Chapter15 The Founding Prospectus

The Founding Prospectus

Sony's distinctive style of personnel management derives from the founding prospectus Masaru Ibuka penned for Tokyo Tsushin Kogyo (Tokyo Telecommunications Engineering), Sony's former name.

In that prospectus, Ibuka wrote of his wish to build a company whose employees gained satisfaction and pleasure from their work and to create a fun, dynamic workplace. Rather than establishing a system of control, Ibuka wanted to create a pleasant working atmosphere and an open-minded corporate culture. Sony has used these fundamental principles when developing its personnel policies. Despite the enormous changes that have since taken place over the years both inside and outside Sony, the company's dedication to realize these objectives remains the same.

In May 1966, Ibuka (then president) and Akio Morita (then vice president) displayed their commitment to upholding the principles of the founding prospectus by establishing the Personnel Development Department and appointing managing director Mitsuzo Narita to run it. The job of this new department was to ensure that the right people were in the right jobs and that employees were properly evaluated by their managers.

When he announced the establishment of the Personnel Development Department, Ibuka told the employees: "It is not the job of managers or of this new department to pull you in their wake. Each and every one of you must act as your own driving force. All the company can do is remove obstacles to individual development and nurture talent by guiding and supporting employees who have the drive and determination to develop their own career paths. The Personnel Development Department will simply act as a catalyst for helping employees to achieve this."

Soon after it was established, the new department implemented a recruiting system whereby job openings would be advertised in the company newsletter. Anyone interested in the job could apply directly to the Personnel Development Department without informing his or her superior. Suitable candidates would then be interviewed by the division that was recruiting and, if offered the job, the employee would be free to transfer from his or her present position.

Ibuka and Morita believed that jobs should be done by people who not only have the ability, but also the motivation to do them. If people were allowed to discover their own strengths and secure positions that truly suited them, they would be able to demonstrate and develop their talents. Since its founding, Sony's top management was an enthusiastic exponent of an open, meritocratic approach to personnel management. By 1966, when the new department was established, Sony's employees had grown to number more than 6,000. The increasing size and complexity of the organization required a more structured system of personnel management.

The internal recruiting system was introduced to make it clear that talented, enthusiastic employees would be given the chance to progress within Sony and to provide a mechanism for the movement of staff. Although experienced personnel were often brought in from the outside to fill specific needs, the internal recruiting system became firmly established within Sony. It is still today regarded by other companies as a pioneering development in personnel management.
The first time the internal recruiting system was used, many applications were received for only two job openings. Initially, members of the Personnel Development Department had to work hard to persuade managers to part with capable staff. But the unique system soon became an established feature of Sony's corporate culture. At present, around 200 employees make use of it each year to change jobs within the company.

While such as system gives employees the chance to grow, what employees do with that chance depends on their own efforts and abilities. Based on the Sony philosophy that people can improve themselves through concrete achievement, the aim of the company personnel policy is not to educate so much as it is to help people realize their own potential by actually giving things a try. If, through their own efforts and determination, people succeed in a difficult job or situation, the experience helps them to develop as people. At Sony, on-the-job training is emphasized with new employees as well as with employees who move internally within the company.

In addition to Ibuka and Morita, this fundamental policy has been followed by Tsunao Hashimoto and all successive heads of personnel. Instead of enforcing rigid corporate rules, Sony's approach has been to create a pleasant, dynamic workplace and encourage individuals to contribute in their own way to realizing common goals.

Another important figure related to personnel matters is Akira Higuchi. Since the founding of Tokyo Tsushin Kogyo, he has made a great contribution to Sony in many areas of personnel management through his basic belief that one must respect the company and look after its people. In the 1960s, Higuchi played an important role in personnel development as general manager of the Personnel Development Department. In the1970s, during terms as manager of the Atsugi, Sendai, Ichinomiya and Inazawa plants, he went out of his way to listen to the views of his staff in order to create a good working atmosphere and an independent identity for each plant. In addition, he has served for almost forty years as chairman of Sony Health Insurance Society, introduced in 1958, and has supported the activities of the Sony Foundation of Science Education (established in 1972) and the Sony Institute of Higher Education (established in 1964). Even today, important questions regarding personnel management are often referred to him directly.

Keeping an Open Mind

A puzzle used in the 1989 CBS/Sony Group
recruitment examination, the first time candidates
were asked not to name their university.

In order for Sony to overcome the dual handicaps of a short history and low name recognition, it had to rely on capable candidates to join from other companies. As a result of this, Sony was able to create a relaxed culture and working environment, so people joining from other companies could easily fit in. In addition, a lack of rigid corporate rules yielded an environment in which new recruits were expected to contribute to the company from their first day and were treated as valuable human resources.

