Chapter 5. Meeting the skills needs of local SMEs in Gwangyang, Korea

In the context of Korea’s decentralisation of employment and skills policies, this case study examines the implementation of two programmes in the Gwangyang that address both skills supply and skills utilisation in SMEs: the Local Local-Based Job Creation Programme and the Consortium for HRD Ability Magnified Programme (CHAMP).

  
KEY FINDINGS
  • Over the past decade, the Korean government has moved to an approach that allows for more locally tailored skills initiatives, recognising that adaptation to local circumstances can improve the efficiency and effectiveness of delivery.

  • Improving how skills are used in workplaces may be an important complement to skills development, especially for SMEs which often have no dedicated human resource department, or may rely more on informal HR processes than their larger counterparts.

  • As the experience of the Gwangyang HRD programme shows, training that allows workers to move between different types of work in SMEs can increase employer satisfaction and lead to better employment prospects.

  • Large companies have a stake in improving the performance and productivity of the SMEs in their supply chains, which can be activated with strategic public support. The POSCO HRD consortium demonstrates how this can be done.

Background

Advanced nations, including those in the OECD, have been transitioning from centralised to localised policies for employment and skills development activities to secure national competitiveness while achieving sustainable growth. Korea has joined this trend of localising various policies for job creation and skills development as part of an overall effort to achieve balanced national growth by lessening the concentration of economic power in the capital. In the late 1990s, when the country was rocked by the Asian financial crisis, the country’s centralised employment policies came under criticism, accelerating the move toward more local employment and skills development policies (Jun and Lim, 2008).

Many scholars have questioned the effectiveness of Korea’s central government-led approach to employment and skills development, citing the following weaknesses. First, the centralised decision-making process for employment and skills development does not meet the local needs with respect to the selection of trainees and training methods, and does not sufficiently reflect the skills needed in the local labour market, potentially leading to a skills mismatch. Second, the central government–led approach hinders the capacity building of concerned parties including industries, workers, local governments, local non-government organisations (NGOs), and other related interest groups. Third, because this approach fails to reflect the unique circumstances and industrial structures of local labour markets, it can be problematic in terms of the greater policy objective of balancing regional growth (Jun and Lim, 2008).

In response to these criticisms and the trend toward localisation and decentralisation, the government has initiated a variety of local development policies with a growing recognition of the importance of ensuring that employment policies and programmes address local needs. As part of such efforts, regional employment deliberation committees have been established in 17 municipalities and provinces in order to address various local employment issues. Moreover, since 2006, the Ministry of Employment and Labour (MOEL) has supported local employment and skills development through the Local-Based Job Creation Programme (LBJCP) (MOEL, 2013). These policy measures have stimulated the creation of networks and enhanced local capacities. In particular, LBJCP stresses the role of local employers in skills development and utilisation to reduce skills mismatch in the local labour market.

Although this policy was not initiated in the context of local development policy, the Consortium for HRD Ability Magnified Programme (CHAMP) has also resulted in local employment and skills development. CHAMP was implemented in 2001 and has become one of the representative programmes that have contributed to the skills development of local small- and medium-sized enterprises (SMEs) through partnerships with conglomerates, employers’ organisations, universities, and other groups.

Sponsored by the MOEL, LBJCP and CHAMP have been recognised as key policy measures that address skills mismatches in the local labour market and contribute to local economic development in Korea. LBJCP and CHAMP are currently operating nationwide, with 482 projects for LBJCP and 161 training centres for CHAMP in 2015. Among the various programmes within LBJCP and CHAMP, this study will focus on two representative cases in the Gwangyang area: the POSCO Human Resource Development Consortium (for CHAMP) and the High-Skilled Human Resources Development Programme of Gwangyang’s Plant Industry (for LBJCP). These cases demonstrate the engagement of employers in the design and provision of employment and skills programmes at the local level.

Policy context for employment and skills development in Korea

Governance of skills and employment policies

In Korea, the MOEL is the central government body that oversees employment, skills development, and unemployment policies. It oversees the labour administration and labour offices operating in various regions. The ministry plans or creates employment-related policies, while its regional apparatus, the labour administration and labour offices, execute the policies. Such division of responsibilities is characteristic of the Korean government structure and is not limited to the MOEL. Under the traditionally centralised government structure of Korea, it has been generally accepted practice for the central body to undertake planning while the regional units execute the resulting policies or programmes.

