LG to push for organizational reform
Koo to sack foreign executives to rebuild organization
By Kim Yoo-chul
LG Electronics said Tuesday that it will streamline its organization by slimming down its business unit and replacing all top five foreign executives with Korean nationals as part of massive restructuring efforts.
Under the ``shock treatment,’’ its business solutions (BS) unit will be dismantled, with the number of divisions reduced to four from five. The surviving units are home appliances, air-conditioning and energy solutions (AE), home entertainment and mobile communications.
In a noticeable move, the AE division is expected to get more of a role as the consumer electronics company is aggressively looking to strengthen its lighting- and solar-related businesses what LG claims are its ``next revenue engines.’’
In line with the new strategy, its global marketing team led by the former TV chief Kang Shin-ik will directly handle procurement, supply-chain management, branding and overseas sales, LG said in a statement.
In a follow-up measure to help LG regain its strength in its important handset business, the company has created ``software technology center’’ to boost software-related capabilities amid blurring lines between hardware and software.
``We need trimmed down structures for faster execution and business efficiencies. Next year will be more than crucial to LG Electronics for survival in key markets,’’ said a senior company spokesman Oh Sea-chun.
Analysts are still cautious over whether the latest ``surgery’’ will yield any imminent and visible results in profits. LG is expected to suffer a rise in its operating losses during the fourth quarter of this year hit by the lack of ``killer’’ products in handsets and uncertainties in the global consumer electronics markets.
``We want to give some credit as the changes mean LG will put more priority on products not cultural transformation,’’ said an analyst at a foreign brokerage, asking not to be identified.
Koo Bon-joon, the younger brother of LG Group Chairman Koo Bon-moo, replaced Nam Yong as of October 1 after Nam had resigned from the chief executive position.
Foreign executives
LG has confirmed the departure of foreign executives from the top positions by saying ``top-down’’ leadership is now the biggest concern.
``All five chief executive level foreign executives will leave,’’ said Oh of LG. Chief marketing, procurement, and supply chain management officers will have their contracts not renewed, while the chief officers in human resources and strategy will have their contracts cancelled early.
``We need to strengthen an in-house control tower under the new CEO. LG needs a strong leadership amid the continued business uncertainties,’’ added Oh.
All five foreign executives weren’t immediately available for comment.
In efforts to make LG as a truly international company, the Western managers were hired under the reign of the former LG CEO.
``LG has seen some improvements in marketing, procurement and supply chain management; however, situations are telling us that the cultural transformation is too superficial. We need substantial results,’’ said a high-ranking executive.
Despite the ambitious hiring, LG had been failed to revive its stalling key businesses, making the new CEO re-evaluate their performances.
Under the reshuffle, Korean executives will take over the roles that had been given to foreigners. Koo will directly handle strategies and abolished the CSO and Chief Go-To-Market Officer (CGTMO) positions.
A senior executive Kang Don-hyun will handle human resources, while another senior Korean executive will take over Tom Linton to lead procurement, LG said.
``The foreigners were a `double-edge sword’ for LG. We thought that’s the right track in the long-term, however, made a half-success,’’ said the LG executive.