A respected colleague shared their thoughts on last week’s commentary “Hit the Target”—noting is was “a timely topic!” “… Especially as we enter the fourth quarter…”
Several readers also chimed in– lamenting that local leadership and teams receive little guidance in HOW to hit the target.
To add some context, HOW has considerable to do with Korean workplace culture norms. Leaders give directives, and teams execute in a top down manner. In some cases, well meaning leaders withhold detailed instructions to empower their teams to work through it themselves…. In other cases, some in less progressive management feel there are being paid to do a job…. And teams need to struggle like they themselves had earlier in their careers… While others recognize providing direction may be efficient, but hope their team will find new and better ways to tackle the challenge. In particular, some form of “hail Mary” that drives sales and even better at a low cost.
Frankly, demands today on Korean export driven business have pushed and stretched teams. Many feel they are operating at maximum with little room for additional market share or sales.
Risk avoidance adds another layer when new ideas are presented, too.
Under these circumstances I have two recommendations.
Present multiple and alternative ideas and countermeasures… vs. selecting one idea. I know a common response is “we do this, but to little avail.” This does take some cultural savvy… the best teams in Korea do find ways to get their message heard. I can help here…. in providing you with a best approach.
Couple with suggesting a trial or pilot approach to minimize risk and investment— with the ability to roll out fast. Again, this takes some savvy in how best to share and present…. Something I do often….
Care to discuss solutions? My personal assistant Stacey at stacey@koreabcw.com can coordinate a time for us to chat by phone, meet or handle by email.
1.Working with and within a culture is sensible, practical and effective.
2. Within an overarching corporate culture, there are generally several subcultures each with the own unique elements.
3. Use the culture you already have.
….take pains to stay within the most essential tenets of existing culture.
4. [it’s] Critical to fully understand the culture, then be able to de-construct and simply aspects relevant to your situation.
These quotes are from a well crafted article titled, “Stop Blaming Your Culture”
A colleague recently shared the article recognizing the concept had value for his own company in working with and within their Culture. In particular, I was asked then to assist with providing insights into the Korean side of my client’s Culture. Echoing the article “Culture matters!”
I strongly recommend you download the article and study. I’d then be happy to share my thoughts on how to work within your specific Culture.
It’s hard not to be a watchdog for Korean facing issues that grow in concern and could potential have a global impact on the organizations and clients I support.
In an interview for an upcoming segment for the Korean media show “Koreascape” on globalization, I was also asked for my opinion on the recent drama within Lotte, Korea 5th largest chaebol over control of the Group. The host Kurt Achin, a seasoned journalist, shared concern over the bold move by one of the Founder’s son to take control of the Group, which has drawn considerable media and popular notice to the ongoing issue of succession among the chaebol. This media attention has not only been limited to Korea, but showed up on Page 1 of the WSJ as well as AP and the other leading wire and new service. [BTW Lotte is Korea’s largest retail, distribution, tourism and construction Group with a growing international presence and annual sales estimated at more than $100 billion. Also, Chaebol is a common South Korean term for their conglomerates, often multinational, global enterprises led by a Chairman and in most instances family controlled.]
This brings us to a media summary on the topic of Korean Family Succession, as well as a FAQ sharing my thoughts.
To prefix my comments, in her book, How to tell your story so the world listens, Bobette Buster author and USC Adjunct Professor notes:
“It has been said that Industrial Age ended after the end of World War Two. Then, it was superseded by the Age of Information via the computer, the 1960s boom in Madison Avenue advertising…and television. Then with the Internet boom of the 1990s, there followed in 2003 with viral explosion of the social media. With this a new deceiving conceit arose: anything worth knowing is available at our fingertips. This immediacy has curiously, made people less curious about discovering the world, at least to any depth.” The author then points out; we often “… know the facts, but not the context in which they happen.”
Let’s start with what we know and specifically fueling so much concern, and then I will share some context in a FAQ.
An editorial on the Lotte controversy in Yonhap, the Korean newswire service, writer sums up popular sentiment:
“Koreans are sick and tired of these internecine fights when the managerial control of a chaebol moves between generations.” More so, “who will succeed a family decision, rather than a formal shareholders’ meeting.”
Fuel to the fire… In July, amid considerable media attention, Samsung C&T and Cheil Industries agreed to an $8 billion merger that essentially consolidated the Samsung Group’s Lee family sway over Samsung Electronics, the Group’s flagship. This move sparked the ire of activist shareholder Paul Singer, CEO of U.S. hedge fund Elliott Associates. The American firm publically felt the deal would undervalued their substantial stock holdings in Samsung C&T while overvaluing Cheil to the benefit of the Lee family successor. Samsung rallied their supporters to win over Elliott in a heated vote.
