Modernization of Business Management
Following its opening to the West in the mid-19th century, Japan imple- mented policies to increase national wealth and military power to catch up with other developed and modernized nations in the West. Overall, Japan aimed to achieve economic growth by integrating its government and peo- ple within its modernization policies. From the Meiji period (18681912) onward, modern enterprises were established and business expanded and prospered. The business corporation gained enormous power to the extent that it interfered in both politics and economy. Small- and medium-sized enterprises were brought into the keiretsugroups and became the subsidi- aries under large companies, thereby shedding their autonomy and business identity. It is not an exaggeration to say that the whole of Japan was trans- formed into a “company state” (Okumura, 2000) and, as such, business had full control of people’s lives.
The economic policies regarding company control of Japan continue to imprison its people in a “cage of economic rationality” (Uchihashi, 2006).
Profits Economic Exchange
Economic Rationality Exchange Economy Private-oriented
Reducing External Diseconomies Gift Economy
Public/welfare-oriented Benefits Social Exchange Sharing
Reciprocity Trust Social Rationality
Fig. 1. Social Rationality.
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This is because the mission of both the government and corporations is to continue growth without any specific purpose, in which growth itself is the objective. Japan succeeded in achieving growth conforming to this policy, but at the same time, it has fallen into a situation where it cannot solve the various irrational problems. Those problems have emerged as external economies that are a consequence of Japan’s thorough pursuit of economic efficiency (Okumura, 2005;Uchihashi, 2006). The problems such as depres- sion, drugs, and poverty are vastly increasing in society at the expense of the growth of the state and the business corporation. Conversely, economic rationality has now become the source of social irrationality. The “com- pany state” no longer improves the lives of the Japanese people.
Nevertheless, so-called “longevity companies” in Japan that were estab- lished around 300 years ago are still active and these companies have not fol- lowed the above company-state model. According to a survey, there are 605 such companies and they have the following principles in common: they offer customer value, they keep sustainability through sound management avoiding expansionism, and the values they created have been handed down (Takubo, 2014). In addition, there are three elements that make those princi- ples effective: coexistence and association between community and company, keeping humility and gratitude for gods and ancestors, and creating commu- nal relationships in the company through organizational education (Takubo, 2014). Their unique rational is based on distancing themselves from bubble businesses for the pursuit of short-term self-interest. This avoids excessive growth of their company scale and, as a result, keeps them embedded in society. The primary tenet handed down by those companies is to maintain social and moral ethics in their business practices and eventually to attain social rationality. The discussion will now focus on this sort of traditional business management in Japan.
Merchant-Ie Business
Companies in Japan used to have an organization known as theIe(house), which flourished as the primary management body from the middle of the Edo period (1603 to 1868) onward. During the Edo period, a significant economic growth was achieved and the way for modern economy was paved (Miyamoto, 1996). The Ie consisted of the family business, family name, and family property, and was inherited in accordance with male pri- mogeniture with the most important objective being the maintenance of the Ie in perpetuity (Sakane, 2011). The merchant-Ie system is different from
thesamurai’s in the Edo period which advocated the Confucian-type of the Ie and became the foundation for the institutionalization of theIe during the Meiji period. The samurai- Ie was based on the patriarchal system, which centered on the submission to the father of theIe(Sakane, 2011).
The merchant-Ie, on the other hand, had the characteristics of an asso- ciation. If there were obstacles to the management and the survival of the Ie, the master of theIewould be forced to retire. The process of becoming a member of theIeand then being expelled was frequent, and only a few of the master’s relatives would live all their lives within it. In addition, it was not always the case that the eldest son in the bloodline would be the succes- sor (Nakano, 1981). Meritocracy was valued in the merchant-Ie; hence, the person with the most outstanding qualities, such as talent and persever- ance, would be made the successor. If there were no sons with the necessary qualities, a man deemed capable was invited into the family as a son-in-law through marrying a daughter.
It was in this way that in the merchant-Ie after the mid of the Edo per- iod, the master of theIewas not considered the agent of management and was controlled by members of the Ie. TheIe included the members, busi- ness, and properties all together and was given a collective name. The con- temporary corporation also represents whole assets, business, and members, but in a different manner from theIe’s; the corporation is perso- nified whereas the Ie is not. Apart from the master’s family and relatives, live-in employees with no blood relation were also considered as members of the Ie. All members devoted themselves to the benefits of theIe’s busi- ness for the purpose of maintaining prosperity regardless of whether the member of the Ie was a relative or a nonrelative. Thus, “loyalty” of the members to theIe was considered important in accomplishing theIe busi- ness (Bellah, 1957).
“Service” was also a significant activity in the merchant-Ie. Service included the children’s devotion to their parents as well as the servants’ loy- alty to their master. It was also synonymous with “labor performed to reci- procate the blessings from the ancestors” (Sendo, 2014). The prosperity of theIe was recognized through reciprocating the blessings bestowed by the ancestors. Bringing shame to the honor of the Ie or the decline of the Ie business was not just considered an insult to the ancestors, but a confession to the public that they had neglected their duties as a whole. Such negli- gence led to loss of trust from the public as well.
