Multicultural Organization: A Case Study of LG (Life’s Good)

By: Prof Pallvi Vadehra

Visiting Faculty (IHRM, HRM, OD)

pallvivadehra@gmail.com

Introduction of Problem

India has attracted a lot of foreign multinationals to invest via joint ventures or wholly owned Subsidiary here. With an increasing number and size of these ventures, it has been routinely seen that Indian Organizations tend to adapt the management models of foreign collaborations. This has created tensions and conflict in relationships sometimes. There are lots of big names in market like Procter and Gamble, Godrej, LG Electronics with CK Birla; Toyota with DCM. This tension is created due to dealing with two different cultural people, unsatisfactory corporate structure, management systems, employee oriented modes of management and the way companies were tackling the change in Organizations.

The Background of LGEIL:

Established in 1997, LG Electronics India Pvt. Ltd. is a wholly owned subsidiary of LG Electronics, South Korea. In India for a decade now, LG is the market leader in consumer durables and recognised as a leading technology innovator in the information technology and mobile communications business. LG is the acknowledged trendsetter for the consumer durable industry in India with the fastest ever nationwide reach, latest global technology and product innovation.

One of the most formidable brands, LGEIL has an impressive portfolio of Consumer Electronics, Home Appliances, GSM mobile phones and IT products. LG Electronics India Pvt. Ltd., a wholly owned subsidiary of LG Electronics, South Korea was established in January, 1997 after clearance from the Foreign Investment Promotion Board (FIPB).

The trend of beating industry norms started with the fastest ever-nationwide launch by LG in a period of 4 and 1/2 months with the commencement of operations in May 1997. LG set up a state-of-the art manufacturing facility at Greater Noida, near Delhi, in 1998, with an investment of Rs 500 Crores. During the year 2001, LG also commenced the home production for its eco-friendly Refrigerators and established its assembly line for its PC Monitors at its Greater Noida manufacturing unit. In 2004, LGEIL also up its second Greenfield manufacturing unit in Pune, Maharashtra that commences operations in October 2004. Covering over 50 acres, the facility manufactures LCD TV, GSM Phones, Colour Televisions, Air Conditioners, Refrigerators, Microwave Ovens Colour Monitors.

Both the Indian manufacturing units has been designed with the latest technologies at par with international standards at South Korea and are one of the most Eco-friendly units amongst all LG manufacturing plants in the world.

LG has been able to craft out in ten years, a premium brand positioning in the Indian market and is today the most preferred brand in the segment.
When we are talking about wholly owned subsidiary it means we are dealing with two different companies’ culture and that is the start of the problems faced by the employees and top management of the companies. In LGEIL the south Korean company LG found some rough time for entry in India but according to Kwang-Ro Kim the managing director of LG Electronics India since 1997 and a much-travelled veteran of LG's expansion around the globe over the past three decades, has played an important role in the company's Indian success story and It was a natural decision for them, given India's population and the likelihood that the country would become a priority region in the way China has become. From the outset, LG was determined to commit a lot of money to the Indian venture, but when they came here in the early 1990s local regulations forbade foreigners from making independent investments. They then tried to work through exclusive importers or agents. Around the end of 1996, the rules changed, and LG South Korea entered in India.
At the same time many Japanese and Chinese companies were arriving in India, but like other foreign-owned businesses they typically put one foot in the water to see if it is warm or cold. They have doubts. They lack determination. One of LG’s competitors shifted its factory to Thailand and is now supplying all its products to India from there. What's been different about LG is that they made a full commitment—a very big investment—from the start, including setting up two full-scale manufacturing facilities.

A culture is a way of life of a group of people--the behaviours, beliefs, values, and symbols that they accept, generally without thinking about them, and that are passed along by communication and imitation from one generation to the next.

Elements of culture:-

• Culture is a group phenomenon and it applies to all members.

• Cultural practices are transformed from generation to generation.

• Culture has normative value; it prescribes acceptable and non acceptable behaviours that are binding on the member of organization.

There are different Levels of culture:-

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LG always believed in becoming Multicultural Organization and according to them Multiculturalism is the appreciation, acceptance or promotion of multiple ethnic cultures, applied to the demographic make-up of a specific place, usually at the organizational level, e.g. schools, businesses, neighbourhoods, cities or nations. In this context, multiculturalists advocate extending equitable status to distinct ethnic and religious groups without promoting any specific ethnic, religious, and/or cultural community values as central.

INTERFACE OF INDIAN AND KOREAN STYLES OF MANAGEMENT:-

KOREAN MANAGEMENT STYLES: - Employees of LG South Korea have some different cultural dimensions like:-

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• They believe in Free Society and

