Business Administration and Value Creation-the US and Japan

GE Executive Advisory Engineer
Hiroshi Suzuki

I moved to GE 2 years ago after I worked for Mitsubishi Electric Corporation. GE is a typical American company, and Mitsubishi Electric Corporation is a typical Japanese company. In this presentation, I will examine the differences between a Japanese corporation and an American corporation

1. Outline of GE

GE consisted of 11 divisions, and now it consists of 6 divisions after restructuring. The 11 division were divided into 2 business types. One is long-term business and the other is short-term business. The long-term type consists of energy, commerce financial, transportation, infrastructure, NBC, health care, and consumer finance. The energy division is the largest, and I belong to that division. Most of GE's staff in Japan belongs to the commercial finance division. The division of energy and the division of transportation were consolidated by the recent restructuring. The division of health care, which has recently grown, lays emphasis on prevention and diagnosis more than on treatment.

It is notable that GE has continued to grow after its founding and that the profit rate is high. Its sales are about 1,800,000,000,000 yen, which are almost the same as those of TOYOTA. GE is so admired in the world that The Financial Times chose it as the most esteemed company and The Fortune chose it as the most admired company in the world. The former chairperson of GE is Jack Welch, 1981 to 2001, and the present chairperson is Jeff Imerto from 2001. It is a feature of GE that the tenures of a chairperson are long. The long tenure of the chairperson tends to cause corruption. However, GE has a system to prevent chairperson's misconducts.

This is my interpretation, but isn't there a correlation between the company's intellectual property and the admiration of the company? The ranking by Nikkei of the intellectual property and the ranking of the Most Admired Company are almost same for high ranks.

2. The Corporation Culture

[The Three Main Differences]

What are the differences of corporation culture between US and Japan? The 3 main differences are: the relationship between the government and the companies, Marketing, and Compliance.

• the Relationship between the Government and the Companies
  The US companies have a stronger backup by the Department of Commerce than the Japanese Companies. For example, in developing countries, the American embassy Department of Commerce officials negotiates for business.
• Marketing
  The marketing of Japanese companies is customer oriented and the marketing of US companies is market oriented. Japanese companies try to respond to each customer's needs. For example, a Japanese company will provide the highest quality of juice when the customer wants juice. However, from the market oriented approach, a US company will first ask the customer why he or she asks for juice and provides water if the customer answered that he or she is thirsty. The satisfaction level of the latter customer may be lower than the first customer, but the latter company can sell water to other customers whose need is similar to the need of the original customer and the cost of water is lower than the cost of juice. The way to earn profit is different. I think the market oriented approach may have a larger innovation power.
• Compliance
  Compliance is the first issue of GE. GE will not try business without compliance. GE makes all decisions by a risk calculation. Even if profitable, it won't do a dangerous business. We calculate the risk of the business that has less compliance quantitatively. We have e-learning systems about compliance training. For example, you are asked for a $10 kickback at the custom office of the developing country where you have a big chance of business. Should you pay or not pay $10? The answer is that it is OK to pay $10. Because if the business meeting in that country cannot be held by your rejection of paying the kickback, people in the developing country may not able to receive benefit from the business and the company may stand a loss of more than $10. So I know that compliance does not equate to ethics.

[GE's Management Principle and Methodology]

GE has made various major corporate changes from 1990: workout/town meeting, productivity and best practice, CAP, Six Sigma, service orientation, globalization, and digitalization.

Workout means having a lot of small group meetings. In Japan, they also have a lot of meetings, but the system of decision making is different. Difference of organization structure of the company causes the difference of the system of decision making. GE's organization is flat; on the other hand, the Japanese organization is pyramid. In GE, the system is not seniority-based, and each staff member has their own mission. Top down decision making cannot function in GE, so we have to make each decision by discussion in meeting. So, we have telephone conference very often and decide in those meetings.

We have some differences in six sigma activity. In GE, we spend much time for definition before measurement. This is called CTQ. We inquire into customers' needs deeply and define the needs quantitatively.

[Human Resource Development in GE]

In GE, leadership is required; however, the definition of leadership is different from that in Japan. Leaders are required to have not only intelligence but also influence in GE. Often in Japan, only intelligence is required.

For the human resource development system, GE takes in excellent human resources (including experienced workers), educates them in GE, and provides an environment for actualization of his or her dreams. In the USA, GE hires new graduates, but it does not hire them in other countries, including Japan.

