Why Hiring the Right Country Manager is Essential — Especially in Japan

Oftentimes Japanese offices have huge problems communicating with the head office overseas.

What we see is not a problem of language — it’s a problem of culture.

Different countries do it differently: the British have a rather long-term view of sending an executive from the home office to Japan. They usually stick with their own countrymen, to establish a presence and eventually be rotated in and out.  The Americans and Australians are more egalitarian, and are open to hiring locally. Eventually, there is a push to transition to the local market to save on costs. This often results in a breakdown in communication, but even more so if the executive is not the right fit for the team (“team” here meaning the entire executive team: HQ & Japan).

When the parent company transfers one of their employees to run the Japanese office, they try their best to run an efficient operation. However, they often wind up with tremendous problems simply due to the fact that the local Japanese staff don’t communicate well with them (though they will pretend to!).

The bottom line is there’s no trust.

It’s part of the structure here. A Japanese employee’s first priority is not learning the job; it’s integrating with others, with the team. Their primary objective is to assimilate. They don’t want to be left out or kicked out, and this trend continues throughout their career.

If you’ve got an executive who has actually changed jobs to run your subsidiary or your branch office, they’ve been steeped in that culture.

There are CEOs and CFOs who have changed jobs four or five times in the last ten years. That used to be unheard of, but not anymore. As such, a communication breakdown is not just about language, it’s also about building your base and securing your role in the company. People don’t want to be fired, they want to be respected and admired by the people that are closest to them.

What do you do when your Japanese subsidiary is not operating the way it should? 

That’s a very difficult situation for any company. Keep in mind, the person who is running your subsidiary is not an employee: they’re selected by the Shareholders to run this wholly-owned subsidiary. That means when they’re not doing well, or when they don’t meet expectations, or when there’s cause for distrust, the Shareholders can move them out. They’re not an employee — the rules that guide a Representative Director are different. They are serving a term, and at the request of the Board, they could resign voluntarily or be forced to resign.

What happens when foreign companies lose trust in their Japanese operation and have to take extreme action?

There are some very famous stories of rogue CEOs causing trouble — even headquarters cannot control what’s going on in Japan. This is mainly because there is a clash of business ethics that people run afoul of. Japan is famous for having one of the lowest crime rates in the world, but the truth is, white collar crime is rampant in this country and the court system is not equipped to deliver justice in this area.

What happens if someone who is selected to run one of the offices just goes wild and starts creating their own private fief there. Can’t they just be fired? 

There are a couple problems with this line of thinking. The first is that, absolutely, fief-building begins on Day 1. It is as inevitable as it is insidious, but those who are going to do so will start fortifying their bases, developing loyal lieutenants, and arranging an exit plan (if they are clever).

Just firing them will simply cut off one head of the hydra.

The Representative Director’s name appears on all corporate records. This means people you are doing business with (banks, main facilitators of your business and all your clients) know this individual as “the face of your business.” This can ultimately damage your brand’s reputation, raise suspicion with potential business partners and more!

If you hire the wrong individual, they have the power to set up an independent K.K., an independent company, to create invoices and get paid on-the-side. That’s cause for termination immediately, but going through this process is very delicate (assuming you discover it in time). You’d be surprised how common this is!

Can’t you just go to a law firm?

While the knee-jerk reaction may be to go to a law firm, it is not always that simple. You will need to provide ample evidence of wrongdoing, which could involve orchestrating several components, such as a detective agency, law firm, and forensic accounting firm. You’re going to spend an enormous amount of money, as well as expend energy managing and overseeing this all the while keeping such an investigation hidden, and “under-wraps.” Just getting separate 3rd parties working together would be expensive, time-consuming and, in my experience, ultimately unsuccessful.

So what can you do?

First off, you can prevent all of this by making sure to make the right selection when hiring your country manager here. That means making sure you do proper due diligence, getting references, and following up with those contacts.

If it comes to getting rid of them, you need to show them why they’re not meeting your needs, and why they are not competent to fill the position. This sounds obvious and simplistic, but it needs to be a carefully orchestrated process. You’re going to need somebody to help you out of that situation, and relying on a bengoshi is sometimes not the best option.

I’ve been around the block doing business in Japan for over 40 years. Through this time, I’ve made every mistake in the book and seen other executives fall into the same traps. After advising countless companies and sitting on the Board for many others, I’ve gained invaluable  insight into this realm of corporate Japan like no other.

If you’re looking to circumnavigate these potential issues, Langley Esquire is ready to deliver the solution.

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