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Management Report

Management reports, briefs issued by Samsung Economic Research Institute

Seven Issues in Labor and Personnel Management

Seven Issues in Labor and Personnel Management

LEE Jeong-Il

Feb. 20, 2007

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Over the past two decades, Korean labor-management relations and human resources management have transformed in response to profound changes in society. In the wake of the 1987 pro-democracy movement, management and labor acquired equal footing in dealing with labor issues. After the 1997-98 Asia financial crisis roiled Korean corporations, they installed a merit-based pay system and rationalized their hiring to ramp up their competitiveness.

Today, Korean companies are struggling to exploit new revenue streams, deal with lack of talent resulting from Korea's low birth rate and aging population, and finding measures to ease labor-management conflicts. Going forward, Korean companies need to establish more efficient human resources management and labor-management systems.

In doing so, they must also change their corporate culture. Rigid hierarchical systems that centralize decision-making, choke bottom-up innovation, and leave employees feeling undervalued and unappreciated dilute companies' competitiveness and growth potential.

What steps are needed to sustain development?

First, firms need to pursue greater creativity. To this end, they need to search for more creative talent and make their corporate culture more efficient.

Second, they should set up a more flexible human resources management system in order to use talent from diverse backgrounds. Korea's workforce, traditionally driven by young and middle-aged Korean males, will need to more fully utilize a labor pool consisting of foreigners, females and elderly workers. In recognition of the various wants and desires of a diversified workforce, Korean firms also will need to be more flexible in their hiring approach and their pay and benefit formulas.

Third, they need to achieve industrial peace, which will help pave the way for sustainable development. Establishing an efficient system that prevents labor-management conflicts from erupting would, of course, would be an excellent first step.

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