A Global Approach: For Korea Management Teams A BCW Case Study By Don Southerton Some Background Feedback on my writings, including my most recent book Korea Perspective is always welcome. My readers have considerable first-‐hand experience working for and interacting with Korea-‐based companies so their input is appreciated and highly valued. The following is a paraphrase of comment from one reader. After reading Korea Perspective, I can only agree with your very accurate analysis. Leadership within Korean companies is crucial, since very little action is left to lower level of management. For example, the Western reflective behavior, as you describe in your book, is not encouraged by the leadership. The focus is solutions and quick action. The comment further notes: I think a good topic and matter to be studied more is how Korean Companies can really expand and/or consolidate their overseas business without considering a change in their leadership. Unfortunately what I have experienced is if this leadership is ONLY Korean these big companies will face hard time in the future, of course against American companies but I would say also with Indians and nowadays Chinese. A Roadmap for Korean Management Mindful of these remarks, I depart from a previous focus that has shared insights to non-‐Korean global teams working for Korean companies. Instead this Case Study provides a roadmap and best practices to their Korean management and overseas divisions. This includes new Korean brands eager to launch their products and services outside Korea. The study is also applicable to those established Korean brands already in overseas markets who could benefit from benchmarking “what works” and “what doesn’t.” Frankly, too often I see the same missteps re-‐occurring. What is frustrating is to witness challenges one company endures in their market entry only to see the same repeated as another new Korean brand goes global. So what are these common missteps and how can they be addressed? That is goal of this Case Study.
The Challenge: Is dispatching a Korean team to spearhead local U.S. or overseas operations outside Korea the best option? When expanding into new oversees markets, all companies need to have their HQ operations represented in the local markets. The Korean model for overseas markets has evolved-‐-‐ improving some over the years. In the best cases, the major established brands have recognized and learned through trial and error that key local leadership and teams, especially sales and marketing, need to be non-‐Korean and industry veterans. In addition to local teams, they may still assign expatriates, called ju jae won. In the larger overseas subsidiaries, these Korean expats are assigned to the major departments, including sales, marketing, HR, and product development, along with engineering, and design divisions. In many, if not most, cases these expats are not assigned manager roles but operate as a “shadow management” with considerable oversight of local operations. For westerners unfamiliar with the Korean model, this “oversight” usually translates into the Korean expats requiring signing off on all decisions—trivial to substantial. This can be a huge challenge when newly assigned expats have little specific background in or knowledge of the host country’s operations and market. Cognitively, the Korean teams recognize localization is needed but, especially if under pressure to perform, may defer to their Korean company procedures and cultural norms. In other cases, Korean firms have also initially resisted local management guidance and followed what they felt would be the best approach. Sadly, the Korean-‐led teams perform poorly and eventually yield to the local teams. That said, it seems to be common practice that new Korean brands with little overseas experience follow a path that rarely is successful-‐-‐feeling their best approach is to dispatch HQ personal to the new market and let them figure it out. In many cases those assigned are among the top employees in the Korean HQ operation—knowing their company and its product well. However, to succeed in the West an entirely different set of skills is required. Foremost is a strong knowledge of the industry—one acquired over decades. All said, the most effective model is to hire a strong local, non-‐Korean management team but not constrain them with a Korean “shadow” management team that must approve or sign off on all the local decisions. This includes the Finance team assigned to the local operations but always independent of operations and reporting to their own teams in Korea. Why? To be truly effective, local teams must be empowered to act based on their experience and judgment. Layers of approval may be commonplace in Korea but slow down the process in overseas markets, especially when the Korean support teams have little or no experience in that market or try to operate the business as
they would in Korea. Inevitably, the work stalls, frustrating and demoralizing the local teams. We will now discuss a second option. In contrast to dispatching dedicated teams from Korea to manage a local overseas operation another alterative is the hiring of Koreans permanently living abroad. The thinking is that these first and second generation Korean locals will be able to better represent the brand than Korean expatriates dispatched from their headquarters. This approach does have merit. Koreans living abroad have been educated and employed locally and have considerable localization insights. They are hired with the assumption that their understanding of the Korean language and heritage enables them to bridge the cultures. While language and cultural understanding are huge pluses, a gap occurs as a result of the very advantage that local knowledge brings. These employees tend to be more comfortable with western business practices than with Korean workplace norms. I have encountered two common situations. One is the Korean locals who truly hope their heritage will help them overcome the cultural barriers but find working with their Korean counterparts to be more difficult than expected. The new hire eventually leaves for another opportunity with a western company and the more comfortable work environment. The second situation occurs when the Korean local does not want to offend corporate management and becomes passive, avoiding pushing back against decisions and plans that are contrary to local practices and will not work outside Korea. Like with the previous outcome, they become frustrated with the situation and eventually explore other employment options. Local Korean or Westerner? This said, perhaps the real challenge is not the recruiting of a local Korean but the hiring of a highly qualified individual—Korean or Westerner. Outside broad fields, such as Law and Finance in which Korean locals support launches very well, Sales, Marketing and Operations leadership require seasoned veterans in their market sector. Finally, we will consider a third option in hiring the right local management. In the previous section, we noted the major issue in staffing an overseas operation is not in the recruitment of a local Korean resident over a Korean expatriate or a westerner but in the hiring of a highly qualified individual—Korean or Westerner. Setting aside my personal bias, I have worked under all three scenarios and found
