Korea-based LG Electronics is recognized today as a market leader in India, but getting there has required a “will to succeed,” according to Yasho V. Verma, who has been director of human resources and management support for the company’s India division since 1997. In addition to the usual bumps that multinationals can expect when entering a new market, Verma describes the company’s brushes with local “mafia” and other challenges in his book, Passion: The Untold Story of LG Electronics India. In a country known for its talent shortage, LG India’s employee attrition rate has dropped from 19% to 6% in the past two years alone. (The industry average is 35%, according to Verma.) At the recent Wharton India Economic Forum, Verma spoke with Knowledge at Wharton about how LG has used non-traditional methods for recruiting and retaining talent and empowering employees “at the lowest levels.”
Knowledge at Wharton: Today we are talking with Dr. Yasho Verma, who is the director of human resources and management support for LG Electronics in India. Dr. Verma, thanks very much for joining us today.
Verma: It’s my pleasure.
Knowledge at Wharton: You wrote the book called Passion: The Untold Story of LG in India. Can you tell us a little bit about what you feel that story is in a nutshell? What’s the most compelling aspect of that story?
Verma: It’s a fantastic story [about] the non-traditional way we really grew up. And the most important thing, let me first tell you, is that LG is the number-one brand in India. Its market share in all the products which it has in India is over 30%. And its next competitor is about 50% less than LG. So it’s a huge success story.
I worked earlier in a company for over 15 years, with the Tatas — you must have heard the name — and now with LG. These are two sides of management. Tata was very traditional, copy-book style; LG, was absolutely non-traditional, meaning anything which is not in the management book, we have done it.
Knowledge at Wharton: Can you give us a few examples?
Verma: Let me tell you about when we started 10 years back. I was the first employee to be recruited in LG India. And we had to recruit people. Let us say I had to recruit a manager for a sales branch. We did not recruit a successful sales branch manager for that region. We recruited a very good number-two person in another brand, because what we believed is that knowledge is something that can be learned. But it is passion and it is attitude which are much more important — and the will to succeed. These were the three qualities for which we were looking and we recruited and went ahead accordingly.
Another interesting story: Just now I am talking about HR, and where our factory got set up in 1997 was an area that was run by mafias. And all the factories had close-downs — “lock-outs,” as we called them — for maybe four months in a year. Until now, we don’t have a union. So the approach we took while handling our employees, while getting them recruited, while maintaining them, was absolutely non-traditional. We tried not only to make them satisfied, but to make them engaged. And the one thing which we really rewarded — all our reward system was [based on] passion. And that is what the book talks about.
Knowledge at Wharton: Are you finding that it’s easy, given your culture, to retain employees?
Verma: Oh, yes, it’s very tough to retain employees. Two years back, our attrition was about 19%, whereas the industry attrition, the consumer durable attrition, was about 30%. If you were to take the total industry attrition, it was about 35%. This year, we have reached an attrition of 6%. And I think that this is something which I also never dreamt that we could do, but it has been achieved.
What my belief is for [avoiding] attrition: One is career plan and the second is engagement. And the third thing, which is very unique about LG, is the idea of empowerment. Which, as you were saying, as a Korean company in India when we started, the first and the foremost thing we worked on was that empowerment should go down to the lowest level.
That is, persons with even a two-year business administration degree can take all their decisions, which was [very] unlike any other multinational in India. I think that these three reasons are why we have been able to get good talent and have been able to retain it.
Knowledge at Wharton: Is this an innovative model for the Indian market itself, or is this very much in keeping with what you know of Korean business models?
Verma: No, it was not LG’s business model, LG’s worldwide business model. This was LG India’s business model. And now they have developed a case study on this strategy, and now it is being taught in LG Academy worldwide: How to empower and be successful in an organization.
Knowledge at Wharton: There is an LG University. Do you find that’s a critical component also for grooming and retaining and training employees?
Verma: Yes, yes. There’s been a change in the LG top management in the last year — the worldwide CEO is a new person, and he’s really focusing on capability upgradationof the employees, capability evaluation, and leadership upgradation. This is a major focus which is coming through now. This is a global intervention.
