THE MANAGERIAL CHARACTERISTICS OF
KOREAN CONSTRUCTION INDUSTRY
AND REQUIRED IMPROVEMENT

Kim, Hee Jin

A dissertation submitted to
Kochi University of Technology
in partial fulfillment of the requirements for
The Degree of Master of Engineering

Supervisor
Professor Keizo Baba

Department of Infrastructure System Engineering
Kochi University of Technology
Kochi, Japan
January 2002

Acknowledgements
The author wishes to acknowledge with gratitude the active support, commitment andinterest of many individuals who helped to make this thesis possible. It is a great honor
to be a scholarship grantee of Kochi University of Technology to study here.
Very special thanks and greatly appreciate are extended to my advisor, Professor Keizo
Baba, who has been extremely helpful and supportive throughout the study. The author
is very grateful for his enthusiastic guidance, valuable advice, and also recognizes his
kindness.
The author wishes to extend his grateful acknowledgement to the examinationcommittee, Dr. Tsunemi Watanabe and Dr. Masataka Takagi for valuable contribution
in serving as committee member as well as for their kind interest, support, helpfulrecommendations, valuable comments and valuable assistance during studying.
The author also wishes to thank Dr. Lee Hyung-Rae, Dr. Song Suk-Enu, Dr. Moon
Hong-Duk, Dr. Kim, Chang-Hak, Dr. Kim, Ki-Hung, Dr. Lee Won-Hong, who gave
valuable contribution information and thoughtful consideration during studying in Japan.
Also, I would like to express my deepest gratitude to Korean teacher, Seo Eun-Gyeung
who has lived in Japan.
Special thanks are extended to Mr. Jirapong Pipattanapiwong, all Thai friends,
Taiwanese friend, Japanese friends and my junior, Jung Jong-Hyuck.
Finally, endless thanks are also extended to my family, farther, mother, my younger
brother, my girl friend, Kim, Min-Gyeung, and my close friends, Lee Jong-Myeung,
Um Chan-Gil for their unfailing love and moral support during the study at Kochi
University of Technology.

iAbstract
The object of this study is to examine the managerial characteristics of Korean
construction industry and the changes required to solve recent organizational problems
and difficulties in that industry. Korean construction industry has been accelerated in
the last 40 years with economic growth aspects of scale and quantity. More recently, anumber of problems have arisen in the construction industry. And in constructionindustry, obvious changes on construction environment are showing as aspects ofconstruction demands, systems of construction markets, and conditions of competition.
These things are accelerating ‘systematic’ changes of Korean construction industry. tocorrect that loss of focus, the customs and the systems related to construction ha ve to bechanges. In order to analyze the problems that are unique to the construction industry,
this study will begin with an examination of first, characteristics of Korean people like‘Ri’ based on ‘reason’ or ‘logic’ and ‘Ki’ based on ‘feeling’ or ‘emotional’, second,differences by culture like power distance, uncertainty avoidance, andindividualism/collectivism, third, management function like planning, organizing,staffing, leading, and controlling in Korean construction company. This will provide abasis for discussion of possible directions for the solution of current problems.
KEY WORD: construction industry, Ri, Ki, culture, characteristic of Korean people,
management functionsii

TABLE OF CONTENTS
Page
Acknowledgementi

Abstractii

Table of Contents

iii-iv

List of Figuresv

List of Tables

vi-vii

Chapter 1 Introduction
1.1 General
1.2 Problem statement
1.3 Objectives
1.4 Scope

1-4
1
3
3
4

Chapter 2 Historical background

5-8

Chapter 3 Present situation and difficulties in Korean construction industry
3.1 Currently state of Korean construction industry
3.2 A tendency of contract amount of construction projects
3.3 Construction technique & Technical develop investment
3.4 The present state of technical development investment
3.5 Financing on construction

9-15
9
11
13
13
13

Chapter 4 Construction industry practices (USA, Japan, Korea)
4.1 The USA
4.2 Japan
4.3 Organization of construction project in the USA and Japan
4.4 Korea

16-21
16
17
18
20

Chapter 5 Nature of management in Korea & typical characteristics anddifferences in construction management
among Korea, Japan, and the USA
5.1 Comparison between Japanese management and the USA management
5.2 Comparison between Korean management and Japanese management
5.3 Principles of the USA, Japanese, and Korean management

22-37

iii

27
32
35

Page
Chapter 6 Influence of culture on management as an origin of differences
6.1 Characteristics of Korean people (Ri & Ki)
6.2 Power distance
6.3 Uncertainty avoidance
6.4 Individualism and Collectivism

38-52
41
43
46
49

Chapter 7 Evaluation of difference by culture
7.1 In the USA case
7.2 In Japan case
7.3 In Korea case

53-55
53
53
54

Chapter 8 Paradigm shift for construction industry in Korea

56-58

Chapter 9 The points to be improved

59-61

Chapter 10 Conclusions

62-64

References

65-66

APPENDIX

iv

List of Figures
Page
Figure 1.1 Relative importance of construction industry on GDP

1

Figure 1.2 the industries associated with construction industry

2

Figure 2.1 the outline of ‘Development process of Korean construction industry’8

Figure 3.1 the rate of construction investment on GDP

9

Figure 3.2 a scope of finance and a budget of infrastructure investment

10

Figure 3.3 the number of general construction firm andcontract amount of construction projects

10

Figure 3.4 the rate of construction contracts on the public and private

11

Figure 3.5 a change of number of Housing and the rate of Housing Supply

12

Figure 4.1 Common organization structure of projectin Japanese construction industry

19

Figure 4.2 Common organization structure of projectin American construction industry

19

Figure 4.3 Common organization structure of projectin Korean construction industry

21

Figure 5.1 Management process

25

Figure 5.2 Systems approach to management

26

Figure 6.1 Flow (from culture to problems) in Korean Construction Company

40

Figure 9.1 Hybrid form required in Korean organization

61v

List of Tables
Page
Table 2.1 Industry compositions of Korea and Taiwan by Japanese

6

Table 3.1 the rate of bankrupt and the number of construction firm

11

Table 3.2 a change of number of Housing and the rate of Housing Supply

12

Table 3.3 Technical levels on construction industry

14

Table 3.4 Development investments on construction technology

15

Table 3.5 Lending performances from a financial institution
on Construction and Manufacturing Industry

13

Table 4.1 Practice of Korean construction industry in the past

20

Table 5.1 Management approaches

31

Table 5.2 Management approaches in Korea and Japan

34

Table 5.3 Principle of management function

35

Table 6.1 Concepts of culture by some of the gurus

38

Table 6.2 Power distance index (PDI) values for 50 countries and 3 regions

44

Table 6.3 Key differences between small and large power distance societies

45

Table 6.4 Uncertainty avoidance index (UAI) values for 50 countries
and 3 regions

47

Table 6.5 Key differences between weak and strong
uncertainty avoidance societies

48

Table 6.6 Individualism index (IDV) values for 50 countries and 3 regions

51

Table 6.7 Key differences between collectivist and individualist societies

52

Table 7.1 Differences by each country’s culture

55

Table 7.2 the dimensions of power distance, Uncertainty avoidance,
and individualism

55

Table 10.1 the dimensions of power distance, Uncertainty avoidance,
and individualism (Before)

63

vi

Table 10.2 the dimensions of power distance, Uncertainty avoidance,
and individualism (Before)

vii

64

CHAPTER 1
CHAPTER 1
INTRODUCTION
1.1 General
Construction industry is a sort of service- industry that form real things like residentialbuilding, industrial facilities, infrastructure facilities and national land development.
The products made by construction industry have characteristics of both things puttedon constructing for the following phases and capital goods rather than consumption
goods. And value effects on construction industry are higher than the other industries on
aspect of products, hiring and added value. Figure 1.2 shows that relationship such as
the industries associated with construction industry.
Korean construction industry has been accelerated in the last 40 years with economic
growth aspects of scale and quantity. Especially, in the 1970s, construction in the
Middle East and the domestic apartment construction had played an important role ondevelopment of Korean construction industry.
In 40 years, not be long period, Korean construction industry has had a previous
experience such as acquirement of construction techniques of advanced countries,
training of construction technicians, and acquiring of construction experience throughthe advanced of Korean construction industry into foreign markets.
In figure 1.1, compare with about
6.0% in 1970 and about 7.5% in 1980,
the relative important of constructionindustry in the Gross Domestic Producthad increased about 11.0% in 1990 on
the period of residential construction
planning. Construction industry in
Korean domestic industry has the big
weight next to the manufacturingindustry and the service industry. Also,
construction industry is related to manyother industries.

Figure 1.1 Relative importance of construction industry on Gross Domestic ProductSource: CM (Construction & Management), 1995
Recently, in construction industry, obvious changes on construction environment are
showing as aspects of construction demands, systems of construction markets, andconditions of competition. These things are accelerating systematic changes of Korean
construction industry.
In 1958, after establishment of Korean construction laws, Korean industry achieved somany prosperity and achievement by motive power of Korean economic growth in last
40 years. But now, all of Korean construction industries are confronted with serious
1CHAPTER 1
DEPARTMENTFINANCEOF

Financial businessInsurance business

DEPERTMENT
OF
SALE
&
MANAGEMENT
Construction
material salebusiness

DEPARTMENT OFCONSTRUCTION
DesignConstruction

Building
management andcleaning service

Supervision
Start-up

Real estatebusiness

DEPARTMENTOF
MATERIALS
Reinforcing bars
and cement
Glasses andwood
Aggregate andpaintsDEPARTMENT OFUTILIZATION
Leasing service, thetourist business
Office, Residence,
Trade
Infrastructure
Figure 1.2 the industries associated with construction industry
Resource: Construction industry shown by a chart, 1995
2

CHAPTER 1
crisis as a collapse crisis of construction industry and a declining industry of
construction industry. Today’s construction industry crisis is originally because
construction culture is backward: Strengthening competitiveness of relationshipbetween people, lobby and collusion than of technology and confidence had an
influence on construction industry.
To correct that loss of focus, the practice and the systems related to Korean construction
have to be changed. In order to analyze the problems that are unique to the current
Korean construction industry, this thesis investigates the characteristics of Korean,
Korean management and the nature of the Korean construction industry throughcomparison to other countries. This thesis will provide a basis for discussion of possible
directions for the solution of current Korean construction industry problems.
1.2 Problem statement.
Korean construction industry is now a crisis to the inside and outside of the country.
After 1980s, the foreign construction market has become decreasing. The reason of thecrisis is lacks of construction projects, which provoked a keen competition among
Korean construction companies. So pay-ability of construction industry decreased
sharply.
Recently, medium and small sized construction companies have being bankrupted. In
addition, big construction companies such as Dong-a and Hundai were faced withbankrupt crisis and a regal management. The construction crisis has an influence on thewhole Korean economics. As medium and big construction companies bankrupted, subcontract firms and collaboration firms brought out chain reaction bankruptcies and massunemployment.
These current construction crises caused systematic problems accumulated on Korean
construction industry for the last few decades.
1.3 Objectives.
Nowadays don’t exist a period of construction market like the last high economic
growth anymore. Construction becomes more and more large-scale, complexity andspecialization. According to customer’s needs, construction project is changing into
diversification and high-degree. And also, competition ordering projects keens among
the same kind of construction companies.
But Korean construction industry was satisfied with the growth in quantity based on
low-construction price and quality manpower, and neglected to secure newcompetitiveness against construction environment changing so fast to diversification,complexity and high-technology. The result, Korean construction competitiveness is
dropping sharply and after IMF crisis in 1997, many construction companies have beenbankrupted.

