|Compensation under Debate
Honda introduced N360, a mini passenger car, in October 1966. Then, in December, it drew public attention as Honda announced a price of only ¥313,000. When the N360 hit the market in March 1967, the response was phenomenal. Within three months, the N360 had topped Japan's list of registrations for mini cars.
Honda, determined not to miss the opportunity to establish a solid foundation as a carmaker, implemented a major, six-month increase in the production of N Series mini cars, starting in September.
A plan was devised that year to raise the average monthly salaries of employees by ¥5,000 through a combination of annual pay hikes in April and basic pay increases in September. At the time, this was Honda's greatest increase ever. Moreover, additional compensation based on ability was to be increased according to each individual's demonstrated level of achievement. The plan reflected Honda's future transition to extra compensation based on ability.
A special August 1967 issue of the company newsletter was entitled Building a Tomorrow. It discussed the background of this major salary increase, as well as of the board members' hopes for Honda employees. The members also indicated their interest in compensating based on ability and achievements through proper evaluations of individuals. As a step toward identifying candidates for expert certification, it was proposed that a system of compensation based on recognition be established.
"At the time," Okubo said, "employees complained that the new record system was disappointing, because there were no rewards but only records and registrations. Therefore, we came up with an impetus to advance the record system a step further and enhance interest in the certification system. We likened it to the 'stairs (recognition compensation) between floors (levels)'."
The system was to work like this: Employees who were not quite ready for promotion to the next level but had shown that their efforts and achievements exceeded others at their current level could be recognized and compensated (at a planned rate of about ¥3,000 per month). Thus, the plan would result in compensation based on ability and achievement. However, negotiations were rough between the union and management regarding recognition compensation. The following is an excerpt from the 15-Year History of the Honda Labor Union.
"While we were working toward increasing wages, we in the union maintained that we couldn't accept a recognition-compensation system on face value alone. It was ridiculous to create a pump-priming measure for the certification system, in light of the fact that no certification system had yet been established...."
Although it was agreed that the union and management would continue examining the concept of recognition compensation, it was not until May 1969, when additional compensation for experts was established, that specific amounts were exhibited and the system was implemented.
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