Fading prospects for lifetime employment is leading to a little known but important transformation in Japan. Increasingly, employees are zigzagging between companies to reach the top of their profession. Such lateral hires make firms more productive through the reallocation of human capital to its best use. That is much needed if Japan’s shrinking workforce is to finance health and pensions of the nation’s growing number of elderly.
Aiding lateral hires is Soichiro Minami. He is the 39-year-old entrepreneurial founder and CEO of BizReach, a firm which manages a digital marketplace where professional job seekers and employers can find one another.
Minami started BizReach in April 2009 after discovering that Japan’s labor market was opaque. He was between jobs looking for a new and satisfying career. In his previous position reporting to Rakuten’s CEO Hiroshi Mikitani, he founded a professional baseball team – the Rakuten Eagles. Then aged 28, Minami had become one of the youngest executives in professional sports. Three years later he resigned, taking time-out to reflect on what to do next with his life.
“That time was all about me trying to find an industry I wanted to work in,” Minami told Beacon Reports. He asked what advice he might give to himself if he could look back in 100 years onto the present day: “I would tell myself an Internet IT revolution was taking place right in front me. It would be a waste not to be a part of it,” he thought.
Within one month Minami had met with 27 recruiters to see what jobs were available. He received many offers, but none seemed right. He felt there was a black box between employers and job seekers which kept him from gaining an understanding of all his career choices.
Looking further afield Minami found that the recruiting industry was far different in Japan than in the US, Europe and Asia. Elsewhere, online platforms allowed job seekers and employers to contact one another directly – but not in Japan, where a few powerful firms dominated the recruitment market. They also greatly profited, earning 30%-35% of a candidate’s first-year salary compared to US recruiters which typically earned 15%, less than half the rate.
Why weren’t employers and job seekers in Japan using LinkedIn to bring transparency to the market as they were in the US and other Western countries? The popular social website makes money as a recruiting platform for professionals who are encouraged to post their resumes online for everyone to see.
Minami thinks LinkedIn never took off in Japan because the Japanese aren’t comfortable boasting about career achievements. He also thinks that less needs saying to be understood in a homogeneous culture where communication is more contextual. Therefore, LinkedIn may be better suited for more culturally diverse markets like the US where direct communication is needed to make a point.
There could be another practical reason why employees shy from posting resumes online. “God forbid their bosses were to see that they’ve completed their LinkedIn profile. It would be career suicide,” writes digital blogger James Riney.
Through BizReach, Minami brought transparency to Japan’s job market with the aid of the Internet and IT technology. His solution was to reproduce a LinkedIn-like service which preserves confidentiality – one in which employers are blocked from accessing records of their own employees who might appear in BizReach’s database. It was a simple solution. “No one has ever been fired for being on our database,” notes Minami.
The service encourages lateral mobility in a country where labor is siloed within large organizations offering lifetime employment. Some experts argue that youth is wasted while in kenshu, the long period of training during which new recruits hold little responsibility. Lateral movement between companies offers the potential to liberate employees to pursue work better suited to them, the companies they work for, and the nation as a whole. It might also increase labor productivity, reported by Morgan Stanley’s Robert Feldman to be only 2/3rds as efficient as that in the US (see link).
Minami launched BizReach self-financed with 6 other founders who had backgrounds in IT and the Internet. Most held full-time jobs at other firms while they worked at the startup evenings and weekends. Minami promised his startup team that he would raise at least $1 million in finance within 12 months. Within the year he had raised $2 million from Japan’s largest venture capital company, JAFCO, and Rakuten’s Executive Vice President, Toru Shimada.
BizReach has since doubled its headcount almost every year. “We went from 10 employees to 30, then to 70, 130, 270 and 550. We are probably hiring 250 people more in the next 12 months,” says Minami. Remarkably, growth has been financed entirely through profits.
Currently 4,000 employers pay BizReach a fixed fee plus a success fee to access a database containing the profiles of 500,000 professional job applicants. The applicants, most in employment, earn between $80,000 and $90,000 each year.
Minami believes the trend towards increased lateral hires will continue as the prospects for lifetime employment fade and as the nation shifts from a manufacturing based economy to one that is more global and service oriented. “What was a $100 million (recruitment) business in the late 1990s has grown into a $2 billion industry,” he reports.
While those numbers are still small, the uptick suggests that firms are beginning to recognize the need to better utilize Japan’s most valuable asset – its people.
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