These days, when the external environment is constantly changing, it’s more important than ever for companies to invest in people to maintain continuous growth. Companies are expected to shift to “human capital management,” with listed companies in Japan required to disclose information about human capital beginning in 2023.

The turnover rate is particularly high in the tech industry, and both acquiring high-level talent and providing a work environment where they can thrive are crucial topics for management. Tatsuo Kinoshita, Mercari’s Chief Human Resources Officer, says that ever since its founding, Mercari’s largest investment has been in people.

In this interview, we spoke with Tatsuo about how Mercari has invested in talent and worked to unleash their potential, even before the concept of “human capital management” became a hot topic.

Human capital management at Mercari: Adhering to our values

—Why has Mercari placed so much emphasis on investing in people since its founding?

At Mercari, the business areas we cover don’t require much brick-and-mortar facilities. Rather, our people have always been the source of our impact. One of the most important issues on the minds of Mercari’s management has been how to recruit talented professionals who fit our culture, and how to then support them in demonstrating their full potential. To achieve our mission, we have especially focused on adhering to our three values—Go Bold, All for One, and Be a Pro—both as a company and as individuals.

In particular, HR has designed policies for recruitment, talent development, objective setting, and evaluation to allow our members to maximize the demonstration of these values. I think these efforts to draw out the ability of each individual are exactly what people mean when they talk about “human capital management” these days.

—Can you tell us more about that?

Back when the organization was still small, it was easy to maintain the values naturally, because there were constantly new initiatives and challenges popping up. But in the last five or so years, as the company has grown, the organization has become more complex. The diversity of talent has increased, and we began to realize that the unspoken understanding we had of the values wasn’t scalable.

So we decided to expand the mechanisms and policies to help our talent embody our values and move from a high-context culture to a low-context one—to evolve from a “village” to a “town,” so to speak. These mechanisms included the Culture Doc, an internal document for sharing Mercari’s culture with its members.

There were some concerns that creating too many mechanisms could limit our ability to Go Bold, but I think that the power of people can solve that problem as well.

For example, when we first began working on Mercari Shops (released in 2021) and put out a call within the company for people interested in tackling a new business, more than 100 people volunteered. By having people who have gained experience at Mercari and embody the values transfer to new businesses or organizations and act as role models there, we’re able to spread the values throughout the whole organization.

I saw the same thing when I visited our India Center of Excellence recently. There are engineers originally from India who worked for a few years at Mercari in Japan, rose to senior positions, and then transferred to our India office. They took their understanding of our values with them, and thanks to that, Mercari’s culture has taken hold in our India organization, despite the geographic distance.

That propagation of our values between people is really important, and using that to empower employees to Go Bold in their work is what we consider human capital management.

Unleashing the potential in diverse talent worldwide

—One of Mercari’s material topics is “Unleashing the Potential in Diverse Talent Worldwide.” When did Mercari start focusing on recruiting global talent?

We began seriously focusing on global recruitment in 2017. We include the phrase “diverse talent worldwide” in this material topic because we like to think of the diversity of our members as a source of creativity. In order to seriously achieve our mission, we need to have access to talent from all over the world and be a company where that talent can thrive.

But whether we’re looking for talent inside or outside of Japan, the aspects we look for in our ideal candidate are the same—we only hire people who feel that Mercari’s mission resonates with them and who can embody our values. As a result, we currently have professionals from approximately 50 countries, and 25.7% of our employees are non-Japanese citizens. In management positions, this number is also 25.7%. In the engineering organization, the percentage is 53.8% and continues to grow.

—Does that mean the retention rate after hiring is high, too?

When it comes to global recruitment, retaining talent is even more difficult than hiring talent. I often hear about cases where someone hired from overseas ends up quitting due to differences in language, culture, or business practices. But Mercari has worked hard to provide an environment where people from all over the world can feel at home and demonstrate their abilities after joining. Thanks to these efforts, the retention rate is about the same for Japanese citizens and non-Japanese citizens.

—What did you do to boost retention?

First, we tackled the language issue. We increased the use of English within the company with the help of the Global Operations Team (GOT), which is our translation and interpretation team, and the Language Education Team (LET), which provides language learning programs.

But we’ve been careful not to make English the “official language” of the company. Just like programming languages, English is just one tool out of many. Our leadership made an active effort to enforce communication guidelines to accommodate both Japanese speakers and English speakers, like posting all messages on the company-wide Slack channels in both languages.

We’ve also proactively worked to incorporate global standards in our HR policies. This is especially the case for our compensation policies; we use a grade system and grade/position-based salary ranges. Sometimes employees from overseas who perhaps aren’t familiar with average pay levels in Japan wonder if they’re really being paid fairly. Instead of just telling them this is how it works in Japan and leaving it at that, we make transparent our framework for evaluation based on objective numbers to clearly indicate how their work is being evaluated.

—Rather than expecting new hires to conform to the organization as it is, you encourage the organization to change as well, right?

Exactly. We’ve also adapted our development practices to follow the standards set by global tech companies. While they’re widespread now, we actually adopted Agile development and the engineering manager system before they were common in Japan.

Thanks to these efforts, we ranked as the top company in perceived developer experience as chosen by engineers for the second year in a row in 2023. Even employees who came to us from major tech companies have said that they actually feel more comfortable working at Mercari because we emphasize our values and employee experience (EX).

Just like we value the UI/UX of our product, we feel really strongly about the EX of our organization. One example of a major initiative is Your Choice, our new work style policy designed to accommodate diversity in how people choose to work. We released this in September 2021. Under this policy, people can choose whether to work remotely or in the office, and even where in the country they live, with the goal of demonstrating greater value and maximizing performance for each individual and the organization.

