The Diffusion of New Public Management Strategy in Japan

Introduction

This research, based on empirical data, examines the case of one of the biggest Japanese local governments, Yokohama City Council. Yokohama City is composed of a large number of municipal organisations and workers, and is currently in deficit financing. The Variety of Capitalism (VoC) approach and the debate on restructuring in government organisations suggests that the public administration in Japan has very limited impetus for administrative reform, as it remains under very strong institutional restraints. Public bureaucracies worldwide have a reputation for being risk averse and change averse, and Japanese public sector organisations are thus even more unlikely to want to break with traditional administrative cultures (Amable 2002). Nevertheless, increasing numbers of Japanese local governments have shown signs of following policies with ‘New Public Management’ (NPM).A large number of councils are suffering from a high deficit resulting from dependence on central government. Local governments that had never previously needed to look for financial efficiencies, met considerable opposition and anger from citizens, and so practical efforts towards restructuring were expected. The case study presented here suggests that Yokohama City Council has employed private companies’ business management strategies, often referred to as NPM, to reduce the city’s extremely large municipal deficit. Yokohama named its particular reform plan ‘The Yokohama Revival Plan’ in what appears to be direct mimicry of other local governments.

However, to what extent do theirreform plans reflect wider reality? The diffusion of NPM strategies clearly goes against a long history of practice in Japan. Most Japanese organisations still maintain traditional ways of operating and restructuring (Osborne & Gaebler 1992; Pollitt 2002). Previous studies have reached an agreement that there has been little change in most Japanese organisations (Dore 2000; Morgan & Takahashi 2002). But these studies cannot explain this recent socially institutionalised practice. Thus it could be argued that there is a gap between the consensus and the recent actuality in Japan.

Neo-institutional theory, which discusses organisations’ isomorphic behaviour in securing legitimacy (DiMaggio & Powell 1983), helps in understanding the current diffusion of NPM reform plans among Japanese organisations; it extends the Japanese restructuring literatures, most of which are in accordance with the approach of ‘old’ institutional theory, which focuses on institutional arrangements as a way of understanding the extent Japanese organisations’ reforms. Neo-institutional theory for Japanese organisational restructuring has not been widely used, except for a famous paper by Ahamadjian & Robinson (2001). They show the new aspects of change in more institutionalised practices, and indicate more institutional pressure to drastically reform among Japanese organisations, now that American-style reform is widely diffused. However, Ahamadjian & Robinson (2001)’s work does not investigate internal perspectives within a firm. Neo-institutional theory still does not focus on this angle.

In the present research, I develop the discussion by drawing in much more detail on the internal and agency-related aspects of organisational behaviour. Prior argument about mimetic isomorphic behaviour tends to assume that actors’ institutional practice meets its goals relatively easily and successfully, without seeing what actually occurs behind the scenes. While very recent works came to focus on more complicated process of institutional practice (Washington et al. 2008; MacLean & Behnam 2010), their suggestions are composed of ideal processes of institutional practice without real consideration of the difficulty of earning external and internal legitimation. Again, considerably less is recognised about insiders’ interpretations. It is less clear at a local, pragmatic level for organisations’ insiders, who are really faced with a gap between socially accepted value and actual behaviour to acknowledge legitimacy of institutional practices.

In this paper, I examine this issue by analysing internal legitimacy perception; how and why staff of a Japanese local government, Yokohama City Council, decide to acknowledge the legitimacy or otherwise of the mayor’s isomorphic behaviour, while examining both external and internal processes of organisational change. Research interviews conducted at the council actually indicate that the new administrative reform plan is very unpopular inside the council. My study suggests that the organisation’s leader is faced with the difficult and delicate process of earning internal legitimation. Firstly, staff are reluctant to acknowledge the legitimacy of reforms since they do not want to reform the council. They are initially more concerned about themselves than about the council. Secondly, internal lack of acceptance further turned into scepticism and mistrust of the mayor, due to the plan’s failure to focus on staff. Whether staff legitimate the plan or not depends on more mundane and day-to-day level issues. Staff tend to consider their own advantages first when they decide to legitimate; they are more self-centred in dealing with mimetic isomorphic behaviour than the theory assumes.

Before examiming the details of the case study, I will review reform in Japanese local government and neo-institutional theory, to identify research questions, and then discuss research methodology. This is followed by a description of the data analysis and discussion of the theoretical analysis.

The central and local government’s financial state since the bubble burst

The Japanese government has increased its dependency on bonds since the 1990s, when the Japanese economy started suffering from long-term stagflation (Cabinet Office, Government of Japan 2003). ¥30 trillion in government bonds were issued in 2002, towards a total budget of ¥81 trillion, which means that the budget dependence on government bonds was 36.9% (The Japanese Ministry of Finance 2003). The percentage of national debt service payments in the national budget was 20.5, and so only 80% of the budget was available for administrative operations. Many government bonds have been issued for countercyclical actions, resulting in 51.5% dependence on government bonds in 2009 and 46.3% as of 2013 (Ministry of Finance 20131). The percentage is much higher than other countries; for example the UK’s is around 15%-20%, the Germany was around 5-10% during 2008-2013. Given this situation, the central government has tried to decentralise administrative power, forcing local governments to implement administrative reforms.

