

data.

the end of their depreciable

vantage of having destroyed during

automakers,

de-

reach

as 80 years).

During

making

accounting

U.S.

the system adopt

them at their depreciated

in management’s

in

who was then em-

Electric.

been using it at government manufacture

the old mills

con-

War II, Deming convinced the War Department to use Shewhart’s technique for quality

ness student should be aware, the loss occurred whether it was recognized on the or not;

in quality

was first developed

1924 by a Dr. Shewhart,

vince

result from the write-down

cost,” but keeping

concept

control on materiel to be used in the war. When the war ended, Deming tried to con-

would

large

a statistical The technique

TOWARD A MORE COMPETITIVEAMERICA

process

of the potential

cost to a few dozen U.S. executives,

If U.S. managers are to compete with their foreign counterparts, they must understand

many of whom were rewarded handsomely for what is now clearly recognizable as a ma-

the fundamental changes that have occurred in their operational environment. Improve-

jor blunder,

ments in transportation

Japan holds a large share of the

U.S. steel market

and communication

while half of the U.S. in-

dustry’s plant lies idle and more than 100,000 workers have become unemployed. Steelcost advantages are one reason the Japanese auto makers

are doing the same thing to the

U.S. auto industry. The second

example

makes

the sit-

uation almost ridiculous. Japanese companies compete for the Deming Prize for quality control, a very prestigious award. The prize is named for William Edwards Deming,

an American

academic

who popu-

75

technology a global must

during

this century

economy

now

in which

compete

who have always

with

foreign

bargo,

of being

raw materials. quickly

the

motivated

em-

relatively

has reduced

the ad-

to sources

of most

close

Finished

and

products

cheaply.

freely

across

in

If one excludes

of a politically

transportation

vantage

managers

had to be more efficient

the use of real resources. possibility

have created U.S. managers

also flow

Technology

passes

our borders

at little

cost to those who acquire

it. Students

rarely

veloped

in other

workers,

don’t move readily

ployment, remaining

to learn skills de-

countries.

Only

people,

to places of em-

so the only resource advantage lies in the area of human resources

utilization.

It was inevitable

agers would global

go abroad

that U.S. man-

come out on the short end of a

competition

-although

the collapse

of trade in the 1920s and the destruction capital

facilities

in Europe

World War II disguised

of

and Japan during

this development

It is of great people

because

be made

the necessary

importance aware

that

nuclear

imperialism

and

invite

these, we must make some changes make

de-

If we don’t wish to do either

us more

economy.

competitive

These

changes,

that will

in the which

of

world

are fairly

substantial, include elimination of the entitlement culture and reestablishment of education

as the mission The

deeply many

rooted citizens

in

the

realize,

verse activities tax deductions, sidies,

of the public

entitlement

culture United

schools. is more

States

than

encompassing

such di-

as unemployment managerial perks,

benefits, farm sub-

and social promotion

in the schools.

These policies have permitted those in the United States to ignore the connection between tribute ciety

the resources

one can and does con-

to the society, to generate

the individuals community,

the ability

benefits,

of that so-

and the benefits

derive from it. In an isolated this disjunction

can be manage-

the

whether better living conditions would be attainable with different social arrangements for distribution of resources. In isolation, a

and social

society

as no one wishes

need only

arrive

to find out

at a consensus

on

changes cannot be made as long as the assumption of plenty remains. Liberal policies

distribution, and whatever pie is available will be divided in an acceptable manner.

emphasize distribution as though there was neither need for production nor limitation

Few societies that degree of isolation.

on available

trade, there is an unbreakable

resources.

