Vol.34-No.09 September 1,1995
The Japan Institute of Labour
The Japanese employment system is beginning to fluctuate. A great wave of restructuring is threatening the statuses of the salaried employees of large-sized corporations, who have enjoyed considerable security in employment, promotion and wages under lifetime employment and the seniority-based promotion system. Many salaried employees have been expecting guarantees of employment until fixed retirement age and automatic annual wage hikes. However, fear of unemployment, pressure for early retirement and constraints on wages are now serious problems which make their life-planning much more difficult. Worse yet, to salaried employees who toiled for lifetime security, sacrificing their family life and community life, losing identity as the company man is equivalent to loss of the meaning of life.
However, transforming to higher-value added activities is crucial for many corporations in Japan to survive, and the restructuring of corporate organization and employment rules is an urgent task. At the same time, abrupt changes of organizations with no guarantees to employees would be very likely to provoke their tough resistance. It is a very important task to clarify the realities of promotion and careers under conventional Japanese employment systems based on empirical data and to consider the future response.
In this paper, I would like to consider the future of careers in Japanese corporate organi-zations, referring to the results of the research, "Promotion Structure of White-Collar Workers," which analyzed panel data for about 8,000 male white-collar employees at the OLL Company (anonymous name, one of the nation's leading heavy-industry firms.)1
2. Japanese Structure of Career and Promotion
It is extremely difficult for companies, however big they are, to unconditionally realize lifetime employment and seniority-based promotion which are generally thought of as features of Japanese employment systems. For it is impossible under the pyramidal structure of the organization to get and keep school graduates until a fixed retirement age and offer the majority of them pay raises and promotions on the basis of length of service. Yet the Japanese employment system functioned effectively as an institutional rule at least in large companies. The rule had been considered a significant frame of reference, or norm, by both employers and employees and thus to consider it fictitious is not realistic. What is important in understanding the Japanese employment system, it can be said, is not to elucidate whether lifetime employment and seniority-based promotion exist but to shed light on the mechanism of adjusting the organization and personnel.
What was clarified by our analysis may be summarized as follows. The Japanese structure of careers typically observable in the nation's big corporations cannot simply be described as the seniority system and lifetime employment system. It should be understood as a total entity of diversified mechanisms which adjust organizational structure and personnel, with the two systems functioning as a major frame of reference. It is never unchangeable and is constantly undergoing evolution through modifications, alterations and additions of adjustment mechanisms to respond adequately to indigenous and exogenous changes of the organization.
Adjustment mechanisms which were clarified through analysis of the OLL include the following. First is the traditional method of differentiating careers based on sex and educational attainment, which facilitated seniority-based promotion of male employees with college education. Second are measures to assure employment by expanding job opportunities outside of the company by passing on excess staff members to subcontractors and affiliates or farming them out to subsidiary companies. Third are measures in which multi-dimensionalization of the reward system (prestige for grade, authority for job status and wages for job levels) leads to buffering of the pressure for positions and wages brought on by the seniority-based promotion system. At the OLL, these adjustment mechanisms have taken root as a personnel management system.
Another adjustment mechanism which is more important is the multi-stepwise promotion system. It is not a simple seniority system, nor is it America's simple competition-oriented system. The rules of promotion change from the uniform seniority-based system to speed race-oriented scheme to the tourna-ment race-oriented system according to the initial stage, the middle stage and the latter stage of a person's career2. At the initial stage of a person's career, the system is strongly colored by seniority and is gradually becoming race-oriented to get quick or slow promotion. As the stages of career advance, the principles of competition appear and finally separate the winner from the loser. In a nutshell, the system does not involve selection at an early stage as seen in American organizations; but this is not to say that no selection takes place. Selection is reinforced in a phased manner.
Japanese careers are considerably different from the image that "the worker gets a pay hike and promotion on the basis of length of service from graduation till fixed retirement age."
3. Multi-Stepwise Promotion System
How will Japanese careers change? This issue is deeply connected with trends in the aforementioned adjustment mechanism and in particular, trends in the multi-stepwise promotion rule will be a major focal point. Let us now examine what the future trends will likely be.
The promotion rule for male white-collar workers with college degrees can be diagrammed as in Fig.1. The vertical axis represents grade, while the horizontal axis, length of service.