Under such circumstances, the characteristics of each region were not readily visible to the central government. Although each region requires employment policies specifically designed for its unique situation, the central government-led policy planning has made it difficult to execute such an approach.

The MOEL has begun to realise that regional or region-based policies are the key to addressing the employment issues of a specific region. The MOEL officially acknowledged the importance of employment and skills development policies customised to each region in 2004 and decided to launch a research project in 2005. In early 2005, the MOEL partnered with the labour administration and labour offices and undertook basic research activities required for local labour markets and skills development projects. Based on the outcome of the 2005 research project, the MOEL has implemented several projects since 2006 to revitalise employment and foster tailored skills development in each region. The project is now referred to as the LBJCP, which will be discussed in more detail in the latter part of this paper.

In recognition of the need for greater decentralisation of employment policies, the MOEL made significant efforts in 2006 to reinvigorate the local employment councils by building a local employment governance structure. The local employment councils are chaired by the mayors or governors of the respective local governments and composed of representatives of labour and management, experts on employment issues, and relevant civil servants. In December 2007, an attempt was made to revise the Framework Act on Employment Policy with the aim of strengthening the role of the local employment councils in leading deliberations on local employment policies. This meant that major employment and vocational competency development projects that had been initiated by the MOEL would now be co-ordinated by the local employment councils, thus increasing participation at the local level. Local plans for competitive projects and training projects would be implemented after deliberations by the local employment councils.

In 2010, the local employment councils were integrated into the Local Association of the Representatives of Labour, Management, Government, and Community, which was another local governance structure that focused on industrial relations and local employment. Evidence of duplicated functions and participants between the Local Association of the Representatives of Labour, Management, Government, and Community and the local employment councils led to the decision to integrate the two. As a result, the association gained official legal status as the integrated body dealing with local employment, human resource development, and industrial relations in many regions. Since the integration, the association has taken the role of advising and deliberating on regional employment and skills development issues.

Skills mismatch in the Korean labour market

Skills mismatches are among the main challenges facing OECD countries. Recent data demonstrate that Korea faces the same obstacle, with the mismatch becoming even more severe in recent years. The labour skills mismatch index by occupation was 26.3 nationwide (2010-14 average, up from 21.2 in 2008-09) due to structural change throughout the industrial sector. Skills mismatches have worsened since the subprime mortgage crisis, as applicants for white-collar jobs have increased more sharply than the number of available positions (Kim and Kim, 2015).

At the same time, there is a clear mismatch between what is taught in the schools and what skills employers require. According to a survey conducted by the Korea Employers Federation in 2008, the amount of money a company spends on retraining a newly hired college graduate before he/she is assigned to actual work is about KRW 60.8 million over a period of 19.5 months. In particular, companies are facing a skills gap as baby boomers (those born in 1955-63) retire. Baby boomers account for around 14.3% (7.14 million) of the total population. Over the next decade, about 150 000 baby boomers are expected to retire from their primary jobs each year (MOEL News, 2012-7-21).

The following case studies will demonstrate various local initiatives that address these kinds of skills mismatch problems in the Korean labour market. These initiatives were mainly implemented through the engagement of industries in programmes to promote the development and utilisation of skills.

Case study: LBJCP and CHAMP in Gwangyang

Overview of Gwangyang

With 153 387 inhabitants, constituting 0.29% of Korea’s total population, Gwangyang is a major economic region in Korea’s south coast in South Jeolla province. It is the home of POSCO’s Gwangyang Steel Works, one of the largest facilities of its kind in the world. The city has grown as a manufacturing area as a result of developed infrastructure and favourable geographical conditions.

Gwangyang is at the centre of development of the Gwangyang Bay Area Free Economic Zone (GFEZ), which focuses on port container handling, steel production, shipbuilding, and leisure facilities. The GFEZ covers 92.7 square kilometres and with a three-phase development scheme expected to be completed over the next decade, is the third largest among the country’s six free economic zones, after Incheon and Busan-Jinhae. As of late 2013, 1 915 domestic companies and 164 foreign-invested enterprises are in the nation’s free economic zones, with 5.6% of these, (79 domestic companies and 39 foreign-invested enterprises) in the Gwangyang Bay Area.

