A typical system has three strands. Performance evaluation measures what the employee achieved, often against targets set under management by objectives. Competency or behaviour evaluation measures how they work, against descriptions for their grade. Attitude evaluation, still found at many traditional employers, looks at qualities such as cooperation, responsibility and diligence. The results are combined into a grade, often on a five-point scale from S to D, and the grade then drives the annual salary increase, the size of the twice-yearly bonus and eligibility for promotion.
Evaluations usually pass through more than one level. The direct manager makes a first assessment, a more senior manager adjusts it, and HR calibrates across departments. Many companies require a set distribution of grades, so that only a fixed share of employees can receive the top rating. The effect is that most people land in the middle grade, and differences in pay between strong and average performers in the same grade stay small.
The 1990s push towards pay for performance, known as seikashugi, exposed the limits of this model. Fujitsu, which introduced a results-based system for managers in 1993, revised it several times after complaints that targets were being set low and teamwork was suffering. Many companies have since moved to blended systems, and more recently to job-based grading with clearer links between role and pay.
What it means for a foreign employer
- Middle ratings are normal. A Japanese candidate rated B for ten years may be a strong performer in a system that forces most people into the middle. Ask for evidence of results, not grades.
- Expect self-assessment to be modest. Candidates trained in this system tend to understate their own contribution. Probe for what they did, not what the team did.
- Explain your system at offer stage. A global process with uncapped bonuses and direct feedback can be attractive, but it can also feel exposed to someone used to collective calibration.
- Introduce changes carefully. Altering an evaluation system so that pay can fall is a disadvantageous change to working conditions and needs consultation and a reasonable justification.
Sources
- Labour Contract Act, Articles 9 and 10 (changes to working conditions through the work rules).
- Recruit Works Institute, Works No. 191, interview with Fujitsu on 30 years since introducing results-based pay.