Who’s good at big firms

I’m back jetlagged from Japan, about which I may have the strength to post a little in the future.

For now a thought – a big generalisation with only the sketchiest of evidence. Please don’t take it too seriously – or think that I have. It just occured to me as the hours and the kilometres whizzed by. Others may well have suggested it also.

Maybe commenters can provide further examples or counter-examples.

My hypothesis: That the Americans are not good at big bureaucratic firms, whereas the Japanese are and perhaps the Europeans are too.

My evidence (better to call it the phenomena that provoked the idea – its not a lot of evidence): Toyota is beating the pants off the American Big Three car makers. Boeing’s not doing that much better against Airbus. In the latter case subsidies make things murky, but Airbus appears to be beating Boeing technically.

My hypothesis as to the reason for this phenomenon if it’s true: The degeneration of corporate culture into naked pillage from the top is unlikely to engender the kind of morale that is conducive to high productivity and innovative dynamism within a large mature corporation. On the other hand it may be neutral or positively beneficial in other kinds of organisations – for instance software producers where work can be much more easily broken down.

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phil
2022 years ago

Nicholas – interesting hypothesis but – like many things – unlikely to be a simple answer. I’ve just trawled the Times of LOndon driving page where it seems that large succesful German motor companies are now very susceptible to corruption. Japanese electronics companies are succesful, I suspect based on good design and construction and knowing what your customers want – ie staying in touch with the market. THe recent US evidence of corporate failings is probably only part of any explanation about declines in fortunes – although, as a mug retail investor, I just keep hoping for a better system in which company disclosures can be aired and responded to by the market. The global airliner duopoly it seems is just too corrupt for words and probably shouldn’t feature as an example for this reason.

Rafe
2022 years ago

Nice run and kick by Wendell Sailor up the right side!

James Dudek
James Dudek
2022 years ago

I think it’s probably a corporation by corporation thing rather than which country the company’s headquarters are in. Toyota has developed the most innovative experimentation programs in the world, which is why it is thrashing the pants off the American automakers.

They actually manufacture a lot (if not all, can’t remember) of their cars for the US market in the US.

For more on why Toyota is the greatest car company I recommend reading “Experimentation Matters” by Harvard Business School Professor Stephan Thomke.

IBM patents more products in a year than the next ten largest companies do combined. Dell is the best computer company in the world. These companies just happen to be HQ’d in the US, but they have global manufacturing, software development, and research facilities.

Cameron Riley
2022 years ago

The American company that seems to be flying in the face of Wall Street culture is Costco. It pays well, has low paying executive salaries, etc. Might be a useful company to test your hypothesis on.

Greg
2022 years ago

There are so many counter-examples: FedEx, for one, gigantic, complex, successful. Many more purely service-based firms, banks & investment houses, law firms, and so forth, also present substantive counters. Manufacturing is certainly troubled, and corporate culture is definitely a significant part of that, especially in those instances where the remuneration scales have become top heavy, where labour is paid so substantially lower proportionate to the executive ranks that the difference begins to tip national averages. Whether the Japanese, alone or just notably, have an overall philosophy that precludes this I don’t know, but I’ve seen what a shareholder-value mentality can do to a company and what that does to its employees, and it’s definitely not just America. My first-hand experience came within 9 months of my first employment in Australia, working for a British company.

Taswegian
Taswegian
2022 years ago

Clearly the US outshone the rest of the world in the decades after WW2. Now the lone cowboy seems to have gone lame. This sense of falling behind clearly troubles many Americans. However I think in a highly connected world with resource shortages the goal of physical or economic dominance may prove elusive, both for corporations and nations. The time seems ripe for the US to reinvent itself with a new social model in which it is less important to be top dog.

GregM
GregM
2022 years ago

It’s worth reading “Out of the Crisis” (1986) by W. Edwards Deming. He was adopted by Japanese manufacturing companies in the 1950s as one of the gurus of quality management. (The hugely presigious Japanese Quality Award is named the Deming Prize.) He was largely ignored in the US until “Out of the Crisis” was published.

He wrote, among other things, that the American corporate obsession with quarterly financial results meant that its managers did not focus on the long term, with adverse effects on their long-term viability.

derrida derider
derrida derider
2022 years ago

I think there’s a self reinforcing mechanism here, too. The best and brightest of the young in the US don’t choose to work in large bureaucracies, whereas in Europe and Japan to work for a large company is still the prestige thing to do. In fact in some countries – eg France – the best and brightest still go into government. So Europe and Japan get better run bureaucracies than the US, but much less dynamism amongst small-to-medium firms. It’s part of the reason governemnt has such a bad name in the US.

Russell Allen
2022 years ago

Having retired out of the Euro-American investment banking system at the tender age of 26, I definitely believe that Euro banks like ABN AMRO and Deutsche Bank work smart where the US companies like Morgan Stanley and Chase work hard, long hours with negligible difference and have more ruthless consequences for failure.

US banks tend to axe a lot of people when the numbers go down but then struggle to be extremely profitbale because their workforce has been decimated. US banks also own a lot of property so when they have a bad year they sell property to balance the books. If you dig deeper they are inherently weaker than their European counterparts.

Pay and bonuses are equitable between the two regions.