Professor Ken Kusunoki of Hitotsubashi ICS and our CEO, Shintaro Suhara have a conversation! What is this corporate strategy that can be realized because this is es Networks, that Professor Kusunoki’s keen vision makes clear? What is the special attraction and uniqueness of ”es”, and what is its contribution to Japanese society!? We will introduce the full story of a deep, dense dialogue that unfolded over the course of 1 hour and 20 minutes.
I think one point that characterizes es Networks within the consulting industry is that your consultants enter into the client enterprise and are involved in the actual work that goes on there. First of all, could you tell us about the major premise of your philosophy in regards to this?
As the two major premises of our business, the first standard held up in our management philosophy is “management support,” and the second, the overarching goal of “manager development” for the world.
As for the position we take to make these happen, there are 2 main parts, the first being the resident consultant system which is a big feature of our company. Our resident corps enter the heart of our customers’ business and undertake the actual work of accounting and finance from there. The second is so-called consulting, wherein we provide M&A advisory and financial instruction.
First I’d like to ask what is different about this from the work of ordinary consultants, and how is it different from the temporary dispatching services of other companies?
Generally, compensation is made based on a package, for example the submission of annual tax filing or audit report. These are worked on “outside.” On the other hand, dispatch work is provided as a functional input to provide talent in areas of the company that may be lacking, such as accounting. This is work from the “inside.”
In terms of that definition, you could say that our company is in a sense “totally immersed inside.” We share the mission and goals of our customers, draw up a schedule, and take up our work advancing step by step.
Though ordinary dispatch workers are “inside,” they don’t participate in sharing the goals or mission of the company, and on the other hand the usual consultant is always “outside.” In our case, in the end we enable the customer to take care of things on their own, steadily passing on our know-how, and we never create a system where the company won’t run without us.
Rather than an accounting function block, you carry the mission of outputting results for the company.
Of course, precisely because there is a hierarchy, there are cases where young members such as new graduates take on practical execution functions, but this is only at the entrance. For example, if they serve as a project manager leading a team, more than serving a single function, they exist as partners who share in the mission of the customer.
But with consultants, depending on their way of working, things can get really bad. For example, if it is an auditing corporation, since the content of the work is more clearly defined than the consulting firm, very bad things can’t really happen, but even then, from the client side, even as they harbor doubts with questions like “why does this cost so much money?”, since they’re unable to do it on their own, they have no choice but to ask for help. However, in the case of a resident who comes “inside,” it could lead to a way of doing things where “without us it won’t run.”
Regarding that issue, we clearly say to our customers that “we will act in good faith.” So we never take the stance where things like stealing the customer’s work becomes possible, and we always provide guidance to the customer’s internal staff, building a system that allows them to operate without us.
I see. So that’s the interface between es Networks and the customer.
How do you go about explaining to the customer the role of es Networks staff and teams?
We sometimes explain that we can be thought of as “mercenaries.”
Paid partners in body and spirit, comrades-in-arms fighting with the same victory as our goal. We work with our whole body and spirit, fight until victory, and never run away.
You’re taking up a method that’s not normally used. In my understanding, a key phrase that comes to mind is “all-you-can-eat.” Taking the ordinary duties of a tax accountant or auditor as one plate, es Networks takes up residence and does all kinds of things, so it’s all-you-can-eat. But by that definition, ordinary “dispatch workers” are also all you can eat. What’s the difference?
In the case of ordinary dispatch workers, the customer side has to decide what they want to eat. We make proactive submissions: “it might be better to order from this particular menu,” “perhaps we should change the seasoning,” or “we can also prepare this kind of cooking.”
I see, I see. That makes sense.
I think you can broadly divide this way of thinking into two axes. The first axis is something like consulting offered from a separate location outside the company, but in this axis the work actually undertaken from within the company. In other words, it’s a way of thinking about what kinds of distances and relationships with which the job should be undertaken. And the second axis involves a way of thinking about business conditions or the way that work is done; one way involves taking on work as an outsourcing with a specified function only, another way is working “inside” as a dispatch and working within a limited scope, and finally there is es Networks’ way of doing things. When thinking about these two axes, es Networks is offering all-you-can-eat while providing suggestions, and also imparting know-how to customers, so in terms of the two axes mentioned earlier, what is known as outside counseling can be positioned as the antithesis of the way things are with es Networks. That way of existing on the “inside” is what es Networks is all about.
