In-House Position of Human Resource Departments at Japanese Corporations
Tomoyuki Shimanuki／Professor, Chuo Graduate School of Strategic Management
Area of Specialization: Human Resource Management
1. HR departments are responsible for HR strategy at corporations
My field of expertise is Human Resource Management (HRM), which is a branch of business administration that the study focuses on the use of human resources in corporations. Research is being conducted from the perspective of securing and effectively utilizing human resources from the labor market in order to achieve organizational goals and sustainably improve corporate value. The majority of previous studies are related to human resource systems (HR systems) and human resource practices (HR practices) that improve productivity and retention of employees; for example, recruitment, training, transfer, evaluation, reward, promotion, work-life balance, diversity management, and international HRM.
On the other hand, there is also research on human resource departments (HR departments) and line managers who are responsible for designing and operating these HR systems and practices. This research examines the roles of the HR departments specializing in HRM and the line managers implementing HRM in their workplaces. The research also seeks to determine the most effective way to collaborate between HR departments and line managers. One of my research themes is to determine the position of HR departments in the management layer. Although little research has been accumulated in Japan, the in-house position of HR departments is important in order to link a corporate strategy and human resource strategy (HR strategy) and to implement HRM in an increasingly uncertain and complex business environment. In this respect, HR departments are worthy of attention. My research examines the following fundamental questions: (1) How is the in-house position of HR departments at Japanese corporations changing; (2) What change is brought about by the change in the position of HR departments in relation to HR systems and practices; and (3) How is the change in position of HR departments linked with organizational performance.
2. How to ascertain the in-house position of HR departments at corporations
In-house position refers to the authority and influence exerted within a corporation. According to overseas research, there are two main ways of understanding the in-house position of HR departments. The first way is the involvement in HRM decision-making.Previous research compares the authority and influence of HR departments in formulating HR strategies and designing/operating HR systems and practices with those of line managers, and focuses on the extent to which the intentions of HR departments can be reflected. Excellent research has been accumulated on Japanese companies.Generally speaking, US companies have a decentralized HRM in which line managers have greater authority and influence, whereas Japanese companies tend to have a centralized HRM in which HR departments have a higher degree of authority and influence.
The second way to understand the in-house position of HR departments is involvement in corporate decision-making. Previous research compares authority and influence in corporate management with other functional departments and business departments. Specifically, research examines areas such as the formulation of management strategies, M&A, the establishment of new businesses, and withdrawal from existing businesses. Research on Japanese corporations is limited, but a valuable comparative study of Japanese and American corporations by Jacoby (2005) showed that in the 1980s and 1990s, the HR departments of Japanese companies possessed stronger authority in corporate decision-making than other departments. Furthermore, the study showed that around 2000, HR departments were only behind corporate planning departments and marketing departments in terms of having a strong influence in corporations. However, almost no research has been accumulated since this study. Based on these research trends, I am conducting research to understand the in-house position of HR departments at Japanese corporations from the perspective of their involvement in corporate decision-making.
3. Changes in the in-house position of HR departments at corporations
A typical indicator in research that assesses the in-house position of HR departments within companies from their involvement in corporate decision-making is whether a head of the HR department is a member of the board of directors. The board of directors is the decision-making body of a joint-stock company. The board decides on important matters related to corporate management and business execution. Therefore, at corporations where the head of HR department is a member of the board of directors, the HR departments are assumed to be more involved in corporate decision-making than at companies where this is not the case, and the HR departments have a higher in-house position within the corporation.
To introduce part of my research, I used data on the directors of 884 continuously listed corporations from 1990 to 2015 to calculate the percentage of corporations in which a head of HR department was a director (Shimanuki, 2016). I also included the head of the corporate planning department and the head of the finance department. In 1990, the percentage of corporations in which a head of HR department was a director was 50%. However, in 2015, this number had significantly decreased to just under 30%. On the other hand, in 1990, the percentage of corporations in which the head of corporate planning department was a director was around 50%, which was the same as for the case of the head of HR department. This percentage was maintained in 2015, and increased slightly. Additionally, the percentage of corporations in which the head of finance department was a director has increased from over 20% in 1990 to around 25% in 2015. These results show that the general trend of Japanese corporations over the past 25 years is that corporate planning departments have maintained a high in-house position at corporations, and finance departments have improved their position, while the in-house position of HR departments at corporations has decreased significantly. Going forward, there is a need for research on how changes in the in-house position of HR departments at corporations are related to changes in the HR systems and practices of corporations, as well as to changes in the functions and activities of HR departments (Shimanuki, 2018).
