Samsung Uses Theory Z to Become a Living Organization

By Lee, Mushin | Industrial Management, September/October 1992 | Go to article overview

Samsung Uses Theory Z to Become a Living Organization


Lee, Mushin, Industrial Management


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 individual action, 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.

RESPONSIBILITY

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. …

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