Lee Advised to Seek Thatcher-Style Privatization
This is the second in a series of interviews with the heads of the top five global consulting firms doing business in Korea ― McKinsey & Company, Bain & Company, Boston Consulting Group (BCG), AT Kearney and Booz & Company. The Korea Times will look into a wide variety of issues regarding the leadership of President Lee Myung-bak, his economic policies, the Korean economy and financial markets through the eyes of leading global consultants. ― ED
By Kim Jae-kyoung
Staff Reporter
Yielding to massive, unceasing candlelit protests, President Lee Myung-bak retreated Thursday and made a second but more sincere apology to the public for mishandling the resumption of U.S. beef imports. Lee also became ambiguous on his commitment to privatize state-run enterprises.
One of the vocal advocates of drastic privatization is Sunny Yi, a global director of Bain & Company, one of the leading global consulting firms.
In an interview with The Korea Times, Yi stressed that Lee's privatization drive can be disruptive but it is a step in the right direction as it will improve efficiency and competitiveness of state enterprises, and also can be of benefit to consumers in general.
``If there were only Korea Telecom here, phone rates would be much higher. Since there are many top-tier competitors, such as SK Telecom and LG Telecom, consumers can take advantage of better services at a competitive rate,'' he said.
Yi, who is also one of the members of the management committee at Bain & Company, stressed that the challenge for President Lee is to pick and choose the right battleground.
He pointed out that Lee should look into how former British Prime Minister Margaret Thatcher successfully privatized state-run enterprises despite strong opposition from militant unions.
``Thatcher was very adamant and strong about privatization. He may find a model of decisive leadership in Thatcher,'' he said.
``In order to move at least one step forward, Lee should implement the privatization plan drastically,'' he added. ``Unless it aims to move two steps forward, the government will not be able to make headway when there is a strong backlash.''
According to Lee's plan, out of 305 public enterprises, around 50 will be privatized, 40 will be merged, while 10 will be asked to sell part of their businesses. The administration plans to cut over 70,000 civil servant positions from the current 258,000.
Thatcher faced a strong backlash from the public when she tried to privatize nationalized enterprises in coal, iron and steel, gas, electricity, water supply, railways, trucking, airlines and telecommunications.
However, she refused to succumb to the public pressure and opted for a head-on collision with the unions. Finally, she won concessions from them and succeeded in transforming non-competitive, bloated public enterprises into competitive ones, he said.
President Lee Is in Need of Talking Skills
Sunny Yi, who is a leader of Asia IT Practice and Financial Services Practices, said that President Lee is a charismatic promoter with a ``follow me'' style, adding that Lee has very similar characteristics to those of U.S. General George Patton.
In his book ``Korean Executives,'' Yi classified leaders into six different types along the lines of Generals Douglas MacArthur, George Marshall, Omar Bradley, Dwight Eisenhower, George Patton and Erwin Rommel.
Patton was a leading U.S. Army general in World War II in 1943-1945. Popular among his troops for his uncompromising leadership, he was remembered for his fierce determination and ability to lead soldiers.
``We herd sheep, we drive cattle, we lead people. Lead me, follow me or get out of my way'' is one of his popular quotes giving an insight into Patton's style.
This may be the spirit akin to the one in mind of President Lee, which explains both how he was successful in the past and why he is struggling now.
``Cheongye stream is a classic example of Lee's leadership. Without such leadership this would have been impossible. We hoped that he would bring similar results to Cheong Wa Dae,'' Yi said.
``Unfortunately, he underestimated the amount of energy and effort it takes to repeat the same success,'' he added. ``In the first place he brought some discipline to the office, however, he has not clearly developed a leadership team and earned the respect from his constituents.''
Yi pointed out that President Lee is a man of decision with a positive drive but seems quite egoistical and self-centered, stressing the need for him to improve his communication with the public.
Consulting to the Lee Administration
Regarding the question of how the President can weather his current difficulties, Yi prescribed two different remedies.
