Samsung Seeks to Lead S. Korean Emergence

SEOUL —  It looked like a scene from some American union protest in the 1980s: Muscular workers set huge piles of Korean-made cordless telephones aflame and smashed others to bits with sledgehammers.

Yet this was no protectionist outcry in a country flooded with imports. The rally was ordered by Lee Kun Hee, chairman and main owner of South Korea’s leading industrial conglomerate, Samsung Group, and the shoddy telephones getting smashed and burned were Samsung’s own.

The event was videotaped for internal broadcast to all 180,000 group employees as part of a quality drive by Lee aimed at making Samsung one of the world’s “top 10” companies early in the 21st century.

“Seeing those products that we made with so much effort being burned to ashes makes me very sad,” lamented Ryu Hee Ja, a young woman required to attend the humiliating rally.

Such methods have won the 54-year-old Lee a reputation as one of the most visionary reformers in South Korea’s business world. Now, in a seeming mockery of that image, Lee stands accused of conducting business in the worst South Korean tradition: He is among eight tycoons being tried on bribery charges in connection with a huge slush fund accumulated by South Korea’s former President Roh Tae Woo.

Yet Samsung has become both a symbol and an agent of South Korea’s wrenching attempt to change, and its goals remain as big as the company itself.

Samsung seeks to lead a South Korean emergence on the global stage far beyond anything yet seen, make Samsung a household name almost everywhere, and in the process push South Korean society to be more democratic, international and humane.

In his effort to transform Samsung, begun three years ago, Lee coined a now-famous slogan: “Change everything,” he told his troops, “except your wife and children.”

Trends set in motion by Lee continue to reshape the corporate culture of the 24-company Samsung Group, which last year had estimated worldwide sales of more than $75 billion--equivalent to about 18% of South Korea’s total economic output.

In a series of directives, Lee has sounded like an American auto executive of a decade ago, struggling to adapt Japanese methods by dismantling old, rigid bureaucracies, empowering workers and elevating quality to the top priority. But if that was a tough task for U.S. manufacturers, it is positively monumental here.

Part of Lee’s strategy has been to try to “get rid of the notion that everything has to be top-to-bottom,” an executive said--a revolutionary notion.

“As reflected in our history, our past governments and a lot of other conglomerates, we come from a civilization where hierarchy is extremely important, where it’s top-down, where it’s very militaristic in the sense that the top person orders and everyone follows,” said Cho Yun Yeong, general manager of the group’s management innovation headquarters.

“There are Confucian elements that perpetuate tyrannical methods and dictatorial ways. That’s one of the elements that the chairman felt had to change, and he changed himself.”

His example is making itself felt through the ranks. Kim Nam Soo, 35, a lower-level Samsung Motors executive who was interviewed briefly after work at a billiard hall near his office, said Lee “understands what’s going on in advanced countries, and what’s the purpose of life.”

“I think he believes someday our society should be like the United States or Canada,” said Kim, who has lived in Canada. “His philosophy is, ‘Please work hard eight hours a day, and the rest of the time please enjoy your life.’ ”

Over time, other chaebol--South Korea’s huge business conglomerates that control much of the economy--will follow Samsung’s lead, Kim predicted.

Samsung, founded by Lee’s father in 1938 as a small provincial rice shop, is still family controlled--but is now a global concern whose overseas operations alone include more than 300 factories and offices and more than 26,000 employees.

The group’s core industries are electronics; machinery, including shipbuilding and aerospace; chemicals; and financial services, including insurance. It has launched a major effort to move into the auto industry, aiming to turn out 65,000 cars in 1998 and 500,000 a year by 2002. Samsung televisions, videocassette recorders and microwave ovens may be the most familiar of its consumer products in the U.S.

Lee, who graduated from Japan’s Waseda University and did graduate work at George Washington University, has run Samsung since succeeding his father as chairman in 1987. His extensive experience overseas has clearly influenced his drive to transform the company. He brashly aims for annual sales to hit $200 billion by 2000--more than any company in the world now achieves--boosted by domestic growth, overseas expansion and foreign acquisitions.

Lee is accused of helping along Samsung’s explosive growth by giving Roh $33 million in pursuit of government favors, including the selection of Samsung Aerospace as the prime contractor for the South Korean production of 120 F-16 jet fighters under license from Lockheed Martin Corp.

Roh admits accepting money from dozens of business tycoons, but he insists the funds were political donations. Lee says the money he gave Roh was a kind of tax and had nothing to do with winning contracts or expanding into new fields.

While the trial is an embarrassment for Lee in his international dealings, few observers here expect him to get anything but a wrist slap: a fine he can easily afford, no time in jail and no significant damage to Samsung. Even his image within South Korea has been virtually untouched by his being hauled into court.

Indeed, in testimony to the pervasiveness of the old culture, almost everyone here accepts it as a given that under Roh and his predecessors, tycoons who refused to make such “donations” risked seeing their businesses ruined.

“We were forced to act in certain ways merely for the purpose of survival,” said Park Ung Suh, president of Samsung Petrochemical Co. “Throw stones if you find we are guilty. If we have to take it, we’ll take it. But I say this with a very light burden on my conscience. Don’t blame our intentions and don’t distort the circumstances. The fact is very clear that we are victims.”

