Typical Japanese Features of Top Management in "Revised" Big Business Since World War II
To eager entrepreneurs, the remarkable recovery and growth of the postwar Japanese economy seemed to supply unlimited business opportunities; it did, in fact, produce a considerable number of growth enterprises. But for at least ten years after the war—the recovery period—virtually no small enterprises grew rapidly enough to approach the scale of the big businesses. Even Sony and Honda, outstanding postwar growth enterprises, were listed on the Tokyo Stock Exchange only in 1958 and 1957 respectively. For that reason, until Japan's postwar economic growth began to accelerate around 1955, Japanese big businesses were virtually all continuations of prewar big businesses. Since the capital structure and executive personnel of such businesses had been completely swept away by the Occupation's democratization measures, it might be more accurate to call them "revised" prewar big businesses. The six points discussed below summarize the characteristics of the top-management organization and decision-making system in these big businesses.
1. With the collapse of the power of large stockholders and the return of company control to individual company directors, there was also a great change from the prewar and wartime power structure in Japanese society. The new company directors reflected the more diversified power structure created in the process of Japanese economic recovery and growth. It was a situation similar to the one in a country that is newly independent after a long period of colonial control, where leaders suddenly become aware that they are in a complicated economic and political system.
2. Because the board of directors became more powerful and represented more diverse interests, each director had to assume a role as an interest group regulator, who balanced a number of influences. As the company's controlling group, the board of directors required the teamwork of personnel with diverse specialties, experiences, abilities, and attributes to deal with various interests and cope with crises. This team was easier to create and maintain because most directors were colleagues holding important positions within the company itself. But some directors lacked the capacity for fulfilling the new responsibilities of aggregating interests and working together as part of a team.
3. Since the large majority of the directors in big businesses had advanced all at once from middle-management to top-management positions when their superiors were suddenly forced to retire en masse, they were generally younger and possessed more than average managerial ability compared with the former big business leaders. Prewar directors of big business, as typified by the banto[*] (head clerks) of the zaibatsu , had had to
display managerial abilities in representing the interests of the few large stockholders who were in reality the owners of the enterprise. Rewarded with money and advancement, even those head clerks who had originally been mere salarymen gradually came to resemble the owners in outlook. After the war the prototype of the manager in Japanese big business changed from the head clerk to what can be called the professional manager of the postwar era.
4. Despite the provisions of the Commercial Law, decision-making in the board of directors was rarely done on a majority-rule basis. Generally, the board of directors followed the traditional Japanese decision-making procedure of "complete consensus" because, despite the drawbacks associated with this decision-making procedure, it had the advantage of preserving solidarity among team members. Further, it provided a principle for assigning responsibility for the effects of decisions separately from the decision-making system.
5. We might ask whether it was necessary for the board of directors to devote excessive time to laborious consultation in order to achieve complete consensus. This was not and is not the case, because of the parallel and continuing existence of the following practices, which are peculiar features of Japanese organizational decision-making.
a. Ringi. Ringi is a procedure for conducting administrative operations that has been in wide practice from before World War II in large Japanese organizations. In particular, in implementing some plan for which the cooperation of a number of divisions is necessary, or whose results will influence many divisions, a ringi is produced in almost every case. After being created by the responsible division personnel (a kiansha , or plan initiator, generally a section chief), the ringi is approved by each division and climbs the ranks hierarchically from the plan initiators through every position of the upper-occupational structure: division chief, managing director, vice-president, and finally the president.
At this point, since the ringi has already received the approval of every appropriate party, if the president affixes his seal, the ringi is established and its contents are translated into action. (Approval, including that of the president, always takes the form of affixing the seal. For that reason, it is not unusual for the ringi to have more than twenty seals affixed to it by the time it reaches the president's desk.) Since the ringi arrives at the president's desk by the process of passing through many hands, it is safe to say that the president's final approval is a mere formality in all but the most unusual cases.
Ringi is used daily in large Japanese organizations for everything from disposal of trivial matters to decisions on fairly important issues. Even top-level matters are sometimes handled by the ringi system when it was desirable to have formal consensus among all responsible parties, including the middle management in the relevant divisions. Since postwar directors
in Japanese big businesses almost all hold important positions as directors within the company hierarchy, their decision-making function is in great part automatically taken care of by the ringi .
b. Nemawashi. Ringi can be called an established system in the sense that it has certain fixed rules and forms despite variations from company to company. The same cannot be said of nemawashi , which is simply a modal organizational activity pattern. However, nemawashi often has a more important role than ringi in the organizational decision-making process.
We cannot say that nemawashi —a process of prior informal negotiation and persuasion among concerned parties used in decision-making and problem-solving—is unique to Japan. But when the Japanese, historically a homogeneous people, construct lifetime employment groups, the relative weight of such informal activities is far greater than in foreign countries. For example, when a ringi initiator wants to establish a certain ringi , he spares no effort in the prior consultation (nemawashi ) of major concerned parties, especially those whose consent is judged difficult to obtain. Frequently, if the effort in consultation before action is successful, it is tantamount to establishing the ringi . In fact, considering the activities related to the decision-making process, the essential decision is often made by the nemawashi process and the ringi is the formal procedure of writing and detailing the decision.
c. Ato ringi . The custom of consultation before action is one factor making complete consensus decisions possible without excessive expenditure of time. For essential matters on which director consensus seems unlikely, it is usual to have meticulous preliminary consultation among concerned parties. For that reason, long discussion during the formal board of directors meeting itself is rarely necessary to reach a complete consensus.
Not every essential item of business is handled by the ringi approval system. There are instances in which the ringi is sought as a formality in order to authorize a consensus previously reached by all attendants at a board of directors meeting. In such a case, the ringi is clearly a post-facto recognition of the actual decision. Such a ringi is commonly called an ato ringi (after-the-fact ringi ). In such cases, too, the ringi is no more than a formal treatment.
6. Through creation and revision of a large group of laws, including the revision of the Commercial Law, the legal foundations were laid for the group of professional managers to run their companies democratically. There was no reason, however, to expect various Japanese management practices to collapse quickly after the war. However, from the mid-1950s American management formulas and techniques were introduced one after another into almost every sphere of business administration—a phenomenon then known as the "management boom." Under the influence of this boom, most Japanese management practices were
considered premodern and became the object of conscious reform. Naturally, the influence of American business administration on top management and the decision-making system also became noteworthy from 1955 on. The establishment of the executive committee and the strengthening of the general staff division in Japanese companies are typical manifestations of this trend.