McKinsey Seoul Office Head Talks about His Stay in Korea

“During my three and a half year stay in Korea, I heard people crying for innovation and change; they were, however, big on words and small on actions. I see constant repetition of unproductive discussions on labor, education and corporate regulations. The next Korean government should be able to put these words into action,” said Stephen Bear, director of world renowned consulting firm McKinsey’s Seoul Office, in a recent interview with Dong-A on his experience in Korea. “Korean economic growth will regain its speed if the government comes up with the fundamental answers to current economic woes promptly,” he added.

Mr. Bear, who took the helm at McKinsey’s Seoul Office in January, 2004, will be moving to the Toronto Office as chairman of McKinsey’s North American region, beginning July 1.

In his interview with Dong-A, he did not show any hesitation in sharing his acute observations. Nevertheless, his unsparing advice revealed his affection for the country. Whenever his sentences began with “Korea”, he more than often used the collective term “we” as native Koreans would do. He added that he would miss Sundubu Jjigae (Uncurdled Tofu Stew) and Ddeokbokki – some of Korea’s favorite dishes – when he leaves Korea.

The interview was conducted last Thursday at McKinsey’s Seoul Office in the Seoul Finance Center, downtown Seoul.

- Impression on the Korean people

“Koreans are greatly devoted to their country. It is a great advantage, but if too much, it may turn into blinding nationalism which may hinder productivity. A case in point is the recent Loan Star issue. I was bewildered at how Koreans expressed the incident as a ‘leak’ in their national wealth. It was inappropriate. It also exerted a negative impact on foreign investment in Korea.”

- Foreign Direct Investment (FDI)

“It is true that there is a decline in FDI flow in Korea. Foreign corporate heads and investors tell me that they think twice about making investment to Korea. Companies want what is best for them. In this regard, the Korean government should make sure that various regulations and labor disputes are not in their way.”

- Korean companies: Strengths and weaknesses

“I admire Korean companies’ passion. They set high goals to achieve growth and take bold actions to that end. High-quality labor is also an advantage. Koreans work hard through the night and get things done no matter what. The problem is the hierarchical decision-making process and promotion system is based not on workers’ performance but on seniorities. Such practice hinders creation of new ideas, leading to lackluster productivity. Furthermore, Korea is far from developing an employment model that attracts the best brains worldwide. Above all, market sensing mechanism is almost non-existent in Korea, meaning it lacks the ability to stay ahead of the market by understanding the market’s potential needs.”

- Case in point

“In too many cases, we (Korea) fail to lead the market although we (Korea) create better products. A case in point is the MP3 market. Successful global companies know how to collaborate with others in the world market. In contrast, Korean companies are not sure how to manage a global company. Not even close. They fail to understand each distinctive market because in Korea, large conglomerates take care of everything by themselves. Global companies such as Apple understand the true meaning of working together, whereas we (Koreans) tend to do everything within our boundaries.”

- Lack of creativity?

“There are many types of creativity. One is to create products and services from the scratch. The other type is benchmarking others and creating an upgraded version of the original. We (Korea) are strong at the second type. This is a great advantage and adds to our competitiveness.”

- Limits of benchmarking: low profit?

“The Korean economy is described as trapped in a ‘nutcracker.’ Korea’s advantage in the past was its ability to roll out products promptly on a massive scale. This is especially so for mobile phones, TVs and memory chips. At that time, Korean companies yielded relatively high profits as opposed to production cost. But now, profit is going down because production cost is skyrocketing. Labor cost, in particular, headed North without proportionate productivity growth at a speed much faster than those of Korea’s competitors. Scarcity in ideas for high value-added creations adds to Korea’s difficulties and saving production cost is not very easy either.”

- Advice as a head of a consulting firm in Korea

“Korea is well aware of its problems. To my disappointment, it was all words and little action on issues regarding education, environment, labor dispute and regulations. The next Korean government should be able to put these words into action”

- Korea-U.S. Free Trade Agreement (FTA)

“The Korea-U.S. FTA will promote overall economic and market growth. FTAs have a positive impact on export-driven economies like Korea’s. Our (Korea’s) economy should facilitate growth in the service sector while maintaining its export-led economy.”

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