This month’s book is Tree-Ring Management: Take the Long View and Grow Your Business Slowly by Kiroshi Tsukakoshi.
“I believe that by taking a close look at where you came from, while also taking the long view, you will see the way forward to a company that endures, whose employees are happy.”
If you’ve never heard anyone refer to corporate profits as “excrement,” this book might surprise you. Whereas the stock market promotes money as a corporation’s raison d’etre, the author maintains that “profit is the dregs—the dregs of management” or, more simply, “crap.” Profit is the natural outcome of an organization.
These are the thoughts and beliefs of Hiroshi Tsukakoshi, the 83-year-old Chairman of Ina Foods. I was lucky enough to meet this remarkable leader last month during Katie Anderson’s Japan Study Trip. It was a rare glimpse at a foreign and truly affecting style of management. He could be the Far East doppelganger of Richard Sheridan, author of Chief Joy Officer. His son runs Ina Foods now, but the culture remains profoundly strong and successful. It’s a Lean company, but with an uncommon approach to leadership.
As Simon Sinek makes clear in Start With Why, the reason an organization exists is what matters most. In Tree-Ring Management, the author’s stated purpose was to “build the kind of company that contributes to society by making its employees happy.” Sales and profits are merely a means to this end.
The author’s stated purpose was to “build the kind of company that contributes to society by making its employees happy.” Sales and profits are merely a means to this end.
What is Ina Foods?
Ina Foods is a Japanese company situated about halfway between Nagoya and Tokyo in Ina Valley. They develop, manufacture and sell “kanten” in the form of powdered agar, gelatin products and other powdered foods derived from brown algae. Think science class with students growing bacteria on gel in a petri dish. That’s agar. But with a robust Research & Development they’ve expanded to over 200 products.
Via mail order, they sell foods like flavored gelatin, honey and dozens of nutritional additives direct to consumers. Their latest innovation is a film resembling plastic wrap. That’s both timely and promising given the current level of pollution resulting from plastic waste.
Ina Foods has a workforce of about 500 employees which, the author points out, is the norm in Japan. It’s the largest Japanese businesses such as Sony and Toyota that get the press, but “ninety-five percent of the companies in Japan are small to medium-sized enterprises with fewer than 300 employees.” These smaller companies are his focus audience although they regularly receive visitors from Toyota managers interested in understanding what’s behind their success.
The company has been in existence for over 60 years and, as per the title, has grown slowly and successfully, like the rings of a tree, for almost all of those years. The secret to their success is both this “slow growth” maxim and his pointed focus on employee happiness. As Ina Foods grew, Mr. Tsukakoshi looked to the practices of 500-year-old companies for guidance.
The secret to their success is both this “slow growth” maxim and his pointed focus on employee happiness.
Origins of “Slow Growth”
He joined the company as a 21-year old after a three-year bout of tuberculosis that kept him bed-bound the entire time. He emerged hungry to work and contribute. With the company in debt and struggling, Ina Foods welcomed his dedication. He worked weekends and holidays and his “only time off was a day or two off for New Years.”
It took years to turn the company around which informed his belief that a “company’s greatest virtue is endurance.” His goal was to survive. After 25 years, when the company was clearly going to make it, he began to form his theories about the purpose of the organization. As president, he determined management’s role to be “finding a balance between the company’s numbers and the happiness of its employees.”
He’s not interested in simply building a “successful” company—the point is to build a good company. Success is typically associated with high stock prices, salaries and profits. In contrast, he strives “to ensure that not just [his] employees, but also [his] suppliers, clients, consumers and community will speak about” Ina Foods as a good company. His goal is to win “fans.”
He’s not interested in simply building a “successful” company—the point is to build a good company.
Profit and the Long View
To build an enduring company, the author took the long view. Since this put him at odds with the short-term goals of the stock market, he chose not to go public. The “demands of the stock market require that listed companies settle their accounts every quarter.” Going public also means shareholder profits are valued above all which conflicts with his commitment to his employees. He points to the wasted energy and effort spent on estimating quarterly profits—energy and labor better spent elsewhere.
Taking the long view led him to make unorthodox decisions like turning down a big contract with a major supermarket chain. The demand would have forced the company to quickly expand and “there’s nothing a manager should fear more than rapid growth.” He also remained wary of diet fads that led to increased demand for his products. He knew fads passed, but the workforce should not. Like many other companies in Japan he believes in lifetime employment. The company hires slowly and carefully because it’s for life and sudden growth doesn’t support that.
