[Special Feature: Rethinking Japanese "Work Styles"] Hajime Ota: How Remote Work Will Change the Way Japanese People Work—Job-Based Employment and Another Alternative

2023/02/07

"Work doesn't progress unless my subordinates are around me," "My boss asks for reports more frequently than before," "I have to keep my PC screen and audio on at all times during working hours." These are the voices heard from both bosses and subordinates as remote work spread during the COVID-19 pandemic. In contrast to countries like the United States, some surveys show that productivity in Japan actually fell with remote work. As soon as the pandemic subsided, many companies shifted back from remote work to office-based work.

The way Japanese companies work—where individual job responsibilities are unclear and work is often performed in collective units like sections or departments—is fundamentally incompatible with remote work.

While the government has advocated for the introduction of new work styles and systems following the tailwind of remote work, the thick wall of the collective work system stands in the way.

For example, systems that allow individuals to choose where and when they work—such as workations, selective three-day work weeks, and short-time employment—tend to disrupt operations if all members are not present. Furthermore, while the government shifted its stance on side jobs from "undesirable" to generally permitted in 2018, many companies still refuse to allow them. It is said that in addition to institutional issues like labor laws and operational disruptions, many managers are concerned that employee loyalty and a sense of unity will weaken.

In short, the Japanese-style employment system of "everyone working together" demonstrated strength during the industrial society era, particularly when collective work was mainstream. However, now that we have entered the digital society and the era of remote work, it has conversely become a drag on reform.

This has led to attention being focused on the transition from so-called "membership-based employment" to "job-based employment" (terms coined by Keiichiro Hamaguchi).

In job-based employment, modeled after Western job-based pay and job-centric philosophies, the roles, responsibilities, and compensation for each individual are clearly defined and stated in a job description. Since employees basically only need to perform their own duties, remote work does not pose a major problem. The fact that remote work was widespread in the West even before the pandemic was largely due to the benefits of the job-based model.

However, attempting to introduce this in Japan hits a part that can be called the core of the Japanese employment system, which is rooted throughout society.

In a job-based system where employment contracts are for specific duties, if that duty becomes unnecessary within the company, the employee must find a job outside. However, in Japan, where the external labor market is not as developed as in the West, changing jobs is not necessarily easy, and unilateral dismissal by employers is strictly restricted by judicial precedents. Furthermore, while the principle of the job-based model is to hire talent with the necessary skills for the job, the reality in Japan—which centers on hiring new graduates—is that employees are often unskilled because they have not received proper vocational training before joining a company.

Therefore, to introduce a job-based system, it is necessary to review the framework of the lifetime employment system itself, which is based on simultaneous recruiting of new graduates.

The seniority system, another pillar of Japanese employment, is also incompatible with the job-based model. Under the seniority system, regular pay raises and promotions occur, but in a job-based system, one cannot receive a raise or promotion regardless of how many years pass unless their abilities reach a higher grade. Meanwhile, disparities between and within occupations are expected to widen.

Will enterprise unions, which are the mainstream in Japanese companies, and Japanese society as a whole, actually accept such fundamental reviews of lifetime employment and seniority systems, as well as the widening disparities among employees?

And behind this lies a more fundamental question: whether the job-based model even matches the coming era.

The job-centric philosophy that serves as the model for the job-based system emerged during the era of mass production of a limited variety of products following the Industrial Revolution. The operations of the entire company are broken down into divisions, departments, sections, and then individuals, and each person's duties are determined. If a company is compared to a machine, the employees are compared to parts. Such a mechanical system was rational in the era of industrial society, where the business environment was stable and saw little change.

However, today, changes in the business environment, such as technology and markets, are becoming far more intense than back then. Furthermore, because routine tasks from production sites to stores and offices have been digitized and automated, employees are now required to have qualities and abilities such as creativity and innovation that do not fit into mechanical division of labor. Therefore, the job-centric philosophy of contracting by specifying individual tasks has major weaknesses in terms of flexibility and adaptability.

In this way, from one perspective, the job-based model can be seen as an even older model designed for industrial society than the membership-based model.

Is there no other alternative to membership-based work besides the job-based model?

When visiting China or Taiwan in the past, I often saw people working in factories and business districts in a way that made it unclear whether they were employees or self-employed. Despite being employees and non-managers, they take charge of a complete set of tasks alone and work at their own discretion, much like a self-employed person. Even in Western companies, one could see work styles where a single employee handles the entire process from product development to marketing.

In Japan as well, in recent years, it has become possible to streamline peripheral tasks using IT or outsource them via the internet, allowing individuals to handle complete sets of work depending on the task. The scope of work per person has expanded.

Along with this, it has become possible to work without being restricted by location or time through telecommuting, and work styles where people from different specialized fields, both inside and outside the company, form teams for each project have become established.

Even at manufacturing sites, some companies have adopted an evolved "single-person booth" (Hitori-Yatai) method where even unskilled workers can assemble an entire product alone using sensors, and others have introduced single-unit flow production where one engineer consistently handles everything from material procurement to processing and delivery management.

This way of working, where one belongs to an organization but takes on a complete set of work almost like a self-employed person, can be called the "Self-Employed Style" (Hajime Ota, "Cho" Hatarakikata Kaikaku [The "Ultra" Work Style Reform], Chikuma Shinsho, 2020).

What is noteworthy is that with the spread of remote work, the boundary between employment and self-employment is becoming increasingly blurred and continuous.

In IT companies and occupations such as product development and sales, when adopting remote work during the pandemic, there were many cases where employees switched from employment to service contracts with their consent to avoid labor law restrictions, including working hour management and salary systems. Furthermore, it is no longer rare for large companies to outsource highly specialized tasks to external freelancers. Overseas, an increasing number of companies are strategically adopting a style where employees in charge of specific tasks become independent and trade with their original company on equal terms.

The "Self-Employed Style" is particularly suitable for small and medium-sized enterprises (SMEs). In SMEs with few personnel, it is not feasible for each employee to be responsible for only a single duty. In many cases, one employee handles multiple tasks, such as general affairs, accounting, HR, and clerical work along with sales, marketing, development, and manufacturing. Even at manufacturing sites, so-called multi-skilled workers are common. Therefore, the "Self-Employed Style" is more familiar than the "Job-Based Style."

To begin with, a culture of self-employment, such as agriculture, fishing, and craftsmanship, is rooted in Japanese society, and until the period of high economic growth, the population of self-employed people exceeded that of employed workers. Furthermore, merchant houses in the Edo period had a system called "Noren-wake" (granting the use of the shop's name) to allow long-serving apprentices to become independent, and some restaurants and retail stores still incorporate this system today. Therefore, the "Self-Employed Style" can be said to have a higher affinity with Japanese companies and Japanese society than the "Job-Based Style."

Even when working as an employee, the Self-Employed Style shares commonalities with the "Membership-Based Style," so the transition to the "Self-Employed Style" is expected to proceed relatively smoothly.

For example, while the Western job-centric philosophy has the image of "a person being assigned to a job," Japanese companies conversely have a strong character of "a job being assigned to a person." In other words, work is person-specific, and the difficulty and scope of the work are determined according to individual abilities and aptitudes.

In terms of career development, Japanese companies have focused on cultivating "generalists," which is also closer to the "Self-Employed Style" than the "Job-Based Style."

Remote work, which was adopted almost as an emergency measure during the pandemic, is a great opportunity to advance "work style reform." Rather than simply following the West, we should look one step ahead.