J. Enterprise Management, Vol. 2, No. 3, pp. 253 to 260, 1980 Printed in Great Britain

VALUE SYSTEMS AND ENTERPRISE MANAGEMENT


GREGORY CLARK



Professor International Division, Sophia University, Chiyoduku, Tokyo, Japan

The enigma of Japanese management can be stated quite simply: the nation which rejects most Western principles as to what constitutes rational enterprise management has little trouble creating one of the world's most efficient economies.

It plays down merit as the basis for promotion. It tolerates enterprise factionalism. It denies inter-enterprise mobility. It dislikes incentive wage systems. It largely rejects hireand-fire employment.

It is averse to laws and bindihg contracts. Even manuals and directives setting out duties are largely taboo.

Indeed, it seems even to deny there is such a thing as management science. Few institutions teach business as an academic discipline.

Baseball coaches who give simple hints on team spirit and leadership seem to be among the most widely consulted experts on the subject!

And yet the system obviously works. In a growing number of industries productivity per worker equals or exceeds the best in the West. And the trend will clearly continue well into the future. Predictions of Japan being inflicted with the "British disease" or falling into a fragility created by the contradictions of its own domestic values show little sign of fulfillment.

In saying this I realize I am not putting forward some important new discovery. Many in the West now appreciate Japan's success in creating a full range of energetic, expanding enterprises. And many are also coming to realize that more is involved than blind loyalty by workers or draconian management by bosses.

Instead they are pointing to such Japanese techniques as in-house training, consensus and bottom-up decision making, family-style concern for worker welfare, company trade unions and so on. Particular attention focuses on the Japanese practice of life-long employment.

The usual conclusion is that the Japanese, through some unusual wisdom, have discovered these techniques, and use them to create company loyalty, team spirit and work application. We are urged to emulate them.

Is it as simple as this? Take lifelong employment, for example, at least as it applies to white-collar employees, "Lifelong" in Japan turns out to be only up to around age 55-57, with the possibility of being "invited" to leave earlier if the company falls on bad times.

Even with early retirement, many in their last years of employment find themselves relegated to madogiwa-zoku (window watchers) with little real responsibility.

So men who have served their firms well and faithfully have had little choice but to embark on a new career at an age when adjustment is difficult and in a society that offers them few chances of new employment. On the face of things at least, it seems hard to conclude that the system is the key to the very real company loyalty that exists in Japan.

By contrast, many of the more enlightened Western firms, and most bureaucracies, offer virtually lifelong employment and on far more satisfactory terms, with a guarantee of rewarding work through to 65 or 70, followed by a leisurely retirement. Yet few of these firms can command anything like the loyalty found in Japan.

Or take the much-publicized consensus system found in most Japanese enterprises. Obviously it is a plus in terms of team spirit if employees can be allowed to join in decisionmaking. But this plus can easily be outweighed by the very large minus of delayed and lowest common denominator decisions. So consensusmaking in Japan often amounts to little more than a ritual whereby all are asked to accept a decision in advance of its being made formally -a small plus perhaps, but hardly likely to explain why the steel industry prospers in Japan and flounders in the UK.

Besides, if consensus is all-important, why do Japanese enterprises tolerate such open factionalism? For years Japan's steel giant-Nippon Steel, the merger of the former Fuji Steel and Yawata Steel companies-has been split down the middle into Fuji and Yawata factions. Almost every large Japanese organization has its competing factions centered on dominant personalities. Their rivalries and exclusiveness are often quite harmful.

In any case, are Western managers quite as insensitive to the need for company loyalty and team spirit as many who praise Japan seem to imply? If these managers do not go out of their way to organize company picnics or wedding presents for employees it could be because they operate under a value system that does not set great store on such things.

In their own way they too would like to see their employees happy and involved. But instead of group activity or family-style benefits, their value system emphasizes incentive wages, job mobility and independent leisure. If the productivity results are less than in Japan it may not be entirely the fault of the managers. It could be the result of major difference in value systems. It could be that the Japanese have somehow stumbled on a system far more appropriate to successful enterprise management than our systems. Or to put it another way, Japanese enterprise success may not simply be a matter of luck or skill in choosing the right management techniques. We need to know why techniques which work in Japan do not work elsewhere, why techniques which we believe necessary are not needed in Japan, or why we feel compelled to turn away from techniques which are needed.

