Management Practices in the

United States, Japan, and the

People's Republic of China
by Heinz Weihrich

Author's note: In researching this article, literature on U.S. and Japanese management practices was reviewed extensively,
and information was gathered during a visit to Japan and from research conducted with Japanese managers operating in
the United States. In identifying Chinese managerial practices, the limited information available was supplemented through
surveys and interviews with scholars, students, and managers from mainland China. I would like to acknowledge the
contributions and assistance of many Chinese scholars and managers, especially Ms. Jie Yu and Mr. Zhijian Yang. Mr.
Yang, a Chinese reporter, investigated the recent political and economic changes in China.

Productivity levels are of great concern to every country on the face of the earth. In recent years, many U.S.
businesses have looked to Japan to find the answer to the productivity crisis in the United States, while many
Japanese scholars attend universities in the United States to learn about management. Japan's phenomenal
success in increasing productivity is often attributed to its managerial approach and low wage rates. But with the
rise of the Japanese yen and the fact that the labor cost component of products becomes increasingly less
important, managerial competence becomes even more crucial.
There is an abundance of literature on both U.S. and Japanese management; one such book even made the bestseller list. But the literature on Chinese management is very sparse. Since Japan and the United States present
contrasting managerial approaches, Chinese managers probably could adopt aspects from either approach. But
which country uses managerial practices that would be appropriate for making Chinese businesses more
effective and efficient? The first step should be to identify Chinese managerial practices and to analyze whether
they are closer to the U.S. or the Japanese model. Then they should be compared and contrasted with current
practices used by large, state-owned businesses in China.
There is general agreement on the basic characteristics of Japanese and U.S. management, but there is less
agreement-and certainty-about the transferability of the practices (not the science) of management to other
cultures. In the 1960s, scholars and practitioners were very much concerned about the universality and
transferability of management. A great deal of controversy centered on the question of whether management is
culture-bound. Some suggest it is, while others point to the universality of management. Harold Koontz, who
developed one of the most comprehensive models of comparative management, concluded that the opinion
differences about the universality of management can probably be attributed to the fact that management as
science-organized knowledge-has universal application, but the practice of management is an art and as such
must be adapted to the situation.
To understand what management is, we have to ask "What do managers really do?" One of the most widely used
frameworks for structuring managerial knowledge is to take the managerial process and divide it, as a first order
classification, into the functions of planning, organizing, staffing, leading, and controlling. Key managerial
activities are then grouped within these functions. We will first discuss these functions and then point out the
differences of managing in the United States and Japan.
The managerial functions will serve as a framework for comparing and contrasting the managerial approaches in
these three countries (see sidebar). At the outset, a word of caution is in order. It is obvious that not all
companies are managed the same way as discussed here. We must also realize that very few empirical studies
exist, especially for Chinese management, and that most of the available literature is descriptive. Many writers
point out the differences in the managerial practices in Japan and the United States, or in the West in general.
But others report that, for example, no differences have been found in participation in the decision making
process or in job satisfaction in Japan and elsewhere. Therefore, the contrasting managerial approaches are
suggestive.
In Japan, planning is greatly aided by cooperation between government and business. After World War II, Japan
developed policies for economic growth and strength as well as international competitiveness. These policies
harmonized monetary and fiscal policies within the industrial structure. In this kind of relative economic
predictability, environment planning is less risky. Planning is choosing the purpose and objectives of the
organization as a whole or a part of it and selecting the means to achieve those ends. It requires making
decisions. The Japanese, in general, have a longer-term orientation in planning than U.S. managers. One reason
for this is that in Japan banks are the primary providers of capital and their interest is the long-term health of the
businesses.

Industrial Management Heinz Weihrich

China, Japan, and the United States:

A Management Comparison
United States Management

Japanese Management

Planning

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Primarily short-term orientation

Individual decision-making
Involvement of a few people in making and
selling: the decision to people with
divergent values
Decisions are initiated at the top and flow
down
Fast decision-making; slow implementation
requiring compromise, often resulting in
suboptimal decisions

Organizing

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Individual responsibility and accountability

Clarity and specificity of decision
responsibility
Formal bureaucratic organizational
structure
Lack of common organization culture;
identification with profession rather than
with company

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Long-term orientation
Collective decision-making (ring) with
consensus
Involvement of many people in preparing and
making the decision
Decision flow from bottom-to-top and back
Slow decision-making; fast implementation of
the decision