The Gwangyang Bay Area, which stretches across the Yeosu, Suncheon, and Gwangyang cities of South Jeolla province and the Hadong region of South Gyeongsang province, was designated a free economic zone in 2003. The area’s proximity to China is one of its main geographical strengths. POSCO’s Gwangyang Steel Works, which claims to have the world’s largest capacity to roll out crude steel, and the Yeosu Industrial Complex, which produces 56% of all domestically produced petrochemicals, have helped make the GFEZ one of the most attractive economic regions for investors (The Korea Times, 2010/11/22). The percentage of foreign-invested enterprises among the businesses in the GFEZ is more than 20% greater than the national average.

By 2020, when the GFEZ is completed, the area expects to generate around KRW 164 trillion (about USD 141 billion) in production, directly or indirectly, and 66 trillion KRW in value added. As such, although the Gwangyang Bay Area accounts for only 15.3% of South Jeolla province’s territory, the area constitutes 61% of the province’s economy and 38% of its population.

Figure 5.1. Map of Gwangyang Bay Area
picture

Source: Gwangyang Bay Area Free Economic Zone Authority.

Over the past decade, Gwangyang Bay Area’s number of businesses, number of employees, and added value have grown by 2.71%, 1.74%, and 7%, respectively (see Tableau 5.1).

Tableau 5.1. Economic Indicators of Gwangyang Bay Area

2005

2013

Average annual rate of change

No. of businesses

   371

   472

2.71

No. of employees

29 290

34 221

1.74

Added value (KRW billion)

13 257

24 380

7.00

Source: Korea Statistical Information Service.

POSCO Steel Works in Gwangyang is the second steel mill established by POSCO in the country, following the mill in Pohang, Gyeongsangbuk-do. The mill is one of the largest steel plants in the world and features modern technology and leading facilities for steel manufacturing. It produces steel coil that is used to make bridges, iron structures, cars, refrigerators, and other products. Its production capacity averages about 18 million tonnes per year (Gwangyang city government homepage, 2016).

Under these geographical and economic conditions, Gwangyang expects to enjoy a high rate of employment, with the support of a variety of public policy programmes and various initiatives customised to the area’s industries. Both LBJCP and CHAMP, which focus on skills development and utilisation, have been implemented in this area under the names “High-Skilled Human Resources Development Programme of Gwangyang Bay Area’s Plant Industry” (hereafter referred to as the Gwangyang HRD Programme) and “POSCO Human Resource Development Consortium” (hereafter referred to as the POSCO HRD Consortium), respectively.

Gwangyang HRD Programme

Background

As discussed earlier, the government has strengthened local employment policies in response to the trend toward localisation and decentralisation. It has established and implemented policies suited to local characteristics in order to enhance efficiency and bridge gaps in skills supply and demand.

In this policy context, the MOEL initiated the LBJCP in 2006 to ensure that local areas take a leading role in designing and implementing their own job creation projects (MOEL, 2014). The programme was created to help local NGOs, academic institutions, workers’ and employers’ organisations, and local governments conduct research on their local labour markets and develop creative job creation projects. In 2014, the government selected 567 local projects through an open bidding process and provided them with KRW 77 billion in funding.

The LBJCP involves a variety of programmes specialising in creating job opportunities, promoting local employment, and developing the vocational skills of individuals in the local community. Related programmes and research projects are conducted by a consortium of non-profit corporations or non-profit organisations formed by local municipalities with the aim of addressing local employment issues. Tableau 5.2 provides an overview of the different types of programmes falling under LBJCP.

Tableau 5.2. Status and Proportion of Programmes

2010

2011

2012

2013

2014

2015

No.

%

No.

%

No.

%

No.

%

No.

%

No.

%

Specialised Programme

47

46.5

136

69.7

225

81.5

374

82

485

85.5

408

84.6

Package Programme

29

28.7

25

12.8

12

4.3

8

1.8

16

2.8

14

2.9

Employment Forum Programme

13

12.9

16

8.2

15

5.4

16

3.5

17

3

15

3.1

R&D Programme

10

9.9

3

1.5

8

2.9

41

9

32

5.6

13

2.7

Consulting Programme

15

7.7

16

5.8

17

3.7

17

3

16

3.3

Project-Typed Programme

16

3.3

Total

108

100

135

100

156

100

104

100

567

100

482

100

Note: The 2015 employment security fund for security guards and the 2010 infrastructure project were excluded.

