1 What I have learned in the trend of Globalization －Essay for The Japan Bearing Industry Association Journal, Bearing (March 2021)－ Tetsuya Sogo, CFO of NTN Corporation When I was 29 years old, I participated in the start-up of a new plant to manufacture HUB bearings for automobiles as a chief engineer in the suburbs of Chicago, USA. This was my first overseas assignment for seven and a half years from 1989 to 1996. Although we introduced the most advanced production equipment and technology of the time from Japan, we struggled in a situation where productivity was much lower than that of the mother factory in Japan. In my first overseas assignment, I faced problems such as low employee skills, high absenteeism and turnover rates. I wondered what the essential management problem was and what needed to be changed. I eventually learned how I could maximize the motivation of local human resources, as well as how to evaluate and treat them fairly, in other words, I realized that people's behavior varies greatly depending on the standards by which they are evaluated. The point of this is to motivate employees with a new evaluation system that objectively and fairly evaluates skills and performance in a way that everyone can understand, and clearly links this to salary, although this may sound too obvious. The ambiguous seniority system had been said to be one of the main characteristics of Japanese employment system, however this new clear system based on skill points and contribution reviews revitalized the entire plant, and the company that had been losing money suddenly became profitable a year later, a result that surprised even myself. This experience was the starting point for my strong recognition of the importance of “Learning Organization”, which was advocated by Professor Peter Senge of MIT at the time, meaning how important it is to make employees eager to learn and bring out their motivation, and how people who

2 experience a sense of accomplishment together, not only as individuals but also as a team, grow greatly. In introducing this new employment system, I explained to all employees directly why we were changing the evaluation system, what we were aiming for, and how it was consistent with the company's philosophy and vision, as well as the strategies and policies of the company. Under the 3 shifts working system for full production, I talked thoroughly with all employees in groups in the morning (1st shift), afternoon (2nd shift), and even in the middle of the night (3rd shift) to answer all their questions and doubts. I was able to do this because I was still young and physically strong, but I think this thorough conversation was the key to the success that followed. I learned that even if my English was not good, I was able to convey what I wanted to say with passion from my whole body, that I needed English that would move people’s hearts rather than simply fluent English, and that fluent English was meaningless without an open mind and passion for change. The direct dialog often gave me eye-opening realizations. For example, based on Japanese way of thinking, I set the minimum assignment period at the same grade in the personnel evaluation at two years or three years because this was a natural approach in Japan. However, one of the female operators at the assembly section criticized me for killing the potential of geniuses and violating the corporate philosophy of “respect and full consideration for each individual employee”. In reality, such a genius is unlikely to emerge, but I was convinced that this kind of thinking was important, and on the spot, I removed the concept of the minimum assignment period from the system as unnecessary. Also, every quarter, we posted the names of employees who had been upgraded in the lunchroom to congratulate them, but a group of employees from Vietnam asked us to stop. Some people felt embarrassed and ashamed to be promoted to a lower grade behind everyone else, while in some cultures like Japanese culture, people want to be the same as everyone else. What is needed in the global stage is the equality of opportunity, not equality of outcome, and we should celebrate those who work hard, even if they are behind others; this is the idea of people who are educated in the United States. However, since there was no need to impose such a majority idea and dare to make some employees feel uncomfortable to celebrate, we stopped this celebration system. People's feelings are difficult to deal with. Factory workers are especially diverse. Even though they are Americans, not all of them are born and educated in the United States. People from all over the world—Mexico, China, India, Russia, Ethiopia, Vietnam, and so forth—were working together. Therefore, basically, a-un no kokyu (communicating and agreeing with each other without exchanging words) does not work as it does in Japan. In Japan, from the time children are in elementary school, their teachers keep telling them to “think from the other person's point of view, and imagine how you would feel if you were in the other person's position”, but this method would not be effective if we were born and raised in a different environment or with a different way of thinking. It is rather dangerous to think that because you feel this way, the other person will feel the same way. The issue of age discrimination was something that we needed to be aware of, especially as Japanese managers.