times when each scenario worked well and times when each was less than successful I find that even the leading Korean groups with decades of international presence have no one model for staffing their overseas operations leadership (COO and CEO/President level). Therefore, it is not surprising that I see the Korean brands new to overseas expansion facing the same dilemma when they look to go global. To restate the options with some additional elaborating: In some cases, Korean expatriates serve as key leadership for a subsidiary. The best scenario is when this Korean management receives the assignment after a career in the Group’s overseas divisions with past positions in Europe, the Middle East, Asia-‐Pacific or the Americas. In other situations, local non-‐Korean talent holds the executive level positions. An equally strong model is when the Western leadership has held long time management positions in the organization and over time has gained the trust of Korean leadership and has risen internally to Executive Vice President, COO and CEO/ President ranks. As I note, both situations have merit and can work quite well. This said, there are a number of situations that do not work as well. In particular staffing senior executive ranks with westerners who may be seasoned industry veterans and may even come into the situation fully acknowledging the need to accommodate Korea facing nuances has pitfalls. In actuality the expectations of these new hires are that the Koreans will step aside in key decisions and let the westerners “run things.” Adding to this flawed expectation, they assume they will have the ability to communicate upward in the organization only to find they have limited direct dialogue with Korea with most approvals and information to and from headquarters channeled through Korea expatriates in the local office. What also works poorly is assigning talented Koreans who may have had successful careers within the organization in other positions, such as logistics, audit or finance, but have little or no specific experience in other business sectors. When newly assigned to a top leadership role in overseas’ market, they do over time come to understand the new responsibilities and the local market, but this typically occurs at a huge cost in ramp up time. As one insightful reader with considerable first hand experience has shared, “The lack of industry knowledge leads to indecision and changing decisions based on influence from [their Korean] colleagues as opposed to decisions being taken on the basis of real understanding and experience of the market.”
Even in cases in which the expatriate may have an excellent track record in growing their brand in an emerging market, running an organization in a mature market, for example, North America, takes a seasoned professional. A more recent approach to staffing has been the hiring of high potential Korean talent from outside the company and assigning them leadership roles abroad. In part, the thought is that a new perspective will spur even further growth. Sadly, the local organization (expat Korean and westerners) and their partners often find this new blood hinders growth since the new talent may have little or no support network and may lack industry and market insights. All Said. I strongly recommend supporting ALL overseas’ leadership, regardless of model chosen. This support must be more than the usual department by department updates. Mentoring and coaching is the key. Because experience and skills vary, each program must be tailored to address individual needs. More significantly, successful mentoring requires a coach who understands both Korean and western business, not to mention the specific Korea-‐based firm and the industry in general. Frankly, I often serve in this role. Working across groups, such as the Hyundai Motor Group in the US, Korea and internationally, over the years, I have found that needs and circumstances vary even among sister companies. Expecting leadership to simply "get it" seldom works—and even if this happens, this approach takes time, is costly, and contributes to stress, poor productivity and even employee turnover. As an example A few years ago, I had a conversation with a Korea-‐based C-‐level executive who was being let go from a top 5 Korean group at the end of their contract. The western executive openly shared the challenges of working for the Korea firm. They were most surprised by the lack of orientation and training programs. Senior level executives had to take it upon themselves to learn the nuances of the company. Their Korean peers were sensitive to the situation but acknowledged that few resources were in place for these activities. Instead there was an expectation that the executive would quickly adjust and engage in work as they would in any other company In closing, Globalization requires localization a concept few dispute. The challenge is in execution. More so resources in time and money must be allocated to support operations and personnel with a sound strategy and actions.
For further reading: Korea Facing: Secrets for Success in Korean Global Business Korea Perspective
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About the Author Don Southerton has a life-‐long interest in Korea and the rich culture of the country. He 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, eFM TBS and FSR) on Korea facing business and culture. He heads Bridging Culture Worldwide a Golden, Colorado based company that provides strategy, consulting and training to Korea-‐based global business. An avid martial artist, Southerton has pursued the practice and study of Korean traditional arts for more than forty years.