After the Korean War, the concept of chaebol -- a family-run business conglomerate structure -- was born. They are so successful that today, five chaebol groups control nearly 60 percent of Korea’s gross national product; two dozen are well known globally, including Samsung, LG Group, and Hyundai.
In the internet age, chaebol, like all companies, face new challenges. But unlike many other global companies, their rarified standing and deferential culture make this risk existential.
As Korean companies increasingly look to enter new markets -- or successfully position themselves in an increasingly competitive domestic market with a young population no longer in awe of chaebol -- it is past time to look at the world differently.
Like all generalities, there are exceptions to each of these points, but they’re based on my own experience, as well as the observations of journalists and Korean crisis communications professionals; we have all encountered the same issues:
1. While highly laudable, the respect for authority and “shame culture” result in bad news taking far too long to be communicated internally, meaning chaebol are almost always running to catch up to the crisis. Once a narrative is formed by the general public, it is far harder to unring the bell. Speed is the best tool in a burgeoning crisis, which requires internal trust and transparency.
2. Like so many foreign companies doing business globally, there is an understandable desire to run the crisis from headquarters, but this almost always results in a full news cycle delay, making them appear uncooperative. Worse, there is often an absence of local knowledge at the headquarters, which significantly harms the strategic response. Your crisis needs to be led by the team in the local market, making “go/no-go” decisions in its time zone. Even the best-run global chaebol seldom abide by this best practice.
3. Their love of brands means that chaebol are seldom willing to consider nonbrand strategies in a crisis (for example, working with a local reporter first, rather than the New York Times) or a change in strategy due to new facts, which does not involve the respected brand. Crisis response is about strategy and nuance, not about a brand. Just because the New York Times writes something doesn’t make it so.
4. If shame drives decisions, then sacrificing a brand, division, product, or person is seldom considered early enough in a crisis to have the desired benefits. The quickest way out of a crisis is to make the sacrifice before regulators or the market demand it.
5. There is a mistaken belief that because Korean media often write flattering features, then global media will, too. The role of American media is to “comfort the afflicted and afflict the comfortable.” It is not to write features about chaebol leadership.
6. Chaebol will hire crisis communications counsel, but only the most heroic will follow their advice. Most estimate that counsel is taken less than 20 percent of the time. You get no points from hiring crisis counsel, only for executing sound advice in a timely way.
7. Chaebol corporate communications is almost entirely relationship-dependent. For example, who are the journalists you know personally? In the internet age, this approach has less relevance every day. Even in the most challenging crisis, there is little conversation about strategy and execution; most of it is about specific reporter relationships. This is akin to taking a spacewalk in a low-quality space suit -- all because you know the manufacturer personally. In a crisis, as in deep space, there is no room for error.
8. The markets you are entering tend to be far more diverse than Korea. You need to get diverse opinions at the management and board level. This is the most sensitive subject. As much as I am honored and respected in Korea, I know on the tough decisions, I am considered an outsider. In a diverse marketplace, chaebol cannot dismiss diversity internally because we are “outsiders.”
9. Boycotts are a real threat in Korea, as we have seen in the past few months with Japanese automobiles, beer and airlines, to name a few. But they seldom work in America and other international markets. Boycotts are far more often a threat in foreign lands than a likely action. Chaebol operating in foreign countries should be sensitive to criticism and threats of boycott, but they must not overreact. Instead, apply web analytics and intelligence to measure a threat to see if it is more sound than fury.
10. The role of the board in a crisis is to bleed the company colors and let the leaders lead. This is the most challenging change. We have to give senior executives the room to make decisions, act quickly, make sacrifices, and do the right thing. If we need board unanimity and historic lines of authority to dominate, history will be written before we get our first shot off.
As Lim Sung-taek, managing partner of Jipyong, one of Korea’s top-tier law firms, puts it, “In order for Korean chaebol to overcome various crises as they expand overseas and become true global leaders, they must embrace the notion of social responsibility on top of legal responsibility. To survive and succeed in these changing times, the chaebols must learn to engage, communicate, and cooperate with diverse stakeholders, and pursue not just economic gains but also social values.”
In closing, allow me to observe that chaebol, like their international counterparts, must learn to focus on strategic communications from the word.
By Richard Levick
Richard Levick is chairman and CEO of Levick. He is a frequent television, radio, online, and print commentator who just completed a two-week trip to Korea. To help Korean and international companies navigate the challenges of doing business in the US, Levick has written an e-book that features strategic counsel from prominent legal, regulatory, and trade experts. A link to the e-book is available on the online version of this article at www.koreaherald.com -- Ed
Here’s a link for Richard Levick’s third e-book, “Navigating US Regulatory, Legal & Communications Hurdles”