3CHAPTER 1
Therefore, in order to prosper with adapting to these construction environments,
management environment of construction industry will be able to be changed. So byinvestigating on the characteristics of Korean management and present problems of
Korean construction industry, this thesis will make a counterproposal for improvement.
1.4 Scope.
The scope of this study, in order to find a solution to current problems of Korean
construction industry, deals with the substance related to the study as follows:characteristics of Korean, management style, and construction industry and comparing
with other developed countries. This study focuses on analysis the nature of Korean
construction industry through comparison with developed countries.

4CHAPTER 2
CHAPTER 2
HISTORICAL BACKGROUND
Now, Korean economy is undergoing big changes. Improvement of Korean economy
has been demanded through an internal requisite and an external requisite called ‘IMF’.
They demand an origin improvement by restructuring. Korean construction industry
become starting at almost similar time like Korean economic and also has a hardexperience. Here, we need to know that how domestic economy and constructionindustry are developed and why they are demanded that kind of changes. Therefore, wewill have to know the growth process and background on entrepreneur based on Korean
economy and also, examines background of Korean construction industry.
Historical background of appearance of a large enterprise.
Korean economy makes ready to do a take-off with meeting the 21st century. Korea had
experienced high growth through 1960s and 1970s. Now Korea is doing to overcome
today’s problem based on potential power maintaining the stable economic growththrough 1980s that long-term slackness of the world economy are accumulated. Even if
it is short period, eye-opening growth of Korean economics is never achieved easily. In
effect, Korea economy had started industrialization in the early 20th century, which wasbehind 100 or 200 years compared with advanced countries. And also, Korean industry
cannot help starting without capital and material resources as not any material
foundation.
In any way, it will be able to say that initial factories were constructed by Japanese. But
most of that was destroyed as the Korean War and the mostly heavy chemical industries
constructed by Japanese are located in the North Korea.
Anyway, it may say that Korean industrialization had started from company was in thecentral of the heavy industry by Japanese. In he re, we need to know background of
Korean company growth through comparison to Taiwan been the same situation.

5

CHAPTER 2
Industry composition of Korea and Taiwan by Japanese are as shown in table 2.1
Table 2.1 Industry compositions of Korea and Taiwan by Japanese
(1)

(2)

(3)

(4)

(5)

(6)

(7)

(Unit: %)
(8)
(9)

K
O
R
E
A

1914
1920
1925
1930
1935
1940

43.2
38.0
41.6
46.2
34.7
25.0

11.6
16.0
14.8
16.1
15.5
18.6

1.1
3.8
4.3
1.7
1.4
1.9

2.8
3.8
4.3
1.7
1.4
1.9

14.9
6.0
6.0
6.2
12.5
8.0

2.0
3.6
3.4
2.0
2.0
4.0

3.7
4.1
3.3
3.4
2.9
3.7

9.1
11.5
15.6
15.3
25.4
33.7

11.6
16.9
11.0
9.2
5.6
5.0

T
A
I
W
A
N

1912
1915
1920
1925
1930
1935
1940

67.5(44.7)
75.7(54.5)
73.4(57.3)
72.3(54.3)
78.4(63.3)
75.3(56.2)
65.4(39.4)

0.7
0.9
0.8
1.7
0.8
1.0
2.4

1.9
0.8
1.4
2.1
2.2
2.2
2.5

0.8
0.6
0.7
0.9
1.0
1.0
1.2

2.6
2.2
3.2
2.4
2.4
3.9
7.7

0.7
0.5
1.8
1.4
1.7
1.6
3.1

2.5
1.5
3.1
2.2
2.3
2.1
3.1

19.3
14.4
13.3
12.9
7.8
9.1
11.4

4.9
3.4
2.3
4.2
3.5
3.8
4.3

Note:
(1) The food industry (the sugar industry; sugar manufacturing)(2) The textile industry(3) Sawing & the wooden article industry(4) Printing & binding industry(5) The metalworking industry(6) The machine & appliance manufacturing industry(7) The ceramic industry(8) Chemical industry(9) The others
Source: Development process of Korean economy and big enterprises, 1998
First, in Taiwan, 65.4% of the whole industry is food industry and 60% of that is thesugar industry. The reminder is consisted of that Chemical industry is 11.4%, themetalworking industry is 7.7%, and sawing & the wooden article industry are 2.4%. On
the other side, in Korea, 33.7% of the whole industry is the chemical industry. And
besides, it is consisted that the food industry is 25.0%, sawing & the wooden article
industry are 18.9%. In Taiwan, the heavy chemical industry si 25.0% of the wholeindustry, but in Korea it is 49.4% of the whole industry and we can know that it isapproximately 2 times than Taiwan’s.
Korea and Taiwan are also industrialized by Japan, but their characteristics on industry
are different. In Taiwan the sugar industry (sugar manufacturing) was main industry,
but in Korea the heavy chemical industry based on the mining resources and waterenergy was main industry.

6CHAPTER 2
Japanese professor Mizoguchi Toshiyuki said in relation to the characteristics ofindustrialization between Korea and Taiwan the follow: 1) In Taiwan industrial output
is closely related to agriculture and sugarcane, in Korea relation to agriculture andindustry by basis of raw materials doesn’t much exist. This point has an influence on
industrialization pattern in both countries infancy decisively. 2) Mainly Taiwanese hadformed their industry under the positive protection of government. But Korean industry
had been developed to industry by Japanese private capital.
This kind of differences differed in initial industrialization condition of both countries
after 1945, which made background of that Taiwan became medium and small- size
enterprises and Korea became large enterprises on progress of industrialization after
1960s.
Korean companies had started economic development by government after 1960s.
Almost all factories remained in the South Korea had been destroyed for the Korean
War in 1950s. After Korean War, Korea had been divided into the North and South andthe South Korea had lost lots of mineral resources and electric power resources in the
North Korea. So Korea has no choice but to adopting an industrial strategy of assemblyand manufacturing and must depend on importing not only all of resources from othercountries, but the fund needed to industrialize.
In 1960s, the similar to period of Korean economy growth, Korean constructionindustry was also increasing. As it mention before, to restructure ruined Korean
industrial and economic environment, construction industry must constructinfrastructure. As same time, numbers of construction companies had been increased
rapidly.
In 1962, from ‘the first five- year plan’ that was the slogan for Korean economic
development, our country must have adopted a strategy aim orienting a foreign market.
It was needed that the type of organization is changed into a large company. In order toexporting products, strengthening competitiveness of a large company was very
important and needed.
In the middle of 1970s, government had made large-scale industrial complex andfactories of international scale by private hands. So Korean exporting structure had beenchanged to the heavy industry, which gave an opportunity of the scale-extension to the
Korean company
In other word, Korean constructio n industry was also increasing from that period. As we
mentioned above, to restructure ruined Korean industrial and economic environment,
construction industry must construct infrastructure. At same time, number ofConstruction Company was increasing rapidly. As a result, lots of problem inconstruction industry came into existence. Figure 2.1 shows the outline of‘Development process of Korean construction industry’7

CHAPTER 2• Establishment of construction laws.
• System improvement.
Establish of construction laws (1958)
The starting period of the constructionindustry (~ 1962)• Growth in quantity.
• Lead of economic development.
Completion of Gyung-Bu (Seoul~ PuSan) Highway (1970)
The period of the growth (1963~ 1972)• Special procurement in the Middle East construction markets.
• A boom of international construction.
Acceptance an order of ‘the biggest canal of Libya’ (1976)
The period of the advance into foreign markets (1973~ 1982)• A large scale of national policy project.
• Prosperity of home-building industry.
Construction of residential 2 millions (1990)
The period of increasing on domestic construction (1983~ 1997)• A lot of dishonor.
• Decreasing of the price of real estate.
IMF (1997), Insolent of big construction company (2000)
The period of systematic arrangement (1998~ the present)

Figure 2.1 the outline of ‘Development process of Korean construction industry’
Source: the crisis of construction industry and urgent suggestion, 2000
8

CHAPTER 3
CHAPTER 3
PRESENT SITUATION AND DIFFICULTIESIN KOREAN CONSTRUCTION INDUSTRY
3.1 Currently state of Korean construction industry.
The rate of construction investment on GDP was around 12.6% in 1970, as continuous
increasing it increased until about 23.5% in 1991. Figure 3.1 shows the rate ofconstruction investment in GDP
25.0
20.0
15.0
10.0
5.0

19
70
19
72
19
74
19
76
19
78
19
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00

0.0

Figure 3.1 the rate of construction investment on GDP
Source: construction & Economy Research Institute of Korea
From end of 1980s to early 1990s, construction investment in Korea is increasing
sharply. The reason is that it is influenced by a boom of real economy, overheating ofreal estate, and residential 2 millions construction under Korean government. But rate ofthis graph shows the top in 1993. In 1997, after IMF crisis, it decreased quickly. In 1999,
it shows 16.5% and also in 2000 is recorded 14.5%.
Then how is investment of infrastructure? First of all, infrastructure means that essential
facilities for smoothly production activities, no producing directly anything: a road, an
airport, a railroad, harbors and so on. Infrastructure is a large-scale construction and its
construction takes long time. So effectiveness of employment is quite high. It makes toenlarge income and consumption and to active economy. Those points contribute tonational economy so much. Korean infrastructure investment was a jump in 1990s, but
nowadays was decreasing by inactive of economy. A part of infrastructure investment ina budget of government reached until 15.6% of GDP but in 2000 of it was a fall by
14.0%. Although continuous enlargement of infrastructure investment after 1990s, a
relative difference with developed countries hasn’t been cutting down for increasing of
the cost of construction and the lack of an efficiency operating.

914.00
12.00
10.00
8.00
6.00
4.00
2.00
0.00

15.6

15.2

14.2

4.07

4.76

12.9

12.1

11.3

11.2

5.48

0.46

0.54

0.66

1993

1994

1995

6.30

7.10

8.85

8.08

16.0

15.2

9.27

14.0 14.0

10.10

1.01

1.21

1.34

1.41

1.41

1996 1997

1998

1999

2000

2001

0.81

12.0
10.0
8.0
6.0
4.0
2.0
0.0

unit: trillion Yen

unit: trillion Yen

CHAPTER 3

year
cost1

cost2

infrastructure

Figure 3.2 a scope of finance and a budget of infrastructure investment
Source: construction & Economy Research Institute of Korea

trillion Yen

In the end of 2000, the number of general construction firms increased over 14 times as
7,971 rather than 1976. While contract amount of general construction firms increased
22.2% in average of year from 1990 to 1997, but after IMF crisis, in 2000 their contract
amount was 6 trillion 15 billion Yen. It is almost same conditions by 75.3% of 7 trillion
991 billion Yen in 1997.

