Japan’s changing ‘gaijin’ CEOs

On April 1, Japan’s small fraternity of foreign chief executives became a little bigger. Michael Woodford, a soft-spoken 51-year-old Briton, became the first non-Japanese president of Olympus, a manufacturer of cameras and medical imaging equipment founded in 1919. It was less than three weeks after Japan’s devastating earthquake and tsunami, and gaijin (foreign) CEOs were making news.

A couple of days before Mr Woodford took office, the fraternity’s most famous and long-serving member, Carlos Ghosn of Nissan, led a pack of reporters on a visit to a Nissan engine factory in Iwaki, a small northern town that had been wrecked by the disaster. In white safety helmet and grey Nissan work clothes, Brazilian-born Mr Ghosn signed autographs for employees and led ritual chants of ganbaro – “work hard”. The Iwaki plant, he promised, would be fully rebuilt – and so, by extension, would Japan.

Rebuilding has been a central theme for foreign bosses since Mr Ghosn joined Nissan in 1999. The story of how “le cost killer” from France’s Renault rescued Nissan from near-bankruptcy – by closing five domestic factories, axing 21,000 jobs and halving the number of Nissan parts suppliers – is well known, having been told everywhere from business school case studies to a Japanese manga comic.

The image of the foreign boss has not changed much since then. He is still the guy you bring in when your company is struggling and you need to fire people or to make other big, unpleasant changes – the ones that a Japanese CEO, for cultural or social reasons, might find impossible to impose. Sir Howard Stringer, CEO of Sony since 2005, has cut 16,000 full- and part-time jobs at the lumbering electronics group and pushed its sometimes reluctant hardware engineers to em­brace digital media.

However, Mr Woodford’s appointment illustrates what some observers view as an evolution in what Japanese companies are looking for in a potential foreign boss. Toshihiko Hiura, a senior consultant at Bain & Co, the consultancy, says the ability to reduce overheads is still important but companies also hope foreign managers will help them become more international by better integrating overseas subsidiaries and by attracting capable non-Japanese managers, engineers and product designers. “The management issue is turning from restructuring to globalisation, and how they grow global talent,” he says.

In one respect, Mr Woodford fits the gaijin profile perfectly. He made his career as a cost-cutter, having turned round Olympus’s US and European medical devices businesses and, later, its overall European operation, which today generates about half of the company’s global profits. “If I’d been Japanese, then I wouldn’t be the president,” he told the Financial Times recently. A self-described rationalist and stubborn, “dog with a bone” problem-solver, he believes he would have been sidelined in Japan, where cultural pressure to achieve consensus and to respect hierarchy often trumps open debate. “The Japanese have a saying, don’t they, that if you’re the nail that sticks out, you get hammered down.”

But while Mr Woodford built his reputation by cutting fat – for a time he was called “Darth Vader”, he says, to Mr Ghosn’s “le cost killer” – his CV reflects the growing general diversity among Japan’s gaijin bosses. For a start, he is not an outsider to Olympus, having worked for the company for 30 years, starting as a junior salesman at a European medical equipment company that was part-owned by the Japanese group.

“The appointment isn’t the same as some clever person coming in from the outside. I’ve grown up in the company,” he says, speaking at Olympus’s headquarters in the Shinjuku district of Tokyo a few weeks after he formally took charge and two months after the tsunami, which damaged several Olympus factories.

He had been in the UK when the disaster struck but soon returned to Tokyo, when many expatriate western managers were fleeing the other way. “There was a lot of fear around,” he says. “A lot of people within Olympus expected me not to come back.”

Mr Woodford’s long history at Olympus does not just set him apart from the likes of Mr Ghosn and Sir Howard – who had a long career at US television network CBS before being recruited by Sony – it also puts him at the opposite end of the spectrum from Japan’s other recently minted gaijin CEO, Craig Naylor, a former DuPont executive who was hired last year by Nippon Sheet Glass, the glassmaker.

Mr Naylor was recruited in an open, worldwide executive search – the first anyone can remember a leading Japanese company conducting – and is NSG’s second foreign chief, after Stuart Chambers, a Briton who had worked for Pilkington, the UK glassmaker acquired by NSG in 2006. Between them, Mr Naylor and Mr Woodford have broken new ground: one as the first total stranger headhunted by a Japanese employer to be its CEO; the other as the first non-Japanese to work his way up through the ranks.

Gaijin CEOs do not always succeed, however: for every Carlos Ghosn there is a Rolf Eckrodt, the now-forgotten Daimler turnround specialist who failed to turn round Mitsubishi Motors. The risk of inviting pain for no benefit adds to Japanese executives’ wariness in hiring foreigners. Like hawkers of risky alternative medicine, they tend to be brought in only when conventional cures have come to nothing.

But these risks are changing as the task faced by gaijin CEOs evolves from restructuring to globalisation. “We are not a Japanese company with operations overseas,” Mr Naylor told the FT late last year. “We are an international company with a headquarters in Japan.”

Mr Woodford sees changing Olympus’s culture as part of his mission. “Harmony and consensus have their place and time but scrutiny and challenging – devil’s advocate, whatever you want to call it – leads to better decision-making,” he says. “You have to be able to confront, and to say ‘Oi’ too, because much of your man­agement is going to be outside of Japan.”

He notes that he does not speak Japanese – but his rationalism shows here as well. “I did think about learning but I read about Howard Stringer. After one year, somebody said to him: ‘You talk like a baby.’ And the Japanese will say, if you talk the language badly, you do everything badly.”

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