In 2004, the government cut ¥2.9 trillion of local allocation tax and national treasury disbursement to local governments. The huge cuts forced local governments to organise their budgets rigidly. The Ministry of Finance declared in 2005 that it must get rid of ¥4.3 trillion of local allocation tax in order to reduce the amount of national bonds issued to ¥30 trillion per year.

While the central government has begun to reform its traditional structure, local government bodies, which up to this point had never really needed to look for financial efficiencies, met considerable opposition and anger from citizens, so practical efforts to restructure were required.Indeed, local government is currently suffering from an enormous debt load2 as a result of major deficit financing from its dependence on central government. In recent years many observers have strongly argued that it was time for even local government to start reforming.

Having said that, Japan is a developing country in terms of local government administrative reform (Minami 2002). Mie prefecture was the first to adopt a system for estimating the value of administrative results. An increasing number of local governments have already dealt with administrative reforms, such as the restraining of labour costs, a radical review of office projects, and other expenditure cutbacks. Since 1999 there have also been a great number of mergers between local governments in Japan at both town and city levels, which have been coordinated by prefectural governments. The merger of local governments has increased efficiency in administration. The local government of Aomori prefecture explained that the main merit of merging was to cut management expenses while offering a higher level of services to citizens. However most of these reforms are characteristic of these governments’ traditional management styles, and the financial state of the prefecture has remained unstable (Kamiyama 2002).

In the meantime, Yokohama City Council adopted a private management strategy based on New Public Management (NPM) in 2002. Yokohama City Council is composed of a large number of municipal organisations and workers. The total number of staff is around 15,000. Yokohama City is located just next to Tokyo and its population is 3.69 million as of 2011.3 The council suffers from an enormous debt load of around ¥6 trillion. A new mayor, Hiroshi Nakada, from central government, took over in 2002 to start the drastic reform plans. There have been a large number of local governments which have also claimed to have currently or recently adopted NPM (Keizaikai 2004): Zushi city council (Kanagawa prefecture), Seto city council (Aichi prefecture), Tokai city council (Ehime prefecture), Sapporo city council (Hokkaido government), Kaga city council (Ishikawa prefecture), Kuwana city council (Mie prefecture), Osaka prefectural government, Kurume city (Fukuoka prefecture), Munakata city (Fukuoka prefecture) and so on (Kamiyama & Minami 2005). There is now institutionalised pressure on Japanese local governments to reform.

Newer perspectives based on neo-institutional theory bring further information about restructuring in Japanese local governments.

Most of the previous studies on Japanese organisational change discussed ‘slow change’ in Japan based largely on ‘old institutional theory’ (Aoki 1999; Dore 2000; Matanle 2003; McCann et al. 2004, 2006; Morris et al. 2006; Morgan & Takahashi 2002). Neo-institutional theory for Japanese organisational restructuring has not been widely used. Ahamadjian & Robinson (2001)show new aspects of change in more institutionalised practices and pressure among Japanese organisations to change. They indicate that more and more Japanese firms carry out employment downsizing, creating a spiral of layoffs. Their argument seems to reflect the current phenomenon among Japanese local governments. However, their work does not draw on any internal perspectives within the organisation. Furthermore, previous literature only examined the case of publicly listed firms; there has been no research about Japanese local government so far. The way in which Japanese local governments react to external pressure is not clear and requires much more sustained analysis if it is to be deeply understood.

Isomorphic Behaviour under Institutionalised Pressure

Neo-institutional theory tries to clarify social phenomena based on the social context of those phenomena. The theory focuses on how cultural norms are structured, justified, legitimated and penetrated. Neo-institutional theorists, as represented by the main figures in the literature such asMeyer and Rowan (1977) or DiMaggio and Powell (1983), have developed a large field of work around the issue of a growing awareness about why organisational structures and norms appear to be homogenising. Popular organisational forms such as bureaucratised systems, divisional company organisations, wages systems based on job evaluation and so on are chosen by an increasing number of organisations because such organisational forms are affirmed by government and other outside bodies, rather than because they are shown to make organisations more rational. This means that organisational change is better understood in terms of a broader social context, especially around the issue of social acceptability of norms and behaviours, or their legitimacy.

Through social context, neo-institutional theory tries to understand organisational change; the theory focuses on the environments in which organisations exist, and in which they become isomorphic (DiMaggio & Powell 1983: 149). Isomorphism occurs because organisations are faced with increasing pressure to conform to their environments. Under this pressure they start to rearrange their forms and norms and become more similar/isomorphic. As a result, similar business strategies, systems, and norms become diffused. DiMaggio & Powell (1983; 149) describe the situation thus:

Organisational characteristics are modified in the direction of increasing compatibility with environmental characteristics; the number of organisations in a population is a function of environmental carrying capacity; and the diversity of organisational forms is isomorphic to environmental diversity.

DiMaggio and Powell (1983; 150) famously identified three mechanisms of institutional isomorphic change: coercive isomorphism, mimetic isomorphism, and normative isomorphism.