It is necessary to raise one's performance, image, and exposure in order to be a leader. Exposure means let people recognize you; for example, find clever ways to have people remember your name and other methods.

The personnel system is a pooled system. In Japan, workers are recruited by each division and advance his or her career in the division. In GE, all new recruits including fresh persons from graduate and mid- career persons are registered in the entry pool at first, are trained in the training program, and raise one's performance gradually. After the entry pool, they go on to the professional pool, the executive pool, and the senior pool. They can move on to the next pool in half a year at the earliest (1 out of 10 people for the top 25%).

GE provides an environment for easily beginning new business.

Potential ability is considered in human resource evaluation. After evaluation, the top 20% of the pool will be promoted to the next level. The lowest 10% will be recommended to move to other work or companies a one year grace period.

We have a system called stretch for salaries. Employees show their plan to GE of how much they will sell for the year and make a contract with GE. GE gives an objective which is a little higher than his or her original plan which is called Stretch, and gives assurance that GE will pay the extra if this objective is achieved. This way, GE has a system in which effort is rewarded.

There are some differences in training and coaching. For example, we have training to express what you want to say as shortly as possible. The objective of this training is to develop an ability to tell your plan accurately in 15 seconds to an important person in business. It is training to increase one's influence.

[Management Strategy of GE]

The 3 management strategies of GE are as follows: maintenance of strong business models, acceleration of internal-growth, and strengthening of business characteristics. Recently, GE began to emphasize eco-magination (developing eco-technology), and is now trying to develop the platform for it.

The development of competitive technology, the development of service, globalization, etc. are among the strategies. For globalization, GE began to emphasize the business in China more than that in the US.

Transparency and governance are also important. GE takes part in volunteer activities in order to spread GE's vision. For example, GE staff visit primary schools, walk around the school with the students, let the students think about what they should do in order to make their town better, let the students make presentations, and gives prizes to the students whose idea is good. The objective of this kind of activity is to increase GE's reputation.

3. Business in East Asia.

Recently, businesses in East Asia tend to be emphasized in a lot of US companies and a lot of Japanese companies. We have three axes of evaluation in order to decide if we do business in each area: intellectual property, possibility of the business growth, cost (low-cost). For business growth, Japanese companies will be concerned with how much they can sell. On the other hand, US companies will be concerned with how many companies can be acquired and how many companies can be used as a platform as well as how much they can sell. Concerning intellectual property, Japanese companies will be concerned with the entire intellectual property the country has, but GE will be concerned with only the intellectual property that GE can use in the country. For the GE standard, Japan has no intellectual property because GE cannot get a lot of good workers even if GE builds a new research institute in Japan. For this reason, GE built a lot of large research institutes in China. On the other hand, Japanese companies build factories, but do not build research institutes.

GE also has an office as a base for computer support and wage calculation in Dalian because the manpower cost is low. They offer high quality computer support services. Two of the four research bases of GE are in Asia (India, Shanghai).

4. Role of Japan in East Asia

I belong to the Engineering Academy of Japan. I suggested an Engineering Academy of East Asia Roundtable and active in it. And, I am engaged in the establishment of a recognition system of “general advisory engineer".

Q&A:

1. Sharing Values

Q: My question is about GE values. We think that the essence of ethics is to share values. How does GE share its values with the many staff around the world?

A: GE values are consists of 7 factors. We are trying through a two-pronged approach to share GE values within the company and with people outside of the company. We have a program called ACFC. This program seeks to share GE's good methods with the customers. For example, we are trying to share six sigma. When we have lectures on six sigma with customers, we ask the customer to evaluate the lecture and to give some quantitative feedback. When we clinch a deal, we not only evaluate it from the price perspective but also from the level of sharing GE values. We appraise quantitatively teaching GE's methodology to the laboratory, sales increase, and whether achievement and reputation rise; that is ACFC value, aiming towards increasing strength.

Q: As an example, I think the concept of “integrity" in English is a little different from the concepts of “Seijitsu". I would like to ask how you share the detail concept among your worldwide staff in this kind of case.