Source: Joo (2015).

For specialised and package programmes (combination of a specialised programme and other programmes), a variety of standards and criteria have been developed with respect to training schedules, trainee recruitment and management, attendance and completion criteria, and employee management. The Employment Forum programme is jointly carried out by the local government, the regional job centre (public employment service centre organised under MOEL), NGOs or NPOs (civilian organisations) and labour relations institutes. The R&D programme features topics that are selected through prior consultation between the local ministry of employment and labour and local government in consideration of the needs of each region. The project-typed programme is a combination of multiple sub-programmes initiated by the head of local municipalities to keep election campaign promises and achieve local job creation as publicly announced (Joo, 2015).

The LBJCP has provided an opportunity to rethink the necessity and validity of local employment policies and has contributed to the development of capacities at the local government level. Moreover, the programme is meaningful in that it serves as an opportunity to better integrate local employment governance and the expand labour management participation as the central and local labour management organisations become more interested in local employment policies. Among a variety of projects nationwide, the Gwangyang HRD Programme was chosen as one of the best practices in 2015, and has been evaluated highly by the partners involved.

Main Features of the Gwangyang HRD Programme

The Gwangyang HRD Programme and the region’s employment-related agencies are providing training customised to Gwangyang Bay Area’s industry. The main objectives of the programme are to address worker shortages in SMEs and to help revitalise the employment of local youth.

One of the most important features of the Gwangyang HRD Programme is that the training courses are based on a demand-driven approach. Before opening training courses and recruiting trainees, the local employers’ demand is first determined through a survey. For instance, a 2015 survey on companies in Gwangyang Bay Area showed that 37% of 529 welding companies face a shortage of welders (Ha, 2015). As noted earlier, while Gwangyang Bay Area continues to grow in terms of the number of businesses and employees, SMEs suffer from chronic labour shortages.

To deal with these problems, the Gwangyang HRD Center, together with other partners, started to open training courses in 2008 to meet the demand of SMEs. Gwangyang HRD partners involve a variety of local actors with their own responsibilities (see Tableau 5.3). These partners include the Yulchon Industrial Complex, POSCO Outsources Association, Gwangyang Chamber of Commerce, MOEL, South Jeolla provincial government, and Gwangyang city government.

Even though POSCO is not directly involved in the skills development course, the Association of Outsourcing Contractors working with POSCO and Gwangyang Chamber of Commerce are engaged in identifying the skills needed by the local labour market. The major advantage of local partnerships in the design and utilisation of skills is that they can reduce the skills mismatch between supply and demand. Due to demand-driven training, the trainees can find jobs after the training ends, while local employers (especially SMEs) can more easily find the workers with the skills they need, reducing the need for additional training.

Tableau 5.3. Gwangyang HRD Programme: Partners and Responsibilities

Partners

Responsibilities

Administrative bodies (MOEL, South Jeolla provincial government, Gwangyang city government)

Administrative and financial support

Yulchon Industrial Complex

Activities in business administration improvement

Association of Outsourcing Contractors working with POSCO

Human resource management practices and work organisation for the SMEs

Gwangyang Chamber of Commerce

Activities in business support and survey

Gwangyang HRD Center

Implement training: plant welding, CAD, etc.

Source: Ha (2015).

In general, the training courses involve welding (ARC, C02, TIG, SAW) and CAD-2D, with 743 hours of training per year. In addition, the training is customised to the target company after basic training is provided. In particular, the CAD-2D course enables trainees to move between different types of work in the SMEs, leading to increased employer satisfaction and better employment prospects.

Results

Between 2012 and 2014, the Gwangyang HRD Programme attained a high level of training performance (see Tableau 5.4). In 2014, the employment rate of the course completers was 96.1%, and the average employment rate for 2012 to 2014 was 92.3% (Ha, 2015).

Tableau 5.4. Gwangyang HRD Programme Outcomes, 2012-14

Year

Recruited

Dropout

Early employment

Course completion

Employed trainees

Employment rate of course completers

2012

112

 6

 6

100

 96

92.9%

2013

119

 6

 6

107

 94

87.8%

2014

118

 6

 8

104

100

96.1%

Total

349

18

20

311

290

92.3%

Source: Ha (2015).

