By Tom Coyner
As a contributing columnist, perhaps the greatest perk in doing this is learning as I pull information together for this page. Some of the material I have been already familiar, but often I'm bringing insight that I have recently encountered, since Korea is a rapidly evolving environment. Below are six of the top developments and discoveries from the past 12 months:
While larger corporations are slowly moving away from severance benefit schemes, small- and medium-sized companies are acting quicker. Though most employees wish to stay with the current severance scheme, older employees with their accruing severance liabilities are increasingly less attractive to keep on the payroll.
Nonetheless, defined contribution schemes can be attractive to younger employees who want to have some say as to how the money is being invested. Unlike defined benefit plans, defined contribution schemes are transferable as employees move among employers. But defined contribution schemes are quite new to Korea, requiring a great deal of employee education.
With salaries inflating roughly 6-7 percent per year, the severance program benefits growth rate remains high. But as companies make the transition to more modern retirement plans, many employees are cashing out their severance program since the tax rate is only 3-4 percent.
Koreans put more trust in information on the unregulated Internet (26 percent) than in what they view on television (22 percent). A 2006 survey by Edelman revealed that Koreans trust newspapers and web-based media equally (41 percent) with television (16 percent) and radio (1 percent) rating far behind.
Korea's Internet can whip up public opinion. Korea boasts the world's highest ratio (66 percent) of consumers reporting they have shared negative opinions about a company over the Internet. A recent survey suggests as many as 40 percent of Koreans believe what they read on others' blogs.
UCC (user created content) has come to the forefront as a remarkably effective form of marketing. UCC takes on a wide array of strategies, but the common denominator is that the consumers participate in the creation of marketing message and thereby assume ownership that makes them more willing to consume the offered product or service.
In broadband Korea, blog inputs often include multimedia of uploaded music and videos. One UCC technique is to run a contest where the top consumer-created videos are rewarded with worthwhile prizes and those videos are used in the overall advertising campaign.
Korea is a world leader in consumer Internet marketing ― and at the same time it is very different than what may be happening in Europe or the U.S. It is critical for business professionals to pay close attention to how Koreans increasingly engage with their favorite web sites.
According to Hewitt Associates, in spite of the economic slowdown, MNC salary increases continue in a competitive game where top companies make above-market offers to get the best while the rest of the pack plays catch-up so as not to be out of the game in attracting and retaining talented employees.
MNC's are striving to move to performance-based compensation systems. Be it the execution or communication or both, many performance appraisal systems are not living up to expectations. Many Korean employees doubt the fairness of these systems. More work is clearly needed on management's part to make these systems fairly applied and appropriately understood by all ranks of employees. At the same time, these and other performance-based systems are needed to attract, motivate and retain top Korean employees.
It remains an ongoing struggle between the ideal: compensation plans that support the business strategy ― and the legacy: entitlements predicated on fix bonuses, job titles, and seniority. Many MNC executives need to do a better job in persuading employees that their long-term welfare is best served by compensation schemes that underwrite the overall success of the company.
Contracted employees may work as such as long as two years. Some employers try to get around the three-month employment probation maximum by asking new hires to agree to a six-month probation. But employers should recognize that if challenged, probation beyond three months is not likely to legally stand. Some employers initially put employees on a one-year contractual basis. Upon successful completion, the employee is hired as a so-called permanent employee.
This strategy, however, has some drawbacks. Contracted employees often demand _ and get _ higher wages in lieu of uncertain, short-term employment while not receiving the full benefits of permanent employees. Upon conversion to permanent employment status, it is virtually impossible to reduce the salary levels. Also, there is often a psychological divide between contracted and permanent employees. As a result, teamwork, diligence and overall morale may suffer causing high turnover among even good contracted employees.
It's an important lesson not to get suckered into the ``cultural gotcha'' of surrendering good business sense due to cultural differences. The Korean cultural trait of not wishing to put things down on to paper or taking contracts as literally serious as Westerners should be accommodated just so far. The westerner is not a Korean and thereby is not part of Korea's social web of obligations and potential penalties. As the westerner regularly works across the ``cultural divide,'' he or she must protect the company's interests by refusing to compromise the company's core values and policies.
If one's company is challenged by government regulator, one should establish a legal defense much as one would in one's native country. Resist ― or at least seriously question ― advice from your Korean employees ― and even Korean legal counsel ― to settle and compromise if one is convinced that your company is totally in the clear.
Even if there is indeed a problem, a western legal defense can be the best course of action. Korean government officials are accustomed to sometimes unfairly getting their way, since most Korean companies will quickly try to settle, even when they are completely innocent. If the regulatory challenge is unjustified, it is often best from the first moment to emphatically state so and get one's legal ducks in a row. The regulator will probably not be amused, but will also realize that dealing with the foreign company is going to be more work and it may not be worth the hassle. Even if the regulator decides to proceed, be prepared to act ``un-Korean'' and cite chapter and verse of the government's regulations, since often they can be used to one's advantage.
It can be critical how good public relations can play in one's Korean operations. Consider how often Korean regulatory agencies take their cure by public perception that a corporation is misbehaving in the marketplace.
Since too often the public appreciation is fanned by cyber gossip over the Internet via email and blogs, a misperception or a devious competitor's negative whisper campaign can ramp up into a newsworthy event of regulators visiting your office with reporters in their tow. All of this only reinforces the overall image that one's business has been acting improperly.
Since it is easier ― and cheaper ― to create a good image rather than repair a damaged one, consider how to create a positive image in today's Korea.
While UCC may be a great way to go, credibility does not automatically accrue from the process. The wise Korea marketer looks for ways to incorporate company positive, third-party web content into local websites ― even if there is a tradeoff between message control and message credibility.
Traditionally, we have trusted word of mouth the most. Today, Koreans are getting increasing volumes of personalized information from email, blogs, cellphones, etc
The most important Korean public perception is the way companies treat their employees. Therefore, it is becoming more important to develop communications campaigns from the inside out, particularly in terms of buy-in from internal stakeholders. Corporate reputation starts with employee relationships. That means building strong relationships with employees, who are among a company's most credible commentators. Since one's employees are prone to talk and send messages over the Internet, it is more critical than ever to foster internal feedback processes. It's important to keep in mind that Koreans are the world's leaders in sharing negative, credible opinions of companies, products and services over the Internet.
If you wish to explore these and other topics in more detail, please visit our web site at https://www.softlandingkorea.com/whitePapers.html.
Tom Coyner is president of Soft Landing Korea, a consulting group focusing on sales and human resources issues. He is co-author of Mastering Business in Korea: A Practical Guide.