Those who are more

conservative, especially those who espouse Reaganomics, wish to reestablish the days when resource advantages allowed managers to do as they pleased. Neither stance will help us out of our economic plight. The

76

adopt

struction.

able as long

of this change

economic

of liv-

severe conOr we can

un-

til the 1960s. U.S.

in our standard

ing and face up to the inevitable flict over distributional issues.

from

abroad flock to U.S. colleges to acquire skills developed in the United States, while U.S. students

quiesce to a reduction

world at large and we, as a nation, now face the same basic choices that the Japanese have faced for the last three centuries. We can choose autarky - that is, national economic self-sufficiency and independence -and ac-

today can maintain In a world of active connection

be-

tween distributional issues and total output because the option to bring resources in from the outside requires that there be resources on the inside that outsiders will want in exchange. Questions of internal justice are important only to those on the inside; outsiders do not care how the insiders divide their pie. Distributional schemes that result in reducing the real resources available for use in the export trade are thus detrimental to society’s

well-being.

Trade

benefits

the society

as a

whole, but some sectors will be hurt. Part of the benefits of trade must be used to compensate

those

Meanwhile, velopment

who

have

attention

been

hurt

by it.

must be paid to the de-

of resources

that will put the na-

these problems race

or

should

are found

socio-economic be looking

these obstacles possession

rather

action

than deciding

enact

destroy

resource United

position-a States

trade.

enhance

situation

at a growing

that puts the disadvantage

No one, not even Americans,

compelled better

to buy United

products

our real in

can be

States goods when

are available

at a lower cost

the identification value,

distributional possible

value.

not for Once we have real

their role in determining

outcomes,

we will find it im-

to run our economy

step is to stop houses

of benefits,

of resource

from

Af-

only when ap-

the idea that real resources apart

that the

important.

is reasonable

plied to the distribution

that would

we

to get around

is not

tion in a better position to compete. The entitlement culture makes it very difficult to policies

with

for ways

of skills

firmative

to correlate background,

using

at all. The first

the schools

as ware-

for the young.

from elsewhere. The

educational

problem

is the

most serious of the entitlement issues because the schools do the developmental

THREE NEEDED CHANGES

work

For business, three changes will be necessary to restore the United States’s competitive po-

for our human

foundation technological nents

resources.

of the problem

skills are actually schools that

resources

for the creation

will

Two major -not

learned

from helping

caring

compo-

sition

whether

respond

and preventing

the young

be conducive

and lay the

of new skills and

the

to productivity-

world marketplace. Identifying the reasons that skills are not learned should be of interest only for the purpose of figuring out other ways to teach skills, not for finding ex-

“The

the absence

of skills.

If

the

world.

to the three

foundation

form values

destroy the best opportunity we and our people have to become competitive in the

cuses that condone

in

These features

of the Japanese

changes that

cor-

are the

system.

First, firms must be more concerned about

whom

quate

recruitment

they hire at all levels. and selection

Inade-

procedures,

employee dissatisfaction, employee-manager conflict, low productivity, and short employee tenure these problems

all go together. Correcting involves four steps. First,

firms must identify what they need to make themselves effective competitors instead of

educafional problem is the most serious

of fhe entitlenzent issues

,

,

,

The fivst

step is to stop using the schools as warehouses for the young. If

77

just

looking

for

the kind

of subordinates

with whom bosses feel comfortable. they must make they are getting is always

cheaper

the first

place

later,

provided

parties.

Third,

honest which

the effort to find out what when

they hire someone.

It

to make the right choice in than

to repair

one includes they

the damage

all costs to all

will need

to be more

about the true nature of the jobs for they are hiring. Glamorous descrip-

tions of jobs that turn out to be highly mented

drudge

disguise

the need

about

work

cause

regi-

suspicion

to think

more

and

seriously

the way the firm’s work is organized.

Finally,

firms should

view employee

not as a cost to be avoided but as an investment and

ployees.

Second,

employee

ing workers

if at all possible,

in both product

satisfaction-they

cept responsibility

training

must

for training

throughout

quality ac-

and retrain-

their careers.

These

rewards

are the easiest to

Accordingly, managers. learned to think about wards.

