Japan's embattled corporate culture will need more than the axing
of company chiefs following a summer of crises that exposed huge gaps in
the country's once formidable industry.
With the reputation of three of its leading companies tottering from a
spate of scandals, Japan Inc desperately needs to reinvent itself, while
reinforcing the "quality first" positioning that helped power the
country's economy throughout much of the '70s and '80s.
Whether the crises were the result of cutbacks in quality control
following Japan's prolonged recession is uncertain.
What is certain is that they showed up a lack of accountability,
transparency, customer concern and crisis management skills, which need
to be shored up if Japanese brands are to dominate in an increasingly
customer-centric global market.
So far, the response to Snow Brand's contamination scare that sickened
nearly 15,000 people, Mitsubishi Motors' 20-year cover-up of customer
complaints and the ongoing Bridgestone/Firestone tyre crisis that has
been linked to 134 deaths in North and South America have kept with
cultural norms.
The heads at the three beleaguered corporations were forced out - the
latest to go at the end of last month was Bridgestone/Firestone chief
executive and chairman of US operations Masatoshi Ono, who was largely
invisible in the early days of the tyre crisis.
Ono's departure follows the replacement of Snow Brand's president
Tetsuro Ishikawa with managing director Kohei Nishi, and Mitsubishi
Motors' president Katsuhiko Kawasoe with Takashi Sonobe, an executive
vice-president in charge of alliance matters.
Few believe this adherence to cultural norms will achieve much, unless
Japanese industry take the crises to heart and updates the prevailing
corporate culture, one that harks back to Japan's "history of recovery
and development since World War II", according to Grey Worldwide Japan
president and CEO Terry Mori.
There are various aspects to this, as Mr Mori explained.
The interest of organisations and companies always precede
individuals.
"Priority for a company employee is, in most cases, protection of the
company before the safety of consumers," he said.
"This is often true from the management to plant labour."
Over the years, Japanese management also appear to have picked up on the
bureaucrats' habit of concealing mistakes and leaving them to their
successors to resolve.
"The same applies to Mitsubishi. There have been management and senior
managers who came to know (the bureaucrats' style of operation) well,"
said Mr Mori.
Unfortunately, it's not a corporate culture understood elsewhere.
For that matter, neither is it accepted in today's Japan amid the rise
in consumer power.
Though nowhere near Western levels, Japanese consumers have shown an
unwillingness to accept corporate misdeeds.
This was clearly seen in the way they shunned Sogo, outraged by a plan
to use taxpayers' money to bail out the bankrupt department store.
So Japanese companies that shun these lessons could well find themselves
losing their customers and their investors. Even their companies.
All three companies saw their share prices slashed by as much as half in
the weeks following the crises.
The bottomline for one of the corporations has also fallen victim to the
crisis.
At the end of last month, Snow Brand announced a group net loss of
US$442 million and a pretax loss of $501 million for the
last fiscal year, compared with a previous earnings estimate of $84 million in group net profit and a pretax profit of $214
million.
As part of the restructuring to return to the black in 2003, the company
will cut its workforce by 1,300 to 5,500 and directors' salaries by 30
per cent.
Bridgestone/Firestone customers have already lost faith in the
company.
An independent online survey by I.think Inc found that only 30 per cent
of those polled said they would buy a vehicle with Firestone tires.
The poll also found that only 26 per cent thought the tyremaker acted
responsibly and had done all it could to correct its problems.
"All three instances are examples of flawed corporate governance and
crisis management systems," said Ms Fumiko Kinoshita of Hakuhodo's
corporate public relations division.
"There are many lessons to be learnt, both in terms of crisis response
in times of trouble and risk management to prevent such problems in the
future."
Meanwhile, all three companies have pledged to win back customers'
trust.
Snow Brand's 'customer first' policy has led to the setting up of a
product safety audit department under the president's supervision, and
with a third party specialist member. It also introduced a 24-hour
hotline.
The departure of former president Mr Ishikawa along with seven
executives was part of a revamp of management after it was stung by
charges that it was slow-footed in responding to the contamination
crisis.
"As one of the ways to rebuild our image, we have now increased our
disclosure level," said Snow Brand Hong Kong general manager Takahiro
Hamada.
Mr Hamada pointed to the setting up of a management advisory committee,
which comprises external specialists, expansion of its Web pages for
investors and customers, and changes to its labelling system to help
customers identify which factory produced the product being
purchased.
Mitsubishi, which is partly owned by DaimlerChrysler, said it will
"rethink the whole vehicle building process" and seek to
"uncompromisingly create and supply products and services to satisfy
customers".
The country's fourth-largest auto-maker has also promised to become more
transparent in its dealings in making its "transition into a global
corporation" said its PR department manager N. Nishizaki.
But will these promised changes actually lead to much-needed
accountability and transparency?
Changes both in and outside Japan will probably force change on
corporations.
As the global marketplace opens Japan up to more customers and investors
outside, the pressure to change will become both immense and
unavoidable.
A revolution that is gaining ground within is also expected to force the
issue.
"Gentle Japanese consumers now have a weapon to confront big companies -
the Internet," said Grey's Mr Mori.
"There have been several cases in the past year or two where consumers
have won against major companies with the help of the Internet."