• No religious caste system

• No food restrictions except for health reasons

• Capability and determination determine your ultimate rank

• Family-Oriented Society

• Loyalty to superiors

• Paternalistic society

• Group-Oriented Society

• Individualism in a group setting

• "Hwa" (harmony) among members

• Education-Oriented Society

• Career success mentality

• Respect for scholars

Korean management also called as a “Principle of Open Society."
In Confucian society, the importance of education cannot be overly emphasized, even today. In Korea, educated men or scholars have been highly respected in the organizations .A Manager in LG South Korea will ensure the strict protocols and rituals that exist should be followed and in business it is important to maintain a degree of formality. Older South Koreans and those in senior positions should be treated with respect. This is a culture that respects hierarchy as can be seen in the use of the word "sonsaengnim", which means "respected person" that is frequently used when addressing someone of a higher stature.
The Managers in LG South Korea, are different from Indian because they know that each person has a very distinct role within the organization, and maintaining that role helps to keep order.
In South Korea managers take a somewhat paternalistic attitude to their employees. They demonstrate a concern for employees that goes beyond the workplace and strictly professional concerns.
Approach towards Change management in South Korea’s intercultural adaptability and readiness for change is medium. This means that change is difficult to implement. Projects will need to be analyzed at every step to assure that all the risks have been assessed and understood. Failure in South Korea causes a demotivation by the individual as well as by others. Because of this attitude, intercultural sensitivity is going to be required, especially when conducting group meetings and discussing contributions made my participating individuals.
Approach towards Time and Priorities in LG South Korean people is a fluid time culture, and it is also very relationship-oriented. Managers in LG South Korea will not want to upset others in order to force adherence to a deadline, however, global and intercultural expansion means that some managers may have a greater appreciation of the need to enforce timescales and as such, agreed deadlines are more likely to be met opposite to Indian managers.
Decision Making Process in which most LG South Korea believes in decentralization and seniority is equated with rank and authority, and demands strict conformity to a meticulously prescribed protocol.
Management styles are a combination of Confucianism and western behaviour, depending upon the person’s education and background. Since this is a hierarchical culture, most decisions are made at the top of LG South Korea and then given to the employees to implement. Personal opinions and criticism are suppressed and the team generally follows the ideas of the more senior members of the team. Disagreements are voiced privately and rarely, if ever, in public by the employees of LG Korea.
South Koreans can be non-confrontational and hesitate to give an overt "no" response to a question. Likewise, a "yes" may not be an affirmative response. Begin with a price that leaves room for negotiation and find areas in your position where you can be flexible.
INDIAN MANAGEMENT STYLE:-

• Rich in Tradition/ Culture

• Macro overview of business

• Sincerity : Sense of belongingness

• Developmental focus

• Participative style

• Good communication flow

• Parental care- job security

• Rich Interpersonal relations

• High versatility – adaptability.

Along with this, over two hundred years of colonialism has ingrained a model of bureaucracy in LG India, an ethos of mistrust and therefore strengthened the value of hierarchy by emphasizing highly centralized decision making, maintaining large power distance and refusing to delegate authority to subordinates.

Change Management in LG India: - “The future is coming so fast, we can’t possibly predict it; we can only learn to respond quickly” is Steven Kerr’s words [a management guru in the University of Michigan business school].

Change brings opportunity to those who can grasp it, and the discontinuities of the new economy offer unlimited opportunities. Today most of the companies are realizing they need to handle change management efficiently and quickly so that their business does not suffer. LG consider change management and training are the two closely linked elements, which are inevitable for the management of any organization, whenever they introduce something new into the organization. There has to be a system, which can manage, i.e., control and coordinate change induced in an organization and periodically evaluate its overall effect.

According to Mr. Daya Prakash, IT head, LG India Electronics, “Since change is inevitable as in today’s economy and organization growth are largely dependent on an organization’s culture and attitude of employees towards change for continuous improvement. Effective change can be implemented with the support of Top management and it is a very important element of success of an organization.”

At the beginning: Strategizing
For change management, an organization requires a culture, which may act as a source for regular improvement for employees. Additionally having this culture, organizations have specific departments headed by managers or chief executives who works as a change agents, who initiate, estimate, coordinate and evaluate the change proposals. However, there are organizations that have external and internal consultants for assistance while deploying a new system.
Mr Prakash commented on LG’s India strategy for change management, “There is a dedicated team called Value Innovation Group who takes care of initiating/ facilitating change management across organization. This group is also responsible for training and educating people on change management process/ tools and techniques. The organization has reward and recognition policy for best changes/ innovation.” The resistance towards change is in a nature of every human being, which is always a bigger problem for organization in implementing new change in organization. The resistance arise may be because of the less transparency within the organization. “LG India strongly believes in change management and there is a high commitment from senior management and HR focus has made it possible in LG that each employee appreciates the change management.
LG is a truly multinational organization and believe in giving respect to the cultural gap. LG recruit people on the basis of knowledge not on the basis of country because what they believed is that knowledge is something that can be learned. The other thing is until now; LG India doesn’t have a union till now and the approach they took for handling the employees and for maintaining them, was absolutely non-traditional. LG India tried not only to make them satisfied, but to make them engaged. LG has a policy regarding reward system for motivating their employees.

For retaining employees LG has started career planning and engagement. And the other thing, which is very unique about LG, is the idea of empowerment. According to survey two years back, LG’s attrition rate was about 19%, whereas the industry attrition, the consumer deliverable attrition, was about 30% and this year, they have an attrition rate of 6%.

Market Share of LG:-

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LG is going through the processes of Six Sigma -- TDR (tear down and reengineering process).
LG India is working hard on its R & D unit in order to generate products of superior value technology along with a unique style for each of its products. It has won a number of awards for its state-of-art form of manufacturing products and this had really boosted up the company's flourishing electronic industry further. The Indian arm of South Korean giant LG Electronics expects a 45 percent jump in turnover during 2010 and from TVs to handsets; LG Electronics is on a mission -- to become a top three player in the global electronics industry.

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