Winners / Selection Rationale

UT Group Co. Manufacturing Division (UT Aim Co., Ltd.)

2019 19th Porter Prize Winner Dispatches workers with specialized skills to factories; provides manufacturing outsourcing services
UT Aim provides a manufacturing outsourcing service and dispatches workers to factories. Contrary to the industry's standard practice, UT Aim hires temp-staff workers as permanent employees. The company offers these workers job security, training, and opportunities for career development. In addition, UT Aim employs an ability-based wage system, and has created a ranking of jobs, which consists of 25 levels, with the specific skills required for each level clearly indicated. Moreover, UT Aim provides educational opportunities to its employees through e-learning and instruction at the company’s own facilities. UT Aim’s Career Development Department provides these workers with career counseling. The available career opportunities include the option of being dispatched to factories in various different industries requiring diverse and specialized skills. UT Aim’s dispatch workers frequently have the option of becoming site managers, career consultants, or dispatch engineers. Many dispatch workers have been hired by the client companies as full-time employees. The company selects as clients large companies that operate factories and require skilled workers who have achieved a level of proficiency. UT Aim dispatches its employees in teams of 30 or more members. The company assigns a site manager, who responds to the clients’ complaints and requests. UT Aim’s attrition rate is low, which contributes to reliable and high-quality manufacturing operations. Clients also highly value UT Aim’s excellent site management program, and its comprehensive compliance program.
This report has been written by Professor Emi Osono based on: (1) the materials submitted by the winner for Porter Prize screening purposes; (2) interviews conducted by the Porter Prize Organizing Committee; and (3) publicly available information. It is being published with the winner's permission.

Background information about the worker dispatching industry in Japan

img_2019_03_p1.jpg In Japan, dispatch business operators (i.e., temp staff agencies) send their regular employees to client companies as dispatch workers, thereby augmenting the client company's workforce. Client companies are responsible for managing those dispatch workers and preparing an appropriate work environment for them. The Worker Dispatch Law, enacted in 1986, allowed, for the first time, the dispatch of workers, but only in 13 industries. By 2019, nearly all industries had access to this service. The number of workers being dispatched to factories came to 420,000, accounting for 30% of the entire dispatch workforce in September 2019. (*15) The market size (which includes both workers dispatched to factories and outsourced manufacturing work) was 2.25 trillion yen (US$20.5 billion) in fiscal year 2017, up 15.4% from the previous fiscal year. (*16)

Although the barrier to entry for the worker dispatching business is not high, a business license must be obtained from the Minister of Health, Labour and Welfare.

Some dispatch business operators employ workers for a specified timeframe, in accordance with the employment arrangements contracted by the client company. This kind of arrangement is commonly used for office workers and factory workers. Large dispatch companies that dispatch office workers in metropolitan areas have an advantage, in that these businesses can benefit from economies of scale. Such dispatch companies can place advertisements to attract workers in metropolitan areas, and invest in an IT platform to improve the matching between job seekers and client companies. In contrast, small and medium-sized dispatch companies adopting a geographic focus are popular among dispatch companies that provide workers to factories, because factories are located throughout Japan. Dispatch companies that temporarily employ workers in accordance with contractual arrangements with a client company have much lower fixed costs, and there is less risk involved. On the other hand, the workers can choose from among numerous service providers, there are no high switching costs, and, consequently, the retention rate is low. Given the high fluidity of the labor market, dispatch companies are not motivated to invest in career development for their workers.

Other dispatch companies employ workers with indefinite-term contracts. For example, companies that provide engineer dispatching services will opt for an indefinite term, leaving it open-ended, because they want to keep highly skilled workers on their staff as full-time employees.

(*15) Ministry of Health, Labour and Welfare, Labour Force Survey , Accessed on November 25, 2019.
(*16) Yano Research Institute, Human Resources Business 2018.

Unique Value Proposition

UT Aim is the leader in the dispatch of production technicians. The company hires workers without specifying a fixed contractual term of employment; educates them; dispatches them to the client company's factory in teams of 30 or more members; and sends them to the factories owned by large companies that require the learning of company-specific knowledge and the continuous improvement of manufacturing efficiency and quality. (*17) UT Aim targets the factories of large companies because such factories are usually better work environments. Moreover, large companies can afford to pay higher wages as the dispatch workers upgrade their skills while working on the factory floor. At the end of June 2019, the average hourly wage increased by 4.9% compared with the same month in the previous year.

