Author: Oscar Fuchs
The Chapman Consulting Group co-hosted another series of HR roundtable discussions for select Japan HR Heads over the last week. Japan HR leaders from high-profile multinationals in the Financial Services, Consumer Goods, Hospitality, Retail, Industrial, Technology, Media and Life Sciences sectors met over a series of breakfasts, lunches and afternoon teas at the Japan headquarters of Barclays Capital, Dow Chemical, Henkel, Infosys, Manulife, Nomura and Siemens. The topic of discussion was HR’s contribution towards business continuity in the months since the Tohoku earthquake and tsunami.
We also launched our first Japan HR Business Partners roundtable at the Japan headquarters of Thomson Reuters, as well as our first Japan Talent leaders roundtable at the Japan headquarters of Bloomberg. The details of those meetings are outlined in separate press releases on the ChapmanCG website.
1) Decision-Making Within the Japanese Management Team
Given that three months had passed since the events of March 2011, it was a good time to reflect about how individuals, management teams, and the corporate entity as a whole reacted during the days following the earthquake. The experience differed immensely from company to company. Within some multinationals, crisis teams formed themselves almost automatically, and companies were able to direct their employees with precision immediately following the incident. With others, the emergency management teams created themselves in a more ad-hoc fashion, especially in cases where key members happened to be out of the office at the time of the quake. Participants agreed that there was no ‘textbook approach’ that could be followed in these situations, and it just came down to the maturity of the leadership team in making quick and tough decisions.
For example, in one company, a plant manager based outside of Tokyo decided to disobey conventional wisdom by ordering all employees to evacuate the plant during the earthquake. No employees were injured, but some employees questioned this decision. However in the plant next door where workers were not evacuated, the roof collapsed in one part of the factory and a worker was killed. This example illustrates the larger point: that it is very hard to define the ‘right’ or ‘wrong’ thing to do while a crisis is still unfolding.
The degree of control and/or influence that a Japan management team has over its employees was also tested during this time. In one example, a company’s population was split between two floors in an office block. The HR Director was located on the 8th floor, and he was able to ensure that no-one on that floor vacated the building, as per the instructions of the building’s management office. However, the workers on the 5th floor decided among themselves to disobey the advice given to them, and unilaterally decided to evacuate, having looked out of the window and seen employees from other companies do the same. Since the HR Director was only in telephone contact with the people on that floor, their impact was diminished. So in such situations, it can be just a matter of chance as to how people will react depending on how they are located (either physically or organisationally) within a company.
2) Decision-Making Within the Context of an International Matrix Structure
The aftermath of the earthquake also held a mirror to the regional decision-making structure of every international organisation in Japan. In the overwhelming majority of cases, the regional (or international) headquarters offered its support to the Japan management team, but ultimately gave the in-country leadership team the authority to make decisions by themselves. In other cases, the company made sure that the Japan leadership team and the international crisis management team made joint decisions collectively by using regular international video conferences. This sometimes delayed the pace of decision-making, causing some frustration to teams in Japan. However it gave them the ‘outside’ perspective that they might not otherwise have been aware of, since the way that the crisis was being managed in Japan would have ramifications to the company’s image in other locations across the globe.
In a minority of cases, the company insisted that decisions be made by crisis management teams based outside of Japan, who could overrule any decision made in Japan. In the case of some of the larger companies, this decision was greeted with a degree of appreciation, because the company employed a team of global crisis management specialists who had years of experience managing emergency situations across the world. They earned their credibility by displaying their specific expertise in advising on what should be prioritised during these unusual circumstances. In other cases, this decision was greeted with more dismay, as management teams in Japan felt that the company was being unnecessarily intrusive and controlling. Like in all these delicate situations, the success of this strategy came down to the way in which it was communicated. In cases where companies did not communicate their involvement in a respectful manner, work must be done to build back trust between the Japan and the international management teams.
Perhaps the most telling situation was with companies that had split their Japan operations into various business verticals, each with their own international reporting lines. This has been a common trend in the last 3-5 years, and has always been somewhat controversial in Japan, where the country management team had in the past been accustomed to being treated as one cohesive country unit. HR Leaders in these vertically-aligned organisations had a very tough time in handling the crisis, since they were not always in a position to give concrete directions to the whole Japan population. Even in situations where the Japan HR Leader could exert influence successfully across all business units in Japan, their advice was often undermined and contradicted by regional leaders who had their own view (and their own authority) on how things should be done.
3) Who to Prioritise: Employees or Customers?
