case study
answer the four questions:
1. no reference
2. 2 pages for 2 question and 1 page for other two (6 pages in total)
3. due date 25 september noon sharp
read the case study and answer the questions
Professor K. Ravi Kumar and Research Fellow Divya Bhutiani prepared this case based on interviews with LG Display.
This case is intended for class discussion and learning, and not intended as source of research material or as illustration
of effective or ineffective management. We wish to thank Padmakumar Nair and Malia Tumacder for their invaluable
inputs in writing this case.
COPYRIGHT 2017 Nanyang Technological University, Singapore. All rights reserved. No part of this publication may
be copied, stored, transmitted, altered, reproduced or distributed in any form or medium whatsoever without the written
consent of Nanyang Technological University.
The Asian Business Case Centre, Nanyang Business School, Nanyang Technological University, Nanyang Avenue,
Singapore 639798. Phone: +65-6790-4864/6552, E-mail: [emailprotected]
LG DISPLAY WROCLAW:
CREATING A WORKPLACE OF JOY
K. Ravi Kumar and Divya Bhutiani
In January 2009, Ji-Hyung Kim, LG Displays (LGD) Country Director of Poland was developing a new
operations strategy for the factory that had opened four years ago. The factory in Wroclaw, Poland was
essential to the companys Eastern European operations, making the plant a gate-of-entry and control
centre for the emerging markets of the region. The emphasis was of high importance and was made known
to all plant employees, and the management at LGDs headquarters was looking forward to having
operational efficiency and healthy financial statements at the end of the year. To enable this, the company
had been giving Kim and the local managers a hand in reinforcing and supporting their activities. Kim, who
was sure of this support, relied on his professional background and human management skills to make the
plant in Poland a swiftly organised and managed factory that had short lead times, lowered costs and better
manufacturing capabilities.
Being nearly 5,000 miles away and eight hours behind the company headquarters in Seoul, Korea, Kim
expected to face some cultural and geographical challenges for the Polish operation. He was also
concerned with the timing of business meetings with headquarters and the long flights employees had to
take if face-to-face business meetings were necessary for certain important internal decisions, such as
many new product development processes. Other than that, he was convinced that the cultural differences
would be negligible since tasks were purely operational and did not require much local adaptation. As he
was given full responsibility and control in forming his local team, he decided to manage the local talent in
the traditional Korean way.
But shortly after its early development stage, LGD Wroclaw began to suffer from a high turnover rate of local
employees. Local talent, which joined the company on the promise of working for a global manufacturer of
state-of-the-art products, became unhappy for various factors. The sum of these factors had not only
increased costs of talent acquisition but also lowered efficiencies and manufacturing capabilities. Kim and
his team needed to know what was causing such conflicts and believed immediate action must be taken to
improve the welfare of the company and its employees. What were the underlying causes of the high turnover
rate and how could they make improvements? Was the working environment harsh or were headquarters
managers treating the local employees in a wrong manner? Although the motto of LGD Wroclaw was to
make the company a joyful place to work, the company was nowhere near being a joyful company that it
had expected to be. The company was losing its reputation in the local market and a solution had to be found
to create a beneficial environment for the global management and the local employees.
HBSP No.: NTU137
Ref No.: ABCC-2017-018
Date: 12 May 2017
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Kims target was to raise the general employee competency level by 85% within the next nine months.
Although the time was short, Kim believed that this would be a reasonable goal considering the fact that he
had full-fledged support from the company headquarters. Kim wondered if the suggestions to increase
employee engagement at the Wroclaw plant will be able to produce quick results to save face or dignity
in front of his headquarters.
