Japan's ABCs of management for America's XYZs

In bookstores on both sides of the Pacific, opposite themes are selling well. In Japan, America's apparent business decline is a popular topic for readers. In the United States, Japanese secrets of economic success have hit best-seller lists.

American corporate leaders, searching for a new light to lead them out of the valley of slow productivity, are beginning to learn how to compete with their Far East rival -- on its won terms.

Their counterparts in Japan are increasingly wary of the quality of "Made in the US" products, a feeling fostered by such new books as "The Great American Disease" by a Japanese professor.

The latest US books on Japan's productivity triumphs are "Theory Z: How American Business Can Meet the Japanese Challenge" (Addison-Wesley Publishing Company), by William Ouchi, a professor at the University of California at Los Angeles, and "The Art of Japanese Management" (Simon & Schuster), By Richard T. Pascale of Stanford Business School and Anthony G. Athos of Harvard Business School.

US companies have tried to figure out Japanese business practices for the past decade. Many, such as Hewlett-Packard and Intel, have already transplanted Japan's management methods, replacing rigid hierarchy for more egalitarian decisionmaking.

But the consensus is weak on just what tricks American corporations can pick up, or even want to.

Does the US need a more industrious work force? Government subsides and policies? Smarter marketing? Higher debt loads? Strong protectionism? The Japanese cultural traits that breed cooperation over competitiveness? Or the latest transplant, robotics?

All have helped Japan. Also, the Asian economic giant has an internal cohesion, ethnic homogeneity, and geographic insularity which have spawned collaborative business relationships. That has accelerated Japan's three-decade evolution from exporting raw silk, cheap toys, and lacquer boxes to the sophisticated products to today's Sonys, Hondas, and Mitsubishis.

Partly because of higher rates of literacy, savings, and capital formation than in the US, Japan now claims 8 percent of the world's gross national product and is heading for 10 percent by 1990. Its trade with the US is doubling about every five years.

Herman Kahn of the Hudson Insitute, an Asian expert, predicted in the late 1960s that Japan would exceed the US in GNP per capita by the mid-1980s. That threshold could be reached before then.

Japan's breathtaking pace, in a way, telescopes America's progress. In the 1950s, Japan's economy resembled the United States during the Civil War. By 1970, it looked like the US in the 1950s. And by 1975, Japan had all the traits of 1970 America.

Is Japan unique? Edward Lincoln, of the Japan Economic Institute of America, comments: "The concept of 'Japan Inc.' just does not hold." Americans can learn Japanese methods in order to compete in global -- as well as US --markets.

"The US still has all the natural advantages: a big market share, abundant resources, and political influence," says William L. Givens, president of Twain Associates Inc., a Massachusetts consulting firm.

In "The Art of Japanese Management," the authors stress product and marketing strategies. The Japanese, for instance, opt for high growth over high profits, developing their wares in domestic markets, then launching global initiatives by using low prices to drive a wedge into a competitor's market share. The latest Japanese move is to produce high-quality products and services to maintain that share.

Dr. Ouchi, however, focuses on management and uses the term Theory Z to show that Japanese methods can be universal. Theory X and Y are terms used by the MIT professor Douglas McGregor, who found that American managers regarded workers either as untrustworthy and lazy (X) or hardworking and responsible (Y).

Theory Z calls for greater mutual trust in companies, relying more on subtlety and intuition in management than on numbers or the predictable, and creating an intimacy between executives and workers.

"We don't want to emulate the Japanese," says author Ouchi, a Japanese-American raised in Hawaii. "We wouldn't want American workers putting on uniforms in the morning and singing the company song.

"We should look at the Japanese model and use that to find out what is distinctive about American companies. Then build on that."

Unlike Japanese firms, says Dr. Ouchi, US companies have learned how to deal with a diversity of employees. (Japan, for instance, still excludes women and minorities from many jobs.)

The US tradition is one of heavily bureacratic corporations loaded with specialists. The Japanese, however, sacrifice expertise for enhanced integration of workers into the corporate structure.

Those US companies most likely to succeed, managerial theorists believe, are ones that can best coordinate specialists -- Japanese-style.

Dr. Ouchi finds that in traditional US businesses, the individual worker feels powerless because everyone else is "too busy" to support him.

Japanese workers are very willing to support one another, and the individual feels more powerful. Ironically, Dr. Ouchi reports, the charge that Japanese companies suppress individual freedom is completely opposite to what workers report.

In Japan, it is often difficult to find out who is in charge, he says. No one is in charge because everyone is in charge. The underlying motto: "For you to make it, every worker has to make it."

Employees don't wait for a leader to imbue the firm with purpose. Through collective decisionmaking, the employees shape the context of their work and thus transform the content of their daily duties. The company's power is not the force wielded by the employer over the employees, but the workers exercising their own choice.

In Japan, organization charts are often strictly horizontal, while US charts are vertical pyramids, Dr. Ouchi says.

One reason: The US is an adversarial society, Japan is a consensus society. "Consensus," says Mr. Lincoln, "is the majority convincing the minority that the decision is notm that bad." Public confrontation is avoided at all costs, as seen in the fact that a nation of 117 million people has only about 5,000 lawyers.

America's worker specialization has its origins in the country's free-wheeling financial markets. With so many stockholders to please, managers often have more regard for quarterly profits than employees. In hard times, layoffs can be expected. Company loyalty is hard to keep, and workers respond by becoming experts in a field rather than the company. This enhances their marketability outside the company if need be, says Dr. Ouchi.

This division of labor often causes problems of coordination. To compete Japanese-style, Theory Z lays out 13 steps that could help a US company shift to a participative, intergrated work force. Some of the key steps include:

* Define a corporate philosophy.

In the past year, says Paul R. Lawrence, a Harvard Business School professor, organizational behaviorists have begun to actively refer to the peculiar "cultures" within individual companies -- the office rituals, the almost mythical stories retold, and the implicit approach to business. One division may have a widely different culture from another division of the same company. Theory Z requires managers to try to unify and make explicit the sometimes unspoken corporate philosophy, knitting together the various subcultures into a larger culture, Dr. Ouchi says.

* Collective decisionmaking.

By forgoing orders from the top down -- orders that are often make with Olympian aloofness -- American managers can achieve grass-roots compromise among workers for major decisions. This democratic, but tedious, process of consensus is common in Japanese companies, leading to an agreement that can be enthusiastically supported.

The company's survival thus rests on how much workers take responsibility for their organization, allowing each employee to make a difference in the company's purpose in a way that nurtures himself as well.

"I'm not saying just be nice to workers and pat them on the head," says Dr. Ouchi, who believes old-style paternalism would not always allow a participatory work place. Companies still need some hierarchy and some discipline.

Executives can send symbolic signals that they listen to workers, such as eliminating executive perks (separate dining and parking) and providing greater access to their offices.

* Security of employment.

Japanese companies hire at only entry level, and not for a specific job. It is mutally understood that neither the employer nor the worker will terminate employment. And compensation is based more on seniority than merit. Security of a job for life, even during hard times, also requires moving workers into different fields -- engineers in sales, for instance -- in the course of a nonspecialized career. Promotions and salaries come slowly.

Pitfalls for Theory Z are many. Some executives simply slap on a Z-type program as a way to raise next year's profits, uncommitted to the necessary long-term perspectives and structural changes. Also, latter-day "Z" companies can suddenly be taken over by "tough guys," Dr. Ouchi says, who take advantages of employees openness.

Most American companies, he admits, will just throw more capital and technology at the productivity problem, rather than confront the deep cultural changes needed for new management techniques.

"It's hard to be optimistic that American business will learn to integrate workers better than they have," he says.