9

9,000

8

8,000

7

7,000

6

6,000

5

5,000

4

4,000

3

3,000

2

2,000

1

1,000

0

0
1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999
year
contract amount of construction projects

the number of construction firms

Figure 3.3 the number of general construction firm andcontract amount of construction projects
Source: construction & Economy Research Institute of Korea

10

CHAPTER 3
Table 3.1 the rate of bankrupt and the number of construction firm
Year 1990 1991 1992 1993 1994 1995 1996 1997(1)
918
912 1700 1653 2651 2958 3543 3896
(2)
3
9
23
49
50
145
196
291
(3)
0.3
1.0
1.4
3.0
1.9
4.9
5.5
7.5
Note:
(1) The number of construction firm. – a unit
(2) The number of bankrupt of construction firm – a unit
(3) The rate of (2)-%Source: construction & Economy Research Institute of Korea

1998 1999
4198 5137
524
112
12.5
2.2

2000
7971
132
1.7

The number of general construction firms was less than 1000 in 1991. After increased to1700 sharply, their numbers have been maintaining continuous a fast increasing.
Especially, in 2000 although a rapid decrease of construction projects as….(????), their
number jumped 40% rather than 1999. On the other hand, the present state of bankrupt
of general construction companies was 524 companies as IMF crisis of 1998. The rateof them was increased so much by 12.5%. After that time as the number of bankrupt
decreased by 112 companies in 1999 and 132 in 2000, the rate of that has been 2.2%
and 1.7%.

3.2 A tendency of contract amount of construction projects.

100%

80%

60%

40%

20%

public projects

19
99

19
97

19
95

19
93

19
91

19
89

19
87

19
85

19
83

19
81

19
79

19
77

0%

private projects

Figure 3.4 the rate of construction contracts on the public and private
Source: Construction & Economy Research Institute of Korea
According to contracts of construction projects in 2000, the cost of contracts in publicprojects is 2 trillion 465 billion Yen like 41.0% of whole cost of contracts. In private, it
shows 59.0% by 3 trillion 550 billion Yen. Private construction has been inc reased
continuously until 1988, and from 1988 the rate of its maintenances over 50% until
11

CHAPTER 3
1997. But as IMF crisis conditions in 1998, private constructions and contracts dropped
temporarily. Korean economy was recovered after 1999, and private construction
contracts are increasing again. The result has been over 50% again on private contracts.
After a boom of the Middle East, in 1990s, Korean construction industry had houndconstruction markets to the domestic. At that time, under government, the policy socalled ‘construction of Housing 2 millions’ had established.
Table 3.2 a change of number of Housing and the rate of Housing Supply<Unit: thousand, %>The rate of
Housing
Number of
The rate of HousingYear
Housing
Construction
Housing
investment
Supply
1965
70
3912
1.73
81.3
1970
115
4360
5.85
77.8
1975
180
4734
6.13
74.4
1980
212
5450
5.94
71.2
1985
227
6317
4.6
69.7
1990
750
7357
8.8
72.1
1995
619
9507
7.4
86.0
1996
592
10113
7.1
89.2
1997
596
10627
6.3
92.0
1998
306
10867
6.2
92.4
1999
405
11181
4.7
93.3
2000
433
11493
3.8
94.1
Resource: Construction & Economy Research Institute of Korea, Korea National
Housing Corp., Ministry of Construction & Transportation

14000

100
90
80
70
60
50
40
30
20
10
0

unit: thousand

12000
10000
8000
6000
4000
2000

19
65
19
70
19
75
19
80
19
85
19
90
19
95
19
96
19
97
19
98
19
99
20
00

0

number of Housing

the rate of Housing Supply(%)

Figure 3.5 a change of number of Housing and the rate of Housing Supply
Resource: Construction & Economy Research Institute of Korea, Korea National
Housing Corp., Ministry of Construction & Transportation
12

CHAPTER 3
As it can see table 3.2 and figure 3.5, the rate of Housing Supply in Korea was 81.3% in
1965. In 1985 as gravitation of the population to a big city and inactivity of housing
construction, it dropped to 69.7% highly. But the end of 1980s, as a large-scale housing
construction caused by a jump of real estate and the housing cost, the rate of Housing
Supply increased so much. In 2000, number of housing is almost 11million
493thousand and the rate of Housing Supply reached 94.1%. While, from 1990 to 1996
the rate of housing investment maintained by 6~7%, but from 1997 to 1998 it dropped
by a level of 6% and stopped by 3.8% in 2000.
3.3 Construction technique & technique develop investment
According to report of Korea Institute of Construction Technology, the total level ofthe domestic construction technology is 65% comparison with developed countries
in1993. And in 1997 its level is 67% by increase only 2%. It means that the domestic
construction technology has been congesting. An incomplete construction, construction
accident, and lowing of productivity have been breaking out due to backward of
construction technology. Table 3.3 shows technical levels on construction industry.
3.4 The present state of technical development investment
Investment rate of technical development on total sales profit and on sales shows each10.1 percent and 1.2 percent in 1999. And it has been increasing after 1997. It meansthat construction companies are expanding the cost of investment on technicaldevelopment in order to secure profitability after IMF crisis. Table 3.4 showsdevelopment investment on construction technology.
3.5 Financing on construction
As shown in table 3.5, a loan performance of construction industry from a financial
institution dropped sharply each –30.8 percent and –13.4 percent in 1998 and 1999. In
2000 a loan performance of manufacturing industry shows recovery, but in case of
construction industry it shows still difficulty of financing as a declining of credit on
Construction Company by bankrupt and restructuring on big construction companies.
Table 3.5 Lending performances from a financ ial institution on Construction and
Manufacturing Industry(Unit: billion Yen, %)Construction
Industry
Manufacturing
Industry

A sum ofmoney
Increase anddecrease rate
A sum ofmoney
Increase anddecrease rate

1997

1998

1999

2000

376.963260.844225.824207.458

2.3

-30.8

-13.4

-8.1

1646.653

1262.206

1188.191

1220.438

9.8

-23.3

-5.9

2.7
13

CHAPTER 3
Table 3.3 Technical levels on construction industry(Unit: % (developed countries = 100))

A highway
A bridge
A tunnelA
undergroundstructure
Water andsewagearrangement
Riversarrangement
The coast
facilities
A dam
A plant
A highbuildingA
residentialbuildingAn
intellectual
building
A building
facility
Total
average

Preliminary
engineering and
Design
1993
1997
71
73
72
69
63
67

Detail Engineeringand Design

Procurement

Construction

Management after
construction

1993
70
72
66

1997
74
70
70

1993
70
75
67

1997
78
71
71

1993
79
76
76

1997
77
73
76

1993
70
68
68

1997
71
67
69

1993
72
73
68

1997
74
70
70

Total

60

62

63

65

64

67

71

71

66

66

65

66

58

62

61

65

65

67

69

71

61

63

63

65

67

69

70

72

67

70

80

79

70

69

71

72

54

59

58

62

61

66

72

71

58

63

61

64

59
54

61
59

64
53

64
63

71
63

71
69

74
71

73
75

68
68

68
73

67
62

67
68

61

63

67

65

67

67

74

70

66

62

67

66

66

65

71

68

71

69

76

71

66

63

70

67

44

53

48

57

55

60

57

65

51

59

51

59

59

60

60

62

58

63

65

68

59

63

60

63

61

63

63

66

66

68

72

72

65

66

65

67

Source: Korea Institute of Construction Technology
14

CHAPTER 3

Table 3.4 Development investments on construction technology(Unit: billion Yen, %)
1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

Constructionsales

2384,43496,546,3794299,76032,07121,58498,88928,57539,2

7407,3Gross profit

259,9

401,1

530,1

623,6

861,6

806,3

1094,5

916,1

738,5

856,6

18,5

30,7

34,0

44,3

55,2

53,3

63,2

69,1

69,0

86,7

An amount
invested ontechnical
development
Investment
rate oftechnical
development
on total
profitInvestment
rate oftechnical
development
on Gross
profit

7.1

7.7

6.4

7.1

6.4

6.6

5.8

7.5

9.4

10.1

0.8

0.9

0.7

0.9

0.9

0.7

0.7

0.8

0.9

1.2

Source: construction association of Korea.

15

CHAPTER 4
CHAPTER 4
KOREAN CONSTRUCTION INDUSTRY PRACTICESCurrently, circumstances of construction industry have been changed rapidly and havebeen being progressed widely in them. A rapid changing of science and technique,economic growth and changing of people’s thinking in society cause mainly those. We
can know ourselves that condition of construction market and demand of owners ischanging so much. According to changing of owner’s desire for construction, a demand
for a center of owner needs a various idea like design-construct, design manage(Turnkey) and professional construction management for construction service. As aproject that is needed a complex function connected to between a professional technique(skill) and construction is increasing, a weight of professional technique management isincreasing. On the other hand, Downsizing for each department of construction isprogressing. So a limitation is appearing to construction management by existing
management system. And domestic construction companies satisfied with domestic
projects feel a limitation for getting projects by an existing contract system as opening
domestic construction market to foreign companies. Competitiveness for getting
projects among construction companies in construction market is needed. Foreign
construction companies have batter construction management ability and information
technology intend to monopolize a high- value part of construction at construction
market in world. Nowadays, big problems in Koran construction industry are said that
insolvent construction and a weakness of oversea competitiveness. That is, thatproblems cause that a decline of productivity, a lake of consciousness of workers,
increase of wages, a lake of R&D, a weakness of financing and whole systematic
problems for construction.
Then, how are developed countries (the USA and Japan) changed for their construction
conditions?
4.1 The USA• Globalization of construction industry
Through caring out for various construction businesses like joint venture, Multiple
Ownership and BOT (Build/Operate/Transfer), they reduce time and cost for
construction and also secure profitability.
• Innovation of a procedure of construction business based on integrating information
Currently, security of construction resources such as manpower, materials, andequipments is caring out quickly as Information and Communication Technique aredeveloped. So decision- making can be done so fast because various information for
caring out business is able to gathering quickly.
• Improvement of profitability
Manpower reduces as construction automation is used. And competitiveness for
manpower is strengthened. It is possible to find manpower at local areas because atechnical skill was improved by globalization.
16

CHAPTER 4• Time reduction for construction businessTechnique like advanced material, development of equipment and innovative method
for construction, quick accumulation of information and decision- making bycommunication is improved. By doing so, it is possible to reduce time for construction
business.
• Change of relationship between owner and contractor
As construction business become more complex, their decision- making process also
become complex. Their relationship as a team not to do against each other is changing.
• Environment change for construction businessTechnical innovation based on environment-oriented construction, operation,
management and taking to pieces will be achieved.

4.2 Japan• Structural reform in construction industry
Security of competitiveness for internalization of construction market and demand of
profitability improvement is needed. As social criticism for an ambiguous publicconstruction business and inactivity of construction market are occurred, therationalizatio n of management is demanded. And specialization, diversification ofmanagement and New Genecon for construction companies is demanded.
• Necessity of synthetic and imaginative ability for construction business
Ability can consider planning proposal, technology and financing together isdemanded, which strengthen an ability against verification and high-degree technique.
• Innovation of production system
Competitiveness for construction cost down and strategy for innovation of
construction production are needed. Now, production system for construction ischanging.
• Strategy for a customer-oriented
As demand of customer is various, a quick strategy coping with their demand isachieving. And a quality-oriented strategy for securing competitiveness is achieving.
Creative, high quality, and high-efficiency for production system is needed to cope withthe competitiveness age.
• Introduction of CM/PM and EC
Confidence for construction business and rationalization for construction produc tionsystem is increased. It is possible to reduce for construction cost. It attaches importantto soft-technology for construction. GENECON for taking engineering ability manages
engineering business to service more strong for customers.

