In Japan, youth shall be served

In Japan, youth shall be served
By Miki Tanikawa International Herald Tribune
FRIDAY, DECEMBER 9, 2005

TOKYO Haruhiko Okamoto, president of a large and fast-growing subsidiary of Mitsubishi Corp., would appear to be the model of a traditional Japanese executive. A longtime employee of Mitsubishi, the largest Japanese trading house, he has benefited from corporate customs like lifetime employment and seniority-based compensation.

But Okamoto defies tradition in one significant way: He is only 41. As the top executive at Create Restaurants, an operator of restaurants that is majority owned by Mitsubishi, Okamoto is the boss of 5,000 employees, including many senior managers in their 40s and 50s.

Just 10 years ago, strict seniority customs prevented workers at Mitsubishi from reaching the rank of senior manager, and supervising maybe 10 or 20 people, until they were at least 45. But as Japan's economy picks up the pace, even the most traditional Japanese companies are looking to younger executives to lead them to new growth and into new areas of business.

The change, part of a gradual dismantling of Japanese corporate traditions in response to economic crisis at home and globalizing forces from abroad, comes at a particularly delicate demographic juncture for Japan. Along with many developed countries, Japan has an aging population, which translates for the moment into an aging work force. As these workers approach retirement age - officially 60, but in reality much later - many can expect to find themselves working for a much younger boss.

Not surprisingly, the shift toward promoting younger executives is viewed differently on the two sides of the age divide. Younger workers are encouraged by the possibility of faster ascent, but for older workers, reporting to a younger boss can be stressful.

Internet publications and chat rooms these days are full of discussions on what to do if you get a boss many years your junior. "Have you been troubled by a younger boss?" asks the headline of an Internet magazine. "That's not uncommon these days. What would you do when you actually face such a situation?"

"The conventional promotions practice based on age is crumbling," said Masaki Utsude, a career coach in Tokyo. "And the biggest worry today is having a younger boss."

As a relatively young chief executive, Okamoto already has company at the top:

Takeshi Niinami, 45, is chief executive of Lawson, a Mitsubishi affiliate and the second largest convenience store chain in Japan after 7-Eleven, with ¥250 billion, or $2 billion, in annual revenue. He got the top job in 2003, at the age of 43.

Kenji Chishiki, 42, is president of Kanebo Cosmetics, one of the largest cosmetics companies in Japan.

Tomoyo Nonaka, 51, chief executive of Sanyo, is the first woman to head a major Japanese electronics company.

To be sure, a 40-something CEO is still the exception rather than the norm in Japan. But the trend is unmistakable. Reiji Shibata, president of Mercer Human Resource Consulting in Tokyo, said the average age of a chief executives in Japan is 55, down from over 60 a decade ago. American CEOs, on the other hand, are most commonly aged between 48 and 50, he said.

The seeds of generational change were sown during Japan's economic crisis of 1997-1998. That period, which followed the collapse of the Japanese stock market in 1990, forced many companies to consider how to cope. Some Japanese companies, including some of the biggest banks and trading houses, responded by introducing 10-year programs to promote younger staff at an accelerated pace.

"If that plan is progressing as anticipated, by 2007, I am thinking that you will start seeing more CEOs in their late 40s," Shibata said.

Management analysts and experts, and the young chief executives themselves, make the case that as Japanese companies respond to improving economic conditions at home and pressures from global competition, having a younger CEO starts to look smart.

"Business decisions must be made much faster than before," said Koji Takagi, president of Celebrain, a business strategy and human resources consultancy in Tokyo. "Things like mergers and acquisitions factor in prominently in business decisions. You must make a quick decision to buy or not or you lose the opportunity forever."

A 60-something CEO is now viewed as unable to keep up with the speed of the marketplace, and might also be more risk-averse than a younger executive. "It's questionable," Shibata said, "if you are going to be able to take a gamble for the sake of the company if you are due to receive your pension in just a few years."

Kenichi Kiso, 39, chairman of Tohato, a leading food and confectionery manufacturer, noted a "strategic disconnect" between the traditional business practices and the needs of Japanese business today.

"When the economy was growing steadily, managers could follow the same old strategy established after the Second World War," Kiso said. "But as the economy matured, they had to make fundamental strategic changes. Companies had to make major adjustments from an organizational point of view as well."

Kiso, who became chief executive of Tohato at 36, said there were young workers who, given the opportunities, would reveal their potential.


Okamoto, the president of Create Restaurants, is an example of a Japanese manager who thinks outside the box. While many restaurant companies grow by inventing a format and replicating it in many locations - think McDonald's or KFC - Create company rolls out multitudes of restaurant formats to capture the fancy of fickle Japanese diners. His company has some 220 outlets in 70 formats ranging from sushi restaurants to Italian cuisine to Hawaiian food.

"Conventional restaurants will invent a product and try to sell it," Okamoto said. "We start from the location, and then consider a package or a solution that will best utilized that venue."

Okamoto makes clear he is running the company for the investors, and he has strict financial criteria. "Each restaurant will have to earn cash flow enough to pay for the all the capital investment in two years," he said.

Since 1999, when Mitsubishi and an investment partner put up the capital to start Create, the company has grown to ¥16 billion in annual revenue. Okamoto was technically on loan to Create until 2003, when he left the parent company to join the restaurant unit. Create Restaurants trades on the Mothers' section of Tokyo Stock Exchange and has a total market capitalization of ¥77 billion.

While the record of executives like Okamoto is giving encouragement to a resurgent Japanese business sector, the phenomenon of workers getting promoted regardless of their age is creating delicate problems in the psyche of corporate workers here.

"One-year difference is a big deal," Shibata of Mercer said. At Japanese organizations, a one year difference results in the younger worker being cast as kohai, or junior, and the older one cast as senpai, or senior.

Hideaki Furuta, the president of Jomon Associates, an executive search firm, said that the desire to avoid the stress of age reversal may be one reason why most big companies - even those, like Mitsubishi, that have named younger top executives - do not have programs for promoting high achievers at a younger age. If they did, "ojisan-tachi," or older Japanese men, would "lose heart," Furuta said.

Furuta often consults with companies led by founder-CEOs who are seeking their replacement. Often, he said, the founders prefer a manager in his 40s. But the companies also have older senior executives in their 50s, and the companies worry about discouraging them.

What to do about the senior staff "is the first thing they ask me about" when considering a younger chief executive, Furuta said.

Those who work under a younger boss may seem to fit in on the surface, but often there is psychological resistance.

"You may have situations where the older guy doesn't really consider the young man as his boss," Utsude said. "You may give people titles, but things won't function in reality. Many human resources managers are studying what to do about these things."

Older workers confirm the sentiment. "Nobody wants to work under people younger than you," said a senior staff member in his late 40s at a leading Japanese electronic company that follows strict seniority practices.

The staffer, who did not want his name used, disputed surveys conducted by newspapers recently indicating that the majority of Japanese workers do not mind a younger boss as long as he is capable

"Many people like to show on the surface that they wouldn't mind, because it is a trend," the staffer said.

As in many areas of business, good management makes the difference. Kiso, the chairman of Tohato, said that when a manager says and does things that are logical, consistent and reasonable, people accept him.

"Regardless of age and gender," he said, "the question is whether are you doing things that make sense to everyone."