Big in Japan: Levent Arabaci on Implementing Culture Change at a Large Japanese Company

Levent Arabaci, Hitachi’s global EVP for HR, gave a highly informative talk on the transformation of Japanese business icon Hitachi and the radical restructuring of the HR system needed to support that transformation. The program was of interest not only to observers and investors following Hitachi’s well-reported efforts to turn
itself into a modern streamlined highly profitable company, but for those who see the Hitachi experiment as the leading edge of a revolution in corporate governancein Japan needed to propel Japan into the post-industrial era.
In introducing Levent, JSNC Board member Rochelle Kopp, who organized the event, aptly set the scene by noting that while it is often said Japan is a countrywith very few natural resources, it is in fact blessed with the best resource — a
labor force that is well-educated, diligent and creative. Japanese companies need
to make the best possible use of this resource, but unfortunately that often fail to do
so.
Levent explained how the company founder’s vision of a “pioneering spirit” turned
into a double-edged sword, with the company entering one frontier after another
until it had reached an unwieldy 1000 uncoordinated subsidiaries with 326,000
employees worldwide. Hit by a declining market in Japan, weakening return on
investment and a decidedly domestic mindset, Hitachi realized that it needed to
change to become a globalized company or face extinction. The appointment in
2010 of Hiroaki Nakanishi, who was running the US business, to President was a
turning point for Hitachi’s efforts to globalize.
Levent described in detail how he has begun the work to create a new global HR
function within the firm, starting with collecting data on employees (hindered in
part by privacy rules in Europe and elsewhere), mapping all those positions,
creating a global standardized grading of the positions, and putting in a place a
performance evaluation process. While these are relatively standard activities for a
western MNC, executing these tasks in a traditional Japanese company was
challenging.
On the positive side, he was able to leverage the strong work ethic, pride in work
and high individual quality of Japanese managers to good effect – once a
consensus was reached on an issue, execution was rapid and thorough. On the
challenging side, Japanese managers were not used to a top-down management
style, were wedded to a seniority system, were averse to open communication, and
experts at passive aggressive resistance to ideas with which they disagreed.
He recounted the successes that the effort has yielded thus far, including a mapping
of the large majority of global positions, a standardized performance
evaluation/feedback system, and even a budding initiative to introduce targeted
performance based bonuses. Hitachi still had a lot of work to do, in particular to
promote diversity. He advised those working on transforming the work place in
Japanese companies to keep reiterating to staff that “anything is possible,” allow
for mistakes but never accept failure, challenge the status quo, implement longterm
solutions not short-term patches, keep solutions simple, and push change from
the top down.
We received strong favorable feedback from the audience, reflected in the active
audience Q&A following Levent’s remarks. Thanks to Levent Arabachi for his
wonderful talk, to MoFo for the use of its beautiful Palo Alto facility and to
Rochelle Kopp for organizing the event.