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Business

What scandal-prone Japan Inc. can learn from airlines

Errors can be learning opportunities, but only if they are brought to light

TOKYO Toshiba, Nissan Motor, Kobe Steel. With every week seeming to bring a new scandal, it would appear that corporate Japan suffers from some deep-set structural flaw. Are Japanese companies doomed to keep repeating their mistakes?

Perhaps the world's least tolerant place for error is behind the controls of an aircraft. The history of air travel has no shortage of tragedies. Yet today, only one in 8.3 million commercial passenger flights results in a fatal accident, writes author Matthew Syed in his 2015 book, "Black Box Thinking: The Surprising Truth About Success."

Rigorous analysis of crashes over the years has taught the industry how to avoid repeating deadly errors -- as well as how to prevent common, inevitable mistakes from leading to disaster.

"When I was flying an airplane, there were many, many instances" that could have resulted in an accident, said Koichi Murakami, a former pilot who logged more than 20,000 flight hours with All Nippon Airways. During a flight, there are a number of ways to prevent an error from developing into an accident, including mechanical safety systems and manual intervention by pilots. "The idea isn't so much to prevent pilots from making mistakes, but to ensure that those slip-ups don't lead to an accident," said Murakami, who now works with airlines and health care facilities to improve safety.

Some companies do try to learn from scandal. Around 50 independent committees and investigative panels have been set up at Japanese companies to look into corporate misconduct each year since 2015, according to Tokyo-based accounting company Farsight. That is more than twice the annual figure in earlier years.

Each year, over 1% of Japan's more than 3,500 listed companies experience some sort of major scandal. Among the latest batch are such heavyweights as Nissan, which put unqualified workers in charge of vehicle inspections, and Kobe Steel, which falsified quality data for aluminum and steel products. The list also includes such repeat offenders as Mitsubishi Motors.

And yet, the slip-ups never seem to end. And sometimes these mistakes bear an uncanny resemblance across industries.

LOOK AWAY Unlike pilots, rule-breaking companies seem either unwilling or unable to pull back from the brink, even when the danger is clear. Evidence of this can be seen in an August 2016 report that followed an investigation into Mitsubishi Motors' cheating on fuel efficiency.

The offending departments, the report said, told higher-ups on several occasions that their targets were impossible to meet. But their protests were largely ignored, and they stopped pressing the matter at a certain point. Eventually, steps were taken to hide the problem from outside observers.

Unqualified workers conducted vehicle inspections at Nissan Motor's Oppama Plant in Japan.

The story at Kobe Steel is strikingly similar. Like at Mitsubishi, workers falsified data for years before being found out, aided by the ignorance of management teams regarding what was happening on the ground. That such cases are so abundant, even across industry lines, is a sign that "the structure of many Japanese companies has suddenly started to degrade rapidly," according to Shuichi Uemura, a professor at Oita Prefectural College of Arts and Culture in southern Japan and an expert on corporate governance.

Others see something else at work besides organizational breakdown. "Japanese organizations have a tendency to proceed toward failure in a rational way," said professor Kenshu Kikuzawa of Keio University. Fear of incurring the government's ire and of having to lay off workers may have kept Toshiba from pulling out of the nuclear power business, for example. At Kobe Steel, fear of losing clients over delays in delivery or higher costs may have encouraged workers to fudge quality measurements.

FATAL SILENCE "When top and middle management order subordinates to do something those workers know to be impossible, they find themselves backed against a wall and their minds turn to misconduct," Kikuzawa explained. "If wrongdoing does occur, those around it turn a blind eye. Silence becomes the reasonable response in that organization."

Airlines have long realized the danger that silence poses. "We consider Heinrich's Law when we discuss ways to prevent accidents," said Hideaki Kuroki, general manager of ANA Holdings' safety promotion center, referring to the empirical observation that "in a workplace, for every accident that causes a major injury, there are 29 accidents that cause minor injuries and 300 accidents that cause no injuries." Pilots and maintenance workers know to look out for these warning signs and rectify problems as they crop up.

When a more serious failure does occur, data is sent not only to the upper echelons of management, but to aircraft makers, government authorities and rival airlines as well. This culture of sharing information across national and organizational lines is probably why the air travel industry learns from failure as successfully as it does.

Management guru Peter Drucker wrote in the preface to the Japanese edition of his work "Post-Capitalist Society" that, on a number of fronts, Japan is not organized to meet the needs of the 21st century. Judging by corporations' inability to change their error-prone ways, Drucker's remark may still apply today, more than 10 years after he first made it.

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