17

CHAPTER 4• Life cycle management
Facility Management is activated. Improvement of an expected efficiency for astructure needs. And also in order to reduce whole cost for construction, life cycle
management is needed.
• A by product of construction and Recycle
A disposition method for a by-product on construction is developed and recycle rateof a by-product is improved.
4.3 Organization of construction project in the USA and JapanThe actual differences in the daily practice of management in the construction industry
between the United States and Japan consist of mainly three aspects. First is theorganization of construction projects by the owner (client), the contractor, and others.
The next aspect is the meaning of conformity with respect to the contract. Third is themeaning of fairness in the tendering system. These differences shall be discussed
hereafter in detail from the differing viewpoints of the principles of the two
management styles.
Figure 4.1 outlines the common structure of a construction project as undertaken by
Japanese management. As you can see, Figure 4.2 has a different organizational
structure and it is this structure that characterizes American management in terms of
construction projects. Japanese management, as stated in the previous section,communicates through face-to- face human contact. Therefore, the fewer people
involved, the more intensive human contact will be, and the easier it will be for theindividuals to communicate on an unconscious level. In this case, harmony and balanceof the power between parties is considered to the key in order to smoothly execute
projects. However, in the case of American management, communication depends onwords: mainly written communication. This system is quite effective and becomes aroutine process. The intention and purpose of each part can be clearly expressed in theletters, giving this system an objective nature. Therefore, the size of the party involved
becomes less important. Moreover, a third party can be easily introduced into theorganizational structure. Also, if we consider these two organizational structures in
Figure 4.1 and Figure 4.2 from the viewpoint of the characteristic analysis theory of thecommunication network, Japanese organization is a kind of “chain” communication
network, but it only has two participants. Likewise, American organization is a kind of“circle” communication network. In order to understand management differences in theorganizational structure, two communication network systems (chain and circle) shallbe compared. The nature of the differences should be examined from the four viewpointof effectiveness of communication, namely, centralization, leadership, groupsatisfaction, and individual satisfaction. The “chain” communication in Japanesemanagement is considered to be moderate from all of the four aforementioned
viewpoints. The “circle” communication in American management is considered low
from the three viewpoints (centralization, leadership, and individual satisfaction) andmoderate only from the viewpoint of group satisfaction. In Japanese organization only
two parties exist and the relationship is called the former and the latter relationship,
which comes from a set phrase of the contract document and gives an impression of18

CHAPTER 4

Owner (Client)Architect

Contractor

Figure 4.1 Common organization structure of project in Japanese construction industry

Owner (Client)

Consultant

Contractor(Design & Supervise)

Figure 4.2 Common organization structure of project in American construction industry

19

CHAPTER 4
the unilateral contract. One of the merits of the Japanese “chain” organization, however,is that effective decisions are easily made to solve outstanding problems harmoniously.
In the case of American organization, contracts become bilateral contracts. For effective
execution, the Japanese works well, but for fair execution, the American system issuperior. (prof. Keizo Baba, 1990)

4.4 Korea• Multi- large contracting is serious in Korean construction industry, which makeconstruction environment like that the cost of construction is increase, but the quality
becomes lower. Figure 4.3 shows Common organization structure of project in Korean
construction industry.
• As market condition of construction industry goes down, the amount of debts ofconstruction companies is increasing. Especially, after IMF (International MonetaryFund) crisis, credit rating of Korean construction industry has lost. So construction
finance became worse.
• From the middle of 1990s, a large accident was occurred very often by imperfection of
construction procedure. The reason is the lack of proper coordination between designand construction, and also poor supervision.
This table shows practice of Korean construction industry in the past

Table 4.1 Practice of Korean construction industry in the past
Practice of Korean construction industry in the past
Structure of pursuingvalueHigh payment – low efficiency

Strategy of management

Extension of an outward form
(A growth in quantity)

Organization

Vertical

Style

Inharmonic during construction

Skill &
Knowledge system

Simple managerial skill.
Labor-intensive

Source: Kim, H. J., 200120

CHAPTER 4

Owner (Client)

General contractor

DesignSubcontractor

Subcontractor

Own forces work

Sub-sub contractor

The third subcontractor

•
•
•

•
•
•

Sub-sub contractor

The third subcontractor

•
•
•

•
•
•

Figure 4.3 Common organization structure of project in Korean construction industry

21

CHAPTER 5
CHAPTER 5
NATURE OF MANAGEMENT IN KOREA & TYPICAL CHARACTERISTICS
AND DIFFERENCES IN CONSTRUCTION MANAGEMENT AMONG KOREA,
JAPAN AND THE USA
To organize any field of knowledge and make it more useful, a classification system isnecessary. In the field of management, a variety of first-order classifications, or“pigeonholes” might be used. Those who subscribe to the operational school ofmanagement believe that it is both realistic and helpful to practitioners to use as thisfirst-order classification the functions of managers – planning, organizing, staffing,leading, and controlling. A useful second-order classification builds the knowledge ineach functional area by looking at the following aspects: (1) the nature and purpose ofeach function, (2) the key concepts applicable to each, (3) the way each is structured, (4)the way each is undertaken, (5) the theory and principles underlying each, (6) the mostuseful techniques that have been developed in each area, (7) the difficulties encounteredin applying knowledge in practice, and (8) the way managers might develop an
environment for performance in each area. (Harold kootz, 1984)
These primary classifications are not airtight and there are many overlaps. Thus, amanager plans an organization structure and may also organize a planning function. But
this is a characteristic of all fields of science.
FUNCTIONS OF MANAGERS (Harold kootz, 1984)
The functions of managers are a useful framework in which to organize management
knowledge. There have been no new ideas, research findings, or techniques that cannot
readily be placed in these classifications. For this reason, then, the basic functional areasof management selected are planning, organizing, staffing, leading, and controlling.
Planning
Planning is decision making; it involves selecting the courses of action that a company
or other enterprise, and every department of it, will follow. There are various types ofplans, ranging from overall purposes and objectives to the most detailed action to betaken to other a special stainless steel bolt for an instrument or to hire and train workers
needed for an assembly line. No real plan exists until a decision has been made-a
commitment of human or material resources or of reputation-to go in a certain direction.
Before a decision is made, all we have is a planning study, an analysis, or a proposal,
but not a real plan.
Planning is deciding in advance what to do, how to do it, when to do it, and who is to doit. Planning bridges the gap from where we are to where we want to be in a desired
future. It strongly implies not only the production of new things, but also sensible andworkable innovation. It makes it possible for things to occur that would not otherwise
happen. Although the future can seldom be predicted with accuracy and unforeseen
events may interfere with the best- laid plans, unless there is planning, actions of people
tend to be aimless and left to chance. There is no more important and basic element inestablishing an environment for performance than enable people to know their purposes22

CHAPTER 5
and objectives, the tasks to be performed, and the guidelines to be followed inperforming their jobs. If group effort is to be effective, people must know what they are
expected to accomplish.
Organizing
People working together in groups to achieve some goal must have roles to play, much
like the parts actors fill in a drama, whether these roles are ones they develop
themselves, are accidental or haphazard, or are defined and structure by someone whowants to make sure that people contribute in a specific way to group effort. A role
implies that what people do has a definite purpose or objective; their activity is in anarea where they know how their job objective fits into group effort, where they have thenecessary aut hority to do the task, and where they have the necessary tools andinformation to accomplish it. Organizing, then, is that part of managing that involves
establishing an international structure of roles for people in an enterprise to fill. It isinternatio nal in the sense of making sure that all the tasks necessary to accomplish goals
are assigned and, it is hoped, assigned to people who can do them best. Imagine what
would have happened if such assignments had had not been made in the programs to put
people on the moon or to land Viking ? on Mars. Thus, organizing involves (1)determination of activities required to achieve goals, (2) grouping of these activities into
departments or sections, (3) assignment of such groups of activities to a manager, (4)delegation of authority to carry the m out, and (5) provision for coordination of activities,
authority, and information horizontally and vertically in the organization structure.
The purpose of an organization structure is to help in creating an environment forhuman performance. It is, then, a tool of managing and not an end in and of itself.
Although the structure must define and cover the tasks to be done, the roles soestablished must also be designed in the light of the abilities and motives of people
available. To design and effective organization structure is not an easy managerial
activity. Many problems are encountered in making structures fit situations, including
both defining the kinds of jobs that must be done and finding the people to do them.
Staffing
Staffing involves filling, and keeping filled, the positions provided for by theorganization structure. It involves setting requirements for the job to be done, and it
includes inventorying, appraising, and selecting candidates for positions; compensating;and training or otherwise developing both candidates and current jobholders toaccomplish their tasks effectively.
Leading
Leading is influencing people so that will strive willingly and enthusiastically toward
the achievement of organization and group goals; it has to do with the predominantlyinterpersonal aspect of managing. All managers would agree that their most important
problems arise from people, their desires and attitudes, their behavior as individuals andin groups, and the need for effective managers also to be effective leaders. Since
leadership implies follower ship and people tend to follow those in whom they see ameans of satisfying their own needs, wishers, and desires, it is understandable thatleading involves motivation, leadership styles and approaches, and communications.
23

CHAPTER 5
Controlling
Controlling is the measuring and correcting of activities of subordinates to assure thatevents conform to plans. Thus it measures performance against goals and plans, showswhere negative deviations exist, and, by putting in motion actions to correct deviations,helps ensure accomplishment of plans. Although planning must precede controlling,plans are not self-achieving. The plan guides managers in the use of resources toaccomplish specific goals. Then activities are checked to determine whether they
conform to planned action.
Control activities generally relate to the measurement of achievement. Some means ofcontrolling, like the budget for expense, inspection records, and the record of laborhours lost, are generally familiar. Each has the characteristic of measuring; each showswhether plans are working out. If deviations persist correction is required. But what iscorrected? Activities through persons. Nothing can be done about reducing scrap, forexample, or buying according to specifications, or handling sales returns except byknowing who is responsible for these functions. Compelling events to conform to plans
means locating the persons who are responsible for results that differ from planned
action and then taking the necessary steps to improve performance. Then, things arecontrolled by controlling what people do.

24CHAPTER 5

Planning and decision-making
Determining the organization’s
goals and deciding how best toachieve them

Organizing
Determining how best to group
activities and resources

Controlling
Monitoring and correcting
ongoing activities to facilitate
goal attainment

Leading
Motivating members of theorganization to work in the bestinterests of the organization

Figure 5.1 Management process
Source: management-3rd edition, 199025

CHAPTER 5

1.
2.
3.

4.

