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Start-ups challenge culture of the Japanese salaryman

At some point during the second year of the Covid-19 pandemic, the world of the Japanese salaryman and woman took an extraordinary — but little noticed — swerve off its historic course. No longer, it seemed, were bigger companies necessarily better; career uncertainty was not so terrifying.

Corporate Japan was facing an onslaught of change in 2021. Its most staid companies, where traditions, working practices and career expectations had barely changed for decades, were being forced to rapidly adapt to work-from-home pandemic norms, remote meetings, hierarchy disruption and the sudden demise of the presenteeism that once firmly policed their work culture.

But behind all that, something far more transformative was evolving. Younger Japanese workers who, through decades of deflation, wage stagnation and a sense of slow national decline, had prioritised predictability in their career, had new ideas of what a company should offer by way of risk, reward, stimulation and opportunities for rapid promotion. 

Companies, which until that point had felt little pressure to revamp their work cultures, given that stability and size had reliably attracted the most talented staff, were facing a new threat.

By the end of 2021, more than a fifth of job transitions from large companies in Japan were people leaving to join start-ups, according to the Japan Venture Capital Association, compared with 8 per cent in 2018. That proportion has continued to push towards 25 per cent, according to JVCA members. 

“I don’t think a lot of Japanese companies realise what is happening, because if they did, they would be in panic mode,” said a 26-year-old Keio University graduate currently negotiating her move from one of Japan’s biggest banks into a Kyoto-based tech start-up. “For a lot of my age-peers, start-ups are offering an alternative work environment — there is still a lot of pressure, but it is pressure you want. When you are at university choosing a job, you don’t see that, but after a few years at a big company, it’s obvious.” 

The social, economic and psychological shift behind that type of comment is arguably the most significant in Japan since the end of the 1980s bubble, according to venture capital firms and the start-ups themselves. Critically, new Japanese businesses are not only attractive as talent magnets, but internally they are beginning to redefine work environments in a way that poses a direct challenge to the large companies they are poaching from.

Entrenched strictures of age-based seniority and a refusal to measure white collar work more qualitatively — characteristics that have dominated Japanese corporate culture for many decades — are high on the list of gripes that may prompt a jump from a large company.

“The Japanese start-up market is probably one of the most misunderstood in the world. So much has changed here, yet a lot of that change has gone mostly unnoticed,” said James Riney, chief executive of Tokyo-based VC firm Coral Capital, who added that investment into start-ups in Japan had grown by about 10 times in the past nine years, drawing in some of the country’s most talented workers.

“The Japanese government’s vocal, financial, and regulatory support have not only made starting up easier, but also mainstream,” he added.

But government support is just one of many factors behind the change, according to Kathy Matsui, co-founder of Tokyo-based venture capital fund, MPower Partners.

“Some individuals at large Japanese companies will look into their career crystal ball and see a predictable promotion path, and a predictable compensation package. More and more you are finding people saying ‘that’s OK, but it’s not great’. At a start-up, meanwhile, you can immediately or very quickly be in a key position and having a real impact on a business where there are, potentially, much higher returns,” said Matsui.

Genesis Healthcare is one example. The Tokyo-based genetic testing and research company’s chief financial officer previously worked at Nomura and another member of its top executive team came from Mitsubishi Bank. Their roles at Genesis offer them greater influence over a company’s future than they might have had at a big bank.

Start-ups are also widening the salary gap between themselves and traditional companies, according to the JVCA. It found that average salaries were ¥580,000 higher at start-ups in 2022 than at big listed companies. Two years earlier the difference was ¥90,000.

Japan’s chronically tight labour market — a feature of low-birth rate demographics and a now shrinking working-age population — takes the edge off the perceived risk of joining a start-up by providing an implicit safety net. 

“Of course there is a risk in leaving the predictable behind, but these days there is built into the equation the idea that if you fail, you can always go back to a large company,” added Matsui.

Others go further, suggesting that for many young Japanese workers, the decision to join a start-up may actually feel like a hedge against career risk. They look at big, traditional Japanese companies and take the view that if they stay at those too long, they may not gain the skills they need to build careers in a world increasingly defined by the rapid pace of technological change.

“So a lot of people think they could gain those skills at a start-up. And once you have people with that shared view in a start-up, of course you are going to get a new type of work culture building around that. You have environments where there is a feeling that they are doing something very different from the way previous generations did,” said Mio Takaoka, a partner at, DNX Ventures, a fund that backs Japanese start-ups and is closely involved in their development.

She and others draw parallels between the emerging start-up culture in Japan in 2023 and the arrival of the internet in the mid 1990s — a period that was notable both for the speed with which it prompted new companies to launch and the ferocity with which it splayed-open generational gaps within business. 

Then, people could build internet companies because there was no older generation to stop them. Now, a similar layer of conservative senior managers is frustrating younger employees who want to embrace AI and other transformational technology.

Many traditional companies do feel forced to adapt, said Riney, noting that almost every big company had an “open innovation” or similar department that engages with start-ups. 

But for all of the disruption that the Japanese start-ups appear to be causing, Takaoka argued, their underlying culture is not explicitly disruptive in intent. They are not looking to confront Japan’s existing business establishment, but rather work with it to fill its many gaps.

“There is some natural conservatism built in there, so you haven’t got people joining start-ups to shake everything up. They are joining because they see it as building something that hasn’t yet been offered, probably faster and better than they could anywhere else,” said Takaoka.

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