THE COMPANY
LGD was the worlds largest manufacturer of liquid crystal display (LCD) panels with revenues of KRW
16.27 trillion (USD 14.66 billion) and operating income of KRW 1.2 trillion (USD 1.1 billion). The company
originally began as part of a South Korean company called Geumsung (later called LG Electronics) in 1987,
developing software products and thin film transistor liquid crystal displays (TFT-LCD) in the central R&D
centre. By 1993, the company officially launched their LCD business and within two years that they
developed their first LCD plant in Gumi, a small town in South Korea. The same year the company released
its first 9.5 TFT-LCDs, and by 1998, the company began mass production at their second LCD plant in
Gumi.
In 1999, the company spun off its LCD business from Geumsung and formed a joint venture with the Dutch
company Koninklijke Philips Electronics to create a company called LG Philips LCD. It manufactured active
matrix liquid crystal displays in the companys third LCD plant in Gumi. The company made breakthrough
innovations in the LCD industry by developing the worlds first 20.1 TFT-LCD for TVs in 2000, the first 52
TFT-LCD for high-definition televisions (HDTV) in 2002, the first 55 TFT-LCD by 2003 and the first 100
LCD panel in 2006. Within those years, the company opened module-assembly plants in Nanjing and
Guangzhou in China, and in Wroclaw in Poland, operating a total of 11 manufacturing plants altogether.
On 12 December 2008, LG Philips LCD announced its plan to change its corporate name to LG Display as
Philips decided to sell all of its shares. The company claimed the name change reflected the companys
business scope expansion and business model diversification, the change in corporate governance
following the reduction of Philips equity stake and LGs commitment to enhanced responsible management.
The removal of the Philips name from the company required LG to revitalise and redefine its brand equity,
and its vision and mission statements. LGD decided to base their campaigns on bringing dreams to life.
(See Exhibit 1 for LGDs mission and vision.)
The change also acted as a powerful equity in reinforcing the LGD brand image in the marketplace and
leveraging the brand name fully in the LCD display market where competition was fierce. The high brand
recognition not only established a platform of trust but also enabled good talent acquisition. (See Exhibit 2
for a timeline of LGDs major events.)
THE LAUNCH OF LGD WROCLAW, POLAND
On 6 September 2005, LGD announced that it would open a TFT-LCD module plant in Wroclaw, a small
city in southern Poland approximately 340 km away from Warsaw. This was not only a big step for LGD but
also a major investment for Poland and the Polish workforce. The news of this travelled fast across the
country, creating a buzz of enthusiasm among potential employees. Despite the size of the European
market, no global brand had ever set up a manufacturing plant in the area before. This was the first time a
global manufacturer commenced its production in Europe. Nearly two years after the initial announcement,
operations began with an initial capacity of three million modules per year, and the company had an
optimistic outlook for the future.
The Polish plant was important for LGD because it offered a demographic advantage and significant
cutbacks in distribution costs. It was home to 22 institutes of higher education that had good international
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reputation and graduated more than 22,000 students every year. Furthermore, the geographical adjacency
to target markets gave LGD a head start compared with the main competitors. The company had positive
return on investment expectations from the plant and they also underlined a plan to further enhance and
develop the plants capacity to a total of 11 million modules by 2011, which accounted for an extra
investment of EUR 429 million. The importance of the plant was also seen in the range of products to be
manufactured. The company claimed to allocate the capacity of the local plant to the production of large
and wide LCD TV modules, such as 26, 32, 37 and 42, as well as 19 and above for computer monitors.
Mr. Duke Koo, the Executive Vice-President of worldwide sales at LGD claimed,
Our plan to build a TFT-LCD module plant in Poland is part of our strategy to lead the fast-growing
European LCD TV market as well as supporting our customers via the timely supply of products
and swift technical support, both of which will be facilitated by establishing a production base
nearer to our customers. This move is in line with the ongoing trend of major TV set manufacturers
setting up production plants in Central & Eastern Europe.1
LGD had consistently pursued a strategy of optimising its global manufacturing processes and its plan to
build a TFT-LCD module factory in Poland was in line with this goal. Central and Eastern Europe provided
a favourable environment for LGD to build lasting strategic partnerships with its customers.
