Dear beloved POSCO family,
The year 2016 has dawned upon us. I wish you a happy and healthy 2016. May the new year be one full of joy, where all your wishes and dreams come true.
Happy New Year!

Dear POSCO family members!
Unfortunately, the local business environment is predicted to decline in 2016.
We anticipate additional challenges to our overseas operations, especially in emerging countries where economic recession is highly likely to persist. Moreover, it has become extremely difficult for us to survive without revamping our current business strategy as we face Japan’s cost competitiveness stemming from its reduced currency value and China’s faster-than-expected technological advancements.
Therefore, I would like to sincerely request that we focus all our efforts towards accelerating “Structural Innovation” in 2016, and break the static mold of old business conventions on operation, cost, profit and consciousness.

First of all, we need to innovatively restructure our Group’s businesses from a perspective of profitability.
Until now, our restructuring initiative has focused on improving financial structure. This year, however, we must carry out thorough restructuring in terms of profitability by eliminating any latent financial issues that may emerge.

Second, we need to improve our current high-cost and inefficient operating structure.
Under the current period of low-margins, it is necessary to improvise our operations to perform under an extremely low cost structure. This transition to low-cost and highly efficient structure should apply to all the functions of the Group including procurement, production, R&D and management. Low-profit and inefficient facilities must all be closely scrutinized to find the most optimal solution, including idling of such facilities. IP projects must be augmented and systemized to accelerate elimination of inefficiencies.

Third, we should also spur our innovations in our revenue structure.
The marketing division needs to implement advanced Solutions Marketing to enhance customer satisfaction. Meanwhile, the R&D and production divisions should seamlessly interconnect with the sales teams to support the expansion of World Premium (WP) product sales.
As for our overseas affiliates that urgently require improvements in profitability, it is important for them to undergo innovative restructuring, strengthen Solutions Marketing and coherently execute cost-savings initiatives.
The significance of breaking away from the conventional captive revenue structure and reinforcing differentiated competitiveness cannot be emphasized enough.
Finally, we must firmly establish an ethical management and a performance-based corporate culture.
Let me re-emphasize that good ethics are POSCO’s most important management principle. No matter what the cost may be, the code of ethics must be adhered to and zero tolerance will be applied to any unethical behavior, regardless of offender’s rank or severity of the case.
Based on this code of ethics, we will create a virtuous corporate culture that generates higher performance results through reinforcing evaluation methods and compensation.

Dear POSCO family members!
As things get more difficult, solutions must be found on-site. As long as we continue to challenge ourselves and make improvements in our production, marketing and construction sites, I have no doubt that we will overcome today’s adversities in no time.

I sincerely hope that 2016 will be a year in which the whole POSCO Group and its members make great strides together.
Thank you very much!

New Year’s morning.
Ohjoon Kwon, CEO

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POSCO held a kick-off event for its IP G-Project on October 30 to share project plans for six new projects

Eighty members attended, including CEO Ohjoon Kwon and Project Director of the IP G-Project, who shared the project plans for six new IP G-Projects and resolved to successfully complete the projects. CEO Kwon said, “Detailed plans for achieving the goals for the IP G-Project have been well established.” He also asked those in attendance to make effort to achieve their goals by working closely with other departments.

The IP G-Project integrates mutual IP projects, research assignments and programs into one strategy for efficiency, and started with the intent to expedite Innovation POSCO 2.0 by concentrating the capabilities of all its companies. Under the previous PWS (project-based working system), cooperation between companies and departments within the IP project was possible, but it was difficult to integrate with other activities. So POSCO renamed the projects which require cooperation between research assignments, IP projects and unique programs to the IP G-Project and decided to operate it at a group level.

IP G-Project facilitates the cooperation between all work areas, and is a top-down system that works by themes suggested by the board of directors, which is then approved by the CEO. The goal is to generate over 30 billion KRW in financial performance within the next three years. Unlike IP projects led by professional executives, IP G-Project is managed by c-level executives who operate as the project director.

