Leaders / ‘Zero overtime’ the road to ¥10 trillion / Way of working fundamentally misguided

Naoko Yamagishi / Yomiuri Shimbun Photograpfer

Shigenobu Nagamori talks in an interview with The Yomiuri Shimbun.

By Kazuyuki Kondo / Yomiuri Shimbun Senior WriterFrom “working twice as hard as anyone else” to “zero overtime.” Nidec Corp. is aiming to become a ¥10 trillion company by changing the way its employees work. “The Leaders” column features corporate management and senior executives under the spotlight, and for this edition, The Yomiuri Shimbun asked Shigenobu Nagamori, chief executive officer of Nidec, about the secrets behind his company’s growth. The following are excerpts from the interview.

We are now living in an era of profound transformation. Technological innovation is putting motors with the ability to communicate in everything around us. Our lives will change completely.

Soon workers will be commuting to work with their “personal drones.” Some experts even think there will be three times more robots than people by 2050. As for cars, Europe and China are shifting gears toward electric vehicles. Motors are replacing engines as the main generators of power.

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  • Naoko Yamagishi / Yomiuri Shimbun Photograpfer

    Shigenobu Nagamori speaks to the Yomiuri Shimbun.

Motors that move things with electricity come in all sizes, from the ultra-compact and small motors used in smartphones and home appliances to the large motors used in cars. Motors now consume almost half the electricity used around the world.

Before around 1980, iron was the backbone of Japanese industry. Afterward, semiconductors became that backbone. Around 2025, however, it will be motors’ turn. Motors will become a key component in everything. The era that I foresaw will finally be here, just a little later than expected.

Nagamori was the youngest of six brothers and sisters in a farming family in Kyoto Prefecture. One day, when he was in the third grade of elementary school, he went to play at a friend’s house. He was amazed by the expensive toys, snacks and food for dinner he encountered in that house. His friend’s father was the president of a company, and this experience led Nagamori to decide that he would become a company manager himself.

My father died when I was young. My mother worked, but we were poor. I never once saw my mother sleep. She was still working when I went to bed, and back at work already when I woke up in the morning. She was an amazing woman.

When I first started my business, I obviously went to my mother for advice. However, she was strongly opposed to my plans. She said, “What will you do if you end up causing trouble for others?” Still I insisted that I wanted to give it a go. Finally, she said: “Can you work twice as hard as anyone else? If you do that, you can start a company.”

That made me decide I would work 16 hours a day. A small company does not have the people, the equipment or the money that a big company can muster. But it has the same amount of time in a day as that big company: 24 hours. My mother inspired my way of working as a manager.

Once known as “Mr. Hard Work,” Nagamori suddenly announced a “zero overtime” policy in 2015. That was just after the company achieved consolidated sales of ¥1 trillion.

Some of my employees might be confused. After all, I pivoted from “Work until morning” to “Zero overtime”! However, I decided about seven years ago that I would make this change as soon as Nidec became a ¥1 trillion company.

In the 2000s, we accelerated our acquisitions of overseas companies. It was then that I noticed something surprising. Employees in the West do not work overtime. German companies even take a full month of summer vacation. And still they turn a healthy profit.

Their productivity is simply on a different level. I fully realized that Japan’s way of working is fundamentally wrong. What really matters is the nature of employees’ work, rather than how long they work.

I want Nidec to become a ¥10 trillion company. I believe that if we cling to our current way of working, we will stall at the level of ¥1 trillion. After all, there are only 24 hours in a day.

That’s where “zero overtime” comes in. We began with having supervisors ask their people to leave the office at a set time. Just like that, overtime decreased by 30 percent. Today, overtime at Nidec is almost half of what it used to be.

To double productivity, Nidec will invest ¥100 billion in systems and the like by 2020. The company plans to use half of the savings from the reduction in overtime to pay bonuses to employees. The other half will be invested in education.

We educate employees in training centers that we have built on company premises. We work on their English language skills and their expertise. Improved skills will lead to increased performance. The salaries of employees won’t be reduced. We will do this over the course of five years.

