from the inside, looking in

Paloma Industries, another crisis management disaster July 24, 2006

For the latest corporate crisis management disaster in Japan, let’s head to Nagoya and Paloma Industries.

Paloma Industries is a privately held company which is Japan’s #2 maker of gas powered water heaters (they also make other gas related equipment like gas cookers). It owns Rheem, the US water heater/HVAC company.

It has transpired that there have been more than 2 dozen incidents of CO (carbon monoxide) poisoning related to the use of Paloma water heaters, resulting in more than 20 deaths going back more than two decades.

The company’s first press conference attributed the accidents to tampering of the saftey devices within the heaters which were designed to detect incomplete combustion. The implication was that the heaters were tampered with by either users or some third party over which Paloma had no control.

It now transpires that many of the cases of “tampering” are likely to have been known if not directed by Paloma. The problem began with a manufacturing fault with the safety unit, which resulted in a large number of units failing in the field. Replacements parts were in short supply, and repairers hotwired the units so that users would not be without hot water. It appears that at least some of these incidents were carried out with Paloma’s full knowledge.

Furthermore, the production of the spare safety units was terminated although Paloma had enough information to suggest that substantial numbers of units were likely to fail. (They did keep parts for the statuatory minimum 7 years)

The Paloma Industries group is a family owned business, with turnover of around $2Billion per year. It’s current 37 year old CEO is the 4th generation of the same family to head the company. His father is Chairman.

At a recent press conference where both were in attendance, each was attempting to shield the other from blame, which you could interpret as the lovely sight of father-son mutual love, or the out of touch behaviour of a family who presided over their own little kingdom. The problem with these mini-feudal organisations that are mega-family run businesses, is that the mere employees are often put in a situation where they are simultaneously demotivated by the promotional ceiling of a company where the top tier of management is defined by blood relationships, and work in a climate of fear/intimidation of a dictatorial boss which leads to poor communications and lack of transparency within the organisation.

It was sort of tragicomic to see one of the underlings attempt to cover his Chairman’s ass by stating that he was not sure if his boss was aware of the reported accidents, even after the Chairman had stated (to his credit, but then he has all but retired from the front line and was doing it mainly to deflect attention and responsibility from his son) that he had been briefed about the incidents at the time.

I guess the underling’s behaviour would have been lauded by many if not most Japanese in the past (even now?), but my personal opinion is that these people have a misplaced sense of loyalty. Of course, being a whistleblower is still very difficult in Japan, especially if you are a middle aged man without any outstanding skills as reemployment on similar terms is a remote possibility.

Unquestioning loyalty used to be the norm and a desirable characteristic. In this day and age, I think it should be seen as a character defect. Sign of a sheeple. A real man should stick to his principles and sense of justice (he should have a moral backbone and a decent set of principles in the first place, of course).

[Sidenote: I know things were different in WW2 (Japan wasn’t a signatory to the Geneva Convention for starters) but I happen to think that people who carried out war crimes and crimes against humanity (class B and class C war crimes) even if they were following orders, should not have been enshrined with the other soldiers who gave their lives for the nation – at least the ones found guilty of crimes severe enough to merit the handing down of the death penalty (about 1000 men in total).

I don’t see how crimes against peace are in such a different league to the other two types of war crimes, both of which seem to be equally dispicable (granted, Class A criminals directed the big picture but the individual acts of barbarism seem inhuman enough to me not to justify a honourable burial). I guess the alphabetical lettering makes it appear as if A>B>C in order of severity….]

[Endnote: Haven’t all these big Japanese companies heard of PR (or even more specifically, crisis communication) management companies? Given how pathetic most Japanese executives seem to be at handling actual communication, it would seem to be a great business to be in]

Cool Osaka? July 24, 2006

Osaka, modelling itself on the UK’s Cool Britannia effort (which seems so 90’s) has announced the Osaka Brand Summit to be held on the 25th of October.

Apparently the aim is to convince people the rest of Japan and the world that there is more to Osaka than Takoyaki and Owarai.

Officials and the local business community have apparently launched this PR campaign worried that many people associate negative images like muggings (of which Osaka boasts the highest incidence in the country) and bad manners (Osaka-jin being stereotyped as loud mouthed and common, and having shocking driving manners).

I guess they forgot the fact that we also associate Osaka with a thriving underworld (e.g. the recent Asuka-kai scandal), a huge homeless problem (i.e. the de facto slums of the Airin district), and the imminent bankrupcy of the local municipal government burdened under 1) an immense amount of debt from financing public sector white elephant construction projects (which are defended as a) having provided work to the construction industry during a time when the industry in Osaka was hard hit, or b) the difference in actual vs calculated demand for the products of the construction projects could not have been foreseen at the time (which is clearly bullsh*t, but is a line offered by bureaucrats all over the country and hardly anyone is ever held accountably) and 2) an inefficient, lazy, money wasting, and militant bureaucratic public sector workforce.

To be fair, there is a strong manufacturing base in and around Osaka, the Matsushita and Sanyo related clusters being two major examples. But Sanyo’s difficulties of late are another big worry for Osaka…