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Management
Strategy

6

MissionValue Creation Process
Management Strategy
Business Strategy

Link

Organizational Strategy

Sustainability

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7

Message from the Chairman and Representative Director

Continuing to Advance by
Maximizing Customer Valueand Human Capital
Ozasa Yoshihisa
Chairman and Representative Director
Link and Motivation Inc.

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We believe human resources are the greatest, mostpowerful type of capital for corporate management.

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A Spirit Driving Further Growth

As Japan’s working population shrinks and the source of companies’ competitive
advantages shifts from tangible goods to intangibles, human resources andorganizations will become crucial assets for corporate management. That was myconviction when I founded Link and Motivation in 2000, a time when the English
word “motivation” was still largely unknown in Japan. No matter how marvelous astrategy, product or service may be, it is impossible to execute strategies, or tocontinue creating new products and services, without employee motivation.
I founded the Company with that thought in mind, and my conviction has only grownstronger as we have helped resolve organizational and personnel issues atcompanies of all kinds as a pioneer in organizational and personnel consulting.
In recent years, attention has increasingly turned to fulfillment in work,
employee engagement, and human capital. The Japanese government’s strategy is
to radically strengthen investment in human capital, stating that “In an era ofprogress from the tangible to the intangible, the source of added value is people,
who generate creative ingenuity and new ideas.” We see this national strategy as amajor opportunity for the Link and Motivation Group. Furthermore, I feel once againthat the conviction I had at the time of the Company’s founding was correct.

Now, 23 years have passed since I founded the Company. Both society and conditions
for organizations and individuals continue to change at a dizzying pace. Business inJapan has transitioned to intangibles, with the service industry now accounting forabout 70% of GDP. Moreover, the declining working-age population is making
productivity improvement essential, and attitudes are diversifying regarding themeaning of life and of work. As a result, social issues related to individuals andorganizations—including promoting human capital management, improving laborproductivity, and providing high-quality education—have come to the fore and are
growing increasingly complex. We are committed to helping resolve these social
issues and fulfilling our mission.
Accomplishing our mission of creating a more meaningful society will require
us to accelerate our growth. We still have a distance to go. But our hope is that
someday, we will have helped to build a Japanese society so replete with fulfillment,
both in work and in life, that people laugh in disbelief to find out that there was once atime when Japan was ranked 128th out of 129 countries in employee enthusiasm. We
also intend to take on the challenge of helping to resolve the major issues Japan isconfronting ahead of other countries. We want to continue delivering our value tosociety decades into the future.
In this era when some eight out of ten companies go out of business within
three years of their founding, I would like to express my sincere gratitude to everyone
involved in the ongoing growth of Link and Motivation. Together with stakeholders
who share our vision, we will continue to make further substantive progress with our
mission of creating a more meaningful society. You can look forward to the continuing
growth of the Link and Motivation Group in the years to come.

Progress toward Accomplishing Our Mission
The Link and Motivation Group has set forth a mission to create a moremeaningful society, and our business has continued to grow. The expression“a meaningful society” may sound somewhat philosophical, but we mean acondition in which organizations and individuals derive meaning from society by
pursuing their ambitions and finding fulfillment in life. Three unique aspects ofLink and Motivation provide us with advantages for accomplishing our mission.

1. Management That Prioritizes Human Capital
2. A Business Model That Fully Utilizes Motivation Engineering
3. Linkage between Business and Organizational Strategies
See “Key Points of Our Value Creation Process” on pages 10-13 for details.

March 2023

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Founding Spirit8Value Creation Process
for Creating a More Meaningful Society
By investing capital, primarily human capital, in a business model that fully utilizes Motivation
Engineering, we will continue to generate value to create a more meaningful society through acycle that provides organizations and individuals with opportunities for transformation.

