Strengthening human capital to increase corporate value
For this section, we invited Mr. Fukuhara, an expert in human capital theory, and Mr. Senoo, who has a deep knowledge of the labor market, to give their objective and frank opinions on how we should think and what we should do to strengthen the Group's human capital.
- Date: Monday, July 8, 2024
- Attendees:
[Outside experts]
Masahiro Fukuhara (Project Professor, Graduate School of Hitotsubashi University; Representative Director, Chairman and CEO, Institution for a Global Society Corporation ; Co -Chairman, Research Consortium on Human Capital and Corporate Value)
Yutaka Senoo (Representative Director, President, Persol Career Co., Ltd.)
[TIS Inc.]
Masakazu Kawamura (Managing Executive Officer; Division Manager of Corporate Planning SBU; corporate sustainability promotion officer)
Yoshiyuki Hayashi (Executive Officer, Division Manager of Human Resources SBU; human resources strategy promotion officer)
Yutaka Tabushi (Deputy Division Manager of Technology & Innovation SBU; Departmet Manager of Design & Engineering Dept.; Section Manager, Development Platform Center)
[Facilitator]
Tomohiko Yamaguchi (Consultant, Cre-en Inc.)
Participants
Masahiro Fukuhara (Project Professor, Graduate School of Hitotsubashi University; Representative Director, Chairman and CEO, Institution for a Global Society Corporation ; Co -Chairman, Research Consortium on Human Capital and Corporate Value)
After graduating from Keio Senior High School and Keio University (Faculty of Economics), Mr. Fukuhara joined The Bank of Tokyo (now MUFG Bank).
He also earned an MBA from INSEAD (the European Institute of Business Administration) in France and a Master's degree in International Finance with highest honors from HEC Paris (Grande Ecole). Additionally, he obtained a Ph.D. from the University of Tsukuba. In 2000, Mr. Fukuhara joined Barclays Global Investors (now BlackRock), the world's largest asset management firm. At the age of 35, he became the youngest Managing Director of that company and was appointed as Director of the Japan branch.
In 2010, he founded IGS with the vision of "Inspiring self actualization through assessment and education ."
Yutaka Senoo (Representative Director, President, Persol Career Co., Ltd.)
In 2000, Mr. Senoo joined Intelligence (now Persol Career), where he held various positions, including Director of the Temporary Staffing Department and executive positions at several group companies. In 2017, he became an Executive Officer at Temp Holdings (now Persol Holdings). After serving as a Director and Executive Officer at Persol Career, he assumed his current position in April 2022.
Masakazu Kawamura (Managing Executive Officer; Division Manager of Corporate Planning SBU; corporate sustainability promotion officer)
After working in the TIS's Financial Industry SBU, Mr. Kawamura became Section Manager of the Corporate Management Department in 2017, Executive Officer and Deputy Division Manager of the Corporate Planning SBU in 2020, and Division Manager of the Corporate Planning SBU in 2021. He assumed his current position in 2024. He is also in charge of corporate sustainability, corporate planning, finance and accounting, IR/SR, corporate governance, and IP legal affairs.
Yoshiyuki Hayashi (Executive Officer, Division Manager of Human Resources SBU; human resources strategy promotion officer)
Mr. Hayashi joined TIS in 1994, initially working in system sales for the securities industry. After leaving TIS once, he later rejoined the Company. Upon his return, he became involved in development projects for the card industry and in planning and promoting new service models. Mr. Hayashi currently works in the Human Resources SBU.
Yutaka Tabushi (Deputy Division Manager of Technology & Innovation SBU; Departmet Manager of Design & Engineering Dept.; Section Manager, Development Platform Center)
Mr. Tabushi joined TIS in 2003, initially working on system development for the manufacturing industry. After serving as an architect for large-scale financial systems, he assumed his current position in 2017. Mr. Tabushi is now engaged in initiatives to enhance the Company's overall development competitiveness and in training its IT Architects.
[Facilitator]
Tomohiko Yamaguchi (Consultant, Cre-en Inc.)
The Group's Human Resources: Challenges and Strategies
Kawamura: The Group has achieved business growth by supporting a diverse range of clients across various industries. We have particularly strong capabilities in large-scale development project in the financial and industrial sectors. In recent years, we have also developed a service-based business that leverages our accumulated knowledge and expertise to resolve our clients' problems. Furthermore, we have expanded our business beyond Japan into Southeast Asia as we pursue global growth. Under these circumstances, a major priority is to activate our Groupwide human resources, covering more than 20,000 people, and harness them as a united force.
