[Inside Chodong] Chinese Performance Bonuses Driven by 'Speed'... Korean Performance Bonuses Hindering 'Growth'

In recent years, the undisputed keyword shaking up the global automobile market has been "China." It did not take long to realize that even the seemingly unshakeable, Germany-centric stronghold and the achievements built by Japanese and Korean automakers were not off-limits.

The reason why Chinese automakers have been able to achieve such rapid results in the global market is, above all, "speed." While it typically takes established automakers four to five years to develop a new car, Chinese companies are now accomplishing this in just one to two years.

They have gone beyond simply replicating and imitating technology, taking the lead in the future trends of electrification and Software Defined Vehicles (SDVs) at an unparalleled pace. What is the secret to this fearsome speed? A senior executive in the automotive industry recently shared a story he heard directly from a Chinese automotive executive. When he asked about the secret to China’s rapid R&D, the answer was surprisingly simple: performance bonuses.

It is said that in the Chinese automotive industry, there is a widespread culture of guaranteeing generous compensation for shortening a six-month project to just one or two months, rewarding the value of the time saved. In other words, they are thoroughly implementing the most intuitive and straightforward management principle of capitalism: "Where there is performance, there is certain reward."

Such clear rewards have become a powerful driving force, motivating employees to immerse themselves in their work without being pushed by the company. Individual achievements have translated into organizational innovation, and collectively, these have been realized as the competitiveness of China’s automotive industry.

What about our labor market? Despite possessing world-class technology and infrastructure, rigid systems and chronic labor-management conflict have become shackles. Comments made a few months ago by the chairman of France’s Renault Group during a visit to Korea starkly illustrated the painful reality of Korea’s manufacturing sector.

Yonhap News Agency

While he praised the quality and technological prowess of the Busan plant as being among the best in the group, he also expressed deep reservations about Korea’s unique wage structure. He lamented that Korea is the only country in the world where monthly wages remain the same regardless of decreases in production volume.

This rigidity in the labor market leads to wasteful internal conflicts within companies and erodes the momentum needed to move forward. The ongoing debate over performance bonuses at Samsung Electronics, one of this year’s hottest topics, is a case in point. Although the company decided to grant an unprecedented, extraordinary bonus of "up to 600 million won," internal and external conflicts have yet to subside. There are even concerns that decision-making in the semiconductor business, where investment speed is critical, could be delayed due to the controversy over performance bonuses.

If there is no consensus on objective indicators and standards for performance, and distrust and confrontation over compensation continue to repeat, no matter how astronomical the payouts, it will be difficult to expect voluntary commitment or innovation. We must boldly break away from outdated seniority-based pay systems and ensure "productivity-based labor flexibility," where rewards are proportional to one’s work and productivity.

If both labor and management fail to set aside vested interests and agree on building a flexible and healthy labor ecosystem, our manufacturing industry will continue to lose competitiveness in the face of China’s overwhelming speed.

This content was produced with the assistance of AI translation services.