Lotte Executive Team Receives Stern Warning from Shin Dong-bin: "Abandon Complacency, Seek Change"

Lotte Affiliate's First Executive Meeting
"Concerned with Survival, Not Growth" Rebuke
Calls for Market Gamechanger Transformation
40% of Executives Replaced Under Performance-Based System
Criticism of Poor Retail and Chemical Results

[Asia Economy Reporter Cha Min-young] Shin Dong-bin, Chairman of Lotte Group, delivered a frank message to the presidents of major affiliates. He reprimanded them, saying that both of the group's two main pillars are sluggish and that it is a time to worry about survival rather than growth. Although the group had grown to be number one in each field in the past, he added that complacency is widespread and that all employees lack the will to change. Through a meeting with the presidents that lasted a full five hours, Chairman Shin ordered ▲establishing a free and flexible organizational culture with open communication among employees ▲a thorough inspection of the entire group’s businesses ▲and exploring new business ventures including digital transformation (DT).

◆Free and Flexible Organization= The keyword Chairman Shin emphasized first at the '2020 First Half Lotte Presidents Meeting' held on the afternoon of the 15th was "game changer." He urged change, noting that the entire group, including the main distribution and chemical sectors, has been experiencing a decline in performance for several years, putting the group in a position where survival is a concern. Chairman Shin said, "To survive, you must not be a frog in a well," and urged, "Break the existing framework yourself and become a game changer who changes the market rules."

This implies that only young organizations that can flexibly respond to changes in the world can survive. Chairman Shin said, "To achieve change, it is essential to establish a flexible organizational culture where communication among employees is free and to instill a strong will for change in employees, but there are still shortcomings. All employees must have a strong will to achieve change and goals, and a winning culture characterized by passion and perseverance must take root within the organization."

◆Deployment of CEOs in their 50s, Generational Change= The large-scale executive reshuffle at the end of last year at Lotte Group was in the same context. In the 2020 regular executive personnel reshuffle at the end of last year, Lotte Group replaced two heads of the distribution business unit (BU) and deployed young professional CEOs in their 50s to most of the key affiliates. A generational change affecting about 40% of all executives was also carried out. The policy is to lead trends in a rapidly changing management environment through performance-based personnel decisions rather than age or experience.

Existing affiliates were also converted into business units. Each business unit head is responsible for the actual operation of the business unit. Through this organizational restructuring, Lotte Shopping will establish future growth strategies and reduce decision-making steps to enhance execution capabilities. It will also lead innovation in the distribution sector amid rapidly changing market conditions. Lotte Group is conducting an organizational restructuring aimed at efficient allocation of personnel by reducing the management support division by about 10% and placing personnel in sales branches to strengthen frontline sales. Chairman Shin’s first move of the new year was also on-site. On the 7th, after a business trip, Chairman Shin held a regular meeting with holding company and division executives and then had lunch with employees at the cafeteria inside Lotte World Tower. Afterwards, he visited the Lotte Hi-Mart 'Mega Store' Jamsil branch in Songpa-gu, Seoul, to personally inspect the site.

◆Reexamining Traditional Businesses, Exploring New Ventures= He also sharply criticized the poor operating performance of the traditionally strong distribution sector (Lotte Shopping) and chemical sector (Lotte Chemical). Lotte Shopping’s operating profit, which took a direct hit from the THAAD incident, recorded 530.3 billion KRW in 2017 and recovered to 597 billion KRW in 2018. However, operating profit is estimated to have decreased again to 548.3 billion KRW in 2019. Lotte Chemical’s operating profit also sharply declined from 2.93 trillion KRW in 2017 to 1.9673 trillion KRW in 2018. The industry estimates operating profit for this year at 1.1944 trillion KRW, showing a decline for two consecutive years.

He also urged a thorough analysis of the profitability and future growth potential of all business units and to proceed with resource allocation and investment based on this. Accordingly, the importance of digital transformation work encompassing the entire organization has increased. At the presidents’ meeting that day, a talk concert was held where practical executives from major affiliates gathered to discuss the current status and future tasks of digital transformation promotion.

This content was produced with the assistance of AI translation services.