March 6, 2006

Shift in Japan Executives Who Earned MBAs

March 6, 2006; Page B1

TOKYO -- Ever since his college days in the early 1980s, Yoichi Wada knew he wanted to be a manager. In the U.S., he might have headed off to business school. But in Japan, Mr. Wada's options were more limited: There were only three business schools in the country at the time.

So Mr. Wada designed his own quirky management-training program during a 16-year stint at a big Japanese brokerage. He sold stocks, analyzed securities, worked as an investment banker, and got himself sent to Poland as a foreign ministry attache -- all the time studying basic bookkeeping and other skills on his own.

Now president of videogame maker Square Enix Co., the 46-year-old Mr. Wada says he's glad he opted for real-world experience over formal business education. "I figured I had to be on the front lines," he says. "I had to get rigorous training."

Mr. Wada's do-it-yourself approach highlights a big difference in the way managers have traditionally learned their craft in Japan versus the U.S. Even at world-leading companies like Toyota Motor Corp., few managers have formal training. Instead, Japanese companies tend to promote executives from their own ranks, valuing long service in the trenches over the latest biz-school smarts.

There are some indications this is changing, as Japan emerges from a 15-year business slump. Companies such as Sanyo Electronics Co. are opting for outsiders to lead them through rough bouts of reorganization. The president of electronics giant Toshiba Corp., who was tapped from within last year, has said the company needs executives with expertise in managing, rather than operating specific business lines.

The soul-searching following Japan's "lost decade" of economic stagnation is spurring interest here in more-formal management training, resulting in an explosion of books teaching basic management skills and a boom in business schools, which have expanded to 45 from eight in 1990, according to Japanese business-school operator Globis Corp. That is still fewer than in the U.S., which has about 850 graduate business schools, according to the Association to Advance Collegiate Schools of Business, an accrediting group.

Japanese management trackers say the first wave of students to get MBAs abroad in the late 1980s are now ascending the executive ranks, meaning there will likely be a gradual shift to more professionally trained managers in the next several years. Yet even some Japanese experts who applaud the trend say the country will probably never become as hooked on MBAs as the U.S., and that the traditional hands-on approach is probably just as helpful in the end.

"If I had to do it again, I wouldn't go to business school," says Shinji Yamamoto, a partner at consultant Bain & Co. in Japan, who in 1985 was sent by the bank where he was working to get an MBA at the University of Chicago. Mr. Yamamoto says managers can learn the most valuable skills on their own; he's written several self-help books, including "Exercise the Work Muscle -- For People in Their Twenties."

The typical Japanese approach is illustrated by Toyota, which despite being the subject of countless business-school case studies, has only three MBAs among its 26 highest-ranking executives.

The company rarely hires outsiders for management posts in Japan. Every year, Toyota sends as many as five of its 65,000 Japanese employees to MBA programs abroad. The rest make do with the company's in-house training system: a mandatory two- or three-day session when they're first promoted to management, followed by optional seminars on topics like reading financial statements.

Mr. Wada's path to a management career started in 1984, when he joined Nomura Securities. At the time, Nomura was known for its ruthless insistence on performance and its relatively rapid promotion of talented young executives, a rarity in a land where an entrenched seniority system typically meant aspiring leaders had to wait decades to rise to the top.

Mr. Wada spent three years peddling stocks and bonds door to door in Hiroshima, learning about front-line sales under a quota system that demanded salesmen double their rivals' results. In his free time, he taught himself accounting and macroeconomics.

Mr. Wada caught the attention of Nomura executives when he proposed a training class for salesmen. They brought him to Tokyo for a three-year stint in the corporate-planning department, where Mr. Wada learned how a big company runs. He lobbied to be sent abroad, and in 1990 Nomura loaned him to the Foreign Ministry as a cultural attache to Poland. "I wanted to be in charge of a project from beginning to end," he explains, noting that such opportunities are rare inside a big organization. Mr. Wada got his wish: In an office with just a handful of staff, he was put in charge of a project to promote Japanese culture to a newly capitalist Poland.

Two years later, he returned to Nomura headquarters, where he worked as a securities analyst, then an investment banker advising companies on mergers and acquisitions, then as head of risk management in Nomura's global accounting office.

Mr. Wada says that practical experience has proved invaluable at Square Enix. He was hired as chief financial officer of its predecessor, Square Co., in 2000. Within a year, that company was foundering after a big-budget movie project flopped, costing it hundreds of millions of dollars and prompting the resignation of its two top executives.

At the end of 2001, Mr. Wada was named chief executive officer of Square Co. He quickly negotiated a much-needed investment from game-console maker Sony Corp. At the same time, he drew on his Nomura experience in crafting contracts to close a tricky deal with Sony rival Nintendo Co.

Mr. Wada's investment-banking chops also came in handy: In 2003, he orchestrated a merger with fellow game maker Enix Corp. Last year, Square Enix acquired game creator Taito.

Mr. Wada, who wears only suits to work to stress his role as a professional manager, says his Nomura experience analyzing companies helped him decide which firms would be a good fit with Square Enix. He has restored the company to profitability, and its shares on the Tokyo Stock Exchange are up roughly 31% since Mr. Wada took over as CEO.

So is there anything Mr. Wada would have learned in an American MBA program that he couldn't get on the job? "Yes," the Japanese executive replies instantly: "English."

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