4. Is "Human Capital Management" an opportunity for HR departments?
A recent HR trend in Japan is "Human Capital Management." According to the Ito Report for Human Capital Management published by the Ministry of Economy, Trade and Industry in 2020, in order for Japanese corporations to sustainably increase corporate value, it is necessary to link corporate strategy and HR strategy. A Chief Human Resource Officer (CHRO) is said to fulfill a key role in doing so. The publication of this report has put a spotlight on HR departments. It is important to keep an eye on whether this attention will improve the in-house position of HR departments. If HR departments can redefine their role and their potential to contribute to internal and external stakeholders, and can take the lead in transforming HR strategies and fostering innovation, the in-house position of HR departments at corporations will be elevated again. However, if change and innovation do not progress and the contribution of HR departments to corporate value is deemed insufficient, the position of a CHRO and HR departments will further decline just after a temporary spotlight. In this case, there is the possibility of a large difference in in-house influence when compared to corporate planning departments and finance departments.
Of course, corporate planning departments and finance departments are not in competition with HR departments; rather, they are partners who work together to improve corporate value. Furthermore, in order for HR departments to fulfill a strategic role, it is essential that they cooperate with digital departments, research and development departments, and other departments in addition to corporate planning departments and finance departments. It is also essential for HR departments to collaborate with functional and business departments. In order for the HR departments of Japanese companies to participate in corporate decision-making as equal partners with other departments, I am paying attention to how well they can use the trend of "Human Capital Management" as an opportunity to promote self-transformation for the purpose of improving their in-house position and creating value for corporations (Shimanuki, 2023a, 2023b).
- Tomoyuki Shimanuki (2023a), "Concept of Strategic Human Resources Management," Hitotsubashi Business Review, 71(2), 98-105, series of articles currently under publication.
- Tomoyuki Shimanuki (2023b), "The Challenges of Human Resource Management in Japanese Firms: Implications of Ito Report for Human Capital Management," Hitotsubashi Business Review, 71(1), 42-55.
- Tomoyuki Shimanuki (2018), "The Status of the HR Department of an Organization," Japanese Journal of Labour Studies, 698, 15-27.
- Tomoyuki Shimanuki (2016), "Are the Human Resource Departments of Japanese Corporations Strong? Analysis of Data from Human Resource Executives," paper presented at the FY2016 Research Conference of the Academic Association for Organizational Science.
- Jacoby, S.M. (2005), The embedded corporation: Corporate governance and employment relations in Japan and the United States. Princeton, NJ: Princeton University Press.
Tomoyuki Shimanuki／Professor, Chuo Graduate School of Strategic Management
Area of Specialization: Human Resource Management (HRM)
Tomoyuki Shimanuki graduated from the Faculty of Law, Keio University. After working in the HR department of a general trading company, he completed the Doctoral Program in the Graduate School of Commerce and Management, Hitotsubashi University. He holds a Ph.D. in commerce from Hitotsubashi University. Before assuming his current position, he served as a Full-Time Lecturer and Associate Professor in the Graduate School of Commerce and Management, Hitotsubashi University, and as a Professor in the School of Business Administration of the same university.
His area of expertise is human resource management (HRM). His main research themes include HRM linked to corporate/business strategy, HRM in organizational restructuring and group company management, and the strategic role of the HR department.
His main written works include Graphic Human Resource Management, (Shinsei-Sha, co-edited/co-authored, 2023), The 1st Step to Human Resource Management, (Sekigakusha, co-edited/co-authored, 2022), Temporary Agency Work: Lives and Careers at the Boundary of Market and Organization, (Yuhikaku, 2017; recipient of the Takamiya Award of the Academic Association for Organizational Science and the Academic Award of the Japan Society of Human Resource Management, and more.