The Journal The Authority on Global Business in Japan

In the space of a little more than a decade, Japanese attitudes and approaches to employment have under­gone a seismic shift. Maybe not every business in the country has completely swept away all vestiges of traditional work style, but an increasing number are encouraging employees to work from home, limiting overtime hours, and introducing measures to help their personnel achieve better work–life balance. Women are increasingly seen in leadership roles previously limited to men. Time off for new parents—male and female—is becoming the norm. And some people are taking their full holiday entitlements.

While these changes are being broadly welcomed, there is also recognition that more is needed, because Japan’s demo­graphic crisis is only going to worsen in the years to come.

SHRINKING WORKFORCE
Japan has the lowest unemployment rate of all the Group of Seven economies, a bloc also comprising Canada, France, Germany, Italy, the United Kingdom, and the United States. The ratio of Japanese people of working age who are employed is at its highest since the 1960s, while that of job offers per applicant is near its all-time high of 1.6, achieved in 1963. Those figures are evidence of the worsening shortage of staff, a problem that affects every company in Japan. And predictions are that those shortages are going to become even more acute.

Since the population began to contract in 2010, the total number of Japanese has fallen by about 1.3 million. The United Nations predicts that, by 2065, it will shrink by a further 28 million people, a 22-percent decline from the present figure.

The population isn’t simply shrinking, it is aging rapidly. Since the turn of the century, the number of working-age Japanese has fallen by 13 percent. By 2040, more than 1 in 3 of all people in Japan will be more than 65 years of age—the highest proportion in the world.

THE PLAN
Given this looming threat to the nation’s economic well-being, the government released an action plan in March 2017. It is designed to reform the way in which people work, declaring a commitment to changes that will “enable every worker to have the hope of a better future.”

The plan states: “We will build a society where everyone can choose various work styles to build one’s own future. We will create various opportunities for motivated people.”

The document outlines a number of areas in which the government will seek reform, including making mid-career changes easier, encouraging flexibility in the job market, and reducing the gap between regular and non-regular employees.

It was a completely new suggestion that caught the atten­tion of many. Among its proposals, the government is calling for companies to permit their staff to have side jobs or second jobs in addition to their main employment.

According to the Ministry of Health, Labour and Welfare, there are about 3.68 million people who want a second job but are unable to take one because more than 85 percent of companies currently forbid employees to work elsewhere. In other countries, employers look more kindly on staff who share their working time—especially with startups, which benefit from workers learning additional skills.

REAL CHANGE
Nicolas Tollie, head of Japan for Guidepoint Global, LLC, believes this sea change will have a major impact on employ­ment opportunities here.

“Up to now, internal compliance rules at most Japanese corporations did not allow employees to have side jobs,” he told The ACCJ Journal. “In addition, corporate culture and values mean that it is considered disloyal to have another job. Lifetime employment here means that you commit your entire life to the company, and the company in return provides employment security.”

However, a number of Japanese companies, such as SoftBank Group Corp., Nissan Motor Company, Ltd., and Rohto Pharmaceutical Co., Ltd., are introducing sweeping employment reforms. And Kagome Co., Ltd. President Naoyuki Terada has said that his company will cut working hours 10 percent and permit staff to take side jobs.

“I believe these sorts of changes make companies a more attractive value proposition for employees, and in turn companies gain access to external knowledge and bench­marks through their employees’ interactions with the market­place,” said Tollie. Guidepoint connects clients with experts from a global network of specialists in any number of business fields, enabling them to make better decisions.

Guidepoint’s experts have other jobs, demonstrating the benefit of permitting people with valuable skills to share their knowledge. “Our clients are the large corporates, buy-side and sell-side analysts, private equity hedge funds, and consultants who are reinventing the world through strategy, corporate planning, mergers and acquisitions, due diligence, and research and development activities. They are constantly looking to speak with experts all over the world, and to do so within 24 hours,” Tollie said.

“Millennials are now looking for workplaces with flexibility, where they are able to work while also engaging in other activities concurrently with their main jobs,” he added. “For workers, this enables them to fully commit to their main job at the same time as having the opportunity, for example, to go to a yoga class, take care of their children, or share knowledge or skills with another organization.”

GLOBAL COMPETITION
The need for Japanese companies to embrace this attitude towards work among young employees is even more critical given that those companies are going to be increasingly competing for top talent in a global market. If corporations in New York, London, Hong Kong, and Beijing are being flexible with their staff, Tollie said, then companies here need to do the same to stay competitive.