The reasons for this conformity vary between organisations and may relate to: compulsory environment under regulation or deregulation by government (DiMaggio 1987); economic interest, risk aversion (Wolfe, 1994); fashion, fad perspective (Abrahamson 1991); or legitimacy through social interaction (Meyer & Rowan 1977; DiMaggio & Powell 1983) among others. The perspective of economic interest and risk aversion has been studied, particularly in the case of innovation diffusion. Theperspective of fashion and fad is applied to the case of organisations suffering from uncertainty and encouraged to follow social fashions created by fashion setters such as mass media or bestselling ‘management guru’ texts (DiMaggio & Powell 1983). Rumelt (1974) suggests that popular fashion, rather than popular strategy, is diffused. When organisations become isomorphic with institutionalised practice, they earn social legitimacy, which institutional theory authors often claim is essential for a firm’s survival (Meyer & Rowan 1977). The concept of legitimacy is of central concern to neo-institutional theory, relating to public approval, customer acceptance, favourable media reports about the company etc.

Neo-institutional theory assumes that organisations’ isomorphic behaviour is bounded by social communities that determine legitimacy (DiMaggio & Powell 1983; Meyer and Rowan 1977). As a result, there has been a lack of knowledge about the interrelationships of agencies, actors and institutions. While recent work in neo-institutional theory has shifted the focus much more to the role of agency, this role has been much underplayed in previous debate. In order to cover this theoretical problem, the process of institutional practice has now been demonstrated by a number of studies from various angles. For instance, Washington et al. (2008) have indicated the complex role of leadership in institutional processes. They suggest that institutional leaders should act politically, with CEOs making efforts to develop external supporting mechanisms and internally manage consistency, in order to maintain legitimation. For this, the CEO externally tries to transmit his or her messages about mission, vision and value to maintain external expectations, while internally using vision and story settings that are useful to establish internal consistency and maintain stable situations. These stories and visions are interpreted by audiences through the CEO’s practical actions. Washington et al. (2008) interestingly cite the case of Jack Welch, a previous CEO at GE, who lectured internal middle managers on leadership and organisational value seven times a year during his leadership of the company. The perspective of leadership is a very new angle in the study, which helps to understand the ways in which institutional practices attempt to earn legitimacy.

Also, some recent pieces of work in this field show the complicated process through focusing on ‘contradiction,’ the gaps between widely accepted values and actual behaviours (MacLean & Behnam 2010; Boxenbaum & Jonsson 2008). McLean & Behnam (2010) demonstrate how organisations decouple formal compliance programmes from actual practices. They indicate that the formal compliance programmes can be part of a ‘legitimacy façade,’ which affects staff behaviour. They show that staff do not follow formal compliance rules, but exploit a gap as a result of internal illegitimacy. They suggest that under conditions of no real internal cooperation, decoupling might not be sustained and might cause a loss of external legitimacy. Boxenbaum & Jonsson (2008) also indicate that it may be difficult to sustain decoupling strategy as it depends on internal cooperation.

While the above aspects (leadership, contradiction) are new lenses through which to view the complexity of institutional practice, they have still paid scant attention to internal legitimacy; there have been few really detailed empirical studies on the lower-level operations of institutional practice. Although there are some studies about individuals (Seo & Creed 2002; Fligstein 1997), there are still unresolved questions about the role of individuals. It is helpful to see how institutional pressure, its meaning and systems, are understood by staff, in order to break down the complex and integrated processes of institutional practice.

In addition, past works have shown how to earn legitimation, but their argument is based on the precondition that the audience does not judge what agents actually do ‘behind the scenes’ of institutional practices and tends to assume that actors’ isomorphic behaviours meet their goals relatively easily and successfully. Their suggestions are composed of ideal processes of institutional practice without real consideration of the difficulty of earning external and internal legitimation. Examples are Washington et al.’s (2008) debate on CEOs’ external sets of supporting mechanisms and internal use of vision and story settings for internal consistency, and Lawrence and Suddaby (2006) and Phillips et al.’s (2004) debate on the role of language in institutional practice. It may be the case that the reality is more complicated and confused for staff who, in looking to acknowledge legitimacy, are faced with a gap between socially accepted value and actual behaviour. Oliver (1991) suggests that institutions change under agents’ rational actions. There continues to be a lack of attention to the role of organisational self-interest (Oliver 1991; 145), despite the focus of recent studies on actors’ intentionality. More detailed description of actors’ intentionality is needed in future research.

The model of the diffusion of official use of New Public Management among Japanese local governments emphasises mimetic isomorphic behaviour (DiMaggio & Powell 1983). I note, however, that these concepts have not crossed into Japan without debate, resistance and translation. At the organisational level, it is quite common for those below the level of CEO to resist, challenge or ignore these narratives. Neo-institutional theory and Japanese restructuring debatesleantoward a macro-levelperspective. Staff in Japanese organisations are likely to resist organisational change (Graham 2003). While organisations earn external legitimacy,how do staff perceive and interpret their isomorphic behaviour? Why do they legitimate (or refute) their organisation’s restructuring plan?