Outcomes

A society filled with organizations that link employee
job fulfillment to business growth

Input: Capital

A society filled with individuals who are independently
designing their own lives and careers

Throughput: Business model

Output: Results

Financial
capitalSocialcapitalSupport for
promotion ofhuman capitalmanagement

Support for
matching
organizations
and individuals

Support for
improving skills

Individuals

Intellectual
capitalOrganizations

Intellectual
capitalFinancial
capitalSocialcapitalMotivation Engineering
Human Capital

Human Capital

Sustainability

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10

Key Points of Our Value Creation Process
There are three key points in the Link and Motivation Group’s value creation process.
Input: CapitalThroughput: Business model

Output: Results

SocialcapitalSupport for
matching
organizations
and individuals

Support for
improving skills

Financial
capitalSocialcapitalMotivation Engineering
Human Capital

Human Capital

Sustainability

Point 1

Point 2

Point 3

Management That Prioritizes
Human Capital

A Business Model That Fully Utilizes
Motivation Engineering

Linkage between Business andOrganizational Strategies

We maximize human and other types ofcapital, placing the highest emphasis on
human capital.

In our business model, employees (humancapital) fully utilize Motivation Engineering, ourcore technology, to maximize customer value.

We consistently link business andorganizational strategies to simultaneously
maximize customer value and human capital.

SocialcapitalSupport for
promotion ofhuman capitalmanagement

Support for
matching
organizations
and individuals

Support for
improving skills

Motivation Engineering

Human Capital

Individuals

Financial
capitalOrganizations

Intellectual capitalBusiness
Strategy

Link

Productivity

Organizational
Strategy

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Financial
capitalSupport for
promotion ofhuman capitalmanagement

Individuals

Intellectual
capitalOrganizations

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capitalIR BOOK 2022

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11

Management That Prioritizes Human Capital
Based on our belief that human resources are the greatest, most powerful type of capital for corporate management—a principle that has remained
unchanged since our founding—we conduct management that prioritizes human capital. Not only is human capital capable of increasing value on its
own, human resources maximize other types of capital through product development, customer development and brand development.

Intellectual capital

Revenues
OperatingincomeOperatingmargin¥32.7 billion¥3.6 billion

ROE¥11.3 billion

23.3%

11.1%

Number of online
reviews
Research reports
Proprietary surveys

Patents

Social capital

1,600 companies
15,2982,966
Approx. 5.25 million

Organizational Development Division
Number of corporate customers Approx.
Individual Development Division
Number of enrollees for the past 12 months
Matching Division
Average number of ALTs dispatched overthe past 12 months
OpenWork
Number of registered users

Human capital

Employees
Number of Group companies withAAA Employee Engagement Ratings

10  out of11  companies

1,505
Level-specific role survey score
Note: See “Organizational Strategies”
on page 27 for details.

All employees Rank of “A” or higher
Managers Rank of “A” or higher
and above

56.8%
75.3%

Note: Figures as of December 31, 2022

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Financial capital
Totalequity3.12 million employees
at 10,060 companies
Approx. 14.1 million
42
13
13

Organizational Approx.
diagnostic data

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A Business Model That Fully Utilizes Motivation Engineering
Our business model maximizes value for customers by incorporating Motivation Engineering, our one-of-a-kind core technology, into practical,
reproducible diagnosis and transformation for organizations and individuals.

Support for Improving Skills

Support for finding the best match based on
conditions, skills and motivation

Support for working people in gaining IT skills, acquiringcertifications and learning languages
Support for improving the academic skills of elementary,junior high and high school students

Cloud-based services for improving
organizational and employee capabilities

Recruiting platform

Learning platform

DKI ブランドマーク 基本パターン（CMYK）
AVV ブランドマーク

Consulting

IR Support

Recruiting

Integrated reports

Training

Personnel
PlacementNew
university
graduates

Systems

Corporate
Culture

ALT Placement

Mid-career
employees

Financial results
announcement videos

Engineering
基幹技術Motivation
モチベーションエンジニアリング

基本パターン（CMYK）

Schools (Online/Brick-and-mortar)

Individuals

Organizational diagnosis,
transformation and disclosure

Organizations

Support for Matching Organizations
and Individuals

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Support for Promotion of Human
Capital Management

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Linkage between Business and Organizational Strategies
A company’s organizations are determined by its business strategy. On the other hand, we also believe that a company‘s business strategy isdetermined by its organizations. We therefore give equal status to business strategies and organizational strategies. By constantly monitoringproductivity (human capital ROI) as a management KPI, we conduct management that balances human capital investment and business results.

