Employment Flexibility in Korea

1. Employment Flexibility in Korea Challenges in Transition Sam Butler DBM Korea Larry Cambron President, DBM Asia Pacific

2. Meet DBM • Strategic HR solutions to help organizations align their workforces to meet changing business needs • Worldwide leader for over 35 years • Services in transition, retention, development, and selection • More than 225 offices in 47 countries • Owned by Thomson, $7.2 billion information solutions provider • Serving 330,000 individuals in transition and 7,200 organizations annually

3. Agenda • Snapshot of Current Challenges • Creating Employment Flexibility • Impact on Your Business: OPC & CTS • Case Study • Q&A

4. Business Environment What is happening in the Korean labour market?

5. Business Environment Background • Korea’s business history is grounded in the chaebol structure • Businesses mired in bureaucracy due to organisational size, centralised control and broad scope of competencies • Managed as family concerns with family values • Enterprise agreement with employees is based on loyalty for job security • Guaranteed lifetime employment concept, investing heavily in employee welfare • Retrenchment was seen as a performance issue

6. Market Drivers What is driving change in the Korean labour market?

7. Market Drivers for Change • Ballooning operational expenditure on headcount and currency devaluation is eroding profits and price competitiveness • Globalisation is creating new, more organisationally efficient competitors • Static corporate structures reliant on family power bases and employee inertia accepting organisational restructuring is hindering growth • Corporate management and financial reporting irregularities is diminishing foreign investment

8. Current Challenges Understanding the employee perspective

9. Employee’s perspective

10. Employee’s Perspective:Challenges when facing job loss DBM Korea Employability Project 2002

11. Employee’s Perspective: What retrenchment means • Retrenched employees receive big severance packages but minimal outplacement support • Retrenched Koreans are more likely to • Be unemployed for a longer period than might be necessary • Be without appropriate levels of support in a stressful career transition • Feel abandoned by their organisation and harbour resentment toward it due to lack of transitional support • Misguidedly start a new business due to poor knowledge of career options and a large lump sum payment • Be pressured to accept any job in order to achieve re-employment • Miss opportunities to gain personalised, insightful lifetime career management skills due to corporate preference for group programs

12. Current Challenges If employees don’t want labour flexibility, why does Korean business want it?

13. Employer’s Perspective • Labour flexibility • is critical to establish Korea as regional hub • should not be reliant on a crisis or immediately prior to bankruptcy • enables much-needed competitiveness in capitalist economies • Removes threat of foreign investment funds being diverted to China • enables corporations to successfully adjust workforce sizes based on business cycles • Opens up the recruitment market by removing the fear and restriction of not being able to downsize in fluctuating markets • Is symptomatic of a growing economy, something Korea is presently experiencing post 1997 reform • Should be approached with a progressive stance with Government providing the environment for corporations to successfully downsize Source: AMCHAM Korea, Washington Doorknock 2003 Source: EUCCK Human Resources Committee

14. Employer’s Perspective:Challenges in planning a restructure DBM Korea Employability Project 2002

15. Employer’s Perspective:What flexibility means • Employment flexibility can be a positive for all concerned • Flexibility requires sensitive handling at all stages of a change process. • Professional organisations, like DBM, exist to assist employers and employees with transition • It’s not only employees who need support in a downsizing but also employers (managers and survivors) • Government must take a more open and active position in enabling organisations to restructure • The business impact is too great to remain inflexible

16. Employment Flexibility Impact How will employment flexibility impact Korean businesses?

17. What if … You return to your office today and: • Find an e-mail from your CEO advising a 3rd consecutive quarter of poor business results? • A message from your secretary that you’re due in a senior management team meeting in 30 minutes to discuss a workforce reduction? • You answer a phone call from a journalist / union delegate wanting to know your company’s position on rumoured layoffs?

