International Comparative Mangement

International Comparative Management Course 2015-2016

INTERNATIONAL COMPARATIVE

MANAGEMENT COURSE


Table of contents CHAPTER 1 FUNDAMENTALS OF INTERNATIONAL COMPARATIVE MANAGEMENT 3

1.1. Comparative management concept .............................................................................................. 3 1.1.1. International comparative management definition ................................................................ 3 1.1.2. Necessity of international comparative management............................................................ 4 1.1.3. Brief history of international comparative management ....................................................... 5

1.2. Main international comparative management schools ................................................................. 6 1.2.1. International comparative management schools typology .................................................... 6 1.2.2. Ragu Nath’s approach ........................................................................................................... 7

1.3. International transfer of managerial knowledge, essence of international comparative management ...................................................................................................................................... 12

CHAPTER 2 INTERNATIONAL COMPARATIVE MANAGEMENT METHODOLOGY ..... 16

2.1. Features of international comparative management researches ................................................. 16 2.2. Stages of a complex comparative management study................................................................ 17

2.2.1. Setting up goals stage .......................................................................................................... 17 2.2.2. Specify topic stage .............................................................................................................. 18 2.2.3. Sampling stage .................................................................................................................... 19 2.2.4. Translation stage ................................................................................................................. 20 2.2.5. Measurement stage .............................................................................................................. 20 2.2.6. Research administration stage ............................................................................................. 22 2.2.7. Information analysis stage .................................................................................................. 22 2.2.8. Conclusions and dissemination stage .................................................................................. 23

2.3. Typology of comparative management studies.......................................................................... 24 2.3.1. Parochial studies ................................................................................................................. 24 2.3.2. Ethnocentric studies ............................................................................................................ 24 2.3.3. Polycentric studies .............................................................................................................. 26 2.3.4. Comparative studies ............................................................................................................ 27 2.3.5. Geocentric studies ............................................................................................................... 28 2.5.6. Synergistic studies............................................................................................................... 29

CHAPTER 3 MANAGEMENT IN JAPANESE COMPANIES ..................................................... 31 3.1. General features of Japanese culture .......................................................................................... 31 3.2. Economic and social features of Japanese context .................................................................... 32 3.3. IAMBAS defining features ........................................................................................................ 33

3.3.1. Specific vision on organization ........................................................................................... 34 3.3.2. Structure of large industrial groups - ZAIBATSU .............................................................. 35 3.3.3. Decision-making by consensus ........................................................................................... 36 3.3.4. Inter and intra groups communication ............................................................................... 37 3.3.5. Organizational structures ................................................................................................... 38 3.3.6. Lifetime employment ........................................................................................................... 38 3.3.7. Management - trade unions relationship ............................................................................ 40 3.3.8. Wage system based on seniority and education .................................................................. 41


CHAPTER 1 FUNDAMENTALS OF INTERNATIONAL

COMPARATIVE MANAGEMENT

1.1. Comparative management concept

A defining feature of the period after 1960 is represented on almost all human

sciences by the vast expansion of comparative approaches. Areas - such as comparative law

or comparative literature, has gained reputation, and proved their scientific potential and

practical viability. Along with this approaches comparative management emerges, even

though later than others sciences. Today, in almost every economic or management faculty in

developed countries, comparative management is part of the curriculum. Dozens of

international scientific events in this area are held every year. This wide proliferation is

explained by the specificity and high scientific level of comparative management, pragmatic

usefulness, and large diversity of national, cultural and managerial issues which has to be

known, understood and considered in terms of internationalization of economic, social,

cultural and scientific activities. Moreover, mankind is - as Peter Ferdinand Drucker argues -

in a transitional period in which science is gradually replacing capital as a basic resource of

economic development, and adaptation to this transition requires new tools and approaches.

In this context, comparative management theory and practice are at the forefront of scientific

and socio-economic change.

1.1.1. International comparative management definition

Like any young science, comparative management does not present a generally

accepted definition. For instance, William Newman, one of the best specialists in thus field,

argues that "comparative management deals with similarities and differences in local

management practices in different countries”. A step forward is, in our opinion, Raghu

Nath’s approach, who considers that "in general, comparative management focuses on

comparing the similarities and differences between management systems and economic

contexts”. Although, comparing with Newman definition Nath’s one extend comparative

management beyond management practice, we note that, regarding the nature and location

system that is being compared is quite inaccurate and even too comprehensive. There is no

requirement to take into account different national and cultural contexts and, in addition to

managerial system, includes economic ones, which is a mistake in our opinion.

Those limits are transcended by Edwin Miller, who proposes a more comprehensive

and accurate definition of comparative management than the previous ones. Thus, he


considers that "comparative management concerns studying managerial process on a

multinational basis focusing on detection, identification, classification, measurement and

interpretation of similarities and differences relating to factors such as managerial

processes, concepts and techniques".

In our opinion, embedding the above definitions, we consider that comparative

management can be defined as: “the science that studies managerial processes of

organizations operating in various national cultural contexts, focusing on identifying and

analyzing managerial similarities and differences in order to promote the international

transfer of managerial know-how and increasing organizational functionality, efficiency

and effectiveness”.

1.1.2. Necessity of international comparative management

As with any new scientific field, it is essential to substantiate the necessity of it. In a

developing country, and especially in Romania, which communist era has been virtually cut

off from scientific developments and international management, the need is much stronger.

To answer this issue, we offered reasons by one of the most significant experts in the

field, Raghu Nath:

a) The comparative approach is unavoidable, in general. Man, by nature, evaluate

and compare permanently. The assessment is explicitly or implicitly, by reference to an ideal,

a standard or a known situation. International business development processes causes the

comparison to gain importance, which is reflected in emergence of comparative management.

b) Mankind is experiencing a strong international interdependence in all areas of

activity, especially concerning economic activities. In 1990, 40% of world economic output -

around 20,000 billion - was achieved through international economic activities, mostly in the

multinational corporations while today it exceeds 50%. Logical requirement that emerges

from this is to focus on managerial process and approaches in order to ensure a superior

information base to conduct international economic processes.

c) Comparative study of the realities of different countries "sharpens" managers’

understanding rather than understanding only the realities of their own country.

d) Consideration of managerial and cultural phenomena in a country by

companies’ management widens the variables considered in managerial process. This

contributes to the broadening of basic management understanding, with multiple

consequences on the accuracy of theoretical and pragmatic solutions available.


e) On individual level, comparative management is likely to develop people's ability

to assess accurately and completely what is happening in other countries. On this basis,

their contribution to economic activities increases substantially.

1.1.3. Brief history of international comparative management

a) Emergence

Comparative management theory emerged in the ’60s in United States. During this

period the first theoretical investigations of management on a multicultural basis were set up.

b) First boom

After initial difficulties, inherent to any start, in the next decade a feverish period of

scientific research was recorded, during 1965-1972, the period called the first "boom" of

comparative management. Research effort was significant, materialized in over 11,000

published studies and articles. Comparative management prestige was growing rapidly and as

a result, a considerable part of North American universities were introducing this discipline in

the curricula, as well as some of the best universities in Western Europe and Japan.

c) Stagnation

After 1972 a relative stagnation was recorded, both in theoretical research and

empirical investigations, which extended to the early 80s. While continuing to develop and

publish a significant number of papers, academic interest for this area was somewhat reduced

and the number studies did not met previous years records. Explanations provided by

specialists are two: 1. in this period the number of North American "business school" has

greatly increased in numbers, academic leadership focusing on compulsory disciplines, no

longer having time and resources to pay equal attention to optional disciplines as comparative

management 2. a number of foundations - like Ford Foundation - which have had a major

role in financing scientific research, have reduced the amounts allocated for comparative

management studies. During this period of stagnation qualitative dimension of comparative

approaches improved, its outcome laying the foundation for the next period.

d) Second boom

1980-1990 period saw a new boom in the comparative management development.

Comparative management saw wide international proliferation, both scientific and

educational. Significant efforts are made to improve scientific systematization and synthesis

of scientific knowledge. During this stage major papers are published, marking maturity of

this new science, like Advances in International Comparative Management - volume I

(1984), vol II (1986), vol III (1988), edited by Richard Farmer and Elton Mc Goaun,


Comparative Management, edited by Raghu Nath, Managing Cultural Differences, by Philip

R. Harris and Robert T. Moreni, Les Differences culturelles dans le management, edited by

Daniel Bollinger and Geert Hofstede.