In fact, Samsung executives confidently predict that from here on out, the group’s companies will “surprise the world,” in Park’s words. “Management has been delegated to the actual operational CEOs a long time ago. Now that we are free from past financial pressures [to give money to the nation’s president], we can only perform better.”

Jonathan Dutton, an analyst for S.G. Warburg Securities in Seoul, said he believes Samsung benefited far more than it lost from those complex relationships with various administrations. But he agreed that the indictment of Lee poses no threat to the group’s business.

“The Samsung Group is the single most powerful business group in [South] Korea,” Dutton added. “Korea cannot deliver economic growth of 7% or 8% without the Samsung Group at the vanguard. . . . It’s probably the best-managed, it has the highest level of technology. . . . I don’t think, frankly, this trial is going to have any impact on its importance.”

Meanwhile, Lee’s reforms continue, among them the delegation of more authority to group company heads, encouragement of subordinates to speak freely with their bosses, and other steps to develop a more individualistic, assertive work force.

He also introduced a new degree of informality at meetings with group company presidents, which used to be marked by all the presidents standing and bowing each time the chairman entered the room, Cho said.

Samsung executives now deride such old practices as “militaristic management,” said Park, the Samsung Petrochemical president, citing as some of its characteristics “centralization, uniformity, complete controls, safe management, disciplined management, elimination of uncontrolled risks.”

“From the 1950s to the late 1980s, that management style and structure gave good results,” Park said. “But in the realities since the late 1980s, with democratic political circumstances, a free press and a free labor situation, we were put under the demands of dramatic changes. . . . So we changed our waking-up time, our time to come to the office, our organizations, our work clothes, our thinking, our systems, just about anything.”

Cho recalled, “One of the things that we began to implement right away . . . was the line-stop policy, whereby on the line if there was any defect found throughout any of the processes before the final product came out, you stopped the entire line to correct that procedure then and there.”

Samsung even produced a lively 206-page comic book on the “crisis” facing the company and what should be done. It compares the situation facing Samsung and South Korean business in general to that of a country about to get hit by a typhoon.

The hero of the comic-book drama--a middle-level Samsung manager in suit and tie--sees the rough waves and pelting rain of the incoming typhoon and runs to warn his colleagues, who tell him not to worry.

“This is the strongest house in the nation,” one co-worker assures him.

“This typhoon is totally different! If we don’t do something, we’ll be blown away,” the hero responds, dragging them outdoors to see three faces in the clouds: Japan, with a rising-sun headband; the United States in a cowboy hat; and Europe with “EU” on his hat--all grinning maliciously.

After 200 more pages of hectoring, self-ridicule, analysis, hilarity, preaching and policy explanation, including such subjects as the need to utilize female employees more effectively, the cartoon face of Chairman Lee makes an appearance on the second-to-last page.

In order to make Samsung a “first-rate” company “loved by the world,” Lee declares, “I will dedicate everything I have, including my life, my wealth and my honor.”

The book’s final cartoon shows the middle-management hero leading a huge column of frowning Samsung workers, fists clenched, marching resolutely into the future.

Despite the comic’s conclusion on a note of grim determination, the changes at Samsung since 1993 have a strongly upbeat tone. Jobs at Samsung, already considered among the best in South Korea, now are even better--at least for employees who don’t mind getting up early.

The key was to move the work schedule up two hours, making for a 7 a.m.-4 p.m. workday. When employees worked later, they often would carouse together late into the night. The early start slashes commuting time for most Samsung employees. The new pressure to get work done in regular working hours has raised hourly productivity, executives say.

And 4 p.m. is too early to go out drinking, so employees are enrolling en masse in company-subsidized foreign language courses, computer classes and sports activities--then have more time to spend with their families. Lee’s idea is to give employees the time they need for various kinds of self-improvement that ultimately will make the company stronger.

“Personally, I love this kind of working schedule,” said Kim, the Samsung Motors executive.

Kang Kyong Sook, a waitress at a restaurant near Samsung’s main office complex, glumly confirmed that employees’ habits have changed.

“In the wintertime it’s a little better, but in the summer, when it’s still so light, nobody comes to drink anymore,” Kang lamented. “Some people come to eat, but nobody will sit and wait for it to get dark so they can drink. In daylight, nobody’s in the mood. Nobody wants to go around red in the face when it’s light out. We are unhappy because we are losing customers. But I have to admit it’s good for them.”

‘Honor and Glory Will Be Ours’

Samsung distributed a 206-page comic book to employees to illustrate the “crisis” facing the company and advocate a course of action. The final page and its translation:

“No matter how difficult it may be, making Samsung a first-rate company in the world is our unflinching goal and value to be inherited by our next generation. When that goal is achieved, the honor and the glory will be ours. Even if the goal is yet to be achieved at the ends of our lives, future generations will remember and honor us for the history we tried to make. Now, wouldn’t that be a life worth living for?!”

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Healthy Bottom Line

Samsung Group’s revenue has increased steadily and its earnings are expected to double for 1995. In billions of dollars:

REVENUE

1995: $75.0 (Estimate)

EARNINGS

1995: $3.4 (Estimate)

********

Sources: Samsung, S.G. Warburg

Chi Jung Nam of The Times’ Seoul bureau contributed to this report.