Case 4-5 National Office Machines—Motivating Japanese Salespeople: Straight Salary or Commission?

The US company National Office Machines (NOM) entered Japan using an International Joint Venture (325). Besides serving as a means of mitigating political and economic risks, International Joint Ventures provide a safer way for firms to enter markets that present legal and cultural barriers; making it less risky than acquiring a company within the desired country. Because of this decision, National Office Machines was able to access and integrate into the Japanese market, which was previously a very small portion of their total sales. Additionally, the Japanese company received a much-needed breadth in product offerings, and an increase in managerial leadership, something desperately needed within the company. The primary sales management issue in this case is NOM’s dilemma of which sales compensation plan to implement within their Japanese branch. NOM had to choose between following the Japanese tradition of straight salary and guaranteed employment, and the US method of commissions and incentives based on sales performance. The US method has been shown to foster competition between employees with the ultimate threat of being fired if sales quotas remain unmet. It is almost never practiced in the Japanese business environment. Most of Japan’s labor force, 65.97 million, (1) operates on the standards of tradition and loyalty; and today, fewer than 2% of Japanese workers are employed by foreign-affiliated companies, compared with the equivalent US figure of 11% (2). However, there have been efforts to adjust the traditional Japanese school of thought in regards to the way business is conducted. In December of 1987, Dartmouth University organized the first US business school in Japan. This program, which was fairly well received throughout the academic community, taught Japanese students the methods, practices, and protocol of how business is done in the US (3). Although this school was relatively successful, the long-standing traditions of the Japanese