Firstly, the value UT Aim provides its workers is job security, by hiring them as full-time employees without limiting the term of employment. Secondly, UT Aim offers opportunities for upgrading skills and pursuing career development. The more-experienced workers serve as a coach to the less-experienced workers on the team, providing them with on-the-job training. There are opportunities for career development for both more- and less-experienced workers. To support the career development of its employees, UT Aim lets employees choose from among numerous jobs at hundreds of factories. UT Aim also gives its employees the option of moving to the UT Group subsidiary that handles the dispatch of engineers, who receive higher pay than factory workers. UT Aim encourages its employees to accept offers to work as full-time employees at the client companies. In addition, the career path for workers includes promotion to supervisor (i.e., team leader or general administrative duties), a management position, or even promotion to an executive position via the "Entry System," which allows candidates to apply for such positions at their own initiative. Dispatching workers as a team allows them to observe how team leaders execute their daily assignments and support the career development of their team members. Thirdly, the company helps workers develop a sense of belonging to a team and belonging to a company (in this case, UT Aim).

The value UT Aim brings to factories is the means for augmenting the factory's workforce, a reliable supply of workers who can help the client company meet increases in demand. The fact that workers can be returned to UT Aim enables the client company to swiftly reduce its workforce in the event of a contraction in demand. UT Aim also implements compliance programs that conform to global standards. In Japan, the working-age population peaked in 1995, and has been declining ever since. Meanwhile, the overall population peaked in 2008, and has similarly shown a downward trend. (*18) The job openings-to-applicants ratio in December 2018 was 1.63, which means that in many industries, employers were having difficulty finding enough workers to fill the available positions. Even in such a challenging environment, UT Aim received 11,137 applications a month, on average. The company hired 729 applicants in 2018. (*19) UT Aim was able to dispatch to client companies the number of workers requested. If the client company so wishes, and the worker agrees, the client company can hire the dispatch worker as a full-time employee. (*20) That said, the attrition rate at UT Aim is low. The workers are trained in teams, which contributes to the smooth execution of duties, enabling more stable operations; fewer mistakes and a lower defect rate; and improved productivity. After 2012, various regulations were introduced to enhance job security and improve work conditions for non-regular employees. This has led to a surge in demand among client companies for the services of dispatch companies with comprehensive compliance programs. UT Aim sends with each team a supervisor, who is in charge of labor management.

(*17) As of May 2019, 11 factories accepted more than 200 workers from UT Aim. Of all the company's technical workers, 80.3% are dispatched to factories in teams with 30 or more members.
(*18) Ministry of Internal Affairs and Communications, the National Census.
(*19) The job openings-to-applicants ratio is calculated monthly by the Ministry of Health, Labour and Welfare using data provided by the Public Employment Security Offices (nicknamed "Hello Work").
(*20) In fiscal year 2018, client companies had hired 391 of UT Aim's workers.

Unique Value Chain

The unique features of UT Aim's value chain are: (1) a recruitment process that can handle large numbers of applicants and new employees; (2) site management that contributes to high-quality performance in the factories, (3) career consulting and specialized training for the technical workers, and (4) human resources management.

Attracting applicants and hiring
UT Aim decided to concentrate all recruitment activities at its headquarters in 2015. In addition, it centralized the purchase of advertisements within the headquarters, enabling a significant reduction in marketing expenses. At the same time, the company customized advertisements by geographic region and job type. UT Aim receives more than 10,000 applications a month, and promptly responds to numerous inquiries through its in-house call center. The company has established a network of interview venues throughout Japan. At these venues, well-trained interviewers identify suitable applicants, and encourage these individuals to accept job assignments as dispatch workers. Once the new recruits are hired, UT Aim handles the paperwork for about 1,000 incoming new employees each month.

