Taking a Hint from the Upstarts

As Net-gen upstarts and foreign interlopers woo Japan's brightest workers and most promising prospects from traditional companies, these old-guard employers are fighting back. They're revamping their seniority-based employment systems, bringing on more people who have spent years working elsewhere, and offering stock options and higher salaries in lieu of 30-year pension plans or company dorm rooms.

The first place many traditional employers look for weapons to fight the upstart poachers? The Internet. Take Sanyo Electric Co. (SANYY ) The electronics maker in January launched a recruiting Web site to help fill 190 technical and clerical spots. Some 25,000 applicants signed on to the site, and 1,800 of them were given online tests. Of those, one-third qualified for interviews. Company officials say the Net helped Sanyo reach 20% more candidates, weed out losers faster, and save $430,000 in administrative costs.

Big companies are learning from the upstarts' style. The newcomers don't expect their workers to stay on until retirement, so they promise far more flexibility in pay and pensions. To keep up, Matsushita Electric Industrial Co. (MC ) in 1998 started offering three retirement options instead of the single program it once had. Two of the plans let workers manage their own retirement account--something 43% of Matsushita's new hires now choose to do. "It's hard for me to imagine what the company's retirement plan will look like by the time I retire," says Yuki Hayakawa, who skipped the pension program and instead took a higher salary when she joined Matsushita in 1999.

Japan's rigid hierarchies are crumbling under the pressure, too. Tokio Marine & Fire Insurance, electronics giant Hitachi (HIT ), and trading company Nissho Iwai have abandoned their seniority-based systems and now take performance into account for promotions and pay raises. And Nissho Iwai is wooing prospects with stock options--still rare in Japan.

Even losing once-loyal salarymen in midcareer is teaching old-line employers a lesson: They're now casting a covetous eye on workers at rival companies. Nissho Iwai today seeks experienced recruits via employment ads and contacts from current employees and clients. One-third of Nissho Iwai's new hires this year came from other outfits. "Companies that hire outsiders expect them to shake things up," says Sakie Fukushima, country manager at recruiters Korn/Ferry International. The same could be said of the Net: Online upstarts have shaken up Japan Inc.

By Ken Belson in Tokyo

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