The Top Three Strategies for Improving Your Labor Situation in Japan

September 12, 2019 by

Tim Bray in International

Top Three Strategies for Improving Your Labor Situation in Japan

Not long ago when I was living in Singapore, one of the search firms I worked with held a listen and learn session for senior HR executives on the state of the Japan labor market. I decided to go along as this was a topic of regular discussion and debate in my own company. The session was standing room only. Many of the top global brands were represented in the room. There was keen interest in learning from others what they were trying in a very difficult Japanese labor environment. The session did not disappoint.

Here are the top three strategies that were shared:

Establish an effective fresh university graduate recruitment and onboarding program.
Send more of your Japanese high potentials abroad.
Establish strategies to attract more women back into your workforce.

More on why these are important will be addressed later in this article.

The Japan Labor Landscape Only Gets Tighter in Coming Years

One might ask, in a country that has had stagnant growth for a couple of decades, why so much interest? Japan remains one of the most important consumer markets in the world. Though growth in many industries may have slowed, it remains a key market in volume and profit for many. Here are some key facts about the Japan labor market that may surprise you.

Demographics – Japan’s total population is 126 million and the working-age population (aged 15-60) is 75.2 million. Estimates by the Japan Labor Department underscore a trend that Japan is a hyper-aging society with 25% of the population over 65 now and this will continue to rise to 36% by 2040. How many of those 75.2 million currently in the workforce do you suppose are working at a non-Japanese MNC? The answer by one estimate is 638,000 people (or 0.84%) are working at about 3,500 non-Japanese MNC’s. (Source Fabian Hoshino and Japan Labor Department).
English Capability – The majority of Japanese citizens have very limited exposure to a foreign country or company other than pop culture. The average TOEIC score for Japan is 516 out of 990 placing Japan 41 out of 49 countries.
Women in the Workforce – Japan is at a historic peak of 77.6% of women in the workforce. This number obfuscates the fact that many women are in non-stable/non-permanent employment positions, salary levels are lower than for men and career advancement is still limited. Historically women join the workforce in their early 20s, find a partner, get married, have a child and subsequently leave the workforce. Only a small percentage later return. In recent years this trend has changed as Japanese women tend to get married later, have fewer children and have them later.
Importing Foreigners – Getting more foreigners into Japan has not been the government’s favorite option, although recently Prime Minister Abe announced reforms in this area. These reforms were not altogether agreed as necessary across the political spectrum. Unfortunately, due to language, cultural barriers and expense, importing talent into Japan remains a limited option. In many ways Japan is still a very insular place for foreigners to work and is not always considered an easy lift for the families of expats.
Labor Law and Practice – Much of existing Japan labor law was developed in the immediate post WWII era when manufacturing shop floor rules were paramount. Mostly it has not evolved to keep pace with global companies and changing talent needs. Employees have to agree to exit the company even in cases of poor performance. Things like non-compete and non-solicitation agreements are not common and often are hard to enforce in Japanese courts. Mandatory retirement age in Japan is commonly considered age 60.
Fresh University Graduates – Whereas in western countries, university recruiting is usually done in the last year of school, this is not the case in Japan. New grads most all accept roles in their junior year. Recruitment begins in May and offers are extended in June and July, the year before they graduate. Japan remains a very brand conscious society and this is important to university graduates in selecting an employer. Japanese students still overwhelmingly prefer to work at Japanese companies.
Workforce Mobility– It is estimated that at any given time in Japan, only 10% or less of the workforce would consider a change in company. Once you take into consideration work and industry experience, you are looking at very small pools of candidates to consider even if you can find them. It is still a very uncommon thing to change your employer. Contacting prospective employees at home is often considered unsavory. Tools like LinkedIn are not as heavily utilized by the Japan worker. When people do switch employers, it is often precipitated by someone who they have a long-standing relationship with who made the jump and is bringing them along. It is typical for a senior executive to bring along some of their closest associates when they make a career move. Employers regularly try sweetening the pot for search firms to funnel prospects to them as opposed to another company, but these search firms are not good at finding passive candidates.
Availability of Senior Leadership Talent – Many MNC’s look to upgrade their leadership in Japan. They often prefer for that to be someone who is Japanese. Many general managers in Japan are promoted from within, hence a dearth of candidates on the open market. Frequently when you do a search you will find a number of younger, very capable individuals who are not quite ready for prime time and then you will find a number of very senior people approaching age 60 who have been moved over to less than desirable roles and would consider something else.

More about the Top 3 Strategies

Establish an effective fresh university graduate recruitment and onboarding program – For you to have a predictable and sustainable labor supply going forward, it will be table stakes to have an effective recruiting and onboarding strategy for university graduates. This requires you think through the following:

An employment brand and employee value proposition that is appealing in the market. This is especially key if you do not have a well-known brand and/or are an MNC.
High quality collateral materials.
High quality meet and greet activities that allow prospective graduates to meet your senior executives and form bonds with them.
Red carpet programs designed to keep the candidates warm throughout their senior year, so they stay with your offer and feel good about the choice they have made.
Ensure there are good quality training programs to teach them proper work etiquette, you and your customer’s expectations of them and technical information.

Send more of your Japanese high potentials abroad – You may wonder why this is important? Frequently we think about sending high potentials to Japan. Having more of your people from Japan farmed out to other places does two things. (1) It creates more opportunities to build leadership breadth and depth for the future in Japan (2) Japanese who have worked abroad can be better mentors to expats and can better appreciate the difficulties of living and working overseas. This helps the expats you do have in Japan be more successful and be more fully integrated and accepted.

Establish strategies to attract more women back into your workforce – This can be an excellent source of hires if you make sure women know that they are welcome to come back, even if some time has lapsed. Some things you will need to prepare for this to happen is:

Make sure senior management in Japan understands the need for the talent and it is an important part of your overall recruitment strategy. More junior people will respond favorably if they see senior leaders embracing the strategy.
Ensure that your employee branding and EVP include this as a key part of your plan.
Keep track of regretted women leavers and make sure you build databases of potential candidates through local groups where women frequent. Make sure you have a thoughtful, appealing approach to messaging to attract them back in. Create effective outreach programs.
Create more flexible work arrangements to accommodate women in the workplace. In Japan, women still shoulder much of the responsibility for tending children and this can be a barrier to re-entering the workforce. Some cultural aspects remain firmly entrenched in Japan which are not very family friendly. For example, traditionally there is an unwritten rule that it is considered poor form to leave the office before the boss does, even if you have completed all your work assignments.

Feel free to contact Merlion Partners if you would like to know more about how to create more effective talent strategies in Japan. We are experts in creating effective people strategies in the Japan market.

Knowledge Center