Myself and our Japanese President are the ones who discovered Tom Nevins. We introduced him to our regional office in Singapore. Since Mr. Nevins’ books are in English, and he only markets to the foreign capital company niche in Japan, he says it is a bit unusual for Japanese local management to bring him in. This is also why he wanted me to help with this testimonial/case study letter.
The truth is, we were being told that we would very quickly have to do something that we didn’t want to do, and were not confident to do. We were also afraid that carrying out the kind of dramatic and drastic staff reduction required of us, would likely lead to a union organization drive, especially at our Sendai plant. It ends up there were no such complications.
We had about 220 people in Japan, but sales had gone way down to about $U.S.50,000,000. The factory had been losing about $U.S.200,000 per month for the last year. Out of 150 employees at the factory, there were about 100 regular employees and 50 part-time, contract employees. In the past, while Japan was making money, we were pretty much left alone, but now everything suddenly changed.
Things moved pretty fast. Within a week Tom was meeting with regional American management. By August 19, 1998 there was a decisive video conference with top U.S. management, our local and regional management, our local attorneys, and Mr. Nevins. We got buy-in on the strategy we had worked out.
Tens of part timers who were on 6-month contracts were moved to 3-month contracts and told they would run out without being renewed. We also would have to dehire tens of regular staff. In the meantime, TMT had made its typical adjustments to our Rules of Employment and we took on new TMT Salary and Appraisal systems. We also rationalized and cut back the retirement benefit. All this involved a lot of work and full communications with employee groups.
We showed the new ROE and personnel systems, along with the designated staff reduction plan, and severance packages to the officials at the local Sendai (and Tokyo) Labor Standards Office (LSO). I still remember the reaction of one of the inspectors in Sendai, “it’s amazing that you have the money to pay this nice severance package to your people. Most of the employees at factories around here have no choice but to continue working at half their peak pay level. Their only hope is to hold out and weather the bad economic conditions. Their companies often can’t even pay the normal retirement benefit promised in the work rules.”
The extra severance package was a typical TMT recommendation of 4 months salary equivalent for everyone, plus 1 to 4 months depending on age, and the full up-coming winter bonus. We cut the work force almost in half, managing to have almost 100 people scaled back.
In the meantime our Japanese President, who never had his heart in it, left, and did not carry through. A new Japanese President came on from October. It was in mid October 1998 that we implemented the staff restructuring, and explained about the new work rules and salary system to all our employees. Within a week or two everything was smoothly implemented, finished, and approved with the LSO.
The financial institution funding our Tax Qualified Pension Plan was quite cooperative. Although there were negative changes, and the benefit was cut back quite a lot, within a month or two this process was also formally implemented. Tom Nevins also helped us with this.
As the Japanese manager who worked the closest with Tom on all this, if asked if I want to do it again, my answer is “preferably not.” Of course, it was not myself or Tom Nevins who compelled these changes. Usually no individual can be blamed for such things. I guess if they have to be done, they should be done professionally, and as quickly and painlessly as possible.
I have since left T&B. I was headhunted (not by TMT). TMT, however, did find my replacement. I understand he is doing well, and came to be in charge of the T&B operation that was further scaled back with the purchase by Tyco of T&B’s electronics division.
Koji Yamashita, CPA
Thomas & Betts Japan, Ltd.