Improving the Effectiveness of
Global Talent Management at Japanese Firms
Hilary J. Holbrow
November 25, 2015

1920
1925
1930
1935
1940
1945
1950
1955
1960
1965
1970
1975
1980
1985
1990
1995
2000
2005
2010
2015
2020
2025
2030
2035
2040
2045
2050
2055
2060

Population (Aged 15-64, 1000s)
100,000
100

90,00090

80,00080

70,00070

60,00060

50,00050

40,00040

30,00030

20,00020

10,000
1000% Overseas Sales at Japanese Firms

Japan’s Demographic Crisis

100,000

90,00080,000

1920
1925
1930
1935
1940
1945
1950
1955
1960
1965
1970
1975
1980
1985
1990
1995
2000
2005
2010
2015
2020
2025
2030
2035
2040
2045
2050
2055
2060

Population (Aged 15-64, 1000s)

12% decline
28% decline

9080

70,00070

60,00060

50,00050

40,00040

30,00030

20,00020

10,0001000% Overseas Sales at Japanese Firms

Japan’s Demographic Crisis
100Japan’s Demographic Crisis
28% decline

80,000100
90

80

70,00070

60,00060

50,00048% increase

40,00030,00020,00010,00050
40

JBIC survey ofmanufacturing firms withoverseas offices

030
20
100% Overseas Sales at Japanese Firms

90,00012% decline

1920
1925
1930
1935
1940
1945
1950
1955
1960
1965
1970
1975
1980
1985
1990
1995
2000
2005
2010
2015
2020
2025
2030
2035
2040
2045
2050
20552060

Population (Aged 15-64, 1000s)

100,000

Foreign Employees and the Demographic Crisis
SpecialistGeneralist

11Long-term

2. Need to expand into
foreign markets

Short-term

1. Labor Shortage

2&1

Problems Incorporating Foreign Employees
Problems with performance difficulties with communication, cultural differences lead
to less effective utilization of foreign employees, andlower productivity.
Problems with job satisfaction
 foreign employees may be more dissatisfied, leading tohigher turnover. Companies report turnover among
foreign employees is 2-3 times that of Japanese employees.

Possible Response
1. Labor Shortage(short-term)

2. Need to expand into foreign markets(long-term)

Japaneseemployees

Foreignemployees

Is this a good response? Is there a better one?

Survey Info I
Survey Target：

Foreign and Japanese white-collar employees, working inthe same sections at the same firms# of Firms：

12 (most 1000+ employees, manufacturing, wholesale)# of Respondents:

539 (456 Japanese, 83 non-Japanese）

Survey Period：

February-April 2015

Survey Method:

InternetSurvey Languages:

Japanese, English, Mandarin ChineseSurvey Info IIForeigners
educated inJapan
8%

Japanese
educatedabroad6%

Japaneseed.
in JapanForeigners
educatedabroad8%
Japanese
educated inJapan
78%

Japaneseed.
abroadForeigners
ed.
in JapanForeignersed.
abroadMeasuring Performance
Performance can be estimated through respondents’ bonuses- bonus is the pay component most affected by performance-doesn’t objectively measure performance, but does provide anestimate of employers’ evaluations of employees’ productivity

(Perceived) Performance
0.661**
Monthly compensation
157.353***
Age-1.635***
Age squared
256.280**
MaleEducation
BA401.783**Above BA
413.070**
Worker TypeJapanese educated abroad-114.233
Foreigners ed. in Japan-34.016
Foreigners educated abroad -273.431*
Constant-3,191.41
Observations
475
Number of groups
12*** p<0.001, ** p<0.01, * p<0.05, + p<0.1

SE
0.249
32.06
0.395
79.323145.467
158.536148.42
136.243
136.553646.02

Predicted Annual Bonus(1000s of yen)

β1300
1250
1200
1150
1100
1050
1000
950
900
850
800

78%

Japanese Japanese Foreigners Foreigners
educated in educated educated in educatedJapanabroad
JapanabroadJapanese Ability and Performance
Monthly compensation
AgeAge squaredMaleEducation
BA
Above BA
English ability
Japanese ability
Constant
Observations
Number of groups

