Terrie's Take: Finding a Good Country Manager is Hard, Japanese M&A, Government, and Cesium

Terrie's Take - AkihabaraNews.com

Terrie’s Take is a selection of Japanese-centric news collected and collated by long-time resident and media business professional Terrie Lloyd. AkihabaraNews is pleased to present Terrie’s learned perspective; we all could use another take on the news - here’s Terrie’s:

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Terrie’s Take on February 17, 2014

Feature:

  • Why Finding a Good Country Manager is Hard

Briefs:

  • Japan Display to do JPY400bn IPO
  • Rakuten to buy Viber
  • Women in senior government posts rises to 3%
  • Air Asia ready to take another shot at Japan
  • Record cesium levels at Fukushima plant

Why Finding a Good Country Manager is Hard
In the last few weeks, we have been approached by a number of foreign firms who are encouraged by the news of success of Abenomics and therefore are looking to start up or expand here. While it is not our job to opine to clients that we think Abenomics' recent success is almost entirely based on April's increase in the consumption tax and that it is only natural for people to buy durables and luxury goods now, we do nonetheless counsel them to make a long-term commitment to Japan. Nothing is easy to do here, and only companies with vision, stamina, and resources can expect to last the first tough 3-5 years. Of course the rewards for doing well in Japan are enormous and can be very long-lasting and far-reaching. It isn't unusual for foreign companies tempered in the tough Japanese market to incorporate the lessons learned and thereafter bolster their operations in other markets as well.

At the same time as receiving requests for advice on starting up, we have also been receiving requests from companies who are already operating here but who are not getting the results they had hoped for from their Country Managers. As most readers will appreciate, the Country Manager of a foreign company starting up in Japan is more than just a manager, he/she also has to be an entrepreneur. This produces a big DISCONNECT for most foreign market entrants and their recruiting companies. How many times have we seen candidates being reviewed for their industry connections and corporate management experience, when in fact they are mostly going to have to be salespeople and run the minutiae of a new business for the first 3-5 years? No wonder the failure rate is so high.

If you look at a simplified list of the top traits for a successful corporate manager versus one for a start-up manager (aka entrepreneur), you quickly start to see where the disconnect lies:

=> Successful corporate manager in any country
(List derived from article by Dr. Phelan of www.npipr.com)

1. Vision: Ability to focus on the vision and to communicate that vision to stakeholders.
2. Overview: Awareness of operational details, however, not involved with them.
3. Technical Skill: On top of industry trends -- an avid reader.
4. Recruiting: Hires strong management teams and supports their decisions.
5. Networking: Meets with customers and can articulate customer needs, challenges and business goals.

To this for Japan we would add:
6. Stakeholder Management: Careful management of key relationships in parent companies and one's "old boy" network.
7. Failure Management: Careful management of one's failures (i.e., not to have them, generally through risk aversion).

=> Successful entrepreneur
(List derived from Success magazine)

1. Flexibility and Risk-taking: Start-ups need to be able to radically alter or throw out business plans and start again.
2. Focus: Ability to allocate one's time specifically to activities that support success of the business.
3. Decisiveness: Ability to quickly make commitments and move the company forward, learning from mistakes as they are made
4. Persistence: Willingness to roll up one's sleeves and hack through challenges
5. Passion/Vision: Ability to instill in your team a dream that will excite them and given them passion.
6. Salesmanship: Great start-up leaders are always selling, to employees, investors, partners and customers

From these two lists, we can see some obvious challenges when hiring Japanese Country Managers:

1. Flexibility is an important trait for dealing with challenges when you're an entrepreneur, but for most corporate types it means eventual accusations of lack of ability or effort. This is an issue on both sides, firstly by the local hire who has previously had years to execute a business plan and who is not expecting to get fired if things don't work as expected. An experienced, internationalized, and desirable manager understands the ego politics practiced by many larger multinationals and will be looking very hard at the Japan-launch business plan to see if is a slam-dunk or not. If not, then he/she will be unlikely to want to switch gears midway through and play things by ear -- it's just too risky for his/her career. For this reason, capable/proven Japanese candidates often seem inflexible in trying new ideas and this makes it difficult for foreign start-ups to test the market with several different approaches to see what works.

