The trickle-down (and up) theory of corporate leadership
Tokyo — ''Men are mortal, but a company goes on forever,'' said Ryuzaburo Kaku.
This dictum by the president of Canon Inc. encapsulates the feeling that most Japanese, from blue collar workers to top managers, have about their place of work.
How to ensure that a company does in fact endure - how, in short, to keep prosperous over a long period of time rather than seek short-term gains - is the preoccupation of most top managers in Japan. When conflict arises within a company, it is not so much over goals as over the specific strategy required to achieve these goals.
Mr. Kaku is no stranger to this conflict. His has, throughout his career, challenged many of the shibboleths of Japanese management. He openly opposed decisions made by top management, yet ultimately was promoted over the heads of five directors to become Canon's president five years ago.
Canon, formerly the Canon Camera Company, was one of Japan's first manufacturers to win international recognition for quality and originality rather than cheapness and imitation. That was in the 1950s, when news photographers covering the Korean War found cameras by Canon and rival Nikon to be equal if not superior to cameras made in Germany.
But today office copiers and other business machines account for nearly half of the company's total sales, which last year were more more than $1 billion.
It was the question of whether to diversify from cameras into calculators and other business machines that brought Mr. Kaku, then manager of the planning division, into conflict with Takeshi Mitarai, the company's founder and longtime president. Dr. Mitarai and the company's top management eventually embarked on this path, but reluctantly, and in 1975, the company, which had been noted for its profitability, was unable to pay a dividend.
Two years later, Dr. Mitarai, by then board chairman, personally chose Mr. Kaku to be president when the incumbent suddenly died. Dr. Mitarai continues as chairman, a situation which observers contend says much for his ability to admit mistakes and discern the right man for the right job.
''We practice lifetime employment and what Dr. Mitarai calls the 'new' family system,'' said Mr. Kaku in his 23rd floor office here. ''But merit takes precedence over seniority, and in decisionmaking, we try to combine the best features of the top-down and bottom-up systems.''
Top-down refers to decisions handed down from the top along a vertical line of command, a practice often identified with US managers. Bottom-up is shorthand for decisions prepared by subordinates and passed upward, receiving the necessary approvals at each level. By the time the issue reaches the board, the action may be a mere formality.
In practice, most companies in Japan combine both systems. As a subordinate, Mr. Kaku experienced first hand the difficulties of shepherding bottom-up decisions through the layers. When in the early 1960s he was convinced Canon had to go into business machines to assure its future, he had to win over his own division chief, then the vice-president, and finally the president. The process took two years, and because the decision was made grudgingly, the results were not what they should have been.
After taking over as managing director and general manager of the accounting and business administration divisions in the early 1970s, Mr. Kaku was asked to take a hard look at all company operations. He found there had been a lack of strategic planning. So, with Dr. Mitarai's approval, he drew up a long-range plan to turn Canon into a ''blue-chip'' company. Top management approved the blueprint, dubbed by Mr. Kaku the ''premier company plan,'' and it was then thoroughly explained to every employee.
The aim was to turn Canon into one of the world's leading companies in two three-year stages. The first step was to improve profitability by reducing waste and restructuring the company's internal organization. One campaign launched among the workers to reduce nine ''wastes'' saved the company $286 million between 1976 and 1981.
In 1978 Canon followed the example of Matsushita and several other Japanese companies by establishing a profit-center system. Three major product groups were set up - photo products, business machines, and optical products - each responsible for its own decisions and revenue development.
''We have taken good ideas from other companies wherever we felt they could be adapted to our needs,'' said President Kaku. ''Matsushita's independent profit-center system, Toyota's inventory-control system. But we never just imitated these practices wholesale.''
The second stage of the company plan refined changes under way. The results of the program, according to last year's annual report, were impressive: Sales in 1981 were up 3.9 times over 1976 and profits were up more than 10 times.
Canon remains the world's largest manufacturer of 35mm single lens reflex cameras and a big producer of business machines. But the company has also moved into electric typewriters, Chinese character word processors, and laser-beam printers, among other things.
For the future, Mr. Kaku thinks Canon must have a mix of three-year and 10 -year plans. He sees little virtue in the approach of some US conglomerates of buying unrelated companies to reap short-term gain. His strategy is to build up Canon by moving first into related industries, then move ''upstream or downstream,'' for instance into semiconductors. The final stage, which he doubts will come before the end of the century, would be into unrelated industries.
Mr. Kaku's management style differentiates between top-down and bottom-up decisonmaking. Basic policy and strategy must come from the upper echelon. But he takes care to reach his decisions only in the context of daily informal discussions with fellow board members.
Ultimately, he says, a company has to ask what is its basic purpose. If it is just to make profits for the owner or manager, there is bound to be conflict between managment and the workers. But there has never been a strike at Canon. That, Mr. Kaku says, is because management and workers agreed from the start that everyone shared in the prosperity of the enterprise. Canon has never divided its employees between white collar and blue collar, and it pays more attention to ability than academic records. Beyond the company's own prosperity, however, is the question of corporate citizenship.
''The conflict between rich and poor countries is not unlike the conflict between management and workers within one country when the management is interested solely in maximizing its own profits,'' says Mr. Kaku. ''So, when we start a factory in a developing country, we have to be careful not to be caught in that trap.''