By highlighting the progress in the last decades should not conclude that all issues and

dilemmas are resolved settled. It is estimated that the main issues that have not found an

adequate solution are:

• Unresolved semantic problem, a major in any new science. As a result, currently, the

same terms have different national understandings or contents. For example, the word culture

is used in the sense of national framework, the specific mentality of the population from a

country, or the mechanism and structure of national economy. Under these circumstances,

accurate and effective communication approaches may be significantly affected;

• Neglecting to a certain extent organizational effectiveness, which is finally one of

the main goals for comparative management. Hence insufficient practical purpose a

significant proportion of knowledge and methodologies;

• There is a considerable gap between the management practices used in the large

international corporations and those provided by comparative management.

1.2. Main international comparative management schools

1.2.1. International comparative management schools typology

Despite its short history, there were outlined several schools in comparative

management.

One of the first classifications of schools of comparative management is made by

Hans Schollhammer. In his book The Comparative Management Theory Jungle he identify

four schools:

• socio-economic school, emphasizing the critical role of management in

economic growth;

• environment school, emphasizing the influence of environmental factors on

the management in a transnational approach;

• behavioral school, which focuses on the behavior of leaders in various

activities, regions, countries or cultures;

• empirical school, mixing different management approaches which share no

common characteristics, but include elements resulting mainly from field


investigations that have served some interesting theories and research

hypotheses.

Subsequently, Edwin Miller proposes a different type of typology, which although

consider some of the issues addressed by Schollhamer introduces some new aspects.

According to him, there are three main comparative management approaches:

• Economic development and environmental orientation, which is actually a

combination of the first two schools designated by Schollhamer;

• Behavioral orientation that focuses on explaining the behavior of individuals and

groups in different enterprises, cultural and national entities;

• Contingency orientation, which focuses on the relationship between enterprise,

management and its environment.

The most recent comparative typology of management schools, frequently quoted by

the specialists, belong to Raghu Nath. Based on the earlier typologies, this professor at the

University of Pittsburgh School Of Management defines five schools: economic

development, environmental, behavioral, open systems and cultural.

1.2.2. Ragu Nath’s approach

A. Economic development school

Early theoretical and empirical investigations conducted in the 1950 - 1960 period

belong to this school which in the following decades continue its existence. Among the many

specialists with major contributions are Frederick Harbinson and Charles Myers. In their

work, Manpower Education and Economic Growth, based on the premise that managerial

input plays a significant role in achieving industrial and economic development they examine

these two major issues in an international comparative vision. For the four stages identified in

the development of human society from agrarian feudalist system to industrial democracy,

specific theoretical approaches to management are discussed. They concludes that

management philosophies are converging towards a democratic and participatory approach,

in line with developments in economic processes.

It also argues the idea that management, in addition to specific developments over

time and across borders, have a basic background with universal applicability. Management

phenomena are studied and investigated in particular at macro level, taking into account the

priority of economic developments in each country considered.


Limitations: a) unilateral consideration of management, almost exclusively in terms of

economic factors, neglecting management at company/organization level, which is essential

for economic development of each nation; b) relative poor applicability, largely because

microeconomic issues are ignored.

Contributions: a) major contribution to establishment of international comparative

management as a science; b) studies and field research gave a new impetus to development of

management in general, especially with regard to the economic purpose of its approaches,

essential for the development of human society.

B. Environmental school

Theoretical papers and pragmatic approaches specific to this school have been

observed from 1960 to 1970. An important contribution to the establishment and

development of environmental school had Richard Farmer and Barry Richman in their

Comparative Management and Economic Progress paper.

Among the major characteristics of it is worth mentioning the environment as a

framework for conceptualizing the phenomena management analysis. On this basis the

effectiveness of management is examined as a function of environmental factors - socio-

cultural, legal, political, economic, etc. Their entire design is synthesized as a model with

variables which influences management and effectiveness in a macroeconomic approach,

widely used in literature. An important factor that contributed to the proliferation of of this

school was Farmer's great organizational capacity, promoter of many scientific events with

broad international participation and his rich publishing activity, reflected in a paramount 3

volumes paper - Advances in International Comparative Management, widely distributed

worldwide.

Limitations: a) overemphasize environmental variables, giving management a passive

role, only receiving outside influences, which obviously does not correspond to reality. All

global management practice shows that usually management comes in strong inter-

relationships with environment, influencing each other; b) another limit lies in the relative

failure to capitalize on theoretical analysis and empirical researches, for instance there are no

investigations designed to quantify the intensity of the correlation between environment and

management.

Contributions: a) environmental approach provides a framework for analyzing the

phenomena of international management, more comprehensive than that provided by

economic development school; b) multidimensional approach of international comparative


management (not only economic dimension), by conceptual and methodological approach

promoted. As a result, there is a considerable enrichment of theoretical and methodological

approaches and pragmatic analysis performed.

C. Behavioral school

Established few years later - 1965-1975 - behavioral school marks a step forward,

although somewhat unilaterally oriented, in comparative management. Through its many

prestigious representatives - M. Davis, D. Narain, Ghisseli, M. Porter - it manages to bring

into discussion behavioral variables such as attitudes, beliefs, personal values etc.

This school is the first switching from macroeconomic approach, defining for

previous schools - to microeconomic one, meaning organization. Behavioral school is

focusing on specific management phenomena interdependencies in different countries with

variables set to organizational, groups or categories of staff levels. Behavioral school pays

particular attention to operational variables relating to attitudes and values scale. On this basis

it try to explain structures and behavioral patterns of individuals and groups within

organizations that operate in various countries.

According to Ragu Nath overall analysis concerning this school, the main categories

of problems considered are:

• identify and analyze beliefs, values and systems required in management hierarchies

prevailing in a given society - a significant contribution in this area having M. Davis;

• highlight the relationship between national character profiles and some variables and

organizational behavior, major contributions belonging to M. Davis and D. Narain;

• highlight variations in transnational managerial attitudes and perceptions on key

concepts and activities. On this topic significant contributions have Gerald Barrett, Bernard

Bass, Ghisseli, Porter, Nath etc.

Limitations: a) ignoring aspects of business efficiency, hence their poor applicability,

b) insufficient adaptation and validation of research tools to the requirements of transnational

investigations, mainly because they were designed and used in United States.

Contribution: a) highlighting the major role that human factors plays in management

phenomena in a transnational approach. Starting from this premise, it highlights significant

differences in management practice across various countries and specifically between

different ethnic or occupational groups. b) notice, with convincing arguments, special

attention to be given to transfer of management practices from one culture to another, from

one company to another.


D. Open systems school

Chronologically, this is established later, in the 1970s – 1980s, capitalizing to a

certain extent previous schools accumulations. A major influence on its emergence and

content has the broad proliferation of systemic theory, characteristic of the time considered.

This school comprise many of the best known exponents of international comparative

management, among which mention Negandhi and Prasad, Bernard Estafen, Rosalie Tung

and others. Moreover, some leading exponents of other currents, such as, for example,

Richard Farmer and Barry Richman, migrated after 1980 to this school.

Theoretical and methodological premise of this school is the conceptualization of the

organization, management and environment as open systems, linked with strong interactions.

Management as an organically integrated system in the organization engage into multiple

relationships with the environment through information, human resources, material and

financial flows. Content and intensity of these flows, with different characteristics from one

country to another, and often within the same national perimeter, have a strong influence on

management systems and organizations involved. Consequently, all these factors are

considered in terms of open systems theory, paying specific attention to identifying the

relevant variables, assessment and evaluation of multiple interdependencies of their

dynamics.

Most successful and comprehensive management approaches belonging to this school

have resulted in models, like Nagandhi - Prasad and Tung management models.

Limitations: a) the main limitation consist of approximate design of some of the

variables considered, especially cultural related environment variables, resulting in an

insufficient credibility of the results.

Contributions: a) this school is considering a more comprehensive range of variables

affecting organizations, including those with a direct influence - suppliers, clients, customers,

government, etc. - which reflects the depth of analysis undertaken and the qualitative

conclusions; b) on this basis there is a more rigorous systematization of both theoretical and

methodological approaches and results, with consequences for both rigorous scientific

research and educational activities in this field and practice of management in various

countries. This explains also development of empirical research in international comparative

management, often with novel results or conclusions, used on multiple levels in social and

economic activity.


