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The "reduction of working hours" being phased in from this July is the biggest topic for Korean companies. With work-life balance now a current of the era, the policy is welcome for shedding the country's reputation for overwork and giving workers an evening of their own — but for the companies that have to apply it right away, the burden is not small.
The additional financial burden companies will have to bear from the actual reduction in working hours is estimated at about 12.3 trillion won for SMEs alone. In particular, workplaces with fewer than 300 employees are expected to face a labor shortage four times that of workplaces with 300 or more, and resulting production disruption is expected to average around 13%.
Park Jae-hyun, CEO of Human Consulting Group (HCG) — Korea's representative HR consulting firm — points out: "The reduction of working hours is a policy that is necessary and desirable in the long term, but there are several things to consider in how it is being driven." He adds, "As in the cases of advanced countries, while the overall framework should be set in law, a certain level of autonomy should be guaranteed when it comes to operation."
He continues, "There are various alternatives that fit each company's environment — flexible working hours (adjustable), selective working hours, compensatory leave, and so on — but what matters most is that countermeasures should be prepared based on transparent agreement, with both labor and management holding to the positions of 'understanding' and 'compromise.'"
The reduction of working hours is a policy that is necessary and desirable in the long term, but there are several things to consider
in how it is being driven. As in the cases of advanced countries, while the overall framework should be set in law,
I believe a certain level of autonomy should be guaranteed when it comes to operation.
The following is a Q&A with CEO Park.
HCG has grown steadily since its founding in 2001, becoming a homegrown Korean HR consulting firm that competes confidently with global consulting firms in the organization and HR consulting space. Over time, it has produced many HR specialists who have helped the HR consulting industry and HR practitioners, and has played a part in advancing the HR management of Korean companies.
HCG is recognized in the industry as the "HR consultant academy" — a leader in expertise in the organization and HR consulting field. It is also a name-and-substance leader in Korea's on-premise e-HR solution space. Many Korean companies have chosen and use our packaged e-HR solutions.
Through HR system consulting, HCG knows what client companies expect — that is, our clients' needs and the key success factors of HR — and we are the only HR Total Solution Provider in Korea that also delivers our own e-HR solutions, the tool needed to execute successfully. Just as we have done until now, HCG will continue to provide execution-focused consulting services that meet our clients' needs and expectations.
Requests for evaluation system improvement work are still common. Even companies that have already adopted performance-based HR systems have many needs for refining KPIs and evaluation elements, securing operating capability, and improving evaluation systems to reflect new trends like ongoing/continuous developmental evaluation.
Together with this, requests for building capability frameworks and linking them to individual development plans, career development, and training systems — and for building leadership capability frameworks and conducting leadership diagnostics — are also frequent.
Recently, requests for organizational diagnostic work to find mid- to long-term improvement roadmaps for organization and HR — to respond to the arrival of the Fourth Industrial Revolution and a rapidly changing labor environment — have also been increasing sharply. Requests for restructuring compensation systems in line with reduced working hours, organizational culture diagnostics and development work, and introducing employee stock option plans as long-term incentives have also been coming in one after another.
The reduction of working hours is a hot potato. There are many voices saying that the methods and pace of reducing working hours should not be uniformly set in law but should be left as much as possible to the autonomous agreement of labor and management.
It is a policy that is necessary and desirable in the long term, but there are several things to consider in how it is being driven.
Personally, I think that while the overall framework should be set in law, a certain level of autonomy should be guaranteed when it comes to operation.
In most advanced countries, working hours are in fact decided through autonomous agreement between workers and employers.
In Europe, the maximum allowable working hours are set in law, but the actual working hours that affect workers are decided through nationwide industry-level collective bargaining agreements. Through this process, most European countries agree on weekly working hours within the 35–39 hour range.
In the UK, the US, and Japan, unlike in Europe, unions are dispersed by workplace, and nationwide-scale collective bargaining does not take place. As a result, working hours in these countries are relatively longer than in EU countries. As an example, in the US, federal law sets a 40-hour standard workweek and requires 1.5x OT pay for any time exceeding it, but the maximum allowable working hours are not set, and most workplaces decide them through autonomous labor-management agreements. In other words, indirect regulation is applied through OT rules.