The company predicted several benefits from the Wroclaw plant, including the high-quality labour available
in Poland and the high level of support from the Polish government. Wroclaw, the nations educational and
economic centre, was well known to also have a well-established infrastructure, including efficient road
networks and excellent power supply. The support from the government gave the company room to breathe
and established a platform of mutual benefits. LGD decided to return the favour of the local government by
creating an affluent work environment and contributing to a positive workplace that gave the local workforce
the opportunity to work for a global manufacturer. (See Exhibit 3 for the timeline of LGD Wroclaw.)
ISSUES AT LGD WROCLAW
The LGD factory in Poland was meant to be a melting pot of the know-how of the global headquarters and
the diligence of the local talent. The intention was to create a significant location in Eastern Europe with
distribution and manufacturing advantages over the competition. However, the companys Polish factory
did not operate as successfully as they had hoped. At an early stage, LGD Wroclaw had an employee
turnover rate of around 10%, which was twice of Polands industrial average of 5%. The turnover rate was
especially important in emerging markets with tech-manufacturing capabilities because of the time lost in
educating new employees about many of the complicated operational management techniques, such as
just-in-time production, kanban and lean manufacturing. These types of training activities were
implemented to create high levels of factory utilisation, shorter lead times to meet demands of the global
management and a better learning curve. But the high turnover rate was creating an additional cost burden
on the company.
Furthermore, the overall production operating rate was very low, and the defect ratio and return defect ratio
of the plant was high in comparison to other plants. Employees were losing motivation to work at LGD
Poland due to the lack of mutual trust between the company and its employees, leading to low levels of
employee satisfaction. Low levels of motivation accounted for the main reason behind the high turnover
rate, and many new employees were also affected by the negative comments of the unsatisfied employees
who were leaving. Employees leaving the company claimed that the main reasons for leaving were
difficulties in communicating with the Korean managers. They further claimed that the lack of successful
1 EE Times (2005, July 9). LG.Philips LCD to build TFT-LCD module plant in Wroclaw, Poland. EE Times website.
Retrieved from http://www.eetimes.com/document.asp?doc_id=1297405
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communication actually enhanced the cultural gap between the two parties, resulting in more complications
at work. To them, the Korean managers showed little or no effort in trying to establish rapport or sympathy
with them, seemed to show no respect to the local standards of the Polish culture and continued to ignore
comments made by their local employees. This not only fuelled arguments and disagreements but also
fostered lack of enthusiasm and engagement.
During their exit interviews, the local employees while sharing their reasons to quit remarked:
Manager Hong would come to work on a Friday and tell our team that we will be having an
overnight workshop on Saturday and Sunday to foster team bonding and brotherhood. I was
told Korean people were all about building friendships and strong relationships within the
workplace, but I see these people all day during weekdays. I would like to spend some quality
time with my family for at least two days a week instead of meeting my co-workers that I dont
really click with, on my precious weekends!
I could not understand why people stay here overtime when our shift is in fact over and there is
no more work to do. Manager Kim apparently stays in the office until late at night, but him staying
overtime gives me no reason to do the same. Yet its funny how people give me the strange look
every time I leave the office at 6pm. It seems as if they are trying to make me feel guilty about
leaving the office on time. I dont feel the least bit guilty, but I definitely dont feel too comfortable.
As a result of the information gathered from exit interviews and several other sources, LGD Wroclaw
decided to conduct an internal survey to understand more about the cultural misunderstandings that local
and expat employees were facing in September 2008. The management hoped the study would help in
finding the reasons of the dispute and point them in the right direction in establishing solutions to create
positive results.
Director Kim also decided to organise a taskforce consisting of both Polish and Korean employees to
provide solutions to these issues. He believed that by doing so he would be able to achieve two main
objectives: firstly, identify and solve the current problems and secondly, create a platform where employees
from different cultural backgrounds would establish rapport and get to understand each others perspective
on business.