The Gwangyang HRD Programme received financial support from the MOEL and the local government to implement the training programmes. The total budget for 2015 was approximately KRW 1 billion for personnel expenses, equipment installation costs, and other related uses, with 800 000 000 provided by MOEL and 200 000 000 provided by the local government.

A survey on the Gwangyang HRD Programme was conducted in 2015 by the Korea Employment Information Service, which is responsible for assessing the LBJCP. The survey shows both the strengths and weaknesses of the programme. The strengths of the Gwangyang HRD Programme included its capacity to secure experts and mobilise resources to carry out the training courses. Local partnerships among stakeholders play a key role in fulfilling the tasks. In addition, the Gwangyang HRD Programme was revised based on the trainees’ satisfaction survey results and consultation with experts. Due to its continuous improvement, the Gwangyang HRD Programme is now recognised as one of the best practices in contributing to local job creation and skills development (Joo, 2015).

Meanwhile, stronger linkages between the Gwangyang HRD Programme (particularly Gwangyang HRD Center) and the local government are necessary in the course of implementing the training programmes. This problem is not only limited to the Gwangyang HRD Programme, but also applies to the LBJCP as a whole. In general, the role of local government is quite strong at the initial stage; however, as the training programme proceeds, the co-ordination and consultation between the two parties become weaker. Strengthening ties with local governments remains a key challenge to address.

POSCO HRD Consortium

Background

CHAMP has been a leading vocational education and training programme in Korea since 2001. CHAMP facilitates joint training between large companies and SMEs that are mostly situated in the supply chain as suppliers and contractors of the large companies.

For instance, POSCO has a large number of suppliers and outsourcing contractors that deliver goods and services for the production of steel (see Figure 5.2). Each supplier and outsourcing contractor has its own suppliers and outsourcing contractors as well. Those companies (mostly SMEs) that are located in the supply chain with POSCO do not compete with POSCO; rather, their success can be directly related to the success of POSCO. Hence, large companies have a strong motivation to be engaged in the skills development and utilisation of the SMEs through HRD consortiums.

Figure 5.2. Members of POSCO HRD Consortium
picture

Source: Adapted from POSCO, 2013.

Tableau 5.5 summarises the CHAMP delivery system for its operations. While the main responsibility of the MOEL and HRD Korea (an affiliated organisation of the MOEL) is to provide financing and guidelines on the consortium businesses, training centres, and participating companies of the consortiums play a critical role in the design and provision of training programmes customised to their own needs at the local level.

Tableau 5.5. Delivery arrangement

Actor

Main responsibility

MOEL (National)

  • Approval of action plan

  • Enactment and revision of related laws and regulations

  • Guidance and supervision of training operations

HRD Korea

Headquarters

  • Selection of consortium joint training centre

  • Screening and evaluation of action plan and performance

  • Fund payment and calculation

Branch

  • Recommendation of new joint training centre

  • Approval of training course, confirmation of the completed trainees, payment of training expense, etc.

Consortium Hub Management Team (Local)

  • Survey and research on HRD consortium

  • Consulting on the joint training centre

  • Strengthening ability of training officer of the consortium

Joint Training Centre (Local)

  • Training demand survey and course development

  • Recruiting trainees from treaty companies and conducting training

  • Connection with partner training centre

Partner Training Centre (Local)

  • Implementation of the training programme consigned from the joint training centre

  • Report to the joint training centre about training results

Companies (Local)

  • Participation in education and training

The budget of CHAMP increased from KRW 139.8 billion in 2012 to KRW 159.4 billion in 2013. The MOEL supports the costs of training and equipment to provide effective training courses that are jointly developed by large firms and SMEs.

In addition, the MOEL established specific guidelines on co-operation between large companies and SMEs to cultivate a skilled workforce through CHAMP in 2012 (See Tableau 5.6). The guidelines cover the human resource management functions of the companies, including assessments of the demand and supply of skilled workers, skills development, career management, retirement, and job transfers. They also include mutual collaboration and support measures that large companies and SMEs should utilise to help skilled workers in the event of job transfers.

More specifically, the guidelines include measures that large companies should follow to support their partner SMEs when establishing labour demand, supply plans, and education/training plans to support skills improvement in SMEs. These include establishing and operating a corporate university and sending skilled workers to SMEs.