Collective responsibility and accountability

Ambiguity of decision responsibility
Informal organization structure
Well-known common organization culture and
philosophy; competitive spirit toward other
enterprises

Staffing

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People hired out of schools and from other

companies; frequent company changes
Rapid advancement highly desired and
demanded
Loyalty to the profession
Frequent performance evaluation for new
employees
Appraisal of short-term results
Promotions based primarily on individual
performance
Training and development undertaken with
hesitation (employee may go to another
firm)
Job insecurity prevails

Leading

!
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Leader acts as decision-maker and head of

group
Directive style (strong, firm, determined)
Often divergent values; individualism
sometimes hinders cooperation
Face-to-face confrontation common;
emphasis on clarity
Communication primarily top-down

Controlling

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Control by superior
Control focus on individual performance
Fix blame
Limited use of quality control circles

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Young people hired out of school; hardly any

mobility of people among companies
Slow promotion through the ranks
Loyalty to the company
Very infrequent formal performance
evaluations for new (young) employees
Appraisal of long-term performance
Training and development considered a longterm investment
Lifetime employment common in large
companies

Chinese Management
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Leader acting as social facilitator and group

member
Paternalistic style
Common values facilitating cooperation
Avoidance of confrontation, sometimes
leading to ambiguities; emphasis on harmony
Bottom-up communication

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Control by peers
Control focus on group performance
Saving face
Extensive use of quality control circles

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Industrial Management Heinz Weihrich

!
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Long-term and short-term orientation (5year plan and annual plan)

Decision-making by committees. At the
top often individual
Top-down-participation at lower levels.
Top-down-initiated at the top
Slow decision-making / slow
implementation. (Now changing)

Collective and individual responsibility

Attempts to introduce the factory
responsibility system
Formal bureaucratic organization
structure
Identification with the company but no
competitive spirit

Most hired from school, fewer from other

companies
Slow promotion, but regular salary
increase
Lack of loyalty to both company and
profession
Infrequent performance review (usually
once a year)
5-year plan, otherwise short-term targets
Promotions are supposed to be based on
performance, potential ability, and
education. But family ties and good
relations with top managers are important
Training programs available. State exam
administered for managers

Leader as the head of the group

(committees)
Directive. Parent-child relations (in TA
terms)
Common values. Emphasis on harmony
Avoidance of confrontation
Communication top-down

Control by group leader (superior)

Primary control by groups-but also by
individuals
Try to save face
Limited use of quality control

In contrast, U.S. managers are often under pressure by stockholders to show favorable financial ratios each time
they report them. This, unfortunately, may not encourage investments that have a payout in the more distant
future. Also, Americans usually stay in their managerial positions only a relatively short time and myopic
decisions can seldom be traced to the manager who had made the decision. Yotaro Kobayashi, the executive vice
president at Fuji Xerox, has admitted that the Japanese learned a great deal about systematic long-range planning
from the Americans.
In China, the situation is quite different. Most of the businesses are state-owned, and it is only more recently that
some private companies have come into existence. In our comparison, however, we focus only on the former. In
these businesses, both long- and short-term plans are prepared. The five year plan is prepared at the top (the
State Planning Commission) while more detailed plans are made at lower levels. The orientation is to meet
objectives and achieve the assigned plan, rather than to be successful in the market. There is also the difficulty of
integrating organizational and personal goals because the achievement of organizational objectives has little
bearing on individual benefits.
One of the most interesting aspects of Japanese management is the way decisions are made. In a typical
organization, several levels are involved in making the decision. Actually, the most important part of the process
is understanding and analyzing the problem and developing various alternate solutions. The final authority for
making a decision still rests with top management, but before a proposal reaches the executive's desk, the
problem and the possible solutions have been discussed at various levels in the organizational hierarchy. Top
management still has the option to accept or reject a decision. But more likely a decision is returned to
subordinates for further study, rather than being rejected outright.
A proposal is confirmed through the "Ringi" process. The "RingiSho" is a proposal document prepared by a staff
member. This paper is circulated among various managers before it goes to top management for formal approval.
The document, which is usually initialed by those involved in or affected by the decision, elicits cooperation and
participation of many people. This, in turn, assures that the problem or the decision is examined from different
perspectives. That this decision making process is time-consuming is obvious. But after a consensus is reached,
the implementation of the plan is rather swift because the understanding of the plan, the clarification of the
problem, the evaluation of the different alternatives, and the involvement of those people who will implement
the decision. But the sharing of the decision power and responsibilities can also result in a problem so that no
one feels individually responsible for the decision.
In U.S. organizations, decisions are made primarily by people and usually only a few people are involved.
Consequently, after the decision has been made, it has to be sold to others, often to people with different values
and different perceptions of what the problem really is and how it should be solved. In this way, the decisionmaking is rather fast, but its implementation is very time-consuming and requires compromises with those
managers holding different viewpoints. The decision that is eventually implemented may be less than ideal
because of the compromises necessary to appease those with divergent opinions. It is true that decision
responsibility can be traced to people, but at the same time, this may result in a practice of finding "scapegoats"
for wrong decisions. In all, the decision power and the responsibility is vested in certain people in U.S.
companies, while in Japan people share both decision power as well as responsibility.
In China, major decisions are made by people at the top, but many people are involved in operational decisions.
Lower-level managers have very little authority to make decisions. Decision-making through the central
planning bureau is under the direct control of the state. This, unfortunately, results in a lack of flexibility in the
implementation of the decisions. Although there is a realization of the need to change, managers in the upper
echelons of the hierarchy resist reforms because it would mean giving up some of their privileges they have as
officials.
Organizing involves setting up a structure to coordinate human efforts so that people can contribute effectively
and efficiently to the aims of the business. This requires determining roles, responsibilities, and accountability.