Research Methodology

As I noted in the previous literature review, the concept of mimetic isomorphic practice had not yet been applied to the case of Japan (apart from Ahamadjian & Robinson, 2001),but this has been developing. New research areas such as this need new empirical data. In such situations, where there is not much data available in preceding literature, exploratory field studies can be especially beneficial (Stone, 1978). I used not quantitative but qualitative research, as this provides deeper and richer descriptions. Qualitative research used by organisational studies scholars clarifies the reasons and the significances of examinees’ activities (ibid).

Qualitative research methods are ideal in that there has been a lack of detail on the internal, firm-level, aspects in the literature on Japanese organisational restructuring and neo-institutional theory. Also, a significant part of the past debate on Japanese organisational restructuring has been basically occupied by the VoC approach, which tends not to consider the role of agency. VoC often relies on stereotyped and abstract models. It is necessary, therefore, to examine internal perspectives that provide deeper, human aspects of institutional practice and organisational restructuring.

Quantitative research methods are not designed to shed light on the complex scenarios behind people’s decisions, actions and values. Quantitative methods cannot provide us with a micro view of interviewees’ behaviours (Stone, 1978). They do not give us rich contexts about how people feel, think and behave. By contrast, qualitative data can provide detailed descriptions of the interactions between people and events (Patton, 1980). Creswell (1998:15) indicates that “qualitative research is an inquiry process of understanding based on distinct methodological traditions of inquiry that explore a social or human problem,” and that qualitative method clarifies “a complex picture and detailed views of informants.” To this extent, qualitative research methods are appropriate to my research, which focuses on social, cultural and human contexts.

Among the variety of qualitative methods available, interview-based case studies can articulate more humanised aspects of the empirical world and contribute to in-depth exploration of the multiple processes of institutional enterprise. They can help to reveal the complexities of change and continuity inside workplaces. Staff are closest to the realities or reorganisation, as they know about, enact, support, ignore or resist the processes of organisational reform. Case study analysis has been widely used to examine theprocesses of change inside organisations (Yin, 1994). Creswell (1998: 6l) suggests that “a case study explores a ‘bounded system’ or a case (or multiple cases) over time through detailed, in-depth data collection involving multiple sources of information rich in context.” A simple case study is used to show that phenomena of interest are logically connected (Yin, 1994). Previous literature has not investigated the various diversified actions of agency that seem to take place within a firm. Therefore, I used qualitative data derived from research interviews inside a Japanese organisation, using a simple case study design based on the methodology of in-depth interviewing.

The organisation studied is Yokohama City Council. The council is suffering from a large deficit and employing private business strategies for its revival plan under a new top leader appointed from outside the council. An increasing number of Japanese local governments have been under the same institutional pressures and have drawn up American-style restructuring measures based on New Public Management (NPM), and the mayor of the council, Hiroshi Nakada, has shown isomorphic behaviours with his NPM reform.

Fieldwork was carried out to conduct personal interviews in Japan. I interviewed around twelve people in the organisation. These were in-depth one-to-one interviews, and each interviewee gave me 1.5-2 hours of their time. I also interviewed the mayor of Yokohama City Council. The majority of interviewees were at line management level or above, because these people deal with organisational restructuring on a daily basis.

A large number of documents were also used as a secondary source of data. Documents from annual reports and official websites are useful to see how organisations officially publicise their announcements. How those announcements may be understood by an external audience is investigated by examining other secondary documents such as the most widely read business magazines. These were analysed along with the interview data, and confirmed the findings from the case study.

Data analysis in case studies can be the most difficult process of the research (Yin 1994). It involves various techniques such as arrangement of information chronologically, categorising, using diagrams, examining and so on (ibid). Any researchers must set aside their personal biases in analysing and producing persuasive conclusions (ibid). This research follows Yin’s suggestions on analysing interview data. Firstly, taped interview data were reviewed multiple times and data relevant to the key themes of the thesis were identified as important segments or ‘thought units’ (see Klein et al 2006). These data segments were then displayed thematically in a new, large document for each case study. The segments covered the categories of US-style restructuring measures in their public claims, external and internal acceptance. This process was ongoing during the process of data collection. When I was faced with contradiction and ambiguity, clarification was sought through comparison with other interview data from the same organisation.

In the final stage, the findings, conclusion, and interview data were translated into English as all interviews were conducted in Japanese. After each case was analysed, I tried to understand the characteristics of the case. These were tabulated, and the outcome and argument were deduced using empirical analysis. In the discussion, I confirmed and revised Japanese organisational change debate and neo-institutional theory.

Yokohama City Council: Organisational Reform with New Public Management

Yokohama City Council announced drastic restructuring plans in 2002. Naming its reform plan ‘Yokohama Revival Plan’ after ‘Nissan Revival Plan,’ the council introduced New Public Management (NPM) (Osborne & Gaebler 1992). Administration under NPM conditions supposedly gives the citizen not only services but also empowerment, as people take more responsible action in taking part in services rather than being controlled by a traditionally bureaucratic elite. This idea was furthermore developed through the approach of neoliberal economic concepts around rational-choice economics. According to Kettl (2000), NPM identifies the following principles: (1) improvement of services to citizens with low tax (2) market-based mechanisms introduced, such as outsourcing (3) higher quality of service offered ((4) decentralisation of the system (5) reform in the policy-making process, and (6) strengthening of accountability. All of these principles clearly relate to corporate restructuring ideas such as Total Quality Management (TQM), in order to shake-up public bureaucracies which have a reputation for being undemocratic, unaccountable, and lazy.

