Managing their human resources effectively is always a key concern for organisations as it is something that has a direct impact on the bottom line. The discipline of HRM (Human Resources Management) has therefore been of great interest to practitioners and scholars all over the world. Distinct HRM practices are often found in different countries because of differences in culture, social setup, and political and economic environments. In this essay we will discuss and compare the HRM practices in two of the world’s most developed economies – USA and Japan. Then we will evaluate the reasons for the differences and look at how despite the differences both countries have managed to achieve the common status of economic superpower. This will be done by looking at various aspects such as ideological and cultural values, demographics and employment, HR policies, the vole of the state and degree of worker representation and collective bargaining systems. The comparative discussion will focus on how these aspects have influenced the shaping of HRM practices in both countries and how these policies are expected to evolve further in the future.
Influence of ideological and cultural values
If we compare the ideological and cultural values of people in Japan and the USA, we will find that the Japanese have always believed and still to a greater degree hold on to their ideology of collectivism. Group welfare, co-operation and value of relationships take priority over individual benefits. The Japanese tend to be quite conservative and emotional and believe in co-operation and joint efforts to solve problems. These values can be traced back to ancient times when they lived in close groups of small tribes and villages. In contrast Americans believe in individuality and people are encouraged to become independent early. Americans prefer more privacy and like spending time alone working to achieve their individual goals and objectives. Holding on to traditional values is considered outdated and changes in thoughts and beliefs is seen as a sign of progress. A possible reason for this lies in the fact that society in the USA is made up of diverse ethnic groups and people from different cultures, unlike Japan.
Demographics and employment aspects
If we look at the demographics and population statistics, Japan is a country with a high population density. Around 77% of the population lives in only 16% of the land area, as most of the region comprises of hills and mountains. The population at the end of 2004 was about 128 million. More than 95% are Japanese and the rest comprises of mostly Koreans and some Chinese and minority groups. Around 65% of the population falls in the economic active age group of 15-64 years. In comparison the USA at present (March 2005) has a population of around 296 million but has a low population density due to its large size. The population compared to Japan is very diverse, with around 75% of population comprising of white, 12.5% black and around 12.5% of races other than white or black. However, similar to Japan, USA also has around 67% of the population in the age group of 15-64 years.
The unemployment rate in Japan has increased from around 2.1% in the 1990s to 4.7% in February 2005, which is slightly lower than the 5.4% in USA. Around 63 million people (about 49% of the population) in Japan are employed of which around 72% are regular permanent employees, 10% are temporary employees, 11% are self-employed and the remaining 7% comprises of family workers and workers on daily wages. In terms of industry the 18.7% of people in 2003 were working in manufacturing, followed by 17.9% in wholesale and retail and 13.4% in services. In the USA the number of people employed in the population is more than 140 million, which is around 48% of the total population and quite similar to Japan. This similarity is also because both the countries have almost equal percentages of the population falling in the working age group. The highest percentage (34%) of the employed people in the USA work in management and professional services. This indicates the reason behind the greater number of entrepreneurs in the USA as compared to Japan, where the highest percentage, 22.8%, of the workforce consists of manufacturing and construction workers.
HR policies and management structure
Employment in Japanese organisations and companies offers great stability and security. People often work for the same company all their life. However the concept of lifetime employment is gradually decreasing due to economic pressures and increasing western influence. The structure of the labour market is also showing changes with increasing number of female and foreign national employees as well as rising education levels in employees. Also there is a shift in youngsters towards careers that offer more creativity and individuality. On the other hand, for workers in the USA, there is no such thing as stability and security in employment. In fact, employees themselves do not prefer working for the same company for many years. Switching jobs in two to three years is quite common and people think more of their own goals and aspirations than those of the organisation.
In terms of recruitment, companies in Japan tend to recruit a large number of new school graduates. Large companies are generally able to attract more graduates by offering them higher wages and benefits and often SMEs have a difficult time in attracting young staff. In the USA big MNCs are generally able to attract most of the graduates from good universities and colleges. However, graduates in the USA also prefer working for smaller firms, where they can get more responsibility early in their careers. Also the working atmosphere in companies in the USA is very informal and direct as compared to companies in Japan where a greater degree of hierarchy still exists. This again reflects the greater importance of interdependence and relationships in Japanese culture as compared to independence and performance in the USA.
The industry average monthly cash earnings of regular employees in Japan was Yen 390,000 in 2003. This has declined from Yen 398,000 in 2000. The average monthly earnings have increased for employees working in manufacturing and electricity, gas, heat supply and water industries but has decreased for workers in most industries including services, finance, wholesale and retail as well as construction and transportation. The average salary in USA in 2003 was around US$ 3300 per month which is a little less, but competitive with Japan. In the USA the salary for people employed in professional services and management sectors had increased marginally as compared to stagnancy and decrease in salary in other sectors.
Role of the State
The involvement of state in the Japanese economy is relatively high when it comes to protection from foreign competition and in the area of Research and Development activities. The USA in comparison is far more liberalised and offers greater opportunity for free competition. From a legal point of view, employment relations in the USA is regulated by the National System of Labour Laws which comprises mainly of the Wagner Act, Taft-Hartley Act and Landrum-Griffin Act. There are no specific labour rights or standards mentioned in the Constitution but there is a National Labour Relations Board to deal with such issues. In Japan the Ministry of Labour is responsible for issues related to employment and labour welfare. Strikes and work disputes are very rare in Japanese companies, probably due to the strong sense of community within the organisations and also due to the fact that the Japanese mostly try to avoid conflicts and disputes. However, in unavoidable circumstances issues are sorted out by arbitration procedures at local and regional levels. In comparison, work related disputes are more common in the USA with matters often being dragged to the court rooms to reach settlements.
Worker representation and consultation
The most common Japanese employee representation systems are the enterprise or company unions. This, however, is usually found in large and medium size companies and not in small firms. A collective representation system is mostly missing in smaller firms and surprisingly there is a sharp division between employees of large organisations and their colleagues working in smaller companies. Labour unions of large companies generally do not provide support to workers in small companies. Also the working conditions in small enterprises in Japan are not as ideal if compared to small enterprises in the USA. This is the main reason why small companies in Japan are unable to attract and recruit young skilled workers as opposed to companies in USA. The wages and benefits available to workers in small companies in the USA are more attractive compared to that provided by small firms in Japan. However, similar to Japan, in the USA employees of large organisations are more likely to be under a collective representation system than employees in smaller companies. In fact, even in large organisations, collective bargaining and representation is much less prevalent as compared to Japan, probably due to the greater emphasis on individuality and independence. Thus in most instances employment terms are negotiated on an individual basis between the employer and the employee.
In conclusion it can be stated that both Japan and USA exhibit very distinct practices in human resource management, and yet both the economies have been equally successful.
Useful lessons can be learnt from the Japanese culture such as how teamwork can be used effectively to overcome big problems and also the value of co-operation in the work place. However, looking at the present scenario and in terms of how things are expected to shape up in the future, the HR practices based on the individualistic approach in the USA are expected to gain more popularity as compared to those based on the ideology of collectivism in Japan.