JapaneseSE
0.083
98.882-0.735-31.2630.458
66.0290.856
124.086210.246220.645
107.015**
26.828*-2,719.817*
105
12326.1
319.61636.683
11.487
1,281.29*** p<0.001, ** p<0.01, * p<0.05, + p<0.1

1200
Predicted Annual Bonus (1000s of yen)

β

1000
800
600
400
2000

Beginner

FluentJapanese Ability and Performance
Monthly compensation
Age
Age squared
MaleEducation
BA
Above BA
English ability
Japanese ability
Constant
Observations
Number of groups

JapaneseSE0.083
98.882-0.735-31.2630.458
66.0290.856
124.086210.246220.645
107.015**
26.828*-2,719.817*
105
12

326.1
319.61636.683
11.487
1,281.29*** p<0.001, ** p<0.01, * p<0.05, + p<0.1

1200
Predicted Annual Bonus (1000s of yen)

β

1000
800
600

46%

400
200
0

Beginner

Fluent(Perceived) Performance
1200
Predicted Annual Bonus(1000s of yen)

Predicted Annual Bonus (1000s of yen)Japanese

1000
800
600
400
200
0
Beginner

Fluent

1300
1250
1200
1150
1100
1050
1000950
900
850
800

Japanese Japanese Foreigners Foreigners
educated in educated educated in educatedJapanabroad
JapanabroadJob Satisfaction
13.5

Job Satisfaction

1312.51211.51110.5
Japanese educated in
Japan

Japanese educatedabroadForeigners educated inJapan

Foreigners educatedabroadJob Satisfaction
13.5

Job Satisfaction

1312.51211.51110.5
Japanese educated in
Japan

Japanese educatedabroadForeigners educated inJapan

Foreigners educatedabroadJob Satisfaction
13.5

Job Satisfaction

1312.51211.51110.5
Japanese educated in
Japan

Japanese educatedabroadForeigners educated inJapan

Foreigners educatedabroadJob Satisfaction & Career Opportunities
13.5

Job Satisfaction

1312.51211.51110.5
Japanese educated inJapan

Japanese educatedabroadForeigners educated inJapanForeigners educatedabroadJob Satisfaction & Career Opportunities
13.5401335

12.530

1225

11.5

20

1115

10.5

10Japanese educated inJapan

Japanese educatedabroadForeigners educated inJapan

Foreigners educatedabroad% Prefer Careers in Japan

Job Satisfaction

45

Job Satisfaction & Career Opportunities
6.7 Million

13.5
13

Satisfaction gap
narrows significantly
if calculations areadjusted for income
differences.

6.9 Million

454035

Job Satisfaction

6.4 Million
12.530122511.5

20

1115

10.5

10Japanese educated inJapan

Japanese educatedabroadForeigners educated inJapan

Foreigners educatedabroad% Prefer Careers in Japan

6.9 Million

Why Are Foreigners Educated in Japan Dissatisfied?
Relationship Between Income and Language Skill
Male
Age
Age squared
Weekly work hours
Education
BAAbove BA
Japanese ability
Japanese ability squar.
English ability
Constant
Observations
Number of groups

SE557.461+
510.360**-4.182*42.518+694.666
1,013.97-364.339*
9.921*
202.788*-7,463.14
10612302.566
159.182
2.102
22.149821.365804.627
156.2354.803
92.371
3,589.47

Japanese
Predicted Annual Income (1000s of yen)βEnglishOther language

7500
7000
6500
6000
5500

5000
4500

** p<0.01, * p<0.05, + p<0.1

Beginner

FluentWhy Are Foreigners Educated in Japan Dissatisfied?
Relationship Between Income and Language Skill
Male
Age
Age squared
Weekly work hours
Education
BAAbove BA
Japanese ability
Japanese ability squar.
English ability
Constant
Observations
Number of groupsSE
557.461+510.360**-4.182*42.518+694.666
1,013.97-364.339*
9.921*
202.788*-7,463.14
10612302.566
159.182
2.10222.149
821.365804.627
156.235
4.803
92.371
3,589.47

