Monday, 22 September 2014

Seven Cultural Issues for Korean Companies operating in the international market

Despite the years of exposure to foreign markets and slow trickle of foreign talent many major Korean companies are still struggling to create “global” corporations that find a balance between their Korean values which made them so successful and the demands of a multicultural marketplace. The following are the major cultural battlegrounds which Korean companies will need to address in order to develop a more balanced business culture.
Many of these themes and issues are excellently covered in a book written by Peter Underwood called 'first mover'

  1. Innovation vs. Improvement
The Korean economy has thrived since the end of the Korean war, known colloquially as the 'Miracle on the Han' the backbone of Korean economic growth has been from industries in which it was the 'follower'. Ship Building, Electronics, Car Manufacturing, Smart Phones -  Korean companies are experts in taking an innovative idea and refining it, improving it, packing it with features and producing it at a lower cost. However now the time has come for Korean companies to become the industry leaders and the innovators but this will require a giant shift in their business culture and education system. Samsung's struggle with the gear is a good example.

The effects of this mentality are much more profound at Korean companies than one might think. Successful companies such as Samsung or Hyundai are seen as the perfect company model by other fledgling Korean companies aspiring for global success and as such many companies look to these Chaebols for  'best practice' approaches for their own companies. It's not exactly the worst strategy but what it does do is stifle innovation, arguably the most important facet for future economic growth. Despite many a Korean company claiming innovation as one of their 'Core Values' this adherence to be “like” a Samsung or a Hyundai is on the contrary restricting their ability to innovate.

  1. Direct vs Indirect
Koreans are naturally indirect in their communication. Respect to their elders and hierarchy  as well as a 2 year plus exposure to military services dictates that “Yes” is the reply of choice instead of “Why?”, Koreans are very unlikely to give back direct, honest feedback to those of senior status. This failure to be open with one another means crucial criticism is not delivered sometimes resulting in the action of bad and unproductive practices. Many global companies strive to develop flatter organisations to allow for direct and honest communication between all levels of employees and Korea too must now begin to look into such practices in their workplace if they are to succeed in a global work environment with a multicultural workforce.

  1. Age vs. Talent
A major aspect of Korean companies that usually draws negative attention from western partners is the Korean system of rewarding and trusting functions of their companies to workers who have shown loyalty and long service over those who have shown the aptitude and talent but are yet of a certain age or status. Role based remuneration just doesn't work in Korea and trials by some major Chaebols to change to a "pay for what you do" system have failed. Thus creating the odd situation where graduate accountants, sales persons, HR officers or engineers are paid the same wages (Despite the obvious difference in job difficulty and importance).

Nationwide companies promotion systems are primarily based on age and years of service - You start at the bottom and work your way up. There is no jumping of levels or climbing the corporate ladder. You sit and wait patiently for your day to come. Despite some of the perceived benefits of such a system it’s negative is that it has now placed a generation of Koreans into leadership positions for departments and business units for which they may not necessarily be adequate! Years of service and loyalty does not always equal a good leader or manager and although such status demands respect in Korea it is unlikely to do the same when it comes to overseas operations. Global partners will look to these leaders and expect to see the talent, experience and qualities that demand their respect.

  1. Education vs. Experience
From time to time you hear stories in America of the Macdonalds manager who started out as a cashier and now is a VP or the receptionist who is now the head of marketing. For many western markets there is a balance between experience and academic qualifications with most often than not a slight bias towards work experience. Koreans competition for office jobs are at a high and while Korea boasts some of the best test scores in the world, a 95% high school graduation rate (Over 80% of which go to university) and record annual spending on extra tuition (over $2,000USD annually per student). It's this emphasis on education in Korean society which has resulted in Korean companies rewarding and actively recruiting those with academic talents over practical work experience. Rookie recruits are on average aged over 27  but won't have a single day of real working experience and as we all know good students don't always equal good workers. Korean companies usually automatically promote workers with master degrees and such practices will need to change to not create conflict with markets that do not place such a high regard on academic talents. More importantly this bias for education could mean that Korean companies are missing out on some truly innovative and remarkable talent like the next Bill Gates or Steve Jobs