Under our new medium-term management plan, which began in April 2024, we will approach to frontier development and target sustainable growth with added value. To achieve this, enhancing the value of our human resources through a strategic approach is our top priority. Our human resources strategy focuses on strategically investing in talent essential for business and management roles. By developing our people, we aim to enhance the value we deliver to clients and society, thus fostering a positive cycle that leads to further investments in talent.
As a related KPI, we have set a target of \3.5 million in operating income per person. Here, we will place particular emphasis on developing consultants who can solve problems in the upstream process, high-level marketing talent who can explore new frontiers, and IT architects who can create high added value to enhance our comprehensive capabilities. I would like to discuss what type of personnel we are looking for as we seek to elevate the Group to the next level.
Our image of high-level human resources
Hayashi: When considering advanced talent, it's important to note that while we do have skilled professionals, the skill sets that we require are evolving. In recent years, we have been developing an offering-based business model. However, the skill sets required to make this our core focus differ significantly from those of the top-tier professionals traditionally engaged in contract development, which has been our longstanding area of expertise. To enable professionals with such skill sets to thrive, we need individuals who can bridge the gap between our legacy business and the offering business. These are the high-level human resources we want.
Tabushi: In my field of expertise as an engineer and IT architect, I believe that application skills are more important than technical stacks, while communication skills developed through working with a variety of clients and services are also important. In addition, as we persist in our work, we will naturally encounter difficulties, whether in existing areas or when cultivating new fields. Therefore, we need to have the resilience to navigate these difficulties and continue moving forward. To achieve this, we must gain diverse experiences and develop the ability to embrace and enjoy change.
Overall, sustainability is key. Rather than focusing solely on recruiting and deploying high-level human resources, it is crucial to build a pyramid structure for cultivating advanced engineers and to ensure that individuals at various levels can thrive and contribute. We need managers who fully understand and effectively address this necessity.
Skills required for high-level human resources
Fukuhara: In addressing what defines high-level human resources, I understand from the comments of Mr. Hayashi and Mr. Tabushi that we need managers who can articulate and quantify not only skill sets and skill levels but also competencies, dispositions, and values. Mr. Tabushi also highlighted the need to establish a pyramid structure for developing advanced engineers across the organization and to ensure their success at various levels. This involves the challenge of visualizing the skills required for each level.
From this perspective, we can divide the skills that are useful in corporate activities into two categories: general skills applicable across the entire market and specific skills that are useful only within particular companies.
In the future, when building the pyramid structure for personnel recruitment and development, we will need to consider an optimal balance between these general skills and company-specific skills. In doing so, we will also need to consider how to deal with the risk of general skills becoming obsolete and company-specific skills being too limited to be effective. Especially in light of our global expansion, it is important to articulate and quantify all aspects related to the recruitment and training of our own high-level human resources.
Hayashi: As you pointed out, our focus in the area of transferable skills has heavily leaned towards IT skills, which has been our emphasis so far. As a result, we have been limited in our ability to visualize our company-specific skills. To address this, we launched a new initiative last year called the Career Framework, with the goal of clearly defining our company-specific skills. We are defining the skills required for each field, with around 60% focused on IT and the remaining 40% encompassing areas that we are working to articulate and quantify, such as consulting, sales, and produce.
Recruiting high-level human resources
Senoo: For my part, I would like to share my insights from a practical, on-the-ground perspective, while also making some general observations. As a starting point, it's important to acknowledge that, as you know, society is undergoing structural changes due to declining birthrates and an aging population, resulting in a shrinking workforce. In this context, business leaders must first recognize, albeit with difficulty, that the pool of potential hires is no longer readily available. In this context, business leaders must prioritize recruitment as a priority management agenda item and make it a company-wide effort. Instead of hiring first and assessing later, we should clearly define our desired talent's level and attributes. Only with this commitment can we attract and recruit high-level human resources.
In your company's case, I sense a growing awareness. You've begun to clearly define not only tangible skills like IT architecture but also intangible skills like issue-resolution capabilities, power of insight, and comprehensive capabilities, as well as understanding client characteristics and competencies as mentioned in the medium-term management plan. This suggests you're increasingly clarifying the profile of the talent you seek with relative precision.
Factors contributing to employee performance
Yamaguchi: As we discuss the two axes of new recruitment and employee retention, I would like to briefly discuss the fundamental question of human development--namely, the roles of genetics and environment--and how these factors are proportionally balanced. In recruitment, the focus would be more on the individual's genetic potential, while in retention it would be providing an environment for shaping and developing that individual. Could you share your thoughts on this perspective?
