Japan: CEO says raising salaries have turned his firm into nation's best-performing stocks

The CEO of a software tester company recently revealed the strategy that turned his firm into one of Japan’s best-performing stocks. While speaking to Bloomberg, Masaru Tange, CEO of Tange's Shift Inc., said that he buys smaller companies that are near the bottom of the industry supply chain and boost their workers’ salaries. Tange said that he is able to do this and still charge competitive prices by cutting out layers of companies that serve as middlemen in the outsourcing process. 

As per reports, Tange’s company shares have risen more than 5,300 per cent since it went public in 2014. The firm’s market capitalization has also surged to about $2.3 billion, pushing the value of Tange’s 33 per cent stake to about $745 million. While speaking to the media outlet, the 44-year-old CEO said that his business model is an attempt to remove “inefficiencies” in Japan’s software industry, where layers of subcontractors take cuts on orders before passing the work to another company below. 

Tange revealed that he grew up in an ordinary family in Hiroshima in southwestern Japan. Both his parents were civil servants. He established his firm, Shift, in 2005 after majoring in mechanical engineering and after spending more than five years working for a consulting company. The 44-year-old started out advising companies on how to improve profits and then in 2009, he entered the software testing business. 

Tange said that he wanted to change engineers’ perception that software testing was a second-rate job, including by paying them more money. He said that his company started by charging 1.5 million yen for a service whose market price was 2 million yen. He said that his strategy would enable him to win customers. At the same time as he raised the amount paid to the engineer, they would also get happy. Tange revealed that he was able to pay an employee 800,000 yen just by getting rid of middlemen. 

‘Just getting started’ 

Currently, Shift has 3,308 engineers as permanent employees and the company has acquired at least 14 firms till now. Tange’s company’s revenue rose to 28.7 billion yet in the 12 months ended August 2020, which is more than triple the level three years earlier. As per reports, profit also increased to 1.6 billion yen, compared to 208 million yen three years before.

Tange said that Shift is “the biggest in Japan in this area”. He also added that he now sees revenue of his firm reaching 100 billion yen, referring to the company’s goal for the fiscal year ending August 2025. “We're just getting started," he said. 

IMAGE: Twitter/Unsplash