The Mind of Management Fifty Years with Konosuke Matsushita By Masaharu Matsushi ita Chairman et of the Board, Matsushita Electric Industrial Co., Ltd.This book was originally published in Japanese by PHP Institute, Inc. under the title of Keiei no kokoro: Matsushita Konosuke to tomoni gojunen. Translated by Lynne E. Riggs. Japanese copyright © 1995 PHP Institute, Inc. English translation copyright © 1996 by Matsushita Electric Industrial Co., Ltd. Published by Matsushita Electric Industrial Co., Ltd. 1006, Kadoma, Osaka, 571 Japan. All rights reserved. No part of this book may be reproduced or utilized in any form or by any means, electronic or mechanical, including photocopying, recording or by any information storage and retrieval system, without permission in writing from the publisher. Printed and binded in Japan by Tosho Printing Co., Ltd. Jacket design by Gow Michiyoshi and interior design by Koitsu Taniguchi. ‘Typesetting by Asahi Media International Inc. The main text is set in 11-point Palatino Roman. First Edition, February 1996 ISBN4-569-54949-7Contents Preface ... 7 Acknowledgments .. 9 Part One: Konosuke Matsushita’s Business Philosophy 1, The Importance of a Management Philosophy 12 . The Mission of a Manufacturer 20 . Profit and Social Responsibility .. . 28 . Coexistence and Coprosperity . The Customer Comes First 2, 3, 4 5 6. Integrating Production, Sales, and Service 7. Management with Collective Wisdom 8. A Sense of Professionalism 9. People Before Products . 10. The Right Person in the Right Place . 11, Dam Management . 12. “Umbrella in the Rain” ManagementPart Two: The Spirit and Practice of Management 13. The Interplay of Permanence and Change 14. The Basics of Management 15. Develop an Inquiring Mind 16. Enthusiasm and Concentration 17. The “Hungry” Spirit ... 18. Big-Corporation Disease .... 19. Independent Management and the Division System . 20. The Importance of Money .. 21. Sales and Customer Satisfaction ... 22. Corporate Communications Is Essential 23. Business on the World Stage 24. Inspiration from Abroad 25. Hearts and Minds ... 104 .120 140 153 Afterword and Dedication .....Preface LMOST SEVEN YEARS have passed since the death of Kono- suke Matsushita, founder of Matsushita Electric, at the age of ninety-four. The century that Konosuke’s life nearly spanned was a tumultuous period for Japan. It began in the Meiji era, when Japan emerged as a modern industrial nation, and extended into the Taisho era, with its heady liberalism, and continued on through the sixty-three years of Showa, which was swept by war and then saw the reconstruction of our nation after the defeat. That century then extended into the cur- rent Heisei era, as Japan confronts the challenges of a highly industrialized society and the advent of a new millennium. Konosuke faced many difficulties and hardships in the course of those rapidly changing times, and he threw himself completely into every endeavor he undertook in the firm con- viction that there was a “right way” to overcome each chal- Jenge and that there were certain necessary measures to be taken in each situation. Konosuke once remarked: For me, there were no miracles and no dramatic moments. But one thing I can say about my whole life and career: From the time I started as an apprentice, to when I went to work at the Osaka Electric Light Company, and from the moment I began igPreface my independent business career, | not only performed my work sincerely, conscientiously, and to the best of my abilities, but I enjoyed what I was doing and had a great sense of fulfill- ment. Since I worked alongside Konosuke Matsushita for over fifty years, I can confirm that these simple statements accu- rately sum up his life. Konosuke believed that a corporation is a public institution, and with deep conviction, he tried to work in accordance with his own ideals to make industrial produc- tion useful to consumers and to contribute to the prosperity of society. Because of his beliefs, neither good nor bad times affected him. With ingenuity and flexibility, he coped with each different situation that came along and tried to choose the path that best served the mission of his business. Konosuke’s ideas on management continue to be the busi- ness philosophy of Matsushita Electric. He wrote a great deal about these principles in his many books, and many books by other people have examined his ideas and his career. Unfortu- nately, as time goes by, fewer and fewer people survive who were directly taught by the founder, actually worked with him, and learned firsthand the living “mind of Matsushita manage- ment.” As we celebrated the centennial of Konosuke Matsushita’s birth last year, I realized that I had both a mission and a respon- sibility to record my own impressions of Konosuke’s manage- ment legacy as gleaned from my five decades of working close- ly with him. The first part of this volume, therefore, is a selection of Konosuke’s management principles which I con- sider to be the most important in management. To these, I have added a few of my own ideas. The second part consists of ideas and practices I myself have developed during the years I worked with Konosuke and afterwards. It is my sincere hope that readers will benefit from the ideas discussed in these pages. December 1995 Masaharu MatsushitaAcknowledgments dhe PUBLICATION OF this book would not have been possible with- out the contributions of many people. I especially appreciate the sensitive rendering of the original Japanese by Lynne E. Riggs, with editorial work and checking by Manabu Takechi and Phyllis Birnbaum, and the thoughtful attention given to the English draft by Laura Rennert, Editorial Consultant, and Robert JJ. Wargo, Exec- utive Director at PHP Institute. I would like to thank Toru Yamaguchi, Managing Director, PHP Institute for undertaking this project, and Koitsu Taniguchi for his supervision of the translation and production processes. I am also grateful for the support and advice from many colleagues in the Matsushita Group, especially the following: from Matsushita Electric Industrial Co., Ltd., Ken Shimba (General Manager, Chairman’s Executive Office) and Peter Y. Iguchi (General Manager, Interna- tional Relations Department, Corporate External Relations Division); and from Matsushita Electric Corporation of America, Richard A. Kraft (President and Chief Operating Officer), Robert S. Marin (Vice President and General Counsel), Justin L. Camerlengo (General Manager, Corporate Communications), Ralph J. Pagano (Group General Manager, Finance), and James V. Reilly (Manager, Public Relations, Corporate Communications).Part One Konosuke Matsushita's Business Philosophy1 The Importance of a Management Philosophy AY ENTERPRISE MUST have a management philosophy. Kono- suke Matsushita declared that this was the most indis- pensable lesson of all his years in business. If a corporation clearly defines its goals and purposes and formulates funda- mental principles and rules, then success will surely follow. Konosuke, of course, recognized the importance of technolo- gy, marketing, capital, and personnel, but he strongly believed that without a sound business philosophy, a company would flounder and lose its way in this highly competitive world. It is only after the philosophical groundwork has been laid that the employees, the technology, and the capital of a company can be utilized to their best advantage. Only then can an enterprise hope to make full use of its resources and experi- ence vigorous growth. The Raison d’Etre of Business In guidelines adopted in March 1929, Matsushita Electric first articulated its basic business philosophy. Overcoming many difficulties along the way, the company had grown from a small family enterprise, founded in March 1918, to a well- 12The Importance of a Management Philosophy established workshop with about 300 employees. New prod- ucts were introduced, and the customer base broadened. Monthly earnings had surpassed ¥100,000, a substantial sum for those days. As Konosuke wrote in his autobiography: What I had considered a private business no longer seemed a private matter. I now realized that Matsushita Electric was working not just for itself, but for the agents [dealers] and for the industry as a whole; it was an enterprise, as it were, entrusted to us by other people. It was our duty to shoulder that responsibility and manage our operations with the aware- ness that private enterprise is indeed a public endeavor.! The following is the Basic Management Objective as defined in 1929: We dedicate ourselves to the development of the nation and to the development of our industry. In our endeavors, we hope to improve the quality of life around us. Profit alone will not be our principal goal: we will also search for ways to benefit society? It was this commitment that enabled Konosuke to con- template growth even in hard times. For example, these princi- ples helped him respond optimistically to the adverse business conditions of 1928-29. Although a grave recession plagued the Japanese economy then, he believed that “the market for essen- tial commodities grows both in good times and bad.” By the force of these ideas, Konosuke convinced the bank to extend him a loan of ¥150,000, without security, for construction of a new head office and a new factory that would manufacture battery-powered bicycle lamps. This factory was to have a pro- duction capacity of 100,000 lamps a month. Looking back on those days, it is clear that the expanding Japanese industrial base had brought about the rapid spread of strictly capitalistic goals. Inevitably, abuses and contradic- tory policies followed. Many members of the establishment called for reform, and communist and socialist ideologues 13THE MIND OF MANAGEMENT launched particularly bitter attacks against business. I myself witnessed frequent debates on these issues. Critics charged that businesses exploited their workers and went to any lengths in the pursuit of profit. Konosuke learned important lessons from those tumul- tuous days. If corporations engaged in the unscrupulous pur- suit of profit, he came to believe, they would inevitably pay no heed to social justice. Great conflict would follow, as people raised their voices in protest. On the other hand, an enterprise dedicated to the development of society, he reasoned, would earn its money with the good of society in mind. Social upheavals and protests would be avoided to the benefit of all. He had these convictions in mind when he promulgated his Basic Management Objective. “Profit alone will not be our principal goal; we will also search for ways to benefit our soci- ety,” he wrote, referring to the turmoil of those days. With these words, he also wished to emphasize that he saw busi- ness as a sacred calling. He was determined that his company would not be the target of society’s outrage. While weighing the pursuit of profit against the greater social good has become a commonplace notion in our present society, Konosuke’s thinking was, for those days, very advanced. It was then virtually unheard of for a company president to devote his or her enterprise to the betterment of society, and one can imagine the astonishment of his peers when Konosuke did not put profit above all else in his corpo- rate philosophy. Even now, decades later, 1 am profoundly impressed by his insight and courage. Tam not sure what inspired Konosuke to think along these progressive lines, and for some time, I wondered whether any other Japanese had developed such an enlightened approach. Then, by chance, I read a set of books I found at home about Japan's great industrial and financial combines, the zaibatsu. With fascination, I pored through the accounts of the great zaibatsu, both old and new. I read about the Mitsui, Mitsu- bishi, Sumitomo, and Yasuda zaibatsu, among others. As is 4The Importance of a Management Philosophy well-known, after World War II the Supreme Commander for the Allied Powers (SCAP) ordered the dismantling of the zaibatsu as part of Allied Occupation policy, hoping thereby to destroy the powerful forces that had built the Japanese war machine. Although, admittedly, the zaibatsu had contributed much to the war effort, these same mammoth combines had, as far back as the beginning of the Meiji period (1868-1912), played a leading role in the industrial and economic development of the country. Truly outstanding individuals were to be found within the ranks of the zaibatsu. The founders and their suc- cessors who maintained and expanded these concerns exerted enormous influence in industry and finance as Japan grew into a modern power. What was the fundamental source of the zaibatsu’s strength? The answer, I believe, is that each had a set of basic principles of business, a corporate philosophy that stimulated vigorous economic activity. It was often the founders who established these basic principles, and their words are pre- served even today in family charters, mottoes, and fundamen- tal rules. When they described their basic motivations, they coincidentally emphasized the importance of making a contri- bution to the nation and to society. While I do not mean to compare Matsushita Electric—which in its early years was quite small—to any of these huge zaibatsu, I do want to point out that for a company of such humble beginnings, Matsu- shita’s business philosophy was quite lofty and far-sighted from the start. During World War II, the Basic Management Objective of our company had to be modified several times, since Japanese society was in the unusual position of being controlled by a military government. After the war, it was revised as recon- struction and rehabilitation of the country proceeded. The latest version of our Basic Management Objective expressed a reaffirmation of the founder’s ideals and a strong commitment 15THE MIND OF MANAGEMENT. to bring improvement not only to Japanese society, but to the world at large. In February 1946, the current formulation of the Basic Management Objective was firmly adopted: Recognizing our responsibilities as industrialists, we will devote ourselves to the progress and development of society and the well-being of people through our business activities, thereby enhancing the quality of life throughout the world. Fifty years have passed since then. In those days, Japan was a defeated, ruined nation. The cities were scorched waste- lands, and citizens lived amid terrible devastation. Matsushita Electric itself was virtually paralyzed. The company was deeply in debt, its factories had been damaged or completely destroyed, and even those factories still standing could not function due to the scarcity of raw materials. Nevertheless, Konosuke was confident that the company’s fortunes would improve when the Japanese economy, then mired in chaos, started functioning properly again. After all, he reasoned, Matsushita was not the only company struggling to survive. Reconstruction of the country would mean increased demand, and in this transitional period diligence and teamwork were vital. He issued a number of specific policies in rapid succes- sion and urged his employees to devote themselves to projects that would help the nation withstand the crisis period, and would, at the same time, equip the company for future growth. Like all Japanese at the time, Matsushita’s employees were demoralized by the defeat and the prospect of an uncertain future. Konosuke’s rallying cry, which he uttered with confi- dence and optimism, seemed like a bright shaft of light in those very dark days and roused everyone to action. His employees were further inspired to work when he urged them to devote themselves not only to reconstructing Japan but also to “enhancing the quality of life throughout the world.” 16The Importance of a Management Philosophy Konosuke’s flexibility in adapting his business philosophy to shifts in the social and political landscape served him and his enterprise well. His new basic management philosophy reflected his view of the new international situation after the war, His perspective had broadened, and he could not help seeing the plight of his own country and others. This redou- bled his sense of mission as an industrialist, and he sum- moned all the lessons he had learned over the years as he set about rebuilding his company. The CCS Management Seminar In later years, I found another reason to admire the wisdom of Konosuke’s management philosophy. In 1949-50, I attended a course organized by the Civil Communications Section (CCS) of the Occupation authorities. The eight-week course was offered in Tokyo and Osaka for executives of Japan’s major electric and communications companies, and I was one of about twenty who participated in the CCS Seminar in Osaka given by Homer M. Sarasohn and Charles Protzman. On the first day, the text to be used in the seminar was dis- tributed. To my astonishment, the very first section of the first chapter on policy declared that the whole purpose of an enter- prise was to contribute in some way to the welfare of society. Moreover, when discussing profits, the text criticized the prac- tice of setting the prices of products by simply slapping a prof- it margin onto basic costs. This arbitrary practice did not take the consumer into account. It was far better, according to this text, to determine the price through the competition in the marketplace. Real profits would come from manufacturing a high-quality, cutting-edge product at relatively low cost. Over lunch that first day, we discussed these ideas with much excitement. Japan had lost the war because the United States possessed superior scientific knowledge, as well as tech- nological and industrial power. Therefore, we had assumed that a course on modern American management would stress only rational, scientific approaches. But the first page of the bidTHE MIND OF MANAGEMENT text contained a discussion about business philosophy! Every- one was amazed. At the close of the first session, our instruc- tor gave us this assignment: “Those of you whose company does not have a company philosophy must sit down and write one as if you were the company president.” Well, I was the only one who didn’t have to toil over this assignment, since Matsushita Electric already had formulated Basic Management Objective, articulating the company’s phi- losophy, in 1929. The instructor was flabbergasted when I told him this, and I will never forget the pride I took in realizing that the guiding principles of Matsushita dovetailed perfectly with those the CCS management course taught. Much later, in 1992, in fact, I learned that one of our instruc- tors was responsible both for the seminar and for its enlight- ened principles of management. By chance, I happened to be in Scottsdale, Arizona in May of that year for a meeting of dealers and distributors of Matsushita Electric Corporation of America. I discovered that my former instructor, Mr. Sarasohn, lived very close to the hotel where our meeting was being held. Reunited after more than forty years, Mr. and Mrs. Sarasohn and I recalled the old days with much nostalgia. At that meeting, I asked my former teacher about who had come up with the idea for the seminar, a question that had been on my mind for many years. Mr. Sarasohn then told me the seminar had been his idea, and he went on to describe the background. General Douglas MacArthur (1880-1964), Supreme Commander for the Allied Powers in Japan, wanted Japan and the United States to become good friends once peace was restored, even though they had recently fought as enemies. He was eager to spread the principles of liberalism and democracy throughout Japan as quickly as possible. SCAP’s Civil Communications Section realized that radio was the best way to disseminate these ideals. Thus, they put much effort into assisting the recovery of Japan’s radio manufacturers so that good, reasonably priced 18The Importance of a Management Philosophy radios would soon become available in large numbers. A series of management seminars resulted from this policy. The CCS had a rival, however, in the Economic and Scien- tific Section (ESS) of SCAP, which took a dim view of the plann- ed seminars. Mediating between them, General MacArthur called in Sarasohn, the representative of the CCS, as well as a representative of the ESS. He asked them to present their views. Sarasohn spoke for about twenty minutes about how he planned to revive the radio industry. When he was finished, he told me, the general stood thoughtfully for a while, arms crossed over his chest, then got up and walked to the door. Suddenly swirling around to face Sarasohn, he instructed him to go ahead with his seminars and left the room. I took great interest in this insider’s story of the Occupation period, since I could see a small historical drama unfold before my eyes. Even now, fifty years later, the CCS management seminar reminds me of the importance of a management phi- losophy in business, and I feel a renewed commitment to the idea that a corporation must make a contribution to society.2 The Mission of a Manufacturer ONOSUKE’S MANAGEMENT PHILOSOPHY contains many pure and noble ideals. Indeed, many have noted that a some- what religious element pervades his thinking as he exhorts his workers and the business community at large, to look beyond their selfish concerns and seek the world’s grander and more altruistic possibilities. In spite of his quasi-religious ardor, Konosuke Matsushita did not belong to any religious group. In 1932, however, at the repeated urging of a friend, he visited the headquarters of a large recently founded religious sect in Nara. While he toured the grounds of the large complex, he observed the intense dedication of the followers who were building a new founder’s hall. Their cheerfulness and enthusi- asm affected all the people around them. With much excite- ment, Konosuke realized that he had just witnessed a splendid example of perfect management. In his autobiography, he recalled this experience: Even after returning home, I could not get the thought of reli- gion on the one hand and management on the other off my mind. I stayed awake for a long time thinking about it. Reli- 20The Mission of a Manufacturer gion was a holy pursuit aimed at guiding people out of suffer- ing and toward happiness and peace of mind. Our business, too, is sacred, 1 thought, in the sense that industry provides necessities that sustain and improve man’s existence. Indeed, the ultimate aim of production is to wipe out pover- ty and create prosperity. There is an old saying in Japanese that poverty is harder to bear than a thousand illnesses. Eliminating poverty is a sacred task, the loftiest purpose in life. To achieve it we must work hard and produce a great abundance of goods; this is our mission and our enterprise. Production aimed at enriching the life of every person on earth is the sacred mission of a manufacturer. Not only spiritual peace but material abundance is necessary if the quality of human life is to be better and people are to be happier. You may be spiritually enlightened, but if you are deprived of cer- tain material comforts you will find it hard to survive. And of course, the greatest abundance of material wealth is worthless unless you enjoy fulfillment and a purpose in living. Spiritual peace and material abundance are as inseparable as the two wheels of a cart. So, I realized, management of a religious organization and of a business concern are equally sacred and necessary pursuits. Essential Commodities in Abundant Supply In expounding upon this insight into the relationship between business and religion, Konosuke sometimes actually made use of a preacher’s techniques to illustrate his point. Like a reli- gious leader delivering a sermon, he saw that his audience would better understand him if he explained his views through parables or anecdotes. His discussions about his expe- rience at Nara contain one such compelling tale that brings his thinking to life. It begins with a description of an episode that had remained in his mind since the early days of his business. This episode had taken place in the busy Tennoji section of downtown Osaka on a hot summer day. A man, his throat dry from pulling a loaded cart, stopped to drink from a roadside water tap. Obviously delighted to quench his thirst, he drank as much as he needed and then continued on his way. That 21THE MIND OF MANAGEMENT was when Konosuke made his discovery: Then it came to me: Water from the tap. Tap water is a processed product that comes at a price. It must be paid for. A person who steals a product of value is punished. As long as water is in abundance, however, one never hears of a tramp being punished for turning on a roadside tap without permis- sion and drinking his fill. Why? Because water is abundant. But water is valuable and man cannot live without it. So what does it mean that even something as valuable as water can be stolen without punishment? It demonstrates the mission of the manufacturer, which is to produce commodities for daily life as abundantly as tap water. No matter how valuable a product may be, it can be supplied to consumers at an extremely low price if it is manufactured in large volume. And when poverty is eliminated, so will be the stresses and grief that derive from it. If the spiritual peace offered through the power of religion is added to a paradise of material abundance, human life will be complete. This is where the spirit of real business manage- ment lies. . . 