Hiroaki Miyahara, president and representative director of Gakken Holdings Co Ltd Photo: Gakken Holdings
executive impact

Gakken sets the pace in education, welfare for Japan’s future

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By Chris Betros

When Hiroaki Miyahara was managing the Kobe branch of Gakken Classroom (a division of education and welfare services provider Gakken Holdings), in January 1995, he learned a valuable lesson that has remained with him ever since.

The earthquake that devastated the city left the business in a precarious position. Yet in the months that followed, he received no financial help to rebuild from the Tokyo headquarters of Gakken.

“It was the toughest time of my life,” says Miyahara, who has been president and representative director of Gakken Holdings Co Ltd since 2010. “Then in March, people's attention turned to the sarin gas attack on the Tokyo subway system, and less attention was paid to Kobe.”

Surprisingly, while the Tokyo headquarters of Gakken distributed 100 million yen to its businesses in Kobe that had been making money at the time, Gakken Classroom was not making a profit, so Miyahara got nothing. What saved the business were donations from franchise teachers and students.

“I’ve never forgotten that to this day,” he says. “That’s why we survived. I cherished their help. Afterwards, I even thought about quitting the company but I couldn’t abandon the teachers, students and my colleagues. When the big earthquake hit the Tohoku region in 2011, I made it a point to call every employee in Sendai to reassure them.”

Never too young to start learning

Miyahara has learned many lessons in his life, some beginning when he was as young as three. Born in 1959 in Kure, Hiroshima Prefecture, he used to go to a Lutheran church on Sundays with a 10 yen coin given to him by his mother to put in the collection plate.

“Over the years, I would listen to the priest's sermons about peace and bible stories,” he recalls. “I was experiencing adult words as a child. I learned about helping people in need. When I was older, I joined the Cub and Boy Scouts and their activities inspired me.”

Later, Miyahara enrolled at the National Defense Academy of Japan where he obtained a pilot’s license (a photo of him proudly standing by a fighter jet is in his office). After graduating from the academy in 1982, Miyahara gave up his career in national defense due to an injury. He then joined the Kobe branch of Gakken.

Miyahara has detailed many of his experiences in a recently published book, 逆風に向かう社員になれ (“Being a Challenger Who Can Tackle the Tough Times”). He hopes an English version will be published in the future. “The Japanese-reading population is getting smaller while the English-reading population will increase, so it would be nice to reach more people,” he says.

It’s a book worth reading and contains many stories about the adversities that Miyahara had to face on his way to the top and how he has brought the company to where it is now. But he has not lost sight of the core principle of Hideto Furuoka who founded Gakken in 1946 -- that “Postwar reconstruction can be achieved only through education.” Miyahara is the company’s sixth president and he says that basic premise remains Gakken’s core philosophy.

Today, the Gakken Group provides a wide range of services, including home study materials, development of cram schools and Gakken Classrooms as well as educational materials for schools. It has expanded into the medical and welfare fields, opening senior residences and group homes for people with dementia. In recent years, Tokyo Global Gateway, Chikyu-no-arukikata, IC-NET and others have joined the group. The company's publishing business includes children’s books, study aid books, dictionaries, books on travel, science, medicine, gardening, cooking, child-rearing, hobbies, sports, educational and puzzle magazines.

Gakken’s behavior guidelines for the 2020s is for its group members to think deeply for people and society, keep on learning, possess passion and speed, harness the power of the individual for the strength of the group, and do not be satisfied with the status quo. Its motto is “Create solutions beyond your imagination.”

Tough first years as president

It wasn’t easy in the first few years after Miyahara became president. The company’s financial position was not good.

“We had a tough time to get financing from banks,” Miyahara says. “Our main bank knew about our financial situation, and turned us down. The second bank we approached also turned us down. I guess they both thought we would go bankrupt. Then we approached a third bank that didn’t know much about us, yet they were willing to help. But they were very strict. They requested we accept a CEO appointed by them at first or sell our headquarters building. So we sold this building which we now rent. But it didn’t end there. Every financial quarter I had to explain what we were doing in terms of internal restructuring, cost-cutting, new business development, such as elderly care services, M&As and so on.”

The perseverance paid off and Gakken has seen a hockey stick improvement in profits over the past several years. Net sales were 150,288 million yen (as of September, 2021). Of that, 43.8% came from nursing and health care, 52.6% in education. The group sales target for 2025 is 200 million yen. Miyahara says that for the future, he would like to see 60% of Gakken’s revenues come from overseas and 40% domestic.

The pillars of the group's mid-term plan, Gakken 2023, are DX (digital transformation) and global expansion in the education and welfare industries. Gakken Classroom has advanced its online classes and learning support with plenty of educational content from the Gakken Home Learning Support website. The company is also actively investing resources into DX efforts such as the use of robots in elderly care and ICT-based satellite serviced apartments for the elderly. The acquisition of IC-NET has given Gakken’s global expansion plans a boost. IC-NET operates an overseas development business in the education field which will enable Gakken to address the issue of educational inequality around the world.

