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Itochu's Niwa: the Salaryman's Favorite Boss

8, 01. 2005

  Uichiro Niwa is chairman of Itochu Corporation, Japan's third-largest trading company. Many working Japanese, particularly salaryman company men and female office workers, empathize with his approach to life and work, and his book Hitowa Shigotode Migakareru (roughly, 'work maketh the man') has sold well since its publication in February 2005 (Bungei Shunju). More than anything else, the secret of his success is probably his clear way of speaking and forward, unabashed manner, attributes seldom seen in a Japanese company president who was formerly a salaryman. As president and now as chairman of Itochu, he continues to commute to work by train, and when the company's numbers are down, he takes responsibility by returning his salary-all of it. This kind of behavior impresses people and strikes a deep chord.

   In Japan's corporate culture, where employees are widely expected to do their utmost to be obedient, unobtrusive and yet efficient, a president who behaved like this could be seen as a manipulator trying to increase his popularity, and ridiculed as such even by his own employees. This has not happened with Niwa, probably because he has given great thought to each step he takes, and has been able to justify himself to those scrutinize his words and actions.

60 Books a Year

Uichiro Niwa, Chairman of Itochu Corporation
Uichiro Niwa, Chairman of Itochu Corporation
 

   Niwa is the son of a bookstore owner in Nagoya. He made full use of the opportunities presented by this upbringing, burying himself in books of all genres from early childhood. During his student years and after joining Itochu, it was not unusual for him to read over 150 books a year in slack times, and even when working as Itochu president he digested 60 books a year. It is not clear how he went about his reading, but 150 volumes a year is a lot of books. His pace was three a week: even bearing in mind that half were paperbacks and novels, for 60 years he has been reading at over triple the speed of the average salaryman booklover. Niwa's powers of persuasion clearly owe much to these long years of reading.
   In Japan, the salaryman who is forward and unabashed tends to come to grief in both his personal and working life. Inside a large organization like a general trading company, speaking out of turn is fiercely criticized. Those who do suffer setbacks, and, at worst, cannot make a comeback and are forced out of their salaryman careers. By personality, Niwa is probably one of these types; either way, the reason he was able to keep his personal life and career on track was surely the broad knowledge and deep wisdom he gleaned from reading books. More than anything, perhaps, it is because he had firm values.
   What, then, makes manager Niwa different from other top managers in Japan? Generally speaking, Japanese managers stay with the company they joined directly after graduation- unlike their US and European counterparts-and, through long years give their all, toiling up the ranks to senior positions. In particular, and again in contrast with US and European practice, the Japanese salaryman cannot reach the top unless he cultivates close personal relations with his superiors. Human relations come first, and ability second. What's more, after retirement, many presidents will appoint as their successor a senior executive they have themselves carefully groomed.
   Niwa had devoted himself to Itochu all his career, and did seem to have had very close relations with former chairman Minoru Murofushi. But, with regard to finding his own successor, it is clear from Niwa's "skip-one-generation" policy instituted after his assumption of the presidency that he values ability more than human relations. A boss who adopts this kind of policy cannot simply anoint a trusted successor he has groomed himself, as the bosses of most other large companies do. Niwa has also departed from senior managerial practice in Japan by stating that the presidential term should be limited to six years, and that a retired president should revert to a mere ojisan (ordinary middle-aged citizen, without a corporate role). It is not clear what kind of ojisan Niwa will make, but he certainly shows little inclination to carefully groom a successor after retirement.

Making a Break with the Past

   The main reason for the protracted structural recession of the 1990s that followed the collapse of Japan's bubble economy was that over 90% of its major companies could not create a business model geared to the needs of the times. This was partly due to lack of knowledge and ability on the part of regular employees, but the underlying truth was this: confronted with the failures of the past during the great shift to a new business model, top managers became worried that their own superiors, the men who had raised them to their present positions, could end up with egg on their faces. This was a major reason for the reluctance to undertake management reforms in this period.
   If top managers in the US or Europe fail in their corporate duties, in by far the majority of cases, more able successors are chosen from inside or outside the company by a board of directors consisting mainly of directors from outside. A new business model is then created and management must respond to pressure for reform. As a result, a new management is free to make a clean break with its predecessor. However, in Japan, a manager who has failed in his role nonetheless often retains powers of successor appointment. So it is very difficult to break the bonds of the past and set management on a new track.
   In this respect, Niwa has behaved in a very "western" way. Two of his initiatives as president-the "A&P strategy" (of concentrating resources on four businesses, everyday consumer goods, energy resources, finance and aerospace/IT) and his "ISI strategy" (vertical upstream-to-downstream integration of food, textile and other businesses)-showed no regard for earlier management approaches. This was in October 1999, when Itochu announced the appropriation of a shocking ¥395.0 billion for disposal of extraordinary losses. The blame lay with an earlier management team, which had made reckless investments, and these executives fiercely resisted Niwa's axe.

Niwa read 60 books a year when he was Itochu president
Niwa read 60 books a year when he was Itochu president

    Two other aspects of Niwa's way of doing things deserve special mention. First, he made a clean sweep of Itochu's internal culture. In this, he resembled Carlos Ghosn, the Renault executive who turned around Nissan Motor after becoming its CEO. Second is his focus on human resources. Niwa set up, and himself heads, a "management cram school" for department and section chiefs and the Aoyama Club for core employees. He is also considered to have been very effective in establishing corporate governance and fostering personnel by changing workplace attitudes through ethics campaigns focused on the concepts of fairness, honesty and nobility of lifestyle.

An Approach Molded by 9 Years in the US

   A major reason why Niwa thinks and acts very differently to other Japanese business leaders is his 9-year residence in the US. He was mainly responsible for buying soybeans for export to Japan, and tasted both success and failure in this role. Although extremely busy, he trawled New York bookstores and read widely about American life, as well as building up personal relations with many people in all walks of life. He came to understand the American way of thinking, and broadened his own lifestyle, by always engaging meaningfully with partners in business transactions and personal relationships.
   Niwa is one of Japan's most gifted managers, but there is no chance of him being appointed chairman of Nippon Keidanren, the association of Japan's business leaders. Trading companies have relatively low status within Japan's business elite, which has traditionally been dominated by manufacturers, and, within the trading sector, Itochu ranks behind Mitsubishi Corporation and Mitsui & Co., Ltd. What's more, his stand-out personality does not fit into the collectivist mold of this elite. Nevertheless, Niwa holds a special place in the upper echelons of Japanese business, and has built up a considerable track record in Japan and overseas. He will surely continue to fascinate not only business leaders but also ordinary working people.

BY NAGAHARU HAYABUSA

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