Site management/labor management
The site supervisors understand the client companies' needs, and respond to complaints. They handle labor management, attendance management, and look after the physical and mental health of dispatch workers by communicating with them on a daily basis. UT Aim recruits supervisors from among the workers dispatched to the factories. The Worker Dispatching Law does not require that dispatch workers be accompanied by site supervisors. This is part of UT Aim's uniqueness. The company emphasizes the valuable contribution that site supervisors make. For this reason, UT Aim is strongly committed to developing site supervisors, and will continue to send them to the factory sites.

Career counseling
Many workers employed at UT Aim worked previously for other worker dispatch companies. Such workers tend to be less motivated about career development. UT Aim works to develop a workforce equipped with specialized knowledge about career development. The company has also created an internal specialization--the "Career Partner"--who provides career counseling and motivates workers to work on upgrading their skills. (*21) Each Career Partner is in charge of several workers. The Career Partner helps individual workers to formulate a "future vision," and think about the money they will need in the future to cover various life events. The Career Partner provides guidance, helping each individual to find meaning in his or her job and motivation for self-development. Workers dispatched to factories in various parts of Japan can take advantage of these career counseling services by chatting online with the Career Partner using the Online Mentor app. Through the company portal app "UT Appli," workers can access educational contents and information from the company, and also read about other workers, who can serve as role models.

Education/Development


The company provides various on-site training programs, everything from classes on basic business skills for new employees to the "Super Manager School" (which trains the future executives of the UT Group) and the UT Advanced Career Center (UTACC) for engineers. The online education program, "UT-Learning," which can be accessed through computers and smartphones, supports the skill development of workers regardless of the location of their job sites. (*22)

Human resource managemen
UT Aim selects as team leaders (site supervisors) individuals who are supportive and attentive to the needs of others. Their role is to provide on-site support to the other members of their team.

Even though the company develops the skills of these technical workers, wages cannot rise beyond a certain level for factory workers. UT Aim encourages its workers to move up to the next level. For this purpose, the company has introduced the Good Job Program. Through this program, workers can, on their initiative, apply to other factories that require higher skills and will pay higher wages. The One UT(*23) Program supports workers by helping them to get the necessary training and acquire engineering skills. Afterward, they can transfer to another UT Group subsidiary that dispatches engineers. The Entry System encourages employees to apply for executive positions (i.e., managers and operations officers) regardless of their age, academic background, or length of employment at the UT Group. The Next UT Program encourages UT Aim workers to seek regular employment at a client company on a full-time basis. (*24)

UT Aim has an educational program and a human resources system that eliminates barriers between its technical staff (the dispatch workers) and regular full-time employees. For example, dispatch workers are able to apply for executive positions through the company's "Entry System."

The company introduced an employee stock ownership program when it became a listed company, to help its employees build financial assets.

UT Aim has also created a job ranking list that consists of 25 levels. This ranking, which serves as a measure for evaluating employees in terms of their ability to take responsibility for specific jobs, is used as a benchmark, to establish a common standard that can be shared with client companies. Each employee's skill level is measured periodically. The dispatch fee charged to the client company and the dispatch worker's wage level are determined taking into account the individual's skill level. (*25)

R&D
The company's R&D aims to support career development, which includes aptitude tests using motion capture technology and artificial intelligence; the development of a career platform that contains an individual's job history and career consulting records. This information can be shared within the UT Group. The company has also developed a system that uses a proprietary smartphone app, UT Appli, which enables dispatch workers to stay in touch with UT Aim while working at the client company. As of July 2019, 83.9% of the dispatch workers had down loaded the app UT Appli. The company provides a labor management platform to each client site that conforms to international standards, specifically the Responsible Business Alliance Code of Conduct (The RBA Code of Conduct). This code of conduct is very strict, to the extent that overtime is paid by the minute. This is even stricter than Japan's labor laws.

Management of company-rented houses
The company hires more than 1,000 workers each month. When necessary, UT Aim rents houses or apartments for its workers that are a short distance to the factory, and arranges transportation between the factory and the residence. The company manages more than 10,000 housing units. This arrangement makes possible the swift transfer of dispatch workers from one client factory to another.

General management
As key performance indicators, UT Aim focuses on the dispatch fee; the number of dispatch workers per factory; the attrition rate; the number of new recruits; and the number of workers that took advantage of the "One UT Project," which enables them to pursue career development within the UT Group. These numbers are reported and monitored at the weekly management meetings.

