What do Japanese companies look for in MBA holders?

Publisher Summary

This chapter discusses the issues such as why companies allow their employees to attend MBA programs, and what relationships exist between sending employees to study on MBA programs and their human resource development systems. After the collapse of bubble economy, the number of business schools and MBA holders increased, human resource management schemes in Japanese companies drastically changed from the nenkô system to performance-based systems, and a succession plan has begun to be introduced by some companies. The reason nobody doubts that the degree of MBA is a credential for a promising future is because there is institutional support for the view that MBA holders are highly valued in the labor market and in company personnel systems in the U.S. and European countries. Therefore, it makes sense that many people pursue MBA degrees at famous business schools to acquire a better future in such societies. However, most Japanese companies do not give short-term privilege to MBA holders, as is the case with companies in the U.S. and Europe. They expect these employees to contribute to the development of the company by taking on the responsibility of management leaders in the long run. This is what Japanese companies look for in MBA holders. The chapter also aims to clarify the relationship between HRM development schemes in companies and MBA education in Japan.

Introduction

As shown in the previous chapter, there has been hot discussion about business schools: their merits and demerits, what business education should be, the changing role of business schools and their future in the USA, UK and Japan (Bennis and O'Toole, 2005; Starkey and Tempest, 2005; Starkey et al., 2004; Mintzberg, 2004; Pfeffer and Fong, 2002, 2004; Okazaki-Ward, 2001; Ishida, 1997; Kagono, 1996). However incandescent the controversy becomes, most people in American and European countries have believed, and will continue to believe, that the title of MBA enhances the holder's career and brings a higher salary than before. The reason why nobody doubts that the degree of MBA is a credential for a promising future is because there is institutional support for the view that MBA holders are highly valued both in the labour market and in company personnel systems in the USA and European countries. So it makes sense that many people pursue MBA degrees at famous business schools to acquire a better future in such societies.

Consider a society where having an MBA is not a credential assuring a bright future. Japan is representative of countries where the direct connection between getting an MBA degree and the holder's brilliant future is not strong. Is it rational behaviour for people to devote all their energy to gaining an MBA degree in such a society? The answer is probably 'no'. But the numbers of both business schools and student enrolments have been increasing in Japan, as already mentioned. The growing concerns about business schools in Japan have already been discussed, but the in-house corporate process which induces Japanese business people to study at business schools has not yet been clarified.

Many Japanese companies have schemes in their human resource management systems by which employees who want to study in MBA programmes can be allowed to enter such courses, although these companies do not promote MBA holders faster than other employees simply because they have MBA degrees. The companies formally support their employees' desire to develop their abilities by attending MBA courses: allowing their working staff to join MBA courses has positive effects not only for the specific employees themselves but also for the companies. So what do the companies gain by sending their employees to study on MBA programmes? Why do employees want to study at business school when the degree of MBA is not considered an excellent credential for a bright future?

In this chapter, these issues will be clarified through qualitative research in five companies: why the companies allow their employees to attend MBA programmes, and what relationships exist between sending employees to study on MBA programmes and their human resource development systems.

Types of MBA students

When one hears somebody say 'I was an MBA student', different images of his/her MBA student days will probably come to mind: some think enviously that s/he studied abroad with financial support from his/her company, while others imagine the person studying in a business school in Japan to improve his/her career after quitting his/her job. The diversity of these images of MBA students is evidence that more people have begun to study at both domestic and foreign business schools than before. Twenty years ago there were few business schools in Japan and almost every MBA student went to a foreign school, so the images of MBA learners and their backgrounds were not so diverse. However, current MBA students are more varied than before; thus it is useful to clarify the types of MBA students, depending on whether they are financially supported by their companies and whether the business school they attend is in Japan or abroad.

One can categorise MBA students who work at companies into two groups. One group consists of those who are sent to business school and given monetary support by their company under the company's scheme of human resource development (cells 1 and 2 in Table 2.1). This type of MBA student is hereafter termed 'despatched MBAs'. Depending on whether they study abroad or in Japan, despatched MBAs are divided into two subgroups: despatched MBAs abroad (cell 1) and despatched MBAs in Japan (cell 2). Most of the despatched MBAs study at MBA courses run by American universities, and almost all the rest go to MBA courses operated in Europe. The number of those becoming MBA students in other regions is very small. Many of these employees are released from work obligations and allowed to immerse themselves in their studies at business school. This pattern - immersion in study and freedom from work obligations - is evident not only when employees are sent to overseas business schools, but also when they are despatched to domestic schools.

Table 2.1

The typology of MBA students

In exceptional circumstances, some employees studying at Japanese business schools continue to work regularly while they are students. For such MBA students, it is an arduous task to balance study with work.

The other group of employee MBA students is formed of those who are studying at their own expense, without any financial or official support from their companies. It is impossible for them to study abroad in this situation (cell 3 in Table 2.1) if they want to continue to work at their current companies. As a result, if they want to study at business school they have no choice other than going to a Japanese school. They work in the ordinary routine, just as hard as their colleagues; at the same time they study at business schools in Japan, mainly in evening classes after work or at weekend classes. Their situation, in which they must satisfy both their business obligations and the requirements of academic work, is harder than those of the despatched MBAs, mainly because of time scarcity and the dual responsibilities of their work and study. These MBA students are hereafter termed 'independent MBAs' (cell 4).

The main focus here is on the despatched MBAs studying in Japanese business schools (shaded cell 2 in Table 2.1), since the aim of this chapter is to clarify the relationship between HRM development schemes in companies and MBA education in Japan.

Promotion and wage systems in Japanese HRM schemes

Before moving on the main point of this chapter, it is necessary to ascertain several characteristics of Japanese HRM systems which closely relate to how MBA holders are dealt with in companies. Those systems concern promotion and wages.

Long-term promotion systems

It is said that there were three sacred treasures which were emblematic of Japanese management: the seniority wage system (nenkô chingin), the lifetime employment system (syûshin koyô) and the enterprise union. All three systems were closely interconnected, and an HRM system using the three sacred treasures was called the seniority HRM system (the nenkô system). After the collapse of the so-called bubble economy in the 1990s, Japanese companies dramatically steered away from the nenkô system and towards a performance-based HRM system (seika syugi). Of course, some top management in well-performing global companies, especially manufacturers, emphasised the importance of human resources and announced that they are trying to keep long-term employment, though they do not use the phrase 'lifetime...