This relaxed culture was emphasized even more after Sony began to regularly recruit university graduates. In addition, Sony introduced systemin1988 under which it periodically hires experienced people, rather than relying solely on university graduate recruitment. Ibuka said that this "mixed blood" policy made Sony a much stronger company. Hashimoto, who had played a major role in personnel development from the second half of the 1970s, concurred with this view point. He said, "Today, Sony should not be the same as it was yesterday. Sony must evolve and develop from the knowledge and experiences brought by its employees who come from outside the company."

Sony applies a similar philosophy to its overseas operations. Sony began appointing local managers as heads of its overseas subsidiaries in the 1960s, well before other Japanese companies took up the practice. And in 1989, the first of two non-Japanese directors were appointed to the board of Sony Corporation. Nowadays, with the full-scale localization of its U.S. and European operations, virtually all of Sony's marketing activities in those regions are led by local employees. Sony firmly believes in giving chances to capable individuals, regardless of nationality.

In 1991, Sony Corporation officially introduced its open-entury system for university graduates, whererby appkicants are asked not to name their respective schookls. The firast staff employed underathsi system joined Sony in April 1992.
In actual fact, Sony had been considering graduates regardless of which school they attended since 1966. Following a philokophy Morita himself advocated, Sony judges the individual rather than the institution he or she has attended. Unlile many other Japanese companies, Sony today still does not rely on an "old boy" or "old girl" system of hiring its recrutits.

The CBS/Sony Group became the first member of the Sony Group to formally introduce the system of asking appicants not to give teh name of their universities in 1989. A short time later, Japan's \central Education Council publicly asked companies to place less emphases on graduation from prestigious scholls, in order to alleviate the damage caused by iferce competition to enter such institutions. This public statement reinforced the Sony philosophy.

However, ther was still some doubt within Sony Corporaiton as to whethe or not such a system coud really meet Sony's recruitment needs. It was the eime of Japan's "bubble" economy and all divisions were in desperate need of new staff. Managers were worried that they might not be able to attract the reauired number of new recureits and that they themselves would be held responsible for this failure.

Hashimoto allayed their fears by saying that if they could not get enough new recuruits, they could always take up the slack by hiring people with previous experience. After all, Sony had enjoyed considerable success in the pst attarcting experienced personnel. Through its courageous hiring policy, Sony gained a variety of highly talented people, and this innovative aproach was well reported in the media.

The fundamental belief underlying Sony's management is that companies and systems must changewith the times. Thisapplies just as much to recruitment and personnel matters as it does to technological development.

"Wanted:People Capable of Arguing in English!"

The first employees of SOSA in Switzerland (from
left to right, Koriyama, Komatsu, a Swiss secretary
and Suzuki).

In the 1960s, Sony placed a rather unusual advertisement in the Asahi Shimbun. The ad read, "Wanted: People Capable of Arguing in English." The text revealed that the advertisement was placed to recruit staff for its overseas operations. Fortunately, it attracted much attention, and Sony received many inquires.

To become a world-renowned brand name, Sony began establishing sales and marketing operations abroad. The most pressing job openings requiring employees were in the areas of tape recorder and transistor sales. "We need people who speak English and can understand the market as soon as possible," read the advertisement. There was no time to hire university graduates and train them.

Personnel with overseas sales experience were recruited from trading firms and this included Hajime Unoki, Shiro Koriyama, Toshio Miyamoto, and Masakazu Jinno the first year, followed by Akinobu Ishihara the second year, and Kenji Tamiya the third. These employees joined the already established International Division, which was located in a shabby building nicknamed "the barracks atop the mountain." On their first day, they received a hearty welcome from the divisional director Masayoshi Suzuki, as well as from Manpo Komatsu, Hiroshi Okochi, and several other employees. Then they were shown to their desks on which countless documents and invoices needing attention were piled. The International Division at the time consisted of several groups divided by region, overseeing all activities in the US, Europe, Asia and Africa.

In the late 1950s, Suzuki, Okochi and Jinno were transferred from the International Division to the US, whereas Komatsu was transferred to Europe. Armed with data based on thorough market research, they began preparations for establishing offices in their respective regions. In February 1960, Sony Corporation of America (SONAM) was established in New York as a local legal entity (see Part I, Chapter 8). In Europe, the first Sony office was opened in Zurich in August of 1959. The following year, this office was expanded and incorporated as Sony Overseas S.A. (SOSA). This sales company began with just four employees: Komatsu as its director, Shiro Koriyama, Reiji Suzuki, and a Swiss secretary. Once SONAM and SOSA were in operation, daily contact with the Tokyo-based International Division was maintained by telex to determine production and sales quantities.