For several years after joining the company, white-collar workers with college education are equally promoted on the basis of years of service. Later, they will be divided in two groups: those who are promoted to a higher grade and those who are not, even if they are in the job for the same length of service. But the entry to a higher grade is not closed to those who are several years behind in getting promotion. They follow those who are quick in promotions so that they do not remain too far behind. This trend, however, ends at a time when the worker is promoted to the grade of lower management (kacho). Above this grade workers are clearly divided between those who win promotion and those who don't.
As shown in Fig.1, the rule applicable to the initial stage of a person's career may be called the uniform seniority-based promotion system. It applies to the first several years after entering the company and is characterized by uniform promotion, based on seniority.
The rule applicable to the middle stage of a person's career may be called the promotion speed type. Promotion is not uniform and a gap is created in the time of promotion among workers. The gap is narrow at first between those who are quick in getting promotion and those who are slow, but becomes wider as they go on up the line. Yet the two sides do not differ from each other by more than one rank. Furthermore, there is a period when all are lined in the same grade again in the race for higher posts. The trend in this period is neither of the pure seniority-based type nor of the sheer race type and is in between, so to speak. The promotion speed type is just the name for the middle stage of a person's career, where whether a person is quick or slow in promotion is a matter of concern.
Furthermore, the rule applicable to the latter stage of a person's career is close to the tournament type verified at America's corporate organizations.3 Starting with the stage of the lower management and up, this type separates workers between those who advance to the upper grade and those who don't, not between those who get quick promotions and those who get slow promotions. There arises a disparity in grade by more than one rank between those who get promoted and those who don't.
It can be pointed out that the multi-stepwise promotion system is superior not only in adjusting the organization and personnel but also in accomplishing tasks at individual stages of a person's career. The initial stage of his career is the period when he settles down in the company. At the time of joining the organization, critical selection has already taken place in terms of education or the level of school, with talents varying little. The OLL, one of the country's leading corporations, which was studied in this survey, in particular, can hire graduates of selective universities and colleges. This means competition or selection is not really necessary for workers at the initial stage of their careers. What matters is rather that workers are incorporated into and adapt well to the organization. The rule considered to be suited to this requirement, is the uniform seniority-based system.
The uniform seniority-based system, however, will likely provoke lower morale; once workers have adapted well to the organization after a certain period of time, they are treated uniformly whether or not they make efforts or whether or not they are capable. The promotion speed type in the middle stage of a person's career can arouse emulation and gradually enable all to participate in the race. To put it another way, it is a system under which a person cannot drop out of the race. It can also be regarded as a system which under the rule of lifetime employment, prevents workers from losing motivation early in the race. The front-runners who advanced to the grade of supervisor (kakaricho) or lower manager in the shortest time possible and the followers who advanced to these positions later on, fall in line with each other and start out again for the rest of the race. In other words, those who stand behind can "start all over again." Thus, the promotion speed system adjusts the gap in the time of promotion arising from job rotation and organizational requests and assures workers an opportunity to join the race again.
The latter stage of a person's career is the period when strict selection is explicitly executed for advancement into scarce vacant posts. The tournament system is a system designed to respond adequately to the pyramidal organization and personnel adjustments. This is close to America's rule of promotion, which clearly divorces those who will get promoted from those who will not. What matters at this stage is not whether promotion takes place early in a person's career; instead, fact of critical selection between those who can get promotion and those who cannot becomes clear.
As we have seen, the Japanese career system is not a simple seniority system on the basis of age; nor is it a system based on the strict principles of competition. It is rather a system under which the principles of competition are gradually reinforced according to stages of a person's career. The great merit of this system is to bring out stronger motivation in more employees. In short, the system, it is fair to say, is intended to take time to groom and select more talented people. Yet the system is not without defects.
4. Toward Reconstruction of Japanese Career Structure
It has been pointed out that the multi-stepwise promotion system institutionalized under Japanese employment rules is defective in terms of fostering leaders.4 But a bigger problem with the system, it seems, is its tendency to result in a waste of labor after the middle stage of a person's career.
As stated earlier, the multi-stepwise promotion rule, the promotion speed system in the middle stage of a person's career in particular, is an excellent system for fostering many talented people. But the possibility of "starting over" (return match), for instance, can no longer be sustained after the first half of the middle stage of a person's career. Falling behind early in the race for the grade of supervisor can be offset by advancing to the grade of lower management later on. But whether advancement to the grade of lower management comes earlier or later in a person's career takes on a decisive meaning for his subsequent promotion. In other words, it is difficult to make up for the delay in promotion. Many workers join the promotion race over a long period of time. In actuality, however, the time when a person is promoted to the grade of lower management is a major turning point. To be more specific, he can bring the race to an end by retaining the grade of lower management or middle management (jicho) for a long time, but the reality is that the time when a person holds the grade of supervisor marks a significant career turning point.
