Reference Guide to Japanese Human Resource Management -Information and Telecommunications-

The Japan Institute of Labour

Distinguishing Features: Information and Telecommunications

As Information and telecommunications (IT) utilize highly specialized talents, it forms a different human resources management from that of the conventional mainstay industry.

[IT industry: For Large Enterprises]

Distinguishing Features of Hiring Management
- Entry Process and Screening Process
In addition to regular hiring of new graduates, there are many cases of mid-career hiring throughout the year. Compared with other industries, many companies in the IT sectors suffer from a shortage in talents whose skills can be put in use immediately. Since technical skills can be used in a wide range, it is possible for a company to acquire a supply of talents with required technical skills from outside of the company.

Distinguishing Features of Salary Management

- Pay System
Although the industry requires highly specialized expertise, many project activities take place in work groups for a long period of time; so, it is difficult to give incentive to individual performances. As a result, the industry tends to adopt a pay system based on seniority. Even employees hired for mid-career often take on a post for employees of the same age. Many companies are now reviewing this system to prepare one based on performance.

- Appraisal System
Since there are many activities based on projects, it is difficult to evaluate performance and contribution every half fiscal year and to assess individuals performance. As a result, it is common for companies to make a team assessment by project.

Distinguishing Features of Training and Skill Development

There is a wide range of qualifications related to information technology, and companies actively support employees to improve their technical skills and to acquire qualifications.

Distinguishing Features of Employee Relations

-Promotion and Job Rotation
Because high technical specialty is required, it is rare to transfer employees to a job that is totally different from their specialty after the first assignment.

- Working Conditions
Employees are allowed to work in casual wear. Many companies give employees a high degree of freedom and adopt a flexi-time system.

[IT industry: For Medium and Small Enterprises]

Distinguishing Features of Hiring Management
- Entry Process and Screening Process
Hiring activities are conducted throughout the year. However, to reduce training costs, mid-career hiring is conducted to obtain employees who can work at the workplace immediately. Because names of companies are not well known to the general public, recruitment activities are mainly conducted through employment agencies. To secure talented employees, companies actively participate in seminars held by the industry and take aggressive actions for publicity.

Distinguishing Features of Salary Management

- Salary Determination Factors
Because most of employees are mid-career workers hired irregularly, salaries are determined based on jobs and an annual salary system. Since companies use services of outside organizations for hiring (e.g. employment agencies), it is easy to understand current engineers salary level. In many cases, companies tend to pay annual salary on the same or higher level compared to previous jobs. Although evaluations by superiors are basically taken into consideration, payments are often determined with the approval of the president, who can evaluate skills of each employee (There are cases of a salary cut.)

- Appraisal System
Because appraisal is one of factors to determine salaries, it is a rule to hold interviews with superiors once or twice a year for determining or reviewing the pay.

Distinguishing Features of Training and Skill Development

- Skill Formation at the Workplace
Since there is no systematic training program prepared, basically skills are improved mainly by the employees self-training.

-Off-JT
As high technical expertise is required, many companies financially support employees to acquire qualifications and attend lectures held outside companies.

Distinguishing Features of Employee Relations

-Retirement
Compared with other industries, turnover is conducted frequently because external labor market is well developed.

-Working Conditions
To enhance flexibility of personnel costs, companies utilize temporary workers for administrative jobs as much as possible. (Temporary workers account for about 20% of total employees.)

Employees Benefits
There are no personal allowances (family allowance etc.) but, in many cases, they are included in funds for a salary and a bonus. A retirement allowance is also included in a salary.

Company Interview
Industry type Capital Number of employees Information Service More than 10 billion yen More than 3,000

Hiring Management <Planning for Required Personnel and Job Design>

Each department makes a request for required personnel when it draws up fiscal plan as well as annual plan. (Number of required personnel is reported separately for new graduates and mid-career workers.)

<Entry Process>
Recruiting is conducted at seminars and meetings to explain the companys activities. The company announces in advertisements and through web sites.

<Screening Process>
Hiring is conducted throughout the year and applicants can register at any time. However, it is customary to recruit new employees in April and October. Mid-career workers are classified into two types: workers with expertise which can start working right after hiring and workers who require two or three years of in-house training. The company hires the first type.

Salary Management <Salary Determination Factors>

Broadband-type skill rank system is adopted. As a head of line is considered as an ordinary role, no special title allowance is provided. Monthly salary comprises only base pay and allowance for professionals. Annual salary system is applicable to part of employees.

