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by Jennifer Arapoff | March 10, 2009

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What exactly makes S.I. Kim an inspiration to any executive who has tried to run a profitable business? Sure, he has a uniquely disarming, yet commanding, leadership style. And yes, his resume is exceptional. But the most impressive thing about Kim is that as a direct result of simply listening to the people who work for him, he's made millions of dollars for his company.

Listening to employees isn't an entirely novel thought. But since taking the helm just over a year ago as president and CEO of Eugene, Oregon-based Hyundai Semiconductor America (HSA), Kim has seen drastic improvements in production (for instance, an astonishing 83 percent increase in die output - a key measurement for the semiconductor plant), profitability and, perhaps most important, employee morale. All, he says, by concentrating on the "people issues" in his organization.

When Kim first came on board, night-shift workers at this 24-hour-a-day, 7-day-a-week, 365-day-a-year microchip factory were less than engaged. Frustrated employees felt disconnected from their managers and the human resources staff. And there were cultural issues - Korean expatriates working alongside U.S. engineers weren't communicating very well. But Kim is a seasoned leader with quality assurance, production and marketing experience in both Korea and the United States. He recognized the situation as a promising opportunity for change.

"When I first arrived, we were struggling in our attempts to ramp up the production numbers here," says Kim. "There were a lot of stumbling blocks, including some pretty serious morale issues. Initially, the focus for change was on technical improvements. But I saw a chance to improve things on a broader scale. I felt we needed to improve attitudes and behaviors more than technical issues. So that's where I focused - on things like personal involvement and communication among the employees."

Since its opening just a few months before Kim's arrival, the plant had been under scrutiny from all angles. For one thing, the local community wasn't overjoyed about the prospect of a new factory in its neighborhood. In addition, workers were feeling the effects of unfamiliar surroundings and the pressures of high production expectations. Against this backdrop of anxiety, creating a well-run semiconductor plant wasn't going to be as simple as adding a few new gadgets to existing machinery. Real productivity improvements would be realized only through intense organizational examination.

"The arrival of S.I. Kim to HSA was fortuitous timing," says Linda Norris, director of human resources. "We'd been hiring very rapidly in the few short months we were up and running, so none of the work groups had found an opportunity to stabilize. Some had five people one week and eight the following - never allowing teams to evolve or a sense of continuity to develop. And we made some changes to management and supervisory roles during that time. With these events all happening simultaneously, it was the right time to start some solid initiatives."

~The People Initiative

One of the first things Kim did was pilfer his own resources - namely, borrow time from some of his management team specifically to improve the overall mood and productivity of the plant. He gave the project a name - The People Initiative - and asked Steve Doran from his Safety and Health department to lead the effort.

"We decided that we needed specific solutions to improve the mood here," says Kim. "So we asked Watson Wyatt to help guide us through the process, beginning with a comprehensive employee opinion survey to identify the areas we needed to improve most. That was the first step in the initiative, and a very valuable one."

Unfortunately, the survey results didn't surprise Kim; there were plenty of unmet expectations at various levels in the organization. And when the results were shared at employee meetings along with specific plans for improvement, there was even more negative feedback.

"The employees basically said 'yeah, we've heard empty promises before,'" says Kim. "That triggered something in me. I realized that we had to have the trust back from employees in order to make this a success."

After the employee survey was completed, Doran held a series of focus groups with participants from different levels in the organization. That gave Kim and his team an idea of the general mind set in the ranks, but it also gave employees a sense of being a part of a team and, ultimately, part of the solution. Employee attitude improved almost immediately.

"Our original plan was to have an initial off-site meeting where we would deliver the results of the employee survey, follow up with focus groups and then create specific task teams," says Doran. "We stuck to that sequence, but from the focus groups we learned that the task teams would be more productive if they were composed of both managers and nonmanagerial employees; employees saw that solving problems isn't always as easy as snapping your fingers. The process was important in building understanding and trust."

The initiative was designed to focus on five key areas: communications, rewards and recognition, performance management, training and development, and leadership. In the area of communications, a concerted effort was made to increase the frequency and accessibility of information given to employees, beginning with the all-employee meetings to review employee survey results and continuing in the form of weekly staff meetings where supervisors share summaries of the executive meetings.

"Another important step in improving communications was getting people connected electronically," says Watson Wyatt senior consultant Al Lopus. "Employees at HSA do not sit at a desk with a computer every day, but S.I. and his team realized that it was integral to the People Initiative to get e-mail access for the entire workforce."

"The factory itself is highly automated, with computers set up at various locations throughout," Doran says. "So we set up systems where employees have the opportunity to simply go to a computer in the bay where they work and log on to their e-mail account. In addition, we have computers set up in the cafeteria for even more convenient access."

The introduction of electronic reader boards also helped improve communications. The boards, like those used at sporting events to display information to crowds, allow information to be shared throughout the company in nearly real-time. Production data can be communicated to the entire factory 10 or 15 minutes after it happens.

"The reader boards are a great example of how the People Initiative has improved our operations," says Norris. "They represent a combination of efforts between our IT staff, which handles the actual dissemination of the messages, and the HR department, which decides what the content will be. It's a fairly simple thing, but it's made a big difference to employees in terms of awareness about how the company is meeting its overall goals."

