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Power Base in Japanese Companies: A Warning for APAC Leaders

Power Base in Japanese Companies: A Warning for APAC Leaders

5 months ago by David Sweet
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​“There are no principles; there are only events. There is no good and bad, there are only circumstances. The superior person espouses events and circumstances in order to guide them. If there were principles and fixed laws, nations would not change them as we change our shirts and a person can not be expected to be wiser than an entire nation.”—Honore De Balzac

APAC leaders find business in Japan bewildering, challenging, or just ignore the differences and blunder ahead to the detriment of the business. Headquarters demands results, but instead listen to familiar excuses, like “This is how Japan is…” or “Japan moves much slower…” or “The team won’t take action.” However, in most instances, this is totally untrue and it’s the incompetence of leadership understanding where the true power and authority of the company resides. 

Generally, in Japan, authority remains within rather than on top of the organization. In traditional Japanese companies, the corporate office, not the president, holds the power. This group of individuals transfer in and then out of this department every for 3-5 years as part of the job rotation system. This group makes final decisions on strategy, budgets, and hiring. A good analysis of how this diffuse power works in politics, check out Karel Van Wolferen’s seminal work, “The Enigma of Japanese Power: People and Politics in a Stateless Nation.” 

In contrast, Western companies will hold a president, leadership team, or board of directors as the power structure, and foreign capital companies in Japan try to mirror this structure without a “corporate office” structure to a greater or lesser effectiveness. The foreign capital company sends over the expat to run the business. Though this leader may have a job title, it’s a mistake to think that this person has any true authority. Silently, the unspoken authority will rest with someone who is first, Japanese, and second, has longevity with the company. Often it is the CFO, as they know the financials and can drive the business. However anyone can hold that authority and drive many of the decisions and politics that can help or hinder the expat. 

For a leader, expat or Japanese, who wants to lead a company in Japan, this critical consideration of systems analysis needs taken into consideration to driven and grow a a successful business here.

First, start with the humbling premise that, in general, for thousands of years this authority structure has worked in Japan. Accept it and embrace it. It has worked more often than it hasn’t worked. Go against tradition at your own risk. 

Next, build relationships, slowly, carefully. Understand who has the authority and realize it isn’t the job title. If there can be a trusted partnership, then the company tends to move in one strategic direction and is profitable and successful. 

Another approach, more Machiavellian, though just as relevant, is to remove those with the authority. In Japan, this can often be more difficult than in Western companies because of tight labour laws, this might take the leadership much more time and effort, along with psychological manipulation to make the individual(s) feel as unwelcome as possible and hopefully leave the organization. 

Is this the case of every organization? No, but in studying the systems analysis of Japanese business structures, it tends to be more true than not, and the analysis helps to unlock the black box that often confronts APAC leaders when they are diving into leading in Japan. 


David Sweet is the founder and CEO of FocusCore Japan, a leading executive search firm. He is author of six books and holds a Ph.D. in Leadership Development. For more information, contact him at David@FocusCoreGroup.com.