Tradition versus Modernity in Japanese Enterprise Management Human Capitalism: The Japanese Enterprise System as World Model.

By Robert Ozaki. Tokyo: Kodansha International, 1991 228pages. $19.95

Reviewed by Gregory Clark

Is it possible there could be two people called Robert Ozaki?

One is clearly the author of the book ‘Human Capitalism: The Japanese Enterprise System as World Model.’ In it, Ozaki, professor of economics at California State University at Hayward, says the excellence of Japanese management has little to do with traditional Japanese culture. Rather, it is due to the care and intelligence that Japan’s modern-minded managers use in handling their employees.

Indeed, and according to Ozaki, the approach taken in Japan amounts to a new form of capitalism — something that he describes as ‘ human capitalism.’ It is a model for the rest of the world, he says. Claims that it owes much to Japan’s unique culture and is therefore exclusive to Japan are false, he insists.

Now I do not want to seem to detract from any of these conclusions, but there also happens to be another book written by Robert Ozaki. Entitled ‘The Japanese: A Cultural Portrait’ and published in 1978, it is among one of the better outlines of how Japanese culture differs from other cultures. Indeed, it is so good and readable that I have long used it as a textbook in comparative culture classes.

This probably accounts for my shock on discovering that in his new book Ozaki not only rules out cultural factors entirely as an explanation for Japanese management; he even seems to pour scorn on people (some influenced perhaps by his earlier book) who do take a more cultural approach.

In the 1978 book, two chapters are devoted to groupism in Japan, described appropriately as the "longing for belonging" (P. 7). He points out that "Japanese culture has long viewed the intricate web of interdependencies as a fundamental fact of human relations," and that "in Japanese cultural tradition, once a master-follower relation- ship is established, it is presumed to remain harmonious for good" (Pp. 182 and 201).

He leaves us in no doubt that these deep-seated cultural traits are the result of Japan's unique history and are crucial to the understanding of modern Japan. Explaining what he sees as the unusual nature of the Japanese enterprise, he says: "According to the moral code of traditional Japan, all problems-personal and otherwise-are expected to be solved within one's group" (P. 205).

In the final chapter, titled "From Onda to Honda," Ozaki goes out of his way to emphasize the links between traditional Japan and modern Japanese management. It begins: "Impressed by the dynamism of Japanese corporations, many Westerners have wondered, 'What is the secret of their managerial system?' The secret is found in an obscure little book, Higurashi Suzui, written in the 18th century [which] tells the story of Onda Moku (1717-1762) who saved his provincial government from financial and moral bankruptcy" (P. 287). Japan’s major car maker, Honda, is given as an example of Onda’s philosophy at work.

Elsewhere Ozaki says that "while radical historical events, such as the fall of the Tokugawa regime and the total defeat in World War II, may alter the exterior of social organizations, the pattern of group behavior in Japan stays essentially the same" (P. 204).

That was Ozaki in 1978. But if we Westerners today were to seek the secret of Japanese management in Ozaki’s latest book, we would receive a very different message. Right at the beginning, Ozaki goes out of his way to tell us that: "It has been fashionable for Western observers to adopt a 'cultural' approach to Japan. The culture model alleges that Japanese culture is significantly different from Western culture, and that the Japanese economy that functions in the context of Japanese culture must be interpreted accordingly" (P. 2). Then, after accusing those who take this cultural approach of laxity, confusion, tautology, and overemphasis, he states boldly: "The truth of the matter is that human capitalism has little to do with traditional Japanese culture" (P. 2). He lists some of the companies in Japan that practice human capitalism. Strangely, Honda is included.

This is not to suggest that Ozaki's extraordinary and unexplained volte-face on the origins of Japanese-style capitalism discredits the rest of his book. On the contrary, he has given us what is probably the most detailed and persuasive outline to date of the many positive elements involved in Japanese-style management. True, Ozaki's claim that what we see in Japan amounts to a totally new form of capitalism, quite different from traditional capitalism, can be disputed. Japanese companies seek profits just as relentlessly as Western firms do and will manipulate the market just as ruthlessly if necessary to gain those profits.

That said, there is no doubt that there are important differences between the management of the Japanese enterprise and the typical Western enterprise. For as Ozaki points out, the strong emphasis today in Japan on employee cooperation and loyalty, on reinvestment and profit sharing rather than dividends for shareholders, and on employee training are all elements badly lacking in the Western company today.

Even so, I am bothered by the persistence and even vehemence with which Ozaki keeps coming back to the theme that Japanese culture has nothing to do with modern Japanese management. True, the Ozaki approach gains support from the many others — ‘revisionists’ they are often called - who today also want to deny the role of culture in explaining Japan’s behaviour. And when it comes to explaining Japanese management behaviour, the ‘revisionists’ provide several important and interesting reasons for believing that culture is not relevant.

Reason number one is the fact that so much that today is labeled Japanese management is obviously plain common sense: thinking long term; emphasizing market share over quarterly profits and dividends; giving priority to the welfare of one's work force and quality control; and so on. One would not normally have to look to bushido, or Zen, or Onda Moku, for an explanation of such commonsensical policies.

Second is the fact that many so-called unique aspects of Japanese management today used to flourish in U.S. and other Western enterprises - quality control circles, company songs, and greater emphasis on seniority or lifetime employment, for example.
Ozaki and others argue that Japan simply borrowed these elements of U.S. managerial technology in much the same way as it borrowed engineering technology.