A: We use an e-learning system among others. We emphasize that compliance surmounts business results. Simply stated, we divide it into four steps, “imagine, solve, build, lead" concretely establishing each value and then teaching that those things should always be kept in mind. This is the way of thinking of compliance. We have to sign to “The Spirit & the Letter" every year, and we have to take a test once a year. Everyone does this so it assures the promotion of a consciousness of compliance.

2. Jack Welch Center

Q: I think GE is characterized by the fact that 9 of 25 top leaders originate in the audit department and by the management research center. I have heard that in GE you hold a thorough investigation into other companies and decide if you buy the companies in 100 days. I think your research center functions to bring up such excellent staffs.

A: Our research center is called the Jack Welch Center. Executives discuss a lot of things in the center. The major department is the department of audit. The department of audit prevents corruption. Recently, the department has a form of committee, which consists of outside members other than the top. GE has a lot of outside board members especially for audit. We have the 100 days decision rule for buy-off. We have to make the decision in 100 days. Quick decision is one of GE's characters.

Q: I think Mitsubishi Electric Corporation and GE have very different business structures. Do you have a chance to feed back your experience in GE to Mitsubishi Electric Corporation?

A: I would like to introduce excellence of GE to public if I have a chance. I would be happy if I can contribute to development of Japanese companies.

3. Mobility

Q: I would like to ask about mobility. What is the driving force to transfer or promote position in GE? In Japan, rank, salary, and so on is the driving force. What is the driving force in horizontal structure company like GE?

A: Employees can apply to a new position after he or her works in one position for 18 months. Recruitment information is sent once every two weeks through the intranet. We can see the contents and salary of each job. If you apply for one job, the manager of the job will check your history and decide if he or she takes you. On the other hand the company can ask staff to move to another position after 6 months pass. So, the shortest move happens in 6 months. In Japan, it is practice to inform you 3 months before you move, however in the US it is common that a person will move a week after he or she it is told.

4. Customer Oriented/Market Oriented and Ethics

Q: A customer oriented approach tends to face to ethical problems more than a market approach because you have to try to satisfy your customer's needs. Do you think GE's approach should use a market oriented approach in Asia? I think that GE should use a customer oriented approach also.

A: In GE, we will not conduct business which seems to include an unclear, gray compliance issue. We have a limited expense account per a year, so we can not spend a lot of money on one customer. It is true that we tend to have such problems in South-east Asia. If we make a partnership with a South-east Asian company, we ask the company to take the risk about such kind of problems. We have T&Cs(Terms and Conditions) in GE. We will never conduct business out of it. It is said that a Japanese customer's request tends to be heavy, however we will never enter into a contact with a company if it is out of T & Cs. In South-east Asia, we tend to put a trading company between us and our customer. We never think of rigging a bid.

5. E-learning

Q: Please tell us the unique points, merit, and problems about your e-learning system.

A: The basis is English, but Japanese, Spanish and the Chinese language et cetera can be selected. There are portions that are only in English. We also have a self-education system called “my learning". We have some paid classes. And also, we have a very unique system that does not have detail program. In that program, participants are assembled and when they are conversing a siren is blown suddenly. The participants have to handle an emergency. This is a training program for handling emergency.

6. Compliance and Risk Estimation

Q: You said that you made judgment about compliance by quantitative risk estimation. Do you make judgment about compliance by quantitative risk estimation in GE? I think we have some parts that cannot be quantitatively estimated.

A: I am not sure if they really make all judgments about compliance by quantitative risk estimation. Each country has their own commercial culture. I think it is difficult to estimate quantitatively the whole risk with such cultural differences. In GE, it is recommended that staff think of the worst cases. We have had a discussion whether it is OK to use Karaoke for business entertainment. In GE, it was outside of the rule originally. However Karaoke is safe enough that we go to Karaoke with family. Another example is in China where they are prohibited to have business entertainment in an underground bar. We don't have such culture in Japan.

7. Antitrust Law

Q: In GE, how do you educate the staff about antitrust law? I think that there are many differences between Japan and the US.

A: I don't know the details because I have not had a chance to do business in the US. It is clear that we cannot belong to an association in which only manufacturer members decide the standard. It may violate the Antitrust Law of the US. By the Antitrust Law of the US, it is prohibited that manufacturers make the standard, set up an organization, and shut others out. I don't know any more about the Antitrust Law of the US than that.

Q: Do the others than manufactures mean governmental offices, for example? Do they mean third organizations?

A: Yes, they do.