Where is all the talent?
Challenges and Opportunity for foreign companies in Korea’s employment market.
By Lukas Beech, Director of HR Service at Nowak & Partner
In his latest book, “The Coming Job War”, Gallup CEO Jim Clifton announced his latest global finding: the one thing that is more desirable than having a family, democracy, freedom of religion and peace, is having ‘a good job’. This is only trumped by one desire; having ‘a great job’.
So, how is Korea doing?
The official rate of employment is just shy of 97%, with a participation rate of over 61% that is growing at 1.4% y/y. But this is not the whole story. While Koreans are still known to have some of the longest working hours in the OECD, their professional longevity is less than in other in countries, where the age of active workers tends to be higher, for example in Sweden (64), Britain (63) and Germany (61). Most Koreans are employed fulltime between the ages of 29 and 54, and while the government has been considering to make the official retirement age 60, the fact is that each private company can make its own rules about when to retire the employees. This has interesting effects, for example at the Hyundai Motor Company (HMC),where unionized mid-level employees are guaranteed a retirement age of no less than 58. The maximum title seniority for union members is Senior Manager (차장), so it is not uncommon for employees at that level to refuse a promotion that would effectively remove the union’s protection from the potential of being retired earlier. The downside of this can be dissatisfaction among younger staff members who are ready to move upward into positions that should become available, but don’t. This stagnation of promotional opportunities also effects mid-level staff who are not in the union, typically the white-collar employees, since their salaries are fixed at the same rate as those their blue-collar counterparts with the same job title. Other departments within HMC have solved the issue for several of the mid-level titles by assuming a functional title only, such as Senior Research Engineer (책임연구원), thus shifting the focus from seniority to value/performance, making it easier to promote the high performers and harder to ‘weeding-out’ people according to title alone.
Nevertheless, the search for that ‘great job’ is proving to be increasingly allusive for many Korean university students, despite the national love affair with education. Like their global counterparts in other developed economies, one of the key challenges is the mismatch between the qualifications of graduates and the real-world requirements of companies for the present and future business needs. The challenge that Korean graduates face is not a lack of education, but one of suitable qualifications, with which to compete in the global ‘Job War’.
When considering this junior end of the employment spectrum, it is interesting to note the path that people under the age of 29 take, when entering the workforce. According to the Korea National Statistics, almost half of the university students interrupt their studies. Female students tend to take 16 month off, during which 36% gain further qualifications and licenses, 32% gain overseas experience, and 24% do jobs in order to finance their studies. Men tend to spend about 2.5 years during which time almost all of them complete their military service, in addition to which about 11% gain further licenses and qualifications, 9% gain overseas experience and 8% do various jobs in order to finance their studies.
Of those students who finish studying, almost 70% find their first job within 6 months, a majority of who aim for management & technical specialist roles (32%), as well as general office jobs (29%), a further 20% work in services and sales, and 13% take machinery and technician roles. In terms of industries, the public, private and business service sectors are most popular, closely followed by sales & accommodation, manufacturing and finally technical and finance industries. (See Table)
Business, Private &•Public Services 42.2%
Sales, Food Service, Accommodation 22.3%
Manufacturing, Mining 18.1%
Agriculture, Forestry, Fishing
Source: Korea National Statistical Office, May, 2012 1.1%
In ‘western’ societies it is common to value the skills and attitude that young people can gain from informal work & life experience while still at high school or university. However in Korea, most students are too focused on studying for exams in order to gain an understanding of what it means to have a job. So when first entering the job market with a freshly minted degree that was meant to propel them¬¬¬¬¬¬¬ straight up the corporate ladder, young people under the age of 29 are commonly faced with a certain amount of disillusionment, as they discover the reality of working a 45-hour week. Therefore, they tend to move jobs a couple of time during their early careers, 65% doing so once or twice, while only 11% stay with one employer. Finding jobs has also only changed slightly, for despite the prevalence of internet job portals where 28% of the jobs are found, over 40% of this age group get their jobs through the recommendations of family, friends, teachers and schools, with a further 11% of the recommendations coming from colleagues. This proves the value of personal networks.
In order to overcome the qualification gap, an emerging trend has been for Korean companies to increase their collaboration with educational institutions to develop a curriculum that produces more desirable graduates that match the real-world business needs. An example of this is the rise of vocational ‘Meister’ schools, following a German model of developing curricula for the requirements of specific industries. Samsung Electronics is one of the supporters of this scheme, providing scholarship, intern and employment opportunities for the top graduates of ‘Meister’ schools. However, this system is still a work-in-progress, as Korean society hasn’t caught up with the fact that this type of education can be a better ticket to success than a university education. Nevertheless, Samsung has also been influencing the diversification of the job market by organizing recruitment fairs for its partners and suppliers. The thinking behind this is that top quality applicants are drawn to the opportunities of working for these suppliers because of their association with the Samsung brand. Furthermore, it is more and more common for experienced big-brand employees to move to smaller partners or suppliers, in order to leverage the existing knowledgebase and potential synergies; a process that is increasingly being supported by the Korean federation of SMEs.
For Foreign companies in Korea, the challenge of hiring Korean professionals is significant. Such companies succeed in this market if they have superior products or services, but for this they require talented employees that are at least as capable as their Korean counterparts as well as the colleagues at the foreign head office. This means that foreign companies have a very narrow pool of talent from which to hire their staff, as only a minority has the linguistic, technical and cultural capacity to meet these high expectations. Therefore, those with suitable qualifications are quite desirable for foreign companies in Korea, making the competition for them fierce. This reality can come as a bit of a shock to foreign companies that wish to enter the Korean market, as their projected salary budgets are sometimes set on the assumption of cheaper labor costs in Asia or on average salaries in Korea.
Foreign companies are faced with a further challenge, arising from the fact that in the past, foreign companies were a very attractive option for talented Korean professionals. However these companies are becoming more of a ‘normal’ choice, as Korean companies extend their global reach and in doing so; compete for the same talent as foreign companies. Both types of companies desire similar qualifications from their employees; technical expertise, a suitable mindset, experience and attitude. The employees in turn demand an environment that has previously been more attainable at foreign companies; flexibility, talent based promotions, opportunities for women, attractive compensation, international exposure etc. Larger brand-name companies have the first choice in selecting the best employees - although this is no different in other countries, while smaller companies attract employees that seek diversity and multitasking.
Looking at the IMF’s 5-year GDP growth forecast for Korea of 3.5%, it could be that Korean professionals are comparatively well positioned in the ‘Job War’, provided that they are willing to look beyond the big brand name employers and apply themselves in an entrepreneurial way to the creation of new customers and markets. Fundamentally, the success of any business lies in its ability to recruit great people, as, in the words of Mr. Gallup's Jim Clifton, “great business people are more valuable and rarer than great ideas”. So in order to succeed, companies must face the challenge of engaging the entrepreneurship of their people to turn innovation into market realities and win new customers, any market.
Nowak & Partner is recognized as the leading service provider to European companies in Korea, specifically in the areas of Executive Search & Recruitment, Market Entry and Project Management. http://www.nowak-partner.com
Since 2005, Mr. Beech has been specialized in providing executive search and recruitment services to foreign companies in Korea. He has successfully placed Korean and expatriate professionals in middle and senior level executive and general management roles, engineering and technical sales, finance, logistics and operational positions. Having gained considerable expertise in the consultation of clients about their strategic human resource requirements, Mr. Beech has fine-tuned a process of targeted search that yields a high success rate well above the industry norm. He can be reached by Email: email@example.com or phone: +82-(0)70-4490-5590