Human Resource Management among Korean Affiliates in the Dutch Consumer Industry

Question

Human Resource Management among Korean Affiliates in the Dutch Consumer Industry
During the 1990s, many Korean companies established logistics locations in the Netherlands. The Korean multinationals were attracted by the Dutch tax system
(which was beneficial to foreign companies), the broad knowledge of the English language and the openness of Dutch society. Despite these advantages, however, all Korean companies experienced difficulties as a result of societal differences, and some closed their Dutch plants after just a few years. Korean managers suggested that cultural differences, combined with the differences in laws and regulations, and especially the unwritten rules, made it extremely difficult to manage their Dutch sales and distribution
plants.

Similarly, Dutch managers pointed to societal differences that made it difficult
for them to work in Korean subsidiaries. Dutch managers experienced the
relationship with their Korean superiors as tiring in the sense that they had to
explain to them time and again ‘the Dutch way of working’. ‘This requires patience
and perseverance,’ a Dutch manager comments. In the following we will take a
closer look at the difficulties that Korean and Dutch managers experience in
working together in Korean subsidiaries in the Netherlands.
A major area in which difficulties were experienced was in human resource
management. Korean human resource management policies are quite different
from Dutch ones, and Korean managers admit that they often have a hard time
understanding and accepting these differences. The problems had already started
during the recruitment phase. Korean managers asked candidates about their
medical history, sexual preferences, and so on. In fact, some candidates were
turned down for giving ‘undesirable’ answers to such questions. These questions
are part of standard recruiting practices in Korea; hence it was quite normal for
Korean managers to ask them and to turn down candidates when undesirable
answers were given. Such questions are, however, illegal in the Netherlands and
candidates could take companies to court when discriminated against on the
basis of their answers to them.
Further, Korean management mentioned that they could not understand why
companies did not have access to employees’ medical files in the Netherlands. In
fact, Dutch ‘sickness’ laws in general were not understood. In the Netherlands, an
independent doctor needs to be appointed and has to verify the ability of
employees to work when illness is reported. Korean management found it upsetting
when the doctor, after declaring that an employee was not fit enough to work,
refused to explain the employee’s physical condition. Moreover, Korean management
never really understood why employees could stay home because they had
a cold! ‘Korean employees will come to work until they are truly unable to do so,’
Korean managers argued. Korean views with respect to Dutch illness laws and
the like are such that they distrust Dutch employees who call in sick too often.
Initially, some Korean companies had a hard time recruiting and retaining
good employees because of their reputation as bad employers. This image was
caused partly by Korean human resource practices. For example, some Korean
firms dismissed employees without (according to Dutch standards) an acceptable
reason. Moreover, some Korean companies maintained a policy of hiring
employees on short-term contracts (three weeks) so that they could dismiss them
whenever necessary. In Korea, employees can be dismissed when, at the end of a
day’s work, they have been unable to meet that day’s goal or haven’t performed
as they were expected to. Against this background, a Korean manager said that
he couldn’t understand the lack of loyalty of Dutch employees. The manager complained
about high employee turnover and the fact that employees did not
hesitate to switch jobs when they got a better offer.
Korean management was usually experienced as quite authoritarian in their
dealings with employees. ‘Especially, in the beginning’, a Dutch manager states,
‘Korean management would call their subordinates by clicking their fingers and

