Pulling Rank Gets Harder At One Korean Company [WSJ]
By EVAN RAMSTAD
August 20, 2007; Page B1
SEOUL -- Hur Jae-hoon, a 33-year-old strategist at SK Telecom Co., used to be able to end debates with younger staffers just by declaring the discussion was over.
As a daeri, the fourth in five staff ranks at South Korea's largest wireless company, he worked under a rigid top-down structure where people with a lower title weren't allowed to question his decisions in meetings. In turn, if anyone above Mr. Hur's rank asked him to do a job, or even just go out drinking after work, he couldn't say no.
But all that changed last October, when SK Telecom overhauled its employee hierarchy in hopes of spurring more risk-taking and creativity. The company scrapped the five ranks that were used in addressing each other. It replaced them with just one title in English: Manager. That meant "Hur Daeri" was now "Hur Manager," and he shared the same title as a 25-year-old just starting out at the company.
It's a major adjustment that highlights the tension between Asian business traditions, which emphasize order and formality, and those in Western countries, where the premium is on ideas and innovation.
Since the 1960s, South Korea has built itself into one of the world's leading economies by doing things its own way, raising trade barriers to protect its companies and concentrating decision-making with top executives to protect their power. The structure is connected to both the military experience that all Korean men get and to Confucian teachings about seniority. There's no formal punishment for violating ranks, but there's plenty of social pressure to observe the rules. Big companies like Samsung Electronics Co. and Hyundai Motor Co. often cite the system as the basis for their success, saying their leaders create change without debate.
The big drawback of the system is that it discourages creativity and the flow of ideas. As the country's growth naturally slows with size, many South Koreans now feel the need to adopt Western practices like decentralized authority to keep moving forward.
SK Telecom's culture shift came after growth leveled off in its main business as the country's leading cellphone-service provider, as the mobile-phone market reached saturation. The company, which had revenue last year of about $11 billion, added close to $1 billion a year in revenue from 1998 to 2002 as cellphones became ubiquitous in South Korea. But that pace has slowed to about $500 million a year. Two years ago, executives decided to push into new markets, including the U.S. and China, and seek more new ideas from employees.
[Kim Shin-Bae]
"To let new ideas bubble up, we needed a new business culture," says Kim Shin-bae, chief executive officer for SK Telecom. "It requires different incentive schemes, an organizational structure, a financial-resource-allocation process and a business-development process."
Most of corporate South Korea remains tied to old traditions. At Samsung, for instance, nonexecutive employees aren't allowed to directly communicate to anyone above their immediate boss. There are pleasantries and casual conversations that cross ranks, but even then it tends to be a senior person initiating the contact with a junior person and not the other way around. Smaller companies, particularly in high tech, long ago embraced flat hierarchies and openness.
"SK Telecom is more pioneering when it comes to dramatic change," says Han Joon, a sociology professor and specialist in Korean culture at Yonsei University in Seoul. He expects that others will follow, though slowly.
Even at SK Telecom, top executives were initially divided over the pace and scope of the overhaul. But Mr. Kim wanted the company to avoid mistakes like when top executives seven years ago shot down a suggestion by younger employees to change the ringing sound that people hear when calling someone they know, so that the caller hears music chosen by the friend they've phoned.
It was only after the younger employees brought the idea up again months later, insisting it would bring in extra revenue through music licensing, that SK Telecom adopted it.
"There were ideas for gradual versus all-out reforms," Mr. Kim said. "But the word 'gradually' means 'not now' to some people. So we decided to go all-out."
He assigned a handful of departments to test two Korean titles and two in English, "professional" and "manager." The English words proved easier to sell to employees since the Korean titles, in some cases, represented downward shifts in stature.
From vice president to chairman, executive titles were unchanged. But managers who are put in charge of projects or people get the added moniker of "team leader." The company also started assigning jobs based on ability, rather than seniority. Some employees in their 20s began leading projects that, under the old system, they wouldn't have qualified for until they reached a higher rank, which would often be when they were in their 30s.
![](http://<br><br>Mr. Hur, who works in SK Telecom's global business strategy office, says discussions have become free-wheeling and more productive. In one recent meeting, Mr. Hur got into a lively debate with a younger colleague who had a different idea than he did on how to finish a project. "For a moment, I wished it was back in the old days when I could have shut that guy down," he said. "But I had to admit his opinion was better than mine, and I adjusted. So the system worked."<br><br>In addition to the title change, the 600 of SK Telecom's 4,500 employees who moved into new business ventures saw their bonus scheme change. Previously, bonuses were based in part on the one-year performance of their business unit. For new ventures, that incentive stretched to three years, reflecting the longer time that new and risky businesses need to turn profitable. Base pay that was linked to rank in the past is gradually changing to other performance measurements.<br><br>The company made other changes to try to spur creativity, such as relaxing the dress code. Even security guards changed, working in more casual dress (short-sleeve white shirts and casual slacks instead of dark uniforms) and exchanging greetings and jokes with everyone who walks through the door.<br><br>Mr. Kim, the CEO, says he's encouraged by employee surveys that show nearly 80% prefer the new titles and flattened hierarchy to the old system. But he says it will take more time for the change to spur enough new ventures to make a financial impact.<br><br>Some Koreans doing business with SK Telecom say the new flattened hierarchy is an improvement.<br><br>Joo Hee-jung, owner of a promotion-services company that SK Telecom regularly hires to help with marketing and internal events, says her company recently produced a musical skit for an employee event there. "We were able to contact the people who are actually in charge of the work," says Ms. Joo. "We didn't have to contact higher or senior people about the play. The younger guys set the direction. In the past, we had to wait for higher and senior people's decision-making. With the new system, we were able to save a lot of time."<br><br>But other outsiders who work with the company are finding it a challenge to adjust. Park Chang-hun, a gwajang (the middle of the five ranks) at LG Electronics Co. in the unit that supplies SK Telecom with mobile phones, says he thinks their new system is simpler. But he also finds it harder to figure out whether or not to pay deference to SK Telecom employees just by looking at their business cards.<br><br>"I know what the old titles were," Mr. Park says. "So unconsciously, I keep that in mind."<br><br>Friends of Im Kyoo-nam, a human-resources manager, pointed out another problem. Under the seniority system, a promotion came every few years and became a moment that was celebrated by taking friends out for drinks. With fewer title changes, SK Telecom employees have fewer opportunities to host a party. "My friends are really upset by that," Mr. Im says.</span></td></tr></table></div></tr></td><tr><td colspan=99 class=) |
