Case Study 9 National Office Machines – Motivating JapaneseSalespeople: Straight Salary or Commission? National OfficeMachines (NOM) of Dayton, Ohio, manufactures of cash registers,adding machines and other small office equipment, has recentlyentered into a joint venture with Nippon Cash Machines (NCM) ofTokyo, Japan. NCM is an old-line cash register manufacturingcompany organized in 1882. At one time, Nippon was the majormanufacturer of cash register equipment in Japan but it has beenlosing ground since 1970 even though it produces perhaps the bestcash register in Japan. The fact that it produces only cashregister is one of the major problems; the merger with NOM willgive them much-needed breadth in product offerings. Anotherhoped-for strength to be gained from the joint venture ismanagerial leadership, which is sorely needed. Fourteen Japanesecompanies have products that compete with Nippon, plus severalforeign giants such as IBM, National Cash Register and Unisys ofthe United States and Sweda Machines of Sweden. Nippon has a smallsales force of 21 men, most of whom have been with the companytheir entire adult careers. These salesmen have been responsiblefor selling to Japanese trading companies and to a few largerpurchasers of equipment. Part of the joint-venture agreementincluded doubling the sales force within a year, with NOMresponsible for hiring and training the new salesmen who must allbe young, collegetrained Japanese nationals. The agreement alsoallowed for U.S. personnel in supervisory positions for anindetermine period of time and retaining the current Nippon salesforce. One of the many sales management problems facing theNippon/American Business Machines Corporation (NABMC – the name ofthe new joint venture) was which sales compensation plan to use;that is, should it follow the Japanese tradition of straight salaryand guaranteed employment until death with no individual incentiveprogram, or the U.S. method (very successful for NOM in the UnitedStates) of commissions and various incentives based on salesperformance, with the ultimate threat of being fired if salesquotas go continuously unfilled? The immediate response to theproblem might well be one of using the tried-and-true U.S.compensation methods, since they have worked so well in the UnitedStates and are perhaps the kind of changes and needed and expectedfrom U.S. management. NOM management is convinced that salespeopleselling its kind of products in a competitive market must havestrong incentives to produce. In fact, NOM had experimented on alimited basis in the United States with straight salary about 10years ago and it was a bomb. Unfortunately, the problem isconsiderably more complex than it appears on the surface. One ofthe facts to be faced by NOM management is the traditionallabor-management relations and employment systems in Japan. Theroots of the system go back to Japan’s feudal era, when a serfpromised a lifetime of service to his lord in exchange for alifetime protection. By the start of Japan’s industrial revolutionin the 1880s, an unskilled worker pledged to remain with a companyall his useful life if the employer would teach him the newmechanical arts. The tradition of spending a lifetime with a singleemployer survives today mainly because most workers like it thatway. The very foundations of Japan’s management system are based onlifetime employment, promotion through seniority and single-companyunions. There is little chance of being fired, pay raises areregular and there is a strict order of job-protecting seniority. 2| P a g e M K T G 3 4 1 0 / S e p t / O c t 2 0 2 0 Japaneseworkers at larger companies still are protected from outrightdismissal by union contracts and an industrial tradition that somepersonnel specialists believe has the force of law. Under thistradition, a worker can be dismissed after an initial trial periodonly for gross cause, such as theft or some other major infraction.As long as the company remains in business, the worker is notdischarged or even furloughed, simply because there is not enoughwork to be done. The Japanese market is becoming more competitiveand there is real fear on the part of NOM executives that thetraditional system just will not work in a competitive market. Onthe other hand, the proponents of the incentives system agree thatthe system really has not been tested over long periods or evenadequately in the short term since it has been applied only in agrowing market. In other words, was it the incentive system thatcaused the successes achieved by the companies or was it marketgrowth? Especially there is doubt since other companies followingthe traditional method of compensation and employee relations alsohave had sales increases during the same period. The problem isfurther complicated for NABMC because it will have both new and oldsalespeople. The young Japanese seem eager to accept the incentivemethod but older ones are hesitant. How do you satisfy both sinceyou must, by agreement, retain all the sales staff? Questions: 1.What is ‘Joint Venture’? 2. What sales management problem is facingby NABMC? 3. Why the new salesmen must all be young,college-trained Japanese nationals? 4. Why Japanese workers arehaving little chance to be fired? 5. What is your solution for theabove problem?