Knowledge at Wharton: Is that to make up for deficits in the hiring market?
Verma: No, it is not. I think it is just to meet the future challenges. This is because they want to have 20% of the subsidiaries [to] have local CEOs in the next three years’ time. So, we are growing in a global way, and we want to have a global business model keeping the local people at the top in the various subsidiaries.
Knowledge at Wharton: It’s a common refrain that it’s very difficult to find highly skilled talent in India right now. And in fact, it will probably only become more difficult as more and more businesses move in. Is this an issue that you think that LG will face or is facing?
Verma: Getting the right type of talent in India is very difficult now. There are too many opportunities; people available for a similar job are far fewer. And it is the only the brand of the employer who will be able to pull them in. I think we were having, three years back, some problems, but they are slowly getting reduced.
Knowledge at Wharton: Talking about your business model — just going back to that for one moment — does it seem almost counter-intuitive that you would move into a culture with an entirely different non-traditional business model? I guess it seems that very often when companies move into other countries and territories, they study what the business models are and they have to integrate themselves.
So, is it an anomaly that LG has done so well by moving in and sort of shaking up the paradigm?
Verma: We really shook the paradigm. I will not say that our business model was very different, but our interventions were very different. This is because as we really believed earlier — and we did it and we proved it — and that was that if there is a leader and he is going a way — let’s say Way A — and if you are going to follow Way A, then you can never become a leader. If you are to beat the leader, you have to follow a different way. Only then can you beat him. This was the belief on which we really worked.
Knowledge at Wharton: Now, the innovation practice falls under your group as well. What is LG’s philosophy of innovation, and how central is it to what the company does?
Verma: For our industry, innovation is very, very central. This is because the product lifecycle is getting reduced from two years to one year in consumer durables, number one. Number two is wastage elimination: How we are going to make money is through wastage elimination. All other costs are going up — 70% of the raw materials costs, employee costs, and all that stuff; everything is going up. The only thing is wastage elimination and innovation.
So, we are having a lot of processes as Six Sigma — TDR (tear down and reengineering process), one-hundred PPM, and so on and so forth. And they are not specialized to an innovation department, because it is believed they are part of the culture of an organization. It should go as a part of the culture of the organization where everyone starts practicing it, and that it is not with a specialized technical group, but it is with me.
Knowledge at Wharton: And so, your job is to help instill that culture in the organization?
Verma: Yes, absolutely.
Knowledge at Wharton: And just speaking more on a concrete level, how does one go about beginning to establish that kind of culture in a company?
Verma: It’s a very tough process to change a culture or establish a culture. So training could be one way. Then, the most important thing, I learned, is that you take people to a place where things are being done that way. Once they see it, they realize it can be done. If you only teach them, they don’t realize it can be done. I think this is the best way of changing people’s minds.
Knowledge at Wharton: Looking ahead, what do you see as some of the greatest opportunities for LG in India?
Verma: LG is a market leader, as I told you. The opportunity which we are seeing is immense. We have three products which are growth engines from now onwards. One is the mobile, second is the PC and [third is] FPD, flat panel [displays]. Now these are the areas. We are not going to compromise on our business on the other products, where we are already a market leader. But, we know because the population in India is becoming younger every year, their interests — their incomes are going up — their interests lie with these three products. And there we are really focusing to be number-one. We are not number-one in these three particular areas…. In the next two years, we want to be number-one in all the three products.
Knowledge at Wharton: And then the flipside of that: On the horizon, what do you see as the biggest challenges ahead?
Verma: The biggest challenge is actually that this industry is very competitive, number one. Number two is that we want to export a lot of products. Maybe in the next five years, our exports from India have to increase from 10%-12% to about 40%. So our belief is that the quality of mind of Indians is such that they [can] export the products which they make and [those products] can be accepted as an export product from India. So, we are focusing on the quality of mind of people. This is another challenge which we are facing.
Knowledge at Wharton: Thanks very much for speaking with us today.
Verma: Thank you.