Pay for Performance

Pay for Performance

As a country which values group performance rather than individual performance, in traditional Japan there are very few opportunities to negotiate salary raises in a company once you are an employee. As I have written previously, the basic idea is that the company will take care of you within its capacity and on a par with other players in the market, therefore, your remuneration is likely to be a mix of salary, small yearly pay increments recognizing your loyalty and seniority, some side benefits, and one or two bonuses. Any recognition for performance will most probably be in the form of a company or division trip somewhere.

But what about the much vaunted performance-based salary systems that we hear are being introduced into major companies? Well in some cases they are genuine and applied across the board, but in most instances you'll find that the term is really just a reference to sales commissions for people with sales responsibility and the reduction of salary increases and bonus payments to older employees. The possible exception here is smaller companies, where the CEO believes in incentivizing individual staff.

Nevertheless, pay for performance, if you can get it, is the most politically correct form of pay rise because everyone is talking about the concept. It is infinitely more acceptable to senior management than opening the pandora's box of offering unstructured base pay raises to demanding or unloyal employees...

The challenge, then, is to find a way to ask for it. In my opinion, the key is "major events" which put the difficulty-versus-benefit equation into perspective. For example, the event of being hired. You will never have as much negotiating power as the time when the company is making you an offer. The mere fact that they are hiring you outside the usual university graduate system means that they see you as being a key to some business problem. Thus, if you can find out what that problem is and how important it is, you can leverage a pay for performance component that can increase your regular pay level by another 10%to 20%.

Also, if you are non-Japanese, you have added leverage, in that mostly non-Japanese are hired as contractors and therefore considered to be outside the limitations of a company-wide salary table. Again, find out what the scope of the business problem is, and price yourself accordingly. In doing so, you'll come across an interesting conundrum. Because the business manager who will be employing you will be inexperienced in dealing with requests for extra money, you'll either find it very easy to get the increase, or very difficult. If the latter, you need to realize that if you don't get agreement before you enter the company, there will be little chance to negotiate later. Anyway, at least a pay for performance request is oblique enough for the Bucho that it won't be seen as an outright challenge to him/her and the system.

Another event which is worth taking advantage of, especially if you are a regular full-time employee, is at promotion time. Although there is a limit on what you can ask for in terms of base salary, I've seen people being promoted tell their superiors that they will be fixing a problem, which is why they're being promoted, and if they are successful, would they be able to receive a bonus of x percentage of the additional profits made by the company? Quite likely the company has already been proclaiming its commitment to paying for performance, so such a request would be hard to ignore.

One more event is when a colleague has been head hunted to another company. This happens most often in the technical and sales roles of smaller companies. I've seen the Bucho realize that he/she may face a catastrophe if a number of key individuals are about to leave, and push the levers of power to get exceptional pay raises signed for those people he/she needs to keep. The easiest exceptions to get authorized are those where the employee is guaranteeing additional, measurable performance.

Needless to say, most of the above advice is for individuals in Japanese firms. Working for a foreign firm in Japan is much more like working overseas. People are generally more flexible and the corporate ethos is more focused on true pay for performance. Just remember that your negotiations should focus on actual achievements to date, or the promise and execution of such achievements, and proving that you are indeed worth more than your colleagues.