Overview Of The Lg Group Management

On February 22, 1995, Bon Moo Koo, took over the helm of the LG Group. Like a newly re-commissioned ship, LG had recently undergone significant renovation and appeared to be in great sailing shape. After steering through some stormy seas from 1985 to 1991, the clouds had cleared and LG's future looked sunny and bright. Group revenues had increased each year from 1991 through 1994, when they stood at a record US$38 billion. In 1995, Chairman Koo announced "LEAP 2005," his vision of the future. Of all the different elements of this vision, the goal of increasing revenue 10 times become US$380 billion by 2005 with fifty per cent coming from international sales was the most challenging.

In the history of LG, they already made some change in their strategy to adapt the situation they face. Low Cost strategy (1947-1987) was becomes the competitive advantage they focused on. LG competed with other multinational corporations by leveraging Korea's low cost labor and government-subsidized cost of capital. The strategy was under-pricing competitors with product of acceptable, although not superior, quality. By mid-1980s, it was clear that the strategic thrust of LG needed to change, became Value Strategy (1987-1995). They transformed for some factors reason such as, Korean consumers were more sophisticated than they before and also the rising standard of living increased the ability of Koreans to afford higher quality products and service that makes most Korean consumers were no longer happy with low quality, even if it did come at a low price; the Korean government began to relax trade barriers that made easier for foreign companies to compete with LG in Korea; as wage rates increased in Korea, low cost labor began to erode as a source comparative advantage.

Some refurbishing to the ship had performed by LG to respond the sales dropped by US$1 billion and 18 per cent decline on profit between 1986 and 1987.

"Management by self-control" was implemented as new management approach on its decision-making style. LG had a history of relatively centralized decision making and a top-down management process. It allowed for much greater autonomy than had ever existed in the group, but many lacked experience with it. LG was restructured in 1987, LG's various affiliated companies were divided into 21 "Cultural Units" that consisted of multiple Strategic Business unit (SBUs) grouped together by common 'cultural' characteristics.

By 1994, the results of these efforts were beginning to show. Sales had increased each year from 1991 through 1994. Net income was up nearly 800 per cent, rising from US$128 million in 1991 to US$965 million in 1994.

New Face and Image

Mr. Bon Moo Koo took over as chairman in 1995. Re-commissioning occurred on January 1, 1995. Lucky-GoldStar Group officially changed its name to the LG Group with a new Group logo - "The Face of the Future" with 5 keys concept were: The World, The Future, Youth, Humans and Technology.

Growth was the center of his new vision for the LG. He charted a course in his LEAP 2005 initiative that would take LG on a journey from being a leading company in Korea to being a leading company in the world.

To achieve the general objectives of Leap 2005, Chairman Koo articulated a basic philosophy:

Compete from a global perspective

Compete with world-class companies in the global market

Secure global management system to be competitive on a world and regional basis

Secure and utilize people, finance, and technology from a global perspective to create world class business systems

Create maximum value for customers, employees, and shareholders

Conduct business with integrity

Contribute to social development as a corporate citizen

Question:

What do you consider as the desired characteristics of the human organization that would help LG achieve Chairman Koo's "LEAP 2005" vision of the future?

If you were a member of Mr. Y.K. Kim's LG Human Resource Team, what HR strategies, policies, programs and/or practices would you recommend to translate the chairman's vision into reality?

What are the key needed capabilities of LG's future global leaders?

How would you identify, attract, select and hire, train and develop, motivate, appraise and reward to perform at peak level, and retain the global leaders with the needed competencies and capabilities?

Could the team take the same approach with the Korean and non-Korean manager?

Recommendation:

The new global orientation of LG in other to achieve LEAP 2005 required a new culture to support it. Although LG had a ambitious and clear vision about what they want to achieve and had begun develop some changing as part of action plan for transformation, some questions remain likes how LG would be able to fuse some attribute of the local tradition Korean corporate culture with global organization. A successful transition should be created and established to a unique corporate culture that combine the best and fit Korean culture with the best and the fit global culture in order to build a new competitive advantage.

