Laura Rodriguez (alias) has been working for a year for one of the major Korean companies at its German office, after her 25 year professional career in sales at the German headquarter of the global number one company. As a Brazilian national, who both worked in and with Korean and German companies, she offers a very objective and keen insight into two distinct business cultures and structures.
All the names of the people and companies concerned in this story are alias in order to prevent any release of confidential information as well as to protect privacy. Facts given by the interviewee are based on her personal experiences with a number of Korean companies.
ME: Before starting your job in this Korean company, have you ever worked with Korean people or Korean companies?
Laura: Yes, of course. Even during my job in my former German company, some of my colleagues were Korean and a number of my main accounts were also Korean.
ME: What was your impression about Korean companies and their working culture?
Laura: It left me a very strong impression in a sense that they try all the measures they had or they could to make things happen.
ME: I also have worked in a Korean company, more precisely to say, at a foreign branch of a Korean company for almost 2 years and I have heard or witnessed some differences in business cultures between Korea and Germany, or Korea and Europe. Some stand out more than others and may I focus on them first?
Laura: Of course.
ME: Korean or Asian companies are very notorious for their extremely strict hierarchy system. What is your opinion on this? Do you think this holds true?
Laura: Yes, this is absolutely true. However, I believe that this hierarchical working culture is not always bad. I have seen my Korean colleagues working very hard and highly motivated for promotion. I guess this works very well as an effective motivation trigger. You will do your best, as you have a higher position that you desire to move to.
ME: How was it in your former German company?
Laura: The system was a bit hierarchical, but compared to Korean business culture, it was nothing.
ME: I cannot imagine a company without hierarchy. Some must be very new and others experienced. Rookies must be trained and there must be also team leaders at a management level.
Laura: First of all, European companies have no such a vertical hierarchy with 10 different positions from bottom to top like here in this Korean company. For example, in this company, you start off as an assistant and then you will be promoted to assistant manager, manager, senior manager, higher senior manager, team leader, division leader, business leader, etc.(referring to 사원, 대리, 과장, 차장, 팀장, 부장, 수석부장, 디비젼 리더, 사업부장 in Korean) These English titles directly translated from Korean sound very awkward. In my former German company, although it was very big, we had only 5 levels from bottom to CEO level; from normal employee, team leader, division leader, board member and finally CEO.
In European companies, these titles are not important at all, as they do not have such system. Each employee will be in charge of some accounts, not many accounts (not as many as in Korea) at the same time. Rookies will take smaller accounts and those with experiences more important accounts. No one will be promoted, only because he/she has worked longer than others. Instead of being promoted to the next level, you will get rewarded by higher salary, for example, if you have well performed. Unless you are a team or division leader, your roles will be basically the same as your colleagues. What counts more is your expertise and performance. In fact, nobody knows how much you earn.
In meetings, employees in European companies feel free to raise questions and argue with their colleagues no matter at which position they are, as most of them are very equal. After moving to this company, I feel like I am always stirring up a bee’s nest by raising unnecessary issues.
|Top down vertical hierarchy with 10 different positions||
only 5 positions from employee to CEO
Too much stress due to extreme work load
extra hours of working only for projects
HR managing stress level of employees.
focused on the achievement of targeted sales volume
causing internal competition, by evaluating team performance
all employees under extreme stress due to hierarchy combined with board members on temporary contracts
volume driven strategy brings about financial loss or stirring market dynamics
Despite, a desirable strategy for late beginners
Margin driven strategy
All employees including board members on permanent contracts
Strategy and planning
10 hour plan
hasty and changing often
10 year plan
Suggestions for Korean companies
Mature employees over 50 years to be nurtured
Employee stress management by HR
Long term planning
ME: What struck me while working for a Korean company is an extremely volume driven business culture. I have heard that European companies evaluate performance of the employees distinctively from Korean ones. What do you think about this?
Laura: This is a significant difference. Apparently, Korean management in general finds internal competition very desirable and even tries to motivate it by assessing performance of each department separately by means of achieving volume. The bonus lies at the mercy of your team performance. In Korean companies, you have fixed salary with a small bonus, mainly subject to sales volume of your team. This combined with the vertical hierarchy puts you under unbearable stress. Even if you are just a rookie, you will be as stressed as your team leader, as his stress will be passed down to you. In addition, a board member of a team is not on a permanent contract and so he can be fired at any moment depending on (non) achievement of the sales volume.
In my previous German company, it is margin driven and the bonus is determined not only by the sales volume of your team, but also by overall performance of your entire company. For your information, earnings in German companies are both equally bonus and fixed salary based. The amount of your bonus is based on performance of your company (60%), your team(30%), yourself(10%). Even though you or your division has shown a relatively poor performance, this can be still fine, if other divisions have performed well. In other words, you share all the pressure and stress with your entire company, all of your colleagues even from different teams. Your bonus goes from 70% minimum to 140% maximum and if you are getting 70 percent as bonus, it means that you have underperformed and you should find another job. Yet, however poor your performance is, you will be never fired. I don’t know how things are in other small or medium sized companies here in Germany, but in a major company, you have your job secured until your retirement.
