Korean banks speed up corporate culture reforms to survive

Streamlining reporting mechanisms, abolishing ranks become new normal

By Lee Min-hyung

Korea's financial firms are ramping up efforts to reform their rigid, hierarchical corporate cultures and break away from long-standing conservatism by streamlining their reporting mechanisms as well as abolishing bureaucratic ranks and outside hiring.

This is seen as a desperate move to embrace rapidly changing business conditions as digital banking trends have been accelerated by the COVID-19 pandemic.

Major banks here identify changing their working environments as a prerequisite, in order to root out their notorious top-down corporate culture and embrace the digital paradigm shift that's taking place in the banking industry.

The trend is noteworthy in that the financial industry has for decades been considered among the least sensitive to change, as their revenue-making structures were stable and simple. As a result, bank clerks have generally been less motivated to take risks and embrace challenges.

But this no longer applies now that non-face-to-face transactions have become commonplace and lenders take aggressive steps to expand their digital profiles. Banks strongly believe they need to change their old-fashioned corporate culture, foster a digital mindset among employees and build a horizontal and agile office culture.

The prolonged economic slowdown and the coronavirus-induced financial uncertainties here and abroad have sparked this trend. Financial firms remained less agile in embracing changes due to prevalent conservatism, but they realized starting last year the importance of adapting to the rapidly changing financial environment represented by digital banking during the COVID-19 pandemic.

The super-low interest rate has also continued to worsen their profitability, raising calls for them to find new and fresh revenue sources. Leaders of the financial holding firms have since identified the need to transform their working environment to encourage innovative attitudes among employees.

Starting late last year, KB Kookmin Bank has streamlined its internal reporting system, allowing even entry-level employees to report directly to the head of their department by skipping reports to team leaders.

KB expects the change to help establish a more horizontal office culture and speed up decision-making processes.

Hana Bank, another major commercial bank here, also seeks to bring fundamental changes to its working environment by giving more authority to team leaders and reducing the roles of division and department chiefs.

The lender believes these changes will help encourage younger employees to make bolder and more creative decisions without walking on eggshells as they try not to step on the toes of their superiors.

Hana Bank is also standing at the forefront in discarding its hierarchical rank system. The lender urges employees to call each other by their English nicknames in the office. Hana Financial Group Chairman Kim Jung-tai hopes other affiliates will follow suit in order to scrap the rigid culture entrenched in the banking industry and foster an environment where employees can freely pitch their ideas to higher-ups.

Shinhan Bank is considering abolishing bureaucratic ranks and titles among its employees. The lender revised the titles of employees in some departments in order to lower the emphasis on rank, and plans to extend the measure to other branches of the bank.

Shinhan Financial Group Chairman Cho Yong-byoung is also seeking to let go of bureaucratic recruiting systems prevalent across the nation. Earlier, Cho named Lee Young-chang, an ex-Mirae Asset Daewoo executive, as the new CEO of Shinhan Investment. Appointing an outside expert as the head of the affiliate was viewed by some with skepticism, but Shinhan reaffirmed its willingness to engage in a competency-based recruitment system by scrapping its so-called “pure-blood” custom, which refers to the exclusive selection of applicants from within its ranks.

Hana Bank recruited two people from other companies recently as vice chairmen of its major subsidiaries.

Last year, Hana Financial Investment CEO Lee Jin-kook was promoted to vice chairman of the group. While assuming a dual role as the leader of Hana's investment arm, Lee also takes control of the group's domestic business. Lee's promotion was noteworthy, as he spent more than two decades at Shinhan affiliates, such as Shinhan Investment, before joining Hana in March 2016.

Woori Bank has also made headlines recently by inviting a leader of a competitor to give a speech during a management strategy meeting broadcast live to employees.

The lender is going all out to achieve a timely digital transition. It invited Kakao Bank CEO Yoon Ho-young recently to deliver a special speech on the future of finance and digital innovation. Woori Bank CEO Kwon Kwang-seok is known to have contacted Yoon about giving the speech.

Kakao Bank is the nation's largest internet-only lender. As a key financial affiliate of the nation's largest mobile company, Kakao, Woori decided to push ahead with the special speech delivered by the head of its rival.

The lenders appear ready to pursue even more reforms.

“Even if the fresh attempts by banking groups here are a step in the right direction, more drastic changes should be made to completely root out the decades-long conservative office culture in the financial industry,” an official from one of the lenders here said.

“But it is worth noting that leaders of the financial firms are reiterating their strong determination to embrace open-minded management, rather than sticking to old customs any longer.”