1 Japanese Approach To PLWS October 22, 2015 Yasuhiko INOUE Japan Productivity Center (JPC)

1. The Meaning of Productivity & PLWS (1) International Common Indicator of Productivity (National Level = GDP & Company Level = Value-Added) (2) GDP = Total of All company’s Value=Added amount in Malaysia 2. Japanese Approach to Productivity and PLWS (1) Three Guiding Principles (a) Job Security First (b) Labor-Management Cooperation (c) Fair Distribution of Productivity Gains (PLWS) 3. Japanese Approach to Quality 3

33 Definition of Productivity(Technical) Output Input Products/Services Profit Value-Added Quality of Management Labor / Workers Capital Machines

Productivity is NOT just a technical concept. Wide social concept is; Productivity is above all, an attitude of mind. It seeks to continuously improve what already exists. It is based on the belief that one can do better today than yesterday and even better tomorrow. (1958, European Productivity Agency ) Human Oriented & Betterment of QWL / QL Definition of Productivity (Social)

(International Common Indicator) WHY PRODUCTIVITY? Why Productivity for Malaysia ? Indicator of Country’s Productivity = GDP or GDP per Capita Because we want to make Malaysia Rich & Competitive.

( International Common Indicator for your NATION / COUNTRY? Productivity Indicator = GDP Bigger GDP = Competitive Country = Higher Productivity

for your NATION / COUNTRY? GDP per Capita ( WB, 2014/2010 US $, PPP) Malaysia 24,951 (20,096) Philippines 6,982 ( 5,524) Indonesia 10,517 ( 8,294) Thailand 14,552 (12,508) Vietnam 5,629 ( 4,396) China 13,216 ( 9,239) Japan 36,426 (33,741) Singapore 82,763 (70,598)

GDP = Total of All Companies’ VALUE ADDED (GROSS PROFIT) In Malaysia Indicator of Malaysia’s Productivity /Wealth is (International Common Indicator)

GDP = Total of All Companies’ Value-added (Profit) in Malaysia AC D n B (Industries) (Companies) (International Common Indicator)

International Common Indicator Company’s VALUE ADDED Management Share Labor (Workers) Share (GROSS PROFIT ( LABOR COSTS =Profit, Dividends ， or PERSONNEL Tax, etc. ） EXPENSES ) Depreciation

Converted into To Renovate Existing Facilities New Projects Reinvestment VALUE ADDED STATEMENT Hotel Business Creating Value Added 39% Employees Salaries 39% 26% Government Tax Provides for 13% Interest on Bank Loan 12% Shareholders Dividend 10% Reserved Earnings

Enlarge Productivity Gains (Value-Added) Value- Added Productivity Improvement Activities (Company Level)

* Company Productivity is to maximize Gross Profit ( = Value Added Amount) * Value Added Amount of All Companies in a Nation = GDP ( = Indicator of National Wealth) Company’s Productivity contributes to National Economy

(Japanese Approach) Management & Labor (Workers) can Cooperate in enlarging Value-Added. International Common Indicator Company’s VALUE-ADDED Management Share Labor(Workers) Share (GROSS PROFIT ( LABOR COSTS =Profit, Dividends ， or PERSONNEL Tax, etc. ） EXPENSES )

Three (3) Guiding Principles for a Company to Increase Productivity PROCLAIMED in 1955 when JAPAN STARTED PRODUCTIVITY MOVEMENT (1) Should Not Layoff Workers (Job Security First) (2) Productivity Increase through Teamwork & Cooperation Between Workers - Management (3) Fair Distribution of Productivity Increase

Three (3) Guiding Principles for a Company to Increase Productivity PROCLAIMED in 1955 when JAPAN STARTED PRODUCTIVITY MOVEMENT (1) Should Not Layoff Workers (Job Security First) (2) Productivity Increase through Teamwork & Cooperation Between Workers & Management (3) Fair Distribution of Productivity Increase

This is a “SYSTEM or TOOL” to materialize the Second Principle Labor-Management Joint Consultation System (LMJCS)

Labor - Management Joint Consultation System (LMJCS) Collective L.M.J.C.S Bargaining Clash of InterestCommon Interest Labor ConditionsProductivity Increase Sharing Fruits Enlargement of Resources for Sharing Character Contents Objective

19 Key Factors of LMJCS (Management Side) (1) Management should consider trade union as Social Partner(Stakeholder) (2) Management has to disclose any information requested by trade union

20 Key Factors of LMJCS (Trade Union Side) (1) Trade Union should consider Management as Social Partner(Stakeholder) (2) Trade Union has to understand management information or language. (3) Trade Union should keep secrecy of information disclosed by management

21 Agenda of LMJCS) (1) Business strategy and plan (management strategy, long-/medium-/short-term plan, production plans, marketing & sales, etc.) (2) Productivity results (3) Basic plan of reorganization, such as merger, new plant, etc. (4) Personnel management (career development, welfare policy, training, etc. )

Three (3) Guiding Principles for a Company to Increase Productivity PROCLAIMED in 1955 when JAPAN STARTED PRODUCTIVITY MOVEMENT (1) Should Not Layoff Workers (Job Security First) (2) Productivity Increase through Teamwork & Cooperation Between Workers - Management (3) Fair Distribution of Productivity Increase (PLWS)

23 (Japanese Productivity & Wage Curve) Productivity : Increase by Workers (Their Experience & Knowledge to improve Productivity) Wage : (1) Seniority System (Increase according to length of service) (2) Life-style & Wage (Wage jump at age 30 ＆ 40 ） )

24 (Wage & Productivity) Age (-) (-) + (+) +(-) = 0 Starting(Age 18 or 22 ） 30 Salary / Wage * Productivity (-) Age / Length of Service (+)

= 99

Productivity & Quality * Productivity & Quality are not trade-offs * High Quality does not make our Goods/Services cost more