Noting, I have prepared a three point FAQ look at context behind Korean succession, past and present.
1. What’s driving Korean family succession?
Looking back, Korea’s chaebol model is strongly rooted in their past. Neo-Confucianism, the dominant secular ideology of the nation going back to 1392, required all government officials and bureaucrats to pass rigid civil service examination for local, provincial or court positions. The Korean monarchy was the exception, male primogeniture used to determine the next ruler. Likewise, within Korean families, the eldest son and his descendants take precedence over siblings and their descendants. Elder sons took precedence not only over younger sons, but all sons took precedence over daughters—even elder daughters.
With the modern era and end of Japanese Colonial Rule, Korean business groups emerged. Family run, they gained considerable momentum during the 1960s, 1970s, and 1980s under the state-run policies mandated by the government.
At times this was a love/ hate relationship between the Groups and Government—with transfer of family wealth becoming an issue as the first generation of Founders handed over control to their children.
It is here we also see the first controversies surface. Following Korean traditional Confucian norms that dictated the eldest son be granted control over the family holdings as the next patriarch in some cases as with Samsung and Hyundai, a sibling or relative other than the eldest was selected by the Founder. In some instances, the elder sibling(s) fell out of favor of Founder, while in other cases a younger son assumed the role following the death of an elder son or if there was no son, a relative would take control.
2. How is the recent merger at Samsung associated with succession?
A second set of issues with wealth transfer centers on inheritance taxation—a tax levied up to 50% of the patriarch’s assets. To avoid the hefty tax, defacto holding companies allowed the second generation to gain control over the Groups with a marginal investment and little direct inheritance of the patriarch’s holdings.
As we move into a 3rd Gen of family control Groups like Samsung and Hyundai Motor have been engaged in similar lengthy and well orchestrated fiscal moves to transfer wealth and control. Much of this is through merging smaller companies, which the future successor has a substantial interest, with a larger Group’s firm, gaining control with no investment of monies. i.e. Samsung C&T and Cheil Industries.
A second method is work funneling.
In this process, Korean chaebol families have considerable ownership stakes in many of the privately held sister companies.
Next, the other subsidiaries give these smaller companies a huge amount of business to increase their revenue. Finally, these smaller companies grow considerably over time and can move to an IPO or sell some of their holdings to outside investors. i.e. Hyundai Glovis and Innocean Worldwide.
The families can then use the revenue stream to buy stock in other key publically traded subsidiaries and their chaebol’s defacto holding company.
In both cases, ownership stake along with circular, cross and pyramid (radiant) shareholdings give them direct and indirect control over the entire Group.
3. Noting public sentiment regarding succession, how likely is it for the South Korean President Park Geun-hye to toughen corporate laws?
As I note above, there has been a longtime Love/ Hate relationship between the chaebol and the Government. Despite the chaebols’ dominance and influence, they are increasingly coming under pressure from new laws and regulations designed to increase financial transparency and accountability of family members.
For instance, the government recently enacted a “deemed inheritance tax,” so that family members can’t get around South Korea’s inheritance tax laws, and has revised commercial laws to tighten requirements for reporting internal transactions.
This said, at time when addressing Korea’s sluggish economy is a priority for the current administration, few feel President Park Geun-hye will lash out at against the Groups. I see pressure being exerted on Lotte to resolve their family differences. I also see succession plans by Samsung and Hyundai continuing, with the reins of control and ownership transferred as planned—with hope to draw as little attention as possible.
To conclude, as a colleague expressed recently that for succession plans still in the works, their transition will come late in the cycle. As others bring attention to the issue, transitions that must and will occur from the current and aging leadership to the next generation will gets more a legal focus and public scrutiny.
I’d add this means focus and resources the Group’s leadership should have on running their business will be re-directed to dealing with succession. Decisions impacting their global operation could be delayed as well as the approval process, which require a high level sign off.
I was recently interviewed by Fortune.com—I often contribute to the media. They were looking into the success of Korean car brands Kia Motors and Hyundai Motor in the wake of the latest J.D. Power’s Initial Quality Survey (IQS). To the surprise of many, Kia ranked #2 just below premium brand Porsche and Hyundai ranked 5th, both well above longtime and formerly top ranking Japanese brands.
With much of my work over the past decade supporting Korean global business, especially Hyundai and Kia, and more so, the Korean carmaker has long been a topic of my research, study, writings and media commentary…. My answer on why the Korean brands have achieved such success is simple. Quality has been an almost singular career message by the carmaker’s chairman, Chung Mong Koo.