2 This was Konosuke’s discovery after his tour of the reli- gious center in Nara, a discovery that filled him with elation and renewed confidence. Questions that had haunted him since the founding of his business had suddenly been answered. He now knew the course he wanted to set for Matsushita Electric. In 1932, Konosuke Matsushita chose May 5—a national holiday dedicated to the development and future achievement of young children—to hold a meeting of all employees. On that day, he read them the following Declaration: Declaration Our company, the Matsushita Electric [Manufacturing] Works, was founded in 1918, Through harmony and cooperation among all our staff and employees, it has continued steady growth ever since, and today it enjoys the respect and admira- tion of the whole industry. Our pioneering spirit is ever-vigor- ous, and we look forward to a promising future. We bear aThe Mission of a Manufacturer heavy responsibility to society. I hereby announce to my trust- ed and faithful staff and employees that this day, May 5th, will henceforth be celebrated as the founding of our company and the epochal turning point marking its embarkment on a mis- sion of growth and responsibility to society. The main purpose of production is to manufacture items of good quality for daily use in abundant supply, thereby enrich- ing and improving the quality of life for everyone, and it is to this goal that I am dedicated. Achieving this mission is the ultimate purpose of Matsushita Electric, and we will devote untiring energy to realization of that goal. I ask you all to share in and understand this, and to do your best. Konosuke Matsushita, President May 5, 19323 All listeners accepted this declaration with enthusiasm. Konosuke designated that day, May 5, as the company’s founding day and that year as the first year of Meichi—” The day we truly awakened to our corporate mission.” His corpo- rate philosophy was dubbed the “tap water philosophy,” once people understood the source of his inspiration. Konosuke Matsushita’s thoughts on the mission of a manu- facturer are described in detail in Asu no kigyo ni nani ga aru ka [What Lies Ahead for the Corporations of Tomorrow?]: The mission of a manufacturer is the development of excellent products that will truly benefit consumers. They must manu- facture these products as efficiently as possible and sell them at a reasonable price, but only in quantities adequate to meet demand. The company must strive to invent and create prod- ucts that will improve people's lives and society at large. Through honest advertising, the company must then educate people about their products’ utility. In other words, we should make high-quality products, produce them in abundance, and sell them at a reasonable price. Products should be delivered and distributed with the assurance of efficient and reliable ser- vice afterwards; the needs of customers must be reported to the manufacturers and reflected in the production process. . .. 23THE Minp OF MANAGEMENT If a manufacturer should, through lack of adequate effort, fail to produce good products that fulfill customers’ needs, or fail to keep the cost low, or fail to produce an adequate supply, such behavior will not be tolerated, nor should it be. We can- not condone such carelessness. All people involved must remain fully aware of their responsibility as manufacturers. Society must judge the activities of a corporation with these high standards in mind. Is a company putting enough creative energy into developing superior products that benefit society? Are all aspects of the company’s operations as efficient as pos- sible? Are its prices fair? Is there a sufficient, but not excessive, supply of products? I believe that a manufacturer should be judged on these basic issues.* Toward Global Prosperity The essence of Konosuke’s “tap water philosophy” aimed at eradicating poverty, elevating the quality of daily life, and making the world a better place. Recently, some people have begun to criticize these ideas as outmoded and unsuitable for modern times. The criticisms reflect the vast increase in mate- rial goods available compared with the early years of Matsu- shita Electric. Eliminating poverty and improving the quality of life are no longer burning issues. In fact, mass production has encouraged the development of a throwaway culture, in which the limited resources of the earth are wasted and the pollution of the environment grows worse. In such a world, Konosuke’s ideals often go unheeded. Yet I believe that Konosuke’s ideas remain valid even today. True, Japan is materially much better off than before, but only Japan, the United States, Europe, and a few countries in Asia enjoy this surfeit of material goods. There are more than 180 countries in the world today and approximately 5.6 billion people. The vast majority still suffer from hunger and want. The simple fact that Japan and the advanced nations of the West have grown reasonably affluent does not mean we can be satisfied with the status quo. We must look beyond the eco- nomic prosperity of Japan and consider the needs of the mil- 24The Mission of a Manufacturer lions of people in the world who still do not have easy access to ordinary modern conveniences. Besides, even in Japan and the advanced countries of the West, I doubt that we have satisfied our basic needs complete- ly. As long as human beings want to make their lives richer and more enjoyable, demand for the products and services of industry will continue to grow. History shows how each new age brings advances in science and technology that have helped to improve people's lives in new and important ways. Certainly our lives are materially more comfortable than before, but the social responsibility of the manufacturer remains the same. In fact, the sense of mission is more impor- tant than ever. As businesses strive to contribute to international prosperi- ty, we cannot forget the importance of mass production. Only through mass production, which makes goods efficiently and inexpensively, can we hope to raise the standard of living worldwide. In considering the improvement of people’s lives, the production of essential commodities is of course impor- tant, but recreational products also must be taken into account. Demand for goods and services may vary greatly, and for each product, production, consumption and distribution will also differ. Still, “mass production” is more or less the most eco- nomically sound, most efficient method of production we know. Take the example of color televisions, nowadays an indispensable part of most households and one of Matsushita Electric's most important products. In July 1960, Matsushita started to sell its first 21-inch screen model for ¥500,000. At that time, the average annual income of a salaried employee was only ¥490,000, and so very very few people could afford to purchase a television. Today, however, the average annual income has risen to ¥6,850,000 and a 21-inch Matsushita color television costs only ¥85,000, one-eightieth of the average annual income! Not only are color televisions more affordable, they come equipped with many new features like improved image, UHF eeTHE MIND OF MANAGEMENT tuners, direct remote control, and multilingual reception; engi- neers are, in addition, working to perfect high-definition broadcasts and next-generation functions for the multimedia age. But even if we were still manufacturing televisions of the same quality and with the same features as thirty-five years ago, the price would have dropped to around ¥70,000. This means that the price of a color television has fallen to one-hun- dredth of the average worker’s annual income. A color televi- sion cost one year’s salary in 1960, but today it can be pur- chased with four days’ worth of wages. Mass production has made this possible. This phenomenon is not restricted to electronics and home appliances. Take eggs for example. They are an excellent source of nutrition and can be cooked in many ways to delight the palate. Since commodity prices are generally high in Japan you might expect them to be expensive, but in fact eggs have long been available at extremely low prices because they are “mass-produced.” Mass production is, thus, a crucial factor in attaining inter- national prosperity, but it is only part of the total picture. Preventing pollution of the atmosphere, protecting the envi- ronment, and conserving natural resources are also essential if humankind is to survive. As part of a tremendous worldwide effort, scientists now search for ways to develop manufactur- ing methods that do not harm the environment. These days, we hear much about clean energy development, energy-con- serving designs, recycling, and non-toxic raw materials. I believe that such technological alternatives must be and will be found some day. Some years ago, consumption was considered a virtue, and slogans proclaimed, “Consumption is beautiful.” As we con- sume, however, we should try to avoid wasteful habits, and we should make sure that the correct attitudes regarding con- sumption are taught in our schools and elsewhere. It should be second nature to treasure what one already has and avoid waste. Prior to 1945 in Japan, the virtues of economy and thrift 26The Mission of a Manufacturer were an integral part of elementary and middle-school educa- tion. In the home as well, parents and grandparents scolded their children if they left even one kernel of rice in their rice bowls. Since Japan was poor then, frugality became a matter of survival. In our present affluence, we must guard against unnecessary wastefulness, now a widespread curse in our consumption-oriented society. Manufacturers, too, should review their assumptions in order to conserve resources and prevent waste. Every product becomes obsolete after a certain number of years, but at one time, some manufacturers actually tried to increase sales by deliberately making products less durable. At Matsushita Electric, we have always tried to give all of our products the longest life possible, keeping in mind that durability is not the only important feature. A light bulb, for example, can be made to last longer by giving it a thicker filament, but that would increase the electrical power consumption and the price. In such cases, the manufacturer has to think of the consumer's needs and weigh costs and technical factors in determining the most appropriate life span for a product. At the same time, we must also recognize that, with the rapid advances in technolo- gy, consumers today can, and do, replace still-functioning equipment with any of the higher-performance models or improved designs that are constantly coming on the market. World history demonstrates that each and every age has struggled to solve problems similar to those I have just exam- ined. With wisdom and wit, humankind has always faced these challenges and overcome them. We are about to enter the twenty-first century and face even more difficult dilemmas. The boundless creativity and intelligence of humankind will be needed to surmount these difficulties. 73 Profit and Social Responsibility N? DISCUSSION OF a business or business philosophy can ignore profit, since profit is, of course, crucial to corpo- rate stability. In Jissen keiei tetsugaku [Management Philosophy in Practice] Konosuke Matsushita discussed profit: Is it wrong for a business to make a profit? Some people think so. But in my view, they are mistaken. Of course, I do not intend to defend any business that abandons its real mission in society and makes the accumulation of profit the sole objec- tive. [ do not find, however, any contradiction between a com- pany’s avowed dedication to the betterment of society and earning an appropriate profit. It is through profit, in fact, that society rewards an enterprise that successfully completes its mission. ... Any unprofitable company simply is not making a large enough contribution to society and, therefore, is not ful- filling its primary mission." Both inside and outside his company, Konosuke took every opportunity to express these convictions about the importance of profits, but let me try to explain his views in more detail. 28Profit and Social Responsibility Market Price Minus Cost Equals Profit If we agree that the purpose of enterprise is to raise the stan- dard of living, then each individual enterprise contributes to the prosperity of society by performing a specific function ina specific industry. The greater the contribution of a corporation to society, the greater consumer trust and support. Prestige, trust, as well as profit are quite naturally the rewards of good performance. Profits will, therefore, increase in proportion to a company’s contribution to society. We can say that an enter- prise exists to enrich people’s lives through industrial produc- tion and thereby raises the general cultural level. Society rewards such a contribution with an appropriate profit. On the other hand, if the pursuit of profit is the only purpose, a cor- poration may be so absorbed in profit-making that society suf- fers harm through its activities. We see this when irresponsible companies, eager for profit, carelessly spew pollutants into our environment. Society will not condone such behavior, and the company will lose the trust and support of the community. The market price of most manufactured products in a sys- tem of free and fair competition, differs from age to age, coun- try to country, and industry to industry, but market mecha- nisms like supply-and-demand and utility generally have much influence. Market prices also vary depending on the prestige of the manufacturer, the specific features offered, and the quality. Companies thus determine the market price for the product first and then labor to manufacture and market it as efficiently as possible within these limits. Naturally, a man- ufacturer must contain costs and at the same time provide benefits for workers and invest in R&D and equipment to assure continued expansion and development. The manufac- turer must also be able to protect the environment and to pre- pare for unforeseen events. In other words, each company contributes to the development of society by working assidu- ously within the free enterprise system to achieve efficient production and marketing of the products and services that society demands. 29THE MIND OF MANAGEMENT. Society rewards these efforts with profits, that is, the differ- ence between market price and the original cost of the product. The proper equation is not, therefore, cost plus profit equals sale price, but market price minus cost equals profit. The Uses of Profit Profit makes possible even greater contributions to society. First, profits are subject to taxes, which are funneled back into society for its further improvement. Taxes are used for educa- tion and culture, as well as for the building of roads, ports, and other public works, Taxes help in the protection of the envi- ronment and in many forms of social welfare. Second, profits pay dividends to the company’s shareholders. A corporation must pay an appropriate amount in dividends to the people who put up the capital for its activities. Third, profit increases the company’s capital and allows for future development. Fourth, only with profits can a company provide greater sta- bility to its employees and their families, as well as provide them with better welfare benefits and facilities. Thus, profit is the company’s reward for its contribution to society and a clear measure of that contribution. A company may manufacture goods, but if these do not satisfy the con- sumer’s needs and do not sell, the corporation has done noth- ing to improve people’s lives and does not deserve any profit. A manufacturer must endeavor to develop attractive products that fulfill consumer demands and distribute them widely on the world market. The manufacturer also must create innova- tive products that offer new value to the consumer and improve the quality and lower the cost of existing products through efficient production and marketing. Only by indefati- gable efforts in all these spheres can a manufacturer truly gain the support of the consumer and maintain the steady growth of an enterprise. When a company does not earn an appropriate level of profit, either the company had no expertise in that particular line of business or inadequate efforts yielded meager returns. 30Profit and Social Responsibility It goes without saying that a company deeply in debt cannot fulfill its responsibility to society. And of course, society con- demns companies that funnel funds entrusted to them by shareholders into hiring people and purchasing equipment and materials for unprofitable undertakings. Those who work in business should be constantly aware of these responsibilities to society. They should reevaluate opera- tions that are inefficient or wasteful, and constantly strive for innovation and improvement. The sale of products or services useful and valuable to consumers should be accompanied by a management policy devoted to quality and to the lowering of costs. Businesses that meet these basic obligations will be rewarded by consumers. Many of the leading companies of Europe and the United States specifically mention the importance of profit in their corporate management philosophies. Ford Corporation, for example, includes profit among its management principles, stating that “Profits are the ultimate measure of how efficient- ly we provide customers with the best products for their needs. Profits are required to survive and grow.” The phrase- ology may differ, but the ideas behind Ford’s statement close- ly resemble thase guiding Matsushita Electric. Profit is also a major concern in the management philoso- phy of the German chemical manufacturer Hoechst, another highly respected international corporation. Its “guiding prin- ciples” are as follows: Hoechst needs profits. © Profit is the yardstick of success in business and also its reward. Good profits are a sign of a healthy company with a sound future. © Hoechst aims to give its shareholders an appropriate return on their capital. * Only a thriving company can offer secure jobs and contribute through its taxes towards accomplishing the tasks facing both government and society. aeTHE MIND OF MANAGEMENT Thus, Konosuke Matsushita was not alone in emphasizing the importance of a management philosophy and the indis- pensability of profit in fulfilling a company’s mission. More and more companies today are reaffirming these principles both to their employees and to the public at large. Indeed they are principles worth reaffirming in any age. German economist Max Weber (1864-1920) wrote that in modern capitalism, money-making is not the chief purpose. Profit is the incidental result of conscientious living. He said that both laborers and managers should think of their work as a vocation bestowed by heaven, as a way to benefit society through hard work and frugal living. a4 Coexistence and Coprosperity OMPETITION Is A fact of life for any commercial enterprise, but some managers focus on it as if it were the be-all and end-all of corporate activity. Throughout his career, however, Konosuke Matsushita stressed the importance of coexistence and coprosperity as ideals. “An enterprise is a public institu- tion whose growth should mirror similar growth in society,” he wrote. “Of course, any successful business strives to achieve steady expansion, but the corporation should not con- sider only its own progress in mapping out strategies. Instead, the expansion in products or services should contribute to the general prosperity of society. A company functioning only to increase its own coffers may achieve short-term success, but will not survive for long. Only a company that takes the good of society into account in its planning will attain genuine, long-term success.”