InputsHuman
CapitalManagerial
Technological

EXTERNAL
ENVIRONMENT

Organizing

Staffing

Leading

Controlling

External variables andinformation
1. Opportunities
2. Constrains
3. Other

Reenergizing the system

Planning

Facilitated by communication that also links
The organization with the external environment

Managerial knowledge.
Goals of claimants

EXTERNAL ENVIRONMENT

Goal inputs of claimants
1. Employees 5. Governments
2. Consumers 6. Community
3. Suppliers
7. Other
4. Stockholders

To produce outputs
Outputs
1. Products 4. Satisfaction
2. Services 5. Goal integration
3. Profits 6. Other

EXTERNAL
ENVIRONMENT
Figure 5.2 Systems approach to management
Source: Management-a global perspective, 199426

CHAPTER 5
5.1 Comparison between Japanese management and the USA management
In order to know how these two countries different kinds of management appear in theactual practice of management, a careful study of the comparison of the USA
management as a typical management by consciousness to Japanese management that
represents management by unconsciousness, will be necessary (Prof. Keizo Baba, 1990).
There has been quite a bit of discussion concerning this comparison. For example, Peter
F. Drucker (1973) pointed out many aspects of the differences between the USA
management and Japanese management in his book. Also, a simple but systematic
analysis of the difference of the two styles of management is discussed and presented in
the form of the comparison table by Koontz et al (1984). These comparative studies of
the USA and Japanese management styles, however, have only analyzed the phenomenaof the procedure and system of the two systems. No further analysis explaining theprinciple of the differences in the system can be found in their works. Therefore, byusing the principle of two types of management by consciousness and unconsciousnessthe basic reasons and background of these differences will be discussed in order toexplain both the nature of Japanese management systems and the different principles
that back up the two management systems.
In the comparison table by Koontz et al (1984), the two kinds of management areconsidered from viewpoints of five functional components of management: planning,organizing, staffing, leading, and controlling. First of all, general indications of thedifferences in each five functional components of management will be summarized asfollow:
Planning- Japanese management: Collective decision making relying on consensus; long-termorientation.
- The USA management: Individual decision making; primarily short-term orientation.
Organizing- Japanese management: Collective responsibility; ambiguity of decision responsibility;common organizational culture and philosophy is well known; competitive spirit toward
other enterprise.
- The USA management: Individual responsibility; clarity and specificity of
responsibility for decision; common organization culture is lacking; identification withprofession rather than company.
Staffing- Japanese management: Life time employment common; loyalty to the company;
promotion based on multiple criteria; small difference in pay increase.
- The USA management: Job insecurity prevails; professionalism; promotion based on
primarily on individual performance; substantial difference in pay increase.

27

CHAPTER 5
Leading- Japanese management: Leader as a social facilitator; leader is part of the group;paternalistic style; bottom- up communication; emphasis on face-to- face communication.
- The USA management: Leader as a decision maker; leader heads the group; directive
style; top-down communication; emphasis on written communication.
Controlling- Japanese management: Control by peers; control focuses on group performance,saving face.
- The USA management: Control by superiors; control focuses on individual
performance, fixing blame.
Table 5.1 shows ‘Management approaches comparison between Japan and the USA
management’ in particular.
Through these five components, Japanese management depends on the group, long-termorientation, ambiguity of responsibility, life-time employment, control by humanism,
while the USA management is based on the individual, short-term orientation,individual responsibility, and professionalism, and is controlled by logic and reason.
It is quite useful to note that one of the most important keys to solving the fundamental
cause of the differences is to contrast the two systems of employment. In the USA
management, the company employs the function of the employee, while in Japanesemanagement the company employs the individual as a human being.
In the USA management, the company needs only the function of the employee.
Therefore, the company does not need an individual as a human being. In fact, a humanbeing employed is nothing but a kind of parasite not necessary to the company.
Moreover, the function needed by the company sometimes changes quickly due to achange in the environmental conditions of the company. Therefore, jobs become
unstable in the USA management. Since the company controls the functions employed,
the company pays the salary for the function of the employee. It is the function, and not
the individual as a human being, that is controlled by the superior in the USA
management.
On the contrary, in the case of Japanese management, the company employs theindividual as a human being who has capabilities that can be useful in future functionsof the company. The company gives him the chance to develop his career in thefunction desired by the company. Since Japanese companies employ the individual as ahuman being and not by his function, the company must pay a salary, taking theindividual’s life into consideration, and assuming that the individual has a family tosupport. Therefore, the salary is paid by the seniority system in Japanese management.
A human being does not change as quickly as the business environment of a company.
Therefore, long-term planning is necessary in order to match employee development
and the company’s actual function needs. The function employed by the company in the28

CHAPTER 5
USA management shall be defined and controlled by words, which are the mosteffective communication media in the world of consciousness. Japanese management,
however, cannot rely merely on words in order to control employees. These facts showthat the USA management has been built on the logic and reason of the conscious mind,
While Japanese management is based on the harmony and humanity of the people’s
unconscious mind.
In the USA management, everything shall be clearly defined and discussed openly.
Japanese management, however, uses ambiguity to form harmony and consensus
unconsciously. If a management system relies on the conscious mind of people, debate
and discussions in meetings and exchanging the purpose of the people by letters is themost common method. Through this procedure the formalities using words are mostpowerful and useful in the USA management. Actually, in practice, the USA
management is based on definition, job description, contract, presentation, and manuals
as tools of management. These tools of management are developed systematically in the
United States to form a sound theory. This system has become one of the main subjectsof study in universities as a part of business administration.
In Japanese management, the management system is based on the unconscious mind,
which cannot be completely communicated by words. Since the unconscious mind
exists in a much deeper place, communication of the unconscious mind is much moredifficult to understand than the conscious mind.
Therefore, in order for the unconscious mind to communicate, a special system should
be developed in place of verbal communication. The most effective method is toestablish group unconsciousness through long periods of human contact. This groupunconsciousness in the company will be created only by a long-term employment
system-a lifetime employment system.
Therefore, within Japanese management, there are two basic concepts of employment:
employment of the individual as a human being and long-term employment with acompany.
These differences in employment, originating in the aforementioned differences in theprinciples of management has great influence on the many practices on the many
practices of management. The biggest difference in the practice of management is thecontrol of personnel. In the USA management, control focuses on the function of theemployee. But in Japanese management, control focuses both on the function and on theemployee as an individual. Therefore, the personnel control system is quite complicatedin Japanese management because there are two objectives to be controlled: function andthe individual as a human being, which cannot always coexist. Generally for this reason,
the Japanese company takes the welfare of the employee into consideration more than in
the case of the USA management. Therefore, sometimes the Japanese control system
has a great effect on the private life of the employee. Recently, young employee whowants to enjoy their private life without intervention from the company has rejected thistendency.
29

CHAPTER 5
For this reason, the management of unconsciousness is effective only in a closed society
where group unconsciousness can be easily formed. Therefore, it is quite difficult todepend on management by unconsciousness in an open and unstable society where it isdifficult to achieve group unconsciousness. In this case, without forming groupunconsciousness, unconsciousness differs so much from individual to individual thatmere unconsciousness becomes useless as the media of communication and the standard
in management (Prof. Keizo Baba, 1990).

30

CHAPTER 5
Table 5.1 Management approaches
Japanese management

U.S. management
Planning

1.Long-term orientation
2.Collective decision making (rangi) withconsensus
3.Involvement of many people in preparing
and making the decision

1.Primarily short-term orientation
2.Individual decision making

4.Decision flow from bottom to top and back5.Slow decision making: fast implementationof the decision

3.Involvement of a few people in making and“selling” the decision to persons withdivergent values
4.Decision initiated at the top, flowing down
5.Fast decision making: slow implementation
requiring compromise, often resulting in sub
optimal decisions

Organizing
1.Collective responsibility and accountability
2.Ambiguity of decision responsibility
3.Informal organization structure
4.Well-known common organization culture
and philosophy: competitive spirit toward
other enterprises

1.Individual responsibility and accountability
2.Clear and specific decision responsibility
3.Formal, bureaucratic organization structure
4.Lack of common organization culture:
identification with profession rather than withcompany

Staffing
1.Young people hired out of school: hardly
any mobility of people among companies
2.Slow promotion through the ranks
3.Loyalty to the company
4.Very infrequent performance evaluation for
new (young) employees
5.Appraisal of long-term performance
6.Promotions based on multiple criteria
7.Traning and development considered a longterm investment
8.Lifetime employment common in large
companies

1.People hired out of schools and from othercompanies: frequent company changes
2.Rapid advancement desired and demanded
3.Loyalty to the profession
4.Frequent performance evaluation for new
employees
5.Appraisal of short-term results
6.Promotions based primarily on individual
performance
7.Training and development undertaken withhesitation (for fear of turnover)
8.Job insecurity prevailing

Leading
1.Leader acting as a social facilitator andgroup member
2.Paternalistic style
3.Common values facilitating cooperation
4.Avoidance of confrontation, sometimes
leading to ambiguities: emphasis on harmony
5.Bottom-up communication

1.Leader acting as decision maker and head of
the group
2.Directive style (strong, firm, determined)
3.Often divergent values: individualism
sometimes hindering cooperation
4.Face-to-face confrontation common:emphasis on clarity
5.Communication primarily top-downControlling
1.Control by peers
2.Control focus on group performance
3.Saving face
4.Extensive use of quality control circles

1.Control by superior
2.Control focus on individual performance
3.Fixing blame
4.Limited use of quality control circles

Source: Management – Koontz, 198431

CHAPTER 5
5.2 Comparison between Korean management and Japanese management
Japanese management receives a great deal of attention, partly because of the economic
success of Japanese companies. Korea has also shown remarkable economic growth.
There are some cultural and structural similarities, such as the dominance of powerfulconglomerate companies. In Japan, managers emphasize group harmony and cohesion,
expressed in the concept of wa; the Korean concept of inhwa also translates into
harmony, but with fewer accents on group values. Korean organizations are quite
hierarchical, with family members occupying key positions. Beyond blood relationships,
the factors affecting hiring decisions often include the school attended or being from thesame geographic region as the top person. The leadership style can best be described as
top-down, or autocratic/paternalistic. This approach enables the firm to adjust quickly tothe demands in the environment by issuing commands. Lifetime employment does notprevail. Indeed, the labor turnover rates are high when compared with the low rates inJapan. Turnover is primarily attributable to people quitting their job rather than being
dismissed. All in all, Korean management is different from both Japanese and U.S.
management practices. (Heinz Weihrich, 1994)
Planning- Korean management: collective decision- making, the minor decision making; shotterm orientation.
- Japanese management: Collective decision- making relying on consensus; long-termorientation.
Organizing- Korean management: organization culture is known; competitive spirit toward otherenterprisers to survive; ambiguity of decision responsibility; ambiguous individual
responsibility.
- Japanese management: Collective responsibility; ambiguity of decision responsibility;common organizational culture and philosophy is well known; competitive spirit toward
other enterprise.
Staffing- Korean management: Lack of loyalty of the company; promotion based on bothseniority and education- Japanese management: Lifetime employment common; loyalty to the company;
promotion based on multiple criteria; small difference in pay increase
Leading- Korean management: Leader as decision maker and head of the group; directive style(authority, charisma and determined); top-down communication- Japanese management: Leader as a social facilitator; leader is part of the group;paternalistic style; bottom- up communication; emphasis on face-to- face communication.
Controlling- Korean management: Control by superior (leader); control focus on group andindividual performance32

CHAPTER 5- Japanese management: Control by peers; control focuses on group performance,saving face.
Korea and Japan are located very closely and influenced on same culture area like China.
But their culture in their countries is also a little different. As mention above, Korea
approaches to management based on short-term orientation, collective decision- making(the minor decision making), ambiguity of decision responsibility, job security (lifetime
employment), top-down communication, and control by humanism.
Korean economy had developed so fast for 40 years and also fast results had been
needed for performance. In Korean management, company needs quick plans andachievement. So they plan short-term orientation by fast decision making. When theydecide plans, they do a collective decision- making but at least the minor person does
decision for some plans.
In Japanese management, employees work commonly in their company for whole
lifetime. And promotions are based on multiple criteria. While in Korean management,
employees also work for whole lifetime. But they put an important to secure better
positions (work). Promotions are based on both seniority systems and education
background.
As being promoted naturally by seniority system rather than evaluation result of
performance. They don’t mind to improve their performance ability but concern tomake a good relationship with superiors. Therefore, superiors evaluate subordinates
ambiguous performance evaluation by good relationship. Decision responsibility is also
ambiguous.
In Japanese management, leader exists to act as a social facilitator and group member
for harmony of each party. They use bottom- up communication. On the other hand, in
Korean management, leaders are decision- maker and head of the group. They haveauthority and charismatic character. Their communication is top-down communication.
Management approaches in Korea and Japan can summarize like in table 5.2.