To share some insights…. I quote from my book Hyundai Way: Hyundai Speed.
By 1999, Chung Mong Koo had assumed control of HMC in addition to his leadership role at Hyundai Precision [today known as Hyundai MOBIS]. Adding to his responsibilities, HMC had also acquired Kia Motors—an early casualty of the Asian financial crisis that ripped across the Korean economy. Having experience in the Hyundai Motor’s after-sale service early in his career, Chung Mong Koo was not without insights into the car division.
Since its founding in the mid 1970s, HMC had focused solely on growth. Indicative of Korea industry at that time, this focus was to produce as many cars as possible—as fast as possible. In turn, product quality and customer satisfaction suffered. From his experience working with consumers at Hyundai Motor’s After Sales division, Chung Mong Koo knew the damage shoddy products could bring to the Hyundai reputation, not to mention the high cost of warranty repairs.
When Chung Mong Koo began sharing his intention to turn Hyundai Motor Company into a top-five automaker, few outside the company took him seriously.
Hyundai, like many family-controlled Korean companies, was hierarchical and at times slow to change if there was a perceived risk. More significant, managers rarely cooperated with one another and division chiefs ran their operations as personal fiefdoms. It was a company of silos. “When a problem occurred, each division would blame other divisions,” says Lee, Hyun Soon, former Hyundai-Kia Motors Vice Chairman and Chief Technology Officer.
Chung Mong Koo’s first step was to replace the former top management with engineers and those with whom he had worked closely at Hyundai Precision. He formulated a strategy to challenge Toyota for quality. Extensive work with a number of top global consulting firms (e.g. J.D. Powers) and benchmarking of the world’s best automotive companies followed. He also sent teams to America to study weather, road conditions and driver habits. Quality control staff increased tenfold to 1,000 and they reported directly to him.
Employees were encouraged to offer suggestions and were rewarded. For example, one worker reported the Sonata and XG350 Grandeur sedans had differently designed spare tire covers. Sharing a common cover saved Hyundai about $100,000.00 per year.
Chung Mong Koo quickly earned a reputation for an obsession with quality. For example, several years ago a new Sonata launch in Korea was delayed for two months with 50 issues that senior management wanted addressed. Employees in the Asan factory worked feverishly to correct these items.
One was a tiny error in the size of the gap between two pieces of sheet metal near the headlight. The problem was not visible to the human eye and was narrower than 0.1 millimeter. However, numerous managers and employees worked on the problem for 25 days before it was solved.
This obsession with quality continues today with the Chairman relentlessly reinforcing the quality mandate to management and teams globally as they strive for zero defects.
All said, for my work I drill deep. I look for and then share with clients the reasons behind Korea facing business, while over time mentoring, coaching and steering teams and C-level leadership to solutions.
If these unique resources can benefit you and your company, I have blocked out some times I’m available to discuss options. Just go to http://www.meetme.so/southerton
June 3, 2015StaceyUncategorizedComments Off on Everything Korea: June 1 Episode: Challenges and Solutions in Recruiting Foreign Direct Investment and Supporting their International Workforce
Just back from Greater Nashville area and specifically the Clarksville –Montgomery Economic Growth Summit. I was honored to have been asked to speak on an elite panel about international business market entry. In particular, my contribution focused on 1) how the community and its leadership can best support Korean Hankook Tire, with construction now underway for the Korean company’s it’s 1st manufacturing plant in North America, and 2) how can the community attract other top Korean FDI manufacturers.
I like to share some comments made by my colleagues Kiyo Kojima, a top lawyer specializing in Japanese market entry and Sebastian Eich an expert of German and EU business.
For starters, Japanese, German and Korean firms approach the overseas’ operations differently. Cultural nuances impact how they look at and enter new markets.
For example, although local quality education for the expat Japanese, German or Korean dependents is important. German and Japanese families expect to return to the mother countries and their children to resume schooling. More often Korean families see value in an American education, with English language proficiency—the later a competitive workplace edge. A recent trend among Korean expats then is for father to return to Korea when the assignment ends, but the family to remain in the states until the children graduate from High School and college.
BTW A positive for Clarksville is the area has the best schools in the state, along with home to the Austin Peay State University campus.
Another factor that stood out among the many questions the panel tackled included the need for a qualified and skilled workforce, not an issue in Germany, Japan or Korea, but labor force can vary much with a country the size of American, and a determining factor on picking one region over another in the site selection process.
All said, having supported major Korean manufacturing facilities in the US and globally, i found the Clarksville—Montgomery County region of Tennessee offering much…. Not to mention just miles from Nashville.
