Company Leaders Honda and Fujisawa Retire; Kawashima Assumes Presidency / 1973

Chapter 1

Training Young Executives, Fujisawa Style

The question had been present in Senior Managing Director Takeo Fujisawa's mind as far back as 1956, when Honda Motor had at last attained success with its motorcycle business. What was the optimal corporate structure, he wondered, that would allow the company to continue growing?


The Big Boardroom: Imminent challenges and other issues were solved promptly through discussions such as these. Kiyoshi Kawashima is shown second from the left.

One idea was that the Research Division should be separate and independent from Honda Motor. That concept, though opposed initially, eventually came to reality with the establishment of Honda Motor R&D Co., Ltd., on July 1, 1960. However, it was not until considerable time had been spent deliberating the matter.

The idea behind an independent division for research and development was to create a system in which the collective power of many experts could be put to full use rather than relying solely upon the power of a single genius, Soichiro Honda. During that period, Fujisawa was painfully aware of an additional problem, that being the need to develop the talent that could succeed Honda and himself in leading the company. As Fujisawa had so often told Michihiro Nishida (the former executive vice-president) and others, "The founder's most important job is to preserve the fundamental practices of managing a business on behalf of the next generation."

Recalled Nishida of that period in the company's history, "I believe it was something Mr. Fujisawa had in mind for a long time. He believed that the most important job for the company's two founders was to make an appropriate decision regarding who would take over, once they'd left the company. That's why he spent more than a decade training his potential successors."

The directors' meetings were from early on attended by several young general managers and assistant general managers, upon the instructions of Fujisawa. He would ask them to present the details of a particular agenda and participate in debates, always aware of their ability to contribute. It was through such activities that these younger employees would receive the skills they'd need to enter the upper management.

Kiyoshi Kawashima became a member of the board of directors in April 1962, at the age of only 34, during a period in which Honda Motor produced a number of young directors. Within a year of his appointment, there were four directors, each of whom had another title of significant responsibility. Kiyoshi Kawashima was the general manager at Saitama Factory, Kihachiro Kawashima was the executive vice-president of American Honda, Nishida was the general manager of the Foreign Division, and Takao Shirai was the R&D Center's director. One day, however, Fujisawa summoned them to company headquarters, whereupon he announced that they would be dismissed from their duties as the managers of each respective division.

"So, what are we to do now?" wondered the four directors aloud. Only a day earlier they were busy fulfilling their duties, and now they had been thrown into a state of confusion as the board of to what their dismissals were all about. In fact, it would take another three or four months for them to fully understand the reasoning behind Fujisawa's decision.

"We came to realize," Nishida recalled, "that we had done nothing as the board of directors, although we had performed our duties as managers. Mr. Fujisawa carried out this change in our positions so that we would become aware of that fact through direct experience."

Thus, the four directors began pondering a new question-namely, what a director was.

Fujisawa, in answering the question, told the four of them to "think about what a director should be doing."

The four men debated this question among themselves every day. Faced with a question resembling those asked in a Zen mondo or Q&A session, they often took to the streets of Ginza to discuss it over Japanese hotchpotch and yakitori at local food stands.

"When Mr. Honda and Mr. Fujisawa first met," Nishida said, "they would go everywhere together like a couple of honeymooners. This was because they were eager to get to know each other and debate the issues. And within about seven years of the company's founding they had come up with a concrete representation of Honda's corporate philosophy. So, just as they had done in their own way, we did in our case, debating a great variety of issues and getting to know one another's personalities."

The question had indeed served its purpose, for in time the young directors grew confident that they could carry on the Honda business as opinion leaders in the boardroom.

Chapter 2

Young Engineers Emerge

The year, 1969, was a major turning point for Honda as an automobile manufacturer. It was also a year symbolizing a dramatic step toward generational change within the company. It all began with the poor sales performance of the Honda 1300 (H1300), which was actually a cutting-edge product for the time. Its failure to meet the market-performance expectations triggered what was to become the "air-cooled vs. water-cooled engine debate."


Company founders Honda (center) and Fujisawa (right) with second-generation President Kawashima (left)

The air-cooled engine was of course Mr. Honda's first choice, despite the H1300's poor sales. Even so, Tadashi Kume and other young engineers maintained that it was necessary to develop water-cooled engines that would meet the coming need for lower exhaust emissions. Therefore, Fujisawa visited the R&D Center to meet with Mr. Honda, who in his enthusiasm had continued promoting the air-cooled engine concept. Fujisawa asked the following question:

Are you going to stay on as president, or are you going to stay with Honda as an engineer?

A moment of silence ensued, after which Honda replied, "You know, I think I'll stay on as president." That ended the debate once and for all.

