The system separates two ladders. One is the grade, or shikaku, which reflects the employee's job-performing ability, judged by the company. The other is the post, or yakushoku, such as kacho or bucho. Pay follows the grade. A person can rise in grade without a change of post, and a post is normally open only to people at or above a certain grade.
The idea was set out in 1969, when Nikkeiren, the employers' federation of the time, published its report on ability-based management. It suited the period. Companies were growing fast, but posts could not grow as fast as headcount, and the grade ladder let them promote and pay people without inventing departments. In theory it rewarded ability. In practice ability was assumed to accumulate with experience and rarely judged to decline, so grades tracked tenure, demotions were rare and pay rose steadily with age.
From the 1990s companies tried to curb the cost, first with performance-based pay and later with role grades and job grades. Many systems today are hybrids, and the old grade logic often survives beneath new labels.
What it means for a foreign employer
- Grade and title can diverge. A candidate may hold a bucho-level grade with no department, or a kacho post on a lower grade. Ask for both.
- Pay is compressed within a grade. People in the same grade earn similar amounts whatever their job, so specialists in scarce fields are often paid below market. That makes them reachable.
- Counter-offers are constrained. A Japanese employer bound by grade bands may struggle to match an outside offer quickly, though some now make exceptions for key staff.
- Integration needs a mapping. If you acquire a Japanese company, mapping ability grades to your job grades is one of the harder parts of harmonising pay.
Sources
- Nikkeiren, Ability-Based Management: Its Theory and Practice (1969).
- Japan Institute for Labour Policy and Training, Japan Labour Review articles on the history of Japanese grading systems.