Briefly discuss the HR reforms adopted by Matsu**a. Do you think they are in the right direction? Why/why not?

Matsushita has revolutionized the way it pays its employees and its example is now being widely followed by other big Japanese firms. It is taking aim at seniority-based pay and lifetime employment, twin bastions of the traditional approach to pay. Since March 1998, new recruits have been offered three options. Under the most traditional, employees can live in company accommodation, go to free social events and buy subsidized services such as banking from group companies. They can still get a retirement bonus equal to two years' salary, a relic of the 1960s and 1970s when Matsushita and many other firms promised the best graduates jobs for life. Under a second version, employees forgo the retirement bonus in return for more money now, but keep perks such as cheap company housing. Under the third, they lose both, but receive even more money now. Last year, only 3% of graduates chose the third option. But 41% chose the second scheme. The company is also changing the performance-related pay scheme. In the past, the traditional twice-yearly bonus depended almost entirely on seniority: the more years a manager had worked for the firm, the more he received. Now, performance matters too. Matsushita plans to make the appraisal process transparent by showing its managers how it arrived at their scores. Matsushita also made efforts to change its employees attitude. The objective was to make them more quality conscious and enable them to understand the needs of their customers. Matsushita is in the right direction, since Matsushita announced these changes, other big companies have followed. Fujitsu has said it is replacing its seniority-based pay system with a payment scheme based on individual performance. Fuji Xerox, a photocopier maker, has thrown seniority-based promotions. Asahi Glass plans to stop automatic pay increases based on years of service and to expand its performance-related pay scheme for managers. Asahi Breweries will soon promote its managers on merit, not length of service. Kansai Electric says it is looking for more mid-career workers with marketing, planning and other expertise. Itochu Corporation ended seniority-based promotion and began introducing bonuses based on performance. A government survey of 2,000 publicly listed companies found that more than 90% intended to introduce some measure of performance to their pay and promotion systems. Lifetime employment once made sense, because the company's strength lay in production engineering, and the ability to innovate through small engineering improvements requires a good deal of experience. As the company has moved into new, creative industries such as software engineering and network-communications technology, Matsushita no longer values experience so highly. Some of the company's brightest ideas are coming from its youngest people, whose

voices tend to be stifled by the seniority-based system. In some ways, Matsushita is merely crystallizing something that is happening throughout Japan, as the country moves away from strict social hierarchies based on age and position. In other ways, Matsushita wants to emulate what it sees as desirable western behaviour by promoting individuality and risk-taking among its staff and by attracting new people with these qualities. Perhaps its culture will slowly change.