Loosening their ties | The Economist
11/27/15, 9:50 AM
Corporate culture in South Korea
Loosening their ties A punishing work culture is gradually being relaxed
Nov 28th 2015 | SEOUL | From the print edition MEETINGS to last no more than 30 minutes; junior staff allowed to speak freely with superiors; a cut in bonuses for bosses whose teams do not take enough holidays. Since 2012 “Pride”, a handbook, has set a new tone for the internal culture of Hyundai Capital. Departments whose staff work latest into the evening are listed on the firm’s intranet: not to hold them up as models of hard work, but to tell them off for not working efficiently enough. It is a striking departure from the norm for the consumer-finance arm of one of South Korea’s most culturally conservative chaebol, the country’s giant family-owned conglomerates. Established during Japanese rule of the peninsula (1910-45), most of the chaebol were fashioned in the working style of Japan’s pre-war zaibatsu, huge industrial companies; many chaebol founders were also educated in Japan, and their successors still have connections there. Lifetime employment, hierarchical management and pay based on seniority rather than performance all struck a chord with Korean Confucianist traditions. Confucianism’s philosophy, based on the importance of the family, continues to hold sway in South Korean business; companies strive to create a sense of brotherhood and belonging. Bosses are treated as father figures, and colleagues like siblings, joining in each other’s family events. In return employees are expected to put in long hours at their desks—more than in any other OECD country, bar Mexico. To leave the office before higher-ups is seen as a betrayal. Late-night drinking sessions with bosses are de rigueur. Employee loyalty and centralised decision-making served the chaebol well from the 1960s on, as http://www.economist.com/node/21679214/print
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Loosening their ties | The Economist
11/27/15, 9:50 AM
they led the South’s rapid industrialisation after a devastating war that cemented the Korean peninsula’s division. Military discipline seeped into businesses. Even now, the immersion courses new chaebol employees undergo—typically two intense weeks of learning and bonding in a company complex in the countryside—are not unlike the boot camps that South Korean men endure at the start of their two-year military service. Recruits are drilled in the firm’s history and principles; they also get little sleep, in preparation, says a Samsung newbie, for a gruelling tempo of work. Some firms require trainees to run a marathon on each week of the course: the only condition is that they all arrive back at their dorms together. Yet companies are realising that their continued success, at home and abroad, requires an overhaul of the working culture that made them so big in the first place. At home, the changing expectations of younger workers—who are increasingly educated abroad, and less willing to sacrifice their home life for their corporate family—are forcing companies to rethink how to recruit. They are also grappling with how to manage their foreign operations: send out Koreans to run them, or put locals in charge? If the latter, should they try to impose Korean corporate ways on them? Piecemeal change has been under way for decades. Samsung introduced a merit-based pay structure as early as 1997. Then, only 2% of South Korean firms adjusted an employee’s annual reward based on his performance; within a decade, 48% were doing so. In 2006 SK, a telecoms company, ditched its elaborate hierarchy of job titles and started calling most staff just “manager”. In 2013 KEPCO, a state-run utility, declared it was discarding 14 “authoritarian remnants” among its working practices (chosen after an open consultation). All employees must now make their own coffee; forced afterhours drinking is banned; and the “managers only” lift has gone. Few were as bold as LG Electronics in its efforts to open up. In 2007 it appointed Yong Nam, a reformer, as its chief executive. Mr Nam hired non-Koreans for senior positions and made English the company’s working language. According to Eric Surdej, the first non-Korean to join its upper management, Mr Nam’s biggest obstacle was winning the support of other LG executives. They were suspicious of his Westernising moves, and “liquidated” him in 2010 when the firm fell behind in smartphones. He was replaced by the founder’s grandson, and within 48 hours, 25 of the 27 nonKorean directors had been fired. Mr Surdej wrote a book about his experiences at LG, “Ils sont fous ces Coréens” (“These Koreans are Crazy”), describing 14-hour working days, the “quasi-religious” obeisance to bosses, and South Korean colleagues anxious to answer the phone on its first ring to impress their chiefs. Another obsession of the companies’ bosses is keeping up with, or preferably getting ahead of, their old colonial masters. Mr Surdej says his South Korean colleagues suspected that their Japanese http://www.economist.com/node/21679214/print
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Loosening their ties | The Economist
11/27/15, 9:50 AM
counterparts had “opened themselves so much to the West that they had forgotten their own DNA”—and blamed this for corporate Japan’s slow decline. If LG hoped it might recover lost ground by reverting to traditional ways, it has been disappointed. It has continued to struggle and lags well behind Samsung, its more globally-minded domestic rival. Some other firms have not paid attention to this parable, however. Don Southerton, who advises South Korean businesses on how to manage their foreign operations, says many have been “going back to basics” since the slowdown in China and other big emerging markets. Their Korean staff have reverted to working longer hours and straining to hit short-term targets, under pressure from the bosses back in Seoul. More South Korean companies appear to be tightening the screws at home, too: a survey of more than 1,000 employees conducted in June by Job Korea, the country’s biggest online job portal, found that almost half felt their company was disciplining them more than before: making them stick to a strict lunch hour, for example; or asking them to arrive at the office an hour earlier; or in stricter dress codes. Relapsing back into old ways is unlikely to work, however, given the reluctance of younger employees to tolerate the strictures of the typical South Korean workplace. Their expectations are “totally different” from those of their parents, says Yongsun Paik, an expert on Korean management culture based in America. Now that many firms have stopped paying people according to time served, those who switch employers to escape an oppressive workplace or to try out something new are no longer penalised. As a result, South Koreans are now much more likely to move jobs than their Japanese peers. Many young workers are still handicapped by not having gone to one of the country’s top three universities, whose old-boy networks reach the top ranks of the chaebol. Recruiters shortlisting candidates award far higher scores to applicants from those institutions, says an executive who has worked at Samsung, LG and Hyundai. But some firms are now wondering if this prejudice is denying them the brightest and best. If Steve Jobs (a college drop-out) applied to work at a Korean company, would we have accepted him? asks Eugene Chung, who works in human resources at Hyundai Capital. “No.” “Misaeng”, a recent South Korean television drama, follows the trials and triumphs of a young employee without a university degree as he climbs the corporate ladder of a typical conglomerate. In one episode his boss scorns his protest that he is doing his best: that may be a good enough excuse at school, but “Here, at work, you just bring the results.” The buzz it generated among young South http://www.economist.com/node/21679214/print
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Loosening their ties | The Economist
11/27/15, 9:50 AM
Koreans suggests more are thinking about the sort of culture they want to work in. Last year Ms Chung’s team set up a special track for candidates who lacked a university degree but who could demonstrate other exceptional qualifications. It has also started a “job fair” in which each department erects a booth and seeks to interest potential recruits—a reversal of the usual chaebol practice of hiring people and then telling them which area they will be working in. Samsung has overhauled the Samsung Aptitude Test, an exam for job applicants covering language, maths, reasoning skills, general knowledge and spatial skills. From this year essays, interviews and handson experience are part of the mix. Such experimentation is necessary. In 2018 South Korea’s working-age population will begin to decline. Its firms will increasingly have to compete for workers, and thus need to rethink their biases against women, foreigners and those with an unconventional education. The country’s traditional work culture helped power it to prosperity. Now it must change to attract the talent it needs.
From the print edition: Business
http://www.economist.com/node/21679214/print
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