Galaxy Note 7 Debacle Raises Questions Over Samsung Leadership Style

The disastrous and embarrassing recall of Samsung's Galaxy Note 7 smartphone is showing CEOs that while a top-down leadership culture might help get things done quickly, it doesn't necessarily mean they'll get done right.

gettyimages-498334311-compressorSamsung is what’s known in South Korea as a “chaebol”—large family-run conglomerates with opaque corporate structures and a small cabal of authoritarian managers. Along with other chaebol such as Hyundai, Samsung has been credited with the country’s rapid economic growth since the end of the Korean war in 1953.

However, these companies, which have become intimidatingly large, don’t appear to be very good at handling criticism, or crises.

Seoul-based corporate governance monitoring group Solidarity for Economic Reform, or SEC, has just told Agence France-Press that engineers at Samsung would typically have silently followed orders, despite any misgivings they may have had about the phone’s functionality.

The company today downgraded its quarterly profit guidance by 2.6 trillion won ($2.3 billion) after this week deciding to kill off production of the Note 7 smartphone, which, in some instances, was found to catch fire due to an overheating battery.

“There was no channel for engineers to tell management they needed more time to test the battery and later prepare a new battery for the recall. And this lack of feedback was the biggest culprit behind this disaster.”

Samsung had already recalled 2.5 million of the devices in early September, at which point it blamed the battery supplier for the fault. It subsequently issued replacement devices, with different batteries, but they started catching fire, too.

“There was no channel for engineers to tell management they needed more time to test the battery and later prepare a new battery for the recall,” Kim Sang-Jo, the head of SEC, told AFP. “And this lack of feedback was the biggest culprit behind this disaster.”

Samsung is also facing accusations that it rushed the launch of the Note 7 to get a market lead over Apple’s iPhone 7. Its handling of the phone exchange process also has been heavily criticized.

As noted by The New York Times, the message Samsung issued to customers on Tuesday warning them to switch off their phone and get a replacement was buried in the company’s website and wasn’t posted on social media.

Samsung is currently being run by Lee Jae-yong, the son and heir apparent to Chairman Lee Kun-hee, who suffered a heart attack in 2014. Under South Korean cultural norms, the younger Lee can’t assume the top title while his father remains alive.

To date, no executives from the company have appeared publicly to address the Note 7 recall, which some American business leaders have warned could get worse.

“I think it’s a very serious problem—it may be even more serious than people have reflected in the market,” former Apple CEO John Sculley told CNBC.


MORE LIKE THIS

  • Get the CEO Briefing

    Sign up today to get weekly access to the latest issues affecting CEOs in every industry
  • upcoming events

    Roundtable

    Strategic Planning Workshop

    1:00 - 5:00 pm

    Over 70% of Executives Surveyed Agree: Many Strategic Planning Efforts Lack Systematic Approach Tips for Enhancing Your Strategic Planning Process

    Executives expressed frustration with their current strategic planning process. Issues include:

    1. Lack of systematic approach (70%)
    2. Laundry lists without prioritization (68%)
    3. Decisions based on personalities rather than facts and information (65%)

     

    Steve Rutan and Denise Harrison have put together an afternoon workshop that will provide the tools you need to address these concerns.  They have worked with hundreds of executives to develop a systematic approach that will enable your team to make better decisions during strategic planning.  Steve and Denise will walk you through exercises for prioritizing your lists and steps that will reset and reinvigorate your process.  This will be a hands-on workshop that will enable you to think about your business as you use the tools that are being presented.  If you are ready for a Strategic Planning tune-up, select this workshop in your registration form.  The additional fee of $695 will be added to your total.

    To sign up, select this option in your registration form. Additional fee of $695 will be added to your total.

    New York, NY: ​​​Chief Executive's Corporate Citizenship Awards 2017

    Women in Leadership Seminar and Peer Discussion

    2:00 - 5:00 pm

    Female leaders face the same issues all leaders do, but they often face additional challenges too. In this peer session, we will facilitate a discussion of best practices and how to overcome common barriers to help women leaders be more effective within and outside their organizations. 

    Limited space available.

    To sign up, select this option in your registration form. Additional fee of $495 will be added to your total.

    Golf Outing

    10:30 - 5:00 pm
    General’s Retreat at Hermitage Golf Course
    Sponsored by UBS

    General’s Retreat, built in 1986 with architect Gary Roger Baird, has been voted the “Best Golf Course in Nashville” and is a “must play” when visiting the Nashville, Tennessee area. With the beautiful setting along the Cumberland River, golfers of all capabilities will thoroughly enjoy the golf, scenery and hospitality.

    The golf outing fee includes transportation to and from the hotel, greens/cart fees, use of practice facilities, and boxed lunch. The bus will leave the hotel at 10:30 am for a noon shotgun start and return to the hotel after the cocktail reception following the completion of the round.

    To sign up, select this option in your registration form. Additional fee of $295 will be added to your total.