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INTRODUCTION

In the past few decades, South Korea has transformed itself from a destitute, war-torn, agricultural country, into a modern, industrialized nation. In 1964, the average worker in Korea earned only US$100 per year, less than the average Indian laborer. Today, Korea is an advanced economy with a GDP per capita of over US$13,500; its economy grew an estimated 8.5% in 2000. Though plagued by economic difficulties in recent years, South Koreas economic performance and growth over the past 40 years has been nothing short of a miracle.

An important part of Koreas success has been the talents and hard work of her people. Koreans are extremely well educated, and the country has the highest ratio of PhD candidates to population of any country. Students face fierce competition in college admission tests. More than 90% of high school students proceed to higher education, making competition for admittance to top schools extremely tough. Students are also showing more interest in Western education, particularly women. For example, between 1994 and 2000, the number of Korean women taking the Graduate Management Admission Test (GMAT), required for entrance into Western MBA programs, increased by 227%. In sum, Korea is blessed with an extremely well educated and talented workforce.

ECONOMIC TURMOIL AND RECOVERY

Though Koreas economic and development experience can be described as nothing other than a success, in 1997 Korea was hit hard by the Asian Financial Crisis (AFC). The collapse of the Thai baht in mid-1997 led to a chain reaction throughout Asia and the world. Koreas currency, the won, also collapsed, GDP growth plummeted, and Koreas unemployment rate jumped from 2.6% in 1997 to 6.8% in 1998. Although the economy recovered relatively quickly, the unemployment rate still hovers around 4.5% -- great by Western standards, but double the Korean pre-crisis figure.

In its efforts to recover from the crisis and ensure that it is not repeated, the Korean government is trying to create an economic structure suitable for an advanced economy. It has focused more on globalization, integrating itself into the world economy, and creating a beneficial environment for foreign investment. The government plans deeper economic restructuring for 2001, including an overhaul of the chaebol, forcing them to abide by more stringent regulations. The government has initiated several programs in order to increase foreign direct investment, such as purchasing land in an industrial complex for exclusive lease to foreign firms. In addition, because labor-related disputes are among the most serious problems that foreign firms are faced with in Korea, the government offers a labor management program that includes government consultants and informational sessions on such issues as severance pay, union-related issues and government policies that support foreign companies.

RECRUITING IN TODAY'S ENVIRONMENT

Traditionally, large Korean companies recruited white collar personnel directly from colleges and universities through open screening exams offered en masse once or twice a year. In 1988, 76.8% of college graduates hired by the 50 largest business groups in Korea were recruited through these mass examinations. Another 21% were recruited through referrals and recommendations. Smaller companies have typically gone through the time and cost consuming routine of running ads in the mass media, receiving applications, and screening hundreds of applications in search of qualified candidates to hire. Though foreign firms often used executive search firms to fill positions in Korea, this method was not popular with local companies until the mid 1990s.

With long-term, lifetime employment crumbling and increased labor mobility, recruiting methods in Korea are changing. Many individual workers now regard job changes as a way of upgrading their personal value. Others have no choice -- layoffs have forced them to reconsider their views towards job changing. For Korean companies, the new labor environment means that traditional recruiting methods are no longer always relevant, making executive search firms more popular. In addition, some companies that traditionally utilized seniority-based personnel systems have moved to merit-based personnel systems.

For firms searching for qualified white collar employees in Korea, there are three major types of candidates: locals, expatriates, and returnees. The merits and drawbacks of each type of candidate are explained below.

Local Employees

As mentioned, Koreas workforce is well trained and well educated, and recent layoffs and increased unemployment have made hiring easier for foreign firms. In addition, Koreas traditional lifetime employment system has deteriorated markedly since the crisis, making it easier for foreign firms to hire top candidates. That said, Koreans still generally do not job hop, and long-term job security remains quite important. Thus, foreign companies must convince potential employees that their organization plans to conduct business in Korea for the long term and that the company is willing to invest in training for local employees. In addition, creating a local presence is often essential to ensure a comfortable working relationship that can withstand occasional bouts of anti-foreigner sentiment that develop in the country. Many foreign firms do this successfully by including some Koreans in management, designing country-specific policies and procedures, and working to improve the companys long-term image.

In seeking to recruit qualified Korean employees, foreign companies have found that they must offer salary and benefits packages better then those provided by Korean employers. As the pay and working conditions of domestic companies improve, foreign employers must also offer additional incentives, including greater opportunities for advancement. Finally, foreign employers must overcome other disadvantages that Korean managers perceive in working for non-domestic companies. These perceived disadvantages sometimes include the absence of personal relationships with peers and superiors, a weak reputation or image in the local economy and sometimes uncertain business prospects. The Korean company functions as more than merely a workplace; rather, it acts like a second family. In order to attract the best candidates to your firm, you must establish this type of relationship with your local employees.

Expatriates

Hiring expatriates to work in Korea is an alternative for foreign companies who prefer not to rely solely on Korean employees. Expatriates, however, generally require significantly more benefits than locals, which dramatically increase the cost of hiring them. However, expatriates are not taxed on housing costs and their expatriate service premium, provided these do not exceed 20% of their pay. In addition, effective April 1, 2001, an agreement between the United States and South Korea eliminated dual social security coverage and contributions, which were costing U.S. and Korean firms employing expatriates tens of millions of dollars in taxes. Thus, while expatriates remain quite expensive, they are not quite as costly as they once were.

In principle, the Korean government tries to restrict employment of expatriates in Korean firms to positions for which no qualified national is available. Thus, most expatriates work either as managers in foreign companies or joint ventures or as highly skilled specialists in Korean firms. Generally, expatriates are admitted to a country on the basis of prearranged employment under the control of the Justice and Labor Ministries.

Returnees

A final alternative for foreign companies is recruitment of returnees -- native-born Koreans who have studied, worked or even taken citizenship in other countries and want to return home to pursue greater employment possibilities. A growing number of such people, particularly from the United States, are returning to Korea to fill management positions. Korean returnees want to return to Korea for a number of reasons, including: (1) to be closer to their families; (2) for nationalistic reasons; and (3) often the jobs they are offered in Korea are of higher stature and pay than those in the U.S.

The key advantage to foreign companies in hiring returnees is that they are well versed in both Korean and Western business practices, culture and language. Returnees often request compensation packages that are a hybrid of local and expatriate compensation. In other words, they are generally more expensive than local hires, but less expensive than traditional expatriates. Given their bilingual, bicultural abilities and skills, returnees often (but not always) prove to be well worth the extra cost.

CONCLUSION

Korea is still suffering from the lingering effects from the AFC. Unemployment levels have fallen since the crisis subsided. However, they have yet to recover to pre-crisis levels. Although the government is demanding that employers take on more workers in the first half of 2001, companies are watching the economy before they add any new recruits. In fact, many companies are laying off their present employees as part of restructuring plans. Additionally, companies have scaled back their recruiting, with the majority now turning to need-based, rather than on-going hiring (which was traditional at large chaebol and other firms). In short, todays environment makes it easier than ever for foreign firms to hire top employees in Korea. However, firms must still be mindful of Koreas culture and business practices in hiring local employees. Other recruiting options available to employers are expatriates and returnees. Returnees can be particularly valuable, as they embody all the benefits of locals and expatriates at a reasonable cost.

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