! Time and again, Konosuke insisted that coexistence and coprosperity should rule in nature and in society.THE MIND OF MANAGEMENT Success Is Relative Coexistence and coprosperity recognizes that the operation of any enterprise depends on a complex web of relationships. There are suppliers of parts or raw materials, wholesalers, retailers, agents, consumers, the stockholders who supply the capital, financial institutions, employees, labor unions, the sur- rounding community, and, on a broader level, the state and even foreign countries. A business cannot hope to survive without this web of contacts which must be nurtured and always treated with immense care. It would be folly for a busi- ness to exploit these relationships or act with only its own self- interest in mind. For example, a company often must lower costs in order to suit a customer’s requirements and will ask suppliers to reduce the prices of parts or materials. Yet a supplier can only lower the price to a certain level in order to preserve the prof- its necessary to meet operating costs. If suppliers cannot achieve sufficient cost reduction, then the manufacturer should visit their plants personally. Consulting together in a spirit of cooperation and mutual respect, they should find ways to rationalize production and lower costs. Konosuke Matsushita used to recall instances when he worked closely with the company’s suppliers in this way. He found that his demands for lower costs often led to improvements that the cooperating companies actually welcomed. The idea of coexistence and coprosperity is also crucial to sales, and Konosuke expanded on this idea in a 1936 pamphlet about management ideals at Matsushita Electric. The possibil- ities for improvement and progress forward are limitless, he wrote, and the company should constantly strive to improve its business and sales methods. Acting on this firm belief, he sometimes advised distributors and dealers, as well as suppli- ers about changes they needed to make and asked them to give him an honest opinion about the company’s policies and ways of doing business. 34Coexistence and Coprosperity Coexistence and coprosperity does not, of course, mean mutual dependence or burdening each other. At a meeting of dealers and distributors in October 1964 he clarified this point: If you do not manage your business independently, you will end up relying completely on others. That is not what I mean by coexistence and coprosperity. Anyone who constantly requires assistance to carry on from day to day will eventually fail. Yet autonomous management does not come to a business. as a gift, wrapped in a fine package, but rather must be achieved through discipline and diligence. If the manufacturer and the dealers and distributors operate independently, they can put their own separate strengths to work for their mutual benefit. That is the essence of “coexistence and coprosperity.” By assisting each other, the abilities of both are enhanced. This principle does not, of course, apply to those who neglect to cultivate their own abilities. But for those who are energetic and trying to improve, cooperation with others of a similar spirit can bring wonderful new insights. In all of life, it is a basic fact that true coexistence and coprosperity requires independent, able participants. A busi- ness is not like a charity. Thus, coexistence and coprosperity can be achieved only when individual entrepreneurs take responsibility for their own affairs and commit themselves completely to their endeavors. Fair Competition The fostering of coprosperity is rather easy among those with common interests, but among rival companies in the same industry, it is a far more difficult task. The basic rule in a free- market economy is that “competition is the mother of progress.” According to this way of thinking, if each enterprise works to its fullest potential, making great strides forward, society will also benefit. In a competitive environment, each company mobilizes its expertise and endeavors to overtake its 35THE MIND OF MANAGEMENT tivals. As a result, the quality of products improves and the manufacturing process gets streamlined, thereby lowering costs. I have observed that without competition, quality improves at a snail's pace and costs remain high. No doubt, competition plays a crucial role in business, but when carried too far, it can prove dangerous, such as when one company tries to corner the market and thereby prevents other companies from making a fair profit. In an extreme case, a company becomes so intent on beating the competition that prices are slashed below cost. This practice sends the market into confusion. Such competitive practices tax the resources of the industry as a whole, sometimes causing bankruptcies that send shock waves through society. In addition, when compa- nies are unable to make a fair and reasonable profit, they pay less in taxes and thus contribute less to the welfare of the nation and society. One can easily be lulled into thinking that excessive compe- tition is good for the consumer since it forces the reduction of prices. In fact, too much competition exhausts the resources of some companies and allows large corporations to gain a monopoly of the market. Progress in that industry will then grow sluggish. In the long term, therefore, unscrupulous com- petition is not in the consumer's best interests. I believe that no matter how intense the competition becomes, each enterprise should attempt to behave with fair-mindedness, contributing to the prosperity of society as a whole in accordance with the principles of coexistence and coprosperity. 365 The Customer Comes First Trousnour HIS LIFE, Konosuke Matsushita urged that the customer be given top priority. In a January 31, 1941 in- house directive, he exhorted his staff and employees to con- sider the customer in every aspect of production and sales. We can only win the confidence of our customers and demon- strate our trustworthiness as a manufacturer if we firmly vow to make and sell useful, high-quality products that suit our customers’ needs. Another directive, dated August 18, 1941, insisted that an industrialist should not simply manufacture products and for- get about them, but instead should assume responsibility for those products afterwards as well. The manufacturer should gauge customer satisfaction and be aware of any inconvenient features or repair difficulties. From the Customer's Perspective In his devotion to customers, Konosuke often urged his execu- tives to leave their offices to visit stores where Matsushita mer- chandise was being sold. In this way, they would understand aTHE MIND OF MANAGEMENT the customer’s needs, and this understanding would later be reflected in improved production and service. At Matsushita Electric today, I constantly remind our people that “devotion to the customer” and “thinking from the customer’s point of view” requires product division directors and sales directors, as well as chiefs of production, technology, and R&D to meet regularly with people working in sales to learn what the cus- tomers want. Every phase of our business should reflect this devotion to the customer, from research, planning, and design to manufacture, sales, service, and even advertising. To make successful products, up-to-date information, cut- ting-edge technology, and long experience are crucial, but con- cern for the customer must inform every aspect of production. In our complex, ever-changing society, the diversity of values and lifestyles is truly dizzying. Yet each manufacturer must respond to these changes, pleasing customers by appealing to a wide range of tastes. Konosuke Matsushita often said that selling does not end when a transaction is over. Rather, a busi- ness must try to cultivate long-term relationships with its cus- tomers that are founded on mutual trust. Among his favorite themes was his view that a company and its products were like parent and offspring: After a daughter marries, her parents worry and wonder if she is getting along with her husband and the in-laws. A product from your store is like a married daughter. Do not forget about it, keep it in mind, and wonder how it is doing. Think about the customer too, who has, after all, become something like a relative? A manufacturing company should stand behind its prod- ucts and be ready to provide prompt repair service if neces- sary. Salespeople should also be equipped to answer cus- tomers’ questions and provide detailed information about each product. Repairs and service should be done conscien- tiously. True salespeople spend their days maintaining close 38The Customer Comes First contact with customers and thereby nurture mutual trust and understanding. Veteran actor Hisaya Morishige, recipient of Japan’s presti- gious Order of Culture (1991), is known for his numerous per- formances of the musical “Fiddler on the Roof” and for his appearances in many other popular plays and films. He once told me a heartwarming story about a recently married couple who purchased a set of coffee cups at a certain department store. They used those cups to serve many guests in subse- quent years. Then one day, the couple was packing their pos- sessions for a move, and the wife picked up one of the cups. “Do you remember where we bought these?” she asked her husband, and he replied, “Sure, we bought those at our favor- ite department store. Just think how much use we have got out of them. A good product like that is worth treasuring for many years.” The transaction between the department store and the cus- tomer ended officially with the sale, but the sale was truly completed many years later, when that couple praised the goods they had bought at a store with a long-established rep- utation. I think that is a good example of how sales involves much more than the brisk trading of goods for cash. Like those coffee cups, our products are lovingly used in households, offices, and businesses. They have important roles to play in many different environments, and the customer depends upon them to work reliably without breaking down. Customers buy goods in the belief that the manufacturer will guarantee performance and quality. “Devotion to the cus- tomer,” therefore, boils down to conscientious production, sin- cere salesmanship, and attentive service. Gratitude and Consideration The success of an enterprise depends not only on the cus- tomers who purchase its products, but on the cooperation and support of many other people and organizations. As I men- tioned before, there are the wholesalers and retailers who sell 39THE MIND OF MANAGEMENT. the merchandise, the suppliers of raw materials and parts, the stockholders and financial institutions who provide the capi- tal for the business, and many others at home and overseas. Konosuke considered all these his “customers,” and as he once wrote, he always felt grateful to them. Ihave always urged my employees to think of our suppliers as favored customers. That's because, as a manufacturer of elec- tric household appliances, I consider everyone, from our sup- pliers to the passersby on the street, as potential clients. You can’t stop at the people who directly purchase our products. Almost everyone and every company is in some sense one of our “special customers” in this present-day world of intricate- ly intertwined people and enterprises . . . If you view things this way, then you can’t afford to treat your suppliers lightly. Even when they thank you for buying their products, you should always be sincerely grateful to them also, silently appreciating their service, even if you don’t express this in words3 Even our loudest and most complaining customers, those who make a fuss and baw! us out for the slightest problem, should be appreciated, Konosuke used to say. A company that handles complaints and other claims with patience and effi- ciency will go far. His company had, after all, achieved success precisely because of extremely demanding customers who scrutinized products for the minutest defects and were quick to complain. This approach, however, is easier in theory than in practice. It is not difficult to mouth slogans about “Devotion to the customer” or “The customer comes first,” but only a person of extremely strong convictions will be able to live up to these words in everyday life. For many years, I worked alongside Konosuke Matsushita, and his deep consideration for the customer seemed to be always at the forefront of his thinking. In the early days, the company’s products were sold by retailers all over the country through our distributors, and meetings of the dealers and dis- 40The Customer Comes First tributors were held in Japanese inns or fine traditional-style restaurants, not at hotels as they are today. Our people in charge of the banquets during those meetings naturally gave meticulous attention to all aspects of the preparations. Still, Konosuke always checked the arrangements personally beforehand. Along with other executives and myself, he would inspect the banquet hall thoroughly to make sure the sitting cushions and the tray tables had been lined up precise- ly, the seating assignments were appropriate and the space between the seats just right. He went over every detail, personally making changes where necessary. His attentiveness to the customer did not stop with stiff formalities; he always tried to make sure that the guests enjoyed themselves throughout the evening. In that way, he expressed his gratitude to his customers for their patronage. The rest of us, of course, did not simply observe from the side, but tried to help him; we moved around the room and checked the preparations as carefully as we could. Konosuke made it a rule to welcome all the guests upon their arrival. He, as well as other top executives thus stood for long periods of time. He saw each guest off upon departure and would not rest until the very last guest had left. To the very end of his life, he showed this kind of gentle consideration to his customers and guests. In this way, those of us who worked in close association with Konosuke received training in what he considered most important. In 1936, Konosuke established a department that would be responsible for expressing thanks in spirit and form to deserv- ing persons both inside and outside the company. The new department sent out congratulations on marriages, child- births, and other happy occasions, such as a child’s entrance into the first grade or a student's matriculation at a university or an employee's construction of a new home. The department also extended condolences and tried to provide comfort in times of serious illness, in the event of fire or other disasters, and on the occasion of a family member’s death. In most cor- 41‘THE MIND OF MANAGEMENT porations, these matters are handled by the president's secre- tarial office or its general affairs department, but Konosuke became convinced that expressing gratitude to the company’s benefactors and employees was an integral part of manage- ment, so he set up a separate department devoted entirely to this work. Not long ago, I heard of the admiration of the president of an insurance company for the way Konosuke treated every visit of a customer as if it were a precious opportunity to express his sincere gratitude. Konosuke used to arrive at the meeting place an hour or two early and plan the guest’s tour by walking the route himself, deciding what parts of the gar- den to show, and scrupulously checking the preparations in the tea ceremony room. The insurance company president said that spirit of gratitude and consideration for the customer is still alive and well at Matsushita Electric. When he visited the company recently, the chairman of the board and the president accompanied him down to the first-floor lobby to see him off. He said he had adopted these Matsushita-style practices at his Osaka head office, but realized that form alone does not con- vey true consideration. That spirit only becomes genuine when one truly believes that customers are the most important asset a company has. I was, of course, elated to hear this glowing praise of Kono- suke, but it also made me think. The company has grown very large and increasingly many of the employees have never had the opportunity to work closely with the founder and learn directly from his example. Thus, I keenly felt that those of us who have had that honor should redouble our efforts to carry on the tradition that Konosuke established and instill it in the hearts of all our employees. eee6 Integrating Production, Sales, and Service N 1923, NoT long after the founding of the company, Konosuke Matsushita invented the innovative bullet-shaped bicycle lamp, and an all-out, nationwide sales campaign was launched. The result of much research, the bicycle lamp seemed to Konosuke a sure-fire big seller. When he showed the lamp to bicycle dealers in Osaka and Tokyo, however, they brushed this new product off with disparaging remarks about its dismal sales potential. In the past, wholesale dealers had tried to sell bicycle lamps, but all had remained lit for only a short period and so served no real purpose. They assumed that battery-powered lamps had no hope of succeeding where the others had failed. Konosuke was determined to overcome these prejudices, and so he set about persuading dealers to try the lamp just once. The production lines were turning out the bicycle lamps in quantity, and the resulting buildup of stock put tremendous pressure on Konosuke. He remained convinced, however, that the lamp was an appealing product, and after many setbacks in his dealings with the wholesalers, he approached retailers directly. To show off the lamp’s extraordinary features, he had 43THE MIND OF MANAGEMENT his salesmen turn the lamp on in the shops and leave it glow- ing there for a long while to demonstrate the impressive last- ing power of the batteries. This strategy turned the tide in the lamp’s favor, and before long, orders began to flow in. Two or three months later, the company was selling 2,000 units per month. This success built up Konosuke’s confidence, and he organized a chain of deal- ers throughout the country. Sales increased to 10,000 units per month by the following year and led to plans for a new facto- ry devoted solely to the production of the bicycle lamp. Cooperation and Coordination: The Seamless Flow In later years, Konosuke recalled that episode: The experience with the bicycle lamp taught me that while working out an original design and manufacturing a new product in quantity is no mean task, the job of getting that product into the market and establishing distribution channels for it is just as difficult. Success in business comes when strength in manufacturing and strength in sales are well matched. How many of the companies we see around us man- ufacture good products but ultimately fail to grow because of inadequate sales. On the other hand some firms have great tal- ent in sales but come to nothing because they handle only mediocre products. Such difficulties at the beginning of his career taught Konosuke that coordinating production and sales was essen- tial for growth. I have certainly seen the wisdom of this lesson confirmed over and over again in our own operations. Those engaged in production need to leave their factory environs and visit the stores where merchandise is sold. They must lis- ten to the opinions of customers and return to their manufac- turing jobs with a new understanding of the consumer's point of view. Sales personnel, likewise, should try to fathom the dif- ficulties faced by the production and design staff by paying frequent visits to factories and R&D labs. In this way, they will 44Integrating Production, Sales, and Service acquire sufficient knowledge to explain the products’ features to the customer. They are also responsible for describing the customers’ needs to the manufacturer. Even though a manufacturer may possess sophisticated technology, creating products that will please the customer is impossible without this back-and-forth communication. What I mean here by “integrating production, sales and service,” actually refers to “development-productian-sales-advertising- service integration,” since I also include those in charge of development, production planning and product design, work- ers in the factory, and persons responsible for advertising, sales, and service. In order to amplify Konosuke’s idea of the integration of production and sales, I often employ the image of a river. A river’s stream can be divided roughly into the upper reaches, the middle reaches, and the lower or delta areas, but these divisions are not perceptible, and the water of the river flows seamlessly, as one body, from its source to the sea. Production and sales should resemble this kind of seamless flow. We should nat think so simplistically of the production process as stopping in one place and the sales process as starting at another. They should flow smoothly from the factory to the marketplace in one uninterrupted flow. There must be mutual understanding and respect between production and sales in order for this to be achieved. Excellent communication and cooperation are necessary to produce and market products that will satisfy customers. Konosuke wrote: Business is not just a matter of buying and selling. A true mer- chant examines his merchandise critically and is always on the lookout for improvements. He is constantly trying to under- stand what new products the shopkeepers require, and he tries to communicate those ideas to the manufacturer. Of course, a manufacturer produces goods regularly and usually has an R&D department that develops new products. Thus, a merchant can simply obtain the products from the manufac- turer and market them. 45,THe MIND OF MANAGEMENT But in my view, the people selling products have the greatest feel for the needs of the purchaser. As part of their daily rou- tine, they hear the opinions of the customers and are attuned to their wants. A diligent shopkeeper will not merely stand idly by and listen to these opinions, but will search long and hard for new ideas and inventions that will fulfill his cus- tomers’ needs. If such ideas are conveyed to the manufacturer, products can be improved and developed. In this way, busi- ness can truly benefit society” Production and sales can coordinate their efforts to create products that reflect a firm grasp of market conditions and the customer’s needs. In such a circumstance, they are sure to make “best-sellers” welcomed by consumers. On the other hand, a technologically superior product, created without attention to the marketplace or to the user’s wants, will never sell well. Motivation—the Key to Quality Service The coordination of sales and service is important as the inter- face between production and sales. In fact, the relationship between these two aspects of business is probably even closer and more inseparable than that between production and sales. In an in-house newsletter published in July 1966, Konosuke Matsushita discussed this issue: No matter what you do, if you do it without any real motiva- tion, your mind will not burn with ideas, and you will quickly Tun out of steam. You can be playing baseball on a vacant lot, but if you have no real desire to play and are only there froma sense of duty, you won't feel any incentive to do your best. Instead of joyfully hitting the ball, you'll just go through the motions of swinging the bat in a sluggish manner. Believe me, those players who race around the diamond, sweating under the blazing sun but feeling no fatigue, are not playing out of a mere sense of duty. Service is part of sales. Sales without service cannot really be called sales. So service is among the duties of a salesperson.Integrating Production, Sales, and Service Yet service can be exhausting and thankless if approached simply as an unavoidable job. In such cases, the salesperson feels put upon and conveys this lack of interest and motivation to the customer. Service should not only make the customer happy, but give the provider pleasure at the same time. When both sides feel pleased, real service has been rendered. The drive to achieve mutually satisfying service, to devote oneself to service with a joyful heart, represents the backbone of an honest and reliable business.? A few years ago, while on a tour of Europe, I visited a con- sumer electronics store that handles Matsushita Electric prod- ucts on the outskirts of London. As a company policy, we ask our dealers to encourage customers to come back when they need repairs or service on Matsushita products. I was particu- larly impressed with that store, which followed the policy almost 100 percent. This was in spite of the fact that since the technology of electronics products has become quite advanced in recent years, providing service support is no easy matter. Various kinds of parts have to be kept on hand for repairs in the store, the staff must include a technician (whose salary tends to be relatively high), and all the employees must work hard to keep abreast of new technology by attending brushup courses, J remarked to the British shopkeeper that the trouble and costs of maintaining the requisite level of service must be con- siderable and that finding people with the necessary expertise must be difficult. Yes, that was true, he answered, but provid- ing repairs and other services keeps customers coming back to this store. I was much gratified to hear him say that he heartily agreed with what they think of in England as the “Panasonic” philosophy of service. Increasingly in Japan, service is moving out of retail shops and being taken over by companies specializing in repair. Examples like the British store are becoming harder to find. For repair of difficult problems, of course, the appliance has to be fixed by experts, and a consumer does not care where the 7THe MIND oF MANAGEMENT. appliance or equipment is fixed as long as repairs are com- pleted as quickly as possible. Speedy service is of paramount importance, since inconvenience to the customer must be kept toa minimum. Service includes many things besides repair of breakdowns. Some customers want advice about what kind of product to purchase and where to install it; others ask for detailed infor- mation about available products. The type of service provided will differ from one market to another, but sales and service must be part of an indivisible package designed to fulfill the customer’s needs and give lasting satisfaction. This universal, timeless credo is at the very heart of “the customer comes first.” 