Cockpit Lesson for Korea and Japan

Questioning Asians’ ability to fly planes is downright racist. But challenging the hierarchical structure that plagues many Asian nations and seeing it as a potential cause of the San Francisco crash earlier this month is probably not.

Speculation is rife that the more junior pilots of the ill-fated Asiana Airlines were loath to speak up to their superiors — even as the plane was approaching the runway far below the recommended landing speed.

What actually caused the South Korean carrier to crash has yet to be determined. Speculations include mechanical as much as human error.

Nonetheless, the fact that there is an ongoing debate about how the four pilots communicated with one another — or didn’t, in this case — is telling.

Far beyond this cockpit and the ensuing tragedy, it tells us a lot about how seniority and adherence to protocol are seen to stifle human and social development as well as economic growth.

What’s more, the issue of bureaucracy and adherence to convention may well be the Achilles’ heel for both South Korea and Japan moving forward. Their traditions run counter to embracing both nations’ major challenge — the ability to be more flexible and adaptable to a rapidly changing world.

Of course, respect for seniority, experience and keeping to a prescribed order are hardly traits unique to East Asia. No military organization in the world, for instance, could function without a strict top-down chain of command.

But while adherence to order may be integral for survival in combat zones, it could prove the death knell for growth in the private sector. Why? Because it stifles creativity and fosters individual inertia.

That wasn’t always the case, though. Two decades ago, Japan’s business practices, including encouragement of fierce corporate loyalty, were touted as a model for corporations worldwide. These were useful assets as the country emerged as a global economic powerhouse.

The zaibatsu system of industrial conglomerates, with strong family connections and the keiretsu network of tight shareholding arrangements between companies, were closely analyzed during the 1980s and into the 1990s.

Academics and business strategists viewed them as models for competitiveness. The networks were instrumental in making Japan the world’s second-largest economy.

The appeal to neighbors in the region was considerable. South Korea in particular looked to the Japanese model as its industrial base grew at a breathtaking rate. The Korean equivalent of keiretsus, chaebols, remain pivotal to the country’s economy.

Yet, 20 years on, what were once seen as keys to success are now regarded as deadweights working against growth. This is most clearly visible in the Japanese manufacturing sector, which not too long ago dominated global markets.

Encouraging lifetime employment and focusing on training existing employees have worked against giants like Sony and Toshiba. Those social virtues prevented them from tapping into outside talent, fresh perspectives and thinking outside the box.

South Korea, on the other hand, has flourished. Seoul has become an international center for technological cool, with Samsung leading the way.

Still, Korean companies strongly echo core tenets of their Japanese counterparts in terms of shareholding structure, personnel management and corporate values. It would therefore be folly not to recognize the risks that maintaining these similarities may pose in the future.

Granted, resistance to change remains big. Even as it falls behind China, Japan remains the world’s third-largest economy. And South Korea’s economy continues to grow from strength to strength.

Nevertheless, the time to recognize the inherent weaknesses of the existing corporate structures is now. That is no shame. In fact, it is a precondition of continued success in the future.

Just consider the case of the United States. The world’s dominant economy from the 1950s to 1970s, large U.S. corporations fell for a serious bout of bureaucratic capitalism in the 1980s.

That growth-killing trait was only removed painfully and over time. But the reinvention of such former molochs as IBM certainly reinvigorated not only the fortunes of the companies concerned, but also of the entire U.S. economy.

The opportunity is here

The opportunity for Japan and South Korea to do likewise and defeat their own demons is great. Both countries have come under new leadership in the past six months. Both Japanese Prime Minister Shinzo Abe and South Korean President Park Geun-hye have put economic reform at the forefront of their agenda.

Both leaders have also acknowledged that a business-as-usual mindset cannot prevail. But it is simply not enough to define the ills. As things stand, it is doubtful whether either country feels pushed into the corner enough to embrace painful and politically unpopular policies swiftly.

Much has been made of the Japanese prime minister’s Abenomics prescriptions for economic revitalization, which have caused stocks to surge 40% in six months. Still, such share price-driven euphoria has no legs unless structural reform takes root.

That includes allowing not only more women to remain and rejoin the workforce after having children. It also requires encouraging men to take on more family responsibilities.

In short, it would require an overhaul of social values that would break down gender-defined roles. The real pay-off for that may well be greater flexibility and openness in the workplace.

The practice of hiring recent graduates from top universities to groom them for eventual corporate leadership should no longer be the rule. If companies are to remain globally competitive, they need to look beyond prestige and look for talent wherever they can find it in their societies.

The general thirst of consumers for more personalization of products and rapid changes in market trends make it critical for companies to have a lot of diversity within. This applies not just to the top leadership ranks, but at all levels of the corporate ladder.

What’s more, immigration must play a key role in providing that much-needed diversity. While Japan has cracked open its doors to highly-skilled immigrants in recent years, government officials have expressed surprise that not more foreigners are taking advantage of the liberalized legal criteria.

Let’s take that outcome as what it likely signifies. It is perhaps the most quantifiable sign that the best and brightest of the world are no longer attracted to Japan, either for financial gain or for personal growth.

Japan and South Korea can be rightly proud of their economic performance to date. But the only way forward is to recognize that what has worked in the past may very well not be effective in the future.

Rewarding seniority, corporate loyalty, and long hours in the office have served both countries well until now. But they have definitely weakened family structures. The major challenge ahead is to come up with a work ethic that will be equally rewarding for corporations, individuals and the national economy.