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Creative Compensation Initiatives in Japan

Hosted by: Baxter

ChapmanCG and global healthcare company Baxter co-hosted a meeting on Compensation & Benefits trends in Japan earlier this year. The session was held in Baxter’s new Tokyo offices, in the beautiful Toranomon Hills, and was attended by BASF, Boehringer Ingelheim, Coca-Cola, General Electric, HSBC, Jetstar, Pfizer, Merck (MSD), and other multinational and Japanese companies. It was particularly interesting to see the different paths taken by various organisations in terms of C&B policies, all with the aim of creatively economising, while increasing performance.

Double-Hatting

We have seen many organisations implementing the concept of ‘double-hatting’ over the last several years. HR Business Partners are often looking after a Centre Of Excellence (COE) function, Recruiters are also training, and even managers from the business are often heavily involved with performance management, recruiting, and succession planning. C&B Leaders have been playing their part in this exercise, because of the value that they can bring with managing headcount, salaries, and linking double-hatting responsibilities with rewards and bonuses. One service company noted that because their business is cost-conscious, it is mixing the responsibilities of different functions that have historically been separate, and ultimately lowering overall labour costs. The challenge has been to gain employee buy-in, but once that hurdle is surpassed, this allows people to build experience in a new area. It will be interesting to see the long-term effect of this phenomenon, as it might prove difficult to find replacements for those with widely varying skills, should incumbents leave.

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Performance vs. Behaviour Focus

Conservative companies in Japan have compensation packages, which consist of guaranteed summer and winter bonuses, housing allowances, and other benefits. Recently we have often seen a restructuring of this package, making it heavily cash-based, with a large portion – often 15-25% – based on performance. One finance company commented that the banking industry has always been highly compensation-driven, and is now moving in the opposite direction. This particular organisation was working hard to instil behaviours that create the ideal company culture. This involved finding role models who exhibit the right behaviours, to lead or champion various initiatives. This financial company also transitioned to using 360 degree feedback, the outcome of which influences the individual’s bonus, so bonuses are no longer pure performance based.

Creativity in C&B

While some companies are moving towards performance and behaviour ratings, others are transitioning to a ‘no-rating’ system. Instead of focusing on individual performance, these organisations are now looking at team goals and the incremental improvement of the employee. There are questions around the allocation and fair distribution of bonuses, and there is also a certain level of risk under current Japanese labour law, but a small handful of organisations that have implemented this system found an increase in engagement without any drop in performance. It will be interesting to see if more companies in Japan follow suit.

The Summary

Huge pressures from an aging population, a dwindling supply of young talent, and changes in organisational needs have all forced companies to get creative in their efforts to economise, while simultaneously improving productivity. We thank our host Baxter, and the participants for sharing their experiences and shedding some light on what is happening on the ground in C&B in Japan. We look forward to the next series of roundtable meetings in late 2015.

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