E. Cultural school

In terms of time, as can easily anticipate, this school was last to be last defined, after

1980. Most substantial contributions to its shaping had Geert Hofstede, John Child, Kelly

Lane, Reginald Worthley, Ch Triandis and others.

Surprisingly for comparative management school focused on the role of "culture" is

that the very concept of culture is not accurately defined, there are several understandings in

paper of its leading representatives.

Raghu Nath argues that in most studies, culture is used as a synonym for nation but he

argues that in recent years, there has been some progress in this respect.

Kelly, in his studies, widely use definition of Child and Kieser according to whom

cultures are structures of thinking and ways of action widely spread in the population and

organizations. From this definition, it is recommended that culture to refer to a region of a

country rather than entire country.

J. Collins show that culture is defined as a state of intellectual development of

population, economic culture is a state of economic development and even more: the

attitudes, values, rules which economic activities are based and helps shape the company's

behavior in a given country.

Geert Hofstede in his well-known research, turn to a more complex definition of

culture. According to him, "the essence of culture is the collective mental programming. It is

part of our conditioning that we accept with other members of the nation, region or group we

belong, but not with components of other nations, regions or groups”. Of course, for

international comparative management researches culture is considered especially at national

level.

Despite these differences in defining culture, its major role in management, often

decisive, is said more often and more strongly. Thus, in a study jointly conducted by three of

the most renowned experts in the field - Douglas B. Allen, Edwin Miller and Raghu Nath –

they argue that culture is generally accepted as a determinant of behavior and an essential

tool for understanding management processes.

Although the notional content of culture is largely different from one author to

another, the essence is the same while similar approaches are employed. Management is

analyzed in close connection with cultural elements, whose sizes vary from country to

another, within the same national territorial and social perimeter, explaining this way the

substantial differences in management systems.


Limitations: a) even though cultural issues has been extensive research and their

results frequent referenced in the literature, due to the imprecision in defining culture, results

related to the similarities and differences of transnational management to not have rigor; b)

studies belonging to this school are still "suffering" serious methodological problems,

especially accuracy and systematization. To avoid this Kelly Lane establishes a procedure to

be followed to ensure rigor, comprising the following phases:

• establishing by experts of culture definition and specify national culture elements

that influence organizational management;

• establishing the existence of cultural elements previously established in the analyzed

culture;

• demonstrating how the factors identified as forming the national culture influences

behavior, structure and organization management;

• consider the fact that not all members of analyzed culture have the same values and

beliefs, and that the intensity impact on culture’s members may be different.

Contributions: a) make possible a broad documentation on management practices in

various countries, which often are made in relation with "cultural differences" between them;

b) there has been a major focus on synergistic effects of the environment on the management

practices worldwide. Representatives of this school introduced many novel concepts,

showing a thorough knowledge of management theory and practice, widely recognized by

scholars; c) As a result of its scientific and educational contributions, not only international

comparative management, but management science progressed.

1.3. International transfer of managerial knowledge, essence of international

comparative management

Recent decades have marked an increased awareness of particular importance of

information and knowledge for the economic and social development. For instance, Jean

Jacques Servan Schreibner appreciate that IT is essential in human progress while R. Vitro

explain the development of society basically as an informational process and Alvin Tofler

argues that the third source of power, that tends to become predominant in the future, is

information and its control.

Simultaneously, it appears that, as E. Miller argues, all countries, companies and

individuals are missing relevant information. Economic development is increasingly

accelerated only when increased volume of information and knowledge is generated, used


and capitalized. Hence, international transfer of managerial know how has to be a priority for

all countries and especially for less developed ones.


The scale and speed of management knowledge transfer is conditioned by six factors:

1) Educational level of population. The higher it is, the higher and faster managerial

information and knowledge in other countries is carried out with superior results.

2) Number of languages of the active population of a country, which only partially reflect its

educational level, have a significant influence. Knowing several languages facilitates better

information and interpretation of knowledge in all areas, management included. Small

countries, in the immediate vicinity of countries using worldwide spoken languages or

located at international traffic crossroads in this respect, cases of Belgium, Liechtenstein or

Luxembourg being well known.

3) The degree of control and enrolment of population, both at macro and micro economic

level. The lower it is, the more international transfer of managerial knowledge is performed

more easily and effectively and vice versa. Interesting to note that, in order to illustrate the

unfavorable action of this factor in literature, evolution of Ford company after 1920 is often

cited, when Henry Ford promoted an autocratic management style, based on a thorough

control of employers, ignoring or stopping their initiatives, which resulted the loss of

supremacy in the automotive market in less than 10 years.

4) Size of companies. It is considered that usually smaller companies are more responsive to

managerial knowledge from other countries. The main causes are their flexibility, more direct

and easy communication flows, faster decisional making process etc.

5) Mobility and personal freedom. It was noticed that the extent people take relevant

information increases with their mobility and personal freedom. In addition, the free

movement of people between countries - like in the European Union - is always

accompanied, consciously or unconsciously, by a genuine transfer of managerial knowledge,

most often informally.

6) Openness of society. Its influence is manifested, firstly, by the extent to which it typically

provides access to information. Open societies freely circulate large volumes of information

from all areas, including management, leading to a high level of reception by most of the

population. Secondly, open societies encourage display of open mentalities, facilitating

international dialogue for individuals, businesses, organizations or countries. Mentality is a

potent inhibitor or facilitator - depending on its features – for management transfer.

Values and the manifestation of these factors naturally varies from one country to another,

from one cultural context to another. In the opinion of specialists, such as the well-known

French researcher Alain Touraine, there is, however, a certain tendency to diminish the


cultural differences between states. In conclusion, the transfer of managerial know-how in

management is the crucial mission of comparative management.


CHAPTER 2 INTERNATIONAL COMPARATIVE MANAGEMENT

METHODOLOGY

2.1. Features of international comparative management researches

Research methodology in comparative management has to consider the main

differences between an international comparative management and a traditional management

study. Typically, a comparative management study differs from general management one

through several elements reflecting its specific features, conceptual and operationalization.

1. A first issue is the higher complexity because it involves elements belonging to

different cultures. The number of cultures investigated is larger and their approach is broader,

both increasing its complexity. Sometimes this complexity is amplified to a higher rate,

because of the need to take into account a significantly larger volume of interdependences

between the elements analyzed.

2. Equivalence in the design and conduct of the comparative management studies is

a factor of major importance. In the context of comparative management, we understand

equivalence as “that approach which, by the concepts and methods used, the way information

is collected, processed and interpreted avoid distortions, making possible to draw accurate

conclusions, particularly with regard to cultural specificity”.

In comparative management research are two possible equivalence approaches that

substantially affect results.

a) The first approach, standardized equivalence, use a standardized set of methods and

techniques, in the same way across various cultures involved in the topic investigated,

regardless of differences between them. Apparently a coherent approach, conclusions are

hard to rely to, largely because of lack of specificity. Often research results are distorted,

failing to sufficiently highlight the cultural particularities, and thus cannot reflect the actual

relationship between general and specific. This approach is usually used in small scale

researches and is less costly than the next one.

b) Unlike previous, equivalent approach is characterized by the fact that, based on a

unitary framework/concept, use concepts, methods and techniques partially identical,

partially different, adapted to each culture, being able to reach a specific set of purposes.

3. Because of both its complexity and territorial dispersion of the subjects

investigated, comparative management research involves a greater and more diverse

workload. Direct expression of this characteristic is an increased number of people and / or

periods necessary to carry out international comparative management research. To a certain


extent, this can be reduced by using experienced researchers and large-scale computing

facilities for data collection, processing and analysis.

4. Various researchers argues that comparative management researches are very

expensive. A comparative management study, designed to investigate a specific topic is

always more expensive than a similar study of general management. Two main causes

generate this. One is, of course, higher workload and the other travel and accommodation

costs substantially higher due to size of the geographical area investigated. Consequently,

budget of these studies are substantially higher and finding funding sources is one of the main

problems to be solved.

5. A final major characteristic of management studies is their difficulty. Higher

complexity of topics, proper resolution of many issues concerning the equivalence of results,

greater workload, their diversified nature and significant funds required, all contribute to this

characteristic. The only way to counter them, and thus to mitigate at least to some degree the

difficulty is to set up a rigorous design for the study, based on competent and deeply involved

researchers and support staff.

