Human Resource Management/Pay and Appraisal Systems of Japan – Part 4

December 22, 2023 [No.117-2023]

Hiroyuki KIKUYA
Prime Consultant Co., Ltd.



Conditions for linking wage increases to personnel utilization and greater corporate profit

As competition for acquiring workers amidst the unequivocal labor shortage caused by aging population grows ever fiercer and pressure is felt from price increases, Japan is experiencing a historical turning point, shifting from a long period of wage moderation to an upward trend in wages.

Likening it to marginal utility theory in the field of modern economics, if a company determines that adding wage costs and more workers brings in additional income, it will aim to grow its workforce and maximize profits. Within this context, companies will continue raising wages even if the labor market is tight and the wage level increases slightly to prepare themselves to hire new workers and prevent current ones from leaving.

That said, it would be an employment and human resource management failure if a company increased its wages and offered good benefits at hiring but did not stimulate more human resources value and greater corporate profits than the additional spending.

So, what conditions must be created to stimulate personnel growth and contribution to match wage increases and achieve more advanced styles of work in highly compensated employees?

What I believe is the most essential is sharing a new view of the organization and human resources called ‘engagement’ that promotes care about the company work and enthusiasm for contribution. Changes in this dynamic bring out the strengths and unique characteristics of the individuals working for the organization and become the foundation for creating a stronger cooperative relationship based on initiative and career independence.

A concrete measure to boost engagement is to clearly state the purpose, strategy, and sustainability of social and natural value as management, put the organization’s credo and employee code of conduct into words, and establish these throughout the organization.

Then, maximize the leadership skills of the people who are contributing to the organization and its results through concrete work, implement the Plan-Do-Check-Action (PDCA) feedback cycle, carry out target setting, reflection, and evaluation to give workers real job satisfaction through growth dialogue and organization training, and set corresponding objective human resource benefits and compensation.

At the hiring stage, rather than the previous idea of corralling employees aimlessly, narrow down the work specifics and personnel requirements to what is needed for the work and offer commensurate wages and benefits.

Work with agents as well to give applicants specifics about the feelings for the organization, job satisfaction, and drive to take on challenges actually felt by company employees towards their work and prevent a mismatch.

In individual workplaces, it is important to carry out steady and persistent management to link concrete benefits to work performance, skill development, and behavioral growth determined through regular talks with superiors who share the employee’s career goals. Thoroughly support the managerial staff in charge of goal management and evaluation systems with management training, reflection, and coaching, and respect their dedication.

Provide employees with training opportunities and tools to encourage a self-directed spirit of inquiry and skill development and make efforts to ensure the burden on managerial staff is not excessive. At times, it may be effective to hold theme-based study sessions where executives, managerial staff, and employees can speak their minds without barriers and to create opportunities for sharing feelings.

Mastering new tools with a little courage, sense of adventure, and fresh ideas may yield changes in the dynamic among members of the organization and a new mode of action that could bring new successes. The self-efficacy and sense of growth of proactively producing value through creative ideas and actions and the joy of self-actualization are the real pleasures of working for an organization. Surely it is the passion and collective intelligence of the people who are linking new knowledge and technologies with market opportunities, supported by trust in and attachment to the organization, that make up the core concept of human capital.