Indeed, we may even have to probe further. To date many have tended to assume that the blend of individualism and the scientific rationalism of the West represented the apex of human development, and that the Western industrial enterprise was the economic manifestation of this apex. If today we are being outstripped by the Japanese enterprise we may need to reappraise the entire philosophical basis of our value systems.

* The Japanese Tribe (in Japanese). The Simul Press, 1977. Yuniiku no Nihonjin (The Unique Japanese), Kodansha, 1979.

I have argued elsewhere* that the main difference between Japanese values and those found in other culturally advanced societies is both sharp and simple. Whereas the rest of us have relied on ideologies and other sets of argued principles as the basis of our universalistic value systems, the Japanese have retained and refined the instinctive, situational and human-relations-particularistic-values usually found only in small groups (e.g. the family) or in primitive societies.

Our values tend to be more intellectual; Japanese values are more emotional.

As to why we find this only in Japan, I suggest it has much to do with Japan's relative lack of foreign conflict for much of its history, and the consequent lack of pressure to develop national ideologies. Once we develop ideologies we come to see the intellectual, abstract approach as superior to group instincts and feelings.

We seek principles as a guide to action.

To date we have always assumed that a value system that emphasizes argued principles just be superior to one that relies on the instinctive, and the rules of custom and tradition endorsed by those instincts. In many respects that is true, for example in creating sciences, philosophies, laws and concepts of central government.

However, when it comes to organizing people to work in an enterprise, the emotional approach may be more effective. This could be particularly true in Japan, where they had much time and pressure to develop complex and highly sophisticated rules of human relations. In other words, while the basis of Japanese values is the same as we find in simple societies, the content is far more advanced.

Perhaps the best example is the use of seniority rather than merit as the basis for promotion. In all the culturally advanced, nonJapanese societies, merit is the preferred basis. It is seen as more principled and rational.

We non-Japanese regard seniority as too arbitrary and unreasoned (though we use it instinctively in our family groups).

Is the merit principle applied to the enterprise as rational as we presume? We assume that it satisfies people and encourages them to more productive effort. This, however, assumes that we can in fact find a truly objective stan
dard of merit, which is often extremely difficult. Even if we can find that standard, it may not be as effective as we think. To encourage greater efforts on the part of one or two promotion hopefuls we may well end up discouraging effort from the half dozen or so who are going to be passed over.

By any objective criterion that is hardly a productivity plus. If it undermines the emotional unity and cooperation within the group it can be a very large minus.

Seen in this light seniority promotion may not be as irrational as it seems. Indeed, as applied in Japan it may even have some positive advantages.

It allows, for example, the all-important "bottom-up" approach. Since seniors do not owe their position to some alleged intelligence or decision-making merit, they are quite happy to delegate authority and ideas formulation to those below them. They see no threat in admitting that in some areas younger men can perform as well or better.

Seniority promotion also allows the important sempai/kohai (literally older generation/ younger generation) system found in almost all Japanese organizations, Here the older members automatically assume parental-style responsibility for later entrants, who in turn are expected to show respect and affection to the seniors under whose wing they have fallen.

The system is crucial in maintaining emotional solidarity and identity within the enterprise but it is largely incompatible with any merit or incentive system, no matter how objective. Many Western enterprises entering Japan have found to their surprise that even salesmen will reject incentive payment schemes. The employees fear damage to group and sempai/kohai relations.

True, some reward for merit is needed if organizations are not to atrophy, but it has to be done subtly. Most Japanese enterprises find they can do it quite well within the framework of the seniority system, for example by offering favourable work assignments, factional preference and so on. Such flexibility is a spinoff from emotional management.

There is, of course, one level-the top onewhere merit has to be used, and openly. This exception happens neatly to prove our rule. The main merit criterion chosen is ability to provide father-figure leadership. Once a man has been chosen, usually through a diffused consensus, all others of equal or greater seniority are expected to resign and accept offers of other positions outside the organization.

It is assumed that the emotional strain of asking them to work under their equal or junior is too great.

It is in this context that we need to see the full range of Japanese management techniques. The aim first and foremost is to preserve and foster the emotional bonds and family-style atmosphere within the enterprise group.