Knowing and taking into account these major features of comparative management

research is essential to assure accuracy and effectiveness. Otherwise, the danger is that under

"business" comparative management disguise to undertake a study of general management,

which fail to capture the specific cultures involved, proposing, therefore, unsubstantiated or

even false conclusions.

2.2. Stages of a complex comparative management study

Comparative management studies are not possible without applying a structured

methodology to properly consider the issues involved, in a logical and operational manner.

We present a methodology to conduct a comparative management study, structured in

several stages, which rely mostly on the approach of Nancy J. Adler from McGill University

in Montreal.

2.2.1. Setting up goals stage

Comparative management investigations can be considered for two categories -

theoretical and pragmatic.

Theoretical goals concerns the development of an equivalent theory within various

cultures, such as establishing a typology of managers or organizational fundamentals

underlying organizational structures of industrial firms.


Pragmatic goals relates to outline management approaches or development of

appropriate social behaviors in various cultures. For instance, establishing the most

commonly used and effective development strategic options for electronic business or design

of effective ways to motivate staff for multinational companies in certain countries are

examples of such pragmatic goals..

In the process of setting up goals several major problems may occur, which must be

considered and properly addressed.

Defining culture is considered the first of them. It is essential, as argues Chris Lane,

to adopt a specific definition of culture and to determine how it will be investigated. It is

advisable to consider issues related to the identification of a culture with a country, the degree

of population considered homogeneous or heterogeneous in terms of culture or approaching

culture as an independent, dependent or residual variable.

Next, universal or specific behavioral issues are established, requiring a similar or

different approach.

Based on all previous elements composition of the research team is established.

Multicultural teams are recommended, whose components reflect the cultures included in the

study.

Another major issue during this phase is establishment of standardized or equivalent

approaches. For high levels of abstraction, such as the typology of management styles,

approaches in different cultures should be identical, while for lower abstraction levels should

be equivalent (for example, collecting data on leadership styles and ways of improving them

across countries).

At the end of this stage, given the issues noted above, composition of research team is

established. Jean Claude Larréché recommended that, besides the criterion of competence, to

consider age, gender and nationality of specialists. The group must include, in addition to

older people that have experience and are open minded, young people with energy and

enthusiasm, women who approach a topic differently than men, specialists of different

nationalities who understand the peculiarities of cultures involved.

2.2.2. Specify topic stage

Starting from the goals of the study previously established, as well as the options

regarding culture, universal / specific behaviors, identical or equivalent approaches, and the

dangers of distortion involved, specify topic is the next stage. Naturally, this takes place

separately for theoretical goals, with a high degree of abstraction and pragmatic goals, much


more concrete. A correct specification of topic is essential considering that its approach is

largely different according to goals.

Concerning management topics, investigated in a transnational view, Nancy Adler

considers that three requirements have to be met simultaneously:

� Conceptually, the topic has to be equivalent meaning that the concept or

concepts investigated has to have same content (understanding) and essential

characteristics in each of the investigated cultures;

� Importance of the topic has to be the same, having a central or marginal

position in all investigated cultures;

� Specificity of topic has to be the same across cultures, meaning that they have

similar religious and political sensitivities.

We express doubts over the last two requirements raised by Adler. Of course, the

subject must have a common conceptually equivalent across various cultures, otherwise

under the same title, different things are analyzed, which makes the effort to establish

similarities and differences between particular concepts not comparable, in fact. But

concerning the importance of topic and its specificity, we consider that these are actually

features that should be investigated during the research and not presumed. The fact that a

management problem is less important in a culture than another, or is viewed differently by

the church or dominant political parties, has to be investigated, and not a prerequisite for its

inclusion as a topic.

2.2.3. Sampling stage

While the first two stages settled basic theoretical and methodological issues

involved, the next ones covers operational elements of an international comparative

management study.

The first of these issue is about establishing sample of investigation. Its importance is

crucial as the scientific validity depends on whether the sample adequately reflects each

culture included in research.

Judicious sizing of the sample is a major issue to be solved first, which refers to the

number of cultures considered and the number of subjects in each.

Selection of cultures investigated, reflected in the number of samples, is

recommended according to the theoretical dimensions of research and purpose, and not

according to how easy access to cultures is. If considering only 2-3 cultures, we actually


perform a pilot study, allowing "training" for the research team on the peculiarities of

methods used, and not a real study.

Management practice usually use representative samples when the goals are

theoretical and the topic is very broad. Another approach consider pair samples from two or

more cultures, common when research fulfill pragmatic objectives or narrow topics, a

common situation for managerial practice. In such cases, it is recommended that major

attention be paid to ensure their functional, de facto equivalence.

Regarding the independence of samples, in international studies it is difficult to

achieve. Due to increased international division of labor, globalization and

internationalization of economic activities, the increased interdependence between cultures, it

is difficult to use strictly independent samples.

2.2.4. Translation stage

Considering translation as an independent phase may be awkward for some, but we

considered it separately due to its importance in the success of an international comparative

management research. It is essential that each version of translation for various stages of

research to be fully equivalent to the other. So translation does not have to be "literally" the

same, but to reflect the cultural differences involved. To ensure this requirement, several

issues must be considered.

In terms of phrasing, it is recommended to use common words, avoiding idioms,

making full but short sentences or phrases, etc.. Two way translation technique can be used,

from original language into other languages, and again in the original language, using

bilingual people with a good knowledge of the topic. Another possibility is to use experts,

both in the language and the specific culture and management, usually people who lived in

both cultures.

A major concern is to avoid the so-called wharfian syndrome, consisting of literary

translation, but which does not ensure equivalence of content. Unfortunately, this syndrome

is quite often met with considerable negative consequences of the results.

2.2.5. Measurement stage

Given the multitude of cultures in which comparative management investigated is

performed, with different scale of values and of different variables used in specific ways,

these issues must be properly addressed.


Among issues to be considered, first is to assure equivalence of variables. This

involves selecting specific variables and selective methods to measure them, so their

assessments across various cultures to realistically reflect the same phenomena, with the

same accuracy, based on similar concepts.

Another important element relates to the measurement of variables. Differences

between variables’ parameters considered in different cultures are not interpreted correctly if

the measurement scales have not been made equivalent. This means appealing to the

equivalent procedures or similar correlation systems for variables considered. For example,

when examining the influence of motivational variable “wage” in different cultures, and

national differences are not considered, wrong conclusions are drawn (for instance, in U.S.

minimum wage is $ 15 while in Romania - $ 0.80 to 0.90, so when analyzing motivational

incentives it is compulsory to consider the scale).

Another issue concerns the identification of possible dangers of distortion due to the

interaction between the variables considered in the investigation. Of course, some

interference is unavoidable, requiring a constant effort to minimize them, paying particular

attention to their handle during the investigation.


2.2.6. Research administration stage

The main issues which form the subject of research administration stage refers to how

to deal with subjects, establishing rules and instructions and ascertain period of

research. Naturally, achieving equivalence is still a major, taking into account the need to

prevent or minimize the Heisenberg effect. Basically, this effect concerns changes the way

investigated communities decide and act as a result of being under observation by specialists.

Consequently, events occur that are not characteristic, which after analysis and interpretation

are reflected in distorted findings and conclusions.

Research is recommended to be designed and conducted as to properly deal with:

• Familiarity of subjects concerning research tools instruments and social situations

during the investigation;

• Psychological tension that arises because subjects must feel the same (confidence,

tension, etc.) on a specific topic toward investigators;

• Experimenter effect, stemming from the way the researcher transmit to the

investigated subjects his preferred assumptions;

• Behavioral parameters of subjects related to their sensitivity toward specific issues

(political, religious, economic, etc.), the extent to which attempts to discover what the

researcher’s intentions are and help him or not etc.;

• Personality and characteristics of the investigators (gender, race, nationality, social

position, etc.), which determines respect, indifference, hostility, cooperation, etc. of the

subjects, according to the characteristics of culture which they belong;

• Purpose and presentation features, which, given the way they are brought to the

attention of those investigated, the instructions received, required amount of time, manner of

presentation and, respectively, the way information is collected may determine various

reactions of the subjects.

2.2.7. Information analysis stage

Certainly, in general lines international comparative management studies are not

fundamentally different than general management investigations. In their case, too, it is

essential that entire analysis is subordinated to achievement of objectives. Complexity of

analyzing management across various cultures more likely determines a lack of focus in their

case.

