1. Changing Business Models Placing Greater
Expectations on “Professionalizing” Foreign Staff
Full-scale actions in response to a globalization of human resources at
Mitsubishi Corporation began in 1994. This was the year the International HRD
Office was established and overseen directly by then-president Minoru Makihara.
A Canadian was assigned as the office GM, whose responsibility was to develop
the skills of foreign employees hired primarily at subsidiaries, branches and
liaison offices. In 1996, programs were also launched to better utilize human
resources selected as “International Staff” and “National Core Staff”. Reflecting
back, Team Leader of MC's current International Human Resources Office,
Toyohiro Matsuda had the following to say: “Foreign employees became more
aware and motivated to increase their skills, in order to attain leadership
positions at subsidiaries and branches. The mindset and management
competencies of staff dispatched from Head Office in Japan, however, lagged
behind.”
More and more employees were quitting after returning
home from Tokyo secondments
Regardless of how often the company encouraged its foreign employees to aim
for management positions, virtually all top positions of responsibility at MC’s
subsidiaries, branches and liaison offices were Japanese people sent from Head
Office. In terms of compensation and working conditions, the company made
sure it was competitive with subsidiaries and branches of other major Japanese
trading companies (shosha). According to Mr. Matsuda, however, “when
recruiting people proficient in English, even in Asia, we had to compete with
companies from many western nations, and it is here where we often fell short.”
The fact that MC did not have clear career plans for its foreign employees was
also a big problem. The company transferred or seconded about ten employees
per year to its Tokyo Head office, selecting those who tried to perform their duties
from the broadest possible vantage point. Unfortunately, most of these
employees ended up leaving the company after returning home from their
assignments. “Following their secondments,” said Mr. Matsuda, “these people
simply went back to performing the same duties in their local regions, which was

2. clearly pointless. We were unable to clarify how these employees should
formulate their careers, nor what the company needed to do to help them.”
But why exactly is MC so concerned about turning locally-recruited employees
into high-level managers and professionals? Underpinning this drive are big
changes in sogo shosha business models. Mr. Matsuda explained this using the
chart below, which summarizes MC's HR portfolio.
The top of the vertical axis represents global businesses spanning different
countries, and the bottom represents local businesses being handled in
individual countries. The horizontal axis represents businesses initiated in Japan
(at left) and businesses initiated overseas (at right).
GLOBALLOCAL
BUSINESS INITIATED IN JAPAN BUSINESS INITIATED OVERSEAS
Business targeting
global markets
New business
overseas
New business
overseas
Business targeting
global markets
Business targeting
global markets
Exports, imports
and investments
from Japan
New business and
investments in Japan
Exports, imports
and investments in
concerned
countries
New business and
investments in
concerned
countries
Recruitment in Japan
Professional Human Resources
Multi-National
Professional Human Resources
Local
Supporting
Staff
Recruitment in Japan
Professional Human
Resources
Recruitment
in Japan
Staff Levels
Multi-National
Professional
Human
Resources
Sogo Shosha HR Portfolio

3. Developing the skills of foreign employees has great
significance
Investments in Japan, such as LAWSON (convenience store business) fall into
the bottom left quadrant. An example of the businesses in the top left quadrant
would be various plants & equipment developed by Japanese manufacturers of
heavy electrical machinery and targeted for sales in China. It is the right side of
the chart, however, that warrants attention. In the upper right quadrant are
businesses such as MC’s sales in China of plants & equipment developed by
western manufacturers. Meanwhile in the lower right quadrant, are projects like
MC’s investment in China’s domestic convenience store business.
Until now, MC and Japan’s other sogo shosha have been strongest in the left
quadrants. Sustainable growth from hereon, however, will necessitate business
developments in the right quadrants as well. If this is the case then the roles
played by foreign staff, who are most familiar with local circumstances, are
certain to become all the more important in the future. “There are about 20
thousand foreign employees working at MC’s consolidated overseas
companies,” said Mr. Matsuda. “Developing and applying their skills will be
extremely significant over the next five to ten years.”
Based on its past experience, some bitter episodes included, MC is now
launching new mechanisms geared towards treatment and HR training for
foreign employees. One such initiative, which has been leading the way as a test
case, is the China Professional System.
The China Professional System was started in 2002. Its intent, as Mr. Matsuda
explained, was to “develop Chinese staff capable of exceeding, within the
Chinese market, the functions performed by employees dispatched from MC’s
Head Office”. In the first year, candidates were selected by the company,
however, subsequent years have incorporated a duel process, whereby
interested employees who have not been selected can also apply for a spot. So
far about 30 Chinese staff members have been chosen nation-wide. While
contracts are reviewed every year, they are valid for a three-year term.

4. Employee compensation is based on job evaluations and determined according
to the market value of their work and a results-based principle. More specifically,
100 companies considered the most probable competitors for a given
employee’s services are ranked according to salary level, the number
one-ranked company paying the highest salaries. The employee’s basic annual
salary is then set at the same level as the 25th
ranked company. An additional
bonus is factored in based on work performance. Consideration is also given to
providing employees with clear directives for career plans. “A number of issues
are agreed on by all concerned parties,” said Mr. Matsuda, “including the roles
employees are expected to play and skills they are expected to acquire from
years three to five following selection, when they should take part in training and
be seconded to Tokyo Head Office, and what kind of positions they should
assume upon returning to their home countries”.
This kind of selective training program for foreign employees has already been
kicked off in a number of other overseas locations, including Europe, Asia, and
Latin America. “For Japanese employees at Head Office, there is a regular
rotation. Providing they adhere to company directives and work hard, their future
career paths are more or less mapped out for them,” added Mr. Matsuda. “There
is therefore little demand for clearly defined career plans. It is difficult though, to
incorporate the same methods in China or other parts of Asia. Maintaining staff
desire and keeping them on has also been very challenging.”
Translating Japanese and disseminating management
information
One of the biggest obstacles for Japanese companies moving into overseas
markets is language. During interviews MC asked its high-performing foreign
staff what they felt was lacking in terms of helping them achieve their peak
potential. The respondents felt they needed more “management information”.
Because medium term management plans and strategic information from the
company’s divisions and business units (BUs) are primarily disseminated in
Japanese, foreign employees who did not speak or read Japanese well were left
in the dark. To counter this problem, the International Human Resources Office
translates the most important management information into English and posts it
on the company’s internal data bases. “The source of our company’s

5. competitiveness is wisdom created in Japanese,” said Mr. Matsuda. “If we
abandon Japanese and incorporate English as our official, internal language, we
will not be able to compete with western companies. Developing our core
competencies in Japanese and figuring out how best or how closely we can
interpret these in English is the key.”
While MC has responded this way to the globalization of human resources,
according to Mr. Matsuda, “there was only one diversification strategy used by
western companies that we could refer to. I think this is probably due to the large
differences in corporate constitutions, historical backgrounds, and cultures. For
this reason especially, I feel Japanese companies must exchange information
and pool their intellect, in order to promote HR globalization.”
In Europe there are many countries crowded together bordering on one another.
Since long ago, the cross-border flow and interaction of people has been a
constant process. The US as well, has welcomed immigrants from all over the
world, which over the course of history has shaped the state of the nation.
Conversely, when compared to these western nations, Japan has had limited
experience interacting and co-existing with foreigners. When considering this
fundamental difference, it is difficult to imagine the diversity mindset developed
in the west being effective in Japanese companies, at least without being
modified to some degree. As Mr. Matsuda says, Japan will need to find its own,
original way of thinking.