JAPAN MNE Insights Volume 6, Issue 2 October 2020 T ABLE OF C ONTENTS Japan Academy of Multinational Enterprises www.mne-jp.org 1. Special Essay: Human Resource Special Essay: Departments in Japanese MNEs: Exploring the Black Box Human Resource Departments in Japanese MNEs: Exploring the Black Box 2. Special Essay: Harald Conrad Do Domestic R&D Heinrich Heine University, Düsseldorf Activities Impact Those Overseas?: Analysis of [email protected] Productivity Changes Hendrik Meyer-Ohle and Globalization in Japan’s Manufacturing National University of Singapore, Singapore Industry [email protected] This article reports on our recent research on thus conducted an interview study with young non- the roles and challenges of human resource Japanese employees working for Japanese departments in Japan’s large corporations. While we corporations in Japan, the HR sections of Japanese are still in the process of publishing our results, we companies and finally the agents involved in the report here shortly on our research motivation and actual recruitment processes (Conrad and Meyer-Ohle research framework and present some preliminary 2019; Conrad and Meyer-Ohle, forthcoming 2020). findings. Talking to representatives of HR sections, we realized that we had quite a good understanding of the HR policies and practices of Japanese corporations, but Research Motivation were clearly lacking an understanding of the roles and We came to this research topic after capabilities of HR departments. For example, we had conducting a study on the recruitment of non- assumed that being in charge of recruitment and being Japanese fresh university graduates into the involved in the allocation and rotation of employees, headquarters of Japanese corporations. As both of us HR departments would carry some weight of their are teaching at universities outside of Japan, we were own in Japanese corporations. However, we found surprised to see an increasing trend of our graduates HR departments facing resistance when placing being recruited not only into Japanese companies in international recruits into operational units to fulfil Britain or Singapore, but also increasingly into requests by board members. We also sensed that headquarters in Japan. We thought that researching some HR policies of companies were not probably this trend was not only an opportunity to look at implemented, with our informants regarding their changes in human resource management in Japan, but work in human resources rather as a transitional would also enable us to advise and prepare our period than a long-term professional career. We students better for work in Japanese companies. We therefore set out to understand better the position and 1 Vol.6 Issue 2 JAPAN MNE Insights roles of Japanese HR departments through an centralized in Japanese companies, and there explorative interview study with HR representatives are considerable numbers of top executives of 37 mostly large, established Japanese MNCs. who have developed their careers chiefly in the personnel department. In recent years, however, the tasks of the personnel Previous Research on HR Departments in department have become limited to more Japanese Companies routine activities (such as the recruitment of new graduates, payroll-related activities, Previous research on HR departments of large employee benefits and welfare, and labor Japanese companies has largely attributed to them a relations) as the corporate organization has more important role than that of their counterparts become more bureaucratic due to expansion in Western corporations. While in Western in size. (58) corporations HR sections have been seen as just Consequently, Nonaka proposed that human another administrative support function, HR resource departments should reassert their sections in Japanese corporations have been importance by playing a strategic role in what would described as controlling the vital allocation and have been a drastic overhaul of the way human rotation of employees, necessary within an resources were to be managed in Japan. His employment system that is built on the assumption propositions included a rejuvenation of decision of long-term employment. Aoki (1990) describes makers, diversification of career paths, this situation in his influential article Toward an individualization of incentive systems, Economic Model of the Japanese Firm as follows: decentralization of personnel movement and In order to administer rank hierarchies, heterogeneous staffing through mid-career hiring, as Japanese firms have developed the personnel well as the development of foreign staff. Nonaka’s department as an important institution. This proposal was derived from the aggregation of department has full control of the recruitment singular progressive initiatives of certain companies. of new employees for career tracks out of Yet, the fact that 30 years later all of these issues are school, designs and runs rank hierarchies still the focus of a lively debate with regards to their (pay scale and promotion criteria), and appropriateness to Japan underlines the stability of rotates white-collar workers with an eye to the original institutions of the so-called Japanese the wider interests of the organization… Since human resource management system. While Nonaka the personnel department potentially has in 1988 mainly related his call for “revitalized” excessive power because of its control of human resource departments to the needs of promotion and rotation, managers of the companies to nurture creativity and build department are usually themselves subject to international operations, HR departments regained rotation. (12/13) some of their importance by default during the 1990s after the Japanese economy had entered into a Yet, Nonaka, another influential scholar on period of stagnation and many companies faced the Japanese management, as early as 1988 questioned need to restructure labour forces through large scale this assumption: early retirement programs. Companies also began to The personnel department of Japanese experiment with new incentive systems (Conrad companies, in general, used to be a more 2010; 2011) or the employment of non-regular strategic section when compared with that of employees, often under the pressure to reduce typical Western companies. Personnel and labour costs (Meyer-Ohle 2009). Jacoby et al. financial management are relatively (2005) provide an overview of the role of the HR 2 Vol.6 Issue 2 JAPAN MNE Insights department in the past and hypothesize for We are still in the process of analysing our Japanese firms that they have lost some of their findings and interpreting them within an institutional power due to a shift of governance away from theory framework, yet, we would like to highlight employees as stakeholders toward the interest of here the following points for an early discussion in shareholders. Finding some evidence for change in this forum. this direction, they still concluded that change in Japan has been relatively slower than in the US Towards a Strategic HR Management in with differences becoming even larger. Japanese MNCs? In Japan, the HR function’s power rests We found a significant interest among our inside the organization: on career informants in developing human resource employment practices, the centralization of management in Japan into a professional function that operating decisions, and on dealings with can participate in the strategic development of the the enterprise union. Executives are company, especially with the perspective to manage somewhat more inclined to see employees as global labour forces and discover, develop, allocate ends, that is, as stakeholders or as and retain talent throughout organizations. Our competitive resources. In short, we have a interviewees highlighted the significant efforts of paradox: both Japanese and U.S. firms are Japanese MNCs to grow overseas operations, with becoming more market-oriented yet national some companies having made substantial overseas differences persist and may even be acquisitions, yet also admitted that the integration of widening. (Jacoby et al. 2005: 238) HR policies was often lagging behind. Our Hirano (2013) also looks at the role of HR interviewees also reported pressure from board departments and, based on a large survey, members to contribute more strategically, but also concludes that the role of HR departments for highlighted the need of HR departments to reinvent managerial employees as well as towards other themselves after losing some of their influence due to functions in the company has changed little since the automation and outsourcing of administrative the high growth period. HR departments are found tasks. In addition, increasingly independent business to remain important and contributing to companies units are claiming more independence in HR through their accumulation of and control over decisions, partly circumventing the HR departments personal information, their involvement in the by resorting to mid-career hiring, with HR transfer dynamic of employees, and the training of departments themselves normally focussing only on employees across functions. the recruitment of fresh graduates. In conclusion, there has been some research on the institutional role of the HR function in Japanese firms, yet much of this Following the US Model? research has focussed on the reasons for its In looking for inspiration for changing the role continued relative institutional importance. of HR departments, Ulrich’s model