2. Decisiveness is not a trait that is highly valued in consensus-driven corporate Japan. Most candidates will have learned in Japanese corporations that if they can't get consensus then they will sit on a problem and let it fester. This clearly won't play well with foreign firms, where being seen to take action and be assertive are as important as being right about an issue. So either you look for a strong personality (which will not necessarily manifest itself in a polite candidate interview in English) or you need to give your new Country Manager access to a consensus-based decision-making group that is responsive -- hard to do for a multinational that doesn't know much about Japan or the Japanese market -- but which is achievable by appointing a board of advisors that is trusted by the Head Office. We're always surprised that more foreign firms don't hire a board of knowledgeable advisors.

3. Salesmanship. Many Japanese CEOs appointees see themselves as having "arrived" status-wise when they transition to a high-paid job in a foreign firm, and are reluctant to roll up their sleeves and hit the pavements again. The higher paid and better regarded they are in their industry, the less likely they are to want to do daily sales work. This kind of attitude is irritating, but if the candidate has an amazing personal network and is able to leverage the efforts of others, they may still be desirable. But for you to hire a person like this, you'd better be ready to back them up with a lot of cash, because they will need personal assistants, financial people, Sales Managers, a bunch of sales staff, and three years of losses before the team starts to become profitable.

Why is it so difficult to find a good start-up level Japanese Country Manager?

There are a number of contributing factors to candidate scarcity, but we believe the strongest are: i) social pressure, ii) limited base of bilinguals, and iii) risk aversion.

1. Social Pressure: Capable Japanese employees are usually well engaged in their existing jobs where they are emotionally/intellectually locked into their peer group thanks to their employers' efficient indoctrination process. There is a reason that Japanese firms are often the primary social focus for their employees (versus the home and family for other nationalities). Japanese companies well understand the need to own their employee's thoughts and feelings, and use social values and peer group habits (e.g., drinking and holidays together) born in the education system to pressure employees to stay in the "family". We've lost count of the number of great job candidates we've interviewed who in the end decided to stay with a highly-demanding underpaid job because they felt a high level of responsibility to the organization and their colleagues.

2. Limited language base: This is a well-known problem, and one that can only be resolved when schools figure out that the current system makes kids "hate" English and causes them to not want to use it again unless they really have to.

3. Risk Aversion: This is a really interesting topic area, and we think is the largest contributor to the lack of decent Country Manager candidates in the Japanese marketplace, not just for foreign firms but for Japanese start-ups as well. Babson College, Massachusetts, USA, has a well-known entrepreneurship program which annually produces the Global Entrepreneurship Monitor (GEM). According to the 2013 issue of GEM, http://www.gemconsortium.org/docs/download/3106, the Japanese were notable for their lack of interest in entrepreneurship (just 4%) and fear of failure (second highest, at 49.3%). We think these figures tell the story pretty well.

a) Fear of failure: Vietnam (56.7%), then Japan/Thailand/Greece (49.3%)... USA (31.1%)
b) Entrepreneurial intentions: Japan (4%), Malaysia (11.8%), S. Korea (12%)... USA (12.2%)
c) Perceived opportunities to start a company: Japan (7.6%), S. Korea (12.7%)... USA (47.2%)
d) Entrepreneurship as a career choice: Puerto Rico (17.9%), Japan (31.3%)... USA (n.a.), Canada (60.6%)
e) New business ownership rate: Italy (1.1%), Suriname (1.2%), Japan (1.5%)... USA (3.7%)

So how to overcome these negative factors and increase one's chances of success in hiring a Country Manager?

We would suggest eliminating the three factors for candidate scarcity that are mentioned above. For social pressure, the only way to secure a strong candidate is to keep working on them. Someone worth having is generally not on the job market, and has to be head hunted. Therefore, identifying them means meeting them in normal business situations where you can assess their performance in their current job. Trade shows, business organizations, trade/technical associations, educational networks, and simply asking vendors to compete on projects (so you can meet their teams) are all good ways to find someone. Then, once identified, you need to find out if their employer is abusive (most are -- it's part of the hangover from feudal times) and this is your point of leverage to winkle them out. A good candidate will take 3-6 meetings over a 6-12 month period, to pull.

For risk aversion, a good strategy is to put a CEO candidate in a less risky role temporarily. We often recommend that companies hire future Country Managers as Sales Managers first and tell them that if they do well, they can expect to eventually get the top job. This approach can work if your firm sees sales as one of the initial key activities (our guess is that at least 90% of foreign entrants have this objective), and let the person prove that they have what it takes. While waiting for them to perform, you can simply hire in an interim CEO, who provides part-time and fairly "hands-off" management of the Sales Manager. Key to this strategy is that the Sales Manager's job description has to have them hiring and managing the rest of the team and having some responsibility for financial aspects, so that you are preparing them for the top job later.