Support for
matching
Support fororganizations improving skills
and individuals

Individuals

Support for
promotion ofhuman capitalmanagement

Financial
capitalSocialcapitalMotivation Engineering
Human CapitalBusiness Strategy
Maximize customer value

Link

Organizational strategy
Maximize human capital

Productivity(Human capital ROI)
We monitor human capital ROI, an indicator of the return on investment in humancapital, as a management KPI. In 2022, the Link and Motivation Group’s humancapital ROI was 41.1% (an 8.1% increase from the previous year).

Note: Human capital ROI = Adjusted operating income ÷ Human capital costs
Human capital costs are calculated as total expenditures including employee salaries and bonuses, statutory internal and external welfare expenses,
commuting expenses and other executive compensation.

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14

Special Feature:

A Conversation between Professor Ito Kunio andPresident and Representative Director Sakashita Hideki
on the Nature of Human Capital
Ito Kunio

Sakashita Hideki

Mr. Ito has a Doctorate in Commercial Science and has served asa professor and dean of the Graduate School of Commerce andManagement, and senior vice president at Hitotsubashi University.
He chaired the study group that published Competitiveness andIncentives for Sustainable Growth: Building Favorable Relationships
between Companies and Investors (known as the “Ito Report”) in2014 as well as other government committees and projects on
corporate governance, intangible assets and ESG. In September
2020, the Report of the Study Group on Improvement of Sustainable
Corporate Value and Human Capital (known as the “Ito Report for
Human Capital Management”) published its findings for the Ministryof Economy, Trade and Industry.

In 1991, Mr. Sakashita joined Recruit Co., Ltd., where he wasinvolved in organizational and personnel consulting as part of
the Comprehensive Human Resources Services Division. In 2000,
he participated in the establishment of Link and Motivation Inc.
as a founding member, and has been serving as president andrepresentative director since 2013.

Professor and Director
Hitotsubashi CFO Education and Research Center

Current State of Human Capital Management
Ito: When I talk to managers, they all say the same thing: Our people are important.
But some data has emerged that presents a shocking state of affairs. For example,
when asked if they want to continue working at their current company for a long time,
employees in Japan answered “yes” at the lowest rate of all countries surveyed. At thesame time, they were also least likely to agree when asked if they want to change jobs
(move to another company). Efforts to restore the competitiveness of Japanesecompanies will not produce results as long as employee enthusiasm and engagement

remain low. That finding led to our publication of the Report of the Study Group on
Improvement of Sustainable Corporate Value and Human Capital in 2020.
Sakashita: When Link and Motivation was established in 2000, efficiency was beingheavily emphasized and expectations were high for IT. However, IT is used by people,
and results will vary depending on the purpose of use. The Company therefore
started with the intention to prove the effectiveness of management that focuses on
people’s motivation and engagement, and to support such management.
One way of approaching this issue is to look at the many companies where
communication consists solely of exchanging figures without any deeper
reflection—without any discussion of why the company exists or why it is engaged ina particular business or type of work. Even when those companies do such things,
employees feel they are forced to do it, and consequently even if those companies do
conduct an employee engagement survey, they find it difficult to improve. I think that
improving motivation from within, rather than just external motivation such as
raising salaries, will serve as the engine of growth for Japan.

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Human capital management has been attracting attention. This management approachviews human resources as a type of capital and emphasizes maximizing their value toimprove corporate value over the medium to long term. We take a look at the nature ofhuman capital management in this conversation between Ito Kunio, who chaired thestudy group that published the “Ito Report for Human Capital Management” and is
promoting human capital management from an academic perspective, and Link andMotivation President and Representative Director Sakashita Hideki, who is promoting itfrom a business perspective.

President and Representative Director
Link and Motivation Inc.

