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Samsung uses Theory Z to become a living organization.

Quite a few American firms have decided to experiment with Japanese management techniques and have had senior executives make several trips to Japanese plants in order to embody the Theory Z philosophy. But, it may actually be just as logical to visit Korean plants, because Korean management philosophy is also of Theory Z, as is shown with the conglomerate Samsung Group, analyzed here, as well as with Lucky-Goldstar, Hyundai, Daewoo, Ssangyong, Hyosung, Kumho and Samyang.

Samsung satisfies the following Theory Z management characteristics:

* The length of employment is neither short-termed nor lifetime;

* The organization culture values a collective approach, not individualaction, regarding mode of decision making;

* Responsibility is assumed by the individual;

* The frequency of employee evaluation is low;

* The control depends on both implicit-informal and explicit-formal measures;

* The career path is moderately specialized; and

* There is holistic concern for employees.

Length of employment

Samsung may not be called a place of life-long employment as far as middle and upper level managers are concerned. Among 27 university graduates accepted by Samsung in 1956 as the first "cadets," only one person is still working with Samsung.

One of the reasons for this seems to be the culture of competition among the members. The Mae-il Economic Daily cites, "Over the last 50 years, Samsung raised many able managers, but also many left. This was mainly due to the personnel policies of strict performance appraisal and of having the members compete among themselves."

At the same time, it is not correct to call Samsung a place of short-term employment. Samsung is a business corporation that is prestigious to work for, allows challenging career opportunities, gives the highest salaries, and, hence, is the first choice of many university graduates. The entrance competition is intense, and once accepted it is not easy to leave.

Mode of decision-making

In his book, Theory Z, author William Ouchi cites, "When a major decision is to be made, a written proposal lays out one 'best' alternative for consideration |in Japan~. The task of writing the proposal goes to the youngest and newest member of the department involved. ... He talks to everyone, soliciting their opinions ... In so doing he is seeking a common ground. Ultimately, a formal proposal is written and then circulated from the bottom of the organization to the top. At each stage, the manager in question signifies his agreement by affixing his seal to the document."

This process called ringi is what Samsung (in addition to most Korean enterprises) follows. Such a culture of consensual decisions is evident at Samsung, where Chairman B.C. Lee (of Samsung Group) has never used the terminology "personal decision-making." His belief was that sufficient information and integration of opinions and knowledge of many people will lead to a decision. One executive even named this consensual decision making.


Ouchi claims that a "key figure of decision making in Japan is the intentional ambiguity of who is responsible for what decisions. In the United States, we have job descriptions and negotiations between employees for the purpose of setting crystal clear boundaries on where my decision authority ends and yours begins."

Samsung never makes the responsibility ambiguous. Emphasis on clear responsibility is institutionalized through systems like the responsibility center system, the individual reward system, and the so-called individual responsibility-center system, which is similar to MBO.

A manager will enjoy the absolute support of the boss. But, if a manager fails to perform satisfactorily due to negligence, the support is retrieved and the manager will have to assume all the responsibilities.

Note the following statements made by the chairman: "When an accident occurred, you should see it happened simply through the wrongdoing of the manager, or it unavoidably broke out even though the manager had done his best. The manager should assume the responsibility only in the former cases," and "Clearly defined responsibility and authority allow managers to work autonomously and whole-heartedly, and also allow fair evaluation of their performance."

Frequency of evaluation

Ouchi notes "Sugao will receive exactly the same increases in pay and exactly the same promotions as the other 15 young men who have entered with him. Only after ten years will anyone make a formal evaluation of Sugao or his peers; not until then will one person receive a larger promotion than another."

It seems, as expressed in the following statements, that Samsung is well aware of the danger of myopic perspective in management. To them, "A planning period of 5 years is not long enough. Ten, even 50 years must be covered," and "Engrossed with immediate gain, one is apt to exploit large profit from poor products. This is the sure way to lose your credit."

In addition, Chairman Lee's expectation for the new university graduates was that they would ultimately become other B.C. Lees. He especially emphasized the ability to work hard, which takes time to be recognized. With his longer time perspective and expectation of finding alter egos, he must have waited, trained and observed the aspirants for a certain number of years.

Implicit and explicit control

In an organization where making alter egos is one of the main philosophies of the founder, while performance measurement systems like responsibility center system are in use, it is natural that both implicit/informal and explicit/formal measures coexist.

Japanese style emphasizes the future direction, and the American the quantifiable objectives. Samsung combines both.

The implicit/informal evaluation is supplemented with various explicit/formal measures, one of which is the personnel evaluation system. The system includes manager appraisal, output appraisal and self-evaluation.

Ouchi's position is "We probably do not want to adapt the Japanese career path entirely. However, some significant movement in the direction of company-centered rather than skill-centered careers could yield many benefits for both employee and employer in the United States."

At Samsung, employees' specialties are respected along the principle of the right people at the right place, but company-centered assignment often sends people to far-flung positions. One Samsung executive recollects, "I was general affairs director at Che-il Wool Co. when ordered to become director of the manufacturing factory without an engineering degree. I served as factory director for about 2 years. Then, I was ordered to work with Shinsegye Department Store with a promotion to vice president."

Holistic concern

Holistic concern is an expression of clan form. Holistic concern is a natural way for Samsung, because one of the two main pillars of Samsung management philosophy is team spirit (another pillar is the strict reward and punishment system). Samsung believes that the work place should be a heaven for workers, the exercise of which resulted in an exceptionally unionized group. It is said that managers should take care of employees like family members. When they feel at home, productivity rises, products get better and the company can run well.

Concluding remarks

Theory Z is in some sense a mixture of Theory A and Theory J, such that Theory A defines the dimension of responsibility, Theory J defines the dimension of decision making mode, evaluation and concern for employees, and Theory A and Theory J jointly define the remaining dimensions of employment length, control measure and career path specialization. Dimensions up to now enable us to conclude that the management of Samsung exhibits the mixture of Theory A and Theory J in such a way that Samsung may be called a living Theory Z organization.

Mushin Lee is a professor of industrial administration and public policy at Korea Advanced Institute of Science and Technology in Science Park, Taejon, South Korea.
COPYRIGHT 1992 Institute of Industrial Engineers, Inc. (IIE)
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Copyright 1992 Gale, Cengage Learning. All rights reserved.

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Title Annotation:Management Techniques; Samsung Group
Author:Lee, Mushin
Publication:Industrial Management
Date:Sep 1, 1992
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