1. Copyright 2000 - South-Western College Publishing Module 2 Korea Case - 1 DAEHAN CORPORATION: OVERVIEW Daehan must layoff 20% of their workforce Same problem(?) in US & Korean employment systems - Downsizing during matured growth -Asian economic crisis Different employment systems require different approaches Understanding the HRM strategies of Daehan: -past vs. present

2. Copyright 2000 - South-Western College Publishing Module 2 Korea Case - 2 UNDERSTANDING DIFFERENT EMPLOYMENT SYSTEMS (1) Traditional Korean HRM assumptions - Paternalistic approach - Lifelong employment - Seniority based systems Korean Labor Relations - before 1987: almost no functioning union - 1987 ~1990: too many strikes after democratization - after 1990: stabilization The role of chaebols in Korean economy

3. Copyright 2000 - South-Western College Publishing Module 2 Korea Case - 3 UNDERSTANDING DIFFERENT EMPLOYMENT SYSTEMS (2) Characteristics of the Korean labor market -Horizontal vs. vertical Layoff policies -Legally possible under New Labor Laws -Rarely applied before economic crisis Social welfare system for the unemployed -Insufficient unemployment benefits

4. Copyright 2000 - South-Western College Publishing Module 2 Korea Case - 4 CHANGING CHARACTERISTICS OF KOREAN EMPLOYMENT SYSTEMS Changes since the 1990s for global competitiveness Strive for lean and flexible organization -Globalization & slow economic growth Making balance between the seniority-based systems and the performance-based systems Main triggers -Employee needs and values are changing -Employers need to develop different competencies -Economic crisis

5. Copyright 2000 - South-Western College Publishing Module 2 Korea Case - 5 WHAT TO DO AT DAEHAN? How to downsize while maintaining the morale and commitment Layoff vs. voluntary early retirement plan - Never a layoff on this scale before -Limited options for those who have to leave -Message for those who remain? Changes in HRM strategies:transition into a new HRM system - From the seniority based system to the performance based system

6. Copyright 2000 - South-Western College Publishing Module 2 Korea Case - 6 ROLE PLAY: UNION How to minimize the number of people to lay off? How to maximize the severance pay? Will Daehan allow voluntary early retirement for all laid off employees? Can Daehan afford a voluntary early retirement plan at this time ? How to deal with changes in HRM Policies?

7. Copyright 2000 - South-Western College Publishing Module 2 Korea Case - 7 ROLE PLAY: MANAGEMENT How to deal with the union’s demands including a possible strike? Compare Savings in labor cost by reducing 20% of workforce vs. One time financial burden of paying any special incentive packages: -Short term implications -Long term implications How to motivate those who remain ? - Need for new HRM strategies - How to get concessions from the union?

8. Copyright 2000 - South-Western College Publishing Module 2 Korea Case - 8 WHAT IS THE BEST FOR BOTH UNION AND COMPANY? The need to use different approaches under different employment systems Minimize the negative consequences from the downsizing processes -Avoid unnecessary confrontation -Maintain morale and motivation How to successfully manage the changing HRM strategy -Short term action plans -Long term strategies