All other objectives-profit-conscious management, control from the top, scientific accounting-are secondary. Even factions have to be tolerated if they help to strengthen group identification.

On the other hand, once the emotional bonds are established, Japanese management can be as tough as any, with its demands for extra effort, forfeited holidays, early retirement and so on.

We need to understand that for the most part employees respond to these demands voluntarily, as part of a quite firmly understood framework of rights and obligations.

If the employer falls down in meeting his share of the obligations-extra bonuses in good times, regular pay raises, "sincerity" in negotiations, worker benefits-he may face emotional outbursts from his workers which would embarrass even hardened Western unionists.

Top executives will be barricaded in their offices, insulting posters will be hung over the company premises, demure secretaries will carry armbands threatening struggle to the finish.

In the face of this uprising by the "children", the enterprise "parents" have little choice but to give in. The balance of obligations is restored.

In other words, where the Western enterprise has its carefully worked out balance of contractual rights and obligations between employer and employee, the Japanese enterprise has its subtle emotional balance.

It is a coherent whole, with its own validity and consistency. To Western eyes the interminable conferences, the rituals of shared consensus, the management paternalism, the company songs and so on may seem immature and wasteful.

To Japanese eyes, and even to quite sophisticated and educated eyes, they are all part of a viable and quite acceptable package. Some might like a few changes here or there, but the overall concept of the enterprise as the focus for emotional rather than principled loyalties is preferred.

Take away the key elements of the package and it starts to disintegrate, as many Western firms entering Japan with management reforming zeal have found too late to their cost.

Which brings me back to the more philosophical question of how and why we see the enterprise in such different terms. To date we in the West have assumed that the path of social advance requires us to move from the instinctive to the principled, the emotional to the intellectual.

Or as the sociologists and economists put it, we move from the particularistic to the universalistic. Instead of seeing things in terms of particular relationships and situations, we are urged to take a broader view based on universally applicable standards. Implicit in this scheme of things is the equation of universalism with rationality.


On this basis most have tended to see the world very much in terms of Fig 1, with economic development showing a direct functional relationship to our level of universalism. Naturally, we like to place our own societies of northern Europe and America (N) at the top.

The problem, of course, is that Fig. 1 requires us to classify nations like China and

India (C and I) as "backward" in terms of values, even though they have civilizations more principled than in the West, and certainly more so than in Japan. A similar problem exists when we relegate southern Europe/ America (S) to the left of N.

To get round the problem the scholars have generally ignored it. Instead they have concentrated on the nature of groups within the various societies. They have defined groups such as clan (extended family) and caste as found in China and India as particularistic, and therefore backward, since they involved association with a particular and strictly-defined group of people on the basis of traditional and rigid criteria. As a result these groups were said to be less than rational.

At the other end of the scale they located enterprise and nation. These two groups were said to be most rational because they required value systems that allowed people to discard outdated and traditional rules, and to come together on a more functional and practical basis.

Intermediate societies and groups were seen including both rational and irrational aspects.

The problem in all this, however, is Japan. Thirty years ago on the basis of these rather artificial criteria it could be slotted into an intermediate position at J. But today its development is on a par with N, but its values, particularly within the enterprise, show little sign of change to universalism. It has to be located at J, far from the curve OT. Clearly we need to take another hard look at the whole concept of particularism, universalism and social advance as it has been developed to date. And a good starting point as any is the concept of the enterprise as a "rational" grouping.

Some have noted with bemused interest the way the Japanese identify themselves by place of work rather than the nature of their work. The hypothetical example is the engineer or driver who is asked what he does and in the West says engineer or driver, but in Japan he says he works for XX company.

In real life we have the way people automatically introduce themselves or others as Mr. Soand-So of such-and-such an organization, and will carry cards and badges to prove it.

In Western eyes, the Japanese approach is backward and feudal. The attributes of one's work should be more important than its location; being an engineer or even a driver should be more important than the fact of working for XX company. We believe strongly that it is only when people take pride and see identity in such professional qualifications there that will be a stimulus for progress. In any case we see the ability to attach to abstract attribute as more "intellectual" than the instinctive, emotional attachment to place of work.

But even at this seemingly obvious level, can we be sure that the more "intellectual" approach of the West is an advantage?