The council announced the message about its new style of municipal government in a PR brochure as follows:

The principle for new city management is composed of five items:

• Provision of information is a key point for this reform and a basis for administrative management. Without citizens’ trust in us, we cannot hope for them to cooperate and be proactive, of to have firms’ systematic activities[…]
• We pursue fiscal management considering cost-effectiveness[…]
• Third, we establish sustainable finance[…]
• Fourth, we promote improvement of the environment that can draw forth the best in private sectors[…]
• Fifth is the improvement of the environment, so that the power of the citizen can be used […]
  (Yokohama City Council June 2004: 5)

The concepts of efficiency and empowerment of citizens, which were new to traditional Japanese public bureaucracies, were brought into the administration system by the council. The second principle was implemented through cutting the cost of routine works through privatisation, outsourcing and so on. The following targets are indicated on the Yokohama city council website:

1. Cutting labour costs: we try to decrease personnel costs through reduction of the number of workers and changing the pay system
   ~Trimming personnel costs by nine billion yen
2. Cutting the costs from routine works: we go ahead with privatization, outsourcing, digitisation and revision of administrative work in order to cut the costs of existing work.
   ~ Reduction in the expenses from administrative works: Reduction by 1% every year
   ~ Reduction in the expenses from ordinary works: Reduction by 3% every year
   (Yokohama City Council’s Homepage)

Thus, Yokohama City Council adopted a quite new reform strategy through its adoption of NPM. Pollitt (2003) suggests that Japan (and Germany) have been the least active, in that NPM jurisdiction has been very limited and there is a low correlation between execution of NPM and macro-economic performance. I will examine internal data gathered at Yokohama City Council to provide detail about its new plan in the following sections.

External Acceptance of the Yokohama Revival Plan

The council’s reform plan, incorporating NPM, was very welcomed by Japanese society. Japanese mass media reacted especially positively. For example, the ‘Yokohama Revival Plan’ came to be widely discussed in the media, who indicated that outmoded, traditional Japanese ways of organising were being overturned by ambitious new thinkers brought in from outside. The following authors of a book treat the council’s reform as a local government version of Nissan, as both organisations were trying to change an enduring traditional system:

Yokohama City Council worked out the reform plan, ‘Yokohama Revival Plan’ in only two months. It has overthrown Japanese tradition. Its reform plan is like a Nissan-style reform in a municipal government. The reform in Yokohama City Council, which employed 3.5 million staff, has hugely impacted on other local governments who have not carried out any reforms yet. (Minami & Kamiyama 2005)

Discussions by mass media mainly focused on the transition from a traditional system. The media regards the council’s reform plan as an ideal restructuring plan that will in turn be copied by other local and regional government bodies. Furthermore, the media claimed that their drastic reform plan was based on cutting-edge approaches. For instance, one business magazine stated that:

The number of local governments who have tried to reform has increased since the mayor, Nakada, started. All governments are aiming at efficiency of administrative finance, and a change of the awareness of staff members and disclosure of information, all of which have not been going well. However, only Yokohama City Council has made steady progress in his reform. (Weekly Diamond 2004; 133)

The media speaks highly of Yokohama City’s bold reform plan. This kind of support was spread further into other local governments. According to interview data, other local governments also come to Yokohama city council in order to ask about its reform plan.

Through his disclosure of the Yokohama Revival Plan, people came to be interested in our council and that reflects well on us. Other local governments often came to Yokohama City Council to ask about the detail of the ‘Yokohama Revival Plan.’ We ended up charging them for our disclosure of information. No other local governments have charged. In this way, we create value for Yokohama City Council.4

While contributing to the further spread of NPM, Yokohama city council further added value to its ‘Yokohama Revival Plan’ through charging other local governments for the disclosure of details about the plan. Clearly the Revival Plan enjoys the advantage of strong social support. This strong external understanding is considerably enhanced by the council-led story, especially by using verbal and visual narrative forms. The very high degree of Yokohama’s media coverage has contributed to strong support from the public. For example, Yokohama citizens have emphasised that they strongly accept the reform plan and pin their hopes for change in the council, as embodied by the image of the mayor, Nakada. The next interviewee indicates that citizens’ expectations of the council rapidly grew:

Citizens often talk about what Nakada says through TV or mass media. I think that he sets the stage to create public interest in Yokohama City Council. His performance on television has a huge impact on the society. When I received calls from citizens, they often said, ‘Why did you do differently from what the mayor said?’ I had never experienced these kinds of reactions from citizens before Nakada came. I feel that through his disclosure, citizens’ expectations of us have increased.5

