From World's No.1 to 'GAFA Academy': Why Japan's NTT Adopted Remote Work [Jjinbit]

(Photo by NTT)

[Asia Economy Reporter Jeong Hyunjin] # On the morning of the 5th at 7:30 AM, Motoki Saito, head of the Technology Strategy Division at NTT Communications, visited Hokkaido New Chitose Airport. It was the day he commutes to the office in downtown Tokyo once every two months. Usually, he works from his hometown residence in Hokkaido. Until a year and a half ago, he was called a 'weirdo' for returning to his hometown, but now he often receives requests from other departments to consult on work styles.

Japanese telecommunications company NTT introduced a remote work system last July. Among the 300,000 employees across the entire group, 30,000 employees of core affiliates were allowed to work without restrictions on their place of residence anywhere in Japan in principle. Like Mr. Saito, commuting by plane is also possible. As a result, about 200 of the approximately 1,500 employees who were previously assigned alone in urban areas have returned to their hometowns and are working from home.

On the 18th, Japan's Nihon Keizai Shimbun reported that NTT is aggressively tackling new ways of working and personnel reforms. According to the report, NTT abolished the previous residence restriction of "within two hours commuting time to the company" and designated work locations as home or satellite offices. Also, there is no upper limit on transportation expenses supported for commuting, and airplanes can be used. Affiliates decide departments that adopt remote work as a principle depending on the department situation, and for some employees, going to the office is treated as a business trip itself.

◆ "Stop Talent Drain"... Changes in Work System as a Kind of 'Carrot'

[Image source=Reuters Yonhap News]

Why is NTT, known for its conservative personnel system in Japan, attempting such a radical change? Nihon Keizai explains that the background for this change is that NTT, once the world's largest company in the 1980s, has sunk to the point of being called the "academy of GAFA (Google, Apple, Facebook, Amazon)" on the internet. The company sees the major decline in competitiveness as caused by talent drain and adopted remote work to strengthen retention.

In places like Silicon Valley in the U.S., the remote work system, which spread due to COVID-19, is used as a kind of 'carrot' to secure talent. Some global companies declared office returns this year, but employees strongly opposed or even switched jobs to companies maintaining remote work systems. Apple ordered a "three-day office attendance per week" last month after many delays, but it is still struggling due to employee resistance.

Reflecting this atmosphere, NTT, which was losing talent to GAFA, decided to fully adopt the remote work system. A managerial employee at NTT told Nihon Keizai, "Last time it was Google, this time it's Amazon," revealing that about 30 employees had exit interviews within a year. Employees learn the basics at NTT and then move to overseas big tech companies. This is why NTT is called the "academy of GAFA." A senior employee who worked at NTT for a long time lamented, "Not only GAFA but also in Japan, the competition for talent acquisition is in a dangerous situation."

NTT was once the company holding the title of the world's largest market capitalization. It showed rapid growth until the 1990s due to the telecommunications industry's boom. According to Nihon Keizai Shimbun, NTT quickly collapsed after the dot-com bubble, and as of the end of last month, its market capitalization ranked 120th worldwide. Instead, this position was taken by big tech companies GAFA. Alphabet, Google's parent company, has a market cap 13 times that of NTT, and Apple is 23 times larger.

"It has become an era where employees choose how to work by themselves. My mission is to make each employee excited to work," said Jun Sawada, NTT president, when announcing the introduction of the remote work system in June, promising to review work methods. Sawada repeatedly emphasized that the goal of the system reform is to pursue the so-called 'work-life balance' desired by talent. Will NTT's efforts be able to recapture the talent heading to GAFA?

◆ Destroying Seniority... Can They Revive Their Presence?

NTT's personnel reform is not limited to remote work. It also plans to dismantle the seniority system traditionally adopted in Japanese organizational society, where status rises according to years of service or age. Starting next April, they will introduce a system to appoint employees in their 20s to managerial positions such as section chief. This will be implemented for about 65,000 employees of major group affiliates and later expanded to all affiliates in Japan.

NTT originated from Nippon Telegraph and Telephone Public Corporation established by the Japanese government in 1952. Although privatized in 1986, it still retains characteristics of a public enterprise, with a strong seniority culture in its personnel system, Nihon Keizai explains. Because of this, even if employees had ability, promotion was difficult if they were young, and it was hard to be properly evaluated for their skills.

To eliminate this atmosphere, NTT abolished the minimum tenure of 2-3 years per rank, allowing promotion without a basic tenure period if the employee has ability. At the same time, they announced that promotion and salary increase evaluation criteria will clarify expertise standards, focusing on expertise rather than age or years of service.

As Japan's largest telecommunications company attempts such a radical move, the impact on the Japanese industry is expected to be significant. However, there are evaluations that it is uncertain how much these changes will contribute to NTT's growth. There are also criticisms that the company's own appeal, not just the personnel system, has declined. Nihon Keizai said, "NTT's fall overlaps with Japan's 'lost 30 years' during which the Japanese economy lost its shine globally," and "NTT's counterattack will be a touchstone to judge whether Japan can shine again in the IT field."

Editor's Note[Jjinbit] is short for ‘Jeong Hyunjin’s Business Trend’ and ‘Real Business Trend.’ It is a corner showing trends in 'work' such as organizational culture and personnel systems after the pandemic. Based on analyses from foreign media and major overseas institutions that have not received much attention so far, we will deliver fresh and differentiated information and perspectives.