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January 29, 2007 12:11 am
The inner sanctum of Shinsei Bank’s imposing Tokyo headquarters is a gallery of contemporary Japanese art collected by Thierry Porté, the bank’s chief executive.
Yayoi Kusama’s red dots grace the wall of one meeting room, competing for attention with brightly lit LED numbers by Tatsuo Miyajima.
Mr Porté’s artistic taste ties in nicely with the bank he now heads. The artists whose work he collects are mostly Japanese painters and photographers who had to win recognition abroad, before finding acceptance at home, much like Shinsei itself.
The bank, formerly Long-Term Credit Bank of Japan, was nationalised in 1998 after being crippled by bad debts. Apparently rejected as too risky by other Japanese financial institutions, it was acquired in 2000 by Ripplewood, a US private equity fund, which renamed it with a word that means “rebirth”.
It was not until Ripplewood listed Shinsei two years ago – generating huge returns for its investors – that Japan Inc woke up to the opportunity it had missed.
The new art is just one of the many changes that Mr Porté has brought to Shinsei since taking the helm in 2005, and which mark the bank out from its peers.
Most Japanese banks tend to go for would-be Impressionists and are headed by Japanese nationals who have spent their entire careers working their way up the ranks. Mr Porté, on the other hand, is a foreigner who spent most of his working life with Morgan Stanley.
A graduate of Harvard Business School’s class of 1982, Mr Porté has brought western-style management discipline to a bank that collapsed from poor management and a mountain of bad loans.
In doing so, he is building on the efforts of his predecessor Masamoto Yashiro, who also attended Harvard as a participant in its Advanced Management Programme and came to Shinsei via Citigroup.
The aim has been to bring transparency and accountability to management and instill a systematic and transparent approach to the decision-making process and to human resources issues, to a degree that is unusual in Japan.
Mr Porté credits his predecessor for, among other things, implementing a committee system to clarify responsibility for specific issues from compliance to compensation and for revamping the bank’s information systems to provide financial results every month, within a few days after the close of the month.
This may sound an obvious technology for a modern bank to have in this day and age, but before Mr Yashiro and his new management team arrived in 2000, it was possible to know the financial condition of the bank only twice a year, on September 30 and March 31.
Mr Yashiro also laid the foundations for Shinsei’s performance-based compensation and promotion system. At the time this was a radical departure from the traditional seniority and lifetime employment system in Japan. Mr Porté’s emphasis has been to build on his predecessor’s achievements and take them a step further.
In doing so, he has drawn heavily on his HBS experience and connection, using methodologies developed by HBS professors. For example, the balanced scorecard, developed by HBS professors Robert S. Kaplan and David Norton, is used to measure the bank’s activities in terms of its vision and strategies.
The bank has brought in HBS professors to look at leadership issues, an exercise which has helped it to identify its vision and values and reflect that in its performance evaluation system.
Shinsei has also adopted key performance indicators based on quantitative and qualitative measures to measure performance.
All of these steps are “an example of taking some of the intellectual leadership content from HBS, seeing how we can apply it here, exposing people to it and then looking at specific applications that we can actually put to work to help us run our business,” Mr Porté says.
This is an important undertaking, Mr Porté believes, because “financial services is a people business. What is going to make the difference between success and failure is going to be the people,” he says.
“You have to have them properly motivated… You have to have a clear understanding of what the goals and objectives are, and you have to have a proper organisation of the priorities,” Mr Porté says.
Shinsei’s emphasis on clarity and transparency contrasts with traditional methods of human resource development in Japan, which tends to be a more nebulous process.
“As Japan developed in the post-war era…you had generation after generation of students who came into companies and expected to be there all their lives,” Mr Porté says.
“Everyone was sort of at the same starting line, with the expectation that anyone and everyone could eventually become president of the company. You’d go through your paces all the way and then all this would get sorted out in some mysterious and not entirely transparent process. I don’t think, with the way the world is today, that that can work any more,” he says.
By contrast, Shinsei uses its key performance indicators to give people a clear idea of where they stand and what they need to do to develop their careers.
Under the new regime, not only are the goals and objectives clearer, but also, compared to a more traditional Japanese environment where a good degree of management time is spent on consensus building, there is less room for dissent.
“We have to have alignment in the organisation. And an agreement on the direction,” Mr Porté says.
Having a greater degree of clarity appears to suit younger staff who no longer expect to join a bank or company and stay there forever, Mr Porté believes.
Particularly where it involves career development, younger staff are much more demanding when it comes to being given the opportunity to develop skills that will help them move ahead,” Mr Porté says.
Shinsei has also adopted an open job posting system that is very different from the long established rotation system, where people are moved on at very short notice, based on decisions made behind closed doors by an almighty personnel department.
Another conspicuous feature is Shinsei’s willingness to accept people from different nationalities and backgrounds. Shinsei’s staff represents more than 10 nationalities – although only 16 per cent of the management are women.
Although more Japanese companies are adopting performance-based compensation and promotion, as well as a degree of choice in career development, Japanese banks are still almost entirely staffed by Japanese nationals who have worked there throughout their careers.
Mr Porté believes that the changes have “created a more professional atmosphere, more direction” and that they have been on the whole accepted.
However, despite its emphasis on people issues, Shinsei has lost many capable bankers since its rebirth, industry officials say. Even Mr Porté concedes that the changes have not been to everyone’s liking. “It’s not for everyone,” he says.
“When you go to a 360 degree performance evaluation system, as we did, that creates a lot of anxiety which needs to be overcome,” he says.
“And it’s not necessarily the case that everyone will agree. Some people are not interested in that and then we try to help them to go off and do other things outside of the bank.”
But “I don’t think that’s necessarily a bad thing,” Mr Porté says.
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