Industrial Management Heinz Weihrich

In Japanese companies, largely due to the search for consensus in decision-making, the emphasis is on collective
responsibility and accountability. Individual responsibilities, then, are implied rather than explicitly defined.
Although this may discourage placing the blame for an incorrect decision on people, it also can create a great
deal of uncertainty. In fact, the organization structure is rather ambiguous and the de-emphasis on formal
authority promotes informality and egalitarianism. Another characteristic found in Japanese companies is a
common organizational culture and philosophy that places a high value on unity and harmony within the
organization. At the same time, there is a competitive spirit toward other businesses. Organizational change is
accomplished by changing processes, with the aim of maintaining harmony among those affected. Also, the
change agent (OD consultant) is virtually always an employee of the company.
Organizations in the United States emphasize individual responsibility, with efforts to clarify and make explicit
who is responsible for what. Job descriptions are perhaps the best evidence of this. Many organizations,
especially those operating in a stable environment, have been rather successful in using the formal bureaucratic
organization structure. As far as the climate is concerned, not many managers make special efforts to create a
commonly shared organization culture. This may indeed be difficult because professionals-managers as well as
technical people-often have a closer identification with their profession than with a particular company. In
addition, the work force often consists of people with different values derived from diverse heritages. Many U.S.
companies have a high employee turnover rate, which is partly due to the great mobility of the people in this
country. With a relatively short duration of employment with any one company, the loyalty toward the company
is at times rather low. Organizational change is often accomplished by changing goals instead of processes. But
organizations using change agents with a behavioral science orientation may focus on interpersonal processes to
reduce conflicts and improve performance. In the United States it is quite common to use outside organization
development consultants. This is almost never done in Japan.
Chinese managerial practices are very much influenced by the fact that the businesses are owned by the state and
guided by government officials. This results in a bureaucratic organization structure that does not respond well
to changes in the environment. This may not have been crucial in the past (although it is ineffective) because
managers did not have to respond to competition. While factory managers, as people, are expected to achieve the
yearly plan, on lower levels the notion of a vague collective responsibility prevails. Within the formal
bureaucratic structure the relationships among people are rather informal. Recently, attempts have been made
through the "factory responsibility system" to delegate more authority to lower levels. In fact, factories are
allowed to make profits, though these profits are specially taxed. Like in Japan, there are strong organizational
cultures in Chinese businesses. Research indicates that the degree of identification with the business may vary
greatly. Even with a low degree of commitment to the company, this does not result in frequent organizational
changes because it is very difficult to change jobs among state-owned organizations. And there is a lack of
competitive spirit among Chinese employees.
Staffing requires identifying human resource needs and filling the organization structure-and keeping it filledwith competent people. It is in the management of human resources, in addition to the decision-making process,
where the Japanese and Chinese approach to managing differs greatly from that of the United States.
In Japan, people are hired out of school. For a young man, choosing a place to work is one of the most important
decision he makes after selecting a spouse and a university. After a person has joined a company, there is hardly
any opportunity to find employment in another company. Promotions are rather slow, and for most young people
the first 15 or 20 years with a company are pretty much the same. Still, employees develop a strong
identification with the company, the company takes care of them, and employees repay with their loyalty. After
joining a company, performance is very infrequently evaluated. In fact, it may take ten years before a formal
performance evaluation is made. This does not mean that the progress is not monitored, but it is monitored on an
informal basis. Working together with others in an office, without walls separating employees and superiors,
leaves little doubt how well people perform. Furthermore, infrequent appraisals, encompassing a long period of
time, reduce the probability that luck or misfortune influence the evaluation. What is evaluated is the overall,
long-range success and decision capability of the person. This practice results in linking rewards (such as promo-