CHANGE MANAGEMENT
Kim and the taskforce agreed upon a new set of goals to be achieved by the end of December 2009. The
CEO had given the following orders to Kim:
The managers of LGD Wroclaw should be attentive listeners and considerate of the culture of
their local employees. We should develop a stimulating company culture where everybody would
be excited to go to work in the morning.
The ultimate goal of LGD Wroclaw was to create an atmosphere of a joyful workplace where employees
felt they had ownership of their work and were loyal to the company. This new project and goal assessment
was thought to lower the employee turnover rate. The new target turnover rate was 5%, which was half of
what they were having. An employee satisfaction survey was conducted for LGD Wroclaw employees to
rate their experience working in the company. The survey included many different questions with the goal
of coming up with a fair evaluation of employee satisfaction.
On a scale of 15, with 1 being the least satisfied and 5 being the most satisfied, the average score for the
general employee competency level was 3.4. The taskforce set this score as the baseline and decided to
implement changes that considered a goal of a decent increase to foster productivity. The company wanted
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to raise this score for the general employee competency level to 85% and to increase the production-
operating rate to 94%. Two employee key performance indicators (KPIs) were selected: (1) to increase
motivation by improving job skills, enhancing employee welfare and further promoting communication
between the managers and employees; and (2) to increase job satisfaction by making a pleasant
atmosphere, changing the internal culture and thus improving the perspectives of their employees. The
company defined each point independently but stressed that both points were complementary and
supported each other to create a chain of improved production. The company expected to have an increase
in both KPIs and they also expected that the synergistic effect would exceed the sum of its parts to create
a more positive impact on the turnover rate, thus improving the manufacturing efficiency.
Kim was also concerned with other performances and linking scores. He was convinced that micro-
management of every problem was needed in order to create synchronisation within the overall effort. More
specifically, LGD Wroclaw wanted to raise all the sub-key performance indexes of company performance,
satisfaction and mutual trust up to 4.0 points out of 5.0. (See Exhibit 4 for the current and target KPI levels
of the company.)
The main trigger for Kim to achieve this change in culture and management was more personal than work-
related. Although it was important for him to save the plant, it was more important to preserve his reputation
and future prospects in the company. It was very important in the Korean culture to save face amongst
peers. If he could not improve the current situation of the Polish plant, he would continuously be negatively
evaluated by other country directors of different LGD plants. It would be shameful for Kim that his plant had
a low-performance rating, which would be detrimental to his career growth. Kim was in his last year of being
a director and successfully managing the Polish plant would enable him to be the chief executive officer
and even to head future plants in Europe. With his personal welfare and the success of the company at
stake, Kim was motivated to spend much of his time and effort on this project and wished to see tangible
improvements in the near future.
Employee Engagement
Looking at the poor employee satisfaction survey results and the comments from the employees in their
exit interviews, Kim knew that LGD Wroclaw was definitely not considered a joyful workplace by his
employees who were still with the company. He decided to look at the engagement level of his existing
employees using the Gallups 12-item employee engagement survey, the Q12. High employee engagement
had been linked to low turnover rate, high satisfaction and high employee performance, all which was on
the agenda for Kim for the Wroclaw plant. As expected, the results of the Q12 survey were alarming and
Kim decided to actively participate in the efforts to create a joyful company and raise the engagement levels
of his employees.
Along with the human resource (HR) department of his company, Kim started brainstorming for activities
which would create an overall rapport among peers; establish trust and pride; bring individuals to a mutual
standpoint, complement and enhance individual capabilities via specialised training; and also bring fun and
joy into the workplace. He knew that the task ahead required more specific thinking and decided to go with
four activities:
1. Training programmes that enhanced personal capabilities and delegated more responsibility to
employees to foster the feeling of earned responsibility.
2. Increased communications among peers and team members by creating transparency within the firm so
that business decisions were transferred efficiently through the different ranks.