487 Management with Collective Wisdom 'N A MORNING assembly address on July 11, 1933, Konosuke passionately urged all employees to take an active role in management operations. All employees must work together harmoniously for the pur- pose of achieving peak performance. Indeed, we consider this the most crucial principle of our company. The day-to-day management of the company should reflect the wishes of all workers, who must freely express their opinions and ideas about necessary improvements. No matter how minor, these suggestions must be conveyed to supervisors or to manage- ment officials directly. Collecting as many views as possible leads to a rich synthesis of ideas, and from this, a harmonious guiding spirit will emerge. At times, of course, even the most outstanding proposals cannot all be acted upon immediately, but good ideas will eventually be adopted, although perhaps in a modified form. Do not be discouraged by thinking that your ideas will never be put to use. Our company must grow with our endeavors, and I, there- fore, urge all of you to feel free to alert me to issues that you believe are crucial to the company’s well-being? 49THE MIND OF MANAGEMENT. Two Heads Are Better Than One Pooling the talents of all employees was one of the manage- ment principles that Konosuke most frequently stressed. In Jissen keiei tetsugaku [Management Philosophy in Practice], he wrote at length about how even the wisest individual could not possibly know everything. Any attempt to complete a pro- ject with only one person’s expertise, he argued, would inevitably result in unforeseen problems and mistakes in judg- ment, which might lead to failure. It is far wiser to recognize the truth in the old proverb, “Two heads are better than one,” and consult as many people as possible. Of course, Konosuke was not suggesting that we hold meet- ings to discuss every problem that arises. Meetings may have their uses, but often, particularly during a crisis, they lead nowhere and just waste valuable time. It may be feasible to consult with all employees in a small company, but certainly not in a large one. Thus, Konosuke was not suggesting that a manager go out and seek the views of every single worker in the company. That would, of course, be folly. Rather, Kono- suke was urging high-ranking officials to be receptive to the ideas of others in order to create an atmosphere conducive to the free exchange of opinions. If such practices are routine, management will always be attuned to the perspectives of employees, and a particular manager’s individual decisions will automatically reflect the company’s collective wisdom. Konosuke also sought to tap each worker’s knowledge by encouraging independent initiative. This could be accom- plished, he believed, by delegating tasks and responsibilities. If individual employees in a company are in charge of certain tasks that make best use of their skills, they will be able to ful- fill their potential. In a very large enterprise, decisions involv- ing the whole company should be made by top management who act from their understanding of their subordinates’ views, while individual tasks should be handled by those immediately responsible. 50Management with Collective Wisdom This principle, which can be applied in various ways, is meaningless without management’s wholehearted commit- ment. We have discussed before how important it is for man- agers to cultivate an attitude of openness to employees’ ideas and advice, but it is equally important for them to act on the basis of their own convictions. Consultation becomes a useless process when a manager vacillates between this opinion and that, and is finally confounded about which option to choose. “A manager should be sincere in efforts to tap the wisdom of other people, but must not forget that the decision is ultimate- ly his or hers alone to make. If a conscientious manager bears this in mind, he or she can be sure that the decision will be an expression of the enterprise’s collective wisdom.”? Transparent Management From the very first days of Matsushita Electric, Konosuke tried to make the management process as open as possible. He developed the policy of “transparent management,” by which he tried to inform those both inside and outside the company about his activities. Although he was at first the sole owner of the company, he posted monthly accounts of business perfor- mance, always keeping his household accounts separate from those of the workshop. He applied the same rule for produc- tion methods. The company began by producing electric sockets and plugs, but in those days, the raw materials used for insulating electrical fixtures were such a closely-guarded secret that fac- tory owners would share the details only with their sons or close relatives. In Konosuke’s view, such secrecy prevented the company from growing, and so he promised to teach key pro- duction methods to even the newest employee, if necessary. For Konosuke, transparent management was a way to express gratitude to his employees for their efforts and to enhance their understanding of their work. Such openness would encourage them to pool all their talents, experience and insights; this would eventually promote the business's growth. 51THE MIND OF MANAGEMENT Konosuke also believed in exchanging information outside the company, and in November 1927, he began to publish a monthly bulletin for the retail shops. In his first message for this bulletin, he called for close ties and communication with his readers, expressing a hope that the publication would introduce the company’s products and features, as well as explain and promote understanding of its management prac- tices. In addition, he asked readers to make their needs known by sending in their suggestions about company practices, complaints about its products, and ideas for reform or im- provement. These suggestions, he promised, would one day be reflected in the management of the business. In October 1955, he started another newsletter for stockholders which not only reported business performance figures, but also ex- plained top management policies and provided progress reports on the activities of various parts of the company, all in an effort to win further support and understanding. Encouraging employees to come up with new ideas and rewarding them for their contributions became a common practice in Japanese industry, after World War II. This practice was first instituted in 1880 by William Denny, a Scots ship- builder, who wanted to involve employees in management and to encourage innovation. The placement of a “suggestion box” on the factory floor of Kanegafuchi Spinning Co., Ltd. (now Kanebo, Ltd.), in 1903, marked the arrival of this practice in Japan, and, by 1950, the “suggestion box” system was stan- dard management practice in Japan. I was appointed to lead Matsushita Electric’s “Suggestion Drive Committee,” which was established in 1950, at Konosuke’s behest, and this com- mittee has remained an important and active one throughout the company’s history. Today, millions of ideas and suggestions are submitted to Matsushita Electric each year, but the success of this system should be measured by the quality as well as the quantity of the submissions. Konosuke took special pleasure in seeing that, as a result of the policy of publicizing management poli- aeManagement with Collective Wisdom cies and projects, all employees had a sense of participation in the company’s future and worked with a positive attitude, taking full responsibility for their own work. 538 A Sense of Professionalism A PART OF his legacy, Konosuke left behind a whole series of expressions, and one of the most important is the term, shain kagyo. By this he meant that an employee, just like the founder of the company, should think of his or her career as a profession. This concept, which Konosuke had developed from his own experience, played a large part in his ideas on business. He spoke about this concept at the annual management pol- icy meeting in 1963. Up until now, he said, employees had made a commitment to the company, striving to fulfill their duties as employees of Matsushita Electric, and that was to be applauded. However, now he wanted them to think of them- selves not just as employees but as the head of their own inde- pendent enterprise within the company. If they wholehearted- ly adopted this stance, he went on, he was sure that their performance would vastly improve and their job satisfaction increase. Anyone who has walked in a Japanese city on cold winter nights knows that the noodle vendors, a traditional feature of Japan's urban culture, are still hard at work until very late, eyA Sense of Professionalism sounding their plaintive horns through the quiet streets. Konosuke chose these vendors to explain his idea of encour- aging employees to be professionals at their work. The noodle vendor carefully tests the flavor of the broth he has made to serve with the noodles before he opens. When the first cus- tomer of the night comes along, he makes cautious inquiries about the taste, since he knows that the palate of the cook and that of the customer can be vastly different. Anxious to know whether the soup has turned out well, the noodle vendor can relax only when the customer says, “The soup really tastes good tonight.” Konosuke urged his employees to approach their own work with this same conscientiousness. Anyone Can Be a “Founder” Konosuke believed that this sense of commitment and atten- tion to detail is the hallmark of professionalism. If every employee could think of himself or herself as an employee- entrepreneur of Matsushita Electric, as someone who in his or her capacity as an employee was managing his or her own family’s business, both the company and the individual would be more productive and successful. When Konosuke enunciated this philosophy of “employee professionalism” at the 1963 policy meeting, I remember thinking that his advice would benefit not only Matsushita Electric employees, but also people involved in any line of work. When Matsushita Electric was originally founded under the sole ownership of Konosuke, he, his wife, and his brother- in-law did all the work, engaging themselves in product development, production, sales, accounting, and many other jobs. Like the late-night noodle vendor, each of them had to pursue his or her work with the attitude of a thoroughgoing professional. As past history shows, Japan did not always have the huge corporations of today. Countless small enterprises throughout the country formed the basis of Japan’s business and industri- al sector. With the advent of the modern age and the adoption eeTHE MIND OF MANAGEMENT of advanced technologies, modern industry developed and the scale of production grew, spawning corporations with ten or twenty thousand employees. The bigger enterprises grow, the more specialized the work done by each individual employee. In a small company of ten or twenty employees, each one can see that he or she represents one tenth or even one twentieth of the organization, but when the number of employees rises into the thousands, the individual may repre- sent only one ten-thousandth of the entire enterprise, and in such an environment, a single member's sense of mission and responsibility can easily fade. While workers in a large enterprise are in a sense “cogs in the corporate mechanism,” each and every one of these indi- vidual “cogs” keeps the whole functioning smoothly. Thus, every cog on every wheel is indispensable. At the same time, when a large corporation divides work into thousands of pieces, the sense of satisfaction workers derive from their jobs may be quite different from that felt by those in a small com- pany. Early in the history of Matsushita Electric, Konosuke adopted the division system, in which each separate part of the company has its own independent accounting system and took every opportunity to stress that each member of the orga- nization is like an independent entrepreneur. I often tell employees that I want them to think of themselves as the “founder” of their own particular job. Of course historically there can be only one founder of the company, but given that, we who work for the company can view each other as entre- preneurs who are responsible for what we make of own jobs. New employees, for example, first learn the basic principles behind their particular work and inherit the accumulated expertise of predecessors and company veterans. In a few years, each employee will become accustomed to the work and will be able to perform even more complicated tasks. Once this basic training and apprenticeship is completed, it is crucial that the individual creatively seek to develop new, per- formance-enhancing ideas for his or her area of operations. 56A Sense of Professionalism Personnel transfers can provide a good opportunity to encour- age entrepreneurial spirit. When transferred to a new post, employees usually carry on where their predecessors left off, but at Matsushita Electric, we encourage employees to avoid going down the same well- worn path when they assume new responsibilities. Instead, we urge them to reinvent their new job ina style that is char- acteristically their own, after having made a thorough study of the nature of the operation and the function it performs. In so doing they become the “founder” of their own job and, like the enterprise’s founder, feel an increased motivation and sense of responsibility. A company in Tokyo, now a top-selling dealer in Matsu- shita products—audio and visual appliances, computers, and related equipment—was started by a man who, upon his release from the armed forces at the end of World War IL, opened a small electric appliance shop. This proprietor was an enthusiastic businessman and worked day and night at his shop. As time went on, he found himself deeply impressed by a Matsushita Electric salesman who started coming to his shop. Every time this salesman visited the shop, he made a point of tidying up the show window, dusting the displays, and rearranging them in an attractive manner, even if the pro- prietor was out. He took great care to make sure that all the merchandise, including that of rival companies, was clearly visible. Much taken by this salesman, the proprietor conclud- ed that the employee training program of the salesman’s com- pany must be superior and that the company would certainly grow in the future. He, therefore, decided to become a Matsushita Electric dealer and sell only its products. This salesman splendidly illustrates what Konosuke meant by seeing one’s self as an entrepreneur within the company. The salesman’s job was selling merchandise to retail stores, and, had he followed the requirements of his job to the letter, he would have simply left the shop when the proprietor was not there and found another opportunity to discuss business aTHE MIND OF MANAGEMENT with him, Indeed, this is the norm for most salesmen. But this man was different. He obviously believed that making a sales pitch to the proprietor was not enough to get the shop to pur- chase his merchandise. He believed that he had to create a pos- itive image of Matsushita Electric and its products, not only in the mind of the proprietor, but in the minds of all the other people working in the shop. He started asking himself, “What do I have to do to achieve that?” “What is necessary to help this shop grow and improve its sales?” He concluded that “helping out around the shop,” to the best of his ability, was the most effective way to accomplish this. That’s why he used to tidy up the show window. This salesman represents only a small part of the entire Matsushita Electric enterprise, but he viewed himself as an entrepreneur, as a thoroughgoing professional, and I’m sure he was an excellent salesman. He doubtless gained tremen- dous personal satisfaction from his work as well. I continue to feel great admiration for the forthright, sincere attitude of that salesman toward his work. I also respect and thank the shop proprietor who appreciated the salesman’s efforts. Doing More Than One's Best It is not easy for an employee to see himself as a professional. The mental framework of an independent entrepreneur is nec- essary, and this requires both a serious commitment to the job and a firm resolve to achieve outstanding results. As Kono- suke Matsushita often said, it is not enough simply to do your best at a job, you have to get the job done right. When work on a certain job is not going smoothly, people often say, “Well, I'm doing my best... ,” meaning, “It’s not going well, even though I’m trying my hardest, so there’s nothing I can do about it.” Konosuke often scolded us in the old days, saying it was not really worth discussing a situation in which you were not doing your best. Giving your utmost to the job was simply assumed, and he demanded that we go beyond that to get the job done right and succeed. “I know 58A Sense of Professionalism you are all completely devoted to your work, but that won’t suffice. You have to go one step beyond that and introduce some ingenious touch or inspired effort of your own. That extra effort will provide you with the breakthrough you seek, and the path ahead will suddenly become clear.” He was very impatient with those who would not push themselves to go beyond the barrier of only “doing their best.” Konosuke required us to apply finishing touches to get the job done the way it should be done. In Japanese, the expression used rather offhandedly today to mean “to do one’s best” is written with the characters that originally meant “to risk one’s life on the land.” A samurai would risk his life to guard the land given to him by his lord or won by his own labors. When Konosuke asked himself whether an employee had really “done his best,” he was real- ly asking whether the employee had approached his job with the unshakable will and resolve of one who was willing to risk his life on the outcome. If you are the kind of person who works as if you are the “founder” of your job, a thoroughgoing professional, you will not be able to tolerate only doing your “best,” but will be determined to do the job right. In this and other matters, Konosuke Matsushita’s approach to management was “deliberate and decisive,” but I remember being bewildered quite often by what seemed to me “exces- sive” deliberation. After prolonged consideration of a particu- lar question, he would decide to proceed in a certain way. We would start preparations to implement this idea, but the next morning he would often say “I’m going to make a change in what we decided yesterday. . . .” When I was younger and greener, I often felt rebellious at such about-faces, and when [ dared to complain, he would simply repeat the old saying about how “A wise man knows when to change his mind.” His change of plan was not the result of vacillation or lack of resolution. He might arrive at a decision after great research and rumination, but up until the moment of implementation, he would still ask people for their advice to determine 59THE MIND OF MANAGEMENT whether this was indeed the right choice or whether there might be an even better solution. After such reasoned and careful deliberation, he would reach a firm decision. Konosuke Matsushita was at his best when he galvanized all his mental and physical powers to solve a problem in this way, and such behavior distinguished him from others to the end of his life. He was blessed with an ability to get to the essence of things.9 People Before Products Wis MATSUSHITA ELECTRIC was still a small-scale work- shop, Konosuke used to tell his young employees: “If a customer asks you, ‘What does your company make?’ tell them that ‘Matsushita Electric makes people. We also make electric appliances, but first we make people.’” Later, he explained: “Manufacturing good products is the mission of an enterprise, and in order to fulfill this mission, you must have the proper personnel. My belief that just having the right kind of people would guarantee