Evolution of Employment Practices in Automobile Industry and Financial Industry in Japan: An Implication on the Diversification of Employment Systems

Sunday, June 26, 2016: 10:45 AM-12:15 PM
251 Dwinelle (Dwinelle Hall)
Mari Yamauchi, Doshisha University, Kyoto, Japan
Employment practices of Japanese enterprises have undergone significant changes and diversification. As the result, it is becoming less relevant to discuss Japanese model as a whole.  This paper analyses the similarities and differences in HRM practices of white collar employees of automobile and financial industries and describes the background and outcome of such constellation of policies and practices. It also discusses the implications on the future employment systems of large elite firms in Japan.  

Prior studies found divergence of employment systems in Japan by ownership, sector, type of corporate governance, etc. (Miyamoto 2006; Yamauchi 2013).  For example, Yamauchi (2013) found that characteristics of traditional Japanese HRM practices, such as new graduate centred hiring, regular job rotation, have been more applied among Japanese firms than foreign firms operating in Japan. The study also confirmed HRM differences by sectors; job rotation is more practiced in automobile and electric industries than medical and pharmaceutical industries, etc.  Other studies found that sub-sector differences also matter in formulating HRM practices or determining organizational structure that cope best with nature and risks associated with each product (Casper & Whitley 2004; Yamauchi 2015).  For example, Yamauchi claims that, among three sub-sectors of financial industry (banking, securities and life insurance), changes in HRM practices, thus, deviation from traditional Japanese model, have been most notable in securities firms, where global competitive pressures have been most acute, whereas changes at life insurance companies remained  subdued.

 Based on case studies of six representative firms, this study analyses changes in HRM practices in automobile industry, particularly in comparison with those experienced by three sub-sectors of financial industry as discussed in Yamauchi 2015. Both Japanese automobile and financial industries maintain seemingly similar HRM policies; new graduate centred hiring, regular job rotation, retirement age at 60, etc.  However, close examination reveals major differences in key parameters; most Japanese firms claim long term employment, however, in automobile industry majority of those hired as new graduates continue to work until retirement age, while in financial industries, significant proportion of employees quit before retirement age. Management of overseas operations also differs markedly. Firms in auto-sector tend to unify HRM policies among senior management by introducing key HRM policies of Japanese HQs into overseas operations. Some claim that ability based criteria have been introduced to senior management abroad.  On the other hand, firms in financial industry maintain HRM policies of overseas operations separate from those of HQs, and one company, which merged them, did so, by adjusting policies of HQs to those of subsidiaries.

 Based on these multiple empirical researches, this paper argues that relative competitive strength or weakness of core products within international markets determine the direction of HRM policies to the extent that the respective markets are subject to international competitions; firms enjoying competitive strength diffuses key Japanese policies into overseas operations (‘Japanization’). Firms whose core products are comparatively weak (e.g. securities, pharmaceutical) try to adopt global ‘best practices’. Firms not experiencing fierce international competition tend to maintain traditional Japanese HRM and manage overseas subsidiaries separately.