Japanese or expat company President?

Japanese or expat company President?

In the previous section discussing recruiting a representative director President for your company’s Japanese subsidiary, we noted that the right person could make business in Japan generate 30% or more of your company’s global profits and that it’s a key officer post in your company’s global corporate structure. Business skill, marketing and sales drive, are essential; so of course is the ability to communicate in English, with the head-office executives.

Before that, we noted that probably just 600 of the 11,500 or so near-native English-speaking Japanese in Tokyo’s workforce have the executive skills your Japanese company needs, which leaves the other 10,900, one of whom could seriously damage your company’s business if it hires him or her, to reject. We also noted that there are about 3,200 foreign company subsidiaries in Tokyo, all of which need to hire good bilingual Japanese executives. So there are four times as many Japanese subsidiaries of foreign companies searching for bilingual Japanese executives, as there are near-native bilingual Japanese executives to hire. If your company’s salary budget for the President post is high, let’s say JPY30,000,000 and up, then attracting one of Japan’s top bilingual Japanese executives is within reach, but for companies on more limited budgets, how can you find the right person?

The first challenge is to avoid the 10,900 ‘other’ near-native Japanese we noted above. It’s likely that some among them cause a problem I have seen often in the past two decades; foreign companies that go through the following painful ‘hire and fire’ cycle for the Japanese company President:

  1. Initially a head-office executive relocates to Tokyo to manage the Japanese company. All goes well except: i) the relocation costs are high, because even after the steady decline in rental values a Western-style family apartment in central Tokyo costs $5,000 – $15,000 per month (at the executive end of the scale), ii) tuition fees at English-speaking international schools are $20,000/year and up, iii) although costs are generally under control, revenues are not growing as desired.
  2. After 1 – 2 years, the CEO decides “We need our Japanese subsidiary to feel more like domestic Japanese companies………that’s how we increase sales!”. The company then replaces the relocated head-office executive with a locally recruited Japanese executive, who demands a very high guaranteed salary “……because of the risk involved working with a foreign company……” and who then proceeds to recruit many of his former employees, who will also be on high guaranteed salaries, to create his idea of a Japanese organization.
  3. After another 1 – 2 years, nobody at the head-office understands what is happening at the Japanese subsidiary, Japanese business expenses have rocketed (especially entertainment expenses), profits “……will still take a couple of years to materialize because this is Japan you know……” (read those myths of the Japanese market to find out more about that one!) and the CEO realizes that “What we really need is a Japanese subsidiary that interacts internally with the same sense of urgency that we have over here, but presents a Japanese image to the local market!”. One of the head-office executives promptly relocates to Japan to straighten things out.

In my experience, the biggest problems in Japanese subsidiary management tend to occur because of cultural mismatches; there are many Japanese executives who are excellent managers of a purely domestic Japanese company, but find it very difficult to interface between the quarterly focused results pressure of a US or European parent (especially a parent in the run-up to an IPO) and the half-annual cycles of Japanese corporate customers. A further cultural problem can arise because your company’s Japanese customers will be far less forgiving of mistakes made by a Japanese executive than of an expatriate, which might make a Japanese executive more risk averse and less likely to aggressively drive results than would an expatriate executive.

If you are fortunate, your Tokyo recruiting agency or executive search firm or other head hunter will introduce a Japanese executive who has a strong track record with companies of your size in your industry and who has spent several years doing business at an executive level. Unfortunately, there are many bilingual Japanese executives who, were it not for their English ability (remember the ‘other 10,350’?), would never be considered for any senior management, let alone executive, position. Among others, I knew a Japanese executive who used his perfect English to convince a US company’s senior executives that he would grow their already profitable Japanese company to a $50,000,000 per year business within a year. During that year the key subsidiary salespeople resigned, the subsidiary’s salary costs soared, and its revenues dived to the floor. Then the Japanese executive resigned with no notice to take up a ‘more interesting opportunity’ with another US company!

Maybe these near-native English-speaking, but business-acumen lacking Japanese find it easy to enter the foreign company subsidiary executive ranks because it’s easy for some foreign executive interviewers to confuse language ability with business and commercial ability. Consider though that within the ‘other 10,900’ bilingual Japanese, are professional interpreters, executive assistants, accountants, attorneys, etc.; would you recruit one of them as your company’s Japanese subsidiary President just because they speak fluent English? It might also be because of a common belief that: “This is Japan; only a fluent English-speaking Japanese can possibly understand the Japanese market, Japanese business culture and etiquette etc. and so you must recruit a bilingual Japanese as your subsidiary President, whatever the cost, right?” Well, not necessarily. Which brings us to possibly the most under-utilized (though increasingly better utilized) source of good candidates to manage your Japanese subsidiary company; foreign executives with several years experience doing business in Japan.

Your company needs a subsidiary President who is business-savvy, able to appreciate the uniqueness of the Japanese culture and how the Japanese think, but just as important, understands your industry, your culture, your way of driving business forward and getting results, your business goals, your priorities, and how you think. If not, he or she will need so much constant management and guidance that you might as well move to Japan and do the job yourself, regardless of your lack of Japanese language skill. As noted in the previous section, such Japanese executives exist but are in very short supply and very expensive. There are less fluent executives with excellent business skill but with whom communication might be a challenge. A foreign executive already living in Japan is an excellent alternative. A benefit of hiring such people is they have already acclimatized to the Japanese culture and are often bilingual. Such foreigners often come to Japan as expatriates with large foreign companies but stay on and made a lifelong commitment to the country. Although relatively few, the cost of recruiting such executives will be far less than the cost of relocating a head-office executive and his family here and often less than recruiting a bilingual Japanese of equal business skill. Better still, such executives are often more likely to accept aggressively performance-related pay packages which many Japanese executives tend to reject.

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