Chapter 3: Inpatriation in Asia: 2 Case Studies
3.1. Inpatriation in the Samsung Corporation
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will serve as a base for comparison with Taiwan.
Japan is a good candidate as it is a major power house for international business and an example of an export led economy that ascended to the top but was unable to maintain its leading position. Korea’s Samsung corporation has enjoyed a steady rise in the past few years and is today’s one of the world’s leading brands. Like Japan and Taiwan Korea is an export led economy. Together with Taiwan it is one of the four Asian Tigers and similarly focused on goods manufacturing (unlike Hong Kong and Singapore who focus more on the service sector). This paper will examine the Toshiba’s and Samsung’s international recruitment programs and will compare it to the process suggested by Harvey. Learning from Samsung’s and Toshiba’s experience can serve as a useful guide for Taiwanese companies and help draft policy recommendations.
3.1. Inpatriation in the Samsung Corporation
For two decades now, Samsung has been grafting Western business practices onto its essentially Japanese system, combining its traditional low-cost manufacturing prowess with an ability to bring high- quality, high-margin branded products swiftly to market. Samsung realized this change was needed and that its continued success requires turning away from what made them successful. Samsung introduced a focus on innovation into an organization focused on continuous process improvement. Into a homogeneous workforce, Samsung introduced outsiders who could not speak the language and were unfamiliar with the company’s culture. Into a Confucian tradition of reverence for elders, Samsung introduced merit pay and promotion, putting some young people in positions of authority over their elders. (Khanna, Song, & Lee, 2011, p. 142)
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Samsung’s ascent from a low cost manufacturer to a branded company began in the early 1990s. Lee Kun-Hee, Samsung’s chairman, Lee spotted an opportunity in the reluctance of Japanese companies—the analog market leaders—to adopt digital technology, which consumers were flocking to in cameras, audio equipment, and other electronic products. This opened the door for Samsung to surpass its rivals if it developed the agility, innovativeness, and creativity to succeed in the new digital market. For those qualities Lee looked to the West.
In 1993, he launched the New Management initiative to import Western best practices related to strategy formulation, talent management, and compensation into Samsung’s existing business model. The aim was to markedly improve marketing, R&D, and design while retaining core strengths in manufacturing, continuous improvement, and plant operations.
Execution of this mix-and-match strategy took three broad forms:
• A formal process to identify, adapt, and implement the most appropriate Western best practices.
• Steady efforts to make Samsung’s culture more open to change by bringing outsiders in and sending insiders abroad.
• Intervention by Lee to protect long term investments from short-term financial pressures.
To compete outside its home markets, Samsung would need to move beyond its well-integrated system to engage with non-Koreans in non-Korean contexts. That meant introducing practices inconsistent with the status quo (Khanna, Song, & Lee, 2011, p. 143).
Samsung’s management knew that introducing change will not be easy. New initiatives were carefully measured and if resistance was too strong, the company delayed adoption, modified
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the practice, or abandoned it. This careful approach to importing Western business practices (such as performance based compensation) reduced disruption, but also slowed progress. Lee sought to increase receptivity to ideas from elsewhere. This was done in 2 ways: by bringing new people from outside and sending insiders abroad (Khanna, Song, & Lee, 2011, p. 144).
Bringing outsiders in:
Samsung traditionally hired only ethnic Koreans, in order to mediate the cultural gap.
However, even these recruitments were met with resistance within the company. Promotions at Samsung had always come from within, the newcomers were perceived to be (and actually were) taking advancement away from existing managers. Not surprisingly, these managers closed ranks, setting the newcomers up to fail by withholding important information, exaggerating their mistakes, and excluding them socially. This reaction was in part justified:
At first, some of Samsung’s recruits had a poor grasp of what was expected of them, and sometimes they were actually more junior than the company had intended. What’s more, success is contextual—to some degree. New hires had performed well in their previous jobs because of their familiarity with the system. The tightly knit nature of Samsung’s culture was a separate issue and they did not perform as well. This needed special attention (Khanna, Song, & Lee, 2011, p. 145).