Employees, Pay and Profit
Profit is not his goal but he pays attention to how it is used. He doesn’t believe in big salary hikes or large employee bonuses. “Exorbitant bonuses in the short term make it impossible for the company to endure.” He believes “raising salaries each year, even if only a little at a time, increases employees’ sense of happiness.”
He’s also against pay-for-performance types of management. “When you adopt performance-based pay or salaries that emphasize the individual assessment, people become only interested in short-term numbers. They place a higher priority on their own performance than on cooperating with others. “
He believes that “employees are motivated not by money or position but rather by their sense that through their work, things are better—and they are happier—this year than last year.” In contrast, he’s sees the current climate as “awash in material goods and yet nobody [is] happy. So many companies [are] going bankrupt and so many people [are] struggling in poverty.”
He believes that “employees are motivated not by money or position but rather by their sense that through their work, things are better—and they are happier—this year than last year.”
How a “Good” Company Behaves
Mr. Tsukakoshi had gardens built on the company grounds so his people would be surrounded by beauty. Ina Foods hosts over 350,000 visitors a year who come to see their gardens. He sets up 15-minute employee tea breaks each day at 10am and 3pm. He provides everyone with a snack allowance. He built an art gallery for people to spend time in and another space for employees and local artisans to sell their crafts.
He encourages his employees to avoid solutions that require purchasing equipment or involve IT enhancements, but he happily spends money to promote employee well-being. For over 50 years the company has sponsored employee trips at home and abroad—not just for recreation but for education. He sees these trips as a chance for his people to broaden their perspectives and reflect on other cultures.
The list of the company’s community contributions is long and their impact on Ina Valley is tangible. In addition to the 100,000 square meters of garden, they’ve invested in footbridges for ease of travel, private roads to reduce congestion and relay races to enhance their surrounding community.
Ten Rules for Building a Good Company
As the company has continued to grow and succeed, he has honed his management theories. The author is aware of how ordinary his rules are but also that “simple” doesn’t mean “easy.” He put them down in writing so he and his people could refer to them regularly to keep themselves in line.
- Always produce good products.
- Do not produce too much or sell too much just because you can.
- Seek whenever possible to sell at a fixed price without offering discounts.
- Seek to produce products and services from the customer perspective.
- Create beautiful factories, shops, and gardens.
- Develop refined packaging and advertisements.
- Give back to the community by volunteering and by supporting culture and the arts.
- Take care of suppliers.
- Improve the company image by ensuring that everyone understands management policies.
- Carry out the above faithfully over time.
Approach to Innovation
He has remained steadily committed to R&D regardless of their level of growth. “When management runs into difficulties, it’s tempting to rein in research and development costs.” He compares this with eating the rice today rather than planting to grow more rice tomorrow. They conduct no market research. They make the kinds of products they’re interested in themselves. A recent innovation is a pouch of edible film to replace the foil sleeve surrounding the ramen noodle flavor packet. Another example of waste reduction.
Take the Long View But Start with What You Can Do Now
Mr. Tsukakoshi advises people to start with little things like courtesy and cleanliness. There is no regular cleaning crew and the garden requires no designated groundskeepers. Employees at all levels participate in cleaning the company and maintaining the garden. Without this kind of attention, he warns, “neglecting the little things is the same as neglecting the big things.”
Neglecting the little things is the same as neglecting the big things.
The Essence of Management Is Creating Fans
He differentiates between gaining customers and winning fans. “Those who purchase our products after seeing mass media advertising are certainly important customers, but they are not yet fans.” The key is treating each and every customer with respect and serving the community well in order to turn them into fans. He realizes this might seem a slow process to some, but asks, “isn’t it more fun, too, to think of your job as fan creation? Wouldn’t it be more exciting to wake up each morning and think about how many fans you could make that day?”
The key is treating each and every customer with respect and serving the community well in order to turn them into fans.
Cleanliness Is the Silent Salesman
Although seemingly simple, he credits cleaning as “the secret to business prosperity.” In the United States there is often impatience with companies who spend too much time on small 5S efforts. In contrast, Mr. Tsukokoshi finds that cleanliness is the “silent salesman” because “people gather in places that are clean and beautiful.” Even online companies can create websites that are clean and beautiful and bring people in by providing attractive spaces.
