To whom do turn the most powerful people in Japan for advice?

To whom do turn the most powerful people in Japan for advice?

Toyota Motor Corp.’s production methods have been studied the world over, inspiring dozens of books about management and manufacturing

So where does Toyota go when it needs management advice? To this mountain town, where a little company called Ina Food Industry Co. makes a living turning seaweed into a gelatine-like substance called agar.

A squishy staple of Japan’s cuisine for four centuries that can be found as a vegetarian substitute for gelatine in the U.S., agar can be pressed into noodles or mixed with The Author of Tree ring Management 02-09-_2015_12-02-10beans and sugar to make a sweet confection. For non-Japanese, it takes some getting used to, and so does the management philosophy of Ina Food’s chief executive-guru, who is followed by many of Japan’s most powerful leaders despite his anonymity abroad.

The agar man, Hiroshi Tsukakoshi, 77 years old, preaches wariness of American management methods, which he says are warped by short-term thinking. He says companies should exist to make their workers happy, and says employees should clean the office toilets to foster a sense of responsibility.

Toyota executives and other Japanese economic and business leaders, such as Bank of Japan Gov. Haruhiko Kuroda, have been trekking to Ina Food’s headquarters to glean insights on a record of consistency that even mighty Toyota can’t match: At one point, the company recorded 48 consecutive years of profit growth.

“I don’t think the size of the company really matters when it comes to learning about corporate management,” says Toyota boss Akio Toyoda. “I’ve learned so much from Mr. Tsukakoshi and his philosophy that steady growth is essential for any company.”

Mr. Toyoda’s reverence for the agar maker helps explain the stickiness of traditional business values in Japan, where long-term success and social cohesion are often favoured over short-term profitability.

Tree Ring Management 02-09-_2015_11-56-23Shareholder returns in Japan have trailed levels in the U.S. and other Western markets. Foreign investors, who hold a record level of Japanese shares, are pushing companies to return more profits to investors. They have an ally in Prime Minister Shinzo Abe, who wants companies to adopt international norms.

Mr. Tsukakoshi offers a riposte, in a book titled “Tree-Ring Management”—so-called because a tree steadily adds one ring a year, rather than expanding and contracting erratically. “Trees keep growing even when the weather is bad,” Mr. Tsukakoshi writes. “Companies should be like that, too. You have to keep growing little by little, even if the pace is slow.”

Toyota executives don’t have to clean their own bathrooms, but Mr. Toyoda requires managers to read “Tree-Ring Management.”

Though the car maker is raking in record profits, Mr. Toyoda says he wants to attract long-term investors rather than those who are focused on short-term gains. In July, the company issued a new kind of shares that lock holders into ownership for at least five years. The plan drew opposition from some foreign investors, who collectively hold around a 30 % stake in Toyota.With USD 140 million in annual sales, privately held Ina Food is only a tiny fraction the size of Toyota, whose revenue tops $200 billion. But it makes roughly 80% of the approximately 2300 tons of agar and related products that circulate annually in Japan, according to Mr. Tsukakoshi, who says he owes his own longevity to a daily intake of the stuff.

Ina Food’s 24-acre headquarters here is a monument to Mr. Tsukakoshi’s steady-as-it-goes philosophy. The complex houses an agar research and development center, an agar exhibition, an agar factory, two agar shops and two agar restaurants.

On a sunny afternoon in July, tourists were relaxing in the Kanten Papa Garden—named after the company’s best-known brand of kanten, as agar is known in Japanese. Hydrangeas, cared for by Ina Food employees every morning, were blooming, and a monument with a metal plate displayed the corporate motto: “Let’s make a good company.”

“You spend a large part of your life working,” Mr. Tsukakoshi said in an interview. “Isn’t there something wrong if companies are producing unhappy people?”

To maintain harmony among Ina Food’s 500 or so employees, he said, the company will stick to its seniority-based lifetime employment system. Some other Japanese companies—including Toyota, with 344000 workers globally—have begun experimenting with ways to reward merit, rather than experience, though rung-by-rung ladder-climbing remains the norm.

Mr. Tsukakoshi’s aversion to rapid growth was reinforced by the Great Agar Bubble of 2005. After a television show highlighted the health benefits of agar, which is low in calories and rich in fibre, Ina Food had to operate its factories day and night to keep up with demand. Annual revenue jumped 40 %.

Some CEOs might have pocketed their bonuses and rejoiced, but not Mr. Tsukakoshi, who fretted about what would happen next. Sure enough, in 2006, sales plunged.

“What’s most important is not to pursue short-term greed and efficiency,” Mr. Tsukakoshi said.

Other companies may talk about social responsibility, but Ina Food offers free agar at the annual Kanten Papa festival in Ina, served as tokoroten, a clear, cold noodle dish dipped in sauce, or as anmitsu, a dessert with agar-based jelly, sweet red bean sauce and fruits. There’s a Kanten Papa children’s music competition and a Kanten Papa children’s drawing contest. Toyota has a similar contest.

Mr. Toyoda, who is 59, first met the Ina Food chief about five years ago, when Mr. Tsukakoshi gave a speech on long-term growth at a Toyota-related event. His words struck a chord with Mr. Toyoda, who was struggling to turn around the car maker from huge losses that followed a period of rapid expansion.

The two have continued to meet since then. Mr. Toyoda, who says he regularly eats agar, has begun to borrow phrases from Mr. Tsukakoshi’s book in his own speeches.

“We were like a tree whose rings grew too rapidly at one point, and whose trunk became weak and prone to breaking,” Mr. Toyoda said at an earnings announcement last year. “To grow sustainably means to build a ring around the tree trunk each year.”

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