  1. Conservatism vs. Forward Thinkers
The year was 2008 and I was in China on exchange. I had the privilege and pleasure of befriended a group of Koreans of whom I am still close friends with today. At the end of this exchange program we vowed to keep in touch and I asked if they had facebook - What's facebook they said? So I was forced to create a profile on the Korean equivalent called Cyworld (Which ridiculously required me to send in a copy of my passport). Anyway come 2009 and I arrive in Korea and still my Korean friends have yet to adopt facebook "it's too confusing" "I don't like the layout" "it's too hard to use" every excuse they could think of not to adopt the social media platform! fast forward to 2014 and Facebook is now the number one social media platform, instagram is huge and twitter numbers are also strong (outside of messaging clients like Kakotalk). Cyworld on the other hand is practically extinct! So what's the point of this story? Whether it was Facebook, bubble tea, Mexican food, imported beer (or more recently craft beer), in the beginning all of these NEW and foreign concepts and products were instantly rejected without trial only to be so widely accepted later that their own 'Korean' versions are extinct (Watch out for domestic Korean beer brands to continue to lose market share) - This for me is the perfect example of Korean conservatism.

Imported beer sales grow year on year despite originally being dismissed because Koreans like to drink beer with soju and hence like a “lighter taste”.
  1. Nepotism vs. Fair Employment Practices
Virtually unavoidable when the countries major conglomerates are run by rich and powerful families. Unfortunately in Korea nepotism is a part of life and it is an obvious conflict when it comes to relations with overseas sites and partners. Let's face it; when the chairman places his young 30 something offspring into positions of power looking after overseas sites it's always going to create a conflict with a society of workers which view nepotism in the workplace as a crime. Unfortunately it doesn't just stop at nepotism - Korea is still yet to adapt a range of fair employment practices. Potential recruits are required to list their age, provide a photo, provide sensitive health information, list family details and list their army training status leaving potential candidates open and unprotected against a whole list of unfair and discriminatory employment practices. These practices can be a big issue when and if the Korean headquarters decide to implement some of their recruitment policies to their overseas operations.

  1. South Korea vs North Korea
I probably have confused some with this title but what I am alluding to is the ridiculous question many Koreans are asked by other internationals all over the world  'Are you from North or South Korea?'. This point is completely out of South Korea's control but in order for Korean companies to become truly global they will need a little help from the international community. The recent rise in soft power commodities such as Korean Dramas, Pop music and food have helped to alleviate the situation but the rest of the world needs to step up it's game and start taking an interest in Korean culture.

I believe this process of creating globally minded Korean companies must be mutual with the international community and global companies looking to Korea for investment, to do business or partake in joint venture opportunities need to do their part in understanding the rich culture and people of Korea in order to make these ventures successful. It is undoubtedly an issue affecting Korean companies because most global business partners are starting from a zero knowledge base (about Korea) making it just that little bit more difficult for Korean companies to be able to export some of their company culture and core values to overseas markets.

1 comment:

  1. "Perhaps it is the result of being sandwiched between the imperial dynasties of China and Japan. It may have something to do with having a nuclear-armed hermit to the north. Whatever the reason, South Koreans nurture a deep sense of insecurity".

    Found this quote in the Economist. I think its quite apt in explaining the hesitancy of Korean firms (and the society in general) to integrate foreign talent on a more than superficial (English teaching or company image commodity) level.

    Interesting, while discussing the subject of seeking employment at a Korean conglomerate in Seoul with my fiancee and her mother, the former pointed out to her mother that it would be hard for me to find a job because there are already plenty of Koreans who can speak English. That kind of illustrates the one-dimensional view held about foreigners and the inability to see the global perspective and/or experience that foreign professionals can continue to Korean organisations (which, as your article points out, need it desperately). Having read up recently on the reviews of foreign employees at Samsung operations overseas, its quite apparent that the input of Koreans in general work practice continues to take precedence over that of foreign employees. In expanding their overseas operations and employing locals, Korean conglomerates do recognise the need to globalise their organisational culture, but I think for them to be successful in this Korean culture (as the background context) is going to have to broaden its perspective of the 'foreign' (i.e. not try to reconcile everything 'not-Korean' into a singular conceptual mass!).