Headhunting in Japan put Samsung on the path to greatness

The South Korean conglomerate Samsung Electronics Co. has single-handedly cornered the consumer electronics market by aggressively headhunting the brightest minds--many from Japan--and, in the process, turned the tables on its Japanese rivals.

While Japanese electronics manufacturers struggle to regain their past glory, the South Korean giant has come to dominate both sales and market share.

The scale of Samsung's success is awesome. Its operating profits last year exceeded those of Japan's nine major electronics makers combined.

Japanese companies, say some experts, must start aggressively recruiting skilled workers if they are to have any hope of catching up.

Yet, many insiders acknowledge that it will be difficult to reverse the Japanese mind-set.

On July 7, Samsung announced that its group operating profit for the April to June 2010 quarter was expected to reach a record 360 billion yen ($4.2 billion). The figure is 87 percent higher than that for the same period last year.

In terms of market share, Samsung is No. 1 in semiconductors, liquid crystal display panels and flat panel TV sets, and ranked second only to Finnish maker Nokia Group in market share for cellphone handsets.

According to Tetsuya Iizuka, president of Tokyo-based THine Electronics Inc., which started as a joint venture formed with Samsung, the South Korean maker's power lies in its philosophy of attracting the best and the brightest.

"Even as it enjoys the top position, the company continues to seek to create good products at the lowest prices and is voraciously trying to gather human resources," said Iizuka, a former director of LSI circuit development at Toshiba Corp. who himself was handpicked in 1992 by Samsung's legendary Lee Yoon-woo, who now serves as CEO.

Iizuka added that Samsung is now focusing its efforts on promising new markets that will follow the so-called BRICs, namely the emerging economies of Brazil, Russia, India and China. He said the company has been sending out feelers to attract the right personnel for the challenges ahead.

The strategy lies at the heart of Samsung's most cherished philosophy--placing human resources first--an ethos which Samsung's founder, Lee Byung-chull, learned funnily enough from Japanese companies.

Samsung's experience of headhunting in Japan dates back to the mid-1980s when the company entered the market for semiconductors, an area where Japanese makers were already strong.

"Back then, Samsung's grand policy was to gather human resources from outside the corporate structure to make up for the lack of basic technologies," explained one former South Korean employee at Samsung's headquarters who was involved in headhunting Japanese engineers.

The former headhunter said Japanese engineers, who were paid poorly for their expertise compared with rates today, would agree to moonlight as technical instructors by traveling to Seoul on weekends. When Samsung decided to hire them full time, it would offer salaries five times higher than what the Japanese engineers were being paid at home. The perks included a home in a pricey neighborhood and a car with a chauffeur.

By the 1990s, Samsung had a team of nearly 80 Japanese technical advisers.

Iizuka, recalling how Samsung filled openings with its own employees as soon as his venture was set up, said: "They would follow me everywhere asking questions, even when I went to the toilet."

Iizuka said that the Samsung employees were probably instructed to absorb as much as they could before returning to South Korea.

While Japanese ingenuity has become just one of many skills Samsung is interested in today, Iizuka said the company is still scouring the Japanese market to tap specialist skills.

A spokesperson for Samsung Japan declined to discuss the matter, saying that "Japanese companies are also important customers to us."

The strategy appears to transcend company borders. LG Electronics Inc., which also ranks high in both sales and market share in consumer electronics, has been actively seeking Japanese input.

One Japanese expatriate in Seoul claimed to have been approached by an LG affiliate seeking help in headhunting employees from semiconductor companies in rural areas of Japan. A reward of 8 million yen for a successful headhunt was offered.

Soichiro Minami, president of Tokyo-based headhunting company BizReach Inc., said companies overseas, particularly in other parts of Asia, are continuing to seek Japanese engineers, who are paid relatively poorly for their expertise.

"Japanese companies have been left behind in the globalization of human resources," Minami said.

A report by the Industrial Structure Council, which comes under the Ministry of Economy, Trade and Industry, in June acknowledged that assuring the mobility of skilled workers is an important element of business infrastructure. At the same time, it noted that Japan ranked at the bottom among industrialized countries in utilizing highly skilled foreign workers.