"Before Mr. Richard left, he said that Sega's financial health has improved by two rating levels compared to when they first came on board." Director Hoshino's tone was relaxed. "The offshore accounts of several overseas branches have also been fully integrated into the monitoring system.
"The early revenue recognition that the sales department cooked up to boost performance figures has all been reversed and redone."
"Department Head Yoshimura didn't complain again?"
"How could he dare to complain?" Director Hoshino chuckled. "After the audit committee was established, all large expenditures have to be approved by the board. Department Head Yoshimura is more meticulous about filling out reimbursement forms than anyone else now, terrified that if any expense isn't clearly explained, Richard will use it as a teaching case and 'publicly execute' him at a meeting."
Takuya Nakayama closed the proposal.
"You've worked hard this past half-year, Hoshino-san. This dual-track audit system was able to land smoothly, and a lot of the credit for mediating in the middle goes to you."
"You've worked hard these past six months, Hoshino-san. Your mediation played no small part in the smooth implementation of this dual-track audit system."
"This is my job. However, Managing Director, a few of the old guard on the Board have been asking me privately—now that the financial audit is over, are we going to start cutting into the personnel structure?" Director Hoshino lowered his voice. "Everyone is on edge."
Takuya Nakayama tapped his fingers on the desk.
"Tell them not to speculate. I'll be going to the President's office this afternoon to give a special report and set the tone for what's coming next."
This financial optimization, which had been gnawing at Sega's internal nerves, was finally reaching its conclusion.
From the arrival of PricewaterhouseCoopers, to the implementation of the dual-track audit scheme, and finally to the departments' own self-examinations and rectifications.
Using this external force, Takuya Nakayama had forcibly wedged an entirely new set of evaluation standards into Sega's rigid operating system.
Through this evaluation system, the Board of Directors had caught a glimpse of the many shackles hidden within the details of their operations.
Stripping away the obsolete practices that no longer suited the development of the times had become the next necessary step for Sega.
In the afternoon, in the President's office on the top floor.
Hayao Nakayama flipped through the final summary report on his desk.
The rustling sound of paper turning echoed through the spacious room.
Takuya Nakayama sat on the leather sofa opposite, holding a freshly brewed cup of tea in his hand.
The old man was reading it very slowly.
This report stripped away the accounting games that had been used to gloss over the true state of affairs, exposing Sega's weaknesses in its channels...
Takuya Nakayama sat on the leather sofa opposite, holding a cup of freshly brewed tea.
The old man was reading very slowly.
This report stripped away the whitewashed accounting tricks, laying bare Sega's actual losses in distribution, marketing, logistics, and every other facet of the business.
"The muddled accounts returned from Yoshimura are less than I expected," Hayao Nakayama said, closing the report and taking off his reading glasses. "It seems your prodding over the last six months hasn't driven them into a corner."
"Killing the goose that lays the golden eggs is unwise. If I really dug out every parasite beneath me, the Sales Department would be paralyzed by tomorrow," Takuya Nakayama said, blowing the floating leaves off the surface of his tea. "What we need is an evaluation system that allows the Board of Directors to see the operational details clearly, not a purge. Now that this system is up and running, the data speaks for itself—which money is being wasted, which links are inefficient. With reforms pushed forward on such a foundation, we can maximize support from the Board and achieve twice the result with half the effort."
Hayao Nakayama picked up his teacup and took a sip of hot tea.
"Reform is a good thing; it's time for Sega, this ship, to scrape off its barnacles," the old man said, his tone calm and steady, reflecting years of steering the helm. "You must maintain the bottom line. Sega's foundation cannot be shaken. Personnel adjustments at the top and the distribution of interests among mid-level management—everything is interconnected. If the commotion is too great, it will undermine confidence in the company, and the battles on the front lines won't be fought."
This titan, who had come of age in the Showa era, always valued the stability and cohesion of an organization above all else.
Sony was still lurking outside, waiting for an opening, and Nintendo's N64 was also gearing up.
If the internal auditing were to cause panic, it would be tantamount to self-destruction.
Takuya Nakayama set down his teacup and nodded in agreement.
"Rest assured, large-scale layoffs and salary cuts are not in my plans," he explained clearly, outlining the next steps. "For future reforms, I will adopt a trial-run approach on a small scale. I'll pick a peripheral department for initial verification, run through the processes, organize training for the relevant personnel, and only then roll it out to the core departments."
"No sweeping changes?"
"Sweeping changes only lead to bloodshed. Slow and steady work produces fine results; it fits our Japanese nature perfectly," Takuya Nakayama smiled. "As long as the rules are established clearly, there are few people in this world who can match their ability to refine their work."
The topic naturally turned to the characteristics of the Japanese workplace.
"Speaking of being meticulous," Takuya Nakayama shifted to a more comfortable position, his tone carrying a hint of sarcasm. "A few days ago, the Second Finance Section submitted a monthly report. The formatting was absolutely beautiful—the spacing of the headers was accurate down to the millimeter. The employee who made this report stayed up for three straight nights just to align two completely unrelated sets of data."
Hayao Nakayama caught the implication: "And the result?"
"The result was that those two sets of data had zero reference value for the company's decision-making," Takuya Nakayama spread his hands. "It's a habit passed down from the Showa era—many people can perfect a completely meaningless task. Human resources and time are just wasted on beautiful scrap paper. How can corporate efficiency ever improve?"
This was a common ailment during a period of transition.
The older generation of employees was accustomed to step-by-step processes and lacked a concept of the efficiency demanded by the new era.
It wasn't just in the Finance and Sales departments; the Development Department faced the same situation, though perhaps not as severely.
Some veteran artists were still insisting on hand-drawing backgrounds bit by bit, resisting the use of more efficient 3D modeling software.
"What do you plan to do with these people?" Nakayama Hayao asked.
"Maintain the lifetime employment system." Takuya Nakayama threw out an answer that surprised the old man.
For a young man who championed American-style management efficiency, keeping lifetime employment sounded like a step backward.
The Wall Street way of doing things, when faced with inefficient employees, was to simply hand them a cardboard box and send them on their way.
"The current macroeconomic environment is not optimistic. Unemployment has been climbing for years since the bubble burst. There's a lot of social unrest," Takuya Nakayama explained the logic. "If we carry out mass layoffs at a time like this, not only will we invite condemnation from the media, but it will also severely damage the morale of our remaining staff. If we really sweep these veteran employees out the door, everyone else will feel insecure, and Sega's cohesion will disintegrate."
Nakayama Hayao nodded.
A company doesn't just need to make money; it also has to bear a certain level of social responsibility.
During an economic downturn, stabilizing employment is itself a form of intangible social public relations.
"That's why I plan to set up a 'skill retraining subsidy' in the HR department."
Hayao Nakayama put his reading glasses back on and motioned for him to continue.
"There is no need to force older employees who cannot keep up with the times to learn complex international tax planning or cutting-edge code architecture."
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