In Korea, indirect regulation — which sets a 40-hour standard workweek and requires payment of overtime — is mixed with direct regulation that sets the maximum allowable working hours. But the biggest issue here is that many workplaces use the comprehensive wage system to enter into wage contracts that effectively obtain labor far exceeding 40 hours a week without paying overtime.
When that happens, the indirect regulation requiring overtime pay when 40 hours per week is exceeded effectively loses its force. The comprehensive wage system is suited to roles that are rewarded based on results grounded in expertise and creativity — like managerial or professional positions. But in Korea's current labor environment, it is excessively widespread even among simple office workers and production workers who should be compensated for additional working hours. This is an area that should be improved going forward.
The labor environments and cultures of the West and Korea — and the immediate issues each is facing — are clearly different. In the end, the labor patterns optimized for a company are best understood by the parties at that company, and ultimately, like advanced countries, our working hours should also be decided based on labor-management agreement.
But in a reality where many companies still work far beyond the maximum allowable working hours and where corresponding compensation is not paid through unreasonable wage contracts, the priority is to first clearly set the maximum allowable working hours in law. In step with that, it is important that companies themselves move quickly toward voluntary cultural transformation — strict measurement of working hours, efforts to reduce overtime and holiday work, and transparent labor-management agreement processes.
Many of the companies affected by the reduction of working hours are companies where labor is concentrated in specific seasons — what is called seasonality. For companies with seasonality, the most realistic alternative to consider is the adjustable working-hours system. This is a method that allows you to set a defined period and calculate working hours by averaging the work time that occurred within that period. Through this, you can save on the overtime pay costs that would otherwise pile up during peak business periods.
Together with this, the selective working-hours system — which lets the worker themselves flexibly manage daily working hours — and the compensatory leave system — which compensates accumulated overtime with leave rather than overtime pay — are also approaches that can be used at companies that face workforce difficulties due to peaks and troughs in the business cycle. There are various alternatives that fit each company's environment, but what matters most is that countermeasures should be prepared based on transparent agreement — with labor and management holding to the positions of "understanding" and "compromise."
As you know, the purpose of blind hiring is to secure "fairness in recruiting" by introducing a job-capability-centered recruiting process that excludes discriminatory factors like education, region of origin, gender, and physical characteristics.
For blind hiring to succeed not only in securing fairness in recruiting but also in the effectiveness side — "selecting the top talent that fits the organization and the role" — the prerequisite is to first build the job descriptions and capability requirements per role that form the basis of job-centered recruiting. These materials need to be made available to applicants so that they can know what capabilities are required for what jobs and apply accordingly.
The next step is to have selection tools optimized to effectively verify capability holdings, based on the prepared per-role capability sets. A cost-effective selection tool is the structured interview method.
This tool minimizes evaluator subjectivity by systematically defining the components of the interview in advance — capability-based question structure, evaluation criteria, procedures, time — and is effective at probing for evidence of an applicant's capabilities. It is the selection tool most widely adopted by companies.
Finally, just as important as advancing these selection tools is securing and developing a well-trained pool of experienced and capable recruiting specialists and interviewers. However good the tool, if the people who use it are inexperienced, the goal cannot be achieved.
The words "creativity" and "innovation" have been thrown around so often lately that some people may find them stale. But the fact that they continue to be emphasized is because they are too important to overlook. And yet, despite the importance of the topic, there do not seem to be many companies that approach it properly.
Many companies stop at building an atmosphere that supports creative activity — work environment, work patterns, and programs that stimulate and recognize creative activity. This is a "surface-skimming" approach. To truly taste the inside, you must first align the details of your HR system in that direction.
For example, when you do a root cause analysis on companies that have failed to build a culture of creativity and innovation, many cite "a culture that does not tolerate failure" as the cause. In such cases, the root cause that makes people fear failure and the disadvantages that come with it — and therefore avoid challenges — must be removed first.
The value system of "take calculated risks and challenge boldly, and if you fail, learn from the failure" must be clearly reflected in the company's core values and capability framework, and connected to capability evaluation. Of course, the level of reflection will differ by job or job family.
