Established in 1920, the consumer electronics giant Panasonic was at the forefront of the rise of Japan to the status of major economic power during the 1970s and 1980s (before 2009 Panasonic was known as Matsushita).
Like many other long-standing Japanese businesses, Panasonic was regarded as a bastion of traditional Japanese values based on strong group identification, reciprocal obligations, and loyalty to the company. Several commentators attributed Panasonic’s success, and that of the Japanese economy, to the existence of Confucian values in the workplace.
At Panasonic, employees were taken care of by the company from “cradle to the grave.” Panasonic provided them with a wide range of benefits including cheap housing, guaranteed lifetime employment, seniority-based pay systems, and generous retirement bonuses.
In return, Panasonic expected, and got, loyalty and hard work from its employees. To Japan’s postwar generation, struggling to recover from the humiliation of defeat, it seemed like a fair bargain. The employees worked hard for the greater good of Panasonic, and Panasonic reciprocated by bestowing “blessings” on employees.
However, culture does not stay constant. According to some observers, the generation born after 1964 lacked the same commitment to traditional Japanese values as their parents. They grew up in a world that was richer, where Western ideas were beginning to make themselves felt, and where the possibilities seemed greater.
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They did not want to be tied to a company for life, to be a “salaryman.” These trends came to the fore in the 1990s when the Japanese economy entered a prolonged economic slump. As the decade progressed, one Japanese firm after another was forced to change its traditional ways of doing business. Slowly at first, troubled companies started to lay off older workers, effectively abandoning lifetime employment guarantees.
As younger people saw this happening, they concluded that loyalty to a company might not be reciprocated, effectively undermining one of the central bargains made in postwar Japan. Panasonic was one of the last companies to turn its back on Japanese traditions, but in 1998, after years of poor performance, it began to modify traditional practices.
The principle agents of change were a group of managers who had extensive experience in Panasonic’s overseas operations, and included Kunio Nakamura, who became the chief executive of Panasonic in 2000. First, Panasonic changed the pay scheme for its 11,000 managers.