3. Great WorkPlace (GWP) activities that had the goal of bringing local and Korean employees together,
establishing a bridge for cultural interaction and dialogue among different teams within the plant.
4. Sports activities based on constructive competition to foster friendship and teamwork.
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The sole aim of all these activities was to enhance employee engagement levels in the company so that
employees thought beyond their self-interests and cultural differences.
Training Programmes
The first option of developing training activities to enhance corporate performance and foster positive
perceptions seemed to make the most sense to Kim. The President of LGD Wroclaw had claimed, To offer
customer satisfaction with #1 quality and productivity, we need to have qualified employees. Kim thought
that additional education and a change in the way of thinking would be ideal to achieve this aim. He also
believed that the classroom atmosphere would remove barriers between the two cultures and establish an
environment for learning and interaction.
Within the training activities, one of the possible suggestions was to develop a Lean School, where
employees could learn about ways to detect and eliminate waste while offering competent products to
maximise customer value. Kim knew that lean manufacturing had been around for a long time for Asian
manufacturers, but it was new to Europe. He believed that local employees would react very positively
towards these practices and implement this in their workplace activities with strong motivation.
According to the employee satisfaction survey, there seemed to be a strong need for lean education. Some
of the employee comments included:
We dont know how to work smart.
MS Office training is needed for us to analyse data, and we need additional job-related training
as well.
Local employees were aware of the shortcomings in the system and were also motivated to improve with
the help of the management. Kim thought that this was the most important way of reaching down the ranks
and establishing a constructive and profitable interaction. Taking these factors into consideration, Kim
thought that the school should comprise a total of eight sessions focusing on the 5S Visual Management
and Lean Manufacturing. If necessary, seven extra sessions of problem-solving courses may also be added
to help employees identify, define and resolve issues at work, and to educate them on how to create and
present reports. He believed that this education plan would create a win-win situation for employees and
the company by increasing their engagement at work.
Another major problem was the lack of communication within the two groups of employees. This not only
blocked the transfer of business knowledge but also created and increased dissatisfaction and distrust
between co-workers. Kim understood that the lack of communication started a chain of ambiguity that led
to strong feelings of dislike among the two groups. Kim decided to develop leadership courses for both local
managers and expats. There were many instances when employees of different cultures had experienced
conflicts while giving feedback to their subordinates, and Kim believed that leadership training would
definitely help to resolve that tension and raise employee motivation within the plant. These courses would
not only help managers in giving feedback to their subordinates, but they would also help employees to
communicate effectively with their seniors on a regular basis. Within the curriculum, sessions involved
attentive listening, developing team relationships and personal development. The training would include
theoretical teaching and roleplaying of potential workplace scenarios. Both the audience and the actors
involved in the roleplays would evaluate the situation and establish common grounds on the subject.
Lastly, the company could offer Joyful Lectures where all members of LGD Wroclaw would attend courses
related to improving soft skills and enhancing their ability to interact effectively with co-workers and
customers. Soft skills were essential human interaction capabilities targeted to the well-being of the
individuals. Unlike the other training sessions, these lectures were less theoretically and involved exercises
related to peer-to-peer interaction and communication. The lectures would have an informal classroom
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atmosphere to facilitate and foster sharing among employees in a friendly and constructive environment. A
few benefits of the proposed lectures were that employees would be able to listen to different points of
views between Eastern and Western cultures, occasionally meeting famous business spokespersons and
having extra time for discussions and self-studying. The purpose of these lectures was to equip the
individuals with a basic understanding of the subject and allowed them to find ways to fully understand and
appreciate it. This process would not only establish understanding about different perspectives but also
foster creativity and innovation where employees would be challenged to come up with new solutions to
existing situations.