Industrial Management Heinz Weihrich

tions) to effective long-tern performance. Still, the differences in pay increases are very small and rewards are
essentially based on group and company performance rather than individual contributions.
Because the employees are an integral part of the corporate community, promotion practices must be considered
by all as being fair and equitable. In Japan, the criteria for promotion is usually a combination of seniority and
merit. Also, educational background plays a role in promotion decisions. Japanese companies invest heavily in
the training and development of their employees and the practice of job rotation throughout their working life
leads to a broad career path in which employees get exposed to many different businesses
Perhaps the most pervasive impact on managerial practices is lifetime employment. Japanese companies make
every effort to ensure a stable employment until retirement age (around 55). At times of economic slowdown,
companies usually dismiss part-time or seasonal employees who are not considered members of the permanent
work force, and rather than laying off permanent employees, they are often transferred to organizational units
that are in need of additional help. But the practice of life-long employment seems to be on its way out. In an
interview, Japanese executives suggested that life-long employment will have to be slowly modified because it is
very costly and results in a top-heavy organizational structure.
The management of human resources in the United States is quite different from the same practice in Japan. Like
the Japanese, U.S. companies recruit employees from schools, but they also hire from other companies. High
turnover rates among recent MBAs are quite notorious. Rapid advancement is expected and, if it is not
forthcoming, an employee may change companies. Professionals such as engineers or accountants often identify
more with their profession than with their company, and job-hopping is not unusual.
A common practice in U.S. companies is to appraise the performance of new employees comparatively soon
after they are hired. If performance does not meet the company's expectations, employment may be terminated.
But even for those who have been with a company for many years, performance is evaluated at least once a year
and in many cases their performance gets reviewed periodically during the year. In general, the focus of
performance appraisal is on short-term results and individual contributions to the company aims. Moreover,
differentials in pay increases are often based on individual performance. These differences in pay may be
substantial, especially at upper levels of management. Promotions in U.S. companies are based primarily on
individual performance. Although progressive companies provide continuous development, training is often
undertaken with hesitation because of the cost and the concern that the trained person may switch to another
company. Thus, employees are often trained in specialized functions resulting in a rather narrow career path
within the company. Finally, in many U.S. companies, employees feel that they may be laid off during economic
hard times which, naturally, contributes to job insecurity.
The staffing practices in China have aspects similar to those in Japan. Like in Japan, employees are hired from
school. They are expected to stay with the business for a long time. More recently, however, personnel is also
hired from other organizations; but people are usually assigned to their positions by higher authorities. As in
Japan, employees are promoted slowly through the ranks with regular salary increases.
Lacking in China is the dedication and loyalty to both company (as in Japan) and to the profession (as in the
U.S.). Performance reviews are done infrequently in China (usually once a year) which is certainly more often
than in Japan, and are more like the practice in the United States. Promotions are supposed to be based primarily
on performance, education, and potential ability. However, family ties and good relations with the superior
greatly influence advancement within an organization. In the past, training programs were available in China
only to the chosen few. Recently, however, training has been provided for more managers by educational
television and professional night schools. Moreover, some managers now have to pass an exam, sponsored by
the State Economic Commission. Jobs are secure; it implies lifetime employment (known as "iron rice-bowl")
regardless of performance.

