When the Japanese economy swept over the world market and many Japanese companies expanded overseas, plenty of papers addressed the topic of Japanese management policies – many favorably. However, among these, some critical opinions were also expressed, one such regarding the topic of the development of host-country nationals (HCN) in Japanese multinational companies.   

In  “New challenges for Japanese multinationals”, Bartlett and Yoshihara, professors at Harvard and Kobe University respectively, point out that the weakness of Japanese multinational companies is that the management of the overseas branches lies on people from the home country (i.e., Japan). This method which neglects HCNs is not sustainable (Bartlett and Yoshihara, 1988). 

Today, thirty years have passed since Bartlett’s and Yoshihara’s warning, the Heisei era (1989-2019) has come to an end, and we have entered the Reiwa era (from May 2019). How has the aforementioned issue of the multinational companies’ development of host-country nationals progressed? This text will explain the present situation of Japanese multinational companies’ strategies to promote HCNs with those situated in Germany as an example – where more than 1500 Japanese companies have emerged.

Trends in the development of host-country nationals and initiatives by multinational companies

As the phrase “the war for talent” suggests, multinational companies are engaged in a fierce battle for capable human resources; a rivalry for talent that has recently crossed national borders.

Multinational companies have abandoned the style they’ve been employing thus far, i.e. the traditional headhunting, and have begun to acquire and develop excellent personnel with the long-term promotion of internal capable human resources as a foundation of their HR strategy.

Such a long-term human resources development policy is called “talent management”, and when it applies not only to employees in the home country but also to human resources at local branch offices, it is called “global talent management”.

The objective of talent management is to secure key future talent – particularly executives and leader candidates. To be able to achieve this, the initiatives listed below are generally employed:

  • Recruitment, staffing, and succession planning (HCN recruitment strategy)
  • Training and development (HCN development strategy)
  • Retention management (countermeasures against HCN turnover)

These strategies go hand in hand. For example, an attractive talent development program can directly reduce staff turnover and encourage new hires.

Most corporations with headquarters in the US focus on these initiatives and are recognized for their internal leadership development programs, but other multinational companies such as Samsung and Toyota (and those listed below) can also be mentioned. 

Source: 20 Best global Companies for Leadership(Hay Group, 2014)

This kind of strategy for training
future managers already begins at the hiring stage, and similar to the diagram below, can be described as a human resources supply chain route (of sorts): hiring leads to the identification of executive candidates, followed by development and training, and lastly career planning.

(DIagram, Grove 2007)

Specific host-country national development methods include initiatives like the following:

  • Temporary transfer to the head office, secondment, and training programs
  • Leadership training
  • 360-degree feedback
  • Job rotation to branches in different countries
  • Explanation of career development opportunities and clear programs
  • Mentoring system

Of course, the type of internal human resource development plan differs depending on the company, destination country, and the characteristics of the host-country nationals.

Current status of the development of host-country nationals and career advancement in Japanese companies in Germany

Although the development of host-country nationals and their career paths is starting to become a global trend, the situation is slightly different in the case of Japanese companies.

In fact, such practical plans for HCN development are seldom carried out by Japanese companies. For example, according to data from 2010, only 25% of the managers in branches of multinational Japanese companies globally are locals. This can be compared to 80% of the managers of such British companies.

As previously stated, a weakness of Japanese companies is the development of host-country nationals. This is often a reminder from the (post-world war II) Showa era (1926-1989).
Particularly, the
management of the local branch office by Japanese expatriates has become one of the main hindrances to the acquisition and development of local human resources in Japanese companies, this is accompanied by barriers to career advancement for these HCNs. 

As will be explored later, for various reasons, there are many cases where Japanese companies have to rely on expatriates for management of local branch offices, which obstructs the development of host-country nationals.
This barrier which doesn’t allow (or makes it difficult for) non-Japanese to be promoted to managerial positions affects the motivation of HCNs negatively and is also a hindrance to the head office’s HR’s future plans for local human resource development. So, why do we have to rely on Japanese expatriates, and is there a solution to this problem?

Factors hindering localization of Japanese companies 

Firstly, one of the reasons why Japanese companies in Germany must rely on a system that emphasizes the presence of Japanese personnel is the actual cultural difference between the two countries in question; the magnitude of the cultural differences renders management of branch offices difficult. When control goes awry, confusion occurs, morale declines and may lead to the tragedy of the commons, and because of the loss of the unique culture and strengths of the headquarters, the leadership may strive to make the branch office’s culture match that of the parent countries. The easiest way to mitigate these cultural differences is to dispatch expatriates and have them govern the branch. 

While this approach is easy, it often fails to dynamically develop and promote host-country nationals. Hence, a branch office often remains a mere “garrison of expatriates”, without any self-governing capabilities.

As a result, although the head office would like to promote localization, the reality is that the risk of the head office’s initiative failing makes it difficult for a drastic localization and promotion of the host-country nationals. 

Additionally, even if a German were to be appointed as manager of a branch office, the concern that communication with the head office would be problematic still remains. There are yet many cases where important internal resolutions and documents etc., are made and/or written only in Japanese, which leaves little room in such situations for HCNs who do not understand Japanese.

Japanese companies’ initiatives to develop host-country nationals in Germany

There are some Japanese companies that have successfully overcome these barriers to host-country national development in Germany and that have been able to appoint local managers, and so forth, without any trouble.

One such successful approach is the use of the “training at the headquarters-method” often used by American companies; among the locally employed personnel, particularly talented ones are transferred to the headquarters for a period of two to three years, in order to (as candidates for executive positions) learn the systems and methods of the headquarters. In the future, when they are at the top of the branch office, these employees can bridge the gap between the branch and the head office.

Additional cases also exist; there are for example various attempts to reduce the communication barriers between the head office and locally hired managers, such as having especially outstanding employees learn Japanese, or hiring people with a Japanese background (who have studied in Japan) as candidates for executive positions, etcetera.

While some companies let their local managers learn the style of the head office in that way, more and more Japanese companies are also actively sending young Japanese to work overseas to get them used to the foreign way of doing things. 

Companies that have achieved a good balance between host-country national development and local management are characterized by a mutual approach; locally hired employees learn the head office style and Japanese employees learn the local style.