Samsung chairman Lee paid special attention to improve the quality of recruits and their reception. Several changes were made in order to ease the induction of new employees and encourage (and even force) their acceptance by their peers.
Beginning in the early 1990s, Samsung sent international recruiting officers (IROs) abroad to familiarize themselves with foreign talent. And in 2002, Lee made 30% of the annual
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performance appraisal of Samsung affiliates’ CEOs dependent on hiring and retaining foreign talent. Newcomers were eased into the organization by having them serve in an advisory capacity in their first months to get to know something of their colleagues, the culture, and the business before taking up their posts. A formal mentoring program was instituted in which newcomers met with their respective CEO at least quarterly to give and receive feedback (Khanna, Song, & Lee, 2011, p. 145).
Samsung’s efforts to recruit and retain non-Korean MBAs and PhDs were hindered by cultural, social, and political tensions, all of which were magnified by the language barrier. To help assimilate these recruits, Lee in 1997 ordered group headquarters to set up a unique internal management consulting unit, the Global Strategy Group (GSG), which reports directly to the CEO. Its members—non-Korean graduates of top Western business and economics programs spend fully two years in GSG and are required to learn rudimentary Korean before taking up their posts. Even so, many of them have eventually been assigned to overseas subsidiaries, usually in their home countries. Of the 208 non-Korean MBAs hired into GSG since it was created and till 2010, 135 were still working for Samsung as of December 2010. The most successful are those who have taken the greatest pains to fit into the Korean culture. (Khanna, Song, & Lee, 2011, p. 146)
The mission of GSG is to “enhance Samsung’s business performance and global reach while developing a pool of talented global managers that can act as strategic advisers to Samsung Group executives. The objectives of GSG are:
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1. Develop a Pool of global managers. The exposure of professionals within GSG to management within the affiliate companies builds an internal resource of global managers with a deep understanding of Samsung and Korea.
2. Enhance Samsung's Business Performance. The activities of the GSG support the overall business performance of the Samsung Group and contribute to continuous improvement by providing innovative ideas and an external perspective on leading issues.
3. Globalize Samsung. Collaboration between senior management within Samsung and the GSG contributes to the acceleration of Samsung Group’s existing globalization efforts.
(Samsung Corporation)
New GSG members participate in a 2-week orientation session to introduce them to Samsung and GSG history, policies, and practices. This initial 2-week orientation includes visits to Samsung facilities across Korea as well an introduction to Korean culture and history. New Global Strategists have the opportunity to form strong bonds with their classmates and also interact with current members and alumni. Following this 2-week orientation, new Global Strategists also participate in a number of additional training sessions throughout their first 6 months in GSG. These sessions include more detailed introduction to the operations of Samsung Electronics and other Samsung affiliates. Furthermore, functional training covers topics such as problem structuring and project management skills in a Samsung context (Samsung Corporation).
As more people from GSG are assigned to different Samsung units, their Korean colleagues
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have had to change their work styles and mind-sets to accommodate Westernized practices, slowly and steadily making the environment friendlier to ideas from abroad. Today, Samsung Electronics (the biggest internal client for GSG) goes out of its way to ask GSG for more newly hired employees (Khanna, Song, & Lee, 2011, p. 146).
The Global strategy group is a unique example of inpatriation used to bring diversity and new ideas into the corporation. Though its impact on the company is big, we should consider a few points of critique when discussing it:
It is a small group of employees (96 employees, (Samsung Corporation)) inside a giant corporation. Samsung is still predominantly ethnically Korean.
The GSG is a “foreign bubble”, an exclusive group of foreigners who work as consultants for Samsung. Its work is on a per project basis and it doesn’t offer complete integration of foreigners in the company. A GSG consultant will work with a department in Samsung for a few months only; this is not the same as having a full time inpatriate team member.