Stay with all aspect of the old LG culture could become a huge obstacle in transforming LG into a world class enterprise. For example, Stability should not be sustained. They need to be more innovative, agile with lean concept and more aggressive since technological innovations, mergers, acquisition, divestitures, alliances, and so on, happened at such a rapid pace in the global environment that to accomplish the ambitions of Leap 2005. The cultural value of respect would also need to play out differently in the future that it had in the past. Respect should not be translated into a top down management style. Respect for others would always be important, but top down management and strong emphasis on hierarchy would not allow LG to respond to the market as quickly as needed to stay competitive. Establish the new LG culture (Challenge, Speed, Simplicity, Boundarylessness) is a strategic transforming that done by LG, but many aspect still need to become concerned seriously by LG Human Resources.

To be a leading global company, LG would need to create a global working environment that included both Korean and non-Korean leaders. But there are some sensitive issues, several studies found that Japanese companies had significant difficulty attracting and then hanging on to top local executive talent in countries such as the US. Many people believe there was barrier non-Japanese executive ran into at a certain point in the hierarchy of the Japanese subsidiary. How success they develop non-Korean global leaders will not be effective and help LG achieve their ambitions if one day LG run into the same problem.

With all issues that mentioned above, HR need to become "agent of Change". All manager and senior executive should not leave HR to do this transformation alone and to make sure all members of the organization should have a same understanding about vision Leap 2005.

If all issues that mentioned above still exist in LG or still not clear enough, can they go global with this? No, they can't.

My recommendations will be put in the next pages of this paper.

This is my recommendation:

We will start with designing of LG Competency:

Organization Strategy:

Goals: Growth 10 times in ten year articulated as "Leap 2005"

Critical Success factor: LG should transform become a world-class enterprise, compete from a global perspective and compete with world class companies in the global market

Strategic plans to achieve goals:

After evaluating where LG is at this moment in time, where the LG wants to be in 2005 and how to get Leap 2005, LG should transform their organization becomes a global company with global perspective and global competitive advantage.

LG should become customer oriented company through fulfilling customer satisfaction with more in term of value by quality, product technology innovation and process technology innovation. These innovations will produce new product, new features that come from faster and more cost efficiently process.

LG should define which market should be enter as avenues of growth for LG and where LG should focus on

In order to achieve 10 times growth, LG should not relay on local Korea market only. Strategic markets should be selected according expected economic growth and size of the market and also the extent of business opportunity in the market. China and Southeast Asia should be identified as a strategic market. LG should also plan to establish regional headquarter in Europe, South America, Africa and the Middle East in the near future because of the market potential in these region.

LG should also concern on technology innovation and process innovation when LG deal with "existing products, existing market". In the other quadrant, LG need to be more aggressive by doing extensions, start ups, acquisitions, and various forms of alliances. It will require its own unique set of managerial capabilities for success.

To be a leading global company, LG should create a global working environment that included both Korean and non-Korean leaders. LG's non Korean leadership development needs were further complicated by the fact that LG's regional focus for growth was China and Southeast Asia. These were areas in which world-class managerial talent was relatively short supply. So LG should develop their own non-Korean Global leader program, the leader should not come from the same region, but what LG needed is the leader that really what understand what the market they face.

LG needed to achieve growth under three primary, but different conditions i.e. South Korean, regional and global context. LG developed three growth models to outline the characteristics and requirements in each context. By identifying the skills, strategic approach, growth vehicles and evaluation criteria the group began to deal with the complexity of managing growth across industry dynamics in the context of geographic competition.

In order to achieve Leap 2005, LG should transform their human organization to a more global working environment with global leadership since 50 per cent of the revenue will come from international sales. People from different disciplines and geographies increasingly needed to work together to analyze problems and figure out solutions. It also means LG will need more new capable global leaders to achieve the growth objective of Leap 2005.

