Japanese employers try to unseat "window tribe" Yoshiaki Fujimori has a problem. The chief executive of Lixil Group, Japan's biggest manufacturer of building materials, has just waved goodbye to almost 2,000 staff, after being overwhelmed with applications for a voluntary retirement programme. But now that he has shed about four per cent of his workforce - twice the target - he wants to rehire some specialist salespeople. "We have to restructure a little bit," he says. It's not like hundreds we have to get back, but we need to refill expertise we have lost. The about-turn neatly illustrates the drawbacks of the voluntary retirement system in Japan where rigid, employee-friendly labour laws make it very difficult for companies to dismiss staff. Recent months have seen a resurgence of such schemes, as companies including Sharp and NEC try to adjust to sluggish demand in China and Europe and a stubbornly strong yen. The tradition has two obvious economic advantages. By periodically clearing out senior people in well-paid jobs, companies can reduce cost bases just enough to keep the banks happy. Second, people signing up to voluntary programmes tend to start their own businesses, find new jobs inside or outside Japan, or stop working altogether. That keeps a lid on unemployment. Joblessness in Japan peaked at just 5.6 per cent in the aftermath of the Lehman crisis in July 2009, even as the country suffered one of the world's worst contractions in output. Government data published last Friday showed the unemployment rate at 4.2 per cent in August, improving from July despite flagging momentum in the economy. That rate compares with 8.1 per cent in the US and 11.4 per cent across the eurozone. However, the big risk of voluntary clear-outs is that a company loses people it really wants to keep. By law, programmes must apply equally to all employees within a targeted group and cannot be offered selectively on the basis of performance. What management wants to do is to get people to leave whom they don't want. But it is often the good ones who can find a job outside who leave first," says Shinya Yamamoto, a partner in charge of HR services at PwC in Tokyo. For an executive with decent prospects of another job on similar pay, the package can be attractive. Lixil's programme, announced in July, was designed to trim excess capacity, after a five-way merger. The company offered two and a half years" salary on top of accrued pension benefits, to any full-time employee between the ages of 40 and 59 with more than five years" service. "Japanese industry has been weakening itself incredibly by doing voluntary retirement programmes," says Tom Nevins, president of TMT, a Tokyo-based consultancy. Rivals in Korea, Taiwan or China know that they can pick up really good people. A related problem is what these programmes can leave behind: a hard core of expensive, demoralised under-achievers. Known disparagingly as madogiwa zoku - "the window-seat tribe" - these executives may be pushed into subsidiaries, sometimes on lower pay, or given titles with no responsibility. Yet they remain a drag on productivity. "In other countries, people would leave," says Mr Yamamoto of PwC. But Japan has no active market for mid-career hires. People just get demotivated and stay where they are. There are ways to mitigate those risks. The current wave of voluntary-retirement programmes is better targeted than previous ones, says Junichiro Noda of Tempstaff Career Consulting, an outplacement agency. Managers can offer "moderate encouragement" to underperforming staff to take the package, via one-on-one consultations, without tripping over labour laws. But in many cases, the programmes mask deeper problems. Two years ago, for example, chipmaker Renesas announced an early-retirement programme that would skim about 3 per cent of its staff. The slide in its shares since then has been halted only by reports of a rescue. "People need to move on," says Nicholas Smith, an analyst at CLSA, paraphrasing remarks once made by former GE chief Jack Welch, on a visit to Japan. Life-time employment is not kindness - it's cruelty.