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Enhancing Management through Human Capital Disclosure
Ito: Looking at many Japanese companies these days, they are all enthusiasticallyclaiming that they will be making a major effort to disclose human capital information,
but I sense that all they are really thinking about is the disclosure itself. Take the ratioof women in management positions, for instance. Their interest in the topic ends withsomehow just making it look like they are meeting their targets, which has a different
meaning from the original objective.
Rather than making it all about the disclosure, it would be better to create apositive cycle—to use the feedback on the information that is disclosed to improve

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Appendix15

conditions at the company through human capital management, which will show up in
the next disclosure.
Sakashita: The Link and Motivation Group conducts regular diagnoses of employee
engagement, which is thought to have a high correlation with corporate growth in areas
such as business results and retention of human resources. We then disclose the levelof employee engagement as an Engagement Rating.
At the same time, as a business, we conduct a cycle of diagnosis, transformationand disclosure for our client companies that leads to improvement in their corporate
value. We also try to make corporate conditions clear even without formal disclosure
through the online employee reviews collected by OpenWork, one of our Group
companies. By doing so, any discrepancies between the details in a company’s
integrated report or other disclosure materials and actual conditions are made clear.
As we work in this way for a more open labor market, we intend to promote andhelp spur human capital management by expanding the organizational and personnel
consulting support for diagnosis, transformation and disclosure that we have offeredsince the Company was established.

People Turn Strategies into Reality
Ito: Companies communicate their management strategy externally through, for example,
their medium-term management plan. Then, when investors see an appealing strategy,
they want to know how feasible it is.
In considering feasibility, the responsibility for turning a management strategy into
reality falls to the people in the company. But actually, until now virtually no information
was disclosed about the human resources who carry out the management strategy.
When investors want to see whether a company is capable of executing its
management strategy, if the disclosed information does not clearly address this issue,
they will have doubts about the company’s ability to perform sustainably. I therefore
believe that disclosure of human capital information is crucial in the sense that it helps
people understand a company’s ability to execute its management strategy. Link andMotivation is a listed company. How is it for you?
Sakashita: To take an example from sports, I think that human capital disclosure is likeshowing not just the scores of games, but also details on the players’ training.

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Ito: I completely agree. Perhaps one reason for the low employee engagement at
Japanese companies, which claim to value people, is their corporate philosophies.
I often hear it said that once those admirable sentiments are written down,
Japanese corporate philosophies are treated as set in stone, and never again become
the subject of a general debate.
However, as you mention, each employee should have a clear idea of why they are
working at their company and doing the job they do, then reconcile that with the corporate
philosophy. Those who are in basic agreement about their reasons will work at thecompany for many years and do good work, while those who are not in agreement will
move on to another company. This kind of healthy turnover is important.

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Ito: That’s an interesting analogy. Admittedly, there is usually no way of knowing how
seriously players are working on the various aspects of their game. However,disclosing information is a way for a company to show that it has a specific training
schedule and its employees are highly motivated to train, and thus that its businessresults will improve.
For example, companies in the manufacturing industry offer factory tours. People
see the company in action, it leaves an impression, and they invest in it. The same istrue for human capital management. For a company to talk about its recruiting without
showing potential investors what they are talking about is a wasted opportunity.

Ito: Until now, Japanese companies have managed their people as resources. Goingforward, they will need to fundamentally change the way they view people. In otherwords, people are not a “resource” that decreases with use, but rather a type of“capital” whose value increases without limits when placed in the right environment.
The value of all human capital is not identical across the board; that is something
management and employees have to get together and discuss at each company.
I think Link and Motivation already does this. Is that the case?
Sakashita: Since our founding, we have held that people are the greatest, mostpowerful type of management capital. Rather than simply adjusting people to fit abusiness, this management philosophy also adjusts the business to fit its people.
I also think that corporate climate and corporate culture are important forunderstanding human capital.
Ito: Creating a corporate culture and climate for developing human capital to its fullpotential is essential. To give one example, Japan does not have a culture of giving
praise. I think that makes it difficult to give employees the motivation to work hard andincrease their own value.
Sakashita: At the Link and Motivation Group, it is important to management thatmembers feel they are growing. When setting goals, for example, they set a goal for
growth we call a “stretch goal” instead of just performance targets. It does not always
lead to immediate results, but we use this stretch goal as a basis for ongoing

communication that gives the member a sense of accomplishment. By encouraging our
employees to try various things in this way, we increase the value of our human capital.
Ito: That consistency between your words and your actions is admirable. Please keep me
updated on your progress, including a look at conditions at your “training camp.”

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Human Capital Rather Than Human Resource