Furthermore, SMEs are encouraged to increase investment in their own education and training for skilled workers in order to implement a reasonable human resource management system that allows skilled workers to get the treatment they deserve, and to create the conditions necessary for the long-term employment of skilled workers.

Various co-operation models between large companies and SMEs can develop following the application of basic guidelines. In this policy context, the POSCO HRD Consortium has been evaluated as one of the best practice organisations that help SMEs develop human resources through the engagement of large firms.

Tableau 5.6. Guidelines on co-operation between large companies and SMEs

Establishing a plan on the demand and supply of skilled workers

  • Large companies and SMEs should establish and implement a labour demand and supply plan including the demand and supply of skilled workers. Large companies should include in their plans matters concerning the demand and supply of skilled workers for their partner SMEs.

Supporting the skills development of skilled workers

  • Large companies and SMEs should make efforts to cultivate prospective skilled workers by supporting in-company work experience and long-term on-the-job training through industry-academia co-operation.

  • Large companies and SMEs should establish and implement an education/training plan. Large companies should include in their plans measures to support education/training by their partner SMEs while SMEs should increase investment in education/training.

  • Large companies and SMEs should promote the system that allows workers to request shorter working hours during learning, with a view to giving workers more opportunities for skills development.

  • Large companies should help SMEs foster a skilled workforce and provide education/training to their workers through 'corporate universities', etc.

Giving skilled workers the treatment they deserve and managing their careers

  • Large companies and SMEs should make efforts to build up a reasonable HRM system giving adequate treatment to skilled workers, and to create the conditions for skilled workers to be able to serve long.

Managing skilled workers' retirement and job transfers

  • Large companies and SMEs should set up and operate programmes, such as outplacement services, that are designed to manage skilled workers' retirement and job transfers, to prevent discontinuities in skills.

Source: MOEL News, 2012. 11.19. Main Features of the POSCO HRD Consortium.

Main Features of the POSCO HRD Consortium

Since 2005, POSCO has participated in CHAMP and provided training for employees of SMEs and outsourcing partners. The company has also provided customised education requested by SMEs as well as safety/job/innovation education to reinforce the human resource management capabilities of SMEs.

POSCO, as the leading national conglomerate in the steel industry, already possesses a large supply of education materials, facilities, and equipment. As the portion of POSCO outsourcing has increased (56% in 2014), the high quality of outsourcing partner companies has become a key element of the competitiveness of POSCO. Drawing on its own training resources with the government’s financial support, POSCO has formed the POSCO HRD Consortium and provided various training courses to improve on-the-job skills and help workers acquire the skills demanded by SMEs (POSCO, 2015).

POSCO developed the training programme in collaboration with outsourcing partner companies. In contrast to other education and training institutes, the HRD consortium links the classes with actual needs in the field, starting with the identification of demand for skilled workers and vocational training until the design and operation of the classes. The programmes and courses are based on demand surveys and customised to the partner companies’ needs.

POSCO currently provides 130 courses in technology, safety, information technology, and ethics. Customised for each trainee company, the courses provide a wide range of lectures, including technical education for newcomers, an E-MBA curriculum for executive members, and even a Green Life Design programme for prospective retirees.

For instance, POSCO provides a self-developed safety training programme for regular employees in SMEs and outsourcing partners, taking the lead in win-win growth by creating a safe workplace. This programme was developed for regular employees of the consortium members so that they can act as safety leaders on site. The lecturer of this training programme is a safety master of the Safety and Health Office in POSCO, who helps the trainees secure their own safety as well as their co-workers’ safety. The programme examines six major safety matters: high-place and heavy-duty work, gas safety, electrical safety, firefighting, facility safety, and cardiovascular pulmonary resuscitation.

The POSCO HRD Consortium set up a systematic training programme in order to enable the employees of SMEs and outsourcing partners to enhance their skills, which in turn contributes to the high quality of POSCO products. The programme provides not only education courses but also a range of features including educational consulting, systematic on-the-job training, and learning systematisation, to implement appropriate solutions to reinforce the trainee company’s competence. “S-on-the-Job Training” is a programme that supports systematic skills development, focusing on each corporation’s needs at the site. Learning systematisation is a business model designed to share practical knowledge and know-how that only on-site workers could possess. Through these training programmes, POSCO supports hundreds of trainees in learning essential techniques and progressing autonomously as they return to their fields.

