Growth vs. Stability – Different Views of Company Life Spans

A few weeks ago, I attended a reunion for a company I co-founded and ran for 12 years. Although those 12 years seemed like an eternity in the context of entrepreneurial firms in Silicon Valley, by Japanese standards, it was a short run. It brought to mind the differences in Japanese and U.S. views of a company's lifespan and how those differences influence the way companies manage their work forces.

In Silicon Valley, change is a constant, and entrepreneurial companies, especially those in the tech sector, often thrive or die in a short periods of time. As an extreme example, consider Groupon Inc. It was founded in the U.S. in 2008, reported revenues of $713 million for 2010, is on track to reach $3-$4 billion in sales this year, and just filed to go public.

While most companies do not grow at that explosive pace (even Google Inc. took six years to go public), they share a rapid growth mentality that affects their staffing practices in many ways. To start with, they make liberal use of recruiters and don't hesitate to pay top dollar for key people, knowing that a great hire will help them recruit other employees.

The flip side of the growth mentality is shorter employee tenure. Where possible, U.S. employers hire people on an "at will" basis (a legal phrase that means an employer can get rid of the employee at any time) and monitor employee performance. People who seize initiative and accomplish things quickly are rewarded, while those who don't are apt to be fired – in some cases after only a few months on the job.

Companies also expect that employees may be hired away at any time, so many use stock options and vesting schedules (rights to the options earned over time, usually four years) to help retain and motivate them.

In contrast, corporate Japan treasures reputation and stability. Most employers avoid "bet the company" gambles like the plague, even if it means missing out on bigger returns. Barring a significant problem, company founders would be hesitant to "cash out" after, say, only five years at the helm – they are there for the long haul. (That may also explain why Groupon and Google didn't originate in Japan.)

When it comes to staffing, the lifetime employment system, while not as pervasive as it once was, still shapes the way people think about work in Japan. Even entrepreneurial Japanese companies seek to hire rookie talent and then build skills through experience and training. Midcareer job seekers are often viewed with suspicion (and thus many go to work for foreign enterprises).

Japanese labor law is more protective of employee rights, making it hard to terminate nonperformers. But cultural practices also have a big impact. Workplace hierarchies and group affiliations are the backbone of office relationships, which means that longevity and commitment are highly valued. These are also more powerful contributors to employee tenure than economic rewards like stock options.

As different as they are, the Japanese and U.S. approaches are uniquely adapted to their places of origin. However, they also help to explain why it can be so hard for companies from one country to function well in the other.

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