the production of quality mer- chandise was expressed in this way partly because of my youthful enthusiasm. But regardless of how it is expressed, it is a principle I have never doubted throughout my career.” “People before products” is now a well-known Matsushita Electric phrase that reflects Konosuke’s strong commitment to employee training and education. His idea is as follows: It is often said that a company is a reflection of its employees, and nothing could be more true. An enterprise will be able to grow and prosper only if its employees are well-suited to the business. Even a firm with a long history and distinguished 61‘THE MIND OF MANAGEMENT traditions will go into decline without people who know how to pass on its procedures and traditions correctly. Manage- ment systems and methods are of course important, but their effective application depends on the people in charge. Introducing the most highly evolved systems and the latest innovations without employing people who know how to uti- lize them will not result in increased performance, nor bring the enterprise closer to fulfilling its mission. A company can go on contributing to the betterment of society and maintain vigorous growth only if competent people are employed at all levels.' Konosuke Matsushita believed that there were four princi- pal ways to “make” capable employees. Before anything else, a basic business philosophy setting forth the raison d’étre of the enterprise and the management principles has to be for- mulated. The existence of such a philosophy and a clear state- ment of its objectives does much to bring out the best in employees, because such principles provide managerial staff with a solid basis for guiding their subordinates and all employees with a set of common values for making decisions. Second, a corporate philosophy must be more than a series of sentences to be engraved on the wall and then forgotten. By frequent explanation and repetition, its precepts should be ingrained in the employees’ minds so that their instinctive responses will be in accord with these ideals. Nor should a corporate philosophy be taught as mere theory; it should be demonstrated in practice, on the job, and should help man- agers formulate correct decisions and advice, while at the same time pointing workers in the right direction. Since a business is a public institution with a mission to con- tribute to society and to work for the public good, employees should never be at the mercy of a manager’s personal whims. A manager should discipline or scold a worker, not from the emotions of the moment, but from that manager’s vision of the company’s mission in society. Employees may consider themselves lucky if they are never reprimanded for their mis- 62People Before Products takes, and managers may think that avoiding a confrontation with a worker is the easy way out, but taking the “easy way” does not nurture the skills and abilities of those working for the enterprise. Konosuke consistently stressed the importance of strong adherence to principles. The third way to nurture employee ability involves delegat- ing responsibility. Workers must be trained to work indepen- dently, with a strong sense of personal responsibility for the tasks they are assigned. Since the ultimate purpose of em- ployee training is to create personnel who are well-versed in management and who demonstrate good business sense in projects big and small, limiting their freedom with too many orders and instructions is a mistake. If they are given instruc- tions down to the last detail, people cease to take initiative and tend to act only exactly as instructed. Konosuke argued per- suasively for handing over responsibility completely, because under those circumstances, the person is far more likely to think autonomously, come up with new ideas and innova- tions, use his or her talents to the utmost, and grow in the process. Of course, whenever work is to be delegated on a large scale, a firm set of basic management policies must first be defined and authority assigned with these policies in mind. In this way, the whole organization will not become fragment- ed, nor will different divisions work at cross-purposes. The divisions of Matsushita Electric have been organized according to the ideas described above, since Konosuke believed that these practices would develop employees of high-caliber. This system of employee training and education has been put into practice not only as a general policy of each division, but at every level and on every project within each division. Finally, Konosuke described the importance of developing a sense of social responsibility in employees: When we train our employees, we cannot forget that they can- not only be skilled and hard working. Skill and technical 63THE MIND OF MANAGEMENT expertise are of course extremely important, and we seek these qualities in the people we train as a matter of course. In addi- tion, a company needs individuals who are also superior as human beings, people who are outstanding adult members of society. In our contemporary age, industry needs people who not only do good work, but who also are responsible members of our society. This is important not only for each enterprise, but for Japan too, since our industries are becoming increas- ingly active internationally. We might assume that training of individuals to be decent human beings and mature members of society is a job for families or schools, but in actual practice in Japan today, com- panies play quite a significant role in such instruction. Thus, managers need to be fully committed to the task of nurturing employees of fine character who are both good workers and respectable members of society? In-House Education Employee education at Matsushita Electric goes back to the “live-in employee” system begun in July 1922, five years after the company was founded. When the new head office and fac- tory were completed that year, Konosuke and his wife, Mumeno, lived together with a number of the younger employees. Konosuke taught and trained them personally, and Mumeno cooked for them and looked after all their daily needs. The live-in employees were in their late teens, and they rose at 5:00 A.M. every day. After holding a morning meeting among themselves, they began the working day by cleaning the buildings and sweeping the grounds. One of them wrote of his experience as follows: The boss (Konosuke Matsushita) spoke repeatedly every day about the importance of conscientiousness and sincerity in everything we did. Mrs. Matsushita taught us to live regular, respectable lives, and she was especially strict about our man- ners.People Before Products The live-in employees were not allowed to go out without permission and were expected to respect an evening curfew. Their trips to the local public bathhouse were the only free time they had in the day. Before going to bed, they lined up at attention in front of the Matsushitas’ room to excuse them- selves for the night. Rules and discipline were strict, but the young employees were treated with affection as members of the family. On the two factory holidays a month, they were all served as much beef sukiyaki or other special treat as they could eat. For Konosuke, whose health was especially frail in those days, it could not have been easy to have young employees who needed constant attention around all the time. Mumeno’s burdens, too, were extraordinary. Like the mistress of a stable of sumo wrestlers, day in and day out she reared her own off- spring, managed the household, and ministered to the needs of this extra band of young employees with motherly care, handling everything without a moment's rest. On top of that, in those early days she was in charge of the company accounts. The live-in employee scheme continued until 1933, when the head office of the company moved from its old downtown location in Ohiraki-cho to Kadoma, in the suburbs of Osaka. After that move, Konosuke sought to realize his long-cher- ished dream of constructing a “factory school” where produc- tion and employee education could be accomplished simulta- neously. Matsushita’s first worker training center opened in April 1934. It accepted primary school graduates, which at the time meant twelve- or thirteen-year olds with six years of edu- cation. In a three-year program, they would receive a five-year intermediate-level vocational and technical education, along with commensurate academic training. They were also given guidance in personal growth. Upon graduation, they would be prepared to work in the company. Classes were held for forty-eight hours each week, eight hours a day, with four hours of academic study and four of 65THE MIND OF MANAGEMENT vocational training. There were no vacations other than Sundays and national holidays because the equivalent of five years of schooling had to be completed, without any lowering of standards, within three years. In this way, Konosuke sought to make young people well-qualified for actual employment by that most impressionable age of sixteen or seventeen, two years earlier than ordinary middle-school graduates of the time. The first class of the school included forty-seven students recruited from among outstanding students who had com- pleted the sixth grade in Osaka and its vicinity. The teachers included specialists from the company itself, as well as highly qualified instructors from universities, higher vocational schools, and technical schools who served as guest lecturers. Konosuke himself gave special lectures from time to time. The worker training institute was renamed the Employee Training School in December 1935 and in 1936, a technical training school was set up alongside it. Once the mobilization for war intensified, however, they had to be shut down in 1944 and were formally closed in October 1945. Employee education was of course resumed at Matsushita Electric after the war, and today this education takes many forms. Konosuke’s devotion to cultivating the human resources of the company did not stop with corporate educa- tion, but was reflected in many other company practices. When the division system was launched in May 1933, daily morning and evening assemblies were held in all divisions of the company. Konosuke later explained the motive and aim of these assemblies: It seemed to me that the employees needed the experience of speaking in front of others, and I thought this would give us practice—indeed, I myself needed such practice. So at each morning and evening assembly, employees would have one minute to speak. The first day 1 would speak, and on subse-People Before Products quent days, the department chiefs, the section chiefs, the regu lar employees, and the trainees would speak. Each in turn would talk about his or her opinions or impressions. This became an established custom that continues to this day. I think of these assemblies as a kind of educational tool for the employees. If something comes up that needs to be com- municated to them immediately, it can be brought up at the next morning’s assembly. . .. To be quite frank, I myself was rather afraid to speak in front of so many people. I wasn’t good at it, and I didn’t really like it. But I did need to learn how to be an effective public speaker. I’ll admit the assemblies are a rather curious way of teaching people to speak in front of others, but they proved helpful in employee education. These assemblies help create a healthy tension and brisk tone for the day’s activities? In July, that same year, Konosuke articulated and defined his “five principles” for the guidance of the company’s employees: Contribution to Society; Fairness and Honesty; Cooperation and Team Spirit; Untiring Effort for Improve- ment; and Courtesy. In 1937, two more principles were added to these: Adaptability and Gratitude. The fifth principle was later changed to Courtesy and Humility, and today these prin- ciples are recited at each morning assembly as the “guiding principles of Matsushita Electric.” The phrase “people before products” symbolizes our con- viction that in business, people come first. As the American industrialist Andrew Carnegie (1835-1919) once said, “Take away the plants, machines, and mills from me, but leave the people. People will take all of them back in three years.” I con- tinue to believe, as did Konosuke Matsushita throughout his career, that cultivating people is one of the most fundamental keys to creating a successful business. 6710 The Right Person in the Right Place Be HUMAN BEING is born with a unique personality, and each has different talents and skills. I believe that people must do the work that best utilizes their particular gifts. Thus, assigning jobs according to aptitude has become a basic tenet of Matsushita management and is summed up by the phrase, “the right person in the right place.” The Secret of Personnel Management In a March 16, 1939 presidential directive, Konosuke Matsu- shita wrote: You cannot discover the aptitudes and abilities of employees overnight. They may do well in one job, but poorly in another. The strengths of workers must be studied over years in order to place each and every person in a suitable job. In this way, employees will be able to work earnestly and happily, furthering their own careers and promoting the growth of the company. The chief executive of the company and the heads of depart- ments should keep this principle in mind and assign work to subordinates according to aptitude. Employees also should understand this principle and should avoid seeking high-statusThe Right Person in the Right Place positions that do not make good use of their talents. Employees who tolerate an ill-fitting reassignment or job forfeit the chance to do work that suits them better. ! In his later years, Konosuke wrote as follows: To make the most of our human resources, we should work in such a way as to give full play to the individual traits, skills, and strong points .... When the right person is assigned to the right job, abilities are used to full advantage and work is per- formed cheerfully. One person, working efficiently and cheerful- ly, has a positive effect on those around him or her. The right person in the right place is a plus—in terms of both performance and morale—not just to the individual in question but to others. Getting people assigned to the jobs most suited to them should begin by taking an unbiased look at a worker's strong points. A manager should not let personal preferences or pre}- udices enter into his or her judgment. By observing people objectively and recognizing their strengths, we can make full use of them? When I say “the right person,” I know, of course, that find- ing a person who is 100 percent qualified for a particular job may be impossible. Such an individual is rare indeed. You may not be able to find the perfect person for every position, but if people are assigned to positions that make use of their special talents, they will one day employ their skills to the fullest. Now everyone will readily agree that putting people in the right jobs is desirable, but we would also have to admit that putting the principle into practice is extremely difficult. Konosuke had a knack for finding a suitable position for each and every person. Properly placed, even those with cer- tain shortcomings or those who were not well-liked were able to perform amazingly well and develop their talents in their jobs. Every time I saw such an example with my own eyes, I was impressed at Konosuke’s ability to draw out the best in people. I saw that, as a management principle, picking the appropriate person for each job is crucial. 69THE MIND OF MANAGEMENT In this regard, I must take a moment to be blunt and say that while amiability is an admirable characteristic, a company would not be likely to flourish with a workforce composed solely of gentle, sincere, and accommodating people. This is not to say that cooperative spirit is unnecessary. Indeed, unless it is pervasive the organization will grind to a halt. A few tough-minded individualists are absolutely necessary. Such people often irritate others, but if they are given work that suits their idiosyncratic abilities, they will, in many cases, out- perform all others and produce astonishing results. Utilizing the unique qualities of such people within an organization is often one of the most difficult personnel problems a manager has to face. In this respect, Konosuke was like a brilliant orchestra conductor who knew how to draw out the subtlest performance from each and every performer. He was able to lead his musicians so that they played together well and pro- duced a splendid symphony. Focus on Strengths, Not Weaknesses Konosuke Matsushita was often asked whether he had some secret that he used in training and managing employees. In his response, he usually said that he tried to look at people's strengths, not their weaknesses. In his book Shobai kokoroecho [A Businessman’‘s Book of Precepts], he expanded upon this point: For myself, as a leader I have always striven to note the mer- its in people rather than their shortcomings. True, there have been occasions when paying attention only to a person’s strengths has resulted in placing someone in an important post for which he was not fully qualified and which he could not handle. Nonetheless I am convinced that my approach was right. If I had looked at only the negative side of an employee, I could never have assigned him to a responsible job without feeling qualms. I would have been constantly worried about him making some very damaging error. Being so preoccupied 70The Right Person in the Right Place would have affected my performance as a manager; I would not have been able to concentrate properly on the more important policy matters of the company. Fortunately I have been able to focus on the strengths of my employees and I have always felt that I would rather over- rate the abilities of my employees than underestimate them. The results have been overwhelmingly positive. It often turns out that if you put a person in a post and give him your full confidence, he does his best to live up to your expectations. Whether the person is appointed department manager or director of a subsidiary, he usually grows into the job, gaining abilities commensurate with his new responsibility. ...> Konosuke stressed the educational element in this policy. His supervisors were expected to encourage employees in developing their strengths and overcoming their shortcom- ings. He advised his managers to give at least seventy percent of their attention to the positive qualities of subordinates and thirty percent to those qualities in need of improvement. Employees, for their part, were expected to understand the strengths of their managers and, as much as possible, do their best to compensate for their boss’s weaknesses. This was what Konosuke meant by “the right person in the right place” in his appointment of management personnel. He often remarked on his own frail health, and recalled that, because of this, even in the early days of the company he often could not personally run all aspects of his business. He always stressed how he was forced to delegate responsibility in order to keep his enterprise growing, and this led to the develop- ment of the division system. This system, he said, enabled the company to grow by making the most of its human resources. While many people are willing to accept Konosuke’s expla- nation at face value, | am skeptical. It is true that Konosuke was often ill, but I do not necessarily believe that the company grew simply because he left matters up to others as a result of his poor health. Had Konosuke been a man of robust health who involved himself in each and every activity in the compa- nTHE MIND OF MANAGEMENT ny and ran his business personally, I believe he would still be known as a great businessman and that Matsushita Electric would still be the large and successful enterprise it has become. Konosuke was simply born to be a great leader, and in fact he did on occasion lead certain projects personally. Sometimes he would discern an important error in my work and would give me a sharp reprimand. Many others in the company had the same experience. We were working as best we could, but Konosuke’s intuition and creativity surpassed ours. He called himself a simple man, but in fact he was deep and complex. In fact it may be that a successful business leader must have the qualities of a general who is willing to fight on the front lines with his troops, if need be, to lead them to victory. He need not, and indeed should not, be there all the time, but he must be willing to step in when necessary. Konosuke was such a leader. He founded Matsushita Electric and he wanted to manage it himself. If he had only managed at a distance and were not willing to get his hands dirty on front line problems he would not have had such a powerful impact on all those who worked for him. Indeed, a person he had delegated to perform a task could not afford to dilly-dally, for there was always Konosuke in the background with enough verve to shunt them aside and do it himself if he saw fit. This awesome energy, hidden in his slender, modest appearance, made the company grow. 7211 Dam Management ©: Fesruaky 11, 1965, at a seminar in Kurashiki, Okayama organized by the business community in the Kansai area, Konosuke Matsushita described his concept of “dam manage- ment.” While a business must of course maintain steady growth at all times, accomplishing this depends on skillful management. I have developed useful techniques for achieving this business goal which I call “dam management.” As is well-known, a dam creates a reservoir in the middle of a river so that a constant supply of water is always avail- able despite changes in the seasons and the weather. Similarly, a business can maintain steady growth, protecting itself against changes in the external environment, by erecting this same sort of dam or reservoir within every part of its management... In utilizing equipment, for example, management should not depend on all systems operating at 100 percent capacity to make a profit, rather the trick is to turn a profit while running at only eighty or ninety percent capacity. In that way, ten to twenty percent is kept in reserve. This provides an “equip- aeTHE MIND OF MANAGEMENT ment dam.” Should demand suddenly increase, the company can immediately step up production. You must give yourself some leeway to create a “capital dam.” For example, let’s say you need a billion yen to under- take a certain project, and you collect exactly a billion yen. Then you'll have nothing to fall back on should something unforeseen occur. That's why it’s prudent to have 1.1 or 1.2 bil- lion yen on hand. In addition, make sure you always have an ample supply of stock on hand to meet any sudden jump in demand. In prod- uct development also, you should have new models ready Jong before the present models are outmoded. By creating management reserves