Today I would like to write about MBO or management by objective. My first experience of MBO was in Fujitsu. When I was working in Fujitsu about three years ago, Fujitsu already installed MBO in every department. My job was the pre-sales of a financial package software for large- and middle-sized enterprises. So the two most important objectives of mine were to achieve the planned amount of orders from our customers and to achieve the planned number of customers who give us orders. I can easily imagine that the objectives of every employees were at that time strictly focused upon the quantitative target closely related to their main tasks.

But Fujitsu changed the direction a little after they recognize that the implemetation of MBO failed. Since the employees were evaluated only by the measurable objectives focused on their main tasks, they began to set the target as low as possible in order to avoid salary reduction. As a result, the performance of Fujitsu as a whole went down terribly as many magazines and newspapers are pointing out recently. For the fiscal year of 2002, Fujitsu even turned to the red ink concernign its current term net loss. Why? Because the customer satisfaction level of Fujitsu went down while that of NEC went up. This is statistically proved in a recent issue of Nikkei Computer monthly magazine.

I think there are two reasons for this decline of Fujitsu customers' satisfaction level. One is an external reason which resides between Fujitsu and its customers. The other is an internal reason which resides in the working ethics of its Japanese employees.

When I was working there, Fujitsu clearly targeted at adapting the western style management for streamlining its business operations and its organization. MBO was one of the measurements for the target. But they didn't seriously think about the fact that the expectation of their customers is widely different from that of IBM customers. Indeed Fujitsu is as an excellent SIer as IBM. But the expectation of Fujitsu customers toward Fujitsu is completely different from that of IBM customers toward IBM. IBM customers know IBM provides services in a very western way. It means the services provided by IBM will be clearly defined by a contract which is somtimes 10 cm thick.

But Fujitsu customers never expect such strictly contract-based services from Fujitsu. They expect that, to some extent, Fujitsu will fulfill their extra-demand which is not written down in the contract. On the contrary, NEC seems to do the very Japanese style favour for their customers. Fujitsu customers expect Fujitsu is a very Japanese company. If they expect Fujitsu should adapt the western style managment and as a result they act strictly based on the contract, they will choose not Fujitsu but IBM. Fujitsu wrongly adapted a western style management such as MBO by neglecting their customers' expectation. This is the external reason of the decline of customer satisfaction level.

The internal reason concerns the gap between the working ethics of its Japanese employees and the western-oriented intention of its top management. First we can ask what are the assumptions of MBO. We can point out two assumptions. One assumption is that employees are working for the money. The other assumption is that employees don't have to do anything other than the defined tasks. But both of these two assumptions are completely wrong as long as the employees were educated in Japanese schools and living in Japanse communities.

Firstly, Japanese workers are never working only for the money. They feel themselves as a participant of the community named 'company'. This basic feeling produces such a Japanese management style as group-oriented decision making, total quality control activities in which everybody from part-timers to CEO participate, etc... Japanese workers are working for the company as a community just like in the local community where they sleep every night.

So Japanese workers can never be motivated even if they are told, "You will not get paid if you don't achieve the target". To motivate them it would be better to say, "You will be excluded from this community (=company) if you don't achieve your target." The most serious sanction for Japanese employees is not to get paid less but to be excluded from their community. From this point of view, MBO focused on the quantitative targets never works for the employees who were educated in Japanese schools and living in Japanese communities.

In addition, Japanese labour market is still very inflexible. So once a Japanese is excluded from a company as a community, he/she will not be able to survive any more. If Japanese employees are asked, "Which option will you take, 50% reduction of salary or instant dismissal?", most of them will answer they take the first option. For Japanese, participating in a community counts much more than getting money because, once they are excluded from a company, it is actually very difficult to participate in another company (=community) again. The older they get, the more difficult it becomes to enter another company.

In other words, the employees who were educated and living in Western countries can choose leaving the company instead of accepting the salary reduction because they know they can still keep working in another company. For most of Western people, the most important thing in working in a company is to achieve their own goal. On the contrary, for Japanese people, the most important thing in working in a company is to continue working in the same company until their retirement even thought there will be some salary reductions.

Secondly, Japanese workers cannot prevent themselves from doing extra work especially for their colleagues. When there is an ad hoc request from a colleague, Japanese employees can't refuse it. For Japanese, the formal things like objectives defined in MBO are less important than maintaining the good community by keeping getting along with their colleagues. Japanese employees can't focus themselves on the defined tasks. The Japanese code of conduct never permits them to neglect ad hoc requests from other participants of the same community. From this point of view, MBO focused only on the targets related to the defined tasks never works for Japanese employees.

These two fundamental characteristics of Japanese working ethics, i.e. community than money and personal relationship than something officially defined, are the main reasons of MBO failure in Fujitsu. Now Fujitsu introduces the non-quantitative and not strictly focused targets into their MBO system as well. For example, they have started evaluating the employees' contribution to foster the motivation of colleagues. I hope this adjustment will make things better for Fujitsu.

I assume that most of the employees who were educated and living in Japan since born will be seriously demotivated when the company introduces MBO which includes only the quantitative targets focused upon the defined tasks. And even if they are demotivated, they will never express their complaint explicitly because Japanese can easily separate their public and private selves, i.e. Honne and Tatemae. Recently I saw Japanese colleagues were talking about their foreign boss in his absence. This scene means that Japanese colleagues have just started drawing the line between Japanese employees' community and the rest. The rest means something related to western style management.

Even if there were not clearly western things like MBO, Japanese employees could easily separate their own community from the foreigners' group. You can check this phenomena easily if you visit the Korean towns in Kawasaki, Osaka, etc... The discommunication can be easily generated even if the foreingers don't push their own style into the Japanese community. If the foreigners do push their own style, the discommunication will become desperately serious.

But I have to admit there are some interesting cases such as Nissan. I personally think the success of Nissan mainly resides in CEO's financial tactics and nothing more than this. Mr. Ghosn succeeded in eliminating dramatically the negative aspects of Nissan's financial status by closing factories and cutting employees. Indeed Mr. Ghosn is always talking about commitment. But I'm very curious about whether or not Japanese employees in Nissan are evaluated strictly only by the quantitative objectives. If some Japanese employees in Nissan are reading this essay, please let me know.

If you accept my argument above, you can easily imagine the result when MBO, which has only the quantitative targets focused upon the defined tasks, is pushed to the end. The result will be that the company will inevitably have to dismiss some of its employees. If this actually happens, the employees who can remain will also be seriously demotivated. At the same time I know this kind of argument will never be accepted by Western management. They will surely consider this kind of argument as a mere excuse for the lack of competence.

As far as concerning me, I can say I have a westernized mind set. As my readers know, I have already changed my job several times. This means I don't behave based on the conformity to the company as a community and I am working for the money rather than for getting along with colleagues. So I welcome such a thing as MBO with the quantitative targets focused upon the defined tasks as long as I like the defined tasks. Because I don't have to do my colleagues any favour by answering their ad hoc requests.

But as I'm observing other Japanese colleagues, the same thing can't be said regarding them. I have clearly different mindset from them. Maybe I'm too westernized since I was studying Western philosophy and a little about Christianity in the university.

There is another important lesson we can learn from Fujitsu's case. Fujitsu took two years by they finally found out something wrong with their MBO. I think it is stupid for other companies to spend another two years in finding the same thing.