To make a long story short, many workers join the race toward the same goal of managerial posts and the race comes to an end considerably later in their careers. But the critical point at which the race is won or lost comes substantially earlier in the process of advancement. The natural consequence is a bulging middle--the bulge of lower managers and middle managers.
This problem is further exacerbated by the fact that the rule of job rotation is not necessarily clear. Lack of space precludes detailed explanations of job mobility in this paper; but the key point is that no clear rules are set for the pattern of mobility from one job to another in terms of the correlation between jobs. It has been clarified that job mobility has "fuzzy" unstructured characteristics,5 which will create the following problems from the perspective of career development of individual employees: bleak prospects for a person's career; the impeded diversification of career in the sense of choice; difficulty in developing a career consciously. All these problems concerning career development will suddenly come to the surface when a person becomes middle-aged or older.6
The multi-stepwise promotion rule fosters a greater number of talented people while on the other hand, it results in a bulging middle and a waste of middle-aged and older workers abilities. This is not only a tremendous loss to corporate management, but also it is highly likely to be a fatal defect when viewed from the fact that the nation's labor force will continue aging in the years ahead. It should be noted that the promotion race is actually fought out at the relatively early stages. The time of promotion to the grade of lower management forms a significant turning point, which means a person's career as supervisor is important and its evaluation determines his later career life.
Thus, designing a person's career as a supervisor is significant in developing his future career. So far, the career of the supervisor has been viewed as an opening in the race; but it is too late to switch to join a new race, say, the professional career race, at a time when a person stays at the grade of lower management or middle management in terms of the timing of career change. Career choice or career formation on a planned and autonomous basis in a person's thirties which has a great impact on the development of his career is an extremely important task facing white-collar workers. Toward this end, it is necessary to reform the one-dimensional career structure centering around promotion towards an alternative career structure.
1) Imada,S. and S.Hirata, 1995, Promotion Structure of White-Collar Workers, The Japan Institute of Labour. In this book, we clarified the career structure in a corporate organization by analyzing two aspects of promotion and job rotation on the basis of panel data covering 7,937 male white-collar workers in clerical and technological divisions of the OLL.
2) The three-layered promotion rule is characteristically applicable to promotion of white-collar workers with college diplomas and graduate-school degrees. The rule for white-collar workers with high-school education is not three-step but two-step; that is, the uniform seniority-based rule and the tournament rule are applicable to them.
3) Rosenbaum, J.E., 1984. Career Mobility in a Corporate Hierarchy, New York: Academic Press.
4) Koike, K., 1993. White-Collar Workers in the United States, Toyokeizai Shimposha.
5) The rule of job mobility is not necessarily clear. True, several notable trends in job mobility have been confirmed. For example, it was confirmed that in terms of the relationship between the stages of career and the frequency of mobility, technological workers with college education experience high intrajob mobility at the relatively early stages, and they experience high inter-job mobility as years of service are longer. But these trends are not observable among clerical workers with college education and those with high-school education. Moreover, those in technological jobs confront a certain mobility barrier between specific jobs. It is quite rare to overstep the barrier for job mobility. But there are also many cases where no such barrier is erected between jobs and diversified forms of job mobility occur among technological workers. Such trends are more conspicuous among clerical workers. With no inter-job mobility barrier--not even a partial one--erected, clerical workers make seamless transitions to and from various jobs.
6) Professional job careers symbolically show this. Many corporations eagerly studied the professional-career system as a measure to foster experts in specific jobs different from line management. The OLL, too, endeavored to develop this system within the firm. However, as was the case with many other firms, the OLL has yet to see the scheme take hold in the true sense of the term. The reality is that the professional job career has not necessarily been recognized as a career intended to foster specialists in specific job fields and tends to be a job area for those who are no longer in the race. There are several reasons why this was brought about, the major cause seems to be the fact that the rules of job mobility are not clearly specified. Fostering experts should be achieved in such a manner that both the employee and the corporate organization join together in pursuing career development on a planned and autonomous basis. This is an extremely difficult task to realize in organizations in which "fuzzy" job mobility is dominant.
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