One thing I would add is that for a successful change to a creative organizational culture, you must continue all-around effort over a long period. All-around effort requires not only continuous improvement of systems and programs but also a monitoring system driven by strong executive commitment. Periodic pulse-check tools must be in place so that, based on feedback, you can confirm where you stand, push along inadequate improvement work, and resolve new issues. Unfortunately, many companies neglect this kind of follow-up work more than you would think.
I remember an overseas research finding that nearly 60% of employees responded "the evaluation system is an inefficient waste of time."
The situation in Korea is unlikely to be very different. Many employees see evaluation as bothersome additional work, and accordingly, some experts openly speak about the uselessness of evaluation.
The main causes of the failure of traditional evaluation systems are intermittent annual processes, a focus on rating and ranking, and time-consuming, formulaic evaluation templates — through all of which, evaluation systems run on a "work over here, evaluation over there" basis.
Recently, among leading Silicon Valley companies — Facebook, Apple, Google, Amazon, and others — more and more are escaping traditional evaluation systems and moving to new ones. The direction of the new evaluation systems is to bring the original purpose of the evaluation system — that is, the individual performance management system — back to promoting "substantive performance improvement" and "employee development."
To pursue substantive performance improvement and development through the evaluation system, we have to break out of the annual rating and ranking method and shift to a developmental approach centered on coaching and feedback that takes place as needed. Rather than "work over here, evaluation over there," the focus should be on aligning everyday work with performance management activity. For this, instead of a time-consuming and formal operating method, we should apply a simple, immediate process management method.
There are already many IT environments being built that can realize this new evaluation paradigm.
HCG also has functions to realize the new evaluation paradigm — agile performance management for ongoing/continuous evaluation and crowd-sourced performance review that manages performance based on the recognition and feedback of multiple parties connected through the work — and is preparing to launch "Performance Plus," a specialized cloud platform for performance management.
While there are many alternatives in response to the reduction of working hours —
flexible working hours, selective working hours, compensatory leave, and so on — what matters most
is that countermeasures should be prepared based on transparent labor-management agreement, holding to the position of "mutual flourishing."
In a rapidly changing environment, innovation is required not only at the company level but also at the individual level. The HR environment will also change rapidly.
The jobs and types of talent needed for company survival will change, as will the way work is done and the way motivation is delivered. Unpredictable new approaches may also emerge.
But however much things change and however hard prediction becomes, the human — or the human element — cannot be completely removed from business. The essential elements of HR will still exist, and to succeed in the relevant business, the key success factors based on the essence of HR must be secured.
I recommend HR practitioners — in the sense of "preserve the core" — start studying new fields like behavioral economics and cognitive psychology that have been emerging recently, instead of staying in past traditional HR theory, in order to better understand human beings.
Beyond this, to perform an active HR role in a process of industrial restructuring, HR practitioners need to take an interest in understanding new businesses and technologies, and even in HR-area innovation that uses technology.
That is, in the sense of "stimulate progress," HR practitioners need to take on the basic understanding and acquisition of new technology, regardless of the industry they currently work in — finance, manufacturing, IT.
Personally, I have recently been recommending to those around me that they learn a programming language regardless of their occupation. Not everyone needs to become a computer programmer, but understanding a programming language brings many benefits — both for understanding IT and for developing a business.
A year ago at an internal workshop, I discussed with our employees the new landscape of professions that AI, big data, and technology innovation will bring. Like in legal and accounting services, in the not-too-distant future the management consulting field will also see machines replacing much of the work done by human experts.
The HR and organization consulting field will also break out of the current "craft" approach, pass through the stages of standardization and systematization, and ultimately evolve into an online service form.
To respond to this change, HCG is pursuing an HR platform business strategy — systematizing the experience and methodology accumulated through 17 years of consulting for hundreds of companies, restructuring the e-HR solution business into a cloud business, and ultimately delivering the content of system consulting and the tools of e-HR solutions through a single portal.
We started an internal project to drive this two years ago, and we will soon release the first output of this work.
The fact that, since the early days of our founding, we have built both the system consulting field and the IT solution field at the same time also connects to this big picture.
Please continue to watch HCG's ambitious moves — "Start Small, Think Big."