ING Insurance Asia/Pacific Organizational Challenges

1 Only for K-MBA International business class
ING Insurance
Asia/Pacific
Organization of International Business
Kyujin Lee
Taehyun Kim

Contents
Introduction of ING Asia/Pacific
Issue Analysis with Questions
Conclusion

Introduction of ING Asia/Pacific

• A Global financial services company of Dutch origin
• One of the 20 largest financial institutions globally
and ranked in the top 10 in Europe.
• Banking, insurance and asset management services
in more than 50 countries with 120,000 employees
• Organized along six major business lines,
which included both regions and product groups
International Netherlands Group (ING )
Banking:
Retail Banking
Wholesale Banking
ING Direct
Insurance:
Insurance Europe
Insurance Americas
Insurance Asia/Pacific

Insurance Industry in Asia
• Expected to expand dramatically
- Rapid economic growth
- Rising incomes
- Popularity of insurance products
• State or company pensions are not enough,
and private insurances fill the gap
• High insurance premiums
• High rate of savings in Asia
• Regulations have highly effects on activities,
however the markets will be more open

ING in Asia/Pacific
• Responsible for the life insurance operations
and asset/wealth management
• Ranked among the top five
foreign financial services with 6 million clients
• Consisted of mature, semi-mature and
emerging markets
• Various types of products and services with
diverse channels in each country
• Hong Kong Regional Monitoring center for Asia/Pacific
• Regional results exceeded its financial expectations
• Recently acquired AETNA, 4 times larger than ING in Asia

Regional Structure of ING in Asia/Pacific
Regional CEORegional CEO
EC MemberEC Member EC MemberEC Member GeneralGeneral
ManagerManager
GeneralGeneral
ManagerManager
Chief of StaffChief of Staff
ExecutiveExecutive
Regional OfficeRegional Office
ProfessionalsProfessionals
JapanJapan
(country Manager)(country Manager)
TaiwanTaiwan
Hong KongHong Kong
ChinaChina
KoreaKorea
IndonesiaIndonesia
ThailandThailand
PhilippinesPhilippines
AustraliaAustralia
(country Manager(country Manager))
MalaysiaMalaysia
IndiaIndia
ChairmanChairman
Executive 1Executive 1
Note:
1) Four country clusters
2) Country Manager only relates to retail operations
3) Individual Business unit has a high level of autonomy

Issue Analysis with Questions

Regional Structure of ING in Asia/Pacific
ManagerManager
GeneralGeneral
ManagerManager
ExecutiveExecutive
JapanJapan
TaiwanTaiwan
Hong KongHong Kong
ChinaChina
KoreaKorea
IndonesiaIndonesia
ThailandThailand
AustraliaAustralia
MalaysiaMalaysia
IndiaIndia
ChairmanChairman
Business UnitBusiness Unit
(country manager)(country manager)
ExecutiveExecutive
Country ClusterCountry Cluster
ChairmanChairman
ManagerManager
GeneralGeneral
ManagerManager
Hong KongHong Kong
(Regional office)(Regional office)
- Monitoring Center
- nominal supervision report
- Report directly to the chairman of the EC
Note:
1) EC(executive committee) Members
2) Management Committee Members
- By request
Functional departmentFunctional department
managermanager
- High level of Autonomy
2
2 21 2 1 2
1 2

The Consultants
• The Problem: Consultants Have Their Own Ideas → Generic Framework
HR Management Branding Pro. Capabilities
Source: HBR article (906M83-PDF-ENG)

Jacques Kemp’s Key issues
“The company was doing well,
but ING’s existing market position,
strategy and operations in
Asia/Pacific
could be enhanced.”
How to create a coherent
strategy, which could be
executed by the entire
organization?
• Line and functions should be better aligned..
• We should set clear objectives..
• We should pay for performance
• We need a better operation/business model
to execute

Questions

Question 1
What are the main organizational challenges
ING Asia/Pacific is facing?
• Distance
• Diversity
– Market size
– Type of local competition
– Nature of product
– Cost differences
• Less direct control
• Degree of uncertainty
→ Revolutionary changes in the
environment and the nature of work
challenge managers to restructure
the organization.
- globalization
- proliferation of the Internet
- knowledge as a critical resource
- need for worldwide employee
empowerment
[ General organizational Challenges in International Business ]