In Africa and Asia, sales were conducted directly through local dealerships, and inquiries and letters of complaint from these dealers left unattended had begun to pile up. The first assignment for the "overseas sales staff" was to familiarize themselves with the product model numbers in catalogs and reply to each letter. Most replies were sent out by mail with only those in need of urgent attention sent by telegram. Facsimile machines were not available at the time and overseas phone calls were too expensive. As soon as an order was confirmed, the staff completed order sheets based on previously written ones and sent them to the factories. The members of International Division were then responsible for making sure the products were shipped safely. On joining the International Division, these newly recruited employees were put in charge of many dealers. They were not given any specific job training or introduction program. It was tougher than many had anticipated. With no set guidelines, each had to invent their own way of doing things.

In the early 1960s, aside from SOSA and SONAM, Sony's two other overseas operations consisted of the Hong Kong Office, established in 1958 and a production plant in Ireland, established in 1959. Members of the International Division took turns taking two to three month business trips to establish local distribution channels and conduct market research.

In those days, people going abroad were still so rare in Japan, so that they were seen off by groups of well-wishers shouting "Banzai!" for good luck at Haneda Airport. The names of employees traveling abroad and returning to Japan were all listed in the "Overseas Travelers" column of the weekly internal corporate newsletter.

With Transistor Radios in His Bag

People in Africa become acquainted with Sony

Unoki left the Mitsui affiliated trading company in 1959 when he was hired as one of the first Sony employees for the International Division. His father had taken the liberty of sending an application form to Sony on his behalf. After joining, Unoki's fate was sealed when he bravely opened a letter from Africa that had been left unopened. Several months after he started working for Sony, he was sent to Africa.

Morita urged, "Go as soon as possible. Africa is calling you." However, at the time, many African nations were still under the jurisdiction of the United Kingdom and other countries. He was told that for the countries he wanted to visit, it usually took up to three months to obtain a visa through the British Embassy. "You must be kidding. I can't wait that long," Unoki replied, irritated. Just then, word came that the newly independent Egypt had established an embassy in Tokyo. When he applied for a visa at the Embassy of Egypt, it was processed on the spot. "I guess I'll find my way around once I get there," he thought to himself and hopped on a plane with a bag full of sample transistor radios. After landing in Cairo, he traveled to Sudan, Ethiopia, Kenya, Uganda, Tanzania, Rhodesia, South Africa, and several west African countries. In total, Unoki spent roughly six months in Africa.

How did he obtain visas? When he was in Egypt, he went to the Embassy of Sudan to apply for a visa, enclosing a "5 note between the pages of his passport and shooting an eager look at the attendant on duty saying, "I'd like to go to Sudan next." He got his visa almost immediately. In Sudan, he did the same thing. In fact, his "5 notes opened borders for him throughout Africa. "This is easier than I expected," he chuckled. "The trick is to get into Africa. The rest is easy." At the time, there were no Japanese firms present in these countries, and Japanese individuals in the region were rare.

Unoki's assignment was to find potential distributors. Based on research he had done on the companies which had made inquiries to Sony, he completed a list of potential partners. Once on location, he conducted further research into the business operations and financial status of these firms through information gathered from banks and local chambers of commerce. If the figures and the storefronts looked promising, Unoki would telephone the potential client and say, "I'm here. May I come and see you?" This is how he went about negotiating deals.

Though he seldom received replies, Unoki wrote letters to Tokyo daily, reporting on and giving his impressions of the stores and people he visited and the feasibility of doing business with them. Many of the places he visited had no reliable sources of electricity, and a transistor radio operating on a small battery proved incredibly popular. Unoki found that as soon as he presented his samples to potential distributors, they all wanted to start doing business with Sony as soon as possible. "We'd like to start from tomorrow," they would say. "Please get approval from Tokyo immediately," they urged. Unoki needed a reply from Tokyo and though he tried telephone and telex, the telecommunication links with Japan were so poor that he could not get through. In effect, the letters he had sent to Tokyo seeking permission had simply become one-way "progress reports" because he seldom received a reply. Unoki was only 30 years old at the time. Business with dealers like Tedelex of South Africa, which Sony has maintained a relationship with for more than 30 years, began this way.

Meanwhile, Tamiya had completed his training in the Japanese domestic market and was in charge of the Central and South American regions. He was sent to Peru in 1963. His choices had been Lima or Beirut. Unfortunately for Tamiya, he was assigned to Peru, a country where English is not the official language. As Tamiya did not speak Spanish, he spent his early days in Peru working by day and studying Spanish at night.

Tamiya never returned to Japan during the five years he spent in Peru, Venezuela, and Brazil, and had few visitors from Japan. He finally returned to Japan in October 1967. In 1970, a residential representative office called Sony Corporation of Panama S.A. was established in Panama to oversee operations in all of Central and South America.