33

CHAPTER 5
Table 5.2 Management approaches in Korea and Japan
Korean management
Japanese management
Planning
1.Long-term orientation
1.Short-term orientation
2.Collective decision making, the minor
decision making
3.Involvement of a few people in making thedecision
4.Decision flow from top to bottom
5.Fast decision making; fast implementation of
the decision

2.Collective decision making (rangi) withconsensus
3.Involvement of many people in preparing
and making the decision
4.Decision flow from bottom to top and back5.Slow decision making: fast implementationof the decision

Organizing
1.Ambiguous individual responsibility andaccountability
2.Ambiguity of decision responsibility
3.Formal organization structure
4.Well-Known common organization culture:competitive spirit toward other enterprises (tosurvive)

1.Collective responsibility and accountability
2.Ambiguity of decision responsibility
3.Informal organization structure
4.Well-known common organization culture
and philosophy: competitive spirit toward
other enterprises

Staffing
1.Young people hired out of school; rarecompany changes
2. Ambiguous performance evaluation andpromotion through seniority and merit
3. Lack of loyalty of the company
4. Infrequent performance evaluation for new
employees
5. Appraisal of short-term results
6.Promotion based on both seniority systemand education
7. Training and development available;considered a short-term investment
8.Job security; lifetime employment

1.Young people hired out of school: hardly
any mobility of people among companies
2.Slow promotion through the ranks
3.Loyalty to the company
4.Very infrequent performance evaluation for
new (young) employees
5.Appraisal of long-term performance
6.Promotions based on multiple criteria
7.Traning and development considered a longterm investment
8.Lifetime employment common in large
companies

Leading
1.Leader acting as decision maker and head of
the group
2.Directive style (authority, charisma,determined)
3. Common values facilitating cooperation;
harmony-oriented
4. Face-to-Face confrontation: emphasis on
harmony
5.Top-down communication

1.Leader acting as a social facilitator andgroup member
2.Paternalistic style
3.Common values facilitating cooperation
4.Avoidance of confrontation, sometimes
leading to ambiguities: emphasis on harmony
5.Bottom-up communication

Controlling
1.Control by superior (leader)
2.Control focus on group and individual
performance
3. Saving face
4. Limited use of quality control circle

1.Control by peers
2.Control focus on group performance
3.Saving face
4.Extensive use of quality control circles

34

CHAPTER 5
5.3 Principles of the USA, Japanese, and Korean management
Here, principles of managerial function can summarize as following table 5.3.
Table 5.3 Principle of management function
Managerial functions

The USA

Japan

Korea

Planning

IndividualGroup

Group (a few)

Organizing

Clear responsibility

Ambiguous
responsibility

Ambiguous
responsibility

Staffing

Employment offunction of humanbeing

Employment of
human being

Employment of
human being

Leading

Order by top-down
communication

Motivation by
employees,
themselves

Order

Controlling

X theory

Y theory

X theory

We can observe that although being differences between two countries, both Korea andJapan for managerial principles show almost same. And also some part is same bycomparing with the USA. Actually, it can say that Korean management has usedmanagerial style of both the USA and Japan.
Now, world is changing to globalization and each companies of each countries have tocompete with not only domestic companies but foreign companies by standard
management style. We can say that international management came from U.S.
management. Originally, international management had started from Europe. But their
management style is relating among them and almost same. So here international
management style will call western style focusing on U.S. style.
Each country has their traditional culture and reflects their culture on management. So
we can see that management style of each country differs a little on managerial style,which also cannot say that some country’s managerial style is good or some country’s
one is bad. But as to compete with foreign companies, they have to concern standard ofmanagement style.
In the USA management of principle, their management style shows that individual;
clear responsibility; top-down communication based on their culture. And they employ
manpower by function. On the other hand, in Japan management of principle, their
management style shows that group; employment of human being; motivation by
35

CHAPTER 5
employees. Therefore, we can observe that their movement is voluntary. But there is
disadvantage like ambiguous responsibility.
In Korean management of principle, their management style shows that group of a few
people; employment of human being; top-down communication. But responsibility for
performance shows being ambiguous.
One view about the nature of people has been expressed in two sets of assumptions
developed by Douglas McGregor and commonly known as “Theory X” and Theory Y”.
Managing, McGregor suggested, must start with the basic question of how managers
see themselves in relation to others. This viewpoint requires some thought on theperception of human nature. Theory X and Theory Y are two sets of assumptions about
the nature of people. McGregor chose these terms because he wanted neutral
terminology without any connotation of being “good” or “bad” (Heinz W., 1993).
Theory X assumptions (Heinz W., 1993).
The “traditional” assumptions about the nature of people, according to McGregor, areincluded in Theory X as follows:
1. Average human beings have an inherent dislike of work and will avoid it if theycan.
2. Because of this human characteristic of disliking work, most people must be
coerced, controlled, directed, and threatened with punishment to get them to put
forth adequate effort toward the achievement of organizational objectives.
3. Average human beings prefer to be directed, wish to avoid responsibility, haverelatively little ambition, and want security above all.
Theory Y assumptions
McGregor sees the assumptions under Theory Y as follows:
1. The expenditure of physical effort and mental effort in work is as natural as playor rest.
2. External control and the threat of punishment are not the only means for
producing effort toward organizational objectives. People will exercise selfdirection and self-control in the service of objectives to which they arecommitted.
3. The degree of commitment to objectives is in proportion to the size of the
reward associated with their achievement.
4. Average human being learn, under proper conditions, not only to accept
responsibility but also to seek it.
5. The capacity to exercise a relatively high degree of imagination, ingenuity, andcreativity in the solution of organizational problems is widely, not narrowly,
distributed in the population.
6. Under the conditions of modern industrial life, the intellectual potentialities of
the average human being are only partially utilized.
36

CHAPTER 5
These two sets of assumptions obviously are fundamentally different. Theory X is
pessimistic, static, and rigid. Control is primarily external, that is, imposed on thesubordinate by superior. In contrast, Theory Y is optimistic, dynamic, and flexible, with
an emphasis on self-direction and the integration of individual needs with organizational
demands. There is little doubt that each set of assumptions will affect the way managers
carry out their managerial function and activities.
Human relation theorists emphasize the impact of individual characteristics like race,
sex, class, cultural background on organizational and group behavior. Douglas
McGregor's book on "The Human Side of Enterprise" distinguished between Theory X(classical systems theory) and Theory Y (human relations theory). Under Theory X,
managers assume workers dislike and avoid work if possible, so they must use coercion,
threats, and various control schemes to get workers to make adequate efforts against
objectives. They assume the average worker wants to be directed and prefers to avoid
responsibility, has little ambition, and wants security above all.
Theory Y, on the other hand, assumes that individuals do not inherently dislike work,
but see it as natural as play or rest. Furthermore, external control and threat isn't the
only way to encourage productivity, and the most significant rewards are the"satisfaction of ego" and "self-actualization needs".
Here, in the USA case, it is thought that being close to X theory. In the Japan case, it isthought that being Y theory. On the other hand, in Korea case, it is also thought thatbeing X theory. So Korea needs to change to Y theory from X theory.

37

CHAPTER 6
CHAPTER 6
INFLUENCE OF CULTURE ON MANAGEMENT
AS AN ORIGIN OF DIFFERENCES
The word ‘culture’ has many meanings, which have changed over the past twogenerations (Barthorpe et al., 1999). Kroeber and Kluckhohn (1952), American
anthropologists, presented 160 different definitions of culture. Bodley (1994) culled asimple version that stated that culture involves what people think, what they do, andwhat they produce. Culture has several properties: it is social heritage or tradition; it isshared, learned human behavior; and it is symbolic, and based on shared, assigned
meanings of the members of a group (Ang Yee Kwan and Geogy Ofori, 2001). There
are many descriptions and definitions of culture by the gurus, which can see in table 6.1.
Table 6.1 Concepts of culture by some of the gurusConcepts of culture by some of the gurus
Tylor E. (1871). That complex whole which includes knowledge, beliefs, art, morals,
laws, customs and any other capabilities and habits acquired by man as a member ofsociety.
Herskovits M. J. (1948). The man-made part of the human environment.
Kroeber A. L. and Kluckhohn C. (1952). Transmitted patterns of values, ideas and othersymbolic systems that shape behavior.
Becker and Geer (1970). Set of common understandings expressed in language.
Van Maanen J. and Schein E. H. (1979). Values, beliefs and expectations that members
come to share.
Schwartz M. C. and Jordon D. K. (1980). Pattern of beliefs and expectations shared bymembers that produce norms shaping behavior.
Hofstede G. H. (1980). The collective programming of the mind that distinguishes themembers of one human group forms another.
Louis M. R. (1983). Three aspects: (1) some content (meaning and interpretation) (2)peculiar to (3) a group.
Hall E. T. and Hall M. R. (1987). Primarily a system for creating, sending, storing andprocessing information.
Harris P. R. and Moran R. T. (1987). A distinctly human capacity for adapting tocircumstances and transmitting this coping skill and knowledge to subsequent
generations.
38CHAPTER 6
Korean culture is strongly influenced by Confucian ideology. Furthermore, in an
attempt to promote more economic development, the Korean government has tightly
controlled industrial policies and management of capital distribution in the country.
Alternatively, the U.S.A. has a cultural heritage based on ‘rugged individualism’ andbelief in the free market.
Korean and U.S. organizations exist in institutional contexts with very different values
and norms. These differences are reflected in the strategic orientations of executives
from these two countries. Korean communication is largely the result of the Confucian
philosophy and has dominated Korean thought and philosophy (Kim, 1992). Other
attributes of the Korean ideology that have affected its deve lopment are a preference for
hierarchical order, authoritarianism, preference for formality, low information sharing
and self-control, and less emphasis on rights than on duty (Chung and Lee, 1989; Yooand Lee, 1987). While communication is characteristic of most Asian counties, Korea’s
approach differs from that in Japan and China. In Korea, the focus is on ‘inhwa’ or
harmony based on respect of hierarchical relationships and obedience to authority. In
Japan, the focus is on ‘wa’ or group harmony and socia l cohesion (Micheal A. Hitt and3 persons, 1997).
Corporations of each country have culture of only them. Geert Hofstede studied aboutcommon cultural factors included in each country for expressing of a national culture,
which is not generalized to all people in their country. So Geert Hofstede used a term of‘dimension’ that identified dimensions of work-related value differences. There are
power distance, uncertainty avoidance, and individualism/collectivism.
Figure 6.1 shows Flow (from culture to problems) in Korean Construction Company. In
Chapter 6, cultural characteristics in Korea will be examined.

