3, 06. 2006
Toshiba Corp., which celebrated its 130th anniversary in July 2005, is Japan's oldest electrical machinery maker. There was a time, before the Second World War, when the company led the industry in Japan by introducing the latest technologies through a tie-up with General Electric Corp. of the United States. After the war, however, the company lost its edge, due mainly to an easy-going corporate culture, and fell behind Hitachi Ltd. and other rivals. For most of the postwar decades, it has ranked 3rd or 4th in the industry in Japan. When Tadashi Okamura, 67, assumed the presidency in June 2000, Toshiba had been buffeted by the crash of the IT ‘bubble’ in the United States and was wallowing in red ink. The company faced collapse.
The question Okamura faced was, how does a company deal with massive losses? In the United States, a top executive would say, ‘get rid of money-losing divisions and build up profit-making operations.’ But in a major Japanese company, where employees have traditionally been well looked after, it is not easy to close divisions that are in the red. At a company like Toshiba, with over 100 years at the top of its business, both bosses and employees would regard such a step as tantamount to refusing to honoring the company’s past.
Okamura, then, is not a strong-arm boss. His appearance is smart and amiable, and he is soft-spoken. Unlike a typical senior manager in Japan, he does not change his basic manner when dealing with young employees. Yet this is the leader who successfully fought to induce Toshiba to make a break with the past. What was his secret?
Tadashi Okamura, Chairman of Toshiba Corporation
One answer is rugby, which he played as both a student and young Toshiba employee. He was in University of Tokyo’s team, which was weak. Thanks to skilled senior students and good coaches, he learned ways to lead a weak team to victory. A characteristic rule of rugby, and one that contrasts with games such as soccer, is that passing of the ball to other players running in front is prohibited. This rule thoroughly impresses on the players the importance of team spirit. Okamura saved Toshiba from its near-fatal crisis by teaching employees the importance of team spirit and the taste of victory.
Soon after assuming the presidency, he worked out a slimming plan for a company that had become too bloated operationally. Its linchpin was the strategy dubbed 'shrink to grow.' It was based on the idea of temporary reduction in scale to position the company for future growth. By axing a considerable number of divisions, including the ATM and satellite businesses, the company has reduced gross assets by about 20%, personnel by 12% and interest-bearing debt by 38% over five years
To beat the global names in the electrical machinery and electronics industries, Toshiba needs to follow the 'shrink to grow' strategy to the end. A US company in the same position would be content to simply announce a major restructuring plan and quietly implement it. But, true to his ‘lifelong rugby player’ mentality, Okamura was determined to implement the 'shrink to grow’ strategy in a way that won the backing of employees who would inevitably lose out in restructuring—that is, in a team spirit.
He made full use of the in-house email system to convince employees of the necessity of the reform strategy. In a display of determined leadership from the front, he promised the employees the ‘taste of victory’ if they followed him. Together with his management reform point man, he also made repeated visits to Toshiba plants and offices for face-to-face sessions with young front-line workers. The talks were held five times a month, and each was attended by about 100 employees. He saw more than 1,500 people in a year.
Most Japanese managers say cite wa—unity, harmony—among employees as the key to beating the competition. Okamura, however, says that there is no wa where there is no victory. He believes that employees discover their own value when they are successful in competition, and that only through further effort can they realize their own potential.
So Okamura could be called a traditional Japanese business leader, but also one of a new breed. Two years ago, he introduced at Toshiba what is known in Japan as the committee-based system of corporate governance. It was modelled on the American pattern of audit, remuneration and executive-appointment committees organized under the board of directors, with the board supervising management.
This is how he describes its impact:
'When I stepped down from the presidency and became chairman in July (2005), I recommended the candidate for the next president, and the appointment committee made the decision. In the past, presidential appointments were, in reality, arranged behind closed doors. Now, for the first time, we were able to make the process transparent, and I believe this will favorably affect the appointment process throughout the company. And I have always thought that it strange that the president should decide his own salary. I am relieved that the president's salary is now decided by a committee, which takes account of such remuneration at other companies in our sector.'
When he became chairman, Okamura simultaneously assumed the vice-chairmanship of Nippon Keidanren, the nation’s leading organization of business leaders. It is not known what contribution he is likely to make in this capacity, but with his softly-softly approach he might just bring change to the business world.
BY NAGAHARU HAYABUSA