For example, a major plus in the Japanese enterprise is the way technical and supervisory staff are quite happy to work on the factory floor, even if they do get their hands dirty. People whose identity hangs on maintaining their professional status are less likely to make that concession.

The much-noted and much-praised ease with which people can be shifted from one type of work to another in response to technological change is another by-product of the Japanese approach.

For lower level workers-drivers rather than engineers-trade union membership becomes an important prop to identity. But whereas in the West the union will tend to be organized on the basis of attribute-the craft union-in Japan it is location-the company union.

Experience suggests the latter is often considerably less harmful to productivity than the former.

True, emphasis on location rather than attribute can lead to the lack of inter-enterprise mobility that bothers Western management specialists so much. It can also lead to a lack of professional drive and discipline in the sciences and advanced technologies.

These may be very small minuses to pay for the very large pluses outlined above, and they can, in any case, be easily compensated for by in-house training and the borrowing of skills developed by others.

At the level of applied technology and quality control, where concentrated group effort may be a more important factor than individual pride, there are signs the Japanese already have an edge over the West.

In short, the "feudal" approach of the Japanese to the enterprise may in its very conceptual basis, quite apart from its actual working, be superior to the more "advanced" Western approach.

As the Japanese put it, "the enterprise is people." An approach based on that rather simple and obvious truth may be more logical and rational than one that tries to convert the enterprise, and the employment in that enterprise, into some abstract concept regulated by intellectually-satisfying principles.

True, there are many groups in advanced societies where a more "intellectual" approach is in fact needed, where attribute is more important than location, where abstract concepts are more important than relations with people. Religious, political and professional groups are obvious examples.

So too are other issue groups (consumer protection, women's liberation) and even academic institutions perhaps. With due respect, I suggest these groups are better organized in the non-Japanese societies than in Japan.

But little of this is relevant to the enterprise group. Why? Because unlike politics, religion or women's liberation, there really is little satisfactory "intellectual" basis on which to ask people to identify with most industrial enterprises.

There is no principle or ideological satisfaction involved in making cars or plucking chickens. In this situation a value system that allows direct emotional attachment to place of work is better.

It is in this context that we can go back to our earlier Fig. 1. Already it should be clear that its basic fallacy is to equate universalism with rationality.

It should be equated to rationalism-the searching after principles which one believes are rational which is a very different thing.

As we have already seen, the emotional, particularistic approach can also show a remarkable rationality at times, with its ability to tap group energies or approach situations pragmatically. It has the logic of non-logic, as the Japanese sometimes put it.

Obviously, too much of the particularistic approach is not likely to help growth. Tribes may enjoy good human relations and cooperation, but unless they have some principles-contract, organization and technology-they will remain tribes.

The ideal, perhaps, is a balance of the two. The Japanese with their ability to retain particularistic values while importing outside ideas and scientific concepts may come closer to this than many of the rest of us.

If we go too far in our pursuit of principles and ideologies, we tend to look down on the emotional/practical even when it is clearly needed. We tend to slip into dogmatism. So too much universalism, like too much particularism, can be a bad thing.

This redefinition of universalism in turn allows us to revise our earlier hierarchy of groups. Instead of trying to classify them according to whether they are "rational," we should simply look at the extent to which they are based on principles rather than people, on attributes rather than location.

On this basis it should be clear that clan (extended family) as found in China, and caste as found in India, are highly univeralistic groups. They are based on strict attributes, endorsed by proud ideologies and bound together by firm principles.

They do not rely on emotional interaction by members. In the same way, issue groups and moves for regional autonomy in advanced societies also come near the top of the universalistic scale, as I have defined it. So too does class, since it is based on attributes rather than location.

Nation, however, is a more intermediate group; as practiced in Japan at least, physical location and emotional interaction are more important than cultural attribute or ideology.

On the particularistic side of the scale there is a clear hierarchy of location-based groups. It begins with family/tribe and continues up through village and feudal fief until it reaches its natural successor-the enterprise.

(As some have pointed out, the Japanese enterprise often preserves not only the attitudes and structure but even the very terminology of the Tokugawa han bureaucracy.)

Figure 2 shows the revised situation. Keeping N in its original position relative to J1 (but expanding it somewhat), we move I, C and S horizontally to new positions at I, C1 and S,.