In addition, the POSCO HRD Consortium has operated the Corporation University and Work-Study Parallel System since 2014. A long-term curriculum for prospective hires or current employees, the Corporation University curriculum is open even to those without undergraduate degrees. The Work-Study Parallel System is a government programme created in 2013 for corporations to hire job applicants as learning employees in order to systematically train them. The learning employees become full-time employees after one to four years of training programmes and completion of an assessment process. With 112 registered participants from 21 partner companies, the POSCO HRD Consortium has developed and implemented curricula that are suited to each company’s demands.

To fulfil the consortium business, POSCO has received financial support from the MOEL. The total government funding was approximately KRW 22 billion for personnel expenses, equipment installation costs, and employment insurance refunds from 2005 to 2014.

Results

As Tableau 5.7 shows, the POSCO HRD Consortium trained a large number of workers. In 2014, 60 484 trainees participated in the training programmes. From 2005 (the year the consortium was created) to 2012, the total number of trainees was about 220 000. There are over 100 training programmes on topics such as hydraulic pressure control, machine elements, electric circuit drawing, crane operation, and quick six sigma (POSCO, 2015).

Tableau 5.7. Training performance of the POSCO HRD Consortium

Outsourcing companies

Suppliers

Number of partner companies

   106

  330

Number of trainees

53 597

6 887

In-house learning

Innovation, safety, etc.

11 854

1 841

Technology

 2 926

  186

E-learning

38 817

4 860

An example of an SME that has benefitted from this training is Donghoo, a partner company of POSCO located in Gwangyang. Established in 2010, Donghoo is a start-up company that provides POSCO with advanced steel for energy. Craftsmanship and technical skills are essential qualities for the employees to produce these steel products. However, 80% of the employees are novices, and stabilising its factory operations was somewhat difficult. To address this problem, Donghoo participated in POSCO’s HRD Consortium. Their newcomers started with POSCO’s three-month programme and continued to receive organised education to advance as professionals. Donghoo’s consistent endeavours in education were reflected in the apparent growth in their management index (POSCO, 2014).

Another example is Roll and Roll, a steel rolling company that has approximately 225 personnel. Roll and Roll was a subsidiary company of POSCO until it became independent in 2005. However, this new enterprise experienced quite a few problems at its starting point. Problems occurred in organisational culture due to the organisational structures and sudden personnel changes. The staff were demoralised due to successive industrial accidents, and internal processes were not yet properly organised. Consequently, the productivity of the company declined, the personnel’s dissatisfaction with the company increased, and vision sharing began to be gradually more difficult. Roll and Roll had to face the task of completely reforming its organisational culture and personnel’s working attitudes.

POSCO’s HRD Consortium used three approaches to solve the problems. The first approach was “change management”, the second one was “productivity improvement”, and the third one was “expert training.” First, POSCO’s HRD Consortium provided leadership education to Roll and Roll to assist with change management. Through the education, POSCO’s HRD Consortium emphasised the importance of communication between organisations and sharing common visions. Second, productivity improvement was pursued through POSCO’s six sigma program named Quick Six Sigma, which can easily and immediately be applied to the field. Finally, POSCO’s HRD Consortium helped Roll and Roll to cultivate skilled experts through certified industrial engineer education courses. In addition to these three approaches, POSCO’s HRD Consortium supported Roll and Roll to improve the skills of personnel in areas such as IT, language, and common sense in management.

The results of these initiatives were overall very positive. In 2009, trainings for 1 690 workers were completed (double counting those workers who received more than one training), and the average education time of the personnel was close to 143 hours. In addition, Roll and Roll was certified for quality management systems such as ISO 090001 and KOSHA 18001. Roll and Roll also saw productivity improvement amounting to KRW 670 million and zero accidents for 1 000 days. Consequently, the net profit increased by approximately KRW 450 million in 2008 and 210 million won in 2009, and 10% of such profits were shared with the personnel. In addition, the personnel were able to improve their capacities and job skills and this led to their higher satisfaction with their jobs (POSCO, 2013).