Strictly from a methodological point of view, two less common issues should be

considered.


Multitude of variables involved and complex interdependencies between them

strongly requires multivariate statistical techniques. More difficult to use, multiple

correlation analysis and other multivariate techniques are only ones allowing a relatively

accurate and comprehensive understanding managerial phenomena.

The other aspect refers to the so-called "ecological fallacy", determined by a common

mistake of treating cultures as individuals. Consequently, correlations between cultures are

analyzed and confused with individuals relationships. The reverse situation (confusing

individual relationship with those among cultures) is also happening. Hence false

conclusions, determining theoretical confusions and ineffective management solutions.

In international comparative management practice, particularly in this stage,

specialists frequently manifests two tendencies:

a) Acceptance and use of a priori general perceptions/assumption on culture

characteristics, use of cultural "stereotypes" about certain cultures, such as those about

German culture (“Germans makes best cars…”), Chinese culture (“Chines products are cheap

but poor quality….”) etc.;

b) Substantiation of research’s approach on individual special experiences of experts-

both positive and negative - about the culture investigated.

Both tendencies negatively influence the analysis stage.

2.2.8. Conclusions and dissemination stage

Any study is ending with formulation, based on abstraction, systematization and generalization, of the main conclusions,

according to predetermined objectives. The conduct of this phase is different, corresponding to the nature of the research objectives.

If the research has theoretical goals, its focus is on coherent theories, consistent with the research hypotheses pursued in previous

phases. Depending on the size and scale of findings, conclusions take the form of scientific communications or essays, studies, articles and

books. Naturally, it is recommended that they should be disseminated with priority in countries whose cultures have been investigated.

Completion of pragmatic research is largely different. The most common form is managerial methodologies, recommendations or

solutions for the companies who financed them. Another possibility regard applied research and investigations aimed at developing case

studies for management training. Of course, all these results can be used as a foundation for scientific papers, comprising however

theoretical elements that make them more interesting and useful for various beneficiaries.

Whatever the nature of research, the drafting of the final material should be paid attention to the presentation to make it fully

accessible for beneficiaries. It raises major questions as to ensure equivalence of language and consider the extent to which persons involved

are familiar with management concepts and specific elements.


2.3. Typology of comparative management studies

2.3.1. Parochial studies

Parochial studies involves only one culture. Their dominant feature is that one culture

is investigated by researchers from that culture. Very often, the concept of culture and its

implications are not explicitly presented at all. A survey of such studies, developed over nine

years, showed that in only 8% cases they covered management issues, discussed in the

context of culture involved. So culture is not addressed as a factor or as a variable, dependent

or independent, but as a constant. In terms of research orientation, most often are focused to

answer the question: How people behave in a company? To answer, the researchers use

traditional scientific research design, sampling, investigation, analysis and interpretation of

the phenomena involved.

Concerning topic, these studies are very comprehensive, dealing with practically

every issue with managerial significance.

Regarding similarities between cultures and management across various countries,

these are assumed without being demonstrated. As a result, there is a tendency that the results

of such studies to be extended from one country to others, although obviously they are valid,

at best, only in the culture investigated. This orientation is most frequently observed in

United States.

Various experts argues that parochial type of studies can hardly be considered

international comparative. They are, in fact, traditional management studies. The only

argument which calls for their consideration as an early form of international comparative

management studies refers to the tendency, particularly in United States., to extend the

validity of the findings to other countries. Therefore, although in terms of scientific rigor are

not part of international comparative management, often from pragmatic considerations, their

results are used to management analysis in various countries.

2.3.2. Ethnocentric studies

Defining for this type of study is that the initial investigation designed and

implemented within a culture is exactly repeated in a second culture. By taking over and

expanding the research in a second country or culture it implicitly assumes that first culture is

more important or superior to the second.

For researchers (theoretical perspective), ethnocentric studies are designed to give an

answer to the question: Is theory valid in culture A valid in culture B, also? Managers,


practitioners (pragmatic perspective) are interested, instead, of another question: Can we use

management approaches of the first culture in other cultures?

Researches examine with priority level of similarity between cultural conditions in the

two cultures, so that theoretical framework established for the first culture can be validated in

the second.

In terms of methodology it use a standardized approach, using the same

methodological approach. Research is conducted in the same way, using the same type of

sample and tools, except the language used, the administration is based on the same set of

instructions, and for analysis and conclusion same methods are used. The premise behind this

type of study is that the standardization and equivalence are synonyms. This is even more

obvious in the way translation is done, using "ad literam" translation based on standardization

of words.

Regarding the similarities between the investigated phenomena, on the one hand, and

universality of final findings, on the other hand, both are questioned and investigated.

However, specific, even questionable issues arise in terms of scientific rigor. Thus, the

discovery of similarities between the two cultures is often interpreted as a confirmation of

management universalism. In addition, demonstrating the validity of the theory within two

cultures is regarded as sufficient to affirm its universality, even though it is obvious that such

a conclusion is not justified.

Regarding the possible differences discovered between the two cultures, these are

often labeled as arising from differences of samples analyzed. For example, different

education of individuals in the two cultures is to blame for such an occurrence. Moreover,

research is frequently biased by self-criteria, i.e. the ones used in the first culture, which

shows ethnocentrism, reflected in the characteristics and findings on the second culture,

which often contain phrases like "less than "," lower compared to "insufficient" compared

with ".

Ethnocentric studies are the first real international comparative management studies,

are widespread, having a significant utility for scholars and practitioners even though they

fail to answer the question whether similarities and differences between the cultures studied

are significant in the context of the second culture.


2.3.3. Polycentric studies

In essence, this type deals with description, explanation and interpretation of certain

management practices in specific cultures. Polycentric studies are actually studies that

address same subject, in several cultures, by national teams of researchers and practitioners.

Main theoretical goal pursued is to identify a structure of relationships that reflects a

particular culture. Ideally, a polycentric study produces theories - new or reconfirmed - that

are applicable to each culture.

In terms of pragmatic goals it seeks answers to questions like: How managers lead

and how employees behave in a specific county?

To give answers to these questions, investigations are focused on identifying

differences between cultures, aiming to capture the specificity of each. Similar to polycentric

research in anthropology, polycentric approach in management question the universality of

theoretical issues involved, many time even denies the existence of universalism. It even

argues that functional equivalence between two cultures, and as a consequence between

management phenomena, cannot be demonstrated. Labeled as "Malinovschi dilemma”, it

argues that transnational cultural comparison is as false action, by comparing elements which

cannot be actually compared.

In terms of specific methodology, they rely mainly on inductive methods, developing

specific structures, models, etc. They rely on detailed description of the phenomena

investigated, which gives polycentric studies a rather descriptive than evaluative approach.

Critics complain that this type of international comparative management studies have

two significant flaws: equifinality and cultural relativity.

a) Equifinality assumes existence of several distinct cultural approaches to achieve

any specific managerial objective or purpose. Logically demonstrable, equifinality is,

therefore, accepted by most researchers.

b) Cultural relativity argues that there is no managerial way of achieving a goal,

specific to a culture, superior to others. This assumption is not generally accepted, naturally,

since there is always differences in quality and yield between various ways and actions and,

therefore, not all have the same effectiveness in practice in terms of productivity, work

satisfaction, profit etc.

In conclusion, polycentric studies serve as a counterweight to ethnocentric studies

with their focus of management and cultural differences. Their usefulness lies not in itself but

on complementarity with ethnocentric studies, encouraging consideration of national


specifics, with beneficial effects on international transfer of management theories and

practices.

2.3.4. Comparative studies

Marking a substantial improvement over previous types, comparative studies are

designed to identify similarities and differences of two or more cultures. Their essence is,

therefore, to analyze what various cultures have in common and what is specific, usually

employing multinational teams of researchers. Researchers are assuming that there is no

dominant culture, and hence there is no a priori best national management model superior to

others (for instance, management in Germany is not a priori considered superior to

management practiced in Italy or Russia).

From a theoretical perspective, the main question is: Which aspects of management

theory are indeed universal and what are cultural specific?. From a pragmatic perspective,

these studies tries to determine To what extent culture A is different compared to cultures B,

C, D, etc.?

