Barbara Murray is the Editor of Families in Business magazine.
Kikkoman: Company, Clan and Community, by W Mark Fruin
Harvard University Press;
Kikkoman: Company, Clan and Community is a meticulously documented, highly extensive analysis of the history of a family business and its relationship to the community. It is also a very readable story about some people and personalities who owned and worked with the firm over its long history.
The book covers the history of the Kikkoman Corporation – one of Japan's oldest firms and the global leader in sales of 'shoyu' or natural soy sauce. It provides a genealogy of the interrelationships among family, enterprise and community, beginning with the company's establishment around 1661 and spanning 19 generations. The description and analysis of these are a rich source for those interested in family business and business history, anthropology, the evolution of ownership and management systems, the internal operations, manufacturing, marketing and strategic considerations faced by a firm in its own evolutionary and revolutionary processes.
Change and development
The book's introduction describes the four phases of organisational change and development by the family and firm. From the 17th century to 1887, we see complete separation of ownership and managerial control – a separation that takes place earlier here than elsewhere in the world – with the owning families keeping their distance from the highly specialised operations. Family roles were ceremonial and the workers were managed like a commodity by local labour contractors. While a large number of families owned the many shoya breweries, they were all fragmented operations with "little feeling" or loyalty.
The second phase (1887-1917) saw several families band together to form a cartel in order to share some costs and reduce some levels of uncertainty. Owning families would meet to set prices and wages, and to minimise competition, while workers were still under the power of labour contractors. Owning families began to control wages, shipping and purchasing, but left alone other internal operations.
In the third phase (1918-1946) the assets of nine families related by lineage or marriage were combined from the cartel to form the Noda Shoyu Company Limited, with a parent holding company securing family ownership.Through the efforts of consolidation, owners then became managers. Apparently, 85% of the directors and 65% of the first eighty managers came from family. The firm soon outgrew the family's ability to provide sufficient managerial talent and the 2,000 employees were managed by more non-kinsmen than kinsmen; the "firm as family" political analogy grew remote. However the analogy then took on a special force during the longest strike in pre-war Japan, starting in 1927 and lasting for 218 days. To recover from the bitterness of the strike and the need for the firm to re-assert an appropriate image, the "firm as family" analogy became an ideology. The political ideology of the day and enduring until 1945, stressed "the equivalence of state and household in a biological as well as ideological sense". Kikkoman used this and other concepts to attain loyalty from employees and achieve the shift from confrontative to paternalistic management style. Workers who felt they were working for family exerted themselves more and, not surprisingly, this period saw a dramatic improvement between company and community relations.
The final phase of post-war democracy (1945-1980) saw the abolition of the definition of the male-centred hierarchical legal family and of the holding company form of organisation. Employee benefits became rights as opposed to gifts and within the family, male primogeniture and single heir inheritance was abolished.
The family firm analogy exists in Japan today only in smaller firms, which constitute 98% of Japan's business. Kikkoman is now regarded as "too large (4,000 employees) to be termed a family firm," though the considerably larger investment needed in larger firms for harmonious workplace relations would benefit from this approach. Generally, family and firm tend to overlap only under certain conditions and are no longer a structural and ideological response to the legal, social and economic imperatives of the day, as they were in pre-war Japan.
Role of family
The book sheds light on Japanese family relationships – described as kin-based units where affection, volitional or contractual arrangements were often absent. The household unit is in effect a legal invention with its exclusively male head-of-household as executor of corporate functions, including the maintenance and continuity of property, genealogy and household ritual. In some Japanese families, including the Kikkoman families, the family is broadly defined, with boundaries of membership extended to those who can contribute to the economic welfare of the group. While genealogical kinsmen may make up the nucleus of the group, kinship is not necessary criterion of membership.
The Kikkoman families brought in an adopted male heir on six occasions over the 19 generations studied: once to implement the strategy of shoyu capacity expansion through household division, and on five occasions to sustain continuity of family ownership and control on soy sauce breweries. Economic considerations, such as the founding of a new shoyu brewery, thus took priority over kinship considerations when the economic imperative prevailed.