A major lesson learned through the development of the H1300 was that the times had truly changed. It was no longer possible for one genius to control every aspect relating to design or manufacturing. Moreover, the experience proved that gifted young engineers were on the rise, preparing to succeed Mr. Honda and his formidable creative intellect.

Chapter 3

Four Senior Managing Directors: A Collective Force

The Meeting of Shareholders in April 1970, officially approved the transfer of leadership from founders Honda and Fujisawa to the so-called collective leadership of four senior managing directors: Kiyoshi Kawashima, Kihachiro Kawashima, Michihiro Nishida and Takao Shirai. It was significant as a strategic move, making way for the retirement of the company's two top leaders.

"The president and I will step aside for the time being," said Fujisawa, addressing the four senior managing directors. "But you must lead the organization on a daily basis, and you must make plans for the future. Please don't hesitate to come to me for advice, should you find yourselves in a real bind."

Company leadership thus having shifted to the four senior managing directors, Fujisawa rarely showed up at headquarters. As for Honda, he showed up every day at the R&D center, ever since it became separate and independent as Honda R&D Co., Ltd. In fact, he had assumed the post of president there. Therefore, the management of Honda Motor, including the course it would take in the future, was left up to the four men, just as Fujisawa had planned.

Each of the four senior managing directors had grown up under Messrs. Honda and Fujisawa, having started as a young person with much to learn about the daily operations of such a company. Recalled Kiyoshi Kawashima, "The only time Executive Vice-President Fujisawa would show up at headquarters was when he was concerned about something regarding one of our policies. The moment it was explained by the one senior managing director most knowledgeable about that policy, however, he would simply say, 'That's fine, then,' and head for home."

The "Big" Boardroom system - that is, all board members shared a big office space without having individual office - was implemented in 1964 upon the suggestion of Fujisawa. Since information was shared commonly not only among the four senior managing directors but also with other board members, new data could therefore find its way quickly to the four senior managing directors and ensure the reliability of their management decisions.

Chapter 4

"Thank you for telling me."

The "water-cooled versus air-cooled engine debate" had long since been settled, but Mr. Honda still carried on his unending work in research and development. Regardless, there was a rising tide of sentiment, even a decade after the R&D Center's independence, that a change in leadership was necessary. This was especially true among the many young engineers who had emerged on the scene. The question, though, was who would propose such a thing to Soichiro Honda. After all, he was still busy displaying his talents as president of Honda Motor and Honda R&D. The job fell into Nishida's lap, since he was the board member in charge of administrative affairs.

A reluctant Nishida thought to himself, "With Kiyoshi Kawashima being a subordinate directly under the Old Man (Mr. Honda) at the R&D Center, I guess I'm the only one in a position to approach him with this request." It was a daunting task, to be sure.

Nishida finally had an opportunity to speak to the company founder when he went to the R&D Center on another business matter. He knocked on the door of the President's Office, then entered upon Mr. Honda's invitation. Upon seeing Nishida, Mr. Honda asked him to join him for lunch. Nishida made small talk as the two of them slurped soba noodles together. When the moment was right for it, he began to talk about the real issue at hand.

Recalled Nishida, "I asked him nervously, 'Now that we have trained and raised so many R&D members, could you please start thinking of handing over the reins? And immediately, while wiping away tears with a handkerchief, Mr. Honda kindly replied, 'Thank you for telling me.'" Always in a rush, he then said seriously, "If you want, I could even quit today." Nishida was at a loss as to what he should do.

"Mr. Honda was so devoted to his work," said Nishida. "Once he'd made up his mind about something, he just couldn't see anything else. Though he never gave much thought to personnel issues, at just one mention he understood everything. He even gladly accepted my proposal. That's the kind of man he was."

Honda retired from his post as president of Honda R&D Co., Ltd., in April 1971. Following his retirement, Nishida felt a pang of guilt when Honda said jokingly, "For a while, in the morning when I left my house in Shimo-Ochiai, I couldn't help heading toward my company. I'd be halfway there and remember, 'Oh, I'm no longer the president,' and would head right back home."

The phrase "my company" meant nothing more than the R&D Center to Soichiro. To him, it was everything.

Chapter 5

"We can't keep up with the times anymore."

Panic struck Japan in August 1971, when the price of the U.S. dollar, which had been fixed at 360 yen, plummeted to 308 yen. This signaled a change in the exchange rate to a floating system, producing the dreaded "dollar shock."

At the time, Soichiro had expressed his bewilderment about the issue. "Why is the exchange rate changing?" he said. "What's wrong with the dollar being 360 yen?"

It wasn't an easy time for Honda and Fujisawa, who would often confess half-jokingly, "We can't keep up with the times anymore."

Honda was not alone in displaying symptoms of the so-called "big company disease." The tumultuous change so evident in the dollar shock continued to ravage the nation's businesses. Honda lacked a sufficient ability to adapt to change, raising fears that a major challenge may affect the entire company more seriously than ever before. It was a fear that Fujisawa had felt before. After all, he knew the company would not be able to call him and Mr. Honda its leaders forever.