In terms of those two axes, that is the case.
Please let me organize this so we can get bit of a deeper understanding.
For example, if there is an axis of “true” and “false,” and within “true” there are three levels, “outside > inside > deep,” I think that “ouside” refers to something like an accounting or tax accountant’s office, “inside” refers to ordinary dispatch services, and the “deep” level is es Networks’ way of engaging in practical business. So I guess that is the point here.
That’s exactly right. As an example of accounting talent, the most common path for talented accounting personnel is overwhelmingly towards an audit corporation, so in actuality they are almost non-existent in the place of actual business. Especially, in the case of passing the CPA exam, 90% will go to an audit corporation. Let’s take that as our opening assumption. Using the example of a pyramid, some listed companies are located at the apex of the pyramid, which is less than 1% of the total, but in fact of the remaining 10% of talented accounting personnel who didn’t go to auditing corporations, a lot of them can be found within this 1% of listed companies. On the other hand, with unlisted companies that have fewer than 30 employees, there isn’t much need for difficult accounting practices. In other words, mid-range companies that lie between the top listed companies and small companies of fewer than 30 employees find themselves in an unfortunate “human resources air pocket.” Companies in this layer are aiming in the same direction as the top listed companies, and they’re looking for the same capabilities as the top listed companies, but they’re in a situation where the necessary resources don’t come to them. That’s why we have made this section our main target since our founding. Companies in this layer don’t necessarily find it feasible simply to have dispatched temp staff that can work according to the company’s directions, since there are times where no one on the company side is able to give such directions, and without putting the complete set in place from commander down to subordinates, it doesn’t matter what you do. That’s where our structure was born.
By the way, I think I can say that people with intentions in the accounting field tend to be diligent, conservative, not the kind of people who climb forcefully up the ladder in a typical company.
(Laughs) I won’t deny that hypothesis. But there are interesting people as well, and that’s the kind of talent that we’re assertively pulling into our ranks.
What we find interesting in people is, for example, not only their work evaluating a company from the outside through auditing, but by entering into the practical work inside a company, or moreover influencing the company on the whole, having a real sense of orientation, things like that. Shouldn’t this kind of talent simply go to one of the companies in the “human resources air pocket” you talked about before from the start? What’s the meaning of joining es Networks?
I think it is the distance from management. People who make suggestions and naturally want to set their own direction can be expected to have a strong intention to participate in management. If that is so, they would like to be able to work in an environment that is closer to the management side. We are a place that connects “classroom learning (MBA, management)” and “onsite management execution” through consulting. At an operating company there are paths that approach management, but in terms of distance and time frame, our company is overwhelmingly shorter on both counts. I think this is the point.
In the same way people tend to think “the president is a different race of person from myself,” it’s hard for ordinary people to form an image of the management world. But through our company, as one enters into practical consulting, and begins having meetings with the president and going out for drinks with them, gradually they begin to feel, “the president is actually surprisingly normal,” “I might be able to do work on the other side, too.” These kinds of realizations start to take shape somewhere. That’s why at this company, we start with practical consulting that involves entering the inside of the customer company. And, as one begins to realize through this process that the hurdles of being a president aren’t so high after all, they begin to take an accelerated interest in management.
In other words, people who make suggestions and naturally want to set their own direction, namely talent with a strong interest in management, comes to es Networks. Even if one works for a company located in the “human resources air pocket,” these kinds of realizations don’t come about easily.
Along the lines of this way of thinking, if that person gains some kind of awareness and then joins that company, that’s also “mission positive” for es Networks.
Yes. However, this is our real motive, but we are a company as well, so it isn’t feasible to have employees leave all at once after being enrolled for only 5 or 6 years. We ask that they stay with us up to a certain range so that we can help them to grow.
es Networks has a position that is distinct from other companies. What is a constraint for the company’s growth or strategy?
While statistically there is only a few talent that is business-minded, independence-oriented, and moreover wants to become management, on the other hand we have to hire a lot of this type of talent in order for the company to grow. This is no small feat; it’s not easy. What’s more, to fully develop talent is a process that takes 10 years, and if the talent exits partway through, as an investment it is a big loss.
Also, because our talent works from the inside of the customer company, superior talent is always receiving offers from clients, and in actuality there are a number of actual examples of people who have unfortunately gone over to the client side. However, even those examples, with our resident service talent as the denominator, are an extremely low percentage of the total. In a sense, we are risk-tolerant, and it’s common sense that talented people will leave the company. It might happen a bit earlier in the case of our company.