This policy was brought about by a realization we had during the COVID-19 pandemic: “lifestyle” is a component of diversity, even more than factors like gender or nationality. We realized that each individual has a completely different lifestyle depending on things like where they live or who they live with, and that lifestyle has a significant impact on how they demonstrate our values. Given that, we thought we should allow each individual to choose the work style that allows them to perform at their best, rather than making everyone work from the office every day.

Of course, a policy like this is only effective because the values are such a strong part of the organization. Everyone understands the purpose of this policy and how to use it.

Initiatives and policies like these are what enables us to maintain a high level of employee engagement, as seen by our referral rate: a good 25% of all hires were referred by employees. Our employees, both Japanese and non-Japanese, consistently recommend working at Mercari to those around them.

Providing a safe and secure work environment while encouraging bold challenges

—So you talked about building the foundation for making Mercari a good place to work by adapting the work environment and creating mechanisms. With that foundation, how have you worked to achieve the “unleash the potential in all people” part of Mercari Group’s mission?

The most important thing is encouraging everyone to take on Go Bold challenges. To do so, we’ve made bold promotions and selections for important positions in new businesses and projects, without focusing on traits like nationality or gender.

We’ve also created mechanisms for compensation to make sure we reward people who took on bold challenges and achieved results. As a person grows and has more influence and impact in the organization, their compensation is adjusted to match external/market standards, rather than only internal standards and preset amounts. This enables us to maintain market-competitive compensation.

—What about people who can’t work for a period of time due to various circumstances or constraints?

We know some people face situations that make it difficult for them to take on bold challenges, like feeling exhausted or anxious as a result of taking care of elderly parents or raising children. Merci Box, which we introduced in 2016, is a benefits system designed to provide support during these difficult times. It comprises a wide variety of support systems, including everything from financial support for employees returning from childbirth/childcare leave, long-term family care leave, or medical leave to support for fertility treatment, financial support for childcare costs, life insurance for employees, financial support for egg freezing, and financial support for childcare for children less than 1 year of age. We care deeply about providing a safe and secure environment where employees can Go Bold to the fullest.

Eliminating the gender pay gap across society

—The Impact Report published in September talks about Mercari’s current initiative to eliminate the gender pay gap. Can you tell us about the background behind this initiative?

First, let me explain that Mercari determines compensation by taking into account both an individual’s contribution within the company and the state of the market. For some positions, the market is constantly changing, leading to fluctuations in reasonable compensation levels. To address this, we sometimes take corrective action to ensure that we’re paying fair compensation.

This initiative to eliminate the gender pay gap stems from the same idea. It began with a survey for the EDGE Assess global gender equality certification, which we carried out last year. We’ve been working on diversity & inclusion at Mercari since 2018, and we undertook this certification to see how our activities fare on an international level and to get a better idea of where we should go next. Through our efforts, we became the first Japanese company to receive certification for our commitment to gender equality. But in the survey, we learned that women employees had a higher tendency than men to think that they were not receiving fair pay.

—Does eliminating the pay gap mean making everyone receive the same pay?

Not exactly. When we say “fair,” we’re not thinking of everyone receiving the exact same pay. Our idea of fair compensation takes into account the market value of each individual’s position and grade—but no more than that.

So, we carried out multiple regression analysis to estimate the “unexplained pay gap,” and found a gap of 7% between men and women. After analyzing where this gap of 7% came from, we determined that the cause was the gap in pay employees received at previous jobs before joining Mercari.

The gap in pay received at previous jobs indicates a pay gap in society as a whole, which we weren’t managing to correct for in our regular onboarding process. Based on these results, we carried out corrective action for current Mercari employees. We also reworked our offer process to not be influenced by the pay someone received at their previous job to prevent this from happening again for employees joining in the future.

—If the gap exists across all of society, Mercari can’t solve it alone. What approach do you think is necessary going forward?

First, it’s important to get an accurate understanding of the situation. It’s easy to just calculate the difference in average income between men and women and call that the gender pay gap, but that’s not enough. To find the real gender pay gap, you have to account for differences due to position or grade, but that’s a difficult process.

—What do you mean?

Organizations designed from a generalist perspective often don’t have detailed position-specific salary ranges based on market value. This makes it difficult to take careful corrective action to match market value. I think that the real intent behind Japan’s move to require companies to disclose gender pay gap information is to call on companies to first pay fair compensation in line with market value. Once that happens, society as a whole can discuss any remaining gender pay gap and look for solutions.

Being chosen by people with whom our mission and values resonate and who are ready to achieve it together with us

—Finally, how will Mercari invest in people going forward to further unleash the potential in its talent?

We aim to make investment decisions that maximize the total value demonstrated by our members in the long term. To do so, we’ve reviewed our culture and values and defined the actions expected of members as we enter our next ten years.

Specifically, we updated our Culture Doc, which puts our company culture into writing, and revised some parts that we want our employees to be particularly conscious of in their work. One point that we emphasized is that it’s okay to fail. Bold challenges naturally come with failures. It’s important to aim to create new value by trying new things again and again, and learning new things every time we fail.

Another point is the idea of “disagree and commit,” which we added under All for One. Even if we disagree with a decision, as long as it was decided through appropriate processes, we commit to it.

Innovation is born from a diverse team of talent working All for One to take on challenges together. But if every discussion goes on until every single person is happy, we won’t be able to take Go Bold actions. After all necessary discussions, those in positions of responsibility take ownership over making the final decisions.

In the coming years, I think it will be important for companies and talent to have a fair relationship where they can choose each other on an equal standing. I hope that, rather than necessarily being a company loved by everyone, Mercari will continue to be chosen by people with whom our mission and values resonate and who are ready to achieve it together with us.