The Accounting Profession is Different in Japan

As we mentioned, the role of financial accounting  in Japanese organizations is quite different from the accounting typically found in American companies. Japanese accounting personnel play a much more proactive role in product target costing, facilitating the budgeting process, and in working with their counterparts than do the usual accounting personnel in the U.S.  For example, Nissan, which is a $50-billion business, has approximately 500 accountants in Japan. A full 200 of them are committed to the approximately 20 new-model planning teams working primarily in the target costing area. As we said earlier, the planning and budgeting process is much quicker than in mostU.S.companies. Finance and accounting plays a central role in leading and facilitating the six-month budgets. Most of the companies with which we are familiar in Japan have at least as many, and frequently more, accountants doing what we would classify as management accounting instead of financial accounting. This situation is very different from the one in most U.S.companies today.

In summary, some of the characteristics that might be applied to finance and accounting in Japan are participatory, that is, working with other parts of the business in a partnership arrangement as contrasted to a “command and control” orientation; cost/production-oriented, that is, focused primarily on the design and production cycle, designing costs out of a product and assuring that they stay out rather than spending a great deal of time on financial planning and analysis; visible, that is, working in the business rather than for the business and focused across the business ultimately to satisfy customers as contrasted to up the business to satisfy more senior levels of management.

It would appear that the combination of characteristics described above has a clear impact on the effectiveness and the efficiency of Japanese finance and accounting organizations. From the standpoint of effectiveness, Japanese accountants are very involved in key decision aspects of their businesses such as product planning and costing, cost control and reduction, and overall business planning, budgeting, and results. They achieve this effectiveness without the deluge of reports that burdens so manyU.S.companies. Reporting is, to a great extent, done locally, closest to where it will have the maximum benefit. Finance and accounting does not produce a blizzard of reports comparing actual results with budgets and transmitting them throughout the organization, nor is there the constant harassment for explanations of deviations.

Our calculations suggest that Japanese finance staffs are enormously productive. Typically they have staffs which, in the United States, would put them among U.S. corporations with the best practices while, at the same time, they seem to be doing a number of more proactive activities than even the “best practices” companies. Examples include involvement with product target costing, managing the budget process, and working with factories to reduce costs meaningfully.

Our last observation is that the distribution of effort between proactive accounting and historical accounting is strongly skewed in favor ofJapan.

Experiencing Japanese Culture First Hand

From my observation, the way we back in the U.S. do business has some small but very important differences. Because I  came over here to work I would like to point some of those out.   Americans who seek business with the Japanese must  have a thorough understanding of the traditions and customs of Japan; otherwise, they will be doomed to failure. Even minor points of protocol might spell trouble for the unwary foreign entrepreneur. For example, a business card that does not clearly state the person’s rank and position in his or her company could prove disastrous–without knowing where that person is on the corporate grid, a Japanese executive will not know how much deference to show. The presentation of a business proposal also is a question of protocol: one must be accurate, honest, and above all extremely well prepared; excuses about lack of detailed information receive silent disdain.

Americans–often an impatient lot–must learn to exercise patience with the Japanese. All too often, American corporate representatives arrive in Tokyo expecting to conclude their business in one or two weeks. When negotiations bog down (as they often do), they grow restless and impatient. That irritates the Japanese, who regard such behavior as a sigh of weakness. They have no time for short-term relationships–consensus and cooperation must be tested and nurtured, and that takes plenty of time.

Surprisingly, many U.S.corporations overlook the need for extensive planning when they contemplate business ventures in Japan. Frequently, they send representatives who lack adequate training in Japanese, or who do not have the sensitivity to understand and appreciate the cultural differences of the two countries. In that area, the Japanese are way ahead of the game. Typically, a person representing a Japanese company in the United States will have spent many years studying the language, politics, and culture. When he or she finally sets foot in the United States, he or she will already be an expert interpreter of our values, attitudes, strengths, and weaknesses.