But at the same time it’s kind of a killer pass, isn’t it? By accepting the risk, you can do things knowing what may possibly happen, and in doing so offer a service that doesn’t exist elsewhere.
That’s true. Besides that, it’s not like everyone leaves, and since a certain number of excellent members are always here for us, we’re able to grow sufficiently. In addition, this may be self-glorification, but members who have left the company have come to be known as “es-ish people” or “es alumni,” and have begun to give us a certain reputation.
What is “es-ishness”?
It’s a feeling that you are doing your job with a sense of independence, staying active and positive.
Meaning the support relationship between the goal and the means to its achievement is tied together precisely. Taking care so that the means doesn’t become the goal.
We take the same point of view as the customer when we work, and most of all we enter from a business perspective.
Which reminds me, es Networks people don’t really act like accounting talent or accounting consultants, do they? There are a lot of accountants, though. I guess that’s the point, eh? Nevertheless, they are accountants. (laughs)
There are accountants, but not so many. Actually, those without qualifications often turn out to be the most outstanding. Though they aren’t accounting talent or accounting consultants who can sing and dance (laughs). A CPA is like a driver’s license, it isn’t a big deal. It is said that business is all about whether or not you can fight when reduced to naked personal merit.
For example, when you go “inside,” there are often customers who can be a little difficult. Although of course our members are doing practical work, they also go for drinks with these customers, and have them become proper fans of our company. We’re looking for people who work on the “inside” in that way, creating their own position as they go, so it isn’t about simply being smart, and it isn’t the case that just being able to do accounting is enough.
So actually everyone is stationed at a company somewhere as a resident, aren’t they? Despite the fact that the amount of time spent at the site of residence is overwhelmingly greater, how is it that “es-ishness” still comes out?
That’s a frequently asked question, but first of all, we do the general things. For example, twice a month we have a morning meeting for all staff members, where we share our thoughts about the company, info, and best practices face to face. Of course, our members in rural areas or overseas, etc. can’t physically attend, but they still participate without fail via Skype. Also, we hold events such as MVP elections and “Outstanding Work Awards” every year, and put great importance on a culture of mutual respect and praise for achievement. We do as much as we can so that even remotely, our hearts are connected.
But in the end those things are really just “extras.” In any case, taking up residence with the customer and coming to grips with them up until a fixed point is for us the elite course, and we continue to say that if you can’t do this then there is no meaning in your being with our company. Treading on the layer that is this elite course, and the next layer that aims at it, well there may be some “storytelling” as it were with the same thing being said, an in-house tradition that has a lot to do with it.
Meaning each person is serving as a role model. I heard something about geisha dwellings in the Edo Period that really moved me; it turns out that geisha originally were attached to restaurants. At a certain point they became attached to geisha dwellings, and the style changed so that they were dispatched to restaurants instead. Why? Well, this is a case of performance going rough, but even if a restaurant was thriving, they couldn’t judge whether it was due to good performances, good location, or good cooking. However, with the geisha dwelling system, it became possible to evaluate the merits and demerits of the geisha directly. Respect was born for a popular geisha, and at the same time a relationship was born where they strongly referred to each other and began to try to differentiate themselves from each other with sentiments like, “that girl is good at shamisen, so I’m going to make my stand with dancing.”
I think that university is similar to a geisha dwelling. We live by selling our art, and it’s fine even if we are freelance. But as a proactive reason for belonging to a geisha dwelling, by looking at the other people who belong to the same university, one can understand one’s own strengths as well as one’s weaknesses.
What I’m trying to say is that es Networks consultants are also using their art (abilities) at their resident sites as weapons, in the same way. There is the axis that is es Networks, with its dense in-house information exchange, and what’s more when staff return to the company after a long residence knowledge accumulates, and there is a cycle where each member’s craft is further refined. So, even if these people were doing the same work as freelancers, the same effect would not result.
That’s exactly right. There is in actuality competition within the company, and we tell stories about ace-class consultants, like “he is accepted no matter where he goes, and comes back after taking long contracts,” including stories about how we get the job done. Since the episodes with laughter and tears that occurs at resident sites is also spoken about here and there, in that way the stories naturally spread.
And these are stories that can’t be told or shared with those who aren’t one’s es Networks comrades.