Back to the question, I think this volume driven strategy is obscure! I have seen so many Korean companies offering low prices, obsessed with the sales volume plan, which ruins the market dynamics in Europe and leads sometimes to huge financial loss for the company as well. In the European market, the prices are relatively transparent. In addition, reliability and trust are given much more weight than short term financial gain by means of “cheap deal”. If your offer is way too cheap, then your product looks cheap and you do not look reliable financially. Moreover, as said before, your cheap offer can sometimes result in a bloody price cutting war, which does no good to anybody.
I have heard that salespeople in Korean companies are sometimes told to beg customers for more sales volume or they choose to lose money to reach the sales targets. Some old sales guys often boast of their success stories that they waited for their buyers every night in front of their houses until they finally made a sales contract. Sometimes, they force their entire team into this old school and reckless strategy. Maybe, this could work in Korea, but if you do this in Europe, you might even go to jail, reported as STALKER. Korean people should understand the culture and should know what they can and cannot.
As a salesman, you have to know how to negotiate better, you have to be smart and you should be sometimes cunning. But I have seen once at a negotiation table that a Korean sales guy reduce the price 5 times in a row in only 30 seconds, causing a huge financial loss to the company. It left both me and another purchasing manager perplexed. In Korean companies, managers do not rarely cheat by manipulating numbers or take illegitimate measures only so as to achieve the sales volume. This is stupid.
ME: what made Korean companies focus on volume instead of margin? Maybe they did not have any other option. If a late beginner joins the market and tries to steal market share from those with hegemony, it might have to focus on quantity base sales strategy.
Laura: A good point, but…… (Laughter)
ME: What draws my attention concerning Korean companies is considerably shortsighted business plans by the board of members. As overall company plans or strategies are constantly changing or final decisions are made only at the last minute, employees stay often until late night doing extra hours. I find it very unfair that employees commit themselves body and soul to follow decisions that they have not made.
Laura: I do not think it is unfair, as this is what you are getting paid for! Nevertheless, decisions or plans from the board of directors are sometimes very hasty, short sighted and volume driven. Let us say that German companies have a 10 year long term scheme, then it feels like Korean companies have only 10 hour plan. The weirdest phrase that I hear very often working with Korean people is “there is no tomorrow.” How can people work for a company without future? As said before, board members, afraid to lose their job next year, focus only on short term gains and sales volume.
Although I have to admit that it is better to be flexible and agile amid rapidly changing business environment. In this regard, this fast decision making process is not always bad.
Additionally, I think employees at management positions focus too much on details here. Distracted by each single tree, they miss the picture of the whole forest.
ME: Do you see clear difference in stress level at work between Korean and German companies?
Laura: Sure. Korean people in Korea (not overseas employees) are under extreme stress from pressure, long working hours, forced socializing events and etc. This is no fun at all. Many Germans place significant importance on the balance between work and life and German companies also enable or allow them to pursue this value. Germans also do a lot of extra hours but only temporarily for special projects or when they are senior managers. One of the most important jobs of HR department in German companies is to make sure that one is not more stressed than others. Workers in German companies are evenly stressed or under equal pressure. If one has too many tasks or suffers from too much stress, then your job will be shared with your colleagues or a new person will be hired.
Korean people identify themselves with their company and they feel so proud of working for it. I believe this helps people to endure that much stress and dedicate themselves.
ME: When Germans work only 8 hours a day and Koreans 11 hours, then someday, I can imagine that we can overtake German or other European companies, becoming global number one.
Laura: Probably. Korean companies or Korean economy has grown big and successful at such a fast pace that no one could believe and they will continue with their glorious successes. Even so, in my opinion, you cannot make a good company with dead people. Excellent job comes from only excellent people. Not the amount but the quality of employees and their job counts. Financial profit per product should be prioritized and be the ultimate goal.
ME: Do you think that the quality of Korean product lags far behind that of German counterpart?
Laura: Nope, Korean product is almost as good as German product, but for only a few items. Korean companies have much to be done in diversification. I guess the number of product by my former German company is at least 7 times bigger than that of my actual Korean company. Nonetheless, it took only 50 years for Korea to achieve miraculous industrial advances that other western countries needed more than two centuries to accomplish. Soon, things will change.
ME: What should Korean companies do to be more competitive?
Laura: They need to nurture their employees better in a long term. In Korean companies, employees cannot develop or train themselves as they cannot afford to do so due to so extreme stress and pressure. I was shocked to see that there were almost no employees over 50 years old. The overall work force was way too young. I asked my Korean friends where all the old people are gone and I was told that they were fired and now, they are running chicken restaurants. This way, no know-hows and experiences can be shared with or passed down to younger people. There are only few people in charge of overall management and no information is shared. I believe only rich and diverse experiences will make one professional. Korean companies need to keep more older people in job and make use of their abilities.
In Korean companies, pressure is considered to be a good thing. From my point of view, this works only in a short term. However, in a long term, this will rather drag their employees down and make them focus only on short term goals. In German companies, as said before, your job is secured no matter how well you perform or how old you are and this is even true with directors or CEO. (Executives also have permanent jobs in many German companies.) I have heard that in Korean companies, you do a yearly based contract, once you become a board member and you will be fired when you have not done well enough. But remember, some projects take years. Companies should not only react dynamically to fast changes but also stick to their long term schemes.