There has been a significant dissemination of Nakada’s NPM reform plan due to his frequent media appearances. Citizens receive information about the reforms through the media, which helps to shape their expectations of the reform plan. Citizens come to look forward to change. The council’s media announcements construct a set of expectations for the council to play, much as we have seen in prior research on American ‘celebrity CEOs’ and their corporations (Khurana 2002). The amount of disclosure by Yokohama could influence public reaction. Indeed, staff indicated significant differences between current and previous media attention towards Yokohama City Council. The following deputy manager explained this point as follows:

What is the biggest change that has emerged through the ‘Yokohama Revival Plan’? The public announcements by the mayor are highly influential. We appreciate that Yokohama City Council receives much more attention from the media than before, which is very helpful. This is the biggest change from the past. I think the mayor has attracted the audience. Although the former mayor also freely provided information, the media did not show any interest. Whether the media is attracted or not may depend on the character of the mayor.6

This interviewee recognises that the media attractiveness of the mayor is a major change. There are reportedly three times the number of magazine articles about Nakada as compared tothe former mayor (Aikawa et al 2005). Articles on Yokohama City Council appeared regularly on television and radio and in newspapers, business journals and so on. On behalf of the council, the mayor usually appeared on television twice a month and radio three times per week(according to one of his secretaries in 2006). According to a press secretary who deals with media requests:

How many times is he featured in the media? He has received a high degree of media coverage comprising of television, radio, magazines and conferences. The total coverage has been 100-150 over one year. Just after he became the mayor in 2002, he had 150 media requests because he was very young to be a mayor. Now the number has reduced to around 100, but we have still too many offers to easily handle all of them.7

Nakada makes 100-150 media appearances during a year (Yokohama City Council homepage). He appears more often than the current mayor of Yokohama City Council, Hayashi Fumiko, who appears 42 times a year according to the homepage. The high degree of media coverage contributed to securing strong external support for the council. In this way, strong social understanding was fundamentally boosted by the proactive PR strategy, as Washington et al. (2008) indicate should happen when a top leader endeavours to set up an external supporting mechanism. External support was led by Yokohama’s PR offensive, which worked well in partnership with the media (Khurana 2002). External understanding results from Yokohama’s considerable and sophisticated efforts to attract outsiders. The following sections will demonstrate that the reality is more complicated and staff in Yokohama City Council struggle to acknowledge the legitimacy of the plan.

Internal Skepticism and Rejection of Yokohama Revival Plan

While the external audience supported Yokohama’s Revival Plan, how did internal audiences interpret the new plan? In this section, I will show how the council managed to get staff to understand its new reform plan.

When the mayor, Nakada, first announced the ‘Yokohama Revival Plan,’ his young, media-savvy leadership style was generally welcomed by younger staff, but not older staff. Older staff basically did not have the desire for change in the council. In this example, a member of staff indicated that older staff completely refuse changes in the council:

We have the image that the Yokohama Revival Plan means cutting the number of staff. Some insiders are union activists, so his reform plan was an even bigger problem for them. As one of his reforms, a reform committee was created so that staff could bring up reform proposals and discuss what the council needs to change. One representative from each department has to be a member of the reform committee. I was a member during last year, but it was very difficult to discuss the issue within my department because there are many older staff in my department. If I tell older staff about what I discussed in the committee, I’m concerned that they might bully me.8

The response of older staff to the organisational reform was never favourable. The following interviewee also pointed out older staff’s negative reaction to the reform plan:

I have gained the impression from inside the workplace that older staff are allergic to the term ‘restructuring.’ What is the measure of the success for the ‘Yokohama Revival Plan’? To be honest, we have not shared the purpose of that plan though we are familiar with that popular term. There is a gap between the term and actual works.

Every time he uses the term, ‘reform,’ I feel heavy. I think the advances we try to make through daily work are ‘reforms.’ I do not feel that we need to change. The term, ‘reform’ has not mentioned what we need to do or change. It is a vague term.9

Older staff have felt uneasy about organisational changes, as prior research (Matanle, 2003) indicates that Japanese organisations and employees are reluctant to change traditional styles. In this case, it seems that it is not easy for older staff to welcome a new reform plan.

On the contrary, some younger staff seemed to have higher hopes of Nakada’s change programme and appeared to be highly motivated by the prospect of reform and change. One of the reasons is the strong external support secured by the reform plan. The positive social reaction to the plan helped to awaken expectations of staff. Younger staff came to support the council’s reform plan while influenced by the mayor’s substantial levels of public disclosure, according to the following interviewee.

Ever since the new mayor came, he has been using the term, ‘reform.’ Younger officers expect some changes through his reform plan. They get the information about his reform plan through the media, so their viewpoints are not as insiders but outsiders. Younger staff bring up some issues that staff should reform together at a reform committee, which is comprised of younger staff from each unit.10

Nakada’s reform plan is highly understood and accepted by society in general, and so younger staff reacted more positively to the media’s reports on the council, accepted it, and came to have expectations as to what the reform would do for them as newer council employees. As Higgins & Diffenbach (1989) argue, media coverage can increases the credibility for a restructuring plan, and it could lead to the boosting of insiders’ expectations for the new reform plan. Indeed, much like the general public, which is influenced by the council’s media performances, staff also show an interest in what the mayor says about the ‘Yokohama Revival Plan,’ according to the following interviewee:

Every Monday, staff came in and talked about what the mayor had said about the ‘Yokohama Revival Plan’ on television programmes broadcast every weekend. He often appears in the media. We are interested in his comments. I think that this is the biggest change. In addition, new officers took pictures of the mayor in the welcome party for them when Nakada came here. They asked him to appear in pictures with them. This did not happen before. He is very charismatic.11

Some staff pay more attention to Nakada’s public comment on the reform plan. In particular, it seems that younger staff who started work in the council after graduating from universities tend to support Nakada. He came to be treated as a hero of Yokohama City Council. Despite past arguments by academics in Japanese organisational studies (Graham 2005; Okubayashi 2002) that it is not easy for staff to absorb totally different management styles, Yokohama City Council’s younger staff appeared not to be put off by the reform plan.

