Changes in HRM in Japan

following two trends are visible in the current context:

• Output-Based Evaluation and Individual Differentiation:

• The externalization of core, regular-status employees

 Recent Trends in PMS in Japan
• Output-Based Evaluation and Individual Differentiation:
The introduction of competitive appraisal practices which
emphasize individual performance and output

Employees are now evaluated on the basis of both

performance and ability/competence
– Fuji Research Institute Survey (1998): Suggested that firms
assigned approximately 40% of the weight to performance and
about 25 to 26% to ability/competence.
– Tsuru, Morishima, and Okunishi (1998): 54.0% of the firms had
some type of pay-for-performance schemes for at least some
segment of their workforce.
– Ministry of Labor in Japan (1996): approximately 7.9 percent
of large firms have built pay-for-performance criteria into their
compensation practices.
(Another 11.6 percent are considering doing so over the next five years)
– Japan Institute of Labour(1997): The proportion of firms
introducing individual differentials after the cohort had been
 Individual differentiation
Traditional approach
Formal status differentiation among employees in the same cohort occurs only
after 7 to 10 years of en masse advancement with little individual differentiation.

New Approach
Early career” differentials are introduced on the basis of employees’ potential and
current performance. These changes are called a move toward Seikashugi
(performance- ism)

Assign employees early in their career with the firm to managerial and supervisory
positions.

.
Ministry of Labor survey (1987) Japan Institute of Labor Policy
and Training (1997)
Firms (proportion) Introduced status and large pay Dropped proportion
differentials
20% More than 10 years after the 7.6 %
cohort entrance
40 % after the cohort had been 33.1 %
employed for 5 to 10 year

The largest proportion of firms (46.3%) reported that they would introduce large status and pay
differentials after the cohort had been employed for three to five years.
• Externalization of Regular-Status, Core Employees :
Externalize core employees’ positions (through the increased
use of part-time and temporary employees, also by hiring
limited-contract employees).
The goal is to obtained better match between employees and
jobs, and also to reduce the cost.

The goal is accomplished by reducing Life – term employment.

Japanese firms use shukko and tenseki to remove redundant

workers from the company payroll
• With Shukko, employees are temporarily lent to other companies

• With Tenseki, their official employment status is permanently

changed and they become employees of the receiving firms
• Rising Concern with Procedural Justice : The
psychological contract between Japanese employees and
employers has shifted from Relational to Transactional
– Relational :The employee-employer linkage that existed in the
learning centered system
– Transactional: The new emerging model
• Why
– Employees have become increasingly more concerned with the
procedural equity which their employers’ performance
management system is operated
– Employees now demand for procedural fairness in evaluation
practices
 Conclusion
• Focused on continuous employee and organizational learning &
developing intellectual skills: Learning of new skills and acquisition
of knowledge to be supported and encouraged

• Compensation practices designed to reward both: employee

performance and skill development
• Progressive policy designed to systematically discourage and
eventually eliminate "life time" employment, seniority wage &
promotion
• Promote seikashugi or “performance-ism”: Individual performance
to be used as one of the major determinant of employees’
compensation
• Frequent job assignment changes to develop organizational skills
(Ability to effectively work within a firm, across divisions,
departments, teams, and individual workers)