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OCTOBER 8, 1999 VOL. 25 NO. 40
M A N A G E R S A T W A R
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 CHO JUNG HO, HANJIN SECURITIES: His father passed him over twice, and Cho fumed as other managers proved lackluster. Then the Crisis struck and Cho got his chance Seokyong Lee - Black Star for Asiaweek |
By JOHN LARKIN Seoul
The meeting was dragging on. Inside, one of the world's biggest finance firms was deciding whether to put the final seal on a joint venture with Hanjin Investment & Securities, one of South Korea's lesser known but up-and-coming brokerages. The hardheads from Prudential Asset Management Asia scoured Hanjin's books for the pitfalls so common in deals at Korean companies. "But what they found was the cleanest and most transparent balance sheet they'd ever seen in Korea," declares Cho Jung Ho, president and CEO of Hanjin Securities. "We were really excited. Them injecting money into us meant there was something valuable in our company."
The word value wasn't synonymous with Hanjin Securities until recently. With a series of complacent managers at the helm, the company languished until Cho, fifth child of Hanjin chaebol founder Cho Choong Hoon, finally got his hands on the wheel. The deal signed early this year gave Prudential, the Hong Kong unit of the U.S. insurance giant, a half-share in the controlling stake in the firm. The sale marked a turning point in the younger Cho's efforts to shake the cobwebs out of the company. For years it had been neglected while money was poured into the group's cash-cow, Korean Air. Cho took over the brokerage in May 1997. The Crisis handed him the chance to push through reforms that would have been heresy earlier but have now transformed Hanjin.
MANAGERS AT WAR
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Cho tried to promote Western-style management, but found no one listened. Now they do. "The previous president believed in seniority," says Cho. "I always thought that was nonsense. They'd say: 'Oh Mr. Cho, you don't want to upset anyone.'" First thing Mr. Cho did was lay off 40% of the staff. "It was a pretty good time to convince labor leaders that 40 can lose their jobs so 60 can keep them," says Cho. Those who disagreed were the first to go. Next Cho took the sword to years of dangerous complacency by cutting wages 30% and introducing performance-based pay. "I told them, either we change or die. They knew they had to change."
Traders at branch offices were the first ones to see the merits of meritocracy. "If a trader generates 100 billion won in profit for the company he should get at least 30% of that profit," says Cho. "That's only fair." Their performance is reviewed every three months and they get bonuses for exceeding sales targets. Next Cho wants to cut contracts from three years to one, a drastic move in South Korea. Opposition doesn't faze him one bit. "I'm sure some people will resist," he says, "but you can always find someone younger and more eager."
Today Prudential executives make up half of Hanjin's board and profess themselves pleased; Cho is searching for "a whiz-kid from New York or London" to act as joint CEO. Tough love has paid off. Last year profits hit 10.3 billion won; the brokerage lost nine times that in 1997. Bigger profits are forecast this year. In two years, Cho has transformed a fusty company into a shiny new one. But some things never change. When Cho walks into reception, his staff stand to attention as if in the presence of royalty.
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