People Power in Logistics

This week in Japan is the first week of work for most college graduates beginning their first job. Since this phenomenon is fairly uniform across each industry, at firms big and small, on Monday there were TV specials discussing this year's hiring data and interviewing the new hires as they began their first day of training.

Last night (Tuesday Japan time), there was another special.  Basically, the theme was "the message to today's young people from some prominent elder personalities." For example, the manager for the Japan team that won the World Baseball Classic had some quotes, along with others. At the beginning of the show, it was noted that 850,000 college graduates will start work this week. It was also noted that since the 1970's the number of college graduates seeking a workplace where they can "show their individuality" has grown by 50%. However, under current conditions, one out of every three college grads quits their first job within three years. For Japan, this is a problematic ratio because the employment systems of most firms are not built to survive this turnover. For example, the pace of training is based on older systems of long-term employment where a college grad will not necessarily contribute a large portion of their potential until after 3-5 years of employment. Although more and more companies are employing a performance-based evaluation system, in the scenario where college grads leave before 3 years, most will leave under-trained, but the company they leave has under-utilized that employee realizing little or no ROI in the process. In this environment, the employee doesn't do their part to drive their career and the company fails to act as a cultivator or guide in the process. As a result, Japan ends up with a majority of 30-year olds who have fallen far behind their Western counterparts. This is why in many cases Westerners surpass Asians early career despite Asia's touted test scores in the areas of science and math versus their Western counterparts at the high school level.

Several companies I am familiar with are no different. On Saturday, April 1, my firm welcomed seven new employees from the college ranks. Out of the seven, four are women and three are men. As our company is quite traditionally Japanese, we all formed a standing half circle around the meeting room while the seven new employees stood in a line in front of us. Each one introduced themselves very briefly in formal Japanese fashion, each one receiving a kind applause. I could tell they were pretty nervous, which I pretty much expected. Perhaps most interesting was each student's major of study in college.

Now, my undergraduate major was in art, but because of the American system's flexibility, I also minored in international economics with an unofficial minor in Japanese. During that time, I had an internship in NYC, one year of study abroad in Tokyo, and another three months in Tokyo for my senior thesis. In addition, my high school studies were geared towards an engineering major in college before I took my turn towards studying art. So, given that background, I tend to think that my MBA and MIM degrees along with a career in logistics are not that hard to fathom despite my art major.

But in Japan, the general educational system at the university level is not near as rigorous nor as flexible. A great deal of vision and ambition are required to achieve a significant level of individual excellence inside and outside the classroom. The best graduates will have had at least one year of study abroad in the USA, Europe, or elsewhere with a rigorous curriculum and excellent campus environment. However, this experience is relatively rare and most of these students are picked up by the leading firms in each industry.

For a medium-sized, logistics company, it is not possible to compete for the best students as described above. Therefore, you must try to acquire the "best of the rest." The majors I heard on April 1 from our new hires included two in literature, two in commercial science, one in liberal arts, one in economics, and one in humanities. However, since we will not expect these students to apply much of their college education to their future responsibilities, what we are truly seeking from this group is adaptability driven by a strong desire to learn. Such a person is highly teachable and has great potential for advancing along the learning curve faster.

The other half of the equation, as inferred from above, is ensuring the work environment we place these new hires in will cultivate them to excel above and beyond their current abilities. This is where many middle-market firms will fail and "stunt" the growth of perfectly capable college grads. It is also extremely frustrating for myself to work in this type of environment, although in my case I am more prepared and in a stronger position to take my personal development into my own hands and pursue the right opportunities in the face of stubborn superiors.

As for logistics as an industry, Japan is not alone in terms of "people power" being under-appreciated and under-utilized. An article with FTB Asia titled "People Power" delves into this area (FTB doesn't maintain a free archive, so access the article now to print or copy). It quotes a Dr. Gattorna who provided a seminar for DHL:

"The biggest threat to achieving high-performance supply chains comes from within your own organisation, rather than external competitors in the marketplace." So said logistics "thought leader" Dr John Gattorna at a DHL seminar in Hong Kong He pointed out that much of logistics derives from management theory on optimised performance design.

"Now is the time for logistics companies to spend more effort on human resources to hire the right people, " he said.

Dr. Gattorna describes the appropriate investment mix that will best leverage "people power" within a logistics firm:

By Dr Gattorna's count, the design and operation of modern supply chains is 45% human behaviour, 45% systems technology and 10% infrastructure.

The potent effect of human behaviour is felt in two main areas, namely outside organisations with customers and suppliers, and inside organisations including boards, management, and employees.

"You cannot grow and prosper as an enterprise by incessantly cutting costs in these two areas of human presence; investment in performance-enhancing supply chains is essential for success in all businesses, " he insisted.

Much of optimum supply chain theory is built on the shoulders of standard management theory in which personality and culture are not factored in.

What is the mindset that plagues today's logistics firms? Dr. Gattorna explains that an obsession with the wonders of technology and equipment are a key culprit:

Instead, modern enterprises must be designed to meet the multiple needs of customers with the equivalent array of supply chains, all configured to align with pre-defined customer segments "It is disappointing that after all the man-years of academic research, numerous articles in respected journals, a myriad of consulting assignments, and the work of practitioners inside enterprises, few if any commentators in the logistics/supply chain field 'get it', when it comes to understanding that human behaviour really powers modern supply chains, " he said.

For some reason, he suggested, supply chain practitioners behave as if people simply don't exist in this context, perhaps because they don't understand or feel comfortable dealing with the behavioural sciences. "Instead we continue to put all the emphasis on technology and systems, and infrastructure as the solution, " he remarked.

In the dialogue that followed, the audience agreed that the better solutions were those in which supply chains would not function until there was a strong investment in people solutions; probably by spending the kind of money companies have spent on technology.

One executive suggested it would be useful to highlight the benchmarking of training spend in transport and supply chain companies against other industries. "Most of us have a pretty good feel for the technology spend benchmarks. Few of us know how our training spend compares, " he said.

Dr Gattorna estimated that most organisations dedicated 5% of expenses to managing human behaviour, 45% to technology and the remaining 50% to infrastructure such as distribution centres and factories. The more appropriate formula, he said, is 45%, 45% and 10%, respectively.

"Technology is still very important but it has to be balanced, " he said.

Of course, for those with any management education, the warnings of treating technology as a cure-all are not new. This is expressed often in such management tools as The Balanced Scorecard, expressing technology as a strategy-enabler and one component in the foundation of a firm next to organizational culture and human capital. The problem is that these tools are not often employed in the logistics industry, if at all in Japan's industry.

UPDATE: Found an interesting article at College Journal, through the Wall Street Journal. It provides a good illustration of the current employment conditions in Japan.