Senoo: As someone involved in human resources, I am inclined to continue believing in individual potential, but I also feel that people change depending on their environment, and I have seen this firsthand.
Fukuhara: From the perspective of "nature versus nurture," it is undeniable that certain abilities, such as mathematical aptitude, have a genetic component. However, it's also widely acknowledged that many skills are acquired and developed over time. On the other hand, an individual's temperament is heavily influenced by genetics as shown in the so-called Big Five*-extraversion, openness, agreeableness, conscientiousness, and neuroticism.
Traits with strong genetic components are harder to improve later in life. For example, while everyone has some degree of extraversion, the extent varies from person to person. It is said that introverted individuals are more likely to experience stress when developing and utilizing communication skills. It is crucial to consider how we understand and address these traits that are strongly influenced by genetics. If we place too much emphasis on intangible skills, we risk undermining individuals who possess strong tangible skills. Ultimately, balance is key.
* Big Five: A personality trait classification method based on common language descriptors, suggesting five broad dimensions commonly used to describe human personality and mental states. These five dimensions are defined as openness, , conscientiousness, extraversion, agreeableness, and neuroticism.
Enhancing our human capital
Hayashi: Not too long ago, companies usually focused their business on a single direction, leaving no place for those who were not suited to that approach. On the other hand, with the recent increase in varying business models, there seems to be a growing consensus that people have their own strengths and weaknesses as you pointed out. We emphasize one-on-one dialogue, the essence of which is to acknowledge and understand the other person. We want to ensure that our subordinates recognize that they have options and elicit their options by engaging in face-to-face discussions about their abilities, strengths, and the roles that best suit them.
Senoo: I believe we need to establish detailed requirements outlining the qualities and characteristics of individuals-including IT architects, high-level marketing talent, and consultants-who can fully leverage their abilities to create value. This isn't something that can be captured through surface-level conversations or the standard content of a resume. For example, in your current business model, the focus has primarily been on contract development, where most team members, aside from project managers, have been executing tasks as planned. Shifting to an offering-based business requires individuals who can engage proactively and take the initiative. In other words, there needs to be a shift in mindset to discern between personnel who ask, "What should I do?" and those who confidently declare, "This is what I intend to achieve."
It's important to hire individuals who at the outset say, "This is what I intend to achieve." However, as I mentioned earlier, I want to believe that people can change through their environment. In other words, individuals who say "This is what I intend to achieve" can also be nurtured through the right environment.
I know it is a lot of work for the HR people, but through the one-on-one process you mentioned earlier, we can find out what people really want to do and let them do it on their own initiative. By embracing each person's diversity, we create an environment where the desire to say "This is what I intend to achieve next" naturally emerges. This positive cycle will, in turn, foster the development of many high-level human resources.
Hayashi: Our HR system encourages employees to consider how their personal goals align with their motivation and abilities. Additionally, we have implemented a system that uses career planning sheets to facilitate discussions between employees and their supervisors about the employee's motivation, thereby continuously asking the question, "What do you want to achieve?" By articulating each other's expectations, we aim to create a positive cycle of motivation, leading to the production of high-level human resources. We still face numerous challenges in our journey to becoming an attractive company that is consistently chosen by a diverse pool of talented individuals.
Tabushi: Today, I feel like I have been confronted with a harsh reality once again. I feel we need to continuously reflect on how we can remain an attractive company for job seekers and keep pursuing various initiatives to achieve that goal.
Fukuhara: In the relationship between human capital and corporate value, research has uncovered a significant positive correlation between investing adequately in employee compensation and the future value of those investments, as well as the relative stock price of the company .*
I believe that your company's pioneering efforts in articulation and quantification will positively impact most of the topics we discussed today. It would be beneficial to continue advancing these initiatives thoroughly.
*Ethan Rouen, Assistant Professor, Harvard Business School
Kawamura: In today's discussion, I was reminded of the critical importance of personnel recruitment and retention for the Group, especially in the current competitive hiring environment. I gained valuable insights into how we can attract and develop the high-level human resources we seek, including potential candidates, through strategic investment in human capital. I've realized that for the Group to convey its thoughts on human resources to society at large, it is important for top management to personally articulate their vision. This approach fosters a sense of ownership, enhances our recruiting capabilities, and ultimately strengthens internal communication.