<Pay System>
Salary is determined by base pay and allowance for professionals. (all the employees are). Regular increase in base pay is conducted in April. (However, there are cases of demotions for professional grades.)

<Appraisal System>
Appraisal is conducted based on performance, skill and stance for work, taking the Management By Objectives (MBO) into consideration. (Appraisal items such as contribution to an organization and/or division are added based on the career group to which 4

an employee belongs.) Employees are trained and evaluated based on the MBO. Setting and review of objectives are conducted through an interview with superior (including self-evaluation).

Training and Skill Development <Skill Formation at the Workplace>

Some divisions adopt a tutoring system. Tutors instruct and nurture new graduates during the first year at the company. At some divisions, new graduates are rotated within the division every half a year.

<Off-JT>
It is possible for employees to choose training items according to their wishes. (Taking lectures based on their own selections) In-house intranet is used during part of the training. Training by career groups is conducted at the time of promotion. The training gives an opportunity to raise employees awareness of skills required for their next career group.

<Management Development>
Training for assessors is conducted.

Employee Relations <Promotion and Job Rotation>

Each department takes charge of rotations within the same department, while the personnel department takes charge of rotations among different ones. For promotion, a graduation system is adopted. In each stage, employees who have met required specifications are promoted. Transfer requests are collected by employees own requests once a year.

<Employment Adjustment and Retirement>

The company has not launched an early retirement plan. Employment adjustment is conducted as follows: review of temporary workers cooperative companies outside order costs. Notice of volunteer resignation should be basically made two weeks before, but it is usually made one to two months before. Transfers to group companies have been made previously. However, since this is based on a review of organizational operations as well as employees own requests, it is different from employment adjustment.

<Working Conditions>
Discretional labor system and a flexi-time system are adopted.

Employees Benefits, etc

About 14 to 15 employees take a childcare leave every year. Reduction of working hours is adopted for up to two years. Employees themselves can determine the timing to come back to the workplace after a childcare leave. Allowances for housing and family have been reviewed and only an allowance per professional is provided. However, a housing allowance is paid to married employees for their first one to three years of employment.

Company Interview
Industry type Capital Number of employees Information and Telecommunications More than 500 million yen Less than 1,00

Employment Management <Planning for Required Personnel and Job Design>

The company suffers from a constant shortage in personnel. Adopting a hiring system throughout the year, it hires workers who meet the required specifications. However, to make personnel costs flexible, the company fills vacancies with non-regular employees, including temporary workers and part-time workers, if they are capable of performing required jobs.

<Entry Process>
Although it is not a specified policy, the company mainly hires mid-career workers. The company recruits in its web site all year round. Because it is a venture company, it is hard to hire workers by classified advertisement to the public. (The number of candidates responding to such ads is very small.) Most workers are hired through employment agencies. An introduction by current employees is an effective way of recruitment. There are some cases that employees receive incentive payment when the candidates they introduced are hired. It is considered a form of recruitment activity for the president to publicize the company through mass media and at various seminars and meetings to explain its business activities.

<Screening Process>
Taking time and costs spent for training into consideration, the company clarifies personnel requirements and job specifications before hiring employees. In an emergency, the company hires workers through an introduction by employment agencies. If necessary, the company tries to pay a relatively high starting salary within the possible range. (As the company reviews salaries twice a year, it is relatively easy to make adjustments.) The company plans to actively utilize an internship system.

Salary Management <Salary Determination Factors>

Taking evaluations and performance into consideration, salaries are determined with approvals of the company president and executives. As a pay system is not well established, in many cases, the company determines an annual salary at the time of hiring new employees, matching the level of the salary of their previous workplace. Since the number of employees is small enough for the president to know the skills of heads of business divisions and employees, salaries are determined by evaluation of the division heads and approvals of executives.

<Pay System>
Pay reviews are conducted twice a year. (There are cases of salary cuts, depending on evaluations.) The basic principle is an annual salary system, but the monthly salary amount is presented to employees. Furthermore, bonuses are provided, depending on performance.

<Appraisal System>
There is an award system for contribution at the end of a fiscal year, through recommendations of each department.

Training and Skill Development <Skill Formation at the Workplace>

The company has not adopted strategic personnel rotation yet. The company has launched a regional branch. A mock on-the-job training is conducted by working on projects in a synchronized way at the branch and Tokyo headquarters as employees travel between offices frequently.

<Off-JT>
Although the company is now reviewing a training system, it has not been established. (now reviewing lectures by outside organizations.) The company recommends TOEIC and shoulders the examination fee. The company awards 10,000 when employees acquire qualifications related to information technology and other fields approved by the company.