3 At that time, I wanted to learn the American way of management while going through a lot of trials and errors at the manufacturing site in the U.S. I therefore studied for Executive MBA at Northwestern University (Kellogg) on the weekends while working for two years from 1994 to 1996. As an engineer, it was a refreshing and eye-opening experience for me, especially in the areas of strategy, finance, and marketing. The admission interview was held in the building specifically designated for Executive MBA, which was like a first-class hotel. I took the elevator and was ushered into an office labeled Assistant Dean, where I was greeted by a woman named Erica. At first, I thought she was a secretary, but she was the assistant dean. I imagined that there would be several interviewers and I would be seated in front of them and asked difficult questions. Yet, in the luxurious reception room, I was told, "Would you like coffee or tea?” and "I'll be listening to you for the next hour." Then the one-on-one interview began on the spot. The interview was completely different from what I had expected, and I had never sat in an interview like this before. Yet, I think you can see many different sides of a person by suddenly giving them a certain amount of time and letting them talk completely freely, whatever and however they talk. Erica didn't ask any questions, just took notes on what I was saying, except for the occasional confirmation of what I meant. I think it is extremely important, especially when working on the global stage, to make sure that what you want to say, your thoughts, and enthusiasm are conveyed to the right person in an hour if you are given an hour, or 90 seconds if you are given 90 seconds. It is also very difficult to talk about one's work without using any jargon and in a way that everyone can understand. Yet, a professional must be able to explain complicated things in a way that is easy to understand, and if you can't do that, it means you don't know your job. At the end, Erica said, “Officially, the faculty committee will go through document reviews and decide whether you will be admitted or not, but you will probably be admitted.” Erica was a dashing, tall woman, a little older than me. I named my first daughter, who was born just before I entered the Executive MBA program, Erica after her. My first daughter is now a working adult, so my interview with Erica was a long time ago, but it still left a strong impression on me. After graduating from Northwestern and returning to Japan in 1996, I worked for 15 years until my second assignment in the U.S. in 2011 in the Corporate Planning Department at the head office, where I formulated medium-term management plans and worked intensively on global alliances and cross-border M&A. I have experienced many negotiations by comparing wits with the other side, bargaining, probing each other's true intentions, and looking at things from all angles. However, in the end, I keenly realized that no alliance would be successful unless you can build a relationship of trust with your negotiating partner. In the midterm management plan, I learned that what is important is not only the competitive strategy and theoretical framework but also how to convince each department, business unit and region to move forward and that so-called facilitation is important in order to achieve

4 results. Although the times will continue to change and progress, I feel that direct face-to-face communication between people is extremely important, both within and outside the company. In my second assignment to the U.S. for seven years from 2011 to 2018 as CEO of NTN Americas Region, I had to make decisions on a daily basis in a cross-cultural environment, especially in the entire Americas region that included South America, where no one knew the correct answer to management questions. I felt that it was very important to have the ability to sense the situation and atmosphere of an organization, which was difficult to express in words, through various interactions. All of the issues that I faced on a daily basis in the field were not something that could be analyzed logically like a computer that finds the correct answer. Rather, I needed to quickly make a better overall decision on the spot, and to do so, I had to polish my ability and sense to accurately perceive fundamental issues, and face-to-face communication was essential in doing so. In the MBA program, subjects such as strategy, marketing, and finance, were very popular, and there were many famous professors, so I put a lot of energy into studying them. On the other hand, subjects such as organizational theory and HR, were not so popular at that time. However, I feel that organizational theory and HR are becoming more and more important as I get older. During my assignment to the U.S. back when I was young, I challenged myself to make various changes to motivate the employees at a manufacturing company. In my second assignment to the U.S., on the other hand, localization of upper management was a major issue to strengthen the organization in the Americas, including South America. So I had to entrust business expansion to the people who knew the markets of each country the best. For the Japanese people on overseas assignment, it is necessary to clarify why things cannot be conducted locally. It is easy and comfortable for Japanese people to communicate with each other, while localization is very tiring due to the language problem among other difficulties, but I believed that there would be no future if we shied away from it. My belief that globalization is based on “motivating local talented people to fully demonstrate their abilities” has not changed at all since my first assignment to the United States. I want to realize a global learning organization that can operate effectively cross-functionally based on the close exchange of information between people across departments, a close-knit organization that does not generate blind spots, by focusing on a middle-up-down management style that is indispensable to resolve the contradictions between ideal and reality in each working area. With this ambition, as CFO, I am still continuing to make changes and go through trials and errors in order to maximize the corporate value of the entire group.

5 June 1996, MBA degree celebration at Northwestern University March 2015, Commencement Speech at Waseda Univ. Dept. of Industrial and Management Systems Engineering - To those who set out to explore careers in the world of globalization -

6 2016–2017, Part-time lecturer at Kyoto University - A study of fostering Japanese manufacturing culture overseas in the context of globalization - 2011–2018, Direct dialog with employees at various business sites in NTN Americas Region (town hall meeting)