Furthermore, business was considered as the practice of the Buddha’s teachings. For instance, the Omi merchants who developed businesses across the country in the Edo period were ardent followers of the 279 A Socially Rational Management
Jodoshinshu(the True Pure Land sect of Buddhism). Omi, presently located in Shiga prefecture, was a juncture of two main roads connecting Edo (the present-day Tokyo) and Kyoto, and the Omi merchants were active in busi- ness in various areas in Japan, dispersing through both land and sea routes.
The Jodoshinshu interpreted the Buddha’s teachings as suggesting that one’s gains are justified in compensation for good service such as supplying goods in time to the people who are in need of them (Bellah, 1957). For instance, Sogan, an Omi merchant in the mid-18th century, made a signifi- cant mark with his advice: “when going to other regions to conduct trade, do not only devote yourself to your own business, but also consider becom- ing important to all the people of that region. You should never crave self- interest and forget the gods and Buddha” (Sendo, 2014).
This belief is based on Buddhist ontology, engi, in that the self is brought into existence through its relationship with others and that truth is found in the convergence of relations among beings. The “relational self”
of engias defined by relations with others who exist outside oneself is dif- ferent from the “modern self-centered individualistic self” (Sakurai, 2008).
The relational self can be explained in another way, that “doing something for another being, and this acting for another life in turn confirmed one’s own value as an individual” (Najita, 2009, p. 158). Business practices per- formed by merchants with the relational self, originated in Buddhist ontol- ogy of engi, are called sanpo-yoshi (or “benefit for all three parties”) and are the point of origin for the Japanese management style that some mod- ern Japanese companies are now paying attention to (Suenaga, 2011).
Sanpo-Yoshi Business
Sanpo-yoshiis a method that brings goodness and gains to all three parties:
the seller, the buyer, and the public. It opens up the domain where eco- nomic exchange and social exchange are connected and benefits the public through a gift economy. Specifically, the Omi merchants performed sanpo- yoshithrough donations, giving rice and money to the poor, and donating food and other products to the people of the region during festivals. When there was a famine or a bad harvest, they would lower the price of rice or distribute cooked rice freely to the poor. They would donate to the famine relief fund and generate employment by ordering construction projects.
They would also donate to shrines and temples, build roads and bridges, erect lanterns, develop new rice fields, perform reforestation and water-sup- ply irrigation works, and construct schools. In doing so, the profit from the
Iebusiness was largely used for public interest, and the merchants not only donated facilities and infrastructure but also contributed immensely to job creation (Suenaga, 2011).
These contributions were commonly observed in business practices after the mid-Edo period. The merchants believed that returning business profits to society through charitable donations was their responsibility and a necessary part in a well-developed business environment in the long term.
Business done by the socially responsible merchants was considered trust- worthy. Trust, therefore, created benefits for business over the long term and formed an essential part of business. The social effect of these philan- thropic actions suggests validity in the sanpo-yoshi business model and increases the prosperity of business.
Currently many business practices have inherited the spirit of sanpo- yoshi, for example, the “One Tank Project” that the author has been fol- lowing as a subject for investigation. This project is attempting to revive thesakebrewing industry, one of Japan’s traditional industries. It involves borrowing one sake barrel from a brewer running a small business in each region, and giving that tank to a company in a different sector of industry.
The latter company uses the barrel to label its own brand ofsakeas a gift for foreign customers. This project matches 1,200 sake brewers nationwide with 1,200 companies in different sectors of industry. It is hoped that the sakeindustry as a whole, which is currently in decline, will be revitalized by this project. The utilization of the intercompany network has further expanded the project; a new community is formed for “the young, women, foreigners, and those who do not drinksake,” while the current main com- munity was sustained by the “elderly Japanese men who like sake.” The intercompany network created by thesakeindustry develops a “venue” for actual interchanges and for empathy amongst various types of people.
Public Autonomy Managed by Merchants
The traditional style of Japanese management combines short-term and long-term cycles and by doing so keeps a balance between economic and social exchange for attaining social rationality. Traditional Japanese com- panies were also characterized by managing their own local communities independently from government and without relying on state approval.
One of the examples is the wealthy merchants in the Edo period in Sakata, presently located in Yamagata Prefecture. There was an autonomous orga- nization called the “36-Merchants of Sakata,” established in the late-12th 281 A Socially Rational Management
century, which maintained a steady system of self-governance (The Sakata Chamber of Commerce and Industry, 2014). This area belonged to the Shonai Han (a domain in the Edo period) from the 17th century, but the
“36-Merchants of Sakata” was not incorporated intoHan(domain)’s orga- nizations (Sendo, 2014). Sakata prospered greatly as the port of call of cargo vessels known as Kitamaebune (literally, northbound vessels). The port was open to all merchants from other competitor domains and this was based on thesanpo-yoshispirit.
In Sakata, the merchant-Ie of Honma was prominent, and established an honest, long-term plan and practiced a commercial code of “receiving the profits in return for being virtuous and benevolent.” For sixty years, the Honma developed a project of planting an erosion-control forest on the Shonai beach at Sakata. This was a public work project to address the issue of unemployed seasonal workers. This erosion-control forest project has been so effective that it still supports the community of the beach today (Sendo, 2014; Sakata Chamber of Commerce, and Industry, 2014). The fol- lowing section will examine the characteristics of Islamic business manage- ment as another example of making a management model with underlying social and moral ethics to attain social rationality.