I also see as a great site for future Foreign Direct Investment as other Korean firms consider launching US manufacturing operations. If interested, I have blocked out my availability to chat and discuss…. Just go to http://www.meetme.so/southerton
Until next time.
Did you check out the Super.me APP yet? Give it a try.
May 7, 2015StaceyUncategorizedComments Off on Don Southerton is highlighted in the month’s Global Success Newsletter from Frankfurt, Germany.
Doing business in Korea- Contractual Agreements
Contracts, legal agreements and negotiations go hand in hand with global business. I was once told that in Korea the purpose of signing a contract or agreement was essentially to formalize the partnership. Over time, terms would be subject to change and re-negotiation.
My Korea facing experience has been that the contract fundamentally solidifies the working relationship. However, to maintain the partnership contractual obligations, the contract will require on-going changes to reflect business conditions. In contrast, a legal agreement in the West is immutable.
Challenges
Major differences in how Korean and Westerners perceive legal agreements can surface during the negotiation stage and even after the contract is in place. In particular, requests by Korean teams for change after change and alterations to a Western company’s standard agreements and contracts can cause considerable frustration, especially for their legal counsel. In the West some “red lining” of a document may take place, but legal teams may see unprecedented levels of questioning the most basic contractual language. Great patience may be required to walk Korean teams through the Western legal terminology and clarifications of what cannot be changed within the document to maintain compliance with international laws.
Finally, it is not uncommon for terms to be re-visited and questioned by other departments – often with limited or no international legal or business experience – despite months of work between the Western and Korean lead teams!
As the Ink dries…
Perhaps of more concern is that terms mutually agreed upon within the binding agreement can be subject to re-interpretation. Most often, Korean and western senior leadership teams did a great job gaining mutual trust. Both negotiated well. The deal is signed and its time to perform.
Sadly, the honeymoon is over. Challenges arise, what appeared to be clear expectations could now seem murky with poor alignment and weak communications. Why?
There are a number of reasons. Over time, as Korean team members are reassigned to the project, the new staff will be unfamiliar with previous compromises and understandings. This new staff, often in response to changing business conditions, will have different expectations and want to implement fundamental changes that alter the agreement. This will require amending the original agreement with all of the associated time and costs. In the worst cases, Western companies will not be open to altering what they feel is fair and binding, resulting in seriously jeopardizing the relationship and creating potential legal action.
Conclusions
In dealing with Korea-facing business partnerships ensuring success and sustainability will require well-communicated expectations and cross-cultural understanding. In particular, any business plan and strategy needs to take into account differences the cultural realities between the West and Korea.
Beginning with its highly popular Korea 101, the Korea facing consultancy now offers programs on-demand via digital download
Golden, Colorado (PRWEB) April 10, 2015
Bridging Culture Worldwide (BCW) provides a wide range of Korea-focused training, coaching, and consulting services beginning with Korea 101, the consultancy’s most popular workshop. For more than a decade Korea 101 has been offered in corporate live and Webinar sessions both in the United States and internationally. Thousands of participants have benefited from this training and the insights shared.
BCW CEO Don Southerton notes, “For the first time we are offering the Korea 101 in an on-demand online learning format. Over five lesson sessions the course builds upon current experiences, while providing new knowledge.”
Southerton adds, “Building teamwork and cross-cultural understanding is paramount to success. Misunderstandings and stress created by the differences in culture impact productivity and interfere with smooth business operations. Cross-cultural education is recognized as a solution to cultural challenges in the workplace.”
Korea 101 is a timely overview approach to Korean culture, modern history, norms and business culture. The goal of the program is to foster a better understanding of Korea and its business culture.
Topics covered include: Business and social etiquette; History and the economy of Korea; Culture (music, art and cuisine); U.S./Korean relations including North Korea; The Korean workplace, management structure, and decision-making; Popular culture and New trends, as well as, Cross-cultural insights.
The program is conducted by noted author, strategist and lecturer, Don Southerton. Don works closely with many of Korea’s top Groups including Hyundai Motor and is an experienced specialist in bridging cultures between Koreans and non-Koreans.
Don has authored numerous publications with topics centering on culture, new urbanism, entrepreneurialism and early U.S.-Korean business ventures. Southerton also extensively lectures and writes and comments on modern Korean business culture and its impact on global organizations. He is a frequent contributor to the media (WSJ, Forbes, CNN Fortune, Bloomberg, Automotive News, Korea Times, Korea Herald, Yonhap, Korea Magazine, tbs eFM Koreascape and FSR) on Korea facing business and culture.