In the United States, people leave work at a fixed time, and then go to school at night to get an MBA. Even employees involved in engineering work learn about administration so they can be company managers. I think that companies in Japan should also pay part of the costs of that kind of education. I just want people to go home early and work on improving their skills.

There was a time when I hired “superstar” employees, the kind that had gone from Nada High School to the University of Tokyo to Harvard University. Unfortunately, I did not get what I was hoping for. Nidec has hired about 6,000 people since it was established, and I’ve seen no correlation between people’s academic background and their work performance. It’s education that’s important. Education changes people drastically.

However, I think it’s easier for people when they only work within set hours. “Zero overtime” isn’t there just to make things easier. In the end, it’s a tool to help us achieve great progress.

Up to now, even people with inferior skills could compete if they worked long hours. However, now they get no more “overtime” [during which they can catch up]. This measure is popular for sure, but for employees, doubling productivity like this is quite hard.

Whoever brings highest profits

Companies where the founder plays an important role, such as Fast Retailing Co., the operator of the Uniqlo casual clothing store chains, and SoftBank Group Corp., are finding it hard to cultivate successors to those founders.

At Nidec, things are clear. Whoever makes money, whoever contributes to the highest profits, is at the top. Second in line is whoever brings good changes to the company. These are our only evaluation criteria for job performance. Who will be my successor will also be decided in the same way. Who brings the highest profits?

Managing a company is about more than just talking about dreams. You must be able to make those dreams a reality. This is something I’ve understood by managing a company for 45 years, but being a good manager is half about character. The other half is training. A harsh environment will make people grow.

Even so, Japan has few people with good management skills. The reason why is we have no system for the professional development of managers. In the United States, people become company managers in their 20s. Outstanding talent doesn’t go to large corporations but to venture companies. In Japan, even graduates of top universities must start as low-ranking employees. Then they can become chiefs and managers. They’re in their 50s by the time they can finally become executives, but by that age, you can’t manage a company anymore.

A company manager must oversee everything, from finding money to making sales. There are many people who are good at giving instructions to their subordinates bossily but could never do the work themselves. And people who can speak English but can’t solve problems on their own.

Failing firms’ commonalities

While developing its high-performance motors, Nidec acquired ailing companies, rebuilt them, and made them grow.

In Japan, only 2 percent of acquisitions are truly successful. Ten percent work out well enough, but 88 percent are outright failures. Nidec has made 56 acquisitions, and every single one of them has been a success story. Of course, there’s a secret behind these victories.

There are three conditions for a successful acquisition. Firstly, you must buy the company cheaply. If you pay too much, bookings of impairment loss will hobble you.

Secondly, the actual acquisition is only 20 percent of the work. You must be aware of that. Who will do what, and how, to rebuild or restructure the company you just acquired? Some people buy companies without having any real insight into them, then leave the rest of the work to their subordinates. The result is failure.

Finally, you must consider corporate cultures. A company can be fantastic, but you shouldn’t buy it if its corporate culture and yours are like oil and water.

Acquisitions take a lot of time. The longest took me 16 years to complete from the time I decided to make it. The average acquisition takes five years. If a company is on the verge of bankruptcy, there is a reason for that. Failing companies have things in common. The workplace is dirty, employees don’t greet each other, they pay too much for their materials, the executives go golfing on weekdays and so on. Fixing those things is very important.

■ Key Numbers

¥10 trillion

Nidec’s consolidated sales for the fiscal year that ended in March 2017 were about ¥1.2 trillion. Nagamori’s goal is to raise these sales to ¥2 trillion in fiscal 2020 and ¥10 trillion in fiscal 2030. He says that while the “¥10 trillion by fiscal 2030” goal is still something of an “ambitious boast,” the ¥2 trillion goal is now within reach. Nidec itself has about 2,400 employees. The entire Nidec group employed about 107,000 people as of the end of March.

■ Profile

Nagamori was born in 1944 in Kyoto Prefecture. In 1967, he graduated from the electrical engineering department of a vocational university. After working at an audio equipment manufacturer, he founded Nidec together with three friends in 1973, when he was 28 years old. He became the president of the company. Nagamori made Nidec into one of the world’s leading motor manufacturers through his skill at acquiring and rebuilding companies whose performance had deteriorated.Speech

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