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    

To  learn  more  Click  Here    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.