One of the most interesting debates that took place in board rooms across Japan in the aftermath of the disaster in March was in regard to which group of stakeholders should get top priority: the company’s workforce, or the company’s customers. In some cases, the answer was clear. For example in investment banks, there was no choice but to continue work — so long as the Tokyo Stock Exchange was operating, there was no way that the banks could operate anything but a ‘business as usual’ approach. It was the same in the hotel industry, where
employees exhibited a similar culture of protecting the safety of hotel guests above themselves as was seen with employees at Mumbai’s Taj hotel in November 2008. And we even saw this trend in many IT and telecommunications firms: So long as there were people relying on communications networks, there was a duty to put customers first.
However in some cases, this policy backfired. Many employees felt that their company was prioritising the pursuit of profit above the wellbeing of their employee population. And in one extreme example, the CEO of a specialist hardware company sent an email to all employees, without consulting the HR Director first. In that email, the CEO stated that the company was well positioned to gain a lot of new business from the direct aftermath of the earthquake and tsunami. By putting profit above compassion, the CEO lost a great deal of credibility with employees, and is still battling a negative perception within the company to this day.
On the opposite side of the equation, one retail company was faced with the choice of whether to close down their retail operations in an area near to the Fukushima nuclear reactor. This retail store was located outside of the Japanese-defined evacuation zone (20km), but was located inside the danger zone as defined by the American nuclear experts (80km). Being a US-based company, they decided to ‘play it safe’ for their employees and closed down their store. However many of their Japanese competitors kept their stores open, and later complained that this US-based store did not look after it’s customers during their hours of need.
Once again, there is no such thing as a ‘right’ decision in these circumstances. But the principal learning was that communication is king, both internally within the company and externally towards the customers and the general public. The ability to accurately explain the reasons behind making a decision was just as important as the decision itself.
4) Facilities and Property Management
While many companies had prepared a Business Continuity Plan (BCP) for situations such as earthquakes, many of these plans did not take into account the interface between the company and its landlord or property manager. For HR Directors looking after office workers on high floors in tall buildings, it soon became very clear that their BCP was only as good as their building management’s BCP. In many cases, BCPs in tall buildings were shown to be entirely inadequate, since many building management teams were prepared to deal with fires but not prepared to deal with the prolonged aftermath of strong earthquakes.
The key learning for Japan HR Directors was that they needed to re-look at their BCPs so that they could work alongside external factors rather than strictly in isolation within the company. In the past, the interface between the building’s property management and the company was handled by very junior members of the company, either within the HR team, the General Affairs (GA) team or the Facilities Management team. While the day-to-day dealings should continue to be handled by junior staff, many HR Directors realised that they needed to have more senior involvement in the overall communication strategy between the two groups, so that contingency planning can be agreed on at a higher level.
Also in conjuction with office location, some companies are now rethinking their plans to consolidate all their Japan operations into one location. For the sake of safety, it now may make sense to keep legacy offices in operation across different part of Japan. Moreover, some companies realised that they needed evacuation sites that were based further afield from Tokyo. In one instance, the company’s evacuation site for its Tokyo office was in Yokohama, but this office was also affected by the earthquake and proved unusable in the event of the earthquake.
As mentioned in the previous part of this article, one of the common themes of the crisis was in how HR leaders dealt with internal communications. The first thing that most HR Directors needed to implement was a blanket ban on all non-essential email communication coming from offices outside of Japan. While the outpouring of support was much appreciated, the huge volume of email traffic coming in from overseas became a distraction from allowing HR leaders to deal with the crisis. After overseas co-workers were instructed to only use agreed channels of communication with Japan, the other biggest issue was in dealing with internal communication with employees in Japan during the days following the earthquake. Many companies realised at this point that they didn’t have the adequate personal contact details of employees across various locations, and many took a number of days before they could confirm the safety of all employees.
Since the earthquake, almost all companies have implemented new across-the-board collection of personal contact data, either directly or through third party emergency services providers. These details included personal phone numbers, personal email addresses, and personal ‘keitai emails’ (emails that can be picked up on mobile phones). In one example, an HR Director has now made it mandatory for everyone in the company to be issued with a smartphone, so that they can be contacted through applications such as Viber or WhatsApp when mobile phone lines are jammed. And in another (admittedly more extreme) example, an HR leader even went as far as asking for the personal credit card details of each employee, especially for non-Japanese employees, so that the company can efficiently book international flights on their behalf in case a speedy evacuation ever becomes necessary. Time will tell whether these strategies will persist once memories of the earthquake have faded.