Fujisawa spoke to Kiyoshi Kawashima about the matter. "Neither I nor Mr. Honda will be around forever," he said. "What will you do when we're gone?" Kawashima's feeling was that it was no longer good enough for the company simply to excel at climbing out of ditches after it fell into them. From that day on the company would have to avoid such circumstances altogether.

"I believed we had to build a corporate system that was capable of an immediate response to changes in the times," said Kawashima of the period. "So, I began devising a new policy."

Clearly, it was important to prevent problems from occurring. Unfortunately, however, that was Honda Motor's one major weakness. Therefore, under the leadership of the four senior managing directors, the Board decided that Honda's corporate structure would be drastically revised through company-wide reform. It was to be called the New Honda Plan, or NHP, in order to define Honda's uniqueness and develop the company in a manner appropriate to its character.

NHP was launched in April 1972, with Kawashima as chairman of the NHP Committee. Because it looked ahead to the next generation, twelve young members in their twenties to early forties assumed full-time posts in promotion of the plan. By April 1973, the actual issues at hand had been organized in order to implement NHP as a full-scale project. This was the company's first step forward under the leadership of Kawashima. Ultimately, the plan became a powerful force in promoting a generational shift within the company.

Chapter 6

Retreating in Manly Fashion

"I will leave the company at the end of the fiscal term," Fujisawa told Nishida in March 1973, thus ordering Nishida to "tell President Honda that" on his behalf. At the time, however, Honda was away in China on business, meaning that Fujisawa's decision had not resulted from a proper conversation with Honda. Therefore, all Nishida could do was wait for Honda's return to Haneda Airport, and pass on Fujisawa's message concerning his wish to retire. Honda, though, had not been expecting it. He thought about it for a moment, and then told Nishida, "I can't be the president without Takeo Fujisawa. If the executive vice-president is quitting, then I'll quit with him."

When Fujisawa learned of Honda's words, he felt he had made the first big mistake in his long relationship with Honda. He had done it in the belief that Honda would need additional time in order to think things through. He regretted not having spoken to Soichiro earlier about his wish to retire.

Recalled Kawashima, "When I was about to take over the post of president, all Mr. Honda said to me was, 'So, we'll resign, now. I'll leave the president's job to you.' I think he was somewhat prepared for that moment, what with the 'air-cooled versus water-cooled engine debate' and his retirement from the presidency of Honda R&D. And when he heard that Mr. Fujisawa was quitting, he immediately thought of his own timing to quit. He knew he couldn't stay by himself and simply let Mr. Fujisawa, his founding partner, quit. That's how thoughtful Honda was."

Thus ended the collaboration between Soichiro Honda and Takeo Fujisawa in which they founded a hugely successful company by uniting behind the fulfillment of a single vision. The joint retirement of the company's two top leaders created a sensation among the public. Not only were the two young enough by social standards to provide many more years of useful service (Honda was 65 and Fujisawa was 61), but Kawashima, who was informally designated as the next president, was also unusually young, at 45. Moreover, the new president was not related to either of the two founders. This turn of events proved conclusively to the people of Japan that Honda was not a typical, family-owned company.

The company itself showed remarkably little confusion about the transition, owing to the fact that Kawashima had already played the role of leader among Honda's four senior managing directors, promoting NHP throughout the organization. It also was reassuring that the remaining directors were continuing in support of his leadership. Therefore, after the retirement decision had become final, Fujisawa spoke to Mr. Honda. Fujisawa looked back on that meeting in the following passage from his August 1973 "Words at Retirement":

(Mr. Honda) signaled me with his eyes to come over, so I went along with him.

"It was all right," he said to me.
"Yes, it was all right," I responded.
"We've had a happy life," he said.
"Yes, I've had a really happy life, and I thank you from the bottom of my heart," I said.
"I thank you, too," he said. "It has been a great life."

That was the end of our discussion on retirement.

The company's founders officially retired together at the Meeting of Shareholders held in October 1973, on the 25th anniversary of Honda's establishment. With that, they assumed their lifetime positions as Supreme Advisors.

Japan was slammed by its first oil crisis only a month after Kawashima became president. Yet, despite the continued rise in prices from that time, the new Kawashima administration firmly established a policy stating that "Honda vehicles could not increase in price," thus helping overcome the crisis.

The training of young successors, and the grace to step aside in due time are qualities that demonstrate Honda's unusual grace in the face of major change. No one has said it better than Kawashima, who stated, "When I became president, the first thing I thought was that I would one day carry on the beautiful Honda tradition of 'resigning in manly fashion.'"

Kawashima himself, in selecting Tadashi Kume to be his successor, stepped aside at the age of just 55 years.