Japanese
Predicted Annual Income (1000s of yen)βEnglishOther language

7500
7000
6500
6000
5500

5000
4500

** p<0.01, * p<0.05, + p<0.1

Beginner

FluentWhy Are Foreigners Educated in Japan Dissatisfied?
Relationship Between Income and Language Skill
MaleAgeAge squared
Weekly work hours
EducationBA
Above BA
Japanese ability
Japanese ability squar.
English ability
Constant
Observations
Number of groupsSE
557.461+510.360**-4.182*42.518+694.666
1,013.97-364.339*
9.921*
202.788*-7,463.14
10612302.566
159.182
2.102
22.149821.365804.627
156.235
4.803
92.371
3,589.47

Japanese
Predicted Annual Income (1000s of yen)βEnglishOther language

7500
7000
6500
6000
5500

5000
4500

** p<0.01, * p<0.05, + p<0.1

Beginner

FluentWhy Are Foreigners Educated in Japan Dissatisfied?
Relationship Between Income and Language Skill
Male
Age
Age squared
Weekly work hours
EducationBA
Above BA
Japanese ability
Japanese ability squar.
English ability
Constant
Observations
Number of groups

SE557.461+
510.360**-4.182*42.518+694.666
1,013.97-364.339*
9.921*
202.788*-7,463.14
10612302.566
159.182
2.102
22.149821.365804.627
156.235
4.803
92.371
3,589.47

Japanese
Predicted Annual Income (1000s of yen)βEnglish

Other language

7500
7000
6500
6000
5500

5000
4500

** p<0.01, * p<0.05, + p<0.1

Beginner

FluentWhy Are Foreigners Educated in Japan Dissatisfied?
Job Placement
Foreign Students’ Preferred Job Content &Actual Job Placement (Selected)
貿易業
国際業務
営業
システム開発・設計
研究開発
01020

採用した外国人の主な職種 (n=199社)

30

405060

留学生が希望する職種 (n=939人)(新日本有限責任監査法人 2015)

Why Are Foreigners Educated in Japan Dissatisfied
Job Placement
Foreign Students’ Preferred Job Content &Actual Job Placement (Selected)
貿易業
国際業務
営業
システム開発・設計
研究開発
01020

採用した外国人の主な職種 (n=199社)

30

40

50

60

留学生が希望する職種 (n=939人)(新日本有限責任監査法人 2015)

SummaryJapaneseed.
in JapanJapaneseed.
in JapanJapaneseed.
abroadForeigners
ed.
in JapanForeignersed.
abroadJapaneseed.
abroadForeigners
ed.
in JapanJapaneseed.
in JapanJapaneseed.
abroadForeignersed.
abroadForeigners
ed.
in JapanForeignersed.
abroadA Better Response?
1. Labor Shortage(short-term)(shortand long-term)
Foreigners
educatedin JapanI.
II.

Foreigners
educatedabroadIncrease job satisfaction of FEJ
Increase productivity of FEA

2. Need to expand into foreign markets(long-term)
Japanese
educated
In JapanJapanese
educatedabroadSteps to Improve Job Satisfaction & Increase
Retention of Foreigners Educated in Japan (FEJ)
1. Reward foreign employees’ investments in Japanese language ability.
2. Reward employees skills in other (non-English) foreign languages.
3. Improve communication about the possibility of work in international
business and trade. If it’s unlikely a FEJ employee will be able to workin this type of position, be clear from the start.
4. If possible, place FEJ in positions with international exposure early intheir careers.

Steps to Improve Performance of Foreigners
Educated Abroad (FEA)
1. Invest in Japanese language training for FEA.
2. Provide incentives for other employees to improve theirforeign/English language skills.
3. Invest in English-language (or other foreign language) training forother employees.

Why Bother?
Knowledge of JapanAt the country level, an increase in skilled immigration leads to increased trade
between migrant sending and receiving countries (Foad 2011; Mundra 2012)

Japanese
educated
In JapanAt the firm level, firms that hire foreigners are able to increase
exports of goods and services (Malchow-Møller et al. 2011)

Japanese
educatedabroadForeigners
educatedin Japan

Knowledge of Foreign Countries

Foreigners
educatedabroadAreas for Further Research
1. Experiments at the company level to test interventions
2. Differences in performance by job content (i.e. Sales, IT, 国際業務)
3. Team composition and productivity, creativity, and innovation.