Starting from discovered transnational similarities, comparative studies specifically

aim to identify universality while simultaneously differences comes under scrutiny. In

the terminology characteristic to this approach, similar elements are called universal and

differences are considered cultural specific, both equally accepted and not presumed, like in

the previous studies. Moreover, the main emphasis during the course of study is the

delimitation of the universal/specific cultural behaviors. The balance between universal and

cultural specific elements is not presumed, but are an actual result or not of each study.

Methodology for conducting such studies is highly complex and is described in the

previous section.

It is worth mentioning an appropriate approach of a comparative study has to solve

five dilemmas:

• What is culture?

• Analyzed phenomenon is cultural specific or universal?

• How can researchers alleviate their national prejudices/assumptions?

• Which parts of the methodology must be equivalent and which identical?

• How can dangers of distortion caused by interactions between cultural

variables be identified and diminished?


Comparative studies marks de facto maturity of international comparative

management as a science, which is reflected in the substantial increase in the quality of

managerial solutions which they serve as a theoretical and methodological foundation.

2.3.5. Geocentric studies

Unlike previous ones, geocentric studies focus on multinational corporations, without

explicit reference to cultures involved. Moreover, often cultures of countries on whose

territory multinationals act are ignored or poorly considered.

Geocentric studies, almost entirely pragmatic, aim to give answer to the question:

How international corporations and how their management can be improved? The answer is

the development of approaches for studying problems they are facing.

However, by default, geocentric studies seek to discover the similarities of cultures in

which multinational corporations operate. This conclusion follows from the fact that

management aims to outline the most effective approaches to corporate subsidiaries that are

located in various countries and cultures. Yet, common management approaches cannot exist

if management systems that operate in different countries do not have appreciable

similarities. Explicitly, geocentric studies are considering aspects of territorial dispersion of

branches and subsidiaries of multinational corporations and their implications on the

functionality of their management. Even though to some extent universalism is assumed in

transnational management approaches, it is not demonstrate through cultural variables but

usually employing non-cultural variables.

Regarding methodology, it is predominantly traditional, but slightly more complex, a

feature determined by taking into account geographical distance. Translation is no concern

because multinational corporations use a common language, often English.

In conclusion, geocentric studies, pragmatic by default, has a noticeable contribution

to international comparative management development as a specific form of it, focused on

multinationals.


2.5.6. Synergistic studies

This type of research focuses on understanding structures of relations and

management theories that apply when people from many cultures interact in working process.

More specifically, these studies analyze human behavior in regard to people working in multi

and transnational companies or companies operating internationally or nationally but with

multicultural teams.

Researchers, through synergistic studies, seek to provide answers on the rules that

govern the interaction and management of individuals belonging to various cultures and

conditions in which the universal approach is possible and appropriate and when is

recommended a pluralistic approach that uses cultural specificities identified. For managers,

synergistic investigations are designed to answer the questions: how transnational interaction

within the organization has to be managed, when it is best to use the universal approach and

when to use specific, indigenous cultural approaches.

Specific for synergistic research is use of cultural similarities and differences in

management as sources of growth and development. Based on them, but also on models and

theories developed and managerial solutions established, researchers are seeking to extend

universality in management.

Major differences between synergistic studies and the others are:

- Focuses on understanding interactions between people from different cultures and

not on the cultures themselves;

- Emphasize creation of structures or models for management and organizations, and

not identification of configurations that occur naturally, often by emphasizing the similarities

and differences;

- Focuses on understanding, harmonization and generate the best balance between

specific cultural models (pluralistic) and universalism, and not understanding the similarities

and differences between them.

Summary of international comparative management studies

Criteria/type Number of

cultures

Similarities and

differences

Universalism Coverage


Parish 1 culture Similarities and

differences are

assumed

Universalism is

assumed

Internal context

Ethnocentric 2 cultures Try to discover

similarities

Universalism is

researched but

commonly is

assumed

Repetition in a

second culture

Polycentric Several cultures Try to discover

differences

Universalism is

denied

Foreign cultures

Comparative Several cultures Both similarities

and differences are

investigated

Universalism is

researched

Foreign cultures

Geocentric International

business

Similarities Try to extend

universalism

Multinational

companies

Synergetic Intercultural

research

Similarities and

differences are

used to create new

approaches in

management

Seek to create

universalism

Teams made up of

people from various

cultures


CHAPTER 3 MANAGEMENT IN JAPANESE COMPANIES

In the first decades after the Second World War, American management was a true

myth, a "Mecca" of management and efficiency for almost all experts in the field, and

generally for all those involved in initiating or conducting business. Japanese economic

miracle has led, especially after 1970, to increased attention paid on Japanese management.

Currently, most frequently studied management concepts and instruments are from United

States and Japan. U.S. and Japanese companies are characterized by the highest

competitiveness. An article published in Business Week about top 1000 companies in the

world (according to the degree of market capitalization) is a proof of the previous statement.

Japanese firms hold 47% of total number of companies in that ranking, with sales of $ 3.000

billion and the U.S. 32%, followed by companies in Western Europe, with only 17%.

Japan's astonishing economic results of the postwar period, especially until 1990, led

to a relentless research in that matter in an attempt to discover the causes and factors that

generated them. One of the main findings of studies and observations, unchallenged by

anyone, is that Japanese management has a major role in achieving such performance. Hence

the importance and necessity of understanding the basic characteristics of Japanese

management.

3.1. General features of Japanese culture

To understand the content of Japanese business management is important to know

specific cultural context.

A first specific element that influence management of Japanese companies is so-

called "AMAE", which designates a specific feeling and mutual dependence that exists

between the components of any organization. AMAE involves interpersonal relations based

on a certain emotional attachment so dependent person has a specific behavior, avoiding to

take individual responsibility. Human relations resemble those between a mother and her

child in that dependent person has a desire to be loved and be protected. AMAE has a vital

importance to the Japanese psyche and emotional stability, it permeates the entire social

structure, becoming a dominant Japanese mentality and behavior.

Characteristic of Japanese social climate, their specific culture, so-called paternalism

or familiarity. In essence, it is the Japanese tend to focus on the group they belong, in the

sense of protection, as opposed to other groups. As a result, for Japanese organizations,

priority is on the group, not personal attributes of members.


In close connection with AMAE, there is another vertical interpersonal relationship

specific to Japanese culture, namely, oyabun - kobun (Oya - father ko - child). In essence, by

oyabun-kobun are designated personal relations between employees located on different

hierarchical levels. Person located above in the hierarchy (chief) is oyabun, who subordinates

several kobuns. Equal treatment of his kobuns is required, otherwise he loses his status of

oyabun. This relationship is relatively similar with that bewteen father of a family and his

sons. One oyabun can have more kobuns but the one kobun is always related to one oyabun.

A Japanese organization involves a set of relationships that gives it a strong

cohesion. In these relations rules of proper conduct are established, with a substantial

contribution having of a wide range of leisure activities practiced together. Of these mention

the organization of one to two annual trips, a monthly meeting, on Saturday, party together

"to a drink" after-hours, etc.., all funded by the company. The result of these actions is the

absolute primacy of authority, respect for seniors and wide proliferation of "friendly" senior

staff, with an affectionate work style, concerned with promoting and protecting the interests

of those kobun.

Another major feature of management and business organizations in Japan is wide

proliferation of "small groups" and “known in Japanese as "habatsu”. Resultant specificity of

mentality and behavior already mentioned - AMAE, paternalism, oyabun-kobun – small

groups are basic functional components of government bodies, political parties, large

companies etc. The most common criteria on establishment of these groups are graduating the

same university, marriage ties and work together in the same community. Small groups

protect the interests of its members and also provides a system of contacts.

3.2. Economic and social features of Japanese context

Consideration of socio-economic mechanisms of Japan reveals the major role that the

government and its agencies have in shaping business landscape. In fact, government set up

and operate a comprehensive national management system, which combines elements of

formal and informal decision-making, which is the result of Japan's economic strategy and

coordination between the key actors. Dominant feature of their work is the wide and intensive

cooperation between government and business circles of Japan.

The MITI (Ministry of Industry and International Trade) is the most powerful

economic ministry. Among its major actions mention the development of guidelines

regulating the use of production and pricing cartels, initiating major economic activities etc.

Typically, strategy and economic policy proposals originates from various governmental


bodies. These are submitted to the Council of Economic Policy, consisting of political leaders

and economic experts that examines them, enhance/improve and then submit to various

ministries. Though responsible for strategy, they never reject proposals received.