39

CHAPTER 6

Korean Culture
Power distance

Characteristics
of Korean people
Ri (reason) & Ki (feeling)

Uncertainty avoidance

Individualism

Management functions
on Korean construction industry

Performance

Environment
Problems

Figure 6.1 Flow (from culture to problems) in Korean Construction Company

40

CHAPTER 6
6.1 Characteristic of Korean people (Ri & Ki)
Here, Ri can be defined by reason or logic, and Ki is feeling or emotional. Let’s see thecharacteristics of Korean people.
There is a tendency to think ‘feeling’ importantly.
Satisfaction for feeling takes first priority. Logic understanding and his/her ability don’t
be accepted. He/She cannot persuade some people without communication based on
feeling. When he/she does business, relationship by feeling takes top priority. It meansthat each person care about ‘feeling’ rather than propriety and prospect for business. To
make this, ‘jupdae’, the social activities –wining, dining, karaoke, and more withwomen- in the name of making business deals. The characteristic that takes important
human relationship is closely connected with irrational character of Korean. ‘Ration’can define that to based on reason understand rather than emotional understand. Korean
people are unreasonable. The reason that reasonableness cannot be established in Korea
although adopting western style like reasonableness is character as mentioning above.
Emphasizing on obedience and devotion than personality and personal liberty‘Ki’ is that as spiritual blindness wills that interesting on oneself and self-protect, someeach member always clash on a conflict interest by some happening.
‘Concession’ doesn’t make a match with reasonable thinking. It based on putting up
with losses and unfair treatment. Citizen like an individual on the past always giveconsideration for the whole people and sacrifices themselves for the whole people.
Serious consideration of propriety
Propriety in the past has been defined by embodiment of Ri, which withdraws
Characteristic of an offensive spirit to the other people and spreads a frie ndship. Not
positive self- insistence, Ri maintain rule like relationship among people through passive
concession and consideration. Also, Ri is based on regular recognition for authority andobedience. The reason that generally Korean people have passive characteristic iscaused by mention above.
A tendency of authoritarianism
Authority in Korea is a tacit sign and compulsion. Generally, that is by unconsciousness.
In Korean people case, authority has come to stay by inviolable obedience and respect
for authority of a head of family at the past. In order to maintain group order andprevent a breakaway, it is most efficient of group member to admit differential reality
and obey that. The traditional society required obedience and modesty by endurance.
What upper and lower consciousness like seniority in Korean characteristics is strong
can be said that authority is strong. That is, Korean people prefer sure seniority to an
equal horizontal system.
41

CHAPTER 6
Korean is proud of their cultures but inbred nationalism can make it difficult to accept
changes. On the other hand, Japan is more mature as an industrialized power andemployees are more accustomed to following management edicts without protest.
In Korea, the management style is less disciplined and less efficient than the USA
management style. In the USA, companies are exacting and demanding. What it wassated above cased by Korean characteristic based on Ki rather than Ri.

42

CHAPTER 6
6.2 Power distancePower distance can be defined as the extent to which the less powerful members of
institutions and organizations within a country expect and accept that power isdistributed unequally. ‘Institutions’ are the basic elements of society like the family,
school, and the community; ‘organizations’ are the places where people work (Hofstede,1991).
Table 6.2 shows power distance index values. Here, Korea is ranked at 27/28, Japan is
at 33, and the USA is ranked at 38. It means that power distance in Korea is stronger
than Japan and the USA one.
In Korea, the hierarchical status based on Confucianism and the conservative formalism
derived from it has shaped authoritarian conservatism. On the one hand, there is theconcept that one ’s own opinion is valid based on the power or authority one wields, andon the other, one is obedient to outside authority by depreciating oneself.
In the large power distance situation superiors and subordinates consider each other asexistentially unequal; the hierarchical system is felt to be based on this existential
inequality. Organizations centralize power as much as possible in a few hands.
Subordinates are expected to be told what to do. There are a lot of supervisory personnel,
structured into tall hierarchies of people reporting to each other. Salary systems show
wide gaps between top and bottom in the organization. Workers are relatively
uneducated and manual work has a much lower status than office work. Superiors andsubordinates are supposed to be initiated by the superiors only. The ideal boss, in thesubordinates’ eyes, is a benevolent autocrat or ‘good father’. After some experienceswith ‘bad fathers’, they may ideologically reject the boss’s authority completely, while
in practice they will comply. Relationships between subordinates and superiors in alarge power distance organization are frequently loaded with emotions.
Visible signs of status in large power distance countries contribute to the authority ofbosses; it is quite possible that a subordinate feels proud if he can tell his neighbor that
his boss drives a bigger car than the neighbor’s boss. Older superiors are generally more
respected than younger ones.
In the small power distance situation subordinates and superiors consider each other asexistentially equal; the hierarchical system is just an inequality of roles, established forconvenience; and roles may be changed, so that someone who today is my subordinate
may tomorrow be my boss. Organizations are fairly decentralized, with flat hierarchicalpyramids and limited numbers of supervisory personnel. Salary ranges between top andbottom jobs are relatively small; workers are highly qualified, and high-skill manual
work has a higher status than low-skill office work. Privileges for higher-ups arebasically undesirable, and all should use the same parking lot, toilets, and cafeteria.
Superiors should be accessible for subordinates, and the ideal boss is a resourceful (andtherefore respected) democrat. Subordinates expect to be consulted before a decision ismade that affects their work, but they accept that the boss is the one who finally decides
43

CHAPTER 6(Hofstede, 1991). Table 6.3 shows up key differences between small and large power
distance societies.
Table 6.2 Power distance index (PDI) value for 50 countries and 3 regions
Score
Rank

Country or region

PDI
Score

Score
Rank

Country or region

PDI
Score

1
2/3
2/3
4
5/6
5/6
7
8/9
8/9
10/11
10/11
12
13
14
15/16
15/16
17
18/19
18/19
20
21/23
21/23
21/23
24/25
24/25
26
27/28

Malaysia
GuatemalaPanamaPhilippines
MexicoVenezuela
Arab countries
EquadorIndonesia
India
West Africa
Yugoslavia
Singapore
BrazilFranceHong Kong
Colombia
SalvadorTurkeyBelgium
East Africa
Peru
Thailand
Chile
Portugal
Uruguay
Greece

104
95
95
94
81
81
80
78
78
77
77
76
74
69
68
68
67
66
66
65
64
64
64
63
63
61
60

27/28
29/30
29/30
31
32
33
34
35/36
35/36
37
38
39
40
41
42/44
42/44
42/44
45
46
47/48
47/48
49
50
51
52
53

South Korea
Iran
TaiwanSpain
Pakistan
Japan
Italy
Argentina
South Africa
Jamaica
USA
CanadaNetherlands
Australia
Costa Rica
Germany FR
Great Britain
Switzerland
Finland
NorwaySwedenIreland
New Zealand
Denmark
IsraelAustria

60
58
58
57
55
54
50
49
49
45
40
39
38
36
35
35
35
34
33
31
31
28
22
18
13
11

Source: Cultures and Organizations – Hofstede, 199144

CHAPTER 6
Table 6.3 Key differences between small and large power distance societies
Small power distance

Large power distance

Inequalities among people should be
minimized

Inequalities among people are both
expected and desired

There should be, and there is to someextent, interdependence between less andmore powerful people

Less powerful people should be dependent
on the more powerful; in practice, lesspowerful people are polarized between
dependence and counter dependence

Parents treat children as equals

Parents teach children obedience

Children treat parents as equals

Children treat parents with respect

Teachers expect initiatives from students
in class

Teachers are expected to take all
initiatives in class

Teachers are experts who transfer
impersonal truths

Teachers are gurus who transfer personal
wisdomStudents treat teachers as equals

Students treat teachers with respect

More educated persons hold lessauthoritarian values than less educatedpersons

Both more and less educated persons show
almost equally authoritarian values

Hierarchy in organizations means an
inequality of roles, established forconvenience

Hierarchy in organizations reflects theexistential inequality between higher-ups
and lower-downs

Decentralization is popular

Centralization is popular

Narrow salary range between top andbottom of organization

Wide salary range between top and bottomof organization

Subordinates expect to be consulted

Subordinates expect to be told what to do

The ideal boss is a resourceful democrat

The ideal boss is a benevolent autocrat or
good farther

Privileges and status symbols are frowned
uponPrivileges and status symbols for
managers are both expected and popular

Source: Cultures and Organizations – Hofstede, 199145

CHAPTER 6
6.3 Uncertainty avoidance
Uncertainty avoidance can be defined as the extent to which the members of a culture
feel threatened by uncertain or unknown situations. This feeling is, among other things,
expressed through nervous stress and in a need for predictability: a need for written
rules (Hofstede, 1997).
The uncertainty avoidance dimension measured the extent to which different culturessocialized their members into accepting ambiguous situations and tolerating uncertainty.
Members of high uncertainty avoidance cultures placed a premium on job security,
career patterns, retirement benefits, and so on. They also had a strong need for rules andregulations; the manager was expected to issue clear instructions, and subordinates’
initiatives were tightly controlled. Lower uncertainty avoidance cultures werecharacterized by a greater readiness to take risks and less emotional resistance to change.
In table 6.4, Korea is listed at high. The USA is low and Japan shows high score in theuncertainty avoidance.
In uncertainty avoidance societies there are many formal laws and/or informal rules
controlling the rights and duties of employers and employees. The need for laws andrules is not based on formal logic but on psycho- logic. The need for rules in a society
with a strong uncertainty avoidance culture is emotional. The emotional need for laws
and rules in a strong uncertainty avoidance society often leads to the establishing ofrules of rule-oriented behaviors (Hofstede, 1997).
In countries with very weak uncertainty avoidance there rather seems to be an emotional
horror of formal rules. Rules are only established in case of absolute necessity, such as
to determine whether traffic should keep left of right. People in such societies pride
themselves that many problems can be solved without formal rules (Hofstede, 1997).
Weak uncertainty avoidance countries are more likely to stimulate basic innovations as
they maintain a greater tolerance towards deviant ideas. On the other hand they seem to
be at a disadva ntage in developing these basic innovations towards full-scale
implement ations, as such implementation usually demands a considerable sense ofdetail and punctuality (Hofstede, 1997).
Currently, failure of Korean economic crisis was caused by high-payment but low- valeor low profitability. But all people call to account for only failure after the economiccrisis. As all people call responsibility for that failure, the persons and companies
concerned to economic crisis tended to avoid difficult situations and uncertainty
situations. But organizations has achieved success don’t avoid their failure and don’thide their failure. They have had ability that overcomes against difficulties directly.
Table 6.5 shows up key differences between weak and strong uncertainty avoidancesocieties.