About Bridging Culture Worldwide Since its founding, Bridging Culture Worldwide has focused on global and Korea-related business services. Based on over 3 decades of experience, they share cross-cultural insights to global teams and management. Bridging Culture Worldwide core services include: Consulting, Strategy, and Research; Publications; along with Franchise and Licensing Development, Market Entry, Product Launch, IP, and Trademark.
For Immediate Release Denver, Colorado January 1, 2013 Korea global business expert Don Southerton has released his latest new publication, an eBook titled Korea Facing: Secrets for Success in Korean Global Business. Southerton notes “With ever-growing number of people employed by Korean-based companies outside of South Korea, this book will provide western teams and management with a strategy and skills to succeed.” Topic covered in the ebook include working with Korean expatriates, managing business partnership expectations, and understanding the Korean decision making and thought process.
Readers will find Korea Facing differ from most books on Korean business with the target audience global teams working outside South Korea and not those employed in Korea, although they, too, will benefit from its content. The author further explaining, “Likewise, if your firm provides services or products to a South Korean overseas subsidiary this book will be beneficial and offer tactics to strengthen and maintain the relationship.”
Finally, Southerton points out a third group that will benefit, ” If your company has significant business in Korea, but leadership and headquarters are located in the West, the book will offers key management suggestions on how best to deal with pressing issues and challenges that surface.”
The eBook is available through iBook, Kindle, Nook, and Amazon. A complimentary PDF version is available upon request. (Just email me, dsoutherton@bridgingculture.com)
About the author When Fortune 500 companies, top Korean Groups, leading international law firms, the media, and elite consultancies like Bain and Monitor look for Korean-facing branding, business strategy, coaching, market-entry, and advice-they turn to Don Southerton. With over 35 years experience, Don Southerton is the definitive authority on Korean-facing global business and branding–from automotive, golf, and QSR/food sectors to New Urbanism and Green technology. When questions surface in development, launch, or fulfillment, we provide sound research, solutions, and comprehensive strategies.
Building on a life-long interest in Korea and the rich culture of the country, Southerton has authored numerous publications with topics centering on culture, new urbanism, entrepreneurialism, and early U.S.-Korean business ventures.
Southerton extensively writes and comments on modern Korean business culture and its impact on global organizations. ###
Over the years, I’ve shared much on business norms and expectations with Korean, American, and global teams and management. I, too, have learned much in exchange. In fact, I’ve been fortunate to have a number of senior Korean leadership share their opinions and thoughts.
Last year I was asked by a Korea client to find out if a successful and high profile American brand was interested in the Korean market. If so, the Korean firm would like to be considered as a potential partner. After talking to the American brand’s founder and CEO, he politely shared that their plans were to focus on the US market. Any Asia expansion would not be for at least 2-3 years.
Several month’s later while they were visiting the US, I hosted the Korean client’s Chairman and his wife at a VVIP lunch meeting. Over the meal, the Chairman’s wife quizzed me on my progress with the American brand. I explained that the US brand’s founder and CEO was polite, but they were not currently looking at Asia and Korea.
Pausing a moment, the Chairman’s wife expressed that their Group was still very interested in the brand for Korea. She then hoped I’d keep trying and not take “no” for an answer; adding firmly that sometimes we need to “Knock on the door a hundred times!”
I came away with 2 insights worthy of sharing…
1. My Korean client’s success was evidently rooted in their perseverance and not taking “no” for an answer. A trait I find in many of the top Korean Groups.
2. That the company’s success was also due to the Chairman’s wife–a strong and influential woman who has gained my respect and esteem. Take away When challenged with an issue, situation, or problem…we need to “Knock on the door a hundred times.”
BTW… I hope all is well. Let me know if you have any pressing questions or issues. I’d be happy to share my thoughts and perspective.
Everything Korea October 19 Episode: Stop Blaming Your Culture
Some quotes to start the Vodcast…
1.Working with and within a culture is sensible, practical and effective.
2. Within an overarching corporate culture, there are generally several subcultures each with the own unique elements.
3. Use the culture you already have.
….take pains to stay within the most essential tenets of existing culture.
4. [it’s] Critical to fully understand the culture, then be able to de-construct and simply aspects relevant to your situation.
These quotes are from a well crafted article titled, “Stop Blaming Your Culture”
A colleague recently shared the article recognizing the concept had value for his own company in working with and within their Culture. In particular, I was asked then to assist with providing insights into the Korean side of my client’s Culture. Echoing the article “Culture matters!”
I strongly recommend you download the article and study. I’d then be happy to share my thoughts on how to work within your specific Culture.
Culture article link
http://
Just go to http://www.meetme.so/
Questions, Comments, Thoughts?
Go to questions@koreabcw.com