Increased Communication
The second means of creating a joyful company was to foster transparency within the company and improve
employees communication skills. Lack of communication emerged as one of the main reasons of employee
dissatisfaction and it had to be addressed immediately. There was no sense of mutual trust between the
LGD Wroclaw management and its employees, and many have complained that they have lost motivation
due to the lack of information sharing within the company, sometimes even within their own team. This
fact made employees question their managers motives. Some thought that the managers personally
disliked them, that they were not trusted with information or that they were seen as incapable of completing
tasks or orders from upper management. The lack of communication created an information deficit which
became a major issue that decreased workplace motivation. The associated ambiguity led to many
misunderstandings as employees had to assume things instead of being fully informed.
The main underlying issue was that managers were unaware of how to share information with employees
other than through formal letters. The HR department was in search for a new method of information sharing
since production employees did not have access to the companys Intranet. Furthermore, it took a long time
to provide information to all four shift members on a timely basis. To try to improve communications, LGD
Wroclaw had made efforts to hang banners on walls to promote a cheerful atmosphere, but people rarely
paid attention to the banners. The banners were ineffective in enhancing productivity and production. Many
voiced their dissatisfaction and unhappiness with the company as they were merely enduring their work.
As one Polish employee remarked, there is absolutely no motivation to be happy about working at LGD.
While thinking about the current problems at the Polish plant, Kim understood that a lot had to be changed
to improve employee morale and motivation. To boost the morale of his employees, he would have to teach
his managers on how to communicate effectively and he would also sponsor outdoor activities and
gatherings for the entire team. One solution that he thought would be good was to hold a monthly or
quarterly meeting for all employees to watch morale movies that shared information about upcoming
events, activities and other corporate-related news. This would be an innovative and interesting way to
increase employee consciousness and develop their comprehension of upcoming local events and
company targets.
Kim also noticed that even though the employees were getting their hands on the most crucial parts of the
products during the manufacturing phase, they had little or no knowledge on the finished product line of the
company. In other words, the employees only knew about the parts they were responsible for, but were
unaware of the rest of the processes and the finished products. Since the employees were only performing
routine tasks in the plant, it hindered their capability to feel a sense of belonging to the company and of
ownership towards their jobs.
Kim knew that showing employees the final results would be very motivating so he decided that he would
show them the outcome of their efforts visually. To better inform employees about the companys products
and technology, Kim believed that it was essential to create an internal showroom where all of LGDs
products would be displayed. On some of the product panels, the same morale movies or other corporate
advertisements could be aired throughout the office premises to keep the employees entertained in
between meetings or during breaks. These movies would act as an additional motivating factor to keep
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employees up-to-date and help improve their negative perspectives towards the firm. Furthermore, seeing
the products on a daily basis would remind employees on how much they were contributing to the company.
This would establish a sense of pride, resulting in higher motivation levels.
Another option to enhance corporate communication was to install digital information stands in every corner
of the plant. Despite LGD being a manufacturer of display screens, managers had never thought of utilising
their own products as tools to share information within the company. Kim thought of developing touch
screen panels that would distribute information within teams and act as a tool for sharing clustered data.
Apart from playing corporate announcements, Kim also wanted to explore the possibility of these
information stands to be linked to the HR system that acted as a check-in/-out tool for employees. Although
this would be expensive to implement, the stands would offer easy access to all important company
information and employees would no longer complain about the delay or lack of information sharing within
the company. Kim believed that the returns would far exceed the initial investment since the immediacy and
sharing of information were not only important for personal morale and motivation, but were also key factors
of the lead production process to enable the plant to increase operational efficiency. The ease of information
sharing would also motivate managers to send out frequent updates on important topics and processes
regarding orders and leads. Kim believed that the screens would be a sweet spot for managers to merge
formal letters and face-to-face interactions, and this would remove the barriers of communication.
Kim thought of converting the company shuttle buses into Talking Buses where announcements would
be made to employees during their ride to and from work. LGD Wroclaw had offered multiple shuttle buses
for their employees to commute to work conveniently. Talking b
