Foreign Metal Suppliers

The Kobe Steel scandal has been widely blamed on everything from the company’s management failures to the whole of Japanese corporate culture.

But one factor has so far not had enough attention: I believe the company’s high technological skills could — paradoxically — have paved the way to its dishonesty.

Kobe Steel has admitted that its managers falsified quality data for decades for customers in Japan and around the world, in a revelation that has badly damaged the company’s reputation. It followed scandals at other Japanese companies including Nissan Motor, where unqualified staff inspected vehicles, and Asahi Kasei, where employees at a construction subsidiary faked building data. Most recently it has emerged that motor company Subaru also permitted unqualified staff to inspect vehicles.

In the case of Kobe Steel, the very high quality of its steel, aluminium and copper could have given managers the scope to fake quality data. If the base quality had been low, falsifying quality data would have led to problems surfacing sooner for the customers. Kobe workers would not have cheated because they would have known they would be easily caught.

Kobe Steel’s cheating probably took place where the base product quality is high, giving a relatively wide amount of leeway in quality standards before the falsified data would surface as a problem. The workers may have thought that because the quality was good, no real problems would emerge unless something extreme happened.

Such thinking became a way of life probably because of their excessive confidence in their product quality. They would cheat on the assumption that because their products were of higher quality than that of any other companies’, they would meet the customers’ needs even when the specifications required on paper are not fully met. Such beliefs would lead to misconduct.

Humans are often not strong enough to admit that they are doing something wrong. They try to justify bad behavior. Perhaps Kobe Steel workers justified what they were doing by saying, “Our products are of high quality, so some cheating on data would not be a problem.”

The grave nature of the mistakes at Kobe Steel is apparent in that more than one business section was involved in the scandal. If it had been confined to one particular operation, the responsibility would rest with that business and the people in charge, and they would be required to solve the problems’ cause. But the misconduct involves multiple business operations including the mainstay steel business, which makes it fair to say the issue is not about individuals but that of company-wide, organization-level acts. This is a huge failure of Kobe Steel’s organizational culture.