Japan, Inc. Still Prioritizes Hiring New Graduates
Newly released data measures the percentage of new hires straight out of college versus external recruits at many of Japan's largest companies.
What’s new: Soon after the cherry trees begin to blossom in a wave across the country, Japan, Inc. will welcome the new fiscal year beginning April 1 with a new crop of university graduates. Data from the 2024 edition of the CSR Corporate Profile (Employment and Human Resources) has just been released. It can be used to calculate the proportion of new graduates hired as a percentage of the total number of new hires in the previous year. To make the list, companies had to have a total of 50 or more recent graduates and mid-career hires, an 80% or higher share of recent graduate hires, and an average tenure of at least 15 years. These companies were ranked in order of their share of recent graduate hires. Not surprisingly, many of the companies with the highest percentage of new hires coming directly out of college are regional banks, life insurance companies, and public utilities.
Why it matters: The prevalence of Japan's system of lifetime employment, or shushin koyo (終身雇用) in Japanese, may be waning, but this business practice is still alive and well at many large companies that still shun external hiring.
Recently, however, a growing number of companies have adopted a "job type" approach to hiring, in which they hire people with the right skills for the job, as opposed to the time-honored preference for "membership type" hiring. Traditionally, new graduates were hired en masse, essentially becoming members of an exclusive club that largely excluded external recruits.
While there are pros and cons to continuing to rely primarily on fresh graduates to bring new blood into an organization, it appears that continued reliance on this business practice may be causing some of Japan's corporate leaders to miss opportunities to hire new talent with more experience, thereby limiting their global competitiveness. External hires bring experience from their previous roles, a diversity of insights and knowledge, and an understanding of the latest practices in their industry. They can also bring new ideas, perspectives and skills to the organization, leading to innovation and growth.
Recent graduates tend to be motivated, highly adaptable, and eager to learn. Hiring new graduates can be cost-effective, as they frequently require lower salaries and their training and onboarding costs are generally lower than experienced external hires. As seems to be the mantra of Japan, Inc, hiring new graduates allows an organization to mold and develop them according to its specific needs, potentially creating a loyal, long-term workforce.
By the numbers: The overall share of recent graduate hires was 55.7% (1,067 companies with at least one recent graduate or at least one mid-career hire). In 2022, the percentage was 62.7%. So it seems that this percentage is trending down. However, large companies listed in the CSR Company White Paper are still mainly hiring recent graduates. By industry, many companies in electricity & gas (83.7%, 13 companies) and banking (77.3%, 30 companies) place a high priority on hiring new graduates.
Highest Percentage of New Graduates: In first place is Iyo Bank, with a 97.8% share of new graduate hires. Iyo Bank is a regional bank that operates in the Setouchi region, mainly in Ehime. The bank hired 135 new graduates last year. It does, however, hire several mid-career employees each year through a system of hiring part-time and other employees. From 2022, the Bank introduced a course-based personnel system that combines job-based and membership-based elements, as well as a "career field" concept that subdivides the specialized areas of career-track employees.
Meiji Yasuda Life Insurance (300 graduates hired) ranked second with 96.8%. The company's distinctive features include a system for changing job titles between "career track (nationwide)" and "career track (regional)," a system for changing work locations when employees need to relocate due to marriage or caregiving, and a re-employment system for employees who retire due to marriage, childbirth, childcare, caregiving, or other reasons, all of which take into account childcare and caregiving.
Another regional bank, Ogaki Kyoritsu Bank, based in western Gifu Prefecture, ranked third with a 95.9% share of new graduate hires. The bank has established a "Variety Talent Course" as part of its selection process for new graduates, which recognizes outstanding efforts and achievements in specific fields.
In fourth place was Shikoku Electric Power with 95.7% (67 respondents), followed by supermarket chain Inageya with 95.4% (62 respondents), Tohoku Electric Power with 95.2% (238 respondents), engineering firm Sanki Kogyo with 94.7% (89 respondents), Shiga Bank with 94.5% (104 respondents), beverage company Takara Holdings with 94.4% (51 respondents), and NIPPON EXPRESS Holdings with 93.7% (237 employees).
Most New Graduates: The company with the highest number of new graduates hired among the companies in the survey was No. 52-ranked car maker Suzuki with 85.5% share of new graduates hired based upon 734 new graduates hired overall. It was followed by diversified homebuilder Daiwa House Group in 72nd place with 82.5% and 684 employees.
Longest Tenure: The regional bank holding company Mebuki Financial Group had the longest average tenure of 25 years at 87.6% and ranked 41st, followed by Takara Holdings (23.8 years) at 9th.
Highest Compensation: Global trading giant Itochu Corporation ranked 28th with an average annual salary of 17.3 million yen (approximately US $115,200), and Mebuki Financial Group ranked 41st with an average annual salary of 12.345 million yen ($82,200).
Commentary: Having helped establish and then run the wholly-owned Japanese subsidiary of a U.S.-based medical device manufacturer, I am somewhat jealous of these companies because, like most foreign investment firms operating in Japan, my longtime employer was never able to hire new employees straight out of college. We only promoted from within and hired from the outside. While I am a big proponent of "pay for performance" merit-based compensation (as opposed to seniority-based compensation), my gut feeling is that the ideal composition of newly hired associates should be a balance of some hired from either the same or different industries as well as portion of completely fresh, newly minted college graduates.
What do you think? While the answer to this question may depend heavily on the type of industry, assuming you can have "the pick of the litter," what is your recommendation for the sweet spot in terms of the percentage of new hires a company should hire directly out of college?
Link to Japanese Source: https://toyokeizai.net/articles/-/733481
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Insightful article on Japan, Inc. I think that in the US, the % of recruits depends on the size of the company and the resources they have to onboard these fresh college graduates.
Top consulting firms and big organizations hire fresh graduates in mass as they can train them in mass and put them to work right away, whereas smaller companies need people with the right skills and experience to start contributing from Day 1.