This paper was submitted for publication 8/4/06 and is copyright to Om P. Kharbanda© 2006.
Published here September 2006.

Introduction | Background to the Japanese Environment | A Unique Concept in Projects
Slow Decision Making, But Quick Execution | The Role of the Computer
 Teams Can Work Wonders | More Plus Factors for Japan | The Role of Information

Background to the Japanese Environment

An overcrowded and impoverished land, Japan has to import all its raw materials. However, it has one principal resource: the dedication of its people. They have developed quality control to a degree where it has become their salvation. Under the compulsion of survival Japan has adopted, adapted and improved western quality control techniques till they have reached superlative levels of effectiveness.[2] Just a generation or so ago, "Made in Japan" was considered a guarantee of inferior quality. The Japanese were notorious for not inventing anything: they were seen as the imitators of everything. Defeated in war, host to an occupying power, listed as a developing country by the United Nations, Japan desperately needed Western aid for mere survival. Yet see what that country has accomplished today!

It was unthinkable that Japan could ever aspire to become a manufacturing superpower, yet that is what has happened. The Japanese production miracle that has taken place over the past forty years is now a matter of history, but there are other emerging nations in the Far East, such as South Korea, Taiwan and Singapore, who are seeking to emulate the Japanese example. In addition, a number of books and articles have been published designed to demonstrate ways in which companies in the Western world can adopt and benefit from Japanese management practices.

In our judgment one of the factors contributing to the Japanese miracle has been the country's management practices, but these do not seem to have received much attention in the literature. These practices differ from those normal in the West in four vital respects:

  1. Cost is everybody's business: Cost control, usually considered to be an accountant's function, is seen to be everyone's job in Japan. The designer, the producer and the sales people are all expected to make valuable contributions to cost control. We have demonstrated that cost control is of equal importance to Western countries, but to be effective it must be control, rather than cost reporting.[3]
  2. Design-to-cost: The normal practice is to develop the cost of a design, and then establish the market price. The Japanese start with the maximum selling price that they think the market will bear, and then work backwards to the basic cost of the product. They then design a product of acceptable quality within that cost.
  3. Enter the market first, profits will follow: In the case of new investment, the Japanese do not normally resort to the traditional indicators, such as the payback period or the return on investment. Instead they look to develop the maximum volume of production at the lowest cost and aim for a high market share. They consider that once they have made an entry into the market, the profit will take care of itself!
  4. Teamwork is the crux: Overall, both decision-making and responsibility, which is largely individual in the West, is really collective in Japan. This leads to close and effective teamwork that has a host of valuable by-products, including better human relations and higher productivity. This team concept pervades not only manufacturing, but also all disciplines, including finance and accounting.

In Japan accounting procedures are used for controlling a company's activities, not merely for measuring what is happening. This means that accounting is used to reinforce management strategies, thus creating a direct link between accounting practices and corporate goals. This has the result that accountancy in Japan plays an "influencing" role rather than a mere "informing" role, as is almost invariably the case in the Western world.

The very real differences in accounting practices between Japan and the major Western democracies is highlighted by a report sponsored by the National Development Council, the Manpower Services Commission and the British Management Council, later published as a book.[4] This report deals primarily with the differences in management roles in various countries, but the numbers in Figure 1 demonstrate how few accountants as such are employed in Japan.

This data for a number of countries sets the figures for Britain and Japan in context. It is quite revealing, surprising and perhaps even shocking. There seems to be an inverse relationship between economic growth and the number of accountants and qualified managers (MBA's), but a positive correlation with the percentage of managers holding degrees. This is a very significant conclusion: one warranting further research.


Top managers with a degree
per 1000 population

Number of qualified accountants (000s)

per year

















West Germany








Figure 1: Contrasting the number of top managers and accountants in different countries[5]
Introduction  Introduction

2. Price, F., Right First Time - Using Quality Control for Profit, Gower, 1984.
3. Kharbanda, O.P., Stallworthy, E.A., Williams, L.F., Project Cost Control in Action, 2nd ed., Gower, 1987.
4. Handy, C., Gordon, C., Gow I., and Randlesome, C., Making Managers, Pitman, 1988.
5. Abstracted from a table in reference 4.
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