18. ROI when using Outplacement Consulting • Taken from a survey of over 1,200 HR Professionals in North America • SVP/VP 25%, Director 38%, Manager 30%, other 7% Frequency • 88% of survey respondents had experienced a downsizing • 38% had experienced four or more downsizings in the last 5 years

19. Utilisation of Services Elements of Outplacemnent Consulting Services Used in Last Downsizing

20. Career Transition Services • A service that helps an organisation’s management team to plan and implement the critical initiatives of a workforce change leading to employee change or separation • Outplacement • One-on-one or group coaching, skill development, and assessment services to facilitate former employees finding their next best employment opportunity, in the shortest period of time, with the least amount of disruption

21. Reasons for retrenchment Don’t Know 0.2% Compatibility with Organizational Culture 0.9% Individual Performance 2.2% Plant Closing 5.0% Other 5.9% Merger/Acquisition 8.6% Reorganization 22.8% Reduction in Workforce/Downsizing 54.3% For a copy of this report, please contact Eun Ju Kim at fraukim@dbm.co.kr

22. Magnitude • 46% of respondents said that 1~5% of organization was affected • 25% of respondents said that 6~10% of organization was affected • 14% of respondents said that 11~20% of organization was affected • 7% of respondents said that 21~40% of organization was affected • 4% of respondents said that 41% or more of organization was affected • 4% of respondents did not know For a copy of this report, please contact Eun Ju Kim at fraukim@dbm.co.kr

23. Benefits and ROI of Outplacement Consulting & Career Transition Services Insert Table 1, page 5 Improves Internal and External Image 78% 72% Reduces Litigation 68% Reduces Managers’ Stress 64% Provides a Good Return on Investment 59% Improves Morale of Retained Employees

24. Implications • Research proves that investments in these services positively affect businesses undergoing downsizing • The return on these investments can be demonstrated to senior management • By making the commitment to invest in Outplacement Consulting and Career Transition Services you can expect to: • Maintain confidence and morale of employees • Minimize negative effects of downsizings • Effectively realise new business objectives

25. Creating Employment Flexibility Preparing to Take the Next Step

26. Strategy / Value Concept Invest in Business COMPANY STRATEGY Future Experience Current Experience Invest in People COMPANY/ EMPLOYEE VALUE Lifetime Employment Lifetime Employability

27. Enterprise Agreement: A New Deal between employer and employee Conceptual shift from • Life-time employment to life-time employability • Commitment to company to commitment to performance • Company-reliance to self-reliance • Corporately-bound to corporately-caring • Rigid employment to flexible employment Embrace the full employment life-cycle rather than parts of it

28. Employee Expect change Job opportunities in new areas Job flexibility & adaptability Full time, part time, contractor, casual Growth in entrepreneurial opportunities Responsible for career development Lured by opportunities for learning and growth Employer Rapid change: mergers, restructures Expansion Values initiative and willingness to learn Work performed anywhere, anyhow Global competition No job security Must attract talent/poach talent Cross company exchange New Deal requires mutual responsibility

29. Employee’s Specific Needs • Downsized employees: • To be treated with dignity and respect • To have support on day of notification • To understand benefits, severance, financial planning, and Outplacement • Re-deployed employees: • To feel valued while on “hold-talent bank” • Career/change strategies while waiting • Clear expectations of job responsibilities and timelines • Retained employees: • To feel competent • To be connected • To be included in a community

30. Your employees will need to • Continually learn and self-manage their career • Network and self-market • Endure change, uncertainty and periods of no formal employment • Seek to create and find own career development opportunities • Focus on balancing work, family and leisure • Understand needs of employers

31. Your future organisation will have • Ability to responsibly manage profit, revenue and costs in changing business environments • Flatter organisational structures • Rigid management systems replaced by networks of workers who team up for projects • Traditionally defined jobs become continuously evolving sets of competencies • Inertia replaced by agility (Turtle to Tiger)

32. Creating the environment for labour flexibility Organisational and cultural transformation initiatives Employees prepared for change Employees encouraged to self-manage careers Career Transition Success

33. Employment Flexibility in Korea Challenges in Transition Questions & Answers