Makiko Tachimori, president of Harmony Jinzai Inc. and vice-chair of the American Chamber of Commerce in Japan (ACCJ) Women in Business Committee, said the difference between what she sees today and what she witnessed starting out as one of a handful of women on the career track at a large securities company 30 years ago is huge. Sexual and power harassment were par for the course three decades ago and were considered completely normal, she said.

And while simply making the workplace a happier and more comfortable environment is important, she said, Japan is at a critical point.

“Large companies are unlikely to go bankrupt because there is a shortage of staff, but those only account for about 5 percent of the total in Japan,” she said, pointing to the recent announcement by The Bank of Tokyo-Mitsubishi UFJ that the company will shed 10,000 staff—fully 7 percent of its workforce—in the coming years, thanks to increased use of technology.

“The remaining 95 percent are small or medium-sized enterprises, and they are the ones who are already feeling the impact of insufficient workers,” Tachimori explained.

“It is clear that the government has taken this step of encouraging second jobs as one way to deal with that labor shortage and the need to share people’s skills,” she explained. “And women also can benefit if they look at second jobs as a new opportunity to sharpen their skills and then use that to broaden their career possibilities.”

Another benefit is that people at both companies are exposed to new ideas and knowledge. This serves to improve knowledge throughout Japan’s business world while smaller companies that would not otherwise be able to hire extremely capable staff on full-time contracts can now access those individuals.

POTENTIAL PITFALLS
There are, however, some negatives that must be overcome if the system of second jobs is to cement its place in corporate culture here, Tachimori admitted. One concern is how to protect company secrets and intellectual property.

This is a concern shared by Jim Weisser, general manager of BroadCloud in Japan for Maryland-based Broadsoft and vice-chair of the ACCJ Venture Company Task Force. He said there have been substantial positive changes in the Japanese working environment, including the Cool Biz dress code campaign, a focus on work style reform (hatarakikata kaikaku), and an improved social status for entrepreneurs.

But, he is less convinced that creating a new generation of job-sharing workers will have the benefits that the govern­ment anticipates.

“How is this supposed to work?” Weisser asked, wondering if employees could be prevented from also working for a company’s competitors. “I see more opportunities for produc­tivity increases in the back office that everyone has been aware of for years.”

Mike Alfant, a former ACCJ president who is CEO of technology consultancy Fusion Systems and an advisor to the ACCJ Venture Company Task Force agrees.

“There is definitely a shortage of employees in all fields right now, but the impact at present is situational, because a lack of clerks in a convenience store obviously does not have the same impact as a shortfall in executive directors with experience in mergers and acquisitions,” he said. “So, it is a strategic problem and one that I think is going to take time to rectify.”

Complex problems require sophisticated answers, he added, and encouraging companies to let their best staff assist business rivals is not a sophisticated solution.

Alfant, an entrepreneur who has set up about 30 companies in Japan since first arriving in 1990, said, “It’s absolutely not something I would do at my company, and I think it is a very short-sighted and counter-productive policy.

“As a CEO, I want the full and complete attention of my folks to be on Fusion Systems,” he said. “I do not want a conflict of interests, a conflict of their attention, issues from other companies to spill over from an outside entity into my office.

“And I would add that people already work hard enough in Japan, so this policy would seem to run counter to the government’s other policy of ensuring a work–life balance. Overall, I would say that this idea is fraught with problems.”

CHANGING WORLD
There’s no doubt that the concept will require adjustment for companies in Japan accustomed to the traditional approach of one company, one job. And, as Weisser and Alfant point out, this approach may not be for everyone. But with lifetime employment becoming a thing of the past, workforce mobility and lifestyle flexibility are key to Japan’s future.

As Tollie explained: “Our world is becoming increasingly digital, with new technologies and business models leading, interacting with, or competing with old ones to create ecosystem platforms. Incumbents are investing massively to remain relevant, but they cannot do it alone.”

An example, he said, is automotive companies building alliances to unleash the connected car of the future. Health­care companies collaborating on clinical trials to cure diseases is another. This kind of information exchange bene­fits society as a whole and—as long as existing company secrets are not violated—each organization can use its competitive advantage to capitalize on the output of the collaboration.

As he sees it, the government’s encouragement of second jobs is coming at the right time—a time when Japanese society is in need of new ways of working and exchanging knowledge.

Julian Ryall is Japan correspondent for The Daily Telegraph.
The government is calling for companies to permit their staff to have side jobs or second jobs