By establishing a plan to complete each project, all related activities are integrated with concurrent engineering strategies, accelerating the performance outcome. Project progress is directly monitored and guided by the CEO. Through integrated VP (visual planning), the effect of cooperation is maximized.

At the end of the year, the continuation of the project will be reviewed by management and if necessary, performance will be constantly evaluated, even after completion of each project. POSCO plans to put all its efforts into creating outstanding results through the IP G-Project and to achieve Innovation POSCO 2.0 as soon as possible.

‘Motivation’ is a significant factor that lets people to hold on to their work with passion. Therefore, POSCO is making an effort to encourage their employees to aspire for a challenge through a variety of motivation system.

As Chairman Kwon Ohjoon started as his position last March, Mr. Kwon has expressed a direction to fulfill the vision of ‘POSCO the Great’ through the ‘Project-based Working Process’. The ‘Project-based Working Process’ identifies projects that will help improve profitability and accomplish qualitative goals, and focuses on producing outstanding results. The reason why the ‘Project-based Working Process’ is so efficient is that a specific purpose and outcome are defined clearly, leading the concentration rate of the project performers to increase. As the substantial rewards of the ‘Project-based Working Process’  reflect the employees’ performance, a positive work cycle will be created, leading to encourage more projects of higher profits.  

What is IP project?

Ever since POSCO has stated a ‘Project-based Working Process’, POSCO is operating ‘Innovation POSCO’ project, in which any employees with great ideas and capabilities can participate as project leaders or performers. With the aim of successfully carrying out the project, POSCO implemented the special executive system to enhance the expertise of project labor and further expanded the PCP (POSCO Certified Professional) system. There are about 500 IP projects in progress to improve profitability and to achieve qualitative goals.  

Starting the ‘IP project special reward system’ 

The ‘IP project special reward system’ was recently instituted so that employees would be encouraged to challenge themselves to take on new projects and concentrate on excellent performance. This system gives substantial rewards to those teams that produce results recognizable to anyone.

A distinct rewarding system

Projects are divided in to two groups – qualitative and quantitative- and compensation system is differentiated by each group. Quantitative projects which are to generate direct financial outcome, are rewarded by a certain percentage of its excess earnings, whereas qualitative projects are rewarded by the existing reward system.

Strict and precise performance evaluation

In order to maintain the fairness of the compensation, each project’s performance is evaluated with an accurate and thorough review. This evaluation proceeds in three stages, including financial performance, counterproductive possibility, and contribution.

Reward distribution according to individual contributions

As there is no limit per person, surprise rewards are plausible and the compensation is paid in a lump sum as soon as the performance is confirmed. The compensation payment is distributed by each person’s level of contribution. For example, the idea proposer’s allocation is 5% or less and the project performer receives about 45% of the reward.  

President Kwon Ohjoon, Directly Inspects the IP Project and Mentors Affiliated Employees

On September 12^th, President Kwon made visits to the head office in Pohang, POSCO R&D Center, and POSCO Research Institute to inspect POSCO’s ‘Innovation POSCO(IP) Project’ and to provide an opportunity to mentor project-affiliated employees. During his luncheon meeting with the IP Project’s key personnel, President Kwon sincerely encouraged the project leaders and paid special attention to their opinions on difficulties and limitations of the project.

President Kwon emphasized an importance of collective efforts in projects by stating, “collaboration of associated departments and their mutual contributions in making the project applicable to the site are the key elements in achieving profitable project”. Furthermore, he requested project key personnel to “put in the best efforts to maximize profit” as he believed in them and their professional experiences.

As shown in the IP Project, POSCO endeavors to inspire and challenge the employees. Its effort to challenge and manage projects in the most efficient manner possible will not stop here. In an upcoming October, POSCO plans to hold Project Ideas Competition to promote new ideas for new projects.