(*21) As of the end of June 2019, UT Aim had 573 Career Partners. They held career consulting meetings 1.5 times on average for each dispatch worker over a one-year period (as of March 31, 2019).
(*22) To date, there are 50 graduates of the Super Manager School. The UT Advanced Career Center (UTACC) has 14 lecturers, 605 students currently enrolled, and 599 graduates. The online educational program offers 116 courses.
(*23) Workers can get transferred to the engineer dispatching company after finishing the UTACC training program and obtaining the necessary certifications. Engineers earn higher wages than factory workers.
(*24) Among 210 site supervisors, 126 were dispatched to the site as workers before becoming site supervisors; 1,278 workers used the Good Job Program; 561 were transferred within the UT Group through the One UT Program; and 51 workers transferred to corporate departments (as of the end of March 2019). In addition, 11 operations officers were formerly dispatch workers (as of the end of June 2019).
(*25) Introduced in 1997. Out of 300 sites, 64 had introduced the job ranking system. UT Aim would like to have all of its client companies introduce this system.

Fit among Activities

UT Aim's activities are selected and optimized to support its core choices: (1) create value for workers; (2) hire dispatch workers as full-time, permanent staff; (3) provide systematic support for career development; and (3) offer programs that create a sense of unity among the team and among employees company-wide. The core choices made to create value for client companies are: (1) provide labor to support high-quality, stable factory operations; (2) undertake the swift allocation of workers, responding flexibly to changes in demand; and (3) conduct site management duties in accordance with international compliance standards. Activities are selected to support these core choices. Activities that create value for workers also create value for client companies, by helping workers to stay motivated, upgrade their skills, and further their own growth and career development. (Please refer to UT Aim's activity system map, which appears at the end of this report.)

Innovation that Enabled Strategy

  • Since its foundation, UT Aim has been recruiting dispatch workers, hiring them as full-time, permanent employees, and providing social insurance.
  • Provides both dispatch workers and corporate staff members the same opportunities for educational instruction and career development, and applies the same human resources management system.
  • The human resource management system encourages dispatch workers that demonstrate a strong work performance to pursue more challenging work assignments as a means of furthering their own career development.
  • Dispatches workers in teams of 30 or more members, and assigns to each team a site supervisor who serves as the team leader.

Trade-offs

  • UT Aim does not employ dispatch workers on a temporary basis. The company employs dispatch workers as full-time, permanent (regular) employees. For UT Aim, the labor cost is a fixed cost. Because the number of dispatch workers required by the client companies changes depending on their production volume at the time, this policy carries a certain amount of business risk. However, UT Aim employs the workers as regular employees. By continuously investing in these employees (i.e., providing training), UT Aim is able to reduce the attrition rate. As a result, the company is able to charge client companies a higher unit rate for its dispatch workers. Meanwhile, dispatch workers benefit from having a stable work environment, which reinforces their sense of unity with the team and with the company. These positive feelings help the workers to stay motivated about their own career development.
  • Does not dispatch workers individually to the client company's factory. UT Aim wants to provide dispatch workers with a stable work environment. The company thinks it best that workers should be able to work in a large team, with the same members, for a significant length of time. UT Aim sends workers in teams of 30 or more workers. The term of the dispatch contract is one year, and this contract is automatically renewed unless otherwise notified. By dispatching workers in teams, the veteran workers can coach the less experienced ones.
  • Does not diversify into other businesses. In general, dispatch business operators have a shorter accounts receivable period, of about 45 days. This usually creates a positive operating cashflow. UT Aim invests the cash in courses for training and career development for these dispatch workers, a work promotion system, and brand development.
  • Does not dispatch workers to small factories owned by small and medium-sized companies. In order to dispatch workers in teams of 30 or more members, the factories need to be large. In order to charge hirer rates for the dispatch workers, who have undergone specialized technical training to upgrade their skills, the client companies have to be above a certain size.
  • Does not put a priority on increasing the number of client companies. Many dispatch business operators employ workers temporarily to spread out the business risk. Such companies also reduce the business risk by doing business with a larger number of clients. In contrast, UT Aim reduces business risk by increasing its share of dispatch workers within a client's factory. UT Aim seeks client companies that can accept large numbers of dispatch workers, offer long-term contracts, and are willing to pay more for well-trained workers with specialized skills. This approach also helps UT Aim to attract workers that are willing to continuously upgrade their skills through formal instruction.