Employee Relations <Job Rotation>

When there is a request for job rotation by an employee, the transfer is possible only with the approval of a project manager and executives.

<Employment Adjustment>
The company conducts employment adjustment by canceling contracts with temporary workers.

<Working Conditions>
The company comprises 60 regular employees and 20 temporary workers. Generally, temporary workers are engaged in supplementary operations. There is no precedence of requests for retirement or requests for early retirement made by the company. For a voluntary resignation, employees notify the employer two weeks in advance as a rule. However, it is customary to notify before 1 to 1 1/2 months from leaving. Although a discretionary labor system is introduced, a flexi-time system is not adopted. With work shifts of 9 a.m. to 5 p.m. and 10 a.m. to 6 p.m., an adjustment is made depending on the requirements of each department.

Employees Benefits, etc

Except for allowances for commuting expenses and social insurance, no personal allowances such as retirement are provided.

Company Interview
Industry type Capital Number of employees Information and Telecommunications More than 10 million yen Less than 1,00

Hiring Management <Planning for Required Personnel and Job Design>

The company hires workers to fill a vacancy. Each team requests for required personnel, and the personnel department takes charge of overall hiring.

<Entry Process>
The company recruits through introductions by acquaintances, employment agencies, and at seminars and industry fairs. It basically hires mid-career workers.

<Screening Process>
There are two categories: hiring people who can immediately start working and hiring young people who have already graduated from school to be trained within the company. The hiring process comprises: resume screening personnel in charge of hiring

determined after interviews with an executive and a manager (two interviewers).

Salary Management <Salary Determination Factors>

Salaries are determined with reference to their previous pays. The company begins to grasp market value in this industry and fixes salaries within the range. Salaries are determined by setting job rankings based on roles. Job ranks as follows: Associate leader chief management (those who are at the chief level and below are

provided bonuses.)

<Pay System>
The levels of value (skill + action) are set for individual employees and evaluation of the value determines a base pay. There is no personal allowance. The company prefers to maintain variable factors in personnel expenses. The personnel expenses funds are divided among employees based on an individuals performance.

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<Appraisal System>
Appraisal is made based on the two factors of value (skill + action) and performance (output for projects). Appraisal process: self-evaluation interview with senior appraisal determination.

Training and Skill Development <Skill formation at the Workplace>

Basically, on-the-job training is conducted. As activities are based on a project, employees do not feel they belong to an organization, but are rather developing their skills in a project-oriented manner.

<Off-JT>
As a supplement, the company holds study sessions (outside the working hours) every Saturday. (Sessions include presentations by in-house lecturers and training for accounting.) The company introduces a mentor system. There are cases that assessors serve as mentors to employees. (Basically, the company appoints a mentor who is not an assessor.)

<Management Development>
The company makes all managers act not only in the role of operation management but also in high-performances on a daily basis.

Employee Relations <Promotion and Job Rotation>

At this moment, the company does not need job rotations. (Because the number of employees is small and job specifications are very clear. When necessary, the organization is flexible because of its project-based system.) Promotions are conducted once every half year, taking overall factors, including performance reviews, into consideration. Because the number of employees is small, the president is able to recognize their skills. Therefore, the president, personnel staff and assessors can determine promotions.

<Employment Adjustment>
There is no precedence of dismissals. The work rules provide that an employee shall notify resignation at least one month in advance. There is a tendency of an over-supply of regular employees (because the company hired many people during the IT bubble period.) As the company does not want to discharge employees, it is starting employment adjustment by decreasing temporary workers and 11

part-time workers. The turnover of employees is high. There is a tendency of changing jobs to a more attractive job such as web creator, for example. (Because the market in the IT sector has just started to be established, workers mobility is relatively high.)

<Working Conditions>
The company adopts a discretionary labor system. Although the company does not allow employees to work at home, there are some workers working at home at their discretion. The company hires many temporary workers and contract workers and entrusts routine work to temporary workers as much as possible.

Employees Benefits, etc

The company provides retirement allowance of 500,000 to employees who worked more than one year and 1 million to those who worked for more than three years.

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URL : http://www.jil.go.jp/ The Japan Institute of Labour ( 2002) Shinjuku Monolith, 3-1, Nishishinjuku 2-chome, Shinjuku-ku, Tokyo 163-0926, JAPAN Telephone: ( 03) 5321-3084 Fax: ( 03) 5321-3125