ed GM Korea's decision

In 1999, General Motors’ Korean offshoot introduced the annual pay system for its office workers, replacing the previous salary step system. On Friday, GM Korea said it would return to the seniority-based pay system from the current performance-based one. What happened to the carmaker in the past 15 years?

Unionists at GM Korea, claiming that the implementation of the performance-based annual salary system has widened the wage gap too much among workers, has called for narrowing the difference by reintroducing the seniority-based salary step system.

The U.S. managers must have found it quite difficult to return to the old Korean system, but have somehow managed to reach a compromise pay scheme, which actually is a 50-50 mix of the two contrasting systems.

Both employers and employees deserve praise for their painstaking negotiations based on mutual respect and concession.

But that does not explain the entire story. Behind the automaker’s bold ― and wise ― decision were various adverse effects the annual salary system has had on corporate management. Contrary to expectations, the performance-based pays destroyed cooperative organizational culture, incited distrust among workers as well as in the company’s personnel management as a whole, and in the objectivity of criteria in grading pays in particular.

GM Korea is not alone in this regard. MS, the global IT giant, also ceased to use its “stack ranking,” a personnel evaluation system, at the end of last year. The system, originally aimed at encouraging competition among staffers, rather became a stumbling block to cooperation and communication, tools for internal power struggle, and the main culprits behind MS’s losing out to other IT powerhouses like Google. Some reports say businesses that do not make performance ratings show higher growth potential and profitability.

This suggests much for the government’s labor policymakers, who have all but forced domestic businesses to use annual pay schemes. The officials should leave the matter to labor-management accords of each work place and industry, admitting that not all policies initiated with good intentions bring about the desired results.

Also noteworthy is the process GM Korea has reached its agreement. The management, based on its in-house survey that found up to 80 percent of workers have dissatisfaction with the performance-based pay system, conducted more than 30 rounds of bargaining, which demonstrate the importance of continued communication with field workers.

More broadly, the latter lesson should apply to the labor policy of the Park Geun-hye administration. President Park has stressed the need for a grand bargain between labor, management and government. But her brutal clampdown on the more militant of the two umbrella unions has resulted in the boycott of the other, relatively moderate one, too. With whom will the government make a grand accord?

Park’s labor policy reminds one of her unification policy, which only envisions grandiose outcomes without making painstaking efforts and painful negotiations.