0T1 is the logical candidate to replace OT, confirming empirically what I have already argued in the case of Japan-that optimum growth (Y) comes when societies can combine the emotional with the intellectual.

It also suggests that the problem for societies with long, post-feudal civilizations is not that they are too "backward" to accept industrialization, but that they are too "advanced." Their attachment to the principled approach makes it hard for them to attach to something as unprincipled as the industrial enterprise.

The main discovery is that Japan and the Western nations may be much closer psychologically to each other than they realized. We have a neat explanation for the "datsu Ajia" or "forsake Asia" (to embrace Europe) trend in Japanese thinking.

In particular, we may be able to explain the strange affinity between the Japanese and the Germans, the last of the European peoples to graduate from semi-feudalism.

This in turn leads to another question: if J1 and N remain relatively close, why does a large gap exist between Japanese and Western management techniques? Even if there is a gap, why should we assume that both of us have to remain forever on our respective sides of Y?

In many respects the Japanese and Western psychologies may in fact be closer than most realize, for example in the grassroots vitality to our societies and the aggressiveness of our wars.

When it comes to organizing small groups such as nuclear family, fighting group or work cell we Westerners can be almost as ready as the Japanese to cast aside formal principles and to operate in terms of direct needs or instincts.

It is only when we try to organize larger groups that we change. Here we see a choice between instincts and principles and the bias of our value system clearly favours the latter. So our societies have all moved beyond Y, unlike Japan whose value system remains biassed in the opposite direction.

More importantly, most of the educated members of our societies want to move even further to the right of the Y apex. They still see the world in terms of the curve OT. They see the greater "intellectualization" of our societies as progress.

As a result bureaucracies strengthen, planners and ideologues meddle, law courts expand, talented men turn further away from employment in manufacturing, class divisions persist, regional autonomy is sought as a matter of principle, trade unions become even more finely demarcated (the caste-isation of our societies, it seems).

In short, we contract the "British disease." We are firmly locked into OT rather than OT, despite, or rather because of, the prowess of our intellectualism.

Once again it is the exception that could prove the rule. An aspect of scientific management is the demand objectively to determine reasons for falling productivity.

Many in the West are now coming to realize, quite independently of the Japanese example, that a major problem is the lack of emotional work identification on the part of the employees. In other words, they realize we are on the wrong side of Y.

The result is the many experiments in "worker involvement," most of which bear a remarkable resemblance to what has long been practised in Japan.

Some stress worker participation in decision or management. Some prefer to divide the enterprise into small work groups. Some emphasize Japanese-style benefits and familystyle concern for employees. Most try to wean workers away from craft unions.

In this area at least, we are trying to move back from N to something closer to J1.

It is not an easy process. In the first place it is often strongly opposed by the more radical and intellectual in our midst. They see it, not incorrectly, as a return to feudalism and paternalism.

Secondly we lack the complex rules and framework of emotional rights and obligation developed by the Japanese over their long history. To offer lifelong employment to workers is meaningless without the concept of an emotional obligation-on or giri-to the enterprise in return.

Breaking enterprises into small groups can be dangerous if we do not have the Japanese emotional techinques for getting those groups to cooperate. We end up with the worst of both worlds.

One alternative is to gain a semi-intellectual level of attribute involvement through the creation of a company "religion" as we find with some U.S. companies, e.g. IBM or Texas Instruments. That is probably something that only large and successful companies can achieve.

Another example to follow may be provided by Japanese subsidiaries overseas, some of which have been surprisingly successful. Attention to worker welfare is appreciated, especially in smaller, non-unionized enterprises in Western societies.

So too are efforts to remove class or status distinctions by requiring all employees to wear identical uniforms and eat in the same facilities.

In Southeast Asia workers are said to like the family-style atmosphere created in some Japanese enterprises.

One problem in Asia is the recruitment of educated staff, especially those of Indian and Chinese origin. They are said to resent the lack of merit promotion and the attempts to make them integrate into, the cloying family-style atmosphere of the enterprise.

Most of the best graduates are said to prefer the "dryer" approach of US and UK firms. It is a serious problem, since without a constant influx of young, vigorous, talented staff the Japanese management approach quickly withers.

A similar problem will, I believe, start to emerge with Japanese enterprises in the West. The gap between particularistic and universalistic value systems cannot be easily bridged.

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