Industrial Management Heinz Weihrich

Leading involves the process of influencing people so that they contribute to organizational aims; it is concerned
with leadership, motivation, and communication. Japanese managers are seen as social integrators who are a part
of the work-group. Using a paternalistic leadership approach, managers show great concern for the welfare of
their subordinates. Common values and a team spirit facilitate cooperation. The role of managers is to create an
environment of esprit de corps, and they are willing to help out in doing the same work their subordinates do. In
an attempt to maintain harmony at almost any cost, managers avoid face-to-face confrontation. This also means
that things may be purposely left ambiguous. Leadership requires "followership" and managers are aided by the
fact that people are expected to subordinate their self-interest to that of the group and the organization. While
managers may not be very directive, influence is exerted through peer pressure. In fact, close personal
relationships are nurtured not only by working together on common tasks, but also by meeting and associating
outside the work environment. The result is a confluence of organizational and private life.
Communication patterns parallel decision-making, with an emphasis on bottomup communication. In one study
it was found that in Japanese companies communication was initiated much more often at lower levels than in
U.S. companies. This communication pattern is also promoted by Japanese managers, who take a great deal of
time communicating with their subordinates. This puts the emphasis on face-to-face contact rather than memos.
The managerial function of leading is carried out quite differently in U.S. companies. Leaders are seen as
decision-makers heading the group; they are expected to be directive, strong, and determined. Their job is to
integrate diverse values, but the emphasis on individualism in the society in general and in organizations in
particular may hinder cooperation. Managers are expected to take decisive actions, and clarify the direction of
the group or the business, even if this requires face-to-face confrontation with those who may disagree. Although
managers work hard, they value their private lives and separate them from their work. Within the organization,
the communication pattern is to a great extent from the top down the hierarchy, with considerable emphasis
given to written communication.
The managerial function of leading in China has characteristics of Japanese and U.S. practices. The leader is the
head of the group (in committees, for example), but the leadership style is generally quite directive. One
interviewee described the relationship between the leaders and followers as "parent-child" in transactional
analysis terms. In other words, it is expected that the leaders' commands are to be obeyed. Leaders, in turn, are
responsible to higher authorities for performance and goals, but not for meeting customer needs and demands
(but this is slowly changing). Like the situation in Japan, leading is aided by common values and an emphasis on
harmony, rather than confrontation. On the other hand, communication is primarily top-down, as with many U.S.
corporations.
In the view of Western managers, controlling involves setting standards, measuring performance, and correcting
undesirable deviations. To the Japanese, this process is less direct. The group, its dynamics, and its pressures
have a profound impact on the managerial process. In an office without dividing walls, peers are well aware of
the performance of their colleagues. Moreover, managers are a part of the work group rather than separated from
employees by an office door. Individual performance is not measured against specific verifiable objectives;
rather, emphasis is placed on group performance. Also, the Japanese approach of letting subordinates "save face"
would be incongruent with fixing the blame for deviations from plans on people. Control emphasizes process,
not numbers. The Japanese reputation for quality is due, in part, to the success of quality control, which requires
grassroots involvement with very active participation in quality control circles.
Control in the United States often means measuring performance against precise standards. Management by
objectives, widely practiced in this country, requires the setting of verifiable objectives against which individual
performance is measured. This way the superior can trace deviations to specific people and this frequently
results in fixing the blame. In an attempt to maximize individual results, group performance may suffer. We all
can think of examples in which the self-interest of people was placed before group or organizational interest. The
use of quality control programs is not new. Hughes Aircraft, for example, had such programs for a long time
under the names of "zero defects" and "value engineering." Many of these programs were developed in this
country and later used by the Japanese in the improvement of their product quality and productivity.
Industrial Management Heinz Weihrich

In China, control is exercised primarily by group leaders. The control focus is on the group, but also on the
person. Factory managers, for example, are expected to meet their yearly quotas. Thus, Chinese control practices
are a mixture of U.S. and Japanese managerial practices. In identifying deviations from standards, there is a
tendency to let the persons responsible for poor performance save face (like the Japanese practice). There is
some use of quality circles, but it is not a common practice.
Management, once considered a U.S. challenge to Europeans, has become, in the minds of many, a Japanese
challenge to managers in the United States. Whether the perception of the superiority of Japanese management
practices is correct-and there is some doubt-remains to be seen. In the meantime, many Chinese managers are at
the threshold of a managerial revolution in which more government-owned organizations gain greater autonomy.
Selectively, competition is encouraged and incentives for private initiatives are promoted. There is an increasing
market orientation, and decision power for meeting customer needs is decentralized (there have been even some
highly publicized bankruptcies). To adapt to these and other changes, Chinese managers look at both Japanese
and United States managerial practices and compare them with their past experiences. Some may be transferable,
but others are not. The environment, especially socio-cultural factors, does influence practice, but its impact may
have been overstated.

Industrial Management Heinz Weihrich