Management 101: Lessons from Seoul

Management 101: Lessons from Seoul


Seoul
has found a way to help companies deal with rising competition and
disruptive layoffs. Business 2.0 wonders why Washington can’t do the
same.

By Jeffrey Pfeffer, Business 2.0 Magazine columnist

August 15 2007: 5:40 AM EDT

(Business
2.0 Magazine) — We’ve all seen the kind of havoc that borderless trade
can wreak on an established economy: the dislocation of whole
industries, for starters, and millions put out of work.

To
combat the turbulence in our economy, the U.S. government is doing what
it’s always done, providing funds to retrain displaced workers and then
relying on the free market to reallocate labor and capital.

Yet the strategy continues to fall short in a couple of key areas.
First, while labor and capital are being "reallocated," they’re often
idle — which in the case of labor means unemployed. Second, statistics
suggest that while most employees who lose their positions to overseas
rivals wind up with new jobs, the new ones typically don’t pay as much.

On a recent trip to Seoul,
I saw a country responding to the disruption caused by foreign
competition in a very different way. A little over three years ago, the
government of South Korea, in conjunction with the Korean Labor
Institute, launched the New Paradigm Center, a government-funded
research and consulting organization with a mandate to study, consult
on, and promote people-centered management practices, primarily in
small and medium-size enterprises.

NPC’s literature lists a
long series of programs and goals, including investing in employee
training, team building, reducing work hours, increasing organizational
trust, raising the level of employee satisfaction and engagement, and
improving communication so employees understand their company’s goals
and precisely what is expected of them.

To date, the NPC has worked with about 170 companies, some facing imminent financial ruin. The results are impressive.

NPC’s
client companies have increased sales an average of 7 percent and
boosted profits more than 26 percent. The companies also report a 60
percent rise in quality of products and services and a substantial
reduction in accidents and injuries through revamped procedures.

NPC’s
client companies also more than doubled the number of hours spent on
training and invested nearly 50 percent more in learning and education.
NPC executives told me that their companies are enjoying better
industrial relations, increased trust and job satisfaction, and greater
customer satisfaction. Many clients managed to grow their employment
rolls while cutting back on average work hours.

One example is Good Morning Hospital, a 400-bed facility in Pyongtaek that was struggling to reduce work hours and fill beds.

NPC
ran employee orientation programs and offered courses in nursing
skills, stress management, foreign languages, and computer use. Hours
decreased, new jobs were created, and revenue rebounded.

Note
that this type of government aid is not what is usually meant by
"industrial policy." The government is not mandating what industries to
get into or out of or directing investment in particular businesses or
technologies. It’s merely providing assistance to help companies be
more effective and competitive.

In today’s knowledge-dominated economy, that usually means providing advice on how to make the employees crank out better work.

During
the 1990s, the U.S. Department of Labor, under former secretary Robert
Reich, tried similar approaches, but they didn’t last because of budget
cuts and the belief that it’s up to companies to figure out how to
manage their workforce.

Our leaders also assume we don’t need assistance to encourage companies to better manage human capital.

But
having seen what one organization has done in a tough environment, I
disagree. The NPC has worked wonders. And judging from our current
levels of employee disengagement and distrust, America could use a new
paradigm too.

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