1.) It’s difficult to fire/layoff people, so subcontracting is used to handle certain jobs that won’t be permanent.
2.) DIY or attempting things by oneself isn’t common. People seem to rather have a specialized expert handle things, whether it is installing an AC, or changing the title of a used car.
There are several reasons, but the leading cause is value focus and flexibility.
Value focus is when a company which secures an expensive contract only has high-value employees, and those employees don’t do grunt work, they focus on management and delegation only.
More often than not, said employees lack management and delegation abilities for whatever reason and they hire consultants to do that job for them.
Consultants, in turn, rarely do grunt work as well and find whichever provider is suitable for them.
The said provider makes their math and outsources the work to somewhere with very cheap workforce, sending sumimasens and moushiwakegozaimasens upwards for whatever delay or trouble caused by the subcontractor.
The consultants above make their money on management skills and manage their way out of whatever dire situation their subcontractor causes.
The contract owner at the top of the chain receives a product of adequate quality in adequate time.
Everybody’s got their piece of the meal and everybody is at work.
Meanwhile, when subcontractors are not needed, they’re simply not bothered. If they were employees, one has to pay a salary to them. I’m not sure if paying salary is economically worse, but it requires, again, some entrepreneurship skills to make them busy and generate value.
And entrepreneurship, management skills are the areas where most Japanese companies are lacking, however networking and mutual assistance are held with high regard, so it’s only natural that such value chain established itself over time.
Because companies hire generalists and need to outsource anything slightly difficult to an “expert”.
Apart from what the others said, there is also the problem, that you have to do a lot of bureaucracy for your employees. Like doing their tax returns. This means that you need quite a substantial HR overhead, even if you have very few employees. Contractors do their stuff by themselves, and it is a lot easier for everyone that way.
Also, if you have a contractor, they are an entrepreneur and not an employee, so the good ones have a different attitude. If you are the “I clean the stairs for Mr. X company”, and you have the sniffles, you don’t just call in sick, you send your wife to do the job! Win-win 🙂 Also, they help carry a bit of “Mr. X’s” risk, as they can be terminated at any time, if Mr X’s financials deteriorate, and he decides to clean his stairs by himself from now on.
IMO, these are good reasons, why the myriads of one-man-companies exist, and it works really well.
5 comments
In general….
1.) It’s difficult to fire/layoff people, so subcontracting is used to handle certain jobs that won’t be permanent.
2.) DIY or attempting things by oneself isn’t common. People seem to rather have a specialized expert handle things, whether it is installing an AC, or changing the title of a used car.
There are several reasons, but the leading cause is value focus and flexibility.
Value focus is when a company which secures an expensive contract only has high-value employees, and those employees don’t do grunt work, they focus on management and delegation only.
More often than not, said employees lack management and delegation abilities for whatever reason and they hire consultants to do that job for them.
Consultants, in turn, rarely do grunt work as well and find whichever provider is suitable for them.
The said provider makes their math and outsources the work to somewhere with very cheap workforce, sending sumimasens and moushiwakegozaimasens upwards for whatever delay or trouble caused by the subcontractor.
The consultants above make their money on management skills and manage their way out of whatever dire situation their subcontractor causes.
The contract owner at the top of the chain receives a product of adequate quality in adequate time.
Everybody’s got their piece of the meal and everybody is at work.
Meanwhile, when subcontractors are not needed, they’re simply not bothered. If they were employees, one has to pay a salary to them. I’m not sure if paying salary is economically worse, but it requires, again, some entrepreneurship skills to make them busy and generate value.
And entrepreneurship, management skills are the areas where most Japanese companies are lacking, however networking and mutual assistance are held with high regard, so it’s only natural that such value chain established itself over time.
Because companies hire generalists and need to outsource anything slightly difficult to an “expert”.
Apart from what the others said, there is also the problem, that you have to do a lot of bureaucracy for your employees. Like doing their tax returns. This means that you need quite a substantial HR overhead, even if you have very few employees. Contractors do their stuff by themselves, and it is a lot easier for everyone that way.
Also, if you have a contractor, they are an entrepreneur and not an employee, so the good ones have a different attitude. If you are the “I clean the stairs for Mr. X company”, and you have the sniffles, you don’t just call in sick, you send your wife to do the job! Win-win 🙂 Also, they help carry a bit of “Mr. X’s” risk, as they can be terminated at any time, if Mr X’s financials deteriorate, and he decides to clean his stairs by himself from now on.
IMO, these are good reasons, why the myriads of one-man-companies exist, and it works really well.
For example?