Be ready for bad times

Having so far weathered the coronavirus, Miyahara knows that another disaster can strike anytime and that Gakken must be prepared to respond. “We have experienced two big earthquakes and the Lehman shock and got through those bad times. Since then, we have been expecting something bad to happen, and it (the pandemic) did. For the past two years, we balanced cost cutting and focused on growing sectors, one of which is developing homes for senior citizens and health care, enabling us to maintain growth.”

Acquiring companies is a major pillar of Gakken’s business strategy. “Before deciding if a company is a good match for us, we look at its corporate culture which is the root of company,” Miyahara explains. “We look at the direction of where the company wants to go and its characteristics. By that I mean if it is conservative or aggressive toward new growth areas and business development, whether there is friction inside the company and so on. We have to be careful about acquisitions.”

Although Japan is experiencing a decline in its birthrate, Miyahara is optimistic about the nursery school business. “Because of the population decline, we have seen that parents are spending more on a single child and the market is experiencing a small but gradual growth. I am confident we can increase our share. Some juku (cram schools) may go bankrupt, especially in rural areas, but overall, only 54% of high school students in Japan go to university and that figure will increase in the future, so there is still demand for juku.”

The biggest growth sector is the aging population. Health care for seniors is a concern. The government pension system is very shaky compared to other countries. Elderly people can’t live on just their pensions and need a lot of savings.

In this field, Gakken has been a pioneer, providing around 150 serviced apartments for the elderly so far and building at least 300 group homes for people suffering from dementia.

“These facilities are for the non-rich segment of elderly with a lower pension rate,” Miyahara says. “They can rent houses for as low as 80,000 yen per month. In Japan, older people want to live where they grew up and be near to their families and grandchildren. We are making that happen.”

Facing an uncertain future

At the other end of the spectrum, young people face an uncertain job future in Japan. Miyahara says he understands those concerns.

“I was a limited location employee (one who has the right to refuse relocation but is paid less than regular employees who cannot refuse relocation) when I started my work life and I was at a loss after the Kobe quake. If you live in urban areas, it may be harder to live as a limited location employee but in rural areas, you can manage OK. The goal of your career should not necessarily be to become a seishain (regular or permanent employee), but try to think of areas in which you can contribute to society and go for it, even if it means moving away from big cities. Historians look back at the Roman Empire and how it became concentrated on one city, which was not good. In the end, it collapsed.”

A busy man, Miyahara doesn’t spend all his time in one place. “I don’t come to the office every day. Even before the coronavirus, I only came here when I had to. I am out and about in the various business fields where the company needs to grow. Twelve years ago when I became president, I was hands-on for all areas of the business, but nowadays, I prefer to delegate operations to the teams. In house, we have a hybrid system. It is up to employees how often they come to the office.”

When he is not working, Miyahara likes mountain climbing and listening to Bob Dylan’s music for relaxation.

Hunters and agricultural workers

Asked what he thinks are some differences between Japanese company presidents and U.S. or European ones, Miyahara answers that it is probably the term of office. Although he himself has been president of Gakken for 12 years, most Japanese company presidents serve shorter terms, often just four years. “If you are president for only four years, you have no time to change the company. This tends to make Japanese presidents too conservative. In the U.S., company presidents or CEOs think in quarterly terms; in Japan it is one year at a time. It’s like comparing hunters (U.S.) to yearly agricultural workers (Japanese).”

One of Miyahara’s most important remaining goals is to help reform Japan’s education system.

“Every change has to start with education and that is why I have devoted my life to it. And education can prevent future conflicts. Countries need to interact not just at government level but also at grass roots and business, sports and cultural levels. But it is going to be a long-term mission and will not be finished during my tenure. It's like a marathon and I will hand the baton over to the next president.”

And who will that be? In his office, the photo of Gakken’s six presidents adorn one wall. There is an empty space beside Miyahara’s portrait for the seventh president. “When I became president 12 years ago, I gave a speech in front of everyone and said the next president would be a woman and maybe not even a Japanese. I’m sorry to say it hasn’t happened yet,” he says.

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What saved the business were donations from franchise teachers and students.

Given that his corporation was saved by the generosity of employees and students, I wonder if he provides living wages to staff and has not joined in the race to the bottom like so much of Japan Inc. in embracing the gig economy.

In this field, Gakken has been a pioneer, providing around 150 serviced apartments for the elderly so far and building at least 300 group homes for people suffering from dementia.

Many of these large Japanese corps, like Benesse, seem to have significant holdings in schools, nursing/care homes and the like.

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