Discussion 1
ING Asia/Pacific is facing?
ManagerManager
GeneralGeneral
ManagerManager
ExecutiveExecutive
JapanJapan
TaiwanTaiwan
Hong KongHong Kong
ChinaChina
KoreaKorea
IndonesiaIndonesia
ThailandThailand
AustraliaAustralia
MalaysiaMalaysia
IndiaIndia
ChairmanChairman
Business UnitBusiness Unit
(country manager)(country manager)
ExecutiveExecutive
Country ClusterCountry Cluster
ChairmanChairman
ManagerManager
GeneralGeneral
ManagerManager
Hong KongHong Kong
(Regional office)(Regional office)
- Monitoring Center
- Report directly to the chairman of the EC
Note:
1) EC(executive committee) Members
2) Management Committee Members
- By request
Functional departmentFunctional department
managermanager
- High level of Autonomy
2
1 2
- nominal supervision report
2 21 2 1 2

Issues Root Cause
- No aligned goal and strategies
- Goals and strategies are established
at business unit (county) level
- Difficulties maintaining common
standards across the region
- All business unit have different
ideas, standards and priorities
- Nominal supervision of Regional
managers
- Individual Business unit have high level
of autonomy and thinks its own market
is special
- Ambiguity and difference of job
description and responsibilities
- Local management followed their
own instinct and defines its own job R&R
- Different reporting formats and
performance evaluation criteria
- Difficult comparison
- Different standards and metrics across
business units
- Lack of corporate communication
- No reflection of company identity
standards in local marking
- Independent marketing strategies and
No “common language” across
business units
ING Asia/Pacific is facing?Opinion 1

Question 2
What are principal organizational alternatives the company
could consider for the future business in Asia/Pacific?
• Organization Structure
– Organizational frame
– Vertical Differentiation
– Centralization vs.
Decentralization
• Organizational Process
– Tools & organizational
routines
• Organization Cultures
[ General organization architecture affecting operations ]
• Formal technocratic methods
– Plans
– Reporting procedures
– Evaluation and reward systems
• Informal / personal methods
– Direct personal orders
– meetings
– Socialization mechanisms

Discussion 2
• Line and functions should be better aligned..
• We should set clear objectives..
• We should pay for performance
• We need a better
operation/business model to execute
Jacques Kemp’s Key issues
StructureStructure
PeoplePeople
CultureCulture
IncentivesIncentives
andand
ControlsControls
ProcessesProcesses
[ Organizational Architecture]

Opinion 2
Root Cause Organizational Alternatives
- Goals and strategies are established
at business unit (county) level
- Align goal and strategy with company’s
global strategy of growth
- All business unit have different
ideas, standards and priorities
- Definition of standards but flexible,
considering business unit’s tailoring
- Individual Business unit have high level
of autonomy and thinks its own market
is special
- Reinforcement of “Steering Committee” to
manage managers
- Establish “Regional committee” and
Involve country manager in decision making
- Local country management followed their
own instinct and defines its own job R&R
- Definition of management report structure
and job function and process description
- Training and change management
- Different standards and metrics across
business units
- Establish “standardization committee” at
the level of EC
- Independent marketing strategies
-No “common language” across business
units
- Reflection of corporate identity standards
- Standardization → Regional Office Professionals
- Customization → Country Manager

Question 3
Which type of organizational structure and process should
the company adopt, and why?
[ Function Division Structure ] [ Product Division Structure ]
[ Geographic Division Structure ] [ Matrix Structure ]

Discussion 3
ManagerManager
GeneralGeneral
ManagerManager
ExecutiveExecutive
JapanJapan
TaiwanTaiwan
Hong KongHong Kong
ChinaChina
KoreaKorea
IndonesiaIndonesia
ThailandThailand
AustraliaAustralia
MalaysiaMalaysia
IndiaIndia
ChairmanChairman
Note:
1) Four country clusters
2) Country Manager only relates to retail operations
3) Individual Business unit has a high level of autonomy