A survey among 20 365 employees of the POSCO HRD Consortium participating companies (POSCO, 2015) showed that the majority of employees (67%) are generally satisfied with the vocational training. They stated that the vocational education and qualification training have contributed to the enhancement of their capacities (68%). Second, the respondents identified the following areas that need improvement: curriculum development (29%), strengthening public relations (22%), and strengthening education specialty (20%). Third, the respondents stated that field staff (44%), office job (9%), management supervisors (36%), and executives (8%) also need training. Fourth, the respondents indicated that the optimal training period for collective training is three days (88%). About half (49%) of the respondents need e-learning, while 33% want both collective training and e-learning. Fifth, respondents want both elementary levels (48%) and advanced levels (51%) of training. This is because the number of new employees is growing due to the increase of retirees; accordingly, training programmes are required for both beginners and experts.

Based on the annual training demand survey, the POSCO HRD Consortium has revised its programmes and number of trainees. In addition to the regular courses mentioned in the main survey, further programmes are provided whenever specific training needs arise.

Conclusions and lessons

Over the past decade and a half, the Korean government has moved to an approach that allows for more locally tailored skills initiatives, recognising that adaptation to local circumstances can improve the efficiency and effectiveness of delivery. This case study particularly considers how skills initiatives can be tailored to meet the needs of SMEs, which make up 99.9% of Korean firms and account for 87.7% of employment (SMBA, 2012). Based on the case studies of the Gwangyang HRD Programme and the POSCO Human Resource Development Consortium, the following findings may prove useful for policymakers in other countries seeking to implement similar initiatives.

  • Improving how skills are used in workplaces may be an important complement to skills development. SMEs often have no dedicated human resource department, or may rely more on informal HR processes than their larger counterparts. In some countries, such as the UK, a “long tail” of SMEs that are not using management best practices, constraining their performance and growth (Department for Business Innovation and Skills, 2015). In such cases, the bottleneck to job creation and productivity growth may be less about a lack of skilled workers, and more about poor management and use of skills. As the case of Roll and Roll demonstrates, intervening at this level – through leadership training, change management approaches, and quality management systems – can be a key complement to skills development activities, leading to improved productivity and employee satisfaction. Likewise, the Gwangyang HRD Programme includes a focus on training that allows workers to move between different types of work in SMEs, which can increase employer satisfaction and lead to better employment prospects.

  • Large companies have a stake in improving the performance and productivity of its suppliers and contractors, which can be activated with strategic public support. Large employers benefit when their suppliers and contractors are more productive and efficient. Programmes such as the HRD Ability Magnified Programme are able to “activate” this interest by providing an enabling framework for action as well as financial incentives. Some employers may also be more willing to engage with a programme lead by another employer, rather than public actors, as they are may have deeper knowledge about their actual business practices and challenges. In this case specifically, the fact that the SMEs in question were POSCO’s suppliers and contractors created a more natural pathway for engagement.

  • Delivery should be flexible to meet employee and employer needs. Using a variety of training modalities (e.g. e-learning, systematic on-the-job training) as well as offering training at a number of different levels (e.g. E-MBA, entry-level training, programmes for prospective retirees) ensures that training is delivered in a way that is flexible to meet the schedules and developmental needs of a variety of employees. Additionally, having a “stock” of available courses as well as the ability to develop bespoke programmes allows the POSCO HRD Consortium to respond to ongoing needs, as well as specific, short-term demands.

  • A wide variety of local partners should be involved, but securing ongoing engagement can be a challenge. Both the Gwangyang HRD Programme and the Consortium for HRD Ability Magnified Programme involved a variety of local partners in their design, delivery and administration. For example, the Gwangyang HRD Programme involved MOEL, South Jeolla provincial government, Gwangyang city government, the Yulchon Industrial Complex, the Association of Outsourcing Contractors working with POSCO, the Gwangyang Chamber of Commerce, and the Gwangyang HRD Center. As such, this programme provides the opportunity to better integrate local employment governance, build local capacities, and engage labour management organisations, as they have become increasingly interested in employment policies. However, a key challenge for this programme was securing the ongoing involvement of local government beyond the initial set-up phase.

  • Programme design and improvement should be an iterative process. Both programmes based training provision on actual local demands, for example through employer surveys, but have also been fine-tuned tuned based on implementation experiences and feedback. For example, the HRD Programme has been revised based on the trainees’ satisfaction survey results and consultation with experts. This continuous improvement process has been an important part of developing both of these best practice models.

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