Japan has long been famous for its lifetime employment system. Companies have traditionally stood for social protection of their employees’ wellbeing, offering a job for life and a pension that took care of the family after workers retired. In return, workers pledged a level of loyalty virtually unseen elsewhere in the world, and put work for the company’s benefit above their own personal career goals.
This lifetime employment mentality has been a factor in the design of the highly structured Japanese educational system. The most prestigious, stable Japanese firms tend to hire new graduates en masse from a select few top universities, which in turn accept applicants from select elite high schools. In such a system, one’s position in society can be determined early in life.
Stigma of changing jobs
According to the Japanese Statistics Bureau, the average tenure for a full-time employee is 10 years. This is more than double the average tenure in the U.S., and almost double the average in leading European countries.
Under Japan’s lifetime employment culture, workers are rewarded not only for performance, but also for loyalty and tenure. Salary increases with seniority in the company, and promotions strongly factor in track record within that business. Therefore, it’s a difficult decision for management to promote a mid-career hire over a loyal employee who has contributed to the firm since having joined as a new graduate many years prior.
Due to this cultural landscape within large firms, it has traditionally been difficult for employees to move up the corporate ladder by changing firms. Workers might change companies for personal or family reasons, or leave due to a negative experience or situation, and seek opportunities elsewhere. Not unlike countries with a caste system, it’s easy to move down, but very difficult to move up. In the majority of cases, those joining a new company mid-career had to accept a lower salary, and often position, than in their original firm. And then they had to face the challenge of being seen as an outsider with a slower promotion pathway.
Market shifts and foreign investment brings a tide of change
In recent years, two major changes have been upending long-held views on job change. Firstly, as Japan’s population grew and became more affluent, the market became more attractive for foreign companies. But often they don’t have the ability to conduct many hires, and train new graduates into their system as established domestic firms do. Therefore, they must rely upon their ability to attract mid-career talent. The challenge for foreign companies has often been to prove that they’re stable, and to market themselves as attractive for top candidates.
After all, for top talent who have studied hard since childhood to join one of Japan’s prestigious banks, trading houses or top manufacturers, joining a ‘gaishikei’ (foreign capital firm) will surely be seen as a step down socially! Multinational companies have had to attract talent by offering higher positions and larger salary packages, therefore creating a market where employees could move up by changing firms mid-career.
Secondly, rapid market shifts have left highly attractive Japanese firms short on potential talent. Though Japan’s corporate giants have a high volume of human resources, when the market shifts faster than their hiring strategy can recruit talent, they’re forced to fill in the gaps with mid-career hires. In the energy market, a clear example is the expansion of the traditional energy and infrastructure businesses into energy technology and distributed energy systems.
As trading houses focus more on investing in energy technologies, commercial decarbonisation solutions and AI/IoT areas, they find that to maintain a competitive advantage they need to acquire qualified talent faster than they can train via their new grad hiring structures. Looking at the makeup of mid-career vs original employees in the ‘Energy Solutions’ team of any trading house compared to the ‘Energy & Infrastructure’ team illustrates this point.
Current market status
In contrast to the Japan of the early 2000s, a growing segment of high performing talent is choosing to leave their original companies at a time where they still have a good career path internally. An increasing number of talented employees see an external move as an option to accelerate and advance their careers. From our own data acquired by interviewing thousands of Japanese professionals, common reasons for this are as follows:
- Belief that foreign firms promote on a meritocratic basis rather than according to seniority
- Dissatisfaction with being rotated into a position not aligned with their goals
- Desire to increase the pace of their promotion and earning potential
- Interest in gaining exposure to global technologies and honing their specialization
To take on a wider role in a smaller organization to develop management skills
Titan recently supported a Japanese professional in his early 30s with such a case. He correctly recognised that pedigree is still important, and after graduating from a top level University joined a top tier trading house, where he performed exceptionally well for five years. His intention was always to leverage this and then boost his career in a global environment. After making a move to a global firm and gaining a wider experience in a smaller organization, we helped him land a position of much higher responsibility with a more attractive global firm that offers a wide range of opportunities.
In contrast to Japan from a few years ago, domestic employers are now placing stronger emphasis on an employee’s business experience and results, rather than their academic record or ‘pedigree’. We have noted multiple cases of Japanese professionals, with an average academic record and with a first company of lower status, moving into larger and more attractive firms based on their work experience.
An interesting illustration is Japan’s two resume formats. The rirekishou is simply a list of every educational institution and company someone has been enrolled in and for how long; the shokumou keirekishou lists responsibilities, achievements etc, much like a resume used in the West. The latter is gaining popularity and relevance, while firms that place high importance on the former likely still communicate by fax and employ a small army of office ladies to serve tea….
Moving toward or away?
As a word of advice for companies looking to hire talent from established, high-status Japanese companies – understand the motivation. Are you talking to someone who is interested in your business for the right reasons? Do they buy into your values, mission, the potential of your business, your technology, or do they face some sort of trouble, a demotion, or a glass ceiling in their current firm?
Also, be careful not to confuse pedigree with results. Graduating from a top tier university and gaining employment in a prestigious firm is valuable much in the same way an IQ test is. Both show a candidate’s potential. The world has plenty of underperforming geniuses; we need to look beyond potential and see what each person has done with the gifts they’ve been given.
Andrew Statter is a Partner at Titan GreenTech, an executive recruitment agency focused on the clean energy space.