pointing at the doors of their offices.’ The Dutch manager had a hard time
explaining to them that this attitude was considered rude in the Netherlands.
Moreover, employee evaluations were an annual event. Korean management
keeps a list of all the comments and criticisms they have and then present them
all at once during the yearly evaluation. Dutch employees, who hadn’t received
any criticism or comments throughout the year, felt completely overwhelmed.
During the initial phases of most Korean companies in the Netherlands, in particular,
they experienced high turnover rates of local managers and employees as
a result of these differences in behaviour and perception. ‘The only way to avoid
frustration and to be able to work together,’ argued a Dutch manager, ‘is to be
aware of each other’s customs and practices.’
Another problematic point proved to be working hours. Dutch employees
generally work from 9 am until 5 pm. In Korea, employees will work until the job
is done, regardless of the time. Initially, this difference led to serious misunderstandings.
Particularly when companies were in the start-up phase, Korean
expatriate managers worked long hours and expected the same from their Dutch
personnel; 12-hour days and working until around 10 pm was considered normal
and was, in fact, expected by Korean management. Dutch employees, in contrast,
saw this as extreme overtime. Dutch staff had to constantly explain what were
considered ‘normal’ working hours in the Netherlands, as well as Dutch expectations
about work in order for Korean management to understand employee
behaviour. In such cases, a question much asked by Korean management was
‘But why can’t they do this for the company?’
In the Netherlands, there is also a clear distinction between functions; jobs
are clearly described in terms of functions, and employees are reluctant to
perform any job outside those descriptions. In Korea, people are assigned to a
department and can be employed in any job in that department, from cleaning to
book-keeping. Hence, Korean management, wanting to reorganize jobs between
employees or assign extra tasks outside the regular functional duties of an
employee, experienced difficulties.
Furthermore, in Korea ‘the boss is the boss’. He can do anything he pleases.
He can order people to do certain tasks at any time of day and they will usually
work until they are finished. He can hire and fire whenever he feels it essential.
Initially, Korean expatriate managers expected the same to hold for managing a
workforce in the Netherlands and were quite surprised about the laws and regulations
that prevented them from acting in this way. The importance attached to the
hierarchical ranking is demonstrated in yet another way: when top management
from Korea visits the Dutch subsidiaries, the Korean managers of the subsidiaries
seem quite submissive to their superiors from Korea; they would only speak and
comment when specifically asked to.
Moreover, Korean management does not accept criticism; it is considered an
attack on their honour, or face. Criticism was something Korean managers had
to get used to in the Netherlands, as Dutch employees tend to be more critical
and direct than Korean staff. Nevertheless, even when they made a mistake and
were criticized for it, Korean management would not apologize. Apologizing to subordinates is akin to admitting that you are wrong, and leads to loss of face for
Koreans. A Dutch manager once came in to work to find a present on his desk,
telling him implicitly that the Korean manager had made a mistake. Honour and
face are important in Korean management.
Moreover, Koreans take a long time to build trust. ‘It takes years before they
trust their Dutch managers and delegate some [more] important tasks to them,’
one Dutch manager commented. It also takes time and trust before Korean management
will listen to the ideas of Dutch managers and adopt them in the
organization. What often happens is that when, initially, Korean management
doesn’t trust the Dutch managers, they carry out the tasks that are considered
important themselves. Here are some examples.
One of the Korean companies under investigation mainly assembles computers,
according to the customer’s specifications. A Dutch manager is in
charge of acquiring the parts to assemble these computers. In the beginning,
however, Korean managers who had more information on new projects
ordered the parts without informing the Dutch manager. Parts would be
delivered, and the Dutch manager had no idea where they came from or who
ordered them.
A Korean operations manager has a good overview of the production lines from
his office. In the beginning, every time he saw something that he believed should
be organized differently, he came down from his office and started to interfere
with the procedure on the production line. He would tell the workers what to do,
and when and how to make changes. The Dutch manager responsible for the
production lines and production-line workers was not consulted. The Korean
manager didn’t feel it was inappropriate to interfere with production directly,
without telling or consulting the production manager. The Dutch production
manager would sometimes come back to the factory floor and find his line completely
reorganized. Indeed, at one point, the Dutch manager commented ‘Well,
I think I’ll leave now, since my job can be done without me anyway.’
Korean managers tend to distribute tasks as problems occur. They focus on
one goal that is important at the time and disregard all the other tasks in
progress. However, when the task they have asked to be performed first is almost
finished, they start enquiring as to why the other projects are falling behind. It is
argued that Korean managers have a rather short-term focus and are essentially
occupied with ad hoc project management.
Moreover, Dutch employees also experience communication as a considerable
barrier to smooth relationships between the Koreans and the Dutch. Korean
managers often have a limited working knowledge of English. However, language
is not the only obstacle. In addition, the way in which Korean management communicates
is different from the Dutch way. While the Dutch are direct and open to
all staff, Korean managers tend to consult each other and make decisions without
informing the Dutch employees. A Dutch manager recalls a case when potential
customers and business partners were informed of certain decisions while he wasn’t. This was a most embarrassing experience for him. Korean management,
on the other hand, said the Dutch were extremely direct in their communication
and did not accept orders. The Dutch complained that Korean management would
order something rather than request it.
Moreover, when Korean managers have complaints about performance or
when problems occur, Korean management will never confront their Dutch managers
in a direct way. The Korean manager assigned to confront the local
manager will first walk around a bit, then ask how things are going and talk about
various other subjects, while trying to approach the problem. A Dutch manager
comments, ‘By now, I recognize the “walk” and behaviour of Korean management
when they are assigned to talk to you about a problem, and I ask what their
problem is and how I can help.’
In the Netherlands, a company with over 50 employees is obliged by law to
install a works council (ondernemingsraad), in which employees are informed of,
evaluate and comment on certain company decisions. Initially, Korean management
experienced the concept as a threat to the company and, in some
companies, tried to stop employees from introducing this organization. Korean
management said they could not understand why their company needed a works
council since everything was fine. Korean management failed to understand,
even after several attempts from Dutch management to explain, that a works
council is meant to involve employees in decision-making and will not, as in
Korea, result in violent strikes. Korean management next hired a consulting firm
to inform them of the laws and regulations with respect to works councils and to
ascertain the necessity for them, as they didn’t trust their employees. Finally,
when a Dutch manager, who had a trusting relationship with his Korean superior,
accepted the role of president of the company’s works council, his Korean
manager felt betrayed, and asked him time and again how he could do this to the
company.
In general, it was admitted by both Korean and local managers that the
first five years of operation were difficult, and characterized by underperformance
due to the difficulties stemming from differences in practices and
customs, lack of trust, and so on. It was argued by both sides that improvement
of the situation depends very much on willingness on the part of foreign management
to delegate functions to local employees, and to adapt to local
customs and practices.

QUESTIONS:

1. Sketch briefly the main problems experienced by Korean managers in their
Dutch subsidiaries.
2. Identify, on the basis of these problems, some Korean societal features.
3. Explain in which EU countries Korean companies would experience similar
problems.

4. Explain in which countries of the EU they would avoid most of the problems.
5. Evaluate whether Korean companies would fit into the Japanese societal
environment.
6. Assess which of the Korean human resource practices could be applied in the
US context.

Explanation / Answer

Answer 1:

Main problems experienced by Korean managers in their
Dutch subsidiaries:

Answer 2:

Some Korean societal features that can be identified based on the problems mentioned in the given case are:

Answer 3:

Some of the EU countries Korean companies would experience similar
problems are:

Belgium, Austria, France, Germany and Luxembourg. There are similarities in the work culture, business etiquette and labor laws of these countries. These countries also favour formal arrangements in documentation and formalities.

Answer4:

Countries of the EU they would avoid most of the problems faced by Korean Companies in Netherlands include:

Poland, Hungary and Czech Republic.

Answer 5:

I believe that Korean companies will fit into the Japanese societal
environment because Japanese style of management practices are very similar to Korean firms.In fact it is also noticed that benevolent paternalism that is applied by Korean Companies for their white collar employees is similar to Japanese model.

Answer 6:

Korean human resource practices than can be applied in the US context is that of performance-based HRM.

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