The subject of this case study is a highly respected United States-based multi-national company in the non-food segment of the FMCG industry. This company had been operating in Korea for 30 years, starting as a small representative sales office but transitioning into a medium-sized stand-alone subsidiary via organic growth and acquisition. Following the departure of the local general manager soon after the Asian economic crisis in 1997, a succession of unsuccessful expatriate general managers had left the company in somewhat of a crisis – poor business results, low employee morale and almost non-existent processes driving up employee turnover. Starting in 2005 the company used Human Synergistics’ LSI 1 & 2 to support the recently appointed general manager assess his leadership behaviors and their impact on his employees.
The challenge for the new expatriate general manager arriving in the latter half of 2003 was to lead a successful and sustainable turnaround in business results, and also to establish an organisational culture which was acceptable to both the local employees and the parent company head office.
Although the FMCG industry is characterised by rapid and continuous change, this particular business was faced with some additional factors, which could have easily distracted a less-focused leader from the turnaround goal. The primary issues of note were:
- Inappropriate business practices forced the replacement of 3 out of 6 department heads within the first 18 months
- Closure of the local factory due to regional consolidation resulted in the outplacement of 25% of the local staff and a 40% increase in raw material costs on 70% of its business
- A global restructuring required the downsizing of some key departments (Marketing, Finance, Supply Chain) by 20-30%
- External market factors affected all of its key categories. Climate factors impacted the seasonal category, which represented two thirds of sales and 80% of profits. Irresponsible media reporting reduced the size of its second largest category by 40%, and increased competitor activity affected its third largest category (the number of serious competitors increased from two to seven within a 12-month period)
The critical issue was that, in spite of all of these negative factors, the United States headquarters still expected the local subsidiary to increase sales, margins, and net profits. There was a critical need to improve employee motivation, commitment to results, and productivity within a very short time period.
It was decided that the best way to achieve an increase in productivity would be via a companywide, top-down approach to enhancing the leadership skills of the relatively newly formed leadership team and creating a constructive and performance-focused environment throughout the organisation. Critical to the success of driving change within the whole organisation, however, was for the new general manager to be accepted and respected as the change catalyst.
In order to initiate the change process and keep the momentum going, the general manager combined the use of LSI with behavioural coaching for the management team to follow through on leadership change.
By early 2007, two years into the change process, the results were quite remarkable:
- 32% increase in sales per employee
- 80% increase in profit per employee
- 30% increase in profit margin
- 15% reduction in overhead expenses
Diagnostic Tools Life Styles Inventory™ (LSI)
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