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Companies that Deserve to be Valued the Highest in Japan.- PREX Island

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Companies that Deserve to be Valued the Highest in Japan.

Koji Sakamoto Professor of the Hosei Graduate School

Professor of the Hosei Graduate School of Regional Policy Design
President of the Association for Business Administration that Values People
Koji Sakamoto

On May 26, Professor Sakamoto of Hosei University, famous for authoring Companies that Deserve to be Valued the Highest in Japan, was invited to give a speech titled Important Indices for the Management of Small and medium-sized enterprises and Successful Examples of Development Abroad as a part of JICA’s Collaboration Desk Seminars at Osaka International House Foundation. The below is a part of this speech.

Business Management with “benefit for all five sides,” which is not influenced by currency exchange rate.

I was interviewed by The Nikkei newspaper yesterday. They asked how the current movement of foreign exchange influences small and medium-sized enterprises. I was asked the same thing twenty years ago, and my answer was the same: “The role of corporations is to protect the lives and daily living of people. The mission of corporate leaders is to manage their businesses so that they are not influenced by changes in currency rates, which even God would not be able to predict.” My belief is that companies must operate above the economic climate.

Recently, I often hear that companies consider going overseas because they don’t sell well in Japan. How can things that don’t sell domestically succeed abroad? Throughout Japan, there are companies that bring happiness to employees, their families, and those related to them, and at the same time experience growth without being swayed by the currency rate at all. Let me give you a negative example of a subcontractor company of auto parts with 500 employees in Kurobe of Toyama Prefecture. The profit rate of their customer, a car manufacturer, is 5%, whereas the company’s profit rate is 2%. I asked the company how they could continue such a business relationship with the manufacturer. Were they not upset about this arrangement? I told them that this situation would not make their employees and families happy.

The famous Ohmi* merchants would value the idea of sanpo yoshi, or “benefit for all three sides” – vendor, customer, and society. I say it has to be goho yoshi, or “benefit for all five sides” – first, employees and their families; second, suppliers, outsourced companies, and subcontractors; third, present and future customers; fourth, socially vulnerable people; and fifth, stockholders. These are not just listed in any order – they are in order of degree of importance.

What is most valuable for a company is its employees and their families.

What is the most important for a company is its employees and their families. The kind of employees who can make moving presentations in front of customers must study twice or three times as hard as other employees. And it is their family members who support that. There is no future for companies that do not value employees and their families. Even if corporate performance improves because of layoffs, this will only be temporary. Who will be motivated to improve a company like that? That’s why you must avoid layoffs and maintain employment even if this means a pay cut for all employees. If a business is managed properly, results will automatically follow. I can say this because I have witnessed hundreds of companies that have conducted proper business management and have been growing steadily for decades.

The second most important is suppliers, outsourced companies, and subcontractors.

The second most valuable people are suppliers, outsourced companies, and subcontractors. Not many companies in Japan understand the importance of subcontractors. The notion of subcontracting work that you don’t want to do yourself, or using subcontractors as an “adjustment valve” to open and shut freely to adapt to the economy, is rampant in this country. And this is dangerous. Each year, 100,000 new companies are born while 300,000 collapse. This means as many as 200,000 companies disappear each year. There are 4,200,000 companies in Japan, so at the current rate, in 21 years there won’t be any companies left. Even companies with a surplus are collapsing, reducing available employment opportunities.

These numbers show that companies should take good care of and give consideration to suppliers, subcontractors and their employees in addition to their own employees. Subcontractors should not be considered a cost, but should be paid like the company’s own employees. Companies that can do this will be loved. And a company that is loved will continue existing even if the profit margin decreases.

Business Management with “benefit for all five sides” is not a uniquely Japanese management style. It is simply proper management. There are also good examples of management in Vietnam. This is because everyone, regardless of the country, wants to be happy. Managers from China are also my students, and they tell me that there’s nothing to learn from large corporations in Japan anymore. Instead, they want to observe small and medium-sized enterprises like the ones mentioned in my book, Companies that Deserve to be Valued the Highest in Japan.

Let me share with you examples of overseas success stories.

The world is becoming borderless, and I understand many companies are forced to be globalized. In my opinion, Japanese companies should aim appeal to people around the world, but do so while remaining in Japan to avoid accelerating the rate of deindustrialization. They should strive to be companies that the people of the world want to work for. Some companies aim for development abroad because they don’t do well in Japan, but if a company isn’t doing well in Japan, I find it hard to believe it can be successful in a foreign country where various things such as laws, systems, and language are different. Some companies go abroad because of cheaper labor costs, but success built upon the sacrifice of other people is not true success. I cannot appreciate this kind of globalization. I would like Japanese companies to stay in Japan and attract people around the world who wish to work for them.

Common indices of focused companies Focused companies…

  1. do not lay off people.
  2. do not allow long stretches of overtime.
  3. do not allow unpaid overtime.
  4. do not let employees get badly injured.
  5. do not produce clinically depressed employees.
  6. do not assign quotas.
  7. do not allow excessive competition between employees.
  8. make corporate information publically available.
  9. pay proper salaries.
  10. conduct employee satisfaction surveys every year.
  11. provide employees with sufficient opportunities for education.
  12. have their own welfare and benefit plans.
  13. take good care of suppliers.
  14. take good care of customers.
  15. take good care of handicapped people.
  16. take good care of the elderly.
  17. gain proper profits.
  18. have small-sized headquarters.
  19. are not easily swayed by the economy or trends.
  20. do not seek rapid growth.
  21. have proprietary technology and/or products.
  22. focus on the development of new products.
  23. have an equity ratio of at least 50%.
  24. celebrate memorial days for employees and family members.
  25. do not join in price competition.
  26. have everyone participate in business management.
  27. Other

From Professor Sakamoto to PREX

I would like organizations like JICA and PREX to develop and conduct many tours, both in Japan and abroad, for people to observe companies with excellent management practices like the ones I introduced today.

  • Date : June 10, 2016
  • Name : Mr.Koji Sakamoto
  • job name : Professor