The MNC’s guide to understanding Japan - Part 3

23 Aug 2018

The MNC’s guide to understanding Japan - Part 3

In the final part of our three-part focus on Japan, we turn to the question of successful MNC leadership in a world where disruption is ever present. What exactly is the right mix of Japanese and non-Japanese managers? And what are the key qualities to succeed in a business culture that is so unique?

We asked Japan-based executives from 20 multinational companies in Japan about the leadership strategies that worked for them, and the pitfalls to be avoided.

The first area of agreement was that to run the business of an MNC in Japan successfully, a leader must be able to understand both worlds. Many companies hire a mixed team of Japanese and non-Japanese managers. They look for leaders who are either “westernised” Japanese or locally-adapted Westerners. Either way, the leader must be able to interact effectively with global and regional leadership, as well as with the domestic Japanese organisation. 

Key qualities

Adaptability, agility, critical thinking skills, self-initiation and self-awareness are necessary for effective leadership. As one FinTech executive pointed out, “transformative change requires the full support of the firm’s senior global executive team and a leader close to the local market who also really understands the company.”

Obviously, for expatriates, Japanese language ability is a plus, as is sufficient time in the country. An executive at a professional services firm explained that "gaishi" (foreign companies in Japan) tend to rotate presidents from their headquarters for three-year assignments. In his opinion, this is too short for the Japanese market and executives should stay for at least five years.

“It’s difficult for expats who only spend a few years in Japan to build a cohesive local team. Local workers tend to reject an expat leader who is only focused on short-term successes and building their own legacy.”

If an inspiring and innovative leader comes to Japan with no cultural awareness or local insight, his or her success will be limited.

A senior professional services executive noted that there is a long, but steady cycle of “pendulum swings” in MNC preference for local vs Western country heads. In his judgment, either can work. In either case, there is a critical need for a “balance of a global vs local perspective”.

MNC successes and failures

There’s no question that succeeding in Japan takes an investment of time and resources and a high level of cultural awareness and sensitivity. One banking executive noted, “No successful global strategy can be implemented here without serious thought about how to adapt it to the local market.”

“It is very important to get someone with local expertise involved from the beginning in formulating the global strategy at HQ.”

Other executives stressed the importance of a long-term strategy that focuses on building partnerships, creating mutually beneficial relationships, and gaining trust.

In the same vein, it was pointed out that the most successful MNCs in Japan have ensured their top executives in-country are highly adept at “all levels of internal networking both globally and locally” This is in order to best manage a “healthy tension among multiple points of view” ranging from global headquarters to local, customer-facing, line employees.

Still, others recommended that MNCs invest in market research to better understand the unique needs of Japanese customers. A FinTech executive advised that this kind of research is “very hard to do from offshore, as it is a local, iterative process”, and the absence of thorough research and subsequent understanding will lead to failure.

While adapting to the local culture and market is necessary for success, two executives advised that this should never mean compromising a firm’s values for the sake of achieving market success in Japan. An executive for a luxury automobile distributor noted, “MNCs that have thrived in Japan have been willing to adapt, but without compromising on their core values. Those that have struggled have either been unwilling or unable to adapt, or they might have compromised too much.”

Hiring well

So where should MNCs in Japan go from here? How can they best adapt to the changing technological, demographic and geopolitical landscape, while remaining relevant to Japanese customers?

A professional services executive shared that his hiring strategy in Japan is to look for someone with the right character traits and then train them in the needed skills. He notes that some MNCs make the mistake of “hiring for English language capability, rather than real leadership or business acumen.” While the leader needn’t be overly Westernised, just being able to speak English is not enough. An international mindset and logical problem-solving skills, according to one tech executive, are of the utmost importance.

With these qualities in mind, one of the executives stated that one of the evolving challenges centres around the “huge competition for the right talent. All MNCs are looking for the same type of people”.

Another professional services executive added that a diverse workforce is becoming increasingly important: “We are transforming our business by bringing a wider variety of people into the organisation to encourage more lateral thinking and drive a mindset change.”

Critical balance

Leadership in any market is about inspiring people to work towards shared goals, but in Japan, in particular, cultural balance and awareness are critical. A leader who can build meaningful relationships with the local team, while also working well with the global senior leadership team is very valuable.

This special set of requirements demands a transformative leader who can think differently and communicate across borders and across cultures.

For Japanese executives, having experience of tackling multi-national business challenges, exposure to global strategy and a growth mindset is an asset.

“We hire Japanese executives with the message that we are not a Japanese company, we are an American company operating with Japanese expertise.”

Ultimately, MNCs need to have patience, realistic expectations and the right in-country leadership team to succeed in this important and unique market.

Read our white paper ‘The Challenge for Multinationals in Japan':

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To read the previous parts of our focus on Japan, click below: