April 20, 2017 3:30 pm JST

Sharp's corporate culture undergoing massive change

Employees are now being paid for their results, not for their years

NATSUKO KATSUKI, Nikkei staff writer

Sharp President Tai Jeng-wu meets reporters at the company's head office in Osaka, March 2017.

TOKYO -- Radical changes in personnel management are impacting Sharp's corporate culture. Parent company Hon Hai Precision Industry of Taiwan -- better known as Foxconn -- is paying no heed to traditional Japanese management practices as it pushes drastic reforms, replacing a largely seniority-based remuneration system with one based on merit.

"The reborn Sharp will be energized under a new system," Sharp President Tai Jeng-wu said.

The reforms take a carrot-and-stick approach to personnel, generously rewarding top performers who contribute to Sharp's earnings while penalizing laggards. It may take some time before workers find their comfort -- or discomfort -- zone in the new system, but the Taiwanese electronics contract manufacturer is determined to make it work.

Tai launched the personnel management reforms soon after assuming his post in August last year. Just two weeks into the job, he organized a committee of executives, division chiefs and other senior managers to assess the performance of employees and classify job assignments.

Tai then decided on a series of reforms. In the second half of fiscal 2016, he began testing an incentive program, offering monetary rewards to young sales representatives according to how well they achieved their goals. In January, Tai started grading performance and corresponding remuneration for both managerial and rank-and-file workers based on type of work and responsibilities, rather than age and seniority.

While most Japanese companies have similar performance-based grading systems, in practice, grades are often determined on the basis of seniority.

Under the new system, Sharp's workers are given assignments then graded depending on the scope and difficulty of the assignment along with level of achievement. Workers who complete their assignments with the intended results receive higher grades and more authority.

Unconcerned about employee outflow

The system, which tends to boost employee morale, is based on Tai's principle of rewarding workers who make positive contributions to the company's bottom line while punishing those who do not.

In November last year, Tai implemented a system that demotes managerial staff to rank-and-file status if they are deemed to have failed their responsibilities. Some managers have already been demoted, according to Sharp sources, although their numbers are unknown.

The new system of promotion and demotion is aimed at revitalizing Sharp's labor force. When asked at a press conference in March to comment on employees quitting because of the reforms, Tai replied, "I am not worried at all because I want employees to stay if they want to work with me."

Doubling recruitment of new employees

Tai said at a press conference earlier this year that Sharp will introduce performance-based bonuses of one to eight months' basic salary in fiscal 2017. The money will come from funds already set aside for bonuses based on four months' salary on average. The wide spread in bonus payouts is aimed at attracting motivated, goals-driven workers.

The planned recruitment of young job seekers fresh out of school in spring 2018 includes some 300 university graduates, double the number hired this spring. In particular, Sharp wants to attract more engineers.

While the Hon Hai style of personnel management is crucial for Sharp's recovery, employees have mixed feelings. Some are embracing the new system, as they feel their work is now getting the appreciation it deserves. Others, however, consider that the reforms on their own are not enough.

Need for new corporate culture

The changes in personnel management at Sharp increase the growth potential of young employees, as they are now given opportunities to take on challenging tasks with more responsibility. But managers and midlevel staff accustomed to the old ways are struggling to adapt.

In any case, Sharp's top priority is on improving its earnings. The company needed a capital injection from Hon Hai for its bailout, and a new performance-based system that rewards employees regardless of age, sex and nationality will help achieve this goal. The system will also help attract top-tier foreign talent as befits a global corporation.

Reforms at Sharp have just begun. To make the new system work, the company needs to create a corporate culture by changing how its employees think and getting the most out of them.

Asia300

Hon Hai Precision Industry Co., Ltd.

Taiwan

Market(Ticker): TAI(2317)
Sector:
Industry:
Electronic Technology
Computer Peripherals
Market cap(USD): 65,802.77M
Shares: 17,328.73M

Sharp Corp.

Japan

Market(Ticker): TKS(6753)
Sector:
Industry:
Consumer Durables
Electronics/Appliances
Market cap(USD): 20,207.18M
Shares: 6,119.52M

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