Opinion 3
• ING Asia/Pacific was doing well with Multi-domestic Strategy, but now Jacques
Kemp is pursuing a Transnational strategy to enhance Global efficiency without
losing benefits of local responsiveness and flexibility.
Global Strategy
The firm views the world as
single marketplace. Primary
goal is to create standardized
products
Home Replication
The firm uses the core com-
petency or firm-specific
advantage it developed at
home
Multi-domestic Strategy
The firm operates as a
collection of relatively
independent subsidiaries
focusing on domestic market
Transnational Strategy
The firm attempts to combine
the benefits of global scale
efficiencies with the benefits
of local responsiveness
Low High
Pressures for Local Responsiveness and Flexibility
Pressuresfo
High
Low
[Global Efficiency vs. Local Responsiveness]
• ING Asia/Pacific
Source: K-MBA Textbook IBKMBAS14-Part8

• Firms that continue to expand will move to either a
• Worldwide product divisional structure
- allows for worldwide coordination of value creation activities
of each product division
- helps realize location and experience curve economies
- facilitates the transfer of core competencies
- does not allow for local responsiveness
• Worldwide area structure
- divides the world into autonomous geographic areas
- decentralizes operational authority
- facilitates local responsiveness
- can result in a fragmentation of the organization
- is consistent with a localization strategy
It sounds like ING
Asia/Pacific
Opinion 3
Source: International Business 8e By Charles W.L. Hill

[ The International Structural Stages Model ]
• Stages a firm goes through as it moves from the international structure to
either the worldwide product division structure or the worldwide area
structure, and finally to the global matrix structure.
• ING Asia/Pacific
Opinion 3

Opinion 3
• ING Asia/Pacific Should adopt Global Matrix Structure
• Simultaneously attains the benefits of the functional expertise and
regional responsiveness
• Promotes organizational flexibility and keep business unit’s autonomy
Support Function 1Support Function 1
Functional ManagerFunctional Manager
Region 1Region 1
Country ManagerCountry Manager
Region 2Region 2
Region 3Region 3
- Operational Decision
- Customization
- Strategic Decision
- Standardization Manager here belongs to Region 2
and Function 2
HeadquartersHeadquarters
Executive CommitteeExecutive Committee

Opinion 3
• Should adopt Coordination and Control Process like
Organization Processes
Coordination
Process
Standardization
Customization
Link the operations of inter-dependent units and individuals of a firm :
Standardization, Plan, Mutual Adjustment
- Develop T/F with members from BU for organization reforms
- Make common rules, standards, metrics and procedures
- Define the job responsibilities and evaluation criteria in common
- Managers should interact with counterparts to share ideas and knowledge
- Rotate managers between headquarter and business unit positions
- Establish formal/informal meetings between EC and country manager
Control
Process
Company Goal
Directs and monitors the activities of individuals in order to compel actions that
support the goals of the firm : Market, Bureaucratic, Clan
- Regular report to EC,MC and Functional Manager
- Management performance evaluation with mandatory and flexible goals
- Base reward systems partially on global results
- BU visits for information collection and sharing advice and directives
- Strengthen the company culture with diverse communication channels

Conclusion

In general
• Firms pursuing a localization strategy
focus on local responsiveness
- they do not have a high need for integrating mechanisms
- performance ambiguity and the cost of control tend to be low
- the worldwide area structure is common
• Firms pursuing a transnational strategy focus on
simultaneously attaining location and experience curve
economies, local responsiveness, and global learning
- some decisions are centralized and others are decentralized
- an array of formal and informal integrating mechanism are used
- a strong culture is encouraged and matrix structures are common
- the need for coordination and cost of control is high
- employees take into account multiple supervisors
- decisions may take longer

ING Asia/Pacific case
• KEMP changed IB strategy and would restructure company,
but he should consider Risks and Mitigation Plan also
Risk Mitigation Plan
- Too much standardization may
cause high complexity
- Standardize support function, job definition,
reporting procedures and metrics
- Customize products and marketing
related to local business environment
- Uncooperative Country Manager
and Business Unit members
(They don’t want changes)
- Establish “Regional committee” and Involve
country manager in decision making
- Unfreeze the organization through shock
therapy like firing of disobliging manager
- Incentive pay for new ideas about reforms
- Lack of communication, training
and support for the changes
- Establish change management department
and conduct consistent actions until it
matches the desired new strategic posture

Conclusion
• For a firm to succeed
• The firm’s strategy must be consistent
with the environment in which the firm
operates
• The firm’s organization architecture must
be consistent with its strategy
- firms need to change their architecture to reflect
changes in the environment in which they are
operating and the strategy they are pursuing

Case study discussion:
ING Insurance
Asia/Pacific
Organization of International Business

ING Insurance Asia/Pacific Organizational Challenges

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