Emerging Markets Business Summer 2016 | Page 82

ORGANIZATIONAL CULTURE – OFTEN INVALID? M&A Impact: Walmart: While the above traits and dynamics underpin work culture inside US firms, the failures of Walmart in Germany, Korea, Japan and China, demonstrate how attempts to export such culture can end in disaster. The US retail powerhouse tried without success to Americanize its ventures in these countries, which when combined with lack of cultural understanding, led to forced withdrawal and losses in each case. Omnicom & Publicis: The failure of the much-publicized merger between marketing and communications giants, Omnicom and Publicis boiled down to cultural differences between the US and French companies, according to the Group CEO of Omnicom Group, John Wren. In media reports he stressed that these cultural differences were corporate, not national, but with national culture and traditions wielding significant influence over business practices, distinguishing the two can be difficult. Announced in July 2013, the proposed US$35 billion merger collapsed in May the following year. In stark contrast to my US experience, I spent five years in Japan establishing branches of an American multinational. It did not take me long to realise that I had entered a different world. Do Like the Japanese In stark contrast to my US experience, I spent five years in Japan establishing branches of an American multinational. It did not take me long to realise that I had entered a different world. The concept of hierarchy is firmly implanted in Japanese society. If there are 100 persons in a firm, each one will know his number or rank and will instruct or obey accordingly. If you are number 98, you will take orders from 97 people of higher rank, particularly from no. 97. In turn, you will advise numbers 99 and 100. Hierarchy is decided by longevity. If a batch of people joined in the same year, age will count. If two people are of the same age, the date of their university degree will decide. There are strict layers of authority: Shacho (CEO), Bucho (senior director), Kacho (junior manager), Kakari-cho (section chief). Leaders of corporations tend to be aloof. They are not involved in day-to-day operations, and decision-making at Japanese firms can take months. The collective nature of Japanese people means that consensus is valued at all levels, though seniors often exert pressure. Collectivism also impacts systems of incentives and punishment: rewards must be conferred on the department not the individual. Meanwhile, sub-cultures hardly exist and tolerance is high as long as one follows the rules. Expectations with regard to new recruits are always high, as loyalty and work ethic are taken for granted. Questions of human rights are barely discussed—one's job is one's job. Periodic appraisals are unpopular and promotion is unrelated to performance. A brilliant performer aged 25-30 is destined, whatever his talents, to accept guidance (and orders) from men in their forties and fifties. During my own sojourn in 80  Emerging Markets Business  Summer 2016 • Issue No. 1 Japan, Akio Morita, the then-president of Sony, confided in me how he dealt with the promotion dilemma: “I cannot promote young stars officially, neither can I give them big salaries or impressive job titles. My best advertising man is 28 years old and has the title of second assistant in the packaging department. His pay is modest, but he knows that my door is always open to him and I listen carefully to all his ideas. I have given him scholarships to spend one year in the United States and plan another year for him in Britain and Germany. Of course, he has introductions and a generous expense account.” When I asked him what he did with his less talented fifty‑year‑olds, he answered, “We keep them away from the real business. Some of them we train to be good golfers. We call them vice-presidents and they entertain visiting American vice-presidents for days on end.” Communication between managers and subordinates in Japanese companies is polite and indirect in comparison with that in Western companies. Brainstorming, so popular in other parts of the world, is almost impossible to achieve in a Japanese company, and disinclination to challenge superiors can also cause problems in error detection or willingness to admit defects in production (Toyota late recalls in 2014). Similarly, whistle blowers in Japan are unpopular. The Fukushima affair has cast serious doubts over the code of ethics at higher levels in large corporations. As these experiences illustrate, the organization of a Japanese corporation is inherently different from the Anglo-Saxon model. Japanese firms considering an international M&A must therefore understand that their business culture is, in all