Organization Structure/Design

Traditionally, LG had structured in a hierarchical way with several divisions and departments, each responsible for a specific task such as human resources management, production or marketing. A cross-functional style should be adapted immediately to make the organization more flexible and devolve the power by empowering the managers with cross-function capability. As a large company that plan to expand and enter new market globally, LG had to change its decision making from relatively centralized decision making and a top-down management process to become more decentralized. Decisions needed to be pushed down where the action was.

Multiple Strategic Business Units (SBUs) should be grouped based on their core competency and common cultural characteristics. Each SBU should be given a growth target based on analysis on market situation, and SBU should be given full profit and loss responsibility and they should formulated specific competitive strategies, and were held accountable for results.

But the Senior Executive should still concern on how each SBU apply the LG's culture.

Organization Style/Culture

LG should create a new management culture with some values that can effectively support LG to achieve the Leap 2005. It will have to understand how the manager will behave in achieving LG's goal. LG should make culture to a more open, innovative and friendly environment with fewer hierarchies and smaller chain of command. These are the value that I recommend to be LG's culture:

Values; include for customers and employees

Harmony by respect people that played out differently that it had in the past. LG should become a fun workplace to establish an innovation and flexibility

More challenge rather than relied on stability. Sometimes it was needed to more passion, aggressive and more ambitious in order to achieve a great ambition

speed, it means LG should be lean and reduce bureaucratic hand off to become more agile

simplicity, for greater product reliability, fewer parts and simpler design were necessary that would also help keep costs down

boundarylessness; functional, geographic, and even business boundaries of the past needed to become less like fortress walls and more like fuzzy lines

Organization Staff

The numbers and types of personal within the organization should be defined carefully. Size of the staff must always support the organization to keep lean and agile in responding the change of environmental. Each personal should fit with the LG's culture and goal. They will become people who make the real difference to the success of the organization in the increasingly knowledge-based society. The importance of human resources has thus got the central position in the strategy of the organization, away from the traditional model of capital and land. LG should put extraordinary emphasis on hiring the best staff, providing them with rigorous training and mentoring support, and pushing their staff to limits in achieving professional excellence, and this forms the basis of these organization's strategy and competitive advantage over their competitors. It is also important for the organization to instill confidence among the employees about their future in the organization and future career growth as an incentive for hard work. They will be a combination between Korea and non-Korean staff with the same understanding on company vision.

Organization Systems

LG should use some systems or internal processes to support and implement the strategy and run day-to-day affairs. New technology could be adapted continuously in order simplifying and modernizing some processes such as procurement of daily use goods to eliminate hand-off by reducing unnecessary decision requirements from higher manager for a specific decision.

All over the world recruitment should be processed immediately in order to support company expansion since they will need approximately 340,000 foreign employees. Recruitment will perform by each regional subsidiary since they know exactly what type and amount of personal they need to compete in their region. Different region or SBU may need a specific particular value of employee. But again, LG's culture should be considered since it designed to achieve maximum effectiveness. Integrating the HR fundamentals with Information Technology such as On Line Recruitment Management System could be adopted for some practices in order to attract as many as best talented applicant from over the world.

LG Academy should provide also leadership program like as a acceleration pool since LG will find some difficulty to find a world class leader from some region. LG Academy should provide a cross-functional training to make them to be more ready to become to run a significant business with international operations.

Organization Skill

A competitive LG's core competencies can only build with some distinctive capabilities of personnel or of the organization as a whole. This skill should make a significant contribution to the perceived customer benefits and should be difficult to imitate by competitors. Core competencies could be built through a process of continuous improvement and enhancement. It will deliver product to customer with high quality, reliability in a competitive price and become most trusted brand.

Organization Shared Value

All members of the organization should have a same understanding about vision Leap 2005 and share some common fundamental ideas or guiding concepts how to achieve that. These values and common goals keep the employees working towards a common destination as a coherent team and are important to keep the team spirit alive.