of this kind, a company can maintain constant growth by regulating its available resources in the same way that a dam provides water in times of drought and collects extra water in normal times." One word of caution: The “dams” that Konosuke advocated had to be of optimal size. An equipment dam or stock dam does not mean excess equipment and excess stock. Often a company installs equipment in anticipation of a certain level of sales, but then finds orders less than predicted. In this way, stock build-ups develop. Equipment sitting idle due to a sales slump is not a “dam,” but a waste of resources caused by the result of miscalculations. A dam provides “insurance for sta- ble growth,” but an excess is simply wasteful. Konosuke’s idea of dam management meant a ten or twenty percent reserve based on an accurate forecast of actual needs. To effectively make use of these various dams in actual management practice, managers must actively strive to acquire “dam consciousness.” They must be convinced of the importance of dams to good planning. This mental prepara- tion is at the heart of dam management. Konosuke’s dam management is a way to keep an enter- Prise on an even keel in times of unexpected changes in busi- ness conditions. Some people charge that this system encour- ages sloppy forecasting and planning under normal business 4Dam Management conditions, but I must disagree. Keen foresight and solid man- agerial judgment are necessary to maintain the adequate reserves of Konosuke’s dam management. Konosuke first articulated the dam management policy in 1965, a watershed year in Japan’s postwar economy. Four years earlier, Konosuke had warned that Japan’s rapid eco- nomic growth was excessive. He saw the danger of being lulled by high growth that was artificially sustained by the government's “income doubling” plan. He often urged all the people around him—not just his company colleagues, but oth- ers also—to create independent and responsible management systems. He saw that it was essential to create a strong inter- nal structure capable of surviving the economic crises that might lie ahead. Just as Konosuke had feared, the Japanese economy entered a recession in 1964, following a boom brought on by the Tokyo Olympics of that same year. To avoid a worsening of the inter- national balance of payments, the government had to tighten its fiscal policy. Konosuke advocated the idea of “dam man- agement” just as the Japanese economy reached a crucial turn- ing point. Steady Management with a Capital Dam Taizo Ishida (1888-1979), President (1948-1961) of Toyota Motor Corporation, was one of the people Konosuke Matsu- shita respected most. Six years Konosuke’s senior, Ishida was another great businessman, responsible for building Toyota into the growing enterprise it still is today. Konosuke became acquainted with Ishida sometime around 1952. In the ensuing decades until Ishida’s death, the two men met on a number of occasions and enjoyed a warm rapport. In 1963, Konosuke was invited to lecture at Toyota Motor Corporation, and in return Konosuke asked Ishida to speak to the executives of Matsushita Electric. Ishida’s lecture took place in March 1965, when Japan was in the midst of a reces- sion, one of most critical economic crises since the war's end. 1 75THE MIND OF MANAGEMENT remember that I was very curious about what the top execu- tive of Japan’s leading automaker would say to us. Ishida’s speech, full of important lessons, left a very strong impression on me. I recall being especially surprised to hear him present ideas that duplicated Konosuke’s principle of “dam management.” Since the end of World War Il, the Japanese economy has enjoyed rapid, continual growth, but lately we have come to take these conditions for granted. Our politicians and busi- nessmen behave in an astonishingly haphazard way, forget- ting the importance of wise government and firm business management. Companies now regularly borrow money to build new factories during periods of increased sales without setting aside adequate reserves. This is a sure prescription for failure which will leave customers stranded. . .. When times are good, a company should save some of its profits and accu- mulated assets, so that during a business downturn, opera- tions will continue without a hitch? This is dam management and nothing else. Ishida went on to say that a corporation should never rely on others, but should find protection in its own resources. He explained how he had worked hard to build up his company’s capital reserves to the point that he was often called miserly, but, he said, this practice had paved the way for the company’s con- tinued growth. He advised against rushing into things since the greatest achievements are won through long and patient effort. He suggested that, by following these principles, the same principles Konosuke advocated with his philosophy of “dam management,” companies could develop wise and steady management policies. 7612 “Umbrella in the Rain” Management N ONE OCCASION in the early 1960s, a news reporter asked Konosuke Matsushita about the secret of his company’s successful growth. Konosuke ordinarily answered this ques- tion by saying “Oh, I was just lucky,” but this time he took it seriously and said, “Because my management follows the laws of nature.” This seemed to take the reporter by surprise, and he asked for further elaboration, “What do you mean by ‘the laws of nature’?” Konosuke simply replied, “Well, I mean that I used an umbrella when it rained.” Though I was not personally present at this interview, I heard about it later. The exchange sounded like the unraveling of a Zen riddle, and no doubt the reporter must have been very perplexed. Konosuke, in an attempt to answer what was in fact a very difficult question, must have mulled over his choice of words carefully in order to find the most succinct response. By answering with this riddle of a phrase, Konosuke actual- ly described his “secret” very well:THE MIND OF MANAGEMENT. Management according to the laws of nature sounds difficult, but really the principles are quite basic: If it starts raining, you should use an umbrella. You do what anyone would do. If you don’t use an umbrella when the rain starts you'll get soaked. Is there anything more obvious or natural? In other words, responding naturally is the basic principle of my philosophy of management. Now I realize that this is easy enough to do in simple cases like putting up an umbrella when it rains, but it’s somewhat more difficult to know how to apply this principle to management or commerce. . .. For myself, I have always thought of this in terms of consis- tently doing what should be done and never allowing myself to do what shouldn't be done. Of course there were times when I made an error of judgment and failed to do what I should have done, and that was perhaps unavoidable, but not for want of trying. Throughout my career I have always striv- en with every ounce of strength I had to do what was right and avoid doing what was wrong. Birth, growth, and development are all part of the endless natural cycle, and if you behave in accord with nature, your affairs should follow the same cycle of birth, growth, and development. At times we may be tempted to act solely on the basis of our limited knowledge and abilities, neglecting to pay sufficient attention to the natural order of things, but such behavior often goes against nature and ends in failure. Of course, we must make use of all our knowledge, as well as our intelligence and ingenuity, but it is crucial that we use these resources to manage our businesses in accordance with the laws of nature which govern all our activities and can neither be created nor modified by us.! In this sense, the phrase, “I used an umbrella when it rained,” is a very eloquent expression of a profound principle of management. Study Universal Laws and Truths After the end of World War II, Konosuke Matsushita began an earnest study of “nature’s laws,” as expressed in the phrase “use an umbrella in the rain.” Before the war, I remember him 78“Umbrella in the Rain” Management telling me more than once that, although he didn’t have any of the hobbies typical of older men, “When I get older and retire, I would like to take up the study of human beings and human society. I’m really looking forward to that.” In fact, he was able to launch that study much earlier than he had anticipated. After Japan’s defeat, the Allied Occupation of Japan conducted a sweeping purge of persons who had held official positions during the war. These included the top executives of private corporations who were suspected of hav- ing cooperated with the war effort. Konosuke was initially among this group, and until his case was investigated, he had seven different restrictions placed on his activities and could not engage in business. With time on his hands, Konosuke immediately turned to the ideas that he had intended to explore during his retire- ment; he undertook a study of human nature. On November 3, 1946, he founded the PHP Institute which was devoted to achieving “Peace and Happiness through Prosperity.” He poured much energy into discussing his ideas and arousing interest in what was to become the “PHP movement.” In January 1949 he spoke as follows to the staff of the PHP Institute: Certain fixed laws govern the universe we live in. ] believe that those laws represent truth, and we human beings and all the other creations of this world owe our existences to those laws and those truths. For example, the earth rotates at a fixed speed, and this determines the time the sun rises and sets. The rising and set- ting of the sun ona fixed cycle proceeds according to a natural law, and because of that law, human beings are active in the daytime and sleep at night. Since our lives are governed by these universal laws and truths, we ought to learn as much about them as we can and teach ourselves to live in accordance with them. In the secular world, we call such a pursuit of knowledge, science, and in the realm of the spirit, religion.THE MIND OF MANAGEMENT. Discussing “cosmic laws” or “universal truths” may sound very difficult, but in fact that is not the case. Just consider the problem in this way: If you go outside in the rain, natural law decrees that you will get wet. This is a truth, and when it is accepted as such we open up the possibility of dealing with it in an appropriate manner, for example using an umbrella. The acceptance of natural law thus gives rise to peace of mind. In primitive times, human beings doubtless went out in the rain and got wet. Later on, someone discovered that if they held up something to shelter themselves (an umbrella), they could avoid getting wet. They recognized the universal law or truth, and then they learned to live in accordance with it. We need to follow this practice in every aspect of our lives. Only by doing so can we enhance the quality of our lives. Indeed, human beings can understand nature’s laws and have the intelligence to learn how to live in accordance with them only as a result of the laws of nature. Aren’t human beings distin- guished from other animals because only human beings are capable of pursuing fuller, more prosperous lives? Konosuke believed that the idea and practice expressed in the phrase “You should use an umbrella in the rain” could be applied not only to corporate management, but to all aspects of life. In his own daily activities, he strove to put that idea into practice. 80Part Two The Spirit and Practice of Management13 The Interplay of Permanence and Change AS EXPLAINED IN the previous chapters, one immutable prin- ciple of management is that a corporation should con- tribute to the betterment of society. In its day-to-day opera- tions and policies, a corporation must of course be receptive to social change and respond flexibly to all developments, but the fundamental principles of management ought to be firm and unchanging. Japan’s seventeenth-century haiku poet, Matsuo Basho (1644-94), is credited with coining the phrase fueki ryuko, which can be translated as the interplay of permanence and change. Basho is so famous that Japanese of all ages can recite from memory such verses as: Meigetsu ya Admiring the full moon Ike 0 megurite I wander around the pond Yo mo sugara Through the night. Shizukasa ya How still it is! wa ni shimi iru Seeping into the rocks Semi no koe Are the cries of the cicadas. 82The Interplay of Permanence and Change Haiku are composed of only three lines of five, seven, and five syllables. Within that brief structure, the haiku must givea sense of the season, express human emotions, and describe a scene. Each word therefore has great significance. Misreading any one can lead to comic results. In this connection I remem- ber a humorous example. One of Basho’s famous haiku, “Furu ike ya kawazu tobi komu mizu no oto” (An old pond/a frog leaps in/the sound of the water) was once put into a translation machine. The machine mistakenly translated “ya” (an exclamation of won- derment in classical Japanese) as the conjunction “and” (its modern Japanese usage). The translation, therefore, had the “old pond” and the “frog” leaping into the water together! No doubt, the odd interpretation that the translation machine came up with would have astounded Basho. Asa result of his travel experiences and ruminations, in his later years Basho developed his notion of the interplay of per- manence and change to describe a principle underlying the construction of haiku. With this phrase, he gave expression to his idea that a haiku must be a synthetic unity of elements that remain essentially unaffected by changes in the times and the environment and elements that change in accord with varia- tions in external conditions. In Basho monogatari [Tales of Basho], the Edo-period litera- ture specialist Isoji Aso quotes the great poet as he explains the phrase to his disciples: While traveling in the northeastern provinces, I visited famous places mentioned in ancient poems, and in many cases, the sites were difficult to find because mountains had eroded and rivers had changed course. I witnessed the changing forms of myriad phenomena with my own eyes, but I also saw many natural phenomena and human creations that had remained unchanged. Human emotions change easily. The human heart is capricious, but I was told stories of filial children and faith- ful retainers that had been passed down through the ages as enduring examples of virtue. I also saw their historical monu- 83THE MIND OF MANAGEMENT ments and sites. These things lifted my spirits greatly. Many phenomena are in incessant flux, and we are destined to be tossed about in their continuing flow, but simply floating along makes us feel insecure. It is our natural impulse to search for something immutable, essential, and eternal within the constantly changing world. Believing that there is some- thing permanent gives us a sense of security. I believe the same rule applies to haiku. Haiku style has been changing continually since the invention of the genre. This is natural, for without change, no progress can occur. But should change be completely erratic? Is it enough to simply drift along with the tide? As we move with the flow, shouldn’t we have something to keep us tied to a particular course? These questions led me to develop the concept of the interplay of permanence and change. In other words, I decided to try to establish my own principles regarding what should change and what should not change in the world of haiku. Basho’s notion of the interplay of permanence and change derives, of course, from his study of the literary genre of haiku, but I believe that his insights are extremely valuable to corporate management and business as well. The ideas about corporate purpose and profit and the principles of manage- ment developed by Konosuke Matsushita (and described in Part 1 of this book) are “permanent.” These are unchanging rules. But since we must manufacture goods to meet the demands of society, our management must be flexible and respond to changing conditions. Basho believed that it was necessary to shape one’s actions around a firm understanding of the distinction between things that may change and those that should not, but in this day and age, the pace of change is so rapid that we have a strong ten- dency to reject the things of the past and focus our energies on the pursuit of the new. This is just as much a mistake as the attempt to cling stubbornly to old and corrupt practices. The Analects of Confucius advises us to “Study the old in order to learn about the new,” and the great British statesman 84The Interplay of Permanence and Change Sir Winston Churchill (1874-1965) said, “The farther backward you can look, the farther forward you can see.” These words of the wise express universal truths that apply to any human society, ancient or modern, East or West. The Importance of Manufacturing Many different kinds of business are conducted throughout society, and each active company or enterprise contributes in some way to the society through its operations. The manufac- turing industry has always played a major role in this process. In recent years, less importance has been attached to manufac- turing in the so-called developed nations, and this is a matter of great concern. In Japan, the steady decline in the number of high school students who apply for admission to departments. of engineering perhaps reflects this trend. The decline of the manufacturing industry in a country, I believe, has a detrimental effect on its economy. If a nation is not engaged in the production of goods, its standard of living will not improve, nor will its citizens lead happy lives. To sup- ply the necessary food, clothing, and shelter, many different kinds of goods must be produced. The manufacturing indus- try makes sure that there is a steady supply of such goods and, in addition, employs many people. It is a universal, eternal principle that society flourishes when its manufacturing industry prospers. Production of goods, however, is a humble profession that requires tremendous effort and perseverance. I would liken our profession to the work of building a wall, one brick at a time, that will last for eons, like the many buildings in Europe that have stood for several hundred or even more than a thou- sand years. While you can say that those structures are built of stone and are resistant to fire, that there are relatively few earthquakes in Europe, and that the environment is drier, those are not the only reasons why those buildings have sur- vived. They have been able to withstand the wind and rain of centuries because the artisans of olden times were discrimi- 85THE MIND OF MANAGEMENT. nating in their choice of brick or stone and meticulous in their workmanship. Needless to say, the buildings also remain standing because certain people respected important cultural traditions and worked to protect these historical landmarks. We in manufacturing are much like these artisans. We must steadfastly apply ourselves to the production of useful prod- ucts for our community, placing one brick upon another, as it were, to create an enduring edifice of prosperity. This is our true mission, our work. I would urge everyone in our compa- ny to approach their jobs with the artisan’s spirit of modesty and professional commitment, and not be mesmerized by flashy but inherently empty fads or shortcuts to success. We must remember that the great icebergs that float in polar oceans are mostly submerged beneath the surface of the water. The invisible bulk of the iceberg supports the part visible above water. The goods a manufacturer produces are like the tip of the iceberg; they are sustained by an immense body of research, development, manufacturing skills, and technologies that are hidden beneath the surface. Without these less visible aspects of industry, nothing useful would be created or pro- duced. Thus I would like to ensure that Matsushita Electric contin- ues to be a conscientious, industrious company with an un- changing corporate philosophy that is committed to making one contribution to society and then another and another, indefinitely.14 The Basics of Management N ORDER TO master a particular sport, you must learn certain basic forms, or your game will never improve. In building a business, too, you must follow certain fundamentals that resemble the basic forms of a sport. One of these rules is what I call “optimization of economic impact.” The rule of opti- mization is fundamental if you run a country or participate in many other activities in society. If you violate the principle of optimization of economic impact when running an enterprise, you will not achieve stable development and expansion no matter how diligently you work. Understanding the Economic Rationale of the Times Let us look at several examples that illustrate this point. The first concerns the location of Honolulu, the capital of Hawaii. Hawaii is now a world-renowned tourist destination and resort, and of the state’s eight islands, the best known is Oahu. The neighboring island, Maui, is much more spacious than Oahu, has many more flat expanses, and fewer steep mountains sloping down close to the coastline. Thus, Maui would seem the ideal tropical paradise. Yet resort develop- 87THE MIND OF MANAGEMENT ment on Oahu far surpasses that on Maui. In 1810, the famous King Kamehameha united the eight Hawaiian islands that had previously been divided among many tribes. At that time, the king moved his residence from the “Big Island,” Hawaii, to Maui, and later he moved, finally, to Oahu. He decided to establish the capital of Honolulu there and to build the kingdom of Hawaii from this starting point. In 1898, during the reign of Queen Liliokalani, the islands were annexed by the United States eventually to become the fiftieth state more than half a century tater. When I learned this piece of Hawaiian history, 1 became very curious to know why Kamehameha had deliberately moved from the spacious Maui to Oahu when he decided to establish his capital. There were many reasons, I discovered, but Oahu’s good harbor and abundant water supply figured importantly in his decision. Obviously, the wise king under- stood the factors crucial to the building of an economic infra- structure in the capital. From this capital, after all, he would tule and develop the eight islands. It should be remembered, however, that factors influencing the economic infrastructure often change with the passage of time. Today a “good harbor” may be an airport. Clean water and air are still crucial, not only for human habitation and for a fertile environment, but also, for example, in the production of semiconductors, now a fundamental necessity in modern industry. Semiconductors are small, lightweight, and easily shipped by air, so a semiconductor factory must be located near the “harbor” of the high-tech age, an airport. Another example is that, until very recently industries