Lg Group Developing Tomorrows Global Leaders Management Essay

Based on the basic management philosophy of:

Competition from a global perspective

Pursuit of best value for customer, employees and shareholders

Become the world’s best business group through management by principle

And contribute to social development as a good corporate citizen,

Bon Moo Koo as a chairman of the LG Group, one of the three largest Korean chaebols, announced “LEAP 2005” as vision of the future. It has a goal of increasing revenue to US$380 billion by 2005 with 50% coming from international sales. Leap 2005 centered on employees and this new vision would lead LG to develop the most rewarding workplace for employees.

Mr. Y.K. Kim as the head of the LG Human Resource (HR) team was charged with the task of identifying and developing high potential individual and the global leaders that LG would need in the future. He worked closely with Dr. Michael Lee, Managing director of LG Academy (LGA). They estimated that LG would need approximately 1,400 new global leaders by 2005 with about half would be Korean and the rest would be non-Korean.

By 1987, LG had businesses and industries in chemicals, communications, energy, electronics, finance, insurance, machinery, metals, sports and trade. Even though LG was strong in Korea, it was not an international technology or quality leader in any of its business segments, especially relative to world-class foreign competitors.

A new corporate identity program was launched in 1995, Lucky-Goldstar Group officially changed its name to the LG Group. The logo was designed to symbolize five key concepts: The world, The Future, Youth, Humans and Technology.

Top management and HR team needed to create global working environments that include both Korean and non-Korean leaders in order to achieve the objectives of Leap 2005.

Strategic analysis using 7s framework

Strategy:

Low cost strategy (1947 – 1987)

Focused on competing through low cost manufacturing but also strongly emphasized high production volumes

Under pricing competitors with products of acceptable, although not superior, quality

It established Lucky-Goldstar brand as a low cost and acceptable quality products manufacturer

Value strategy (1987 – 1995)

Korean consumers were increasingly aware of and demanding higher quality products because of the standard of living increased the ability to afford higher quality products and services

Korean government began to relax trade barriers that made it easier for foreign companies to compete with LG in Korea

The cost competitiveness of Korean began to slip

Strategic orientation of LEAP 2005

Focused on strategic markets that expected with economic growth and size, also the extent of business opportunity in that market

Technological revolution through innovation to be produced faster or more cost efficiently

Investment for the greatest possible return

Customer satisfaction as a key measure of success

Structure:

Centralized decision making and a top-down management process

In 1987, LG’s various affiliated companies were divided into 21″Cultural Units” consists of multiple Strategic Business Unit (SBUs)

Systems:

Departments were separated and sequentially “handing off” projects – from product research to product design to engineering to manufacturing to marketing to sales

Managers had to develop a new perspective on time based competition thus speed had to be a central value that permeated the group’s culture

Shared Values:

Focused on valuing employees and contributing to social development through good corporate citizenship

In 1987, focused on creating customer value

Valuable components from old culture: stability, harmony and respect

Established and reinforce four new cultural elements: challenge, speed, simplicity and boundarylessness

Style:

In 1980s, the new management approach “management by self-control” for greater decision making autonomy

Cultural value of respect, translated into a top down management style and emphasis on hierarchy

Leap 2005 required LG to change course to a global setting, leadership development emerged as one of the biggest challenges

Staff:

Managers focused on producing high volumes and getting per unit as low as possible rather than finding out what customer wanted, developing high quality products or expanding marketing capabilities.

SBU heads were given full profit and loss responsibility for their units

Within SBUs, middle managers were charged with reviewing and reengineering business processes to ensure efficiency and effectiveness

Cultural Unit presidents focused on integration and coordination across SBUs

Need more global leaders because LG had a domestic orientation in the past included both Korean and non-Korean

People from different disciplines and geographies increasingly needed to work together to analyze problems and figure out solutions

Skills:

Many managers were lack experience with decision autonomy

Need hundred of world class managers to achieve its target with more sophisticated knowledge in finance

Recommendations:

Characteristics of the human organization that would help LG achieve Chairman Koo’s “LEAP2005” vision of the future

First, HR should be held responsible for defining an organizational structure. It should identify the model of the company’s way of doing business. The well known 7s framework distinguishes seven components in a company’s architecture. LG Human resources Team should also used a change model to guide a transformation process at the company began by asking Who, Why, What and How. This model helps an organization identify the key success factors for change and assess the organization’s strengths and weaknesses regarding each factor. As change agent, HR professionals do not themselves execute change, but they make sure that it is carried out. The hardest and most important challenge facing LG in that era was changing their culture. In helping to bring about a new culture, HR must follow a four steps process:

It must define and clarify the concept of culture change

It must articulate why culture change is central to business success

It must define a process for assessing the current culture and the desired new culture, as well as for measuring the gap between the two

It must identify alternative approaches to creating culture change

HR strategies, policies, programs or practices translating the Chairman’s vision into reality

Key needed capabilities of LG’s future global leaders

Managers had to change their mindset from flawlessly executing orders to determining strategic direction

Managers are required to have a clear idea of what customer needs, values and preferences

World class managers that have capabilities for success and growth strategies

LG needed a cadre of managers with more sophisticated knowledge of finance

To challenge and think differently and to come up with “breakthrough” innovations

Globalization: they must be more literate in the ways of international customers, commerce, and competition than ever before therefore LG should increase their ability to learn and collaborate and to manage diversity, complexity and ambiguity.

Profitability through growth: they must also become more focus, more in touch with the fast changing and disparate needs of their customers.

Technology: the challenge for managers is to make sense and good use of what technology offers. They will need to figure out how to make technology a viable, productive part of the work setting.

Intellectual Capital: The challenge for organizations is making sure they have the capability to find, assimilate, develop, compensate and retain such talented individuals.

Change, change and more change: LG must be able to learn rapidly and continuosly, innovate ceaselessly, and take on new strategic imperatives faster and more comfortably

How to 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?

The establishment of a development strategy is an important first step in the recruiting process. The second is achieving a fit between it and the rewards that an organization offers. A good fit must exist in in order to attract and motivate effective performance. The issue that needs to be considered when recruiting individuals relates to their motivation to perform. Attracting and recruiting the right talent is a critical part of managing human capital and an integral element of the designing process in organizations.

Companies are starting to evaluate their employees not only by objectives but also by the competencies they develop. One possible procedure is what is known as the balanced scorecard. Under this procedure indices of competencies are added to indices of results, and a weighted average is calculated to obtain a final index, which tends to be tied to variable pay.

Every company must decide what competencies it needs to develop in its managers in order to achieve its specific goals. The competency profile it chooses is a clear and precise expression of the culture it wants to promote, and can therefore be used as a tool for cultural change.

Core competence of the corporation

Collective learning in the organization, especially how to coordinate diverse production skills and integrate multiple streams of technologies

Harmonizing streams of technology, organizing work, and delivering value

Complex harmonization of individual technologies and production skills

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

Yes, as long as managers have some strategic competency as follows: business vision, problem solving, resources management, customer orientation, effective networking and negotiation. And also leadership capacity with following basic competencies: communication, organization, empathy, delegation, coaching and teamwork.

Questions:

What do you consider as the desired characteristics of the human organization that would help LG achieve Chairman Koo’s “LEAP2005” vision of the future?

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

What were 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 managers?