But the clinching argument for Ozaki and other ‘revisionists’ is the fact that the prewar Japanese enterprise did not have lifetime employment, emphasis on quality, or the other aspects that characterize it today. Normal logic would say that prewar Japan was closer to the culture of traditional Japan than postwar Japan. From this it follows that the management systems we see in Japan owe little to traditional culture.

To quote Ozaki: "JSMS [Japanese-style management system] as such did not exist in prewar Japan" (P. 97). Or: "Human capitalism actually has American origins: The United States served as midwife at the birth" (P. 67).

Maybe. But in that case are we supposed to assume the differences between U.S. and Japanese management today are just an accident, that somewhere along the line Japanese managers became smart and adopted the good elements of former US management just when U.S. managers became stupid and began to reject or forget about those elements? And what are we to say about the seemingly convincing arguments Ozaki put forward in his 1978 book?

There is a way to get around all this confusion, and it is this: When we use the word ‘culture’ we need to distinguish between the surface aspects — lifestyle, religion, language etc — and the underlying value system. At the surface level, Japanese culture has many unusual aspects - bushido, Zen, and so on . But if we are talking about values, then the key elements in the past at least were not very different from those of the Anglo-Saxon, Germanic and other north European value systems, which also developed in relative isolation and which also passed through a prolonged period of full feudalism. As in Japan, here too we found a liking for group activities, diligence, pragmatism and so on.

So when the Anglo-Saxons began to take enterprise management seriously, as the basis of our emerging industrial society, they too came naturally to emphasize collectivism, quality control (pride in making things is a feature common to all advanced feudal societies), the long-term welfare of the enterprise group etc. , just as Japan does today. For all its faults, the feudal ethic can and does encourage sensible attitudes to production — group cooperation and an emphasis on quality in particular.

If prewar Japan had a much sloppier attitude toward enterprise management, it was for the same reasons that caused the poor enterprise management we Anglo-Saxons had in the early stages of our industrialization, namely, that it took our managers some time to realize that good collectivist management contributed more to profits than worker exploitation did. When we realized that, we had little trouble introducing the values of our former feudalistic societies — values that still existed and were respected in other areas of our societies. Today, our management systems may differ greatly from those of Japan. But only a few generations ago we were able to rely on our residual feudal legacy to create management systems very similar to what we see in Japan today.

So instead of having to explain Japan, we need to explain the rest of us. Why did we move away from what Ozaki calls humanistic management to embrace what I call the more rationalistic style of management — hire and fire. short-term profits etc? . And here the main reasons, surely, has to be the shift in our value systems away from feudalistic, collectivist values. This in turn was partly due to the passage of time. Another factor was the influence of the strong rationalistic tradition in Western civilization. While initially this may not have done much to influence things on the factory floor, it has long had a strong impact on our elites, and they in turn have come to have a strong impact on management systems. The shift from more instinctive management to more rationalistic management was inevitable.

By comparison, Japan's island isolation was more complete. Its feudalism was both more recent and more intense, and its elite was less influenced by the rationalism of east Asian civilization. Or to put it another way, Japan started with a stronger collectivist culture than we did and has been able to retain it longer. Germany, whose feudalism was also strong and only recently ended, remains somewhat closer to the Japanese model in some areas.

Ozaki seems to see culture at the more superficial level of everyday lifestyle, rather than value systems. He cites the rapid change in U.S. sexual mores as proof that culture changes quickly and therefore is not very important in determining things like management style.

Here Ozaki is being rather superficial in his approach. If we are trying to explain shifts in U.S. sexual mores, then we need to note the strong emphasis on logic and principles in the U.S. value system. In the past, religious and other conservative principles called for chastity. Today those principles have been replaced by more liberal principles, which allow much greater sexual freedom. So while the sexual mores may have changed greatly, the emphasis on principles remains the same as before. In this sense the value system has not changed.

We could go further and suggest that the fairly balanced attitudes that the Japanese have always managed to maintain in sexual mores is due to the lack of emphasis on principles within the value system.

Ozaki's other problem is to confuse the human with the humane. There is no doubt about the emphasis on the human factor in Japan. And often it is a good emphasis. The collegial atmosphere found in many enterprises, or between the workers in enterprises, can be very attractive. But another and more negative side also exists, and at times it can be rather inhumane.

As it happened, on the very day I began reading Human Capitalism, NHK (Japan Broadcasting Corp.), in connection with the recent financial scandals, ran an in-depth account of how one of Japan's leading banks forced its employees to fulfill their monthly quotas (norma) for new deposits. Those who failed by more than a certain percent had to remove much of their clothing and prostrate themselves on a desk in front of their colleagues in abject apology.

Admittedly, the bank concerned has a reputation for extreme pressure on employees. But the problem of quota fulfillment exists in many other companies. So, too, do the much publicized problems of severe, even brutal, indoctrination for new employees, the undue stress of maintaining relationships in the workplace, overwork leading to premature death (karoshi), and the posting of employees without their families being able to accompany them (tanshin-funin).

In his enthusiasm for the many and undoubtedly highly attractive aspects of Japanese management, Ozaki tends to ignore this less attractive side.