in Japan would build factories only on sites that were ten min- utes by foot from a railway station. Now, of course, the situa- tion has changed due to improved highway networks. Factories are built in the foothills of mountains and on open plains far from cities. I once visited a factory in the Japanese countryside, which was surrounded by a huge parking lot. The factory manager explained that the employees would 88The Basics of Management commute by car if parking space was provided. He told me that the factory had at first chartered buses to pick up the employees and take them home, but few had used this service. Since everyone drove their own cars, the chartered bus system was abandoned. Conditions have changed considerably since the days when a factory had to be built in the vicinity of a rail- way station in order to facilitate the shipment of goods and employee commuting. As these stories show, we have to think carefully about how to keep our operations economical and efficient as conditions change. Applying the principle of economy to simple activities with a clearly defined objective is not very difficult. To take a com- mon experience, when we eat out, we naturally want to find a restaurant that serves good food at a reasonable price. When. the problem becomes more complex and a large number of factors are involved, however, we are more likely to begin a project without giving careful thought to fundamental eco- nomic considerations. Iam reminded of the time when Matsushita Electric was studying the feasibility of large-scale development of our overseas factories in Brazil. At the time, we had a headquar- ters for production and sales in Sao Paulo, and we thought first of expanding and reinforcing operations at the Sao Paulo factory. But we also knew that the Brazilian government was offering various incentives to draw industry into the Manaus free zone as a way to develop the Amazon River valley. In making our decision, we first carefully researched condi- tions in both Sao Paulo and Manaus and compared their rela- tive merits. Our results showed that expanding production in Manaus would be far less costly, and we thought we could overcome such negative factors as the heat, the difficulty of recruiting middle-echelon technicians there, and high trans- port costs. We kept our long-term economic interests in mind and decided to develop a large-scale production base in 89THE MIND OF MANAGEMENT Manaus, in addition to maintaining the factory in Sao Paulo. Fortunately, our decision turned out to be correct, and the ven- ture was very successful. In business, therefore, economy is essential, but I hasten to add that the rule of optimization of economic impact is not supreme in all human endeavors. Temporary vs. Chronic Issues Just as economic impact is a major concern in business, so too is being able to distinguish between temporary and chronic problems. The management of a business face many difficult challenges, and some of these problems are quickly resolved, while others stay around for a long time. Seasonal goods, for example, often cause difficulties, but never for long. If the summer is unusually cool, air conditioners and cold beverages may not sell as well as projected, and if the winter is unsea- sonably warm, the sales of heaters and winter clothing drop. These kinds of seasonal disappointments worry the industries that handle such goods, but cool summers and warm winters don’t usually occur consecutively, and all companies are affected equally by these conditions. This sort of dilemma will eventually go away and is not a cause for serious concern. But what happens if a company falls behind in technical expertise or productivity and can no longer make high-quality products? Or what if sales and marketing methods cannot keep abreast of the times? Such problems will severely weaken a company’s ability to compete and if not attended to can have disastrous long-term consequences. Chronic or structural problems of this sort should be viewed with the utmost seri- ousness. Another major chronic issue that should be vigilantly mon- itored is worker morale. As a company grows, all the ills endemic to large corporations become apparent: the workers’ sense of individual responsibility dims, their solidarity and ability to cooperate weakens, sloppiness becomes rife, and morale declines. Once these malaises begin to grow, they are 90The Basics of Management hard to weed out, and have a lasting effect on corporate per- formance. And let me cite one last continuing concern that also merits close attention: maintaining a good corporate image in the community. I believe that steps should be taken to assure that society’s confidence in a company is not lost, since such confidence can only be restored through tremen- dous, extended effort. Here too, great care must be taken on a daily basis to make sure that the company’s reputation is not tarnished. Chronic or structural problems are, of course, far more important than temporary troubles. Thus, the settlement of accounts for any business term may look favorable, but if some hidden weakness lurks behind those favorable numbers, the flaw may at any time rise to the surface and have a long- range deleterious effect. This is indeed reason for worry. On the other hand, even if a business is in a slump, as long as the problems have been identified and efforts are being made to remedy them, there is no need to worry. It is of crucial impor- tance to ensure that the company’s fundamentals, its basic structural features, contribute to the growth of the company in the long run. There are three challenges which, when met, will form the basis for an enterprise producing favorable results not just in the short term but far into the future. The first is finding employees who understand the social mission of the company and are firmly committed to the company’s growth. The sec- ond involves achieving a high level of research and develop- ment, productivity, and sales. This will enable the company to conduct long-term, sustained research and development and create and make available high-quality products and services. The third challenge is building a prominent and trusted image of the company. These are the foundation stones on which cor- porate strength and stability can be built. 9115 Develop an Inquiring Mind EOPLE IN BUSINESS need to develop an inquiring mind and must aggressively seek answers to the questions that come to mind when they are working or relaxing. In business we are constantly called upon to respond to new conditions, and the spirit of inquiry that is necessary to do so successfully is not something that can be turned on and off at will. Always Ask Why I once found myself entranced by a television program on the habits of the musasabi, a giant flying squirrel found in some parts of Japan. The musasabi, which is about the size of a large opossum, spreads its legs when leaping from tree to tree and opens wide the folds of its skin, enabling it to sail quite far through the air. The film showed the squirrel scrambling up a tree and flying from one treetop to another several meters away, landing there with a resounding thump. Since the musasabi's speed in flight was said to be some thirty miles per hour, I wondered how it could manage to land without getting hurt. When a slow-motion sequence was shown, I realized that the squirrel held its body horizontal in flight, but in the 92Develop an Inquiring Mind split second before landing, drew its body up vertically, increasing air resistance and softening the impact of landing. Quite an admirable feat. My curiosity was also piqued when I saw the kangaroos and wallabies of Australia at close range. When these animals move slowly, they use four legs, and their gait is rather clum- sy, but when they move quickly or begin to run, they use only their hind legs, maintaining balance with their large tails. In this way, they can move with considerable grace and speed. I don’t know why, but they jump with their hind legs to- gether, rather than by moving them alternately. I watched for a long time, but I didn’t see them move their two hind legs separately. At the Myoko Pine Valley Golf Course, I am always fasci- nated by the woodpeckers. They cling to a tree trunk and pound away with their sharp bills at an incredible speed, drilling holes in the wood and picking out the insects they find beneath the bark. I thought that any human who tried pound- ing a tree like that would quickly suffer a concussion and won- dered how the woodpecker could go about its work so blithe- ly. When I looked into the matter, I found that woodpeckers have a bone structure in their heads that prevents the shock of their pecking from being transmitted directly to the brain and a honeycomb structure at the top of their brains that absorbs the impact. In this way, I make it a habit to be curious about everything and to pursue the answers to my questions, no matter how obvious they may seem to experts. There are too many times, I believe, when we ought to ask questions or be skeptical about things, but we don’t bother, telling ourselves, “That's just the way it is.” Even when we do wonder about something, we often don’t take the trouble to pursue a really satisfactory answer. I believe that curiosity is vital for human beings of any age, and for those of us advanc- ing in age, it is certainly one of the secrets of staying youthful. I myself am determined that I shall retain an insatiable curiosity about things no matter how old I grow, keep inter- 93THE MIND OF MANAGEMENT ested in everything going on around me, and do my best to find answers to my questions by asking other people or look- ing things up until I understand. The level of civilization we have achieved today is, after all, the result of people asking questions in many different fields of inquiry and pursuing the answers one at a time. This process brings us closer to an understanding of nature’s truths and helps us advance human knowledge. Having an open mind is part of being curious. One of the themes Konosuke Matsushita stressed over and over was the importance of an “untrapped mind.” In PHP michi o hiraku [PHP Essays: Opening Up the Path], he described the untrapped mind as being like a child’s. Children’s minds are open and unprejudiced. They ask questions about things they don’t understand, constantly coming to us and wondering, “Why this?” or “Why that?” They sincerely want to know and are eager for an answer. Even after they get an answer, they'll think it over carefully, and if they’re not satisfied, they'll keep on asking, “But so, why this?” “Tell me, why that?” A child’s mind is not self-centered, nor hemmed in by prej- udices and preconceptions. For them, good things are good; bad are bad. Sometimes they surprise us by cutting through conventional wisdom to see things with a clarity that escapes an adult. Children grow by asking “Why?” by contemplating the answers they receive with an open mind, and by asking still more questions. Adults should do the same. They should try to begin each day with a fresh, new attitude that causes them to constantly ask, “Why?” We adults must look carefully for answers, care- fully think about the answers we hear, and seek more infor- mation from other sources. If we are open-minded, not self- centered, and genuinely interested in the world around us, everything inspires curiosity. When people lose this impulse to inquire, every day seems just like the one before, tomorrow blurring into the same routine as today. That is how we can 94Develop an Inquiring Mind fall into a rigid rut and cease to grow. Society ceases to progress. The seeds of prosperity germinate in the soil of inquiry. In other words, an “untrapped mind” gives us the ability to see things as they are, to understand them without being blinded or prejudiced by self-interest, emotions, or preconceptions. By cultivating an untrapped mind, you will be able to grasp the truth and the reality of things. Then you will know what you should do and what you shouldn’t, and you will have the courage to act accordingly. Society is changing both dramatically and rapidly today. We can no longer simply act on the basis of past experience. We cannot progress without observing our situation carefully at each and every step, constantly asking why and how. Given the rapid advances and the greater complexity of every aspect of society, getting satisfactory answers to every one of our questions is difficult. In the final analysis, what really matters is not whether we solve all the problems or answer all the questions, but whether we continue to feed and nurture an insatiable curiosity and persevere in our efforts to satisfy this curiosity. Making the Most of the Comparative Method You can analyze and examine things in detail to learn how they work, but studying things in comparison to others is another way to go about this. The comparative method is sim- ple and easy to understand, and I find the objectivity required by this technique extremely valuable. In business, you can compare your management with that of other companies or your products with those of other man- ufacturers and find out in very specific terms whether you come out ahead or behind, whether you are superior or inferi- or. This method requires that you not get absorbed by minor details or surface appearance, but compare crucial elements. I often receive reports that performance has exceeded plans by five percent or has increased eight percent over last year. 95THE MIND OF MANAGEMENT This kind of news is, of course, greatly appreciated. Yet with- out putting the figures in perspective, you cannot know if there is really anything to get excited about. If, for example, your company’s performance has increased eight percent, but the competition’s has risen ten percent, you come out two per- cent behind. Then again, if you’re shocked to find that your performance has fallen by eight points, but learn that the com- petition suffered a ten percent setback, the drop in perfor- mance would carry an entirely different meaning. Your de- creased performance is not a cause for celebration, but you don’t have to be terribly concerned as long as what you have achieved through diligent effort exceeds your competitors’ performance. The summer of 1994 was very hot in Japan, and air condi- tioners sold extremely well. The sales of no appliance is as decisively affected by the weather as air conditioners. When the summers are hot, not just one company but the whole industry prospers. When the summers are cool, demand falls off; at such a time, it’s only natural that air conditioners don’t sell. When sales decrease because of conditions shared by all manufacturers, like unseasonable weather, it’s unfortunate, but not a reason for real concern. What you really have to wor- ry about is whether you are coming out ahead or behind the competition. In other words, no matter how the market changes, all the enterprises participating in that market are faced with the same changes. So what determines your company’s success is directly proportional to how well you respond to those changes. Ultimately, the best measure of success is your company’s market share. Market share is a measure of how much the day- to-day work of a company is contributing to society. Of course, it is possible to increase market share by random selling at low prices without regard for profit and without checking on customers’ credit, but this is a route no smart company would ever take. Market share might increase in the short term, but eventually it will fall. Reasonable profits and %Develop an Inquiring Mind careful credit control should not be forgotten when you think about market share. Market share can be utilized, moreover, to study the market, since it is a good indicator of how to improve performance. For example, take a product that is manufactured and sold not just in Japan but in other countries. For the same product, mar- ket share ought to be about the same in any country, but in reality, it tends to vary. A comparative study can determine the reason. The difference may be a result of the varying period your products and your competitors’ products go on sale, the varying level of effort invested in sales, the number of retail outlets, or any number of other factors. 1am often invited to attend the general stockholders meet- ing of an internationally renowned manufacturer, and invari- ably at these meetings the president begins his remarks with a clear statement of accounts for that period and an explanation of the company’s performance. I am even more impressed to find that a detailed chart comparing the company’s perfor- mance with that of others in the same industry is one of the documents distributed to the audience. I regularly attend the stockholders’ meetings of another company where the president discusses various documents, including a report ranking his company in relation to its com- petitors under a number of indices. I am always impressed at the strength and vigor of the management of these companies. The Sun-tzu, China’s Chou dynasty period (722-481 B.C.) classic on the military arts, declares, “To know your rivals and know yourself enables you to win one hundred battles with ease.” We should learn about others and understand our weak points and strong points through comparison, so that we will be able to win “one hundred battles.” 9716 Enthusiasm and Concentration i THE PREVIOUS chapter, I wrote about the importance of hav- ing an inquiring mind, because asking questions and pursu- ing the answers until you get to the heart of any matter is what gives a human being—and a business—vitality. Just as important as curiosity are enthusiasm and concen- tration. After a job is completed, many of us have bitterly tegretted how much better the results might have been if only we had been more energetic or had concentrated on just that one task instead of trying to do too many other things at the same time. Focus Your Energies In any business, field of study, or creative endeavor, the results very much depend on the amount of energy and enthusiasm invested in the project and on the ability to concentrate on just that one thing. In other words, without enthusiasm and con- centration, nothing can really turn out well, and even what seems like success may turn out to be only a temporary or minor victory. 98Enthusiasm and Concentration In my copy of the Bible, there is a map of the routes that St. Paul took during his evangelical missions. He journeyed three times from what is now Israel to Turkey and Greece, and each time he traveled to propagate the Christian faith. I am always astonished to look at this map and imagine the tens of thou- sands of kilometers he patiently trod to spread the faith. Today, we can travel that distance in a few hours by jet, but in those days, travel must have been mostly by small, frail ships that were none too safe. Overland, he must have traveled by foot. It is extraordinary to think that he devoted his time at every stop along the way to teaching Christian doctrine. The Christian faith spread throughout the world because the people who carried on the teachings of Jesus Christ burned with unflagging conviction and an intense sense of mission. Having the courage of their convictions enabled them to over- come repeated persecution and sometimes martyrdom in order to propagate their gospel. We do not all have to be missionaries, but we do have to have enthusiasm for our work in order to be truly successful. I am reminded of a situation in the early 1960s, when we were to receive a number of foreign visitors at our home. The house had been built in 1953 on a rather tight budget, and so the ceil- ings and lighting fixtures were somewhat cheap. We decided that at least in the living room, where guests would be enter- tained, we should put in new, attractively designed lighting. Since in those days the wide variety of ready-made fixtures available today did not exist, an interior designer introduced us to the sculptor and lighting designer Minami Tada, and we asked her to create fixtures for us. Finally, the fixtures were complete, and Tada, along with some of her assistants, came to the house to install them. They started work in the evening, and she remained there from beginning to end, fastidiously supervising the work. The installation began with the main chandelier. This chandelier, which must have weighed about 100 kilograms, was really a huge aluminum bowl-shaped shade with light bulbs installed 99THE MIND OF MANAGEMENT inside and pieces of crystal glass hanging down to reflect the light. I remember being quite surprised to find the artist clam- bering up the work ladder herself to make sure that the bolts were being fastened properly and that the aluminum shade was level with the ceiling. She personally inspected every- thing with great care to make sure nothing was amiss. When I protested that surely she didn’t have to be so con- cerned about the installation, she replied that she had worked hard to design the fixture and would not be able to rest easy until it had been correctly installed. She then told me that the work would not be finished until very late at the night so I shouldn’t wait up for them. I bid them good night and retired. The next morning I was astounded to hear that Tada and her assistants had worked all night! She had not only poured her heart into the design of this fixture but had concentrated all her energies on the details of the installation, working until she was completely satisfied. I was deeply impressed. I felt that she had done a first-rate job and had shown remarkable integrity. She had given us a very practical case lesson in the way work should be done. Ina magazine article, this same Minami Tada once wrote, “When making something, you must not only look at it from the distance to take in its broad outlines, but you must also examine this work up close, taking pains with each minute detail. Otherwise, you cannot produce anything truly good.” Tada has indeed done work of distinction, and her creations hang in the new Imperial Palace built in 1968, illuminate paintings in the main lobby of the Imperial Hotel in Tokyo, and grace the prestigious Royal Hotel in Osaka, as well as many other important buildings. In the same way, Konosuke Matsushita’s enthusiasm and concentration in regard to his work is legendary. One story dates from around 1940, just before I began to work for Matsushita Electric. At the time, I had many opportunities to hear him talk about his views on life and business. 