For language, you might consider hiring a Country Manager who is not a bilingual. While this might sound like a recipe for disaster at headquarters when board room presentations are necessary, it can be resolved if the company has an Asia-Pacific director who can handle the board and who is either multilingual themselves or who is flexible enough to work with the Country Manager through an interpreter (who should NOT be one of the members of the staff -- since this undermines the Country Manager's authority). We should also recognize that what is considered "not bilingual" is not necessarily as limiting as one would think. For example, most Japanese professionals are quite capable of handling English-language email, so long as you can remember to supplement verbal interchange on a frequent basis as well. Not being able to talk directly to your employee is of course not desirable, but it is interesting that in many big and successful foreign companies making money in Japan, by virtue of time and local job promotions, eventually non-bilinguals who are otherwise high-performers wind up in those positions and the foreign firms learn to live with it. Profits are not always convenient.

Japan Display to do JPY400bn IPO
In one of the few successful turn-around stories for Japanese electronics companies in recent times, Japan Display Inc., a company amalgamated from the loss-making subsidiaries of Hitachi, Toshiba, and Sony, has said that it is planning to IPO this year. The listing is expected to raise up to JPY400bn for the company, which is the world's biggest maker of displays for mobile devices and which is a major supplier to Apple. Japan Display says that about 30% of its revenue comes from Apple, which likes their products because of their power efficiency and reliability. (Source: TT commentary from wsj.com, Feb 14, 2014)

Rakuten to buy Viber
Continuing its strategy of expanding abroad by acquisition, the wisdom of which is not yet proven, Rakuten is shaking up the internet phone business by announcing that it will buy Cyprus-based Viber for US$900m. Cyprus??? Well, actually, Viber is Israeli, but based in Cyprus for tax reasons. Rakuten says that with 280m users globally, Viber will provide the firm with a platform that allows the company to host content, much the same as Line and Facebook do today. However, as others are saying (read the Haaretz site comments from the link below), there is substantial doubt as to whether Viber is worth US$100m let alone US$1bn. ***Ed: Perhaps a hint to the motivation behind the deal is the fact that the advising financial party for Viber was Goldman Sachs, Mikitani's old employer and occasional funder of choice...** (Source: TT commentary from yahoo.com and from haaretz.com, Feb 14, 2014)

Women in senior government posts rises to 3%
The latest numbers on government employment reveal that for the first time 3% of senior government jobs are now occupied by women, the highest level of appointments since the statistics began. While trending up, the figure is still distantly behind that of other developed nations (in 2010 43% in USA and 35.7% in U.K.), and the government says that it intends to increase the number to 5% by 2015. Specifically, women were appointed to 287 of the 9,691 senior posts in central government as of last October, up by 28 from the start of the year. ***Ed: Clearly the rate of appointments will have to move forward pretty quickly if they are to hit that 5% target...** (Source: TT commentary from theguardian.com, Feb 15, 2014)

Air Asia ready to take another shot at Japan
It is said that one of the defining characteristics of successful entrepreneurs is persistence, and that is certainly the case for the CEO of Air Asia, Tony Fernandez. He announced in a news interview that he is in the final stages of deciding on partners and top executives for a new discount airline he plans to launch in Japan, in competition to ANA and others. Fernandez won't announce the names as yet, but has said that it will start the new airline next year with more than US$70m of capital, and his company will own 33% of the voting rights. It is likely to serve Nagoya and Osaka rather than Tokyo, due to Air Asia's previous inability to gain access to Haneda and the undesirability of working out of Narita. (Source: TT commentary from bloomberg.com, Feb 14, 2014)

Record cesium levels at Fukushima plant
Tokyo Electric Power Company (TEPCO) has said that one of its test wells is producing a record high and apparently increasing levels of radiation (37,000 becquerels of cesium-134 and 93,000 becquerels of cesium-137 per liter of groundwater), up from the 76,000 becquerels of cesium-137 detected on February 12. The well is about 50m from the sea wall, and TEPCO is at a loss to explain the increasing radiation levels. Experts think it might be water leaking from an underground tunnel located near Reactor No. 2. ***Ed: Our take is that there is direct contact (leak or otherwise) between the coria of Reactor No. Two and the groundwater, not merely some secondary source.** (Source: TT commentary from presstv.ir, Feb 15, 2014)

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That was Terrie's Take. What's yours?

Let us know down below.

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Images: Terrie's Take; AkihabaraNews

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