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Stakeholder Dialog YKK AP's Management Strategy which Balances Economic and Social Needs

Professor Kunio Ito, who issued a human resources version of the Ito Review in 2020 and who is a proponent of the importance of purpose, and President Hidemitsu Hori of YKK AP, who established YKK AP's Purpose in 2021, sat down to discuss YKK AP's management strategy for sustainable growth.

YKK AP's Management Strategy which Balances Economic and Social Needs

Kunio Ito

Director of Hitotsubashi University CFO
Education and Research Center

Hidemitsu Hori

President Representative Director of YKK AP

Mr. Kunio Ito

Professor emeritus, Hitotsubashi University. Former president of the Japan Accounting Association. Chaired the Ministry of Economy, Trade and Industry project "Competitiveness and Incentives for Sustainable Growth: Building Favorable Relationships between Companies and Investors," for which the final report (Ito Review) garnered a large response overseas as well as in Japan and drove the subsequent reform of Japanese corporate governance. Serves as chair of the TCFD (Task Force on Climate-related Financial Disclosures) Consortium starting in May 2019.

"Purpose" engenders a sense of ownership in employees

Hori: In addition to the existing YKK Philosophy and Management Principle, we established "We Build a Better Society Through Architectural Products" as our Purpose for existence in society.

Professor Ito: It's wonderful that you established Purpose on top of your corporate principle. Purpose is created by the current management and employees, so it creates a sense of ownership and triggers dialogue between management and employees and also among employees. The discussion of purpose revisits capitalism to ask why we work and what the company exists for. I think Purpose can pose the question of how the company and employees can be happy.

Kunio Ito

Kunio Ito

Hori: So it's important to have a dialogue with employees about Purpose.

Professor Ito: Yes. One executive asked me, "Is it okay for Purpose to change over time?" If the company's core technology or social environment changes significantly, I think it's okay for Purpose to change.

Hori: So Purpose is something you discuss to create, and it can change. That's easy to understand for new employees, too.

Laying the Foundations for the Future of YKK AP

Hori: Our sales and market share are on the rise at the moment, but given the scale of the domestic market in Japan we will hit a limit in a number of years. I think what we do now as we look ten years ahead is extremely important. Unless we think about what's next and take action, there won't be any innovation.
As one of those actions, we brought in external talent to bolster the IT Division. I worked in the U.S.A. for 17 years, so bringing in people from outside the company is a matter of course. The new talent is working on a plan for a new initiative in the U.S.A.
In addition, we created a new organization to drive a new business with the future in mind. The number of carpenters and installation technicians to work on construction sites is decreasing. We are considering how we want the company to look in the future, including business models to do that work in factories and provide products that include windows along with the roof, walls, and foundation all in one package.
And with the expanded online possibilities due to the COVID-19 pandemic, we are considering virtual overseas assignments for our employees. This plan will connect those who develop technology in Japan with international businesses. Even employees who can't transfer abroad for a variety of reasons can be deeply involved in overseas business without leaving Japan.
Also, with the YKK Group's removal of the mandatory retirement system in FY 2021, the average age of our employees will rise. I would like to lower the average age of our managers, however. Eventually, I think the average manager will end up being younger than the average employee.

Professor Ito: The COVID-19 pandemic has made it easier to enact reforms. Even companies that were aware of problems had difficulty making changes in normal times.

Hori: Right now, I would like to see our employees build a large network of personal connections. For our top-level employees in particular, I want to see them proactively attend various gatherings to make connections and hear various things. Unless they get to know many people and take an interest in various fields, they might not notice the value of an idea that a subordinate brings to them.

Professor Ito: That's true, there are times when managers nip innovation in the bud without meaning to. When future business models plateau and no new ideas emerge, it's often because of a lack of contact with other industries.
Because of your long years of experience working overseas, you're able to view headquarters (the main office) from the outside, and you can see issues clearly. Your unique ideas to create new strategies and your ability to spot people's talents and hidden potential are wonderful.

Hidemitsu Hori

Hidemitsu Hori

SDGs and Materiality of YKK AP

Hori: Working toward SDGs is a priority issue, but we believe it's also necessary to take steps beyond that.

Professor Ito: Japanese corporations tend to have low consciousness of materiality rooted in their organizations. I think a good approach is to determine the company's material issues and what should be done in the next 30 or 50 years, and then decide what to do in the next 5 years to accomplish that.

Hori: For example, we're thinking about developing windows with functionality that has never been developed before. We want to work with partners such as startup companies.

Professor Ito: Your company has the ability to change existing lifestyles for the better. You can take global issues like climate change and make them your company's materiality issues. I'd like to see you create technological innovations that can solve society's issues. I have high expectations for your company's development going forward.

This conversation took place on April 9, 2021.

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