Will GS Construction Shift to Owner-Managed System? ... Major Organizational Restructuring Undertaken

GS Construction has carried out a major organizational restructuring a month earlier than usual. It replaced 40% of its executives and appointed 17 young executives in their 40s and 50s, signaling a personnel overhaul. This move is interpreted as an effort to revitalize the organization, which has been stagnant following the Geomdan parking lot collapse accident, and to restore trust in the 'Xi' brand. Some speculate that Im Byung-yong, Vice Chairman and CEO of GS Construction, may step down from his leadership position for the first time in 10 years, with Heo Yun-hong, GS Construction’s Chief Innovation Officer (44, pictured), potentially taking over as CEO.

GS Construction Headquarters (Grand Seoul) exterior view. [Photo by GS Construction]

On the 13th, GS Construction reorganized its business and execution units, which were previously divided into 15 teams, into 10 headquarters. The existing structure of six business divisions and nine execution headquarters was integrated and unified according to the nature of the work. The new structure includes the Management Support Headquarters, Life Tech Headquarters, Finance Headquarters, Procurement Headquarters, Australia Business Headquarters, Architecture and Housing Business Headquarters, Green Business Headquarters, Plant Business Headquarters, and New Business Headquarters. This is seen as a measure to enhance internal communication, decision-making, and response speed when critical issues such as quality problems arise.

Alongside replacing about 20 existing headquarters-level leaders, GS Construction also appointed 17 new managing directors as part of its personnel renewal. Considering that typically around five people are promoted to managing director, this is regarded as a bold move. Notably, four managing directors in their 40s?Ki Nohyeon, Head of the Prefab Business Group; Kim Byung-su, Head of Housing Sales 2; Kim Eung-jae, Head of Australia Infrastructure Execution; and Yoo Young-min, Head of the Management Strategy Group?were promoted, marking the start of a generational shift. Additionally, to improve quality issues, many professionals with extensive construction site experience were appointed as executives. This is interpreted as a determination to make a fresh start through personnel renewal following the rebar omission incident.

Earlier, at the end of April, GS Construction faced losses amounting to thousands of billions of won due to the collapse of the underground parking lot at an apartment complex in Geomdan, Incheon. GS Construction decided to completely reconstruct the Incheon Geomdan apartment, reflecting the related cost of 550 billion won in its accounts, resulting in an operating loss of 255 billion won in the first half of the year and triggering a red flag on the company’s credit rating. Its stock price has also halved compared to a year ago and has yet to recover.

Moreover, the Ministry of Land, Infrastructure and Transport identified the causes of the accident as ▲lack of shear reinforcement ▲poor concrete quality ▲insufficient review of additional loads, and imposed an unprecedented 10-month business suspension penalty on GS Construction along with the Seoul Metropolitan Government, citing poor construction practices. This has caused significant damage to the company’s corporate and brand image due to the repercussions of substandard construction.

Some speculate that along with this personnel overhaul, Vice Chairman Im Byung-yong may step down from frontline management after 10 years. Im is the longest-serving professional CEO among major domestic construction companies. He was appointed as a savior for GS Construction in 2013, steadily improving performance and achieving four consecutive terms, maintaining the CEO position for a decade.

Yoonhong Heo, Head of Future Innovation at GS Engineering & Construction.

Heo Yun-hong, Chief Innovation Officer and son of Heo Chang-soo, Honorary Chairman of GS Group, is mentioned as the likely successor to Im Byung-yong as CEO. Heo taking the helm could strengthen the family’s responsible management while accelerating generational change. This can also be interpreted as the family’s intention to take the lead in accountability rather than leaving responsibility to professional managers in the event of major accidents or serious disasters.

Heo joined GS Construction in 2005 and was promoted to president in 2019. Since this year, he has been serving as Chief Innovation Officer (CInO), overseeing the new business division and research and development departments. The new business division led by Heo has been growing steadily every year. In the first half of this year, GS Construction’s new business division recorded sales of 662 billion won, a 46.7% increase from 451.3 billion won in the same period last year. Its share of total sales also rose from 8.3% to 9.4% during the same period.