The role of women in the family up to the period of occupation during World War II was to marry males where a useful linkage with minor houses allowed the main household to expand as it wished. Sons apparently created branchings while daughters merely married.
The family had to abandon this practice after World War II when the occupying forces eliminated male-centred inheritance and family headship. In its place emerged a new legal framework to support a social ideology of equality rather than hierarchy. Evidence is presented from a public opinion survey in 1956, showing how support for the pre-war family institution, where the household head commanded legal, political, moral and emotional authority over the members, had weakened. Parental obligation and a much-reduced civil authority of parents over children replaced absolute power of the household. The democratisation of the family also changed corporate ownership profiles and therefore the definition of family enterprise in Japan: the "zaibatsu-busters" disbanded holding companies, reduced the permitted share holding and prohibited the passing of an undivided estate to a single heir. Families were no longer managed like firms, where property counted for more than people. The regime which engendered the submissive role of women meant that the role played by daughters an wives was in fact fundamental in the firm's strategy of economic preservation, expansion and diversification. However the evidence presented seems not to recognise this fact other than to show how the corporation realigned itself once this potential resource became obsolete. In fact, the frequency of interlineage marriage and adoptions dropped off with only two cases recorded in the post-war period (the average pre-war was one every four and a third years).
While the demise of the stem family after 1945 saw increasingly constricted ownership (the Mogis-Takanashis now own 25%), the family has continued the domination of management control. Excellent academic achievement is a requirement for the rapid promotion and continuity of family management at Kikkoman. Daughters are "still excluded from significant managerial careers outside of the family."
Appreciation of achievement
One of the disappointing aspects of the book is its failure to celebrate the achievement of this family firm. It is a shame that business historians seem to look for evidence of family introversion and caution. Fruin offers the performance of Kikkoman in the 20th century to corroborate the lackluster performance of French family business during the eighteenth to twentieth centuries. One wonders what exactly it is that a family firm has to do or achieve to be successful if over 300 years of enterprise and global brand leadership are simply not enough. It is regrettable that the business historians, who should represent a rich scholarly stream of knowledge for today's family business readership, choose to reinforce the harmful negativism that does so many family enterprises a disservice. Of course, there are cautious, introverted family firms, but it is time to see some appreciation for other characteristics, such as the ability to maintain stability within the family, community and industry: then such enterprising firms like Kikkoman will be seen to underpin most of the world's economies rather than retard them.
In fact, Kikkoman is a testament to the achievement over time of entrepreneurialism on a global scale, and to maintaining security and stability over three centuries by constantly re-configuring the structure and infrastructure of family and firm. Until World War II, the Japanese model of family governance (primogeniture, adoption and branch families) removed or controlled the issues of share dilution over the generations and of the supply of suitable and eligible managerial talent – the issues that continually lead to the demise of western family firms. Kikkoman therefore represents an alternative model of the business family where cultural norms in effect controlled some family variables in ways that would be unacceptable in probably all other societies in the world. The role and place of women were controlled in the firm by means of cultural subordination, and the right of eldest males to the leadership position were controlled by the use of adoption and branching of families. It is disappointing that there is so little mention made of the role of women in the history of the firm: it seems that the obvious assumption that their part was negligible and therefore unworthy of comment. Of course the reality is that the role of women was quite profound – without their submission to be "dispatched" in Darwinian fashion to the fittest suitor offering desirable economic characteristics, the firm would have been maladapted to survive in the evolving business world.
This book should serve as an important reference for those who wish to expand their knowledge of the behaviour of business families and the effect of cultural and political imperative on entrepreneurial activities. It also serves as a reminder, in this relatively new field of family business, that much knowledge does already exist about our interest. Yet the interpretations of current research and writings need to be continually challenged in the light of new perspectives which emerge as the field grows.