The main objective pursued in recent decades to set up the development of

competitive industries in foreign markets. It acts simultaneously stimulate both financial

support and priority sectors and to protect industries and corporations are faced with difficult

problems. The main actions concerns:

• formation of cartels to obtain complex products at competitive prices on foreign

markets;

• reducing excess production capacity through financial and other incentives;

• reduce surplus labor in certain sectors;

• selection of firms necessary to survive due to their importance for the Japanese

economy;

• funding of research development;

• providing subsidies for exports of certain products;

• providing capital for new investments;

• finance training and investment programs.

Economic circles, large companies manifests their main influence on economic policy

through "Zakai", which is a political-economic group of financial leaders coming from the

main national business organizations: Kaidanren, Kiez Doink, Nikkeiren, Nissho. Among

these organizations Kaidanren is the strongest (meaning Federation of Economic

Organizations, whose steering committee is made of the chairmen or CEOs of major

companies and government personnel from industry, commerce and finance). Zakai proposals

on economic issues are always considered by Japanese Assembly and the government. In

practice, Zakai actually carries veto over major economic problems of Japan.

3.3. IAMBAS defining features

Japanese economy has a dual structure, the major economic groups (keiretsu or

Zaibatsu) coexisting with a large number of small businesses. Currently there are six major

economic groups - Mitsui, Mitsubishi, Sumitomo, Fuji and Dai Ski Sonwa Kongya –

compared to 10 at the end of World War II, abolished by the Americans according with the

Treaty of Peace. Most Japanese companies are small, however. Employing, according to

Japanese regulation, fewer than 100 employees, small businesses represent about 98% of


Japanese firms. Today there are 6.5 million such companies which employs 40 million

people, or 80% total of employment, providing more than 50% of the Japanese GDP.

3.3.1. Specific vision on organization

A Japanese company, in any cultural context, has simultaneously several dimensions:

economic, social, technical, legal, etc. Japanese companies’ specific priority is its social

dimension. For a typical Japanese the company is a place to daily meet colleagues and spend

time together. Psychologically, most Japanese have two families: at home, the traditional one,

the other being the community in which he is included in the company. Both have their

importance for a balanced life. Richard Dare considers that a Japanese company's first feature

is that it is a human community in which the principal stakeholders are its employees.

In addition, specific to Japanese organizations is the absence of a clear demarcation

between managers and subordinates, like in European or North American companies.

Personal contacts within the organization has a crucial importance for employees.

Oyabun-kobun relationships and other labor relations like common leisure activities after

finishing work program have a strong emotional charge, provide consistency and special

meanings. This is not uncommon for a Japanese when he retires, often, his personal balance

is affected with such intensity that he end up divorcing.

Japanese company employees shows, in opinion of Professor Kaarna Koboyashi,

three major obsessions.

a) First obsession translates into intense concern for updating and enhancing their

skills, directly contributing and involving in economic activities of the company. This is

reflected in wider acceptance of the technical elements, in case of Japanese companies the

"NIH syndrome" (Not Invented Here) being far less common than in Europe or America.

b) Second is focus on team work. Due to the strong belonging to the group feeling,

essential in Japanese culture, Japanese employees emphasize work in common and group

performance, but have a local nature (company or community), doesn’t mean they necessarily

achieve effective multicultural work teams.

c) Uncertainty acceptance. Finally, due to social willingness to live and work together

but also the historical background, Japanese does not rely on rigorous instructions and are

willing to accept ambiguity. For instance, the concept of law was introduced in the later 19th

century while still it was no word to describe it. Use of insufficiently or less precisely defined

concepts, acceptance of uncertainty favors a rapid, complex and sometimes chaotic

ambiguity, associated with economic efficiency.


At the core of Japanese companies is of the the so-called "Anshinkan" which in

translation means “ensure safety and protection for customer”. Hence, company focuses on

providng QPDS, ie quality, price, delivery and service. Considering a priority in attracting

and convincing customers not only price and quality of their products and services – what

typical North American and Western European businesses do – but also the delivery (when,

how, under what conditions) and after sale services provided to the customer. This shows

both focus on the client and concomitantly their comprehensive approach, designed to meet

customers full requirements and preferences.

3.3.2. Structure of large industrial groups - ZAIBATSU

Each Zaibatsu is a complex structure comprising group’s bank, general commercial

company and factories/plants.

Bank exercise primarily its traditional function of providing financial resources for

major operations and development of the group. In addition, assure - a situation rarely seen in

other countries - an integrative function through financial policies they promote. While

Japanese companies are characterized by rapid expansion, which requires massive loans, this

enables group’s bank to supervision other parts of Zaibatsu activities, usually deciding CEO

of it.

General commercial company, in addition to conventional business functions, plays

an important role in innovation and boost the development of zaibatsu. They are trading a

significant part of group’s products and raw materials, for example, Mitsubishi Corporation,

Mitsui & Co. and Sumitomo Shaji, general commercial companies of Misubishi, Mitsui and

Sumitomo account for more than half of the respective groups export and import. The main

activities of general commercial companies involves:

• carry out marketing research for Zaibatsu products in exchange for a fee;

• initiate the development of new companies or startups, especially in new industrial

sectors;

• organize joint ventures both in Japan and other countries;

• provide group credit for Zaibatsu suppliers and customers, especially for small

businesses;

• buy shares in Zaibatsu bank on behalf of suppliers and customers to tighten relations

with them.

Factories/plants are the operational units of Zaibatsu, places were products and

services are manufactured.


Between all these components of Zaibatsu there are strong economic and management

connections, which gives these big monopolies impressive economic strength, demonstrated,

by the spectacular evolution of the Japanese economy in recent decades since Zaibastus are

considered the core of Japanese economy.

3.3.3. Decision-making by consensus

Perhaps the most specific Japanese feature in terms of decisions is the consensus

based decision making process called ringisei, a unique process to make decisions. Relying

on decisions by consensus significantly changes the way decisions are made. The decision

process is triggered by those directly involved in that activity, being down-top.

Step 1. Presenting solution at department level. When an employee address a major

problem and wants to offer a solution, he announces his direct supervisor. Supervisor

organizes a meeting in which the problem and that decisional variant proposed by employee

are discussed. If participants consider that solution deserves to be considered, they trigger the

consensus process that requires involvement of other organizational divisions of the

company. A formal consent from people involved directly and indirectly in the department

facing that problem has to be achieved.

Step 2. Discussing solution with other departments. Head of department where

solution occurred organize a meeting with representatives of other departments involved.

Typically, each department sends its head and two deputies. Solution is presented and

discussed. The process is repeated until the participants get all information judged as

necessary. To provide the information requested, they use formal and informal approaches in

all other departments and, if necessary, outside them. When they considered that all

information requested was sufficient, the solution was valid and consensus was reached,

decisional process switch from informal to formal approving the decision.

Step 3. Formalization. Employees from the department where solution was initiated

draft a document outlining the solution, collected information is attached and request formal

approval of all senior staff involved in implementing that decision. Each manager puts its

stamp of approval on the document. Normally 10 to 14 approvals are required. Finally, they

submit the document to top executives, which gives final approval, making it official.

Step 4. Implementation. Registration takes place and then decision is implemented.

From the above scenario we conclude that the main features of decision making by

consensus are:


• high degree of complexity due to large number of managers involved and numerous

interventions on the decisional proposal;

• frequent involvement of senior staff during the decision making process, but their

proposals are not automatically accepted by the others;

• combining formal and informal communication, the last often having a decisive role;

• crucial role is played by mid-level executives in achieving the necessary consensus.

Finally, we consider useful to point out that this system of decision-making, despite

its shortcomings - the slow progress and focus on continuity in terms of avoiding uncertainty

- has two major advantages that make it particularly effective. It provides a high degree of

involvement in leadership from staff, and accelerates the process of implementing the

decision.

3.3.4. Inter and intra groups communication

Communication in Japanese companies differ substantially from North American or

European companies. A first difference relates to the large share of symbolic, nonverbal,

ritualistic issues.

Japanese take very much respect to traditions in communication processes. Two types

of communication can be discerned: intra and inter group.