However, this internal motivation did not seem to last very long. Once great pressure was brought to bear on younger staff to actually change and engage in tough reform measures, many staff became reluctant and resistant. The following interviewee indicated this point as follows:

Whether staff support the mayor’s reform plan or not depends on their sense of value and consciousness level. To go to the extreme, it relies on whether they like the mayor or not. It is difficult to fundamentally change those points. On the bad side, they come to be brainwashed by the mayor. However, he often said we need to change. Then they gradually reject the mayor’s comments.12

Younger staff’s high motivation for the council’s reforms was allowed to rapidly dissipate. Young staff who possessed relatively higher expectations of the reform plan also began to show feelings of dismay at the reforms. Also one of young staff member complains of the difficulty of restructuring inside the council:

The image of the council has improved, which is good. There are many opportunities to meet with those from private firms and other city councils through my jobs. Everyone knows us, which make me happy. Having said that, we have worked here because the city council has a slow pace of work. We did not hope for the current busy and messy situation. That is, we have not found satisfaction in the actual condition. It is hard for us to take the new reform plan seriously if it asks that we should change. We will refuse continuous reforms and his frequent use of term, ‘Restructuring.’13

Younger staff had great expectations of the reform plan, but soon realised that severe difficulties were being faced once the reform started. My interview data related to this area indicate two important points. Firstly, ‘productivity’ and ‘efficiency’ are notoriously hard to measure in public sector service environments (Pollitt 2003). As we can see below, the total amount of debts have actually increased in recent years, despite the repeated pronouncements about restructuring to clear the council’s deficits.

There have been various reasons for the change failure inside the council: inadequate budgets, more difficulty in deinstitutionalising the existing system than within private firms, and so on. A wide range of research indicates that it is especially difficult for local governments to adopt private firms’ management strategies (Pollitt 2003, 2007; Brunsson 1993).

Secondly, whether or not awareness of Yokohama’s reform plan increased depended hugely on staff’s understanding of what its practical implications might mean for them. The reform may be a much more difficult set of tasks than many staff anticipated. Both older and younger staff came to resist, in various ways, the supposedly drastic organisational reforms. Previous literature on Japanese restructuring and neo-institutional theory tends to place most of the emphasis on the perspective of outsiders and does not see the daily, pragmatic forms of resistance or indifference that take place at the level of staff behaviour. This case sheds light on the importance of internal interpretation. Staff tend to consider their own advantages first when they decide to legitimate; they often act with more self-interest than the theory assumes.

Internal illegitimacy is further accelerated by the mayor’s lack of internal focus. Staff exacerbated their distrust of the mayor. Even the younger supporters became rather sceptical about the PR offensive engaged in by the council.

While the ‘Revival Plan’ has been popular in society, it has weighed heavily on staff. Despite that, the mayor publicly keeps promoting the term ‘Yokohama Revival Plan.’ Staff have eventually become tired of his term, which is further evidenced by the following interview.

We feel that the term ‘restructuring’ denies our past, and mistrust grows every time Nakada uses the term. The mayor always says the term ‘Yokohama Revival Plan’ in public. His continuing to announce this contributed to earning social trust. On the other hand, we are tired of that term and not comfortable with it. I feel that insiders are feeling, ‘Who is to blame for this mess?’ We tend to blame the mayor now. I think that Nakada stresses the term ‘reform’ too much.14

While the plan is continually promoted to wider society, staff feel alienated from it and eventually come to deny and tacitly resist it. Nakada appears to have lacked genuine consideration for the minds of staff when he exhibited his mimetic isomorphic behaviour. This implies that the mayor might not have paid enough attention to how staff understand the mimetic isomorphic behaviour. Isomorphic behaviour with a popular strategy is not, by itself, sufficient to sustain genuine organisational reform. It also requires serious and committed work to encourage staff to join in with organisational change.

Discussion

Thus far I have explored the facets of how Japanese local government has reacted to external pressure from economic, social and political changes that have forced it to depart from the practices of old institutions. What is new—and very real—however, is the wide and deep institutionalisation of the practice of crafting official messages, usually with very American language and tone. It is clear that significant change seems to be occurring around Japanese local government reform strategies in recent years. Certain very recent literature has developed the argument, suggesting more transformation in Japan than previous studies anticipated (such as Buchanan & Deakin 2009; Dore 2006, 2008, 2009, 2011; Olcott 2009). However, my findings show that their argument still does not take into account what is happening inside Japanese organisations.