In the other key areas, goals are more long-term, but changes have already taken shape. Managers and supervisors now conduct regular meetings with employees to evaluate their progress and promote professional development.

"Overall, what we've learned is that the basics are what's important," Norris says. "Do people know how to do their job? Do they have a good supervisor? Are those supervisors managing performance problems? And is anyone giving employees good information about the company, the product and where the organization is going? We're addressing all of those issues, and we're also concentrating on improving benefits and enhancing our performance management and evaluation systems."

~Translating People to Profits

So with all of the improvements put into place, can Kim point to bottom-line results?

Absolutely. And the numbers are staggering.

"We typically measure our productivity in two ways," he explains. "First, we measure yield. From last September through the same period this year, we saw a 25 percent increase in product yield.

"Second, we measure our total product output. We saw an increase of nearly 83 percent in the same time frame."

These numbers not only are impressive relative to previous standards, but also relative to HSA's competition. In fact, in the wake of Kim's People Initiative, the company performed better than its Korean counterpart - the factory that taught HSA its production process.

"The People Initiative project is the main reason for our production improvements," says Kim. "We implemented some technical improvements, but it's more about the attitudes of the front-line employees. The commitment and sincerity of the manufacturing technicians and equipment engineers are the catalyst for these major improvements - and the overall improvement of that employee morale is a result of the initiative."

According to senior Watson Wyatt consultant Patrick Murray, the culture shift saves HSA money. "When we first met with HSA about this, we reviewed the results from the employee survey and prioritized the responses into the five key areas that could most significantly impact shareholder value based on Watson Wyatt's Human Capital Index?," he says. "Based on the HCI, we estimated they could see more than a $600 million improvement in shareholder value. They doubted that number in the beginning, but they worked together as a team and are starting to see the results from the initiative and feel the bottom-line results. It's a great success story and a tribute to their dedication to employees."

A Paragon of Progress

Production efficiency, employee morale, community integration - since the People Initiative was put into place, HSA has become a model for best practices in organization effectiveness. In making changes to improve the profitability of its business, HSA has simultaneously made the transition to employer-of-choice status.

"When I first came to this company, I felt as though there were two families living under one roof," says Kim. "In addition to the other employee concerns, we had Korean expatriates here communicating with one another and Americans communicating with one another - but very little communication between the two. It was a tangible cultural barrier, and one that Watson Wyatt's Chuly Lee was able to help us overcome."

Korean-born Lee was invited to attend the first managers' meeting, where she helped orchestrate a productive, open discussion of cultural differences. Based on her experiences with international culture integration, mergers and acquisitions, she was also able to recommend some practical solutions.

"The exercise of bringing the cultural issues out on the table relieved a lot of stress and created a great deal of trust that hadn't existed previously," says Lee. "That was a key element to success for HSA, and is something many organizations are dealing with today as the business world becomes more global."

To support cultural integration, Kim and his team set up a program through the local community college where Korean employees could attend classes on English as a second language as well as on American customs and culture. Tips on using simple phrases and explanations of differences in etiquette were found to be extremely helpful.

So where is HSA today? At this point in the evolution of Hyundai Semiconductor America, feedback continues to be positive. A recent follow-up employee "mini-survey" showed improvements in every area originally targeted.

"One of the most visible changes we've made is in the area of technology/ communication," says Doran. "On that question on the survey, employee responses went from an original rating of 52 percent favorable to 81 percent favorable. But we had nearly as impressive feedback on less obvious changes - in the category of career growth/advancement, we went from just 15 percent satisfied to a full 40 percent satisfaction rating. I think that is a reflection on S.I.'s philosophy of ensuring that all employees see a future with the organization and opportunity for growth."

There is other evidence of ongoing improvements as well. At the annual employee meeting held recently, Kim recognized a dramatic turnaround in employee attitudes.

"The first meeting I had to do when I came to HSA was filled with negativity and open criticism," Kim remembers. "It was a humbling experience and one that I'd never want to sit through again. In this year's meeting, I heard employees asking constructive questions about where the company was going and what type of productivity goals we were planning on. Their concerns echoed my own concerns, which tells me that we've succeeded in creating a sense of common ground and unified goals."

In that first meeting just over a year ago, S.I. Kim also clearly set the tone for his leadership style by sharing his vision of a more close-knit community; one where he would be addressed on a first-name basis and where families and job satisfaction would be made a key priority. By listening carefully to what was said - and in many cases reading between the lines when no opinions were voiced at all - Kim and his team were able to strategically set priorities and create a vibrant, extremely productive environment. In the process, they set a great example for other organizations facing similar challenges.

The Payoff

Since the People Initiative was introduced, results have been extremely positive:

  • Overall productivity increased 30 percent

  • Turnover dropped by two percentage points in just the first post-initiative quarter, with projections for additional drops

  • Fabrication cycle times declined by 11 percent

  • Costs reduced by .43 per unit produced

  • Scrap declined by 40 percent

    HSA At-A-Glance

  • HSA produces memory chips used in computers, printers, telephones, televisions, automobile electronics, industrial machinery, traffic control systems, airport telecommunications and dozens of other applications.

  • The manufacturing plant in Eugene, Oregon, opened in 1998 and now employs nearly 1,000 full-time employees.

  • HSA was the first semiconductor company in the United States to achieve certification on two key international environmental protection standards, the ISO 14001 and ISO 9002, simultaneously.
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