The key needed capabilities of LG's future global leaders:

First of course the global leaders should understand the vision of Leap 2005, understand where LG is at this moment in time, where the LG wants to be in 2005 and how to get Leap 2005. They have to understand and can accept the new culture of LG.

They should have a global perspective with more open, flexible, has ability to change and has a dynamic culture to encourage innovation. They have to aware about softer components usually difficult to change and overcoming the staff resistance to change. What I am saying is, in order to do transformation; the global leaders should focus not only on the hard components and neglecting the softer issues.

They should a talented team players that have a high level of commitment and loyalty; not a forced loyalty but voluntary loyalty that influenced by organization; who able to internalize and execute innovation across the board.

How would you identify, attract, select and hire, train and develop, motivate, appraise and reward to perform at peak level, and retain the global leaders with the needed competencies and capabilities?

This will be defined on LG Organization System, some approach had mentioned before.

Some skilful expatriate that fit with LG's goals and fit in well with the company's corporate culture from other country could be effective for some region in which world-class managerial talent was in relatively short supply. It could be considered if LG doesn't have many candidates to fulfill some vacant in some region and LG did not enough time. But at the same time, HR should provide a "World Class Leader Development Program" to internally train LG's own human resources.

Another recruitment using an Integrating the HR fundamentals with Information Technology such as On Line Recruitment System could be adopted for some practices in order to attract as many as best talented applicant from over the world especially for fresh graduated with high committed and enthusiastic team player. A campaign that LG will chose only the best and the right people in order to achieve a great ambition with Leap 2005 can attract schools graduated who have a strong passion for winning. This personal type will be fit with this ambitious vision. After that HR and assisted by Line Manager should explore this best-in-class talent with managerial potential as well as effectively managing resources to support the company's global business by nurturing human resource capabilities and staff. HR should evaluate LG's employees' capabilities and positioned them appropriately within the organization to create top performance. LG should build a system which focused on local talent and policies to create better results in each market.

All global leaders should be given an equal opportunity regardless race, gender, age, religion or nationality. It had been become a sensitive issue; there should no more limitation for level that non-Korean manager position can achieve. Even for a 35-year-old manager, as long as they had fulfilled the required competence, they have to be promoted if organization needs a new senior manager. Equal opportunities will build trust among people.

In order to stimulate the innovations, the global leader's creativity should become the basis of value creation. They should given more autonomy to allowing them to exercise their creativity to the full.

LG should always equip the global leader with training about LG's corporate culture and about professional capabilities with global perspective that LG needed. A three up to six month training at Korea headquarter about corporate culture and goal, especially for new recruitment could be performed to make sure that everybody in the organization has a same understanding about this vision. Other effort to make them enjoy and love to work at LG and make LG become a fun work place for them should be recognized and affiliate on the LG's corporate culture.

Finally, a reward based on performance is essential for manager motivation. LG should evaluate performance results fairly and rewards them accordingly. This rewards system should be maintained well and will motivate employees to perform better by helping them to enhance their quality of life. LG's rewards system could be consist of fixed salaries and bonus. Fixed salaries are determined every year through a fair evaluation process. Bonuses are immediate rewards given to individual employees for their performance and competence.

Although LG had a clear vision of where it wanted to be and had begun to develop realistic action plans for transformation, a key question remained as to how the organization would be able to fuse the favorable attributes of the existing local traditional Korean corporate culture with the necessary characteristics of more global organization. A different approach for with the Korean and non-Korean manager should be performed. In one side, non-Korean manager could still not have a clearly trust about all changes which this transformation could be bring such as equal opportunity, since it was rare for Korean or Japan company give a same opportunity to other nationality. In the other side, some Korean manager, especially who had been at high level positions could be resistant for this changing since at LG traditionally; it's not common for them to be led by other non-Korean manager or a younger manager. A different culture could be approached with different way. A successful transformation could create a unique corporate culture and an enduring source of competitive advantage. HR also should encourage all other departments to work together on this transformation. These visions could only success if all components of LG's organization work closely and have same perception on what and how Leap 2005 could be achieved.