There

material dance.

managers other kinds

is, however,

rewards,

even

never of re-

a problem

with

in a state of abun-

As they increase

ginal value of further

has alfor U.S.

in quantity,

increases

the mar-

declines,

with

the result that the monetary cost of providing these rewards rises much faster than the value of the human

resources

and this is an age of growing

they buy -

material

scar-

city. Heavy reliance on monetary rewards, particularly for top executives, gives the impression

that the purpose

to make money managers.

of U.S. business

not for stockholders,

The example

is

but for

being set is not lost

on workers; the result is that these factors are weakening the U.S. economic position in

measures .would increase satisfaction and reduce conflict. Employees would then plan on

the world.

staying

longer because

tions will have to begin giving other kinds of

dicated

that it has objectives

the firm will have inthey can share,

as opposed to simply trying to exploit them. Longer tenure reduces the cost of hiring and training savings

(as well as that

of discharge!)

that frees up resources

-a

to be spent on

To solve

this problem,

organiza-

rewards to workers and executives These will include rewards growing affiliation,

job satisfaction,

alike. out of

and the uplifting

value of contributing to the well-being of U.S. society. Use of these rewards is foreign

current employees, research, product development, or even dividends. There, is no rea-

to

son to assume that all firms will need people having the same qualities for similar jobs, so

ward packages-but they are a key feature to any solution to our economic mess.

I expect

there is room for improvement order system.

on

Japan’s pecking different

78

Monetary

dispense, and material abundance ways made them relatively cheap

Second, firms should learn to utilize kinds of rewards for their em-

most

U.S.

managers,

doubt be appalled

Regardless

who

would

no

to receive them in their re-

of whether

they

adopt

such new rewards, firms must stop using one kind of reward. In most U.S. firms, the right to make decisions that affect other people is used and viewed as one of the rewards bestowed on managers. Because decision making is the power to determine who pays what costs and who reaps what benefits, simply having decision-making authority as a reward is cause for concern, regardless of how it is used. Few people will miss the obvious implication that the real reward is the ability

to choose what rewards

one wants

and then

have the ability to compel other people to bear the cost of providing them. The fundamental

role of unions

prevent

managers

making

power in precisely

competence

at other

fers no reason the ability porate

has always

to

this way. Because

technical

to believe

will conclude

bosses,

distributional

discussed

above,

ismost

that decision-making for fealty

to senior

are drawn

in

cannot

succeed

or their

selection

to emphasize

ute to flexibility

change and

is to

promotion

qualities

that contrib-

and a long-term

perspective.

Current practice depends on a self-promotional ability that gives positive value to (1) for monetary

rewards

and (2) per-

viding

for

Well-being

straction. economic leaders

society’s depends

the qualities

view

osity,

lack

tudes

toward

of specialization,

nonmonetary ligence and

people, rewards. creativity

and

positive preference

there

to

in particular

they

ab-

they must focus first

other

be unable Managers business

norant

rational

then

on

they should

line of work to succeed

longer in the developing that

only

this set of priorities,

some

will

and

will be. If they canbecause for much

world economic who

can

is not independent

approaches

en-

accept

the will

of human resources, product safety, the environment, and related issues. They will find that labor problems will be readily resolved.

for

to doing

ways.

on profits,

atti-

innovation

is no commitment

things

than

adopt

The need for intelshould be fairly

contributes

well-being.

curi-

obvious. Curiosity leads to the experimentation essential to innovation. Lack of specialso

rather

the job done

not observe

and

creativity,

material

what their own rewards

vironment.

intelligence,

Business

on the state of the na-

in any context,

on getting

easiest to understand

include

if they

States.

Executives are the leaders in the sector and need to realize that, like

agers find such people

sought

themselves,

which are little more than an accounting

consider

Instead,

for

recognize

is not an independent entity, but merely the sector of society that is entrusted with pro-

sonality traits that are dysfunctional for the effective utilization of human resources -and this is so because current mancontrol.

in U.S.

stockholders

don’t succeed for the United

tion’s real resources

managerial

particular

must

they

third necessary

The

because

managers

that

this manner.

alization

Finally, their

The lines for conflict

should

lacking

has

is a reward

preference

has been

that will incor-

managers.

criteria

that

business.

