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International Rectifier’s Mike McGee

As the first non-Japanese chairman of a Japanese-listed company, McGee had to orchestrate a restructuring that ran contrary to traditional Japanese business practices.

You think your commute is long? Don’t complain to Mike McGee. For five years (2000–2005), McGee served in two executive capacities: as CFO of International Rectifier, an El Segundo, California-based power semiconductor company, and as co-CEO and chairman of Nihon Inter Electronics Corp. in Japan. McGee’s role at Nihon was hardly ceremonial. After IR had taken a 5 percent stake in the Japanese chip maker, Nihon’s managers tapped McGee to turn the foundering company around. That was no small task. As the first non-Japanese chairman of a Japanese-listed company, McGee had to orchestrate a restructuring that ran contrary to traditional Japanese business practices. And he had to be there to do it: in his five years at Nihon, McGee reckons he made the 14-hour flight to Tokyo 80 times. But the hours spent in transit paid off. Last year, Nihon Inter Electronics posted record profits, and IR has now gained a foothold in the semiconductor market in Japan.

Why did IR allow you to assume this role?

It was strategic. IR is going through a transition from a manufacturer of commodity components to a manufacturer of real high-value proprietary products in two key markets: consumer electronics and motor control. Those two markets are also prominent in the Japanese electronics industry. But to work with [managers at] Japanese companies, you must understand the culture. Having an IR executive manage through a troubled business there demonstrated our ability to work with Japanese companies. In addition, as IR repositions, we need to address some of our older assets and either sell them off or use them in joint ventures. So my participation in Nihon also gave us opportunities to participate in the restructuring of the Japanese semiconductor industry.

What were you least prepared for at Nihon?

The decision-making process is very different. You do something called Nema Washi, which involves talking to all the constituents about important decisions and requesting their support before it is discussed at a meeting. In the United States, a business meeting is usually very functional, with a lot of dialogue and an exchange of ideas. But in Japan, a meeting is much more procedural, since prior to the meeting everyone has already agreed to a decision.

Did you find that frustrating?

The Japanese culture focuses on harmony and doesn’t ever want to put people in a position where they could lose face. So, many times when you’re talking to somebody and they say “yes,” what they are really saying is, “I understand that that’s important to you. I understand that’s how you think.” They don’t necessarily agree with you. That’s where Nema Washi comes in.

So how did you get them to agree to the restructuring?

A lot of conversation. I spent days in one-on-one meetings, trying to gain a certain level of trust with each member of the management team. I asked what they thought the company’s strengths were, what they would like to do long term, and what issues frustrated them. I came to understand their sensitivities and their views of the company’s strengths. From that I was able to create a different vision of the company, [a vision where Nihon] would be growing faster than the industry…and where its products would not be commoditized. Once we created a vision we all agreed on, we worked through how to achieve it.

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