Work in GSG is relatively short term – not longer than 4 years (Samsung Corporation).
This could be attributed to the tasking lifestyle of consultants but might also stem from an inability to bridge cultural gaps.
Apart from inpatriation, Samsung practices also a unique expatriation model: Samsung’s regional specialist program. Each year for more than two decades, Samsung has sent some 200 talented young employees through an intensive 12-week language-training course followed by one full year abroad. For the first six months, their only job is to become fluent in the language and culture and to build networks by making friends and exploring the country.
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In the second six months, they carry out one independent project of their choice. Initially sent mainly to developed countries, in the past 10 years they’ve gone more often to emerging regions, especially China and, most recently, Africa. Like their colleagues who have trained abroad, the specialists come back to major posts at headquarters or in the business units at home and abroad. In those roles they disseminate information about how successful foreign companies operate, and they advocate for and experiment with best practices (Khanna, Song,
& Lee, 2011, p. 146).
It is noteworthy to point out the asymmetry between the inpatriation of GSG employees and the expatriation of regional specialists. Both in number of participants and also in the extent of training and time dedicated to socializing into a new culture (this asymmetry is even greater if you take into consideration the opportunity costs of taking leading employees away from their work for 15 months). GSG employees are not given as much time to acculturate into Korean society and HQ working style. Perhaps this could be a point that can improve the success of the GSG in the future.
Similarly to other Asian cultures, Korean culture is a collectivist, hierarchical culture.
Coupled with a unique language barrier this creates great difficulties trying to bridge cross-cultural gaps.
This might explain why Samsung and other Korean companies prefer recruiting Ethnic Koreans whose transition into Korean work life is (theoretically) smoother.
Apart from the case of Samsung, other Korean firms are now actively recruiting overseas with an emphasis on recruiting Korean returnees. International returnees are people who have completed post-graduate studies overseas, and then returned to work in their home country.
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Expatriates, repatriates and inpatriates are not the only human resource available to emerging market firms that can be used for capturing foreign tacit knowledge. As emerging markets grow and provide new economic opportunities, firms in these countries have an opportunity to benefit from the international knowledge their diaspora can bring when they return home.
Because of the number of students from emerging market countries who go abroad to pursue graduate studies, international returnees can be an important human resource for emerging market economies. This extremely large group of highly educated workers can potentially be, if properly managed, a rich source of knowledge for emerging market firms (Roberts, 2012, p. 14).
Returnees are becoming a particularly mobile group in the global war for talent. No longer are firms restricted to recruiting talent from local sources. In his research, Michael Roberts writes that the vast majority of Korean MNEs are actively recruiting overseas—particularly in the United States. Some of the large Chaebols have permanent departments for recruiting and retaining overseas Korean nationals (Roberts, 2012, p. 3).
In a globalized business environment, where success relies increasingly on the ability of firms to recognize and transform external knowledge, these post-graduate scholars represent a potentially powerful resource for firms in emerging markets looking to catch up to their rivals in more developed nations. Upon graduation, these individuals will have been exposed to the latest knowledge in their field. Depending on the activities they engaged in and the time spent immersed in the foreign culture, they will also have developed communication skills and an understanding of the culture in which they have been immersed. In addition, a sustained and long term international experience that is part of completing a post graduate degree in a foreign country often equips these graduates with a more global mindset—which
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in turn allows them to compare and contrast cultures and organizational logics. Some Korean firms have two streams for recruiting employees. The regular stream is to hire new undergraduates and post graduates from local universities, which generally happens annually or semi-annually. In addition, employees are hired as ‘special talent recruits’. A large majority of these special talent recruits are international returnees, almost all of whom have a graduate degree from a foreign academic institution. These returnees, even if hired at a more junior level, are paid a premium salary over regular hires, presumably because of the knowledge they bring to the firm (Roberts, 2012, pp. 4-5).