Eric Surdej’s book, Ils sont fous ces Coréens, provides a vital insight into the operating methods of the French subsidiary of one of the largest Korean chaebols, LG. In this insider’s tale, sometimes tinged with disillusionment, the author makes the error of comparing the way LG operates to all Korean companies or even to all Koreans. However, it is actually very difficult to define a definite Korean management model, as this is both protean and heavily influenced by Confucian morals.
Korean capitalism has gone through four key stages which have all influenced corporate management methods.
The early 1960s saw the dictatorial regime taking over the running of the economy. The various industrial sectors were divided between the chaebols. In this despotic economy, it was the government which set the rules through the use of preferential loans and penalties. In return, it gave companies a docile working-class. Japanese-style management methods were used as a model. These focus on harmony within the company, jobs for life and a salary based on length of service. Heavily influenced by this period of dictatorship, the management style was militaristic, patriarchal and paternalistic. Company growth was guaranteed by high productivity, massive exports and low salaries.
When democracy arrived in 1987, the whole of society experienced major changes. Companies followed suit. A new economic model emerged: Fordism. From 1987 onwards, major salary increases created a large internal market, constantly seeking comfort and innovation. State despotism ended and the markets were deregulated. Little by little, American management styles emerged as the dominant model, with companies moving to restructure their activities, paying their staff based on appraisals. Seoul hosted the Olympic Games in 1988. South Korea emerged on the international scene. The country was heavily in debt but settled its payments in cash. This was the golden age, unfortunately brought to a close by the Asian crisis of 1997.
The ultra-liberal economy
South Korea was hard hit by the crisis, and the restructuring plan imposed by the IMF brought the country to its knees. Restaurants proposed “IMF” menus to meet demand from an increasingly poor population. While investing massively in new technology to get the economy going again, the state deregulated everything they could. The ultra-liberal economy had no time for people’s feelings. Women were made redundant from companies en masse, and subcontractors were exploited to the extreme. Although Daewoo didn’t survive the crisis, other chaebols took advantage of governmental help and became world leaders in the new technologies, such as Samsung or LG. The American management model became widespread. After appraisal, employees were dismissed at short notice if their results didn’t meet targets. The economy was no longer based on production but on knowledge.
The second crisis to affect the country was that of 2008. Less perceptible, it didn’t really bring the economy to its knees but stagnation set in and companies stopped hiring. To get the economy going again, as in 1997, the government decided to heavily invest, deploying 354 million euros over four years in a sector it considered a strategic one: renewable energy and the environment. The effects were quickly felt and this newly acquired know-how was quickly marketed internationally. In just four years, exports increased tenfold. The aim is that by 2020 the country should be among the top 10 producers of green energy. However, the labour market has not felt the benefits. Young unemployed graduates are becoming entrepreneurs instead. Although older employees removed from the labour market are happy to open a local grocery store or restaurant, the younger ones are innovating and reinventing both management models but also their relationship with society. Mobile applications have proved to be an incredible source of success stories, such as that of KakaoTalk, the instant messaging system created in 2010, which today has 140 million users including 37 million in Korea (out of a population of 50 million) or Bookpal which, with its free book model, has revolutionised the publishing market and is in the process of conquering China. These young people have often left to study abroad, with an average of 250,000 opting to do so each year, and learning from the management models observed in the host countries.
Korean management and Confucianism
It is therefore impossible to define a single Korean management model. Heavily affected by the country’s recent economic history, there are many models, which are hybrid and often differ from one company to another. The only common aspect of all these management experiences is the significant influence of Confucianism, because although Japan during the Meiji era (1868-1912) and China during the Cultural Revolution (1966-69) both threw off the Confucian yoke, South Korea remains a profoundly Confucian country. Established as a social model in the late 14th century, Confucian values (such as humanity, uprightness, correctness, wisdom, loyalty and sincerity) still constitute the cornerstone of Korean society. These values are naturally echoed in Korean companies.
We find an excessively paternalistic management style here, including respect for elders, with strong emotional ties. Although “the boss is always right” is very much an aspect of Korean life, decisions are actually a combination of authority and input from middle management. A networked society: recruitment is essentially based on family ties, attendance of the same school, coming from the same region, etc.
The two key qualities sought in an employee are loyalty and sincerity. Here, we are not talking about verbal sincerity but rather sincerity in the way the person acts, who should be selfless, honest and loyal. In work, this means working hard and being prepared to make all the necessary sacrifices to succeed in your job. Company songs, slogans, team building exercises and almost daily drinking sessions are all used to forge tighter links, to promote harmony in the team and to build staff loyalty. Major groups develop training programmes designed with this in mind, in which emotion, physical ability, spirituality and intelligence are all developed to make genuine warriors of the workforce.
From an achimnika society to a yoseo society
Non-Koreans are always surprised to see Korean managers shouting at their staff. Such authoritarian outbursts mimic the way the army operated during the years of the dictatorship. For several years now, the army’s way of doing things has been called into question. We can mention many incidents: from simple suicides to conscripts who murder their fellow troops, unable to stand the pressure or the bullying. It is no longer considered a model to be imitated.
Today, we are seeing a clear shift from a achimnika society (this is a formal means of address), a society based on submission, to a yoseo society (an informal means of address used between friends in the same age group), a young and cool society, an open and dynamic society.
In companies, it is considered bad form to lose your temper. In management terms, this is seen as a failure and the manager will be practically considered incompetent. He will be blamed for not being able to manage his stress. However, the Koreans are a hot-blooded people and shouting or virulent demonstrative behaviour are sometimes part and parcel of negotiations here.
Studies are currently being performed to monitor this phenomenon, showing that they are giving careful thought to this here, in the same way that there was a great deal of soul-searching in France over harassment in the workplace. The latest study is very wide-reaching, as this sort of behaviour is difficult to categorise and quantify. Between 2008 and 2012, 62.3% of employees suffered intimidation and 45% witnessed this. Among these 45%, two thirds considered the altercation to be very serious and 58.3% stated that they saw their colleague leave their job following the altercation. In 2013, a draft law was presented to Parliament and is currently on hold.
The Samsung management model
To illustrate this diversity of managerial models, Samsung Electronics, a company synonymous with South Korea’s success, is a good example. Inspired by the management practices used by General Electric and Toyota, Samsung’s management model has been carefully thought out: the semiconductor division is seen as the most Americanised, while hundreds of employees are sent each year to Toyota study the major models of this Japanese giant.
Based on Toyota’s methods, Samsung uses both horizontal and vertical diversification focusing on competitiveness and product quality, intensive training to harmonise the workforce, and requires strict organisational discipline and exemplary loyalty from its personnel.
The strategy, the HR policy and recruitment type, the frequent restructuring, salaries based on excellence and the risks taken by the general managers are all products of the American model.
The two managerial models are often considered as being incompatible as they are counter-productive. This is definitely one of the Koreans’ many strengths: they don’t ask questions about what is feasible and what isn’t. Quite simply, you take the best of the two models and apply it.
These Koreans are not so crazy after all!
After having worked as an HR manager and subsequently a consultant, Arnaud now works with two South Korean companies, one based in Paris and the other in Seoul, working in the training field. With his bi-cultural profile, he has a keen interest in Confucian countries and more particularly in the Korean peninsula. As a consultant in intercultural management specialising in Korea, he teaches in companies and business schools focusing on the problems related to these countries or their neighbours. In his next book to be published by Editions Lemieux, he proposes an interpretation of Korean society that pulls no punches, based on real life and personal experiences.