The story of organisational restructuring and the diffusion of a top leader’s official use of NPM reform measures at the Japanese local government level illuminates complex dynamics of internal legitimacy. When organisations externally manage the complex process of securing legitimation, they are exposed to more difficult processes as they attempt to earn internal legitimation.

Richer understanding of internal legitimacy creates a foundation for greater exploration of its dynamics and the hugely complicated process of organisational change involved in gaining, or failing to gain, internal acceptance in other contexts. I found that staff tended to accept organisational reform when they felt that doing so would not cause obvious damage to their daily working lives or careers or to their moral code. However, it is not clear whether other contexts also show equally the aspect of internally complicated processes of internal acknowledgement. We know very little about the specific situations under which staff validate such contradictions, and thereby legitimate top leaders’ plans.

This study also contributes to literature on organisational reform in Japan by addressing the need to go beyond the current simple, stereotyped and abstract understandings of the mechanisms of reform practices (processes) from the perspective of outsiders, and attend in much more detail to the more human aspects of understanding and interpreting the mechanisms of human agency; individuals’ personal involvement in, or rejection of, organisational change, such as how and why individuals appear to legitimate wider institutional structures (Suddaby et al 2010). My study does this by revealing that bottom-line, calculative aspects of individual’s behaviour are implicated in people’s decisions as to whether or not to be involved in the change process, demonstrating how the often cautious behaviour of staff makes internal processes of reform more complicated and unclear than those associated with external audiences.

Neo-institutional theory recently highlighted how to manage complex institutional processes in securing external and internal legitimacy. The recent literature has speculated that effective institutional actors have to manage complicated institutional process and reduce a gap, the contradiction between socially accepted value and the actuality. For example, actors have to recognise and creatively use a gap between ideals and actual behaviours (Washington et al. 2008; Boxenbaum & Jonsson 2008). Washington et al. (2008) suggest that effective actors have to attract external and internal audiences through offering benefits and promotions. A leader’s political action is important to maintain legitimacy; it involves externally sending ‘visions and values’ and also engaging in internal story-setting to maintain internal consistency (Washington et al. 2008).

My research also indicates the importance of leaders’ additional actions to stabilise legitimacy. Leaders’ internal discourse significantly influences staff decisions as to whether or not to engage in organisational change (Boxenbaum & Jonsson 2008; McLean & Behnam 2010). My research illustrates yet more pragmatic behaviour of individuals in daily practices when they acknowledge legitimacy. Organisational members adopted a realistic view of a gap, and as a result of pragmatic decisions of internal legitimacy, began not to participate in organisational change. This outcome suggests that although leaders’ ongoing efforts are surely important, in order to create a situation where company members can be involved in institutional practices, staff will not always quickly react to a leader’s internal actions, but might instead react to more realistic and ‘authentic’ lower-level stimuli (pragmatic benefits) that appear to have a bearing on their daily practices. Staff have motives of self-interest when they decide to acknowledge a leader’s new practices as legitimate, which make the internal institutional processes more complex, difficult and unclear than the external processes of institutional practices.

This is also applied to the current Japan. Since 2012, the current Prime Minister, Abe Shinzo, has been running his structural reform to end the worst economic slowdown since the 2011 earthquake and revitalise the economy. The Japanese public named the reform Abenomics. Abe has engaged in process of Public Relations about his public reform, which has been widely accepted. The reputation of Abenomics has improved within the country and overseas (Honda 2013). Contrary to the social legitimation, it seems to be difficult to encourage individuals to join his reform. Japanese firms are cautious to invest in plant and equipment while yen depreciation has to be advantage for their further investment. Their investment seems to stop declining according to the Cabinet office15 but still not to grow especially in the manufacturing industry. Consumers are still reluctant to spend, though they have 1,400 trillion saving and total wages have increased by 0.8% (Yamaguchi 2013). Reuters16 indicates that Japan’s annualised GDP growth has been decreased since 2012 though it temporarily grew just before consumer tax increased in April 2014. The current growth rate is -6.8% as of April-June 2014 (ibid). Having said that, the Cabinet Office Government of Japan and the public has summarised that the economy has stepped forward (2013).

External understanding cannot always illuminate all the changes. Individuals take more time to move actions than we expect. Japanese central and local governments’ performance into ‘recovery’ is a continuous process of trial and error with their institutions faced with near-constant pressure from outside to demonstrate change.

Conclusion

After the financial crisis in 2008, each country has increasingly been under pressure to build up its strength to survive under international competition and sudden crisis. While they are forced to swim with the tide, they also need to react to the internal pressure. The cautious approach of staff may avoid the situation where temporary fads completely shape institutional strategies. Staff can subtly say ‘no’ through tacit resistance in order to prevent reformers from ‘going off the deep end’ or acting as a ‘toxic leader’ (see Reed, 2004). Future studies aimed at examining in-depth data of positive and negative aspects of institutions’ conduct might provide a reformer with a clue as to how they should manage the massive complexities of adaptation and translation of organisational trends, some of which seem doomed to be simply passing vogues.

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Notes

Article copyright Chie Yorozu.

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