Consistency of Strategy over Time

The company AIM CIC, UT Aim's predecessor, was founded in 1995 as provider of manufacturing outsourcing services. From the beginning, the company has been putting job seekers at the core of its operations and adopting the job seeker's perspective. The company has tried to create a work environment in which all workers can feel a sense of job security, make efforts to upgrade their skills, and pursue career development. The company is able to achieve these goals by: (1) hiring workers as full-time, permanent employees; (2) providing training; and (3) covering the cost of social insurance for all dispatch workers. The company is hired to carry out the work of an entire manufacturing process (start-to-finish outsourced production) within the client company's factory. UT Aim dispatches a team of workers to the factory, and these workers take full responsibility for the contracted manufacturing operations. Originally, the team included a team leader, who was in charge of managing the workers. This has led to the current system of dispatching workers in teams with 30 or more members.

In 2001, faced with a sluggish market, semiconductor manufacturers started to accept dispatch workers in their factories to reduce labor costs. UT Aim decided to focus on semiconductor manufacturers because these clients require on-site training, and can accept teams of workers. The company took the risk of focusing on one industry, determining that demand in the semiconductor industry would be large enough. The company developed a unique system for training workers, and convinced customers to pay more for superior service. This strategy worked well. UT Aim was listed on the over-the-counter market, JASDAQ, in 2003, becoming the first in the labor dispatch/contract service industry to do so.

In 2006, there were reports of illegal conduct by many contract service providers, including the industry leader at that time. (*26) UT Aim employed workers as regular employees, and made investor relations a high priority since before its listing on JASDAQ. As a result, the company began attracting more orders. Workers who used to work for the company's competitors moved to UT Aim. In this way, UT Aim has been able to develop its business by leveraging its uniqueness.

Amid the global recession of 2009, there was a significant contraction in the demand for workers dispatched to manufacturing industries. The semiconductor industry was no exception. UT Aim started entering other industries where skills developed in the semiconductor industry would be appreciated. These other industries include the environment and energy-related industries (the manufacturing of batteries), and infrastructure-related industries. By analyzing the impact of the recession on its business operations, UT Aim realized that its business was less affected in cases where UT Aim's workers handled a larger share of outsourced manufacturing operations within a single factory. The company decided that it would be better to increase the scale of its operations within one client's factory rather than increase the number of factories.

In 2013, another subsidiary of the UT Group launched an engineer dispatching service. UT Aim has made it possible for its workers to be transferred to this company, thus expanding their career opportunities.

The dispatch workers (and other temporary workers) are frequently used as a buffer during fluctuations in the economy. The lack of job security for these workers also attracted much attention, especially after many dispatch workers lost their jobs during the economic downturn of 2009. The Amended Worker Dispatch Act, which was implemented in September 2015, requires dispatch service operators to support the career development of dispatch workers. (*27) Companies in the manufacturing industry that saw an increase in orders for dispatch workers when the economy recovered began paying more attention to job security, work terms and conditions, and also the career development of dispatch workers. UT Aim, which had been making these issues a priority, saw even higher levels of growth.

(*26) Contract service providers manage workers who work at customers' facilities. However, many client companies give directions to the workers who work for contract service providers. This makes it unclear who has responsibility over the workers. The result? Insufficient attention was paid to safety, work terms, and work conditions. Some service providers were issued a business suspension order.
(*27) Ministry of Health, Labour and Welfare,
Summary of Amended Worker Dispatch Act Heisei 27 (2015) (in Japanese), accessed on November 25, 2019.

Profitability

UT Aim Co., Ltd.'s five-year averages for the return on invested capital (ROIC) exceeded the industry average by a wide margin. The return on sales (ROS) stayed below the industry average. Most companies that provide engineer dispatch services can enjoy a much higher ROS. (Profitability analysis was conducted by PwC Japan.)
Profit

Activity System Map of UT Group Co., Ltd., Manufacturing Division (UT Aim Co., Ltd.)

Activity System Map

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