6) Some Unexpected Positive Effects
In much of the world’s press, the articles written in solidarity with the Japanese people were published alongside other articles that hoped for a ‘turning point’ in the Japanese economy and in Japanese politics. The hope was that a watershed event such as the earthquake might force the country to make some difficult policy changes that it might have otherwise resisted. To some extent, this hope was also extended to Japanese corporate life, and in some cases there was indeed some evidence of a shift in thinking.
Here are some examples:
a) In one US-headquartered technology company, the HR Director had been trying for many months to implement a hot-desk culture, which would help to provide more interdepartmental communication. The idea had never taken off before, because people had been wedded to their seating plans and their personalised cubicles. The earthquake, however, caused a great deal of damage in the office, which necessitated periods where employees needed to be moved into different areas on a rotational basis. Since this ‘forced experiment’, most workers are very happy to adopt a more mobile working style.
b) Taking that example one stage further, in many companies there h
ad been huge resistance to the concept of remote working before the earthquake. There was a general feeling that the culture of a company depended on everyone being physically together in one place, and exceptions to the rule were looked upon unfavourably. However since the earthquake, where many people have been forced to work from home, the policy of remote working has been much more readily accepted. Business leaders were forced to admit that the business could be kept running, even with large swathes of the workforce logging in from home. Granted, some employees were not happy about being forced to work from home, claiming that the cramped housing conditions of Tokyo city living do not allow for employees to work in peace around the house. But there is hope that the growing acceptance of remote and flexible working conditions will allow for more people who are at present excluded from working (for example single parents, physically disabled people, etc) to become more useful participants in the Japanese workforce.
c) In general, the earthquake made people think more about the concept of contingency planning. For example in one European-headquartered manufacturing company, the HR Director realised that they had no contingency plan in place for if the payroll manager became hospitalised. Because of the serious business ramifications that this would have, the HR Director has since reshuffled their team so that a skills overlap became possible.
d) The HR Director in one US-based healthcare company had been trying to implement a ‘no overtime’ evening on one day per week, but this had been routinely ignored in the past. The company had created this policy in an attempt to improve productivity through better health and sustainability of the workforce. Since the earthquake has brought into force severe energy cuts, the HR Director finally has the excuse to close the office at 6pm and turn off all the electricity, thus finding a way to enforce the planned initiative. The company is keeping close tabs on the results of this experiment.
One final example deserves a special mention. The HR Director of a multinational insurance company shared information about a change that was implemented which has brought a long-lasting improvement to its business. Ordinarily, damage caused to private property following an incident such as an earthquake would need to be inspected in person by an insurance agent, who would then report back to the company’s head office where any claims could be assessed. However, this company did not want to keep people in the affected earthquake-hit areas waiting too long to get their money from damage claims, especially since road access to many of these locations was still perilous. So the company decided to use modern technologies to speed up the process. They allowed the damage assessment teams to utilise iPads and other mobile devices to take detailed photos and videos of the damaged areas, after which they could use the 3G network to relay information back to valuers sitting in Tokyo in real time. The knock-on effect of this innovation was to allow pay-outs to be made much sooner than in competing insurance companies. And as a result of this, the company has now created a policy to continue this initiative, and will be using this as a lasting way to differentiate themselves in the market.
7) Conclusion: What Will Happen in the Near Future?
As summer in Japan approaches its height, many manufacturers in Japan have now shifted their production patterns so that they run on Saturdays and Sundays to conserve more energy during the working week. The companies that offer services to those companies have also needed to follow suit, so that they can offer continuing support to their clients. This has had some interesting effects on HR Directors in many companies, since a wide array of services that they rely on during weekdays (for example childcare facilities) are not readily available during the ‘normal’ weekend days of Saturday and Sunday.
Other companies have needed to implement more long-term energy saving policies. For example, some companies have needed to shift their supply chains overseas. And many office corridors will be kept in darkness for the next few months ahead. In some cases, HR Directors are seriously considering moving office location following the earthquake. Many are fed up paying premium rental prices for high-rise offices, and there have also been sporadic cases of employees who are too scared to go back to work. The ‘unknown factor’ of the Fukushima nuclear reactor is also having an effect on the flow of international workers into Japan. Until the situation there can be stabilised, there will continue to be resistance in attracting the usual rotation of international and expat talent into Japan, even though most of the country (including Tokyo) has been proven to be safe.
Thankfully multinationals in Japan are in most cases seeking to continue their long-term investment in the country and are returning back to ‘normal conditions’ where possible. It’s up to the Japan HR Leader to continue being the mouthpiece for this international commitment, and to continue engaging the workforce in the pursuit of further business growth.
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