DEMISE OF JAPANESE --HRM STYLE

The End of Japanese-Style Human Resource Management?

By Gregory K. Ornatowski

April 15, 1998

Are Japanese companies changing their practices of lifetime employment and seniority-based pay? Will a new system based on individual performance affect their competitors?

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A plethora of articles in the popular business press in both Japan and the United States have reported the end of the Japanese-style human resource management system, in particular, the demise of lifetime employment and seniority-based wages and promotion in large Japanese firms.1 While many companies are making changes, it is inaccurate to proclaim the end of the current system, since the system has been evolving, rather than remaining stable in the long term. Moreover, evidence shows that while changes are occurring, they are generally limited to seniority-based pay and promotion, whereas lifetime employment remains intact in most large companies. In addition, only a minority of large firms (approximately 10 percent) have substituted performance-based pay and promotion systems (nen posei) for seniority-based wages (nenko), and even some of these firms guarantee wage levels, which is contrary to a pure performance-based system.

My evidence comes from the results of published surveys by the Japanese Ministry of Labor (JMOL), the Federation of Japan Employers or Nikkeiren (FJE), the Japan Productivity Center (JPC), and the Japan Employment Information Center (JEIC). From these surveys, I was able to obtain a broad-based picture of large Japanese companies’ employment policies, in particular, lifetime employment and seniority-based wages and promotion. I used the survey results to examine the first issue: Are... To read the complete article, login or sign-up using the form below.