46

CHAPTER 6
Table 6.4 Uncertainty avoidance index (UAI) values for 50 countries and 3 regions
Score
Rank

Country or region

UAI
Score

Score
Rank

Country or region

UAI
Score

1
2
3
4
5/6
5/6
7
8
9
10/15
10/15
10/15
10/15
10/15
10/15
16/17
16/17
18
19
20
21/22
21/22
23
24/25
24/25
26
27

GreecePortugal
GuatemalaUruguay
Belgium
SalvadorJapan
Yugoslavia
Peru
FranceChile
Spain
Costa Rita
PanamaArgentina
TurkeySouth Korea
MexicoIsraelColombia
Venezuela
BrazilItaly
Pakistan
Austria
TaiwanArab counties

112
104
101
100
94
94
92
88
87
86
86
86
86
86
86
85
85
82
81
80
76
76
75
70
70
69
68

28
29
30
31/32
31/32
33
34
35
36
37
38
39/40
39/40
41/42
41/42
43
44
45
46
47/48
47/48
49/50
49/50
51
52
53

EquadorGermany FR
Thailand
Iran
Finland
Switzerland
West Africa
Netherlands
East Africa
Australia
NorwaySouth Africa
New ZealandIndonesia
CanadaUSA
Philippines
India
Malaysia
Great Britain
IrelandHong Kong
SwedenDenmark
Jamaica
Singapore

67
65
64
59
59
58
54
53
52
51
50
49
49
48
48
46
44
40
36
35
35
29
29
23
13
8

Source: Cultures and Organizations – Hofstede, 199147

CHAPTER 6
Table 6.5 Key differences between weak and strong uncertainty avoidance societies
Weak uncertainty avoidanceStrong uncertainty avoidance

Uncertainty is a normal feature of life andeach day is accepted as it comes

The uncertainty inherent in life is felt as acontinuous threat which must be fought

Low stress; subjective feeling of wellbeing

High stress; subjective feeling of anxiety

Aggression and emotions should not be
shown

Aggression and emotion may at proper
times and places be ventilated

Comfortable in ambiguous situations andwith unfamiliar risks

Acceptance of familiar risks; fear of
ambiguous situations and of unfamiliar
risks

Lenient rules for children on what is dirty
and taboo

Tight rules for children on what is dirty
and taboo

What is different, is curious

What is different, is dangerous

Students comfortable with open-ended
learning situations and concerned withgood discussion

Students comfortable in structured
learning situations and concerned with theright answers

Teachers may say ‘I don’t know’

Teachers supposed to have all the answers

There should not be more rules than isstrictly necessary

Emotional need for rules, even if thesewill never work

Time is a framework for orientation

Time is money

Comfortable feeling when lazy; hardworking only when needed

Emotional need to be busy; inner urge towork hard

Precision and punctuality have to belearnedPrecision and punctually come naturally

Tolerance of deviant and innovative ideas
and behavior

Suppression of deviant ideas and behavior;
resistance to innovation

Motivation by achievement and esteem or
belongingness

Motivation by security and esteem or
belongingness

Source: Cultures and Organizations – Hofstede, 199148

CHAPTER 6
6.4 Individualism and Collectivism
Most comparative analyses of conflict management behavior contrasted groups such as
Japanese-collectivists- and Americans-individualists. Koreans are more collectivistic in
conflict communication styles than Japanese.
In table 6.6, it is confirmed that Japan, the USA, and Korea are ranked to 22/23, 1, and
43. Koreans and Japanese have been considered collectivistic in their social behavior, incomparison to Americans. Closer examinations of Japanese and Korean conflict
behaviors are likely to reveal nontrivial differences. Table 6.7 summarizes key
differences between collectivist and individualist societies.
The Korean culture, given more enduring and profound impact of Confucianism thanJapanese, seems to place a high value on extensive reciprocal relationships with others
that often transcend an immediate context.
Collectivists, in contrast to individual goals to collective goals, possess a sense of
harmony, interdependence, and concern for others (Hui and Triandis, 1986). In
collectivist cultures group decisions are favored over individual ones, and individual
initiative is frowned upon. Furthermore, one’s identity in collectivist cultures is basedon the relations with in groups, thus, emphasizing a strong ‘we’ consciousness(Hofstede, 1980).
Hofstede wrote that in most collectivist cultures, the word ‘no’ is seldom used, becausesaying no is a confrontation; ‘you may be right’ or ‘we will think about it’ are examplesof polite ways of turning down a request. Similarly, the word ‘yes’ should notnecessarily be seen as an approval, but as maintenance of the communication line: ‘yes,
I heard you’ is the meaning it has in Japan.
Individuals in a high context culture are more likely to assume a non-confrontational,
indirect attitude toward conflicts.
Japanese and Koreans have both been grouped together as ‘collectivists’. The degrees towhich they actually utilize ‘collectivist’ communication behaviors, and the nature of thedifferences, if any, between the two groups, have yet to be examined.
Conflict, as part of interpersonal interactions, occurs in specific cultural settings.
Culture is a shared, collective product that provides a repertoire of actions and astandard against which to evaluate people ’s actions. Culture is often manifested in theshared symbols and rituals that invoke common responses in social situations within thecultural context (Ross, 1993).
Koreans and Japanese share some cultural heritage, and have exerted influence on eachother in the past, the social and psychological attributes that underlie their interpersonal
behavior do display some important differences.

49

CHAPTER 6
Scholars describing Korean culture have stressed that Confucian principles haveinfluenced the interpersonal relations more profoundly in Korea than in Japan (Oliver,
1993; Yum, 1988).
The Confucian principles are manifested through patterns of communication that people
employ in their daily interactions: process-oriented communication differentiatedlinguistic codes, indirect communication emphasis, and receiver centeredcommunication. As Confucianism stressed its primary value on the maintenance ofhuman relationship, communication is perceived to be a process of infinite
interpretations, rather than the transference of message. Thus, communicating withother is not a means, but an end in itself.
Koreans may be more collectivistic based on Ki in cultural orientation than Japanese.
Anthropological and psychological studies have characterized traditional Asian cultures
as being group-oriented, Korean are expected to show more collectivistic tendencies
than Japanese.
Korean scored more highly in their collectivistic orientation and also used moreinterpersonal tactics typically associated with collectivists in requesting situations.
The notion of ‘face’, a representation of social propriety, has both psychological andemotional components that manifest themselves through behavioral interaction patterns.
For collectivist cultures in which saving face is a critical matter, the style of ‘facesupporting’ behavior, rather than efficient and direct goal orientation may be effective
and may produce desirable consequences in the long run. These ideas, as applied tointeractional behavior, would mean that ‘collectivists’ have a preference for ‘facesaving’ means of achieving primary goals, such as the desire to avoid imposition, toavoid hurting the hearer’s feelings and to avoid being disliked by others. Therefore, we
expect that the ‘propriety’ of one ’s conventional tactics will be mo re important for
Koreans than for Japanese.

50

CHAPTER 6
Table 6.6 Individualism index (IDV) value for 50 countries and 3 regions
Score
Rank

Country or region

IDV
Score

Score
Rank

Country or region

IDV
Score

1
2
3
4/5
4/5
6
7
8
9
10/11
10/11
12
13
14
15
16
17
18
19
20
21
22/23
22/23
24
25
26/27
26/27

USA
Australia
Great Britain
CanadaNether lands
New Zealand
Italy
Belgium
Denmark
SwedenFranceIreland
NorwaySwitzerland
Germany F.R.
South Africa
Finland
Austria
Israel
Spain
India
Japan
Argentina
Iran
Jamaica
BrazilArab countries

91
90
89
80
80
79
76
75
74
71
71
70
69
68
67
65
63
55
54
51
48
46
46
41
39
38
38

28
29
30
31
32
33/35
33/35
33/35
36
37
38
39/41
39/41
39/41
42
43
44
45
46
47/48
47/48
49
50
51
52
53

TurkeyUruguay
GreecePhilippines
MexicoEast Africa
Yugoslavia
Portugal
Malaysia
Hong Kong
Chile
West Africa
Singapore
ThailandSalvadorSouth Korea
TaiwanPeru
Costa Rica
PakistanIndonesia
Colombia
Venezuela
PanamaEquadorGuatemala

37
36
35
32
30
27
27
27
26
25
23
20
20
20
19
18
17
16
15
14
14
13
12
11
8
6

Source: Cultures and Organizations – Hofstede, 1991

51

CHAPTER 6
Table 6.7 Key differences between collectivist and individualist societies.
Collectivist

Individualist

People are born into extended families orother in-groups which continue to protect
them in exchange for loyalty

Everyone grows up to look after
him/herself and his/her immediate(nuclear) family only

Identity is based in the social network towhich one belongs

Identity is based in the individualChildren learn to think in terms of ‘we’Children learn to think in the terms of ‘I’Harmony should always be maintainedand direct confrontations avoided

Speaking one’s mind is a characteristic ofan honest person

High-context communication

Low-context communication

Trespassing learns to shame and loss offace for self and group

Trespassing leads to guilt and loss of selfrespect

Purpose of education is learning how to do

Purpose of education is learning how to
learn

Diplomas provide entry to higher statusgroups

Diplomas increase economic worth and/or
self-respect

Relationship employer-employee isperceived in moral terms, like a family
link

Relationship employer-employee is acontract supposed to be based on mutualadvantage

Hiring and promotion decisions takeemployees’ in-group into accountHiring and promotion decisions aresupposed to be based on skills and rules
onlyManagement is management of groups

Management is management of
individuals

Relationship prevail over task

Task prevails over relationship

Source: Cultures and Organizations – Hofstede, 199152

CHAPTER 7
CHAPTER 7
EVALUATION OF DIFFERENCE BY CULTURE
It is important of us to understand common organization culture and a characteristic
culture in each country in order to develop a desirable organization culture. Here,difference of each country’s character on culture will be arranged.
7.1 In the U.S.A. caseAs some investigation, characteristics of American companies for management pattern
or management skill have shown common points; bias for action, close to customers,
autonomy and entrepreneurship, productivity through people, hands-on/value-driven,stick to the knitting, simple form/learn staff, and loose-tight control.
Generally, excellent companies in the U.S.A. show characteristics like that quick
behavior coping with some problem, close to custome rs, autonomy management,
business development on imaginative power and human-being-oriented management.
Their characteristics have been shown such as mention above.
Member’s behavior in organization.
Communication shows that free and open among member in organization. And in orderto do rapid decision-making they have used task force and project team consisted ofsmall member. In the behavior coping with some problem, they may use toexperimental and imaginative behavior.
Value-oriented simple aim
In setting aim of company, they concentrate their efforts on simple and unique aim, forexample, customer service, technology development, imaginative idea, and so on, not toconcentrate on various and complex aim.
Simple organization operation
Although scale of excellent companies in the U.S.A. is big, actually they have stressedon simple organization system and form. Therefore, they can work freely.

Cultural character in American companies is that commonly