100Enthusiasm and Concentration Once, when sitting face to face across a coffee table and talk- ing, I saw Konosuke reach out, pick up a cigarette from the tray, and light it. I thought to myself, “That's odd, he rarely smokes,” and waited to see what would happen. He was so completely absorbed in what he was talking about that Konosuke didn’t seem to realize that he was holding a ciga- rette. My attention, too, was completely riveted upon what he was saying, until I noticed that the cigarette in his hand was burning unattended, leaving a long ash that threatened either to scorch his fingers or drop and burn a hole in the expensive carpet. I became distracted in my worry about whether I ought to say something, but hesitated to interrupt his train of thought. Finally, he realized what was happening and extin- guished the cigarette. I was twenty-seven at the time, but Konosuke would often talk like this, passionately explaining his ideas and talking even to a young novice like me. I still remember how exhila- rating it was to encounter such an extraordinary person. It is rare to meet someone with such a powerful presence and awe- inspiring energy. Konosuke threw himself completely into any job he did, concentrating all his powers on the task at hand. Throughout the fifty years I worked alongside him, I never saw him under- take any activity, no matter how slight, with anything but total concentration and devotion. The Sun-tzu says that if you organize your forces skillfully, “your strength will be unified into one, while the enemy is scattered into ten. You can then attack one at a time. In this way, your troops will outnumber the enemy forces.” In other words, if you concentrate all your powers into one unified charge you can easily win against an enemy whose forces are divided. This is one of the ancient strategies of war, but it applies equally to business. Essentially, the Sun-tzu teaches the importance of concen- tration. We must concentrate our powers on whatever we do, no matter how big or small the task. 101THE MIND OF MANAGEMENT Self-Motivation Ninomiya Sontoku (1787-1856) was an agricultural reformer and philosopher during Japan’s early modern period. He is remembered for his great achievements in social reform and for his love of learning. Until relatively recently, bronze statues of the young Sontoku, reading a book as he walks along witha heavy load of firewood on his back, were to be found in every public elementary schoolyard in Japan. The eldest son of a poor farmer, he lost both parents while he was still very young and had to work hard. He gathered wood in the mountains from early morning, toiling during the day and plaiting rope at night. It is said that he spent his every spare moment read- ing books. To Japanese of my generation, he was a well-known model of diligence and frugality. While reading a biographical study, I was particularly impressed to discover that Ninomiya Sontoku was also a great social activist. The respected historian Tatsuya Naramoto tells how Ninomiya was put in charge of restructuring the econo- my of the Sakuramachi estate in Shimotsuke province (pre- sent-day Tochigi prefecture, north of Tokyo). Repeated flood- ing had destroyed fields and rice paddies of the area, and exploitative taxation had demoralized the populace. Upon arriving at his new post, Ninomiya Sontoku visited the more than one hundred households in the area in order to understand the lives and feelings of the farmers. Using the information gathered from these visits, he drew up a restruc- turing plan that provided interest-free loans for the rebuilding of devastated fields and expansion of agricultural land. His plan allowed farmers to pay back part of their loans through labor on flood-control and irrigation works projects. In ten years, the harvest of the district had more than tripled. Japanese society of the time was strictly divided into four classes—samurai, farmers, artisans, and merchants, in des- cending order of status. Instead of forcing people to simply comply with orders from above, Ninomiya argued that if farmers were encouraged to be self-reliant and self-motivated, 102Enthusiasm and Concentration agriculture, which was the basis of the feudal economy, would flourish. He taught rural people the joys of hard work and the importance of pulling themselves out of their own poverty. I have deep respect for Ninomiya’s philosophy and approach to life. The idea that we can find the way to improvement and suc- cess through our own efforts is part of Christian culture as well and is expressed in the famous verse in the Gospel of Matthew (7:7): “Ask, and it shall be given you, seek, and ye shall find; knock, and it shall be opened to you.” This verse may seem to illustrate the very opposite of self- help, but that is not so. You have to initiate the sequence: you must do the asking, seeking, or knocking in order for anything to happen. More importantly, you have to know yourself well enough to realize that you need help. You have to be humble enough to seek it out, and courageous enough to follow through. I am reminded of the famous painting by British artist William Holman Hunt (1827-1910) showing God holding a lantern and standing at the door to a house. He is knocking at the door, but there is no handle on the outside of the door, so unless those inside open the door, He cannot enter. What are the people inside thinking? Some might think they are saying, “I'm sorry, Lord, the room is a mess, so I cannot have you come in”; or “I already have light, and it is bright enough in my house, so You do not have to come inside.” But others would welcome him, “Come in, My Lord. My house is a mess but I was just about to tidy up. Dear God, would you mind helping me?” And no doubt, the good Lord would smile and help to rec- tify the mess. 10317 The “Hungry” Spirit N RECENT YEARS, Sports have become very popular in Japan, with increasing numbers of people enjoying baseball, soccer, tennis, golf, swimming, and other games. World-class compe- titions are held in Japan quite frequently. In addition, the physiques of our young people have steadily improved, and Japanese have grown markedly taller over the past few decades. Of course, the number of people who actually com- pete in tournaments and games is very small. Most people are just spectators who only occasionally get a chance to play a sport hard enough to work up a sweat. Escape from Apathy Although our young people have grown taller, they have not necessarily become stronger, as we know from the rising fre- quency of broken bones and muscle injuries among the young. In the old days, when we had fewer conveniences in our pub- lic and private lives, the average young person was, on the whole, in much better physical condition than today. People walked long distances every day, lifted heavy loads regularly, 104| The “Hungry” Spirit and otherwise used their bodies for physically demanding work. We are very fortunate, of course, to be able to enjoy many labor- and time-saving conveniences today, but once we become overly accustomed to having everything at our finger- tips, our physical strength can quickly deteriorate. The less physically fit we are, the more likely we are to become mental- ly lazy as well and to avoid anything taxing. It is a serious cause for concern when this tendency takes root in a society or corporation. I believe that maintaining a “hungry spirit” is extremely important in whatever work we do. The word “hungry” usually refers to a desire for food but, I am using it here ina broader sense, to refer to a drive or “desperate urge” to improve oneself and overcome shortcomings. I am urging people to be “hungry” to attain some personal goal or to rid themselves of apathy. The struggle to achieve this will be dif- ferent for different people, depending on the nature of their work, but still we all must strive to maintain this “hungry” mentality. I once had the opportunity to visit a pre-tournament prac- tice of sumo wrestlers. The wrestlers had whipped themselves up into an intensely competitive state of mind, pitting their techniques and strengths against each other in preparation for the upcoming seasonal tournament. In order to retain or advance their rank in the sumo hierarchy, they have to win at least eight of their fifteen matches in the tournament. If they fall short by even one victory, both their rank and their salary are immediately affected, so they stay “hungry” and drive themselves to achieve as many victories as possible. Not only in sumo, but in any team or individual sport, being hungry for victory is essential to success. This applies to all top-notch athletes in all professional sports. Professional athletes stake their reputations and livelihoods on every com- petition or game they play throughout their careers. The spec- tators at these sports enjoy watching the players work within 105THE MIND OF MANAGEMENT the framework of the game’s rules and performing to their utmost in the clash of strength and skill. The viewers shower the victors with praise and admiration. In the United States today, there are approximately 30,000 professional golfers, but I hear that only about 200 are quali- fied to play in the major tournaments. Facing such tough com- petition, a top-notch player who does not practice faithfully or maintain a certain level of skill at the game will soon be left behind. Even the top professional American golfers, who appear in one major tournament after another, have to work constantly to maintain the ranking that enables them to play in these tournaments. They seek to achieve outstanding scores, earn an adequate income by consistent winnings, and main- tain lofty reputations in the world of golf. This requires a men- tal and physical discipline that is achieved through hard prac- tice. Players must also stay in good physical condition if they truly wish to win. They can’t sit back and take things easy or veer from their strict regimen of practice for even one day. This kind of competition exists not just in sports, but in many other fields, including academia and the arts. It is not easy to compete and win and to keep on winning. At one time, Matsushita Electric sponsored a one-hour televi- sion program called “National’s Documentary Features.” One of the features shown in this series, “The Audition,” followed the tough selection process and the successive auditions faced by prospective performers for a Broadway musical. Seven hundred women applied to audition for eight female roles. The program focused on three young women who were stu- dents at a dance studio run by the female producer of the musical. The field was narrowed down to seventy-five in the first stage of auditions, and to twenty-eight in the second. When the interviewer asked the three young women how they felt about the auditions, they all answered that they were ter- tified and that the process was “torture.” When one of the young women failed to pass the second stage, she burst into tears and begged her teacher to tell her what she had done 106The “Hungry” Spirit wrong. The teacher replied that she had done very well, but others had done even better. Then the teacher encouraged her protégé, saying that she wanted her to succeed in the audi- tions for the next musical so she should not give up, but study and practice even harder. The young woman accepted this advice and returned to her practice with renewed dedication. The words of her teacher, “You did well, but others did even better” express, I believe, the essence of the principle of free competition, which those intense auditions clearly exempli- fied. The camera skillfully captured the smiles and joy of those who succeeded in the auditions and the disappointment and the tears of those who did not. The joy and the gloom were openly expressed, with profound impact. ] was deeply moved as the program came to an end. It is precisely because those who want to perform on Broadway are constantly competing, honing their skills and further cultivating their abilities, that those theaters provide the world’s finest musicals and plays. Anything that becomes first-class in the world is the result of assiduous effort and perseverance in the face of the toughest competition. “Blessed Are the Poor in Spirit” When the “hungry” spirit fades in an individual, a nation, or a corporation, decline results. In order to avoid that fate, we must constantly raise our standards and reassess our objec- tives. Assuming that the competition in the marketplace is fair and open, business success depends on consistently high per- formance in that competitive environment. A manufacturer, for example, strives to make products that surpass those of its tivals. The better the company’s products, the more rivals it can overtake, until that company reaches the pinnacle of the industry nationwide. Then the company must concentrate on making the best products in the world. Once it reaches that goal, then there must be more work to improve further, creat- ing products that exceed even this best-in-the world standard. 107THE MIND OF MANAGEMENT The Gospel of Matthew tells the story of the Sermon on the Mount, when Jesus spoke these famous words (5:3): “Blessed are the poor in spirit, for theirs is the kingdom of heaven.” When I first read this verse, 1 wondered how Jesus could say such a thing. Aren’t those who are generous and courageous in spirit the most blessed? I could not grasp the meaning until I came across a commentary in the Nihon Keizai Shimbun by Shozaburo Kimura, Professor Emeritus of the University of Tokyo. As Kimura explained, “poor in spirit” refers to those who feel a spiritual hunger or thirst, those who are not satis- fied with things as they are. These are the kind of modest and humble people who constantly try to improve themselves. Kimura ended his commentary by writing: People, enterprises, and even countries certainly seem to be at their best when they are struggling to “get ahead of their neighbors,” when they are dissatisfied with the status quo. In such a state of mind, they will experience growth and develop- ment that may reach up to the heavens. After the end of World War II, Japan felt that way, never content to be anything less than equal to or better than the advanced nations of the West. The intensity of the population's drive to get ahead fueled a pace of rapid economic growth rarely seen anywhere. Today, Japan has achieved its goals, and people have become compla- cent and proud of their affluence and progress. But in their self- satisfaction and arrogance, they have lost contact with those who are “poor in spirit.” This bodes ill for Japan’s future.! A company may be in greatest peril just when it views itself as utterly secure. When human beings are “hungry,” in what- ever sense of the word, they are filled with energy and drive. They rack their brains to find ways to make up for what they lack. And they make fewer mistakes because they are much more determined to succeed. I have often talked about the importance of cultivating a “hungry” spirit in the management of our enterprise. My belief in the importance of this kind of “hungry” attitude has 108The “Hungry” Spirit been even further strengthened by the discovery that Jesus Christ also described the importance of effort and the wish to improve oneself when he spread his wise teachings two mil- lennia ago. Human beings naturally seek comfort and ease, and they tend to be satisfied with the small successes that can be achieved through spurts of effort. But our free-market econo- my awards prosperity to those who succeed through free and fair competition, thereby promoting the advancement of soci- ety. In order to join and win that competition, we have to maintain a “hungry” spirit. In order not to lose this healthy drive to improve, you must always find new challenges. Each time you feel in danger of falling into complacency, you must set new and loftier goals for yourself.18 Big-Corporation Disease x IT Grows larger, an enterprise must be increasingly wary of the afflictions that debilitate big corporations. While the symptoms of the disease may not surface the moment an organization reaches a certain size, they will inevitably make their appearance unless we take precautions. The disease can be prevented, but we need to know the symptoms and how to deal with them. Good Communication Environment The first symptom becomes apparent when the staff increases, and the organization becomes too complex to maintain satis- factory communication and cooperation. Experts say that in order to have a smoothly running managerial unit it should not have more than 100 or so members. A factory foreman, for example, can probably remember the names and faces of 100 workers, as well as have a sense of each individual’s way of thinking, character, and family situation. But that is about the limit. Up to about 100 employees, an organization can function at its best. More expansion may bring trouble. 110Big-Corporation Disease Suppose a company has 10,000 employees. If the whole organization is divided into units of 100 people each, this would maintain the 100-person limit. It would, however, also mean a more complex organizational structure since there would now be at least 100 managerial units. Even so, I believe the organizational setup should be kept as easy to understand as possible. The locus of responsibility and the chain of com- mand must be well-defined and simple. A simple organiza- tional setup makes for a more dynamic corporation. In manufacturing, I think a line-staff organization that is heavily weighted to the line is optimal. The deployment of “Service” and “Administrative” divisions requires particular care. While this requires a small, powerful head office, in actu- al practice, the staff side can quickly, if inadvertently, enlarge. Only the essential top executives and staff are really necessary, and their number should be kept to a minimum. Also, in order to prevent excessive supervision from above, the head office should not require the operational divisions to submit more reports than are absolutely required. Aggressive efforts should be made to eliminate as many meetings as possible, except of course, those required for legal purposes, such as board meet- ings. Yet care should be taken to assure adequate exchange of information on a day-to-day basis. Long ago, the British historian Northcote C. Parkinson pre- sented his “Parkinson’s Law.” According to this law, when the people working in government offices think they are over- worked, the organization—in the belief that employing many subordinates makes for a prosperous image—tends to hire more people. But the new assistants will also think they’re overworked, even though there’s been no change in the quan- tity and difficulty of the work, and they, too, will hire new sub- ordinates, causing the organization’s staff to multiply expo- nentially. With the increase in the number of employees, work must be assigned to each individual separately, and there must be more meetings to settle problems and make decisions about who will do what. In this way, the members of a large organi- m1THE MIND OF MANAGEMENT zation are simply making work for each other, resulting in quite a cumbersome operation. This phenomenon, in which huge additional workloads are internally generated by the organization, is the essence of “Parkinson's Law.” This law applies equally to the private corporation. When people start spending most of their energy on introspective tasks like drawing up rules and creating posts and on fine-tun- ing these various chores, they are in fact obstructing the growth of communication and cooperation throughout the enterprise. In the end, the members of an organization become isolated and cut off from each other. When communication is poor, getting people to cooperate on the implementation of even very important directives is difficult. With smaller num- bers of employees, a message can be directly transmitted any- time, anywhere, correctly and speedily. A large staff makes such an approach impossible. For example, suppose you want to make sure that all employees understand and agree to follow a certain policy. The policy has to be announced in steps, from the top down, beginning with the management staff, who pass the informa- tion down to rank and file employees. In this process, the gist of the policy may be altered, distorting its original intent; there actually have been cases when a policy was actually trans- formed into its opposite in the course of its journey through a large organization. This is not intentional, but the result of the subtle changes in nuance that any piece of information often acquires as it is transmitted from person to person. If this hap- pens often enough, the message the last person receives can be totally different—or even the direct opposite of—the original. Of course, communications in our society and in various arenas of business range from simple black-and-white issues to very complex matters. So, the simpler the message, the more likely that it will be accurately communicated; the more complex the message, the more difficult to transmit it without distortion. When a message is inaccurately transmitted, all kinds of trouble can result. No one can say who is responsible 112Big-Corporation Disease for the problem, since one side will deny saying what the oth- er side claims to have heard, or claim to have said what the other denies hearing. Before you know it, tension poisons the atmosphere, and suspicion builds within the organization. There are various ways to prevent such a situation. Routine checks may be instituted to ensure that an important directive has been accurately transmitted. Or, the order can be repeated several times on different occasions. The directive can also be written down and initialled by all the relevant parties, or third parties involved. Still, these techniques can get out of hand as well. If too much time is being devoted day-to-day in checking back, writing up orders and reports and other internal com- munications, the pace of the real work of the organization will be slowed down, and the overall efficiency, undermined. I believe that open lines of communication can be main- tained within a corporation only by fostering mutual respect, trust, and cooperation among its members. If colleagues understand each other’s attitudes and feelings, information and ideas will flow freely within the enterprise. Maintaining good communication with co-workers and cre- ating an atmosphere conducive to cooperation partly depends on the attitudes of each individual, but the nature of the orga- nization exerts some influence as well. For example, red tape should be reduced as much as possible. An environment should be created in which employees feel free to take reports or suggestions not only to their immediate superiors, but, going over their supervisors’ heads, employees should also be able to speak directly with higher management personnel. Ideally, supervisors should be working with their staff or line workers and easily accessible all the time, but often they are not. It is wise to have a routine policy stating that if one’s immediate boss is not present, problems or questions can be taken to other supervisory personnel who are available. This is particularly important in an emergency. I believe that the newest recruit should be able to appeal directly to the presi- dent of the company, if the situation so requires. 13