Academic journal article Journal of Organizational Culture, Communications and Conflict

Design of Psychological Contracts in Japanese Firms and Their Binding Force

Academic journal article Journal of Organizational Culture, Communications and Conflict

Design of Psychological Contracts in Japanese Firms and Their Binding Force

Article excerpt

INTRODUCTION

While Japanese companies have increasingly non-permanent employees such as part-time staffand temporary workers since the 1990s, data from recent investigations have begun to show signs of a return to the trend of hiring new university graduates as permanent employees1 (JILPT, 2012). In a 2012 survey by the Japan Institute for Labor Policy and Training, 39.7% of responding firms expected to increase both the proportion and number of full-time employees in the organization over the next three years, a 6% increase from the same question three years prior (JILPT, 2012). Moreover, in the Recruit Works Institute's 2009 Human Resource Management Survey, 79.2% of respondents said that their firm's employment strategy focused on new university graduates, an increase from the 1990 rate of 67.7%. In parallel, 12.5% of respondents indicated a policy centered on hiring mid-career professionals, a decrease from the 1990 rate of 15.5% (RWI, 2010). It seems that Japanese firms have begun to revert to hiring new university graduates as regular employees.

Researchers have long noted that relationships between the employer and new-graduate hires in Japanese firms are characterized by an almost complete lack of codification in contract documents or related forms of the obligations that both parties must meet (e.g., long-term job security, acceptance of relocation) (Uchida, 1990 & 2000). Even if employees sign a written contract, this is seen as a mere formality and it is rare for terms-even important ones like job security-to be discussed explicitly between the two parties at the beginning of the employment relationship. Instead, the terms of employment are gradually understood after the hire, unspoken and tacitly, during the organizational socialization process (Nakane, 1970). Employment contracts for new-graduate hires at Japanese firms are like a "white stone plate," in the words of Hamaguchi (2009) and the idea that the reciprocal obligations between companies and employees should be designed in an explicit, formal and meticulous manner at the first step of the employment relationship has been a rarity, historically speaking (Nakane, 1970). Researchers have long debated the advantages and disadvantages of the implicit, unwritten and flexible nature of these obligations: on the one hand, it is claimed to benefit Japanese firms by allowing them to dynamically modify their human resource management systems to adapt to changes in the business environment (Dore, 1986), while on the other hand, it has been viewed as a problem with employment in Japan by making organizations more susceptible to psychological contract breach (Hattori, 2010 & 2015).

In the case of permanent employees, the implicit, unwritten and flexible essence of their employment contracts has been attributed to Japanese employment practices, such as the long-term continuation of employer-employee relationships (Nakane, 1970) and the indirect nature of Japanese-style communication (Hall, 1976). It is precisely because they presume that the mutual relationship will last a long time that employees tolerate the practice of leaving the content of those reciprocal obligations vague, without confirming them in detail beforehand and allow for their gradual manifestation and as situations warrant-alteration with the passage of time. In addition, some accounts explain it as a consequence of Japanese-style communication, in which employee-employer interactions are non-verbal, vague and dependent on shared context and less contingent on explicit language (Hall, 1976).

Yet, these claims have not been validated by empirical research. Several studies have examined full-time employees at Japanese firms, including Ogura (2013); Suzuki (2007), but they did not target the employment contract itself, nor focus on full-time workers hired out of university. In light of the recent trend of reinvigorated hiring of new university graduates as permanent employees, the purpose of this study is to examine (1) how are employment contracts in Japanese companies designed, (2) and what kind of consequences do the employment contract features-such as implicitness, vagueness and mutability in these obligations-have on Japanese business organizations and individuals today. …

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