Intra group communication, within the group that person belongs, composed of

individuals working together in the same compartment, is radically different from

communication between representatives of various groups. Communication specific to the

primary group is highly informal. Meetings take long, a familiar, intimate atmosphere is a

rule, hierarchical differences between group members fades, there is a process of democratic

participation for all. In the first part of the meeting are presented and discussed mainly factual

information, then, gradually, group members proceed to outline points of view and discuss

decisional choices. It’s worth mentioning that every member of the group manifests great

care to avoid conflicts with the others. Different views are expressed in elegant form,

opinions are expressed in a diplomatic manner, without hurting others feelings. Where a

decision has to be made, discussions continue until consent is reached from at least 70% of

participants. Once that threshold reached, the minority automatically join the majority and

involve without reserves in implementing that decision.

Inter groups communication (between representatives of several groups) is very

formal, being carried out according to a carefully planned ceremony under strictly observed

rules. Often, meetings at this level are conducted using a predefined scenario. Moreover, the


presiding manager is accompanied by a meeting secretary sitting next to him to facilitate its

smooth application.

Regarding the content of communication processes, it is important to note that each

participant submit information and express views only about the group that he represents. If

there are new, important issues to be discussed without being previously on the agenda,

participants may require a postponement for consultation with group members or even a

postponement for the next meeting, being forbidden to express opinions without consent of

other group members.

3.3.5. Organizational structures

The most widely used types of organizational structures in Japanese companies are,

according to organizational documents, functional, divisional and matrix structures. But

regardless of the type adopted formal organizational has a minor importance compared with

elements of informal organization. Functionality and effectiveness of organizational

structures are based on encouraging initiative at lower levels of the hierarchy, responsibility

distribution to all components involved in delivering major actions, delegation of tasks.

Information flows are less the result of formal organizational and more of personal

relationships between various organizational structures’ managers.

Configuration of the company's organizational structure is influenced by the

placement of Japanese managers in managerial positions largely depending on their age.

In the organizational pyramid, the decisive role is played by middle management.

Experience shows that the Japanese management system is effective when middle managers

are competent, covering convincingly the "gap" between top and lower management. In this

process, interpersonal relations with other echelons of management is of major importance.

Top management, represented by Board of Directors, President and his deputies,

concentrates its efforts in three main directions:

• initiating and guiding radical change in company;

• solving the crisis that may occur in the company,

• promoting "public relations" with staff, stakeholders and government.

3.3.6. Lifetime employment

One of the best known and discussed features of Japanese management is hiring

employees for life, which is rooted in family tradition of feudal period and Zaibatsu practices.


What is less known, however, is that of lifetime employment benefit only a minority of

Japanese workers. According to the investigation made by Namik Nobaaki and Prakash Sethi,

the percentage of this type of employees varies between 25-40%, with manufacturing

departments in the top of the range.

Japanese companies’ staff is divided into three categories: permanent, which is

subject to lifetime employment, semi-permanent or experimental recruits and temporary

workers. Permanent staff, made of specialists, represents company’s elite workforce.

Annually, in April the company is recruiting young graduates. The selection gives priority to

generalist, those able and willing to perform any tasks. It places particular emphasis on the

ability to work as a team, to emphasize group interest above personal one. Recruitment is

based on a staff selection plan according to whom the company is employing yearly around

6% of current staff to cover retirements - 2% - and to enable enterprise development. Please

note that recruitment is seen as a long term investment, short-term cost is often regarded as

secondary. When candidates are very good, everyone is hired, and vice versa.

Lifetime employment success depends on the fulfillment of a double set of

expectations with a strong determination in Japanese culture and traditions. The worker is

expected to be able to work in the company for his entire life, and moreover to be willing to

do so. This desire is driven by the fact that, according to Japanese-specific rules, he is

expected to achieve good financial returns through continued work at the same company. In

turn, the employer count on the employee's lifelong involvement, ensuring a standard salary

under normal working conditions. Social and cultural norms require that employer must

ensure permanent wage for lifelong employees and take care of them. If not, its behavior is

considered as a major negative deviation from social norms, which is reflected in the massive

decline in the morale of its employees and trade union resistance, the pressure from

government bodies and public opinion.

It is important to notice that lifetime employment is not a widespread system. Small

businesses do not practice at all, while only large companies have enough resources to use it

and only for specific categories of employees. Currently, efforts are being made in many

companies to reduce the percentage of permanent staff.

This system have considerable disadvantages and advantages. Among disadvantages

we mention:

• Rigidity and inflexibility of the system in recruiting skilled personnel;

• High labor costs, especially in periods of economic crisis;

• Insufficient incentives for employee training and development;


• Generate strong pressures for increasing the volume of business activities, which

often leads to excessive diversification.

Disadvantages are, however, shadowed by considerable advantages in the context of

specific Japanese mentality and culture:

• Top executives pays special attention to long-term training and labor productivity;

• Significant investment in HR training;

• It is easily to balance wage curve if the period an employee work for the company is

known;

• Improvement of workforce performance based on employees' sense of security, a

state of harmony and cooperation within the company.

3.3.7. Management - trade unions relationship

In Japan, as in other countries, unions’ interest are opposed to those of management.

However, a number of specific elements occurs, which make Japanese trade unions radically

different than those operating in other countries.

Japanese trade union organizations are established on company and not on

professions or industries, as in most other developed countries. All personnel within an

enterprise, except senior managers, are part of the union. Even though interests are potentially

adverse, dialogue dominate between unions and management, working to make

agreements and harmonize interests in company’s best interest.

Talks between unions and company management on salaries are occurring usually in

May. They take place between union leaders and HR department, who have staff

specialized in this field. Only when they cannot reach an agreement despite best efforts senior

management gets involved.

It is worth to mention that conflicts between company’s management and union are

constantly under contextual pressure from local community and the need for general

consensus by Japanese society. Trade union protests usually have a demonstrative form,

emphasizing inaptitude of company’s executive in meeting employees’ needs. Usually

protests are held during breaks when employees shout slogans and march with placards on

company's premises. Through these actions they try to convince senior management of the

company to be more conciliatory in negotiations with the union and to better interests of

employees. Strikes are very uncommon form of protest as it is considered a moral shame for

both top executives and union leaders.


Another aspect worth to mention is that unions have always considered company's

interests on the long run, looking for agreements on wages and working conditions without

harming or impairing company’s interests and jeopardizing financial situation. Therefore,

“zeal strikes" are more common than conventional strikes so widely used in most countries

around the world.

3.3.8. Wage system based on seniority and education

In determining income the most important criteria are seniority and education. Wage

differences between those with higher and secondary education are small, however, the

decisive criterion is the age. Number of years worked in the company is the main foundation

to establish the size of wage and promotions. Wages grow very rapidly, coupled with number

of years worked in the company. As a rule, the salary at retirement is 3.5 times higher than at

employment, a significant higher proportion than in U.S. companies.

Besides wages, the Japanese company's employees benefit additional payments, the

most significant of these being the bonus system. On average a bonus is 2-3 times higher

than the monthly salary and is awarded twice a year, differentiated according to performance,

based on the profitability of the company and individual performance.

Along with bonuses Japanese employees receive incentives for hard work,

dangerous conditions and overtime. In addition, they receive salary supplements depending

on the family situation. For instance, when a Japanese is getting married he receives a

significant bonus, then when having the first and second child.

Another category of indirect revenue are represented by low interest loans granted

by enterprises to their employees (especially in case of zaibatsu’s bank), high interest rates

enjoyed by employees who deposit their savings in the company where they work,

accommodation allowance etc.

In case of managers, they enjoy a dedicated annual budget at their disposal to ensure

effective coordination of their compartment and foster relationships with other companies.

Specifically, managers uses their budget to organize parties or invite to restaurant employees,

suppliers, customers and any other person who, in his opinion, can bring value to the

company. Size of the budget is confidential, differentiated from one enterprise to another and

within it from one manager to another. Overall, it is estimated that this budget varies between

500,000 yen allocated for a production manager and 30,000,000 yen for CEOs or marketing

managers.


Regarding retirement system, only in the last decades was introduced in Japan.

Traditionally, when an employee retires he is granted a special premium whose size is 50-60

times the monthly salary. If the employee leaves the company for personal reasons, this

premium is drastically reduced.

Wage arrangements used by Japanese companies show a main disadvantage:

insufficient reward of creativity and the outstanding results achieved by employees. To some

extent, these are offset by the elimination of individual competence, which often has a

destructive effect on harmony and interpersonal relations within groups.

International Comparative Mangement

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