If visitors unwittingly leave things untidy, “whoever notices first just quickly cleans things up.” This is similar to a Starwood/Marriott innovation that led to a reduction in workplace injuries. They stopped designating specific individuals in housekeeping or maintenance to manage spills. Instead they required the first person to see the spill to deal with it. The results speak volumes since the injury and workman’s comp rates immediately dropped and stayed there.
Kaizen and Employee Comfort
When asked how he managed to encourage employees to improve productivity, he countered that the goal of Kaizen (continuous improvement) was employee comfort. How could they make the space more enjoyable to work in? How could they improve the lighting and the effort it took to move machinery? Improvements come from engaged employees who reap the benefits of better working environments. And the company appreciates the increased productivity that allows them to serve more “fans.”
Improvements come from engaged employees who reap the benefits of better working environments.
Another offbeat aspect of the company are their meetings where “idle chit chat” is encouraged and agendas dispensed with. He wants meetings to be arenas of real exchange and not simply employees “reporting numbers.” The discussion might include recent visitors, jokes and news stories, but the process builds “deeper mutual understanding” and helps to build consensus among the directors about the direction of the company. The goal is to get everyone moving in “perfect harmony” which gives the company its greatest power.
He quotes the disturbing rate of suicide in Japan as proof that being a prosperous nation is no guarantee of happiness. The year the book was written, there were 30,000 suicides in Japan. He points instead to the satisfaction of helping others. “I have been managing a company for more than half a century and I have never lost a thing by helping other people.”
What Will You Accomplish Before You Die?
Mr. Tsukakoshi posts one-hundred-year calendars all around the company and asks his people to consider the date of their death. He wants everyone to consider what they want to achieve in the time they leave the planet. He gets shocked looks, as you might expect, because he understands, “the young do not give much thought to death, which is why they assume they have unlimited time left. Showing them a hundred-year calendar, though, gives them a visceral sense their own lives are limited.”
Given our limited time on earth, he urges people not to “take it easy.” He believes in the struggle. “The more struggle involved in a job, the greater the sense of accomplishment will be when it’s done. Nothing makes a person happier than being useful to someone and being appreciated for it.” Adversity builds character. “The world is full of excess now, and there is far less material hardship than before. This is why it is necessary that young people be proactive in seeking to shoulder hardship for themselves.”
The book is overflowing with one man’s wisdom and apparent joy. His life’s work is a company filled with beauty and contented, hard-working people. He challenges mainstream perceptions as well as some continuous improvement dogma. Part of what makes Ina Foods special stems from unique aspects of Japanese culture. But much of the credit goes to a fascinating octogenarian who rose to life’s challenges with a big heart. “Living happily is the goal of life, a human right and a human responsibility.”
About the Author:
Hiroshi Tsukakoshi was born in 1937 in Komagane, a small city in Nagano Prefecture, Japan. He dropped out of Ina Kita High school after contracting tuberculosis and later joined Ina Food Industry Co., Ltd. in 1958. He became President in 1983 and assumed the post of Chairman in March 2005. In recognition of his achievements in establishing a stable supply system for kanten and for pioneering new markets in areas such as healthcare, biotechnology, and nutritional care, Tsukakoshi was awarded the Government of Japan’s Medal of Honor with Yellow Ribbon in 1996. In 2002 he received the Outstanding Business Person Award, the highest award from Nikkan Kogyo Shimbun Company honoring outstanding managers of small and medium-sized enterprises.
In 2006, as recognition for his accomplishments of achieving 48 consecutive years of rising sales and rising profits, and for his company’s philosophy, track record, and future potential, Ina Foods Industry Co., Ltd. received the Good Company Award Grand Prize from the Medium and Small Business Research Institute. He is the author of Let’s Build a Good Company and co-author of Getting Back to the Basics of Happiness. In 2011 he received the Order of the Rising Sun, Gold Rays with Rosette from the Government of Japan.
Practical Tools and Concepts Covered:
Who Should Read Tree-Ring Management?
- Team Leads
- White Belts, Yellow Belts, Green Belts, Black Belts, Master Black Belts and Lean Practitioners