He said that in the long term, the nation should transform its economy into a services-centered one because the manufacturing sector improves efficiency but it cannot support the creation of employment.
``In order to join the league of developed economies, the nation first needs to develop a services based economy. This can be done by focusing and putting a lot of effort into this sector,'' Yi said.
``Today, we don't even track the services economic sector and we, as a country, do not know exactly where and how much such economic activities are conducted here,'' he added.
He pointed out that in a few years the U.S. will convert from an 80 percent services economy to a 100 percent one, emphasizing that Korea must spend time and money to develop this sector.
Yi said that although the long-term outlook for the Korean economy remains upbeat, the Lee administration is faced with a number of challenges in the short term.
To overcome these successfully, the first thing to do is to fill Cheong Wa Dae with talented staff, which will improve productivity and efficiency in decision-making and policy-making procedures, he added.
In fact, one of the root causes of the current political and economic turmoil is the fact that the presidential office, as a control tower of the administration, is not functioning properly due to key secretaries' amateurish handling of state affairs and inefficient decision- and policy-making processes.
Against this backdrop, as a short-term remedy, Yi advised Lee to focus on a team buildup at Cheong Wa Dae so that work is done more efficiently and strategically.
4P's (4 Principles)
As a first step to accelerate team buildup and improve the performance of Cheong Wa Dae, Yi recommended that Lee adopt key management tools called ``4P's (4 Principles)'' from the private sector ― Performance, Positioning, Professionalism and Perfectionism.
Performance is a principle needed to break the cultural legacy inherited from the past and bring in change to Cheong Wa Dae. Aside from a passive role as a guard to protect infrastructure, staff should focus more on managing the presidential office to better serve the public needs. By having the performance-oriented culture rooted there, President Lee will be able to transform Cheong Wa Dae into a more productive organization.
Positioning helps staff set a clear role and goal. It is not enough to just put down roles and responsibilities of a position in documents, each role must be clearly define and a goal set that should be achieved. This process helps the staff acquire skills for horizontal cooperation and makes it possible for them to work as one unit to achieve a common goal. One of the most important things when positioning is that you have to realize that working at Cheong Wa Dae should not be considered as compensation for hard work and achievement in the past.
Professionalism is a principle that encourages every member to learn the skills and mindset that is essential to handle demands from the policy side in modern society. Professionalism cannot be achieved without efforts to learn on a continuing basis.
Finally, perfectionism prevents a disaster scenario. If 99 percent of Koreans are satisfied with public services, it can be considered a very good accomplishment, but sometimes it can turn into a disaster. For example, in an under 99 percent satisfaction situation ― if poison is put into the public water system by mistake ― it can affect a majority of the people.
Korean Banks and Companies
Yi said that Korean banks have become somewhat more competitive than before.
``The challenge for Korean banks is that they lack scale beyond Korea. Therefore, M&As are a must for them. This requires focusing more outside of Korea and bringing talent from overseas,'' he said. ``The banks are still inwardly focused and have yet to embrace the globalization concept in their management systems''
He picked Shinhan Bank and Samsung as most competitive Korean players in the global market.
``Shinhan's productivity is the best in Korea and among banks they are the most respected in terms of internal processes. Customers may not recognize this, but the bankers agree it. Particularly, Shinhan management is very talented,'' he said.
``Among conglomerates, Samsung, by far is the best managed company due to its talent pool, management systems, global scale and so on. It is hard to find a second player close to this. Samsung's global brand value is much greater than many people think,'' he added.
About Sunny Yi
Sunny Yi is a global director of Bain & Company and leader of Asia IT Practice and Financial Services Practice. He serves as one of members of Bain's Management Committee as the first Asian from January, 2008. Yi has over 20 years of industry and consulting experience in transformation & change management, organization and leadership design. Yi holds an MBA from Harvard, an MS from University of Southern California in Information Management Systems, and a BS in Aerospace Engineering from West Point, U.S. Military Academy, where he graduated top in his department.