that someone

authority

alter

perspective

of-

between

sues and total output

monetary rewards for employees. Such people will automatically exhibit the long-range

functions

to make decisions

the linkage

workers

been

from using their decision-

cerned with feathering their own nests and more open to understanding the use of non-

to the utilization

It is only because business of-or, more likely, unwilling

is igto ac-

cept - its actual place in society that regulation is needed. People who share one’s values can be trusted

to think out the proper

course

It fos-

ters a systemic approach to problems and opportunities instead of defining situations in accordance with parochial interests. Managers who think positively about people will seek ways to employ them effectively and be responsive to their concerns. Managers who value nonmonetary rewards will be less con-

79

of action

in any given circumstance.

People

declining

role in the world

who cannot or will not accept those values must be given detailed instructions on what

unmistakably

they must,

disappointing.

may,

or may not do. If business

economic

changes,

challenges

ciety,

to government

that must

change-and

of the future,

quences

of its errors,

tion in this country. The prospects

sought

to return

tal change,

for such fundamen-

a paradigm

change,

are fairly

slim if we are to judge from history. the disaster

of World

War

It took

II and its after-

math to sufficiently

discredit

anese elite to allow

the current

take hold.

cycles in America

spond

Business

not only

the prewar approach

to the introduction

technologies, but also to changes iness elite. Before this century, failed

to make

necessary

changes

ucts, technologies, or managerial were soon forced out of business, real resources

to be better

elite. The duration

Japto

correof new

in the busfirms that

Neither

has

culties will be found problems

aren’t

in the past, but today’s

yet serious

enough

to dis-

credit those who stand in the way of change. It would

be unprecedented

for an elite to in-

troduce reforms that render itself obsolete yet unless the Japanese, or other competitors, teach us a good lesson,

that is the best

we have to hope for.

in prod-

Depression SELECTED BIBLIOGRAPHY

The reference

for Lester Thurow’s

Zero Sum Society (Basic Books, lyzing Global

Interdependence

day are dominated

Choucri

by firms that are heavily

and too big to be allowed their

to

managers

for the bankruptcy

of their skills. The changes needed today call for the adoption of concepts contrary to cherished assumptions and attitudes at odds with an entrenched corporate culture. Those with the greatest power to effect change are

80

they have

techniques freeing up

of the World War of state-of-the-art

Size protects

it from the conse-

to the past.

national Studies, Document setts Institute of Technology,

from facing the penalties

the

has turned

and together

managerial techniques by government fiat. It is probably no coincidence that the sectors of our economy in the greatest difficulty to-

go bankrupt.

embracing

tried to learn from the experiences of foreign lands. No end to our current economic diffi-

may be attributable to relief efforts’ preventing the rise of a new elite, while the rapid re-

bureaucratized

has been

used by a new

of the Great

covery at the beginning may reflect the infusion

of

business

to protect

until it does, there will be a need for regula-

point

for fundamental

but the response

Instead

values are at odds with those of the wider soit is business

economy

to the need

precisely the ones with the greatest personal interest in preventing it. Privileged incumbents rarely give way voluntarily. The nearly continuous recession since the Arab oil embargo and America’s

Alker, tween

Jr.,

Lincoln

describe

tries, including

(Center

for Inter-

I’. Bloomfield,

and

Nazli

interactions

States and a number

Japan, in economic,

tural, and military

is The

C/74-27, MassachuX974), Hayward I’.

the interlocking

the United

book

1980). In “Ana-

affairs. Another

be-

of coun-

political,

cul-

item of inter-

est is Eric von Hippel’s ‘Users as Innovators”

in the

January 1978 issue of Technology Review, which is a short report on the problem of specialists and innovation. Current management

and notable

include

(Addison-Wesley,

books

on Japanese Theory Z

W. G. Ouchi’s

1981), R. Pascale

and A. G.

Athos’s The Art of Japanese Management & Schuster,

(Simon

Inc. 1981), as well as the sources men-

tioned in the selected bibliography accompanying the article by Marsland and Beer in this issue.