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Of excellence and global best practice

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I recently overheard someone say that no Japanese company has reached global standards, and that none employs global best practices.  Even the most "international" Japanese enterprises are reluctant internationalise.   

I could not believe this, so I went straight on to PriceWaterhouseCoopers Global Best Practices website to see what it had to say.   


What are best practices?  They are defined as the best way to perform a business process. They are the means by which leading companies achieve top performance, and they serve as goals for other companies that are striving for excellence. 

Best practices do not provide the definitive answer to a business problem.  Rather, they are a source of creative insight for improving your business. By adapting best practices to their specific needs, companies can dramatically affect performance, leading to breakthrough performance that saves time, improves quality, lowers costs, and increases revenue.  The Global Best Practices knowledge base is a compilation of best practices content and benchmarking tools on more than 150 critical business processes.   

PriceWaterhouseCoopers Global Best Practices website identifies best companies across a broad range of business practices like: understanding markets and customers; developing vision and strategy; designing products and services; marketing and sales; producing and delivering products and services; producing and delivering for service oriented organizations; invoicing and servicing customers; developing and managing human resources; managing information resources and technology; managing financial and physical resources; managing environmental, health, and safety issues; managing external relationships; and managing improvement and change. 

Out of the more than 240 "best companies" identified, some 170 come from the US.  The analysis must be biased, you will say -- although it is not for nothing that GDP per capital in both Europe and Japan is 30 per cent lower than in the US.  The next leading country is the UK with 24 best companies identified (another crisis country!). 

Japan comes in next with 9 "best companies", in the same league as much smaller countries like the Netherlands with 8, Switzerland with 7 and Canada with 5. Let's look more closely at Japan's results (the title below refers to a business practice, while best companies are identified by business sub-practices):  

--  Under the design of products and services -- Hitachi Ltd scores for creating an innovation framework, while Honda Motor Co. and Komatsu score for planning and deploying cost targets. 

--  Under developing and managing human resources -- Benesse Corp scores for planning and forecasting workforce requirements. 

--  Under managing financial and physical resources -- Nissan Motor Co and Wacoal Holdings Corporation score for closing the books, while Wacoal Corporation scores for providing internal financial information. 

--  Under managing environmental, health and safety issues -- Honda Motor Co. scores for assessing sustainability risks and opportunities.  

--  Under managing improvement and change -- Toyota Motor Corporation scores for managing process performance.  

In short, not bad, but not good enough.  But also not surprising.  Have you ever worked for a Japanese multinational enterprise?  Well don`t!  They are the least international of all.  They have virtually no foreigners in their Tokyo head office, and the working language is still Japanese.  Those foreigners who are there have to bow and scrape to their Japanese empereur bosses, gritting their teeth and pocketing millions along the way.  And there is virtually no communication or co-ordination between head office and all the overseas branches.

Apart from that, so what could be holding Japan back from achieving corporate excellence?  There are many possible factors like heavy regulations which strangle companies' freedom to innovate, and an inward-looking and self-satisfied corporate culture.

Another factor could also be what is known as "convoy capitalism"!  A convoy is of course a group of ships or troops or even motor vehicles traveling together with a protective escort or for safety or convenience.  In a convoy, no-one can go faster than the slowest convoy member. 

And so it sometimes is in the Japanese economy under the watchful eye of the bureaucrats and the LDP.  Banks will lend money to companies which have no capacity to repay them.  Banks will even forgive loans.  Another example is when a company like Toyota buys highly priced raw materials from inefficient companies, just to help them stay alive.  Japan's most efficient company is being bled to save the weakest.  By keeping banks and enterprises afloat, the systems of lifetime employment can be maintained.  This is a form of socialism.   

All this sounds nice, but it is a waste of the country's savings and deprives more efficient companies of much needed finance.  When Japan was at the depths of its financial crisis, this convoy capitalism helped result in many "zombie" banks and enterprises -- that is, banks and enterprises which were insolvent, but still surviving like zombies.  

Convoy capitalism fell into disrepute with Japan's financial crisis, as the public became aware of the great costs.  But now with the deep recession caused by the global financial crisis, the pressure is on to save fellow convoy members -- for banks to lend to bad borrowers, for enterprises to help keep their suppliers afloat. 

At one level, convoy capitalism represents a complex web of political connections, favours and corruption.  Another perspective is that of Murray Sayle who called this “ethnoeconomics” in this 1998 articles in the Atlantic -- by this I think means doing business, but looking after your tribe members at the same time.   

This behaviour runs deep in Japanese society.  When he was at school, a friend of mine won first prize for both his academic and artistic work.  He was of course asked to renounce his art prize.  It was given to another student so that the prizes could be shared around. 

Whatever the perspective, it is impossible to achieve excellence when you have to help the weakest part of the convoy, or when you have not allowed to win too much.  Economic and social policy have different goals and should be conducted separately.    



PriceWaterhgouseCoopers Global Best Practices – http://globalbestpractices.pwc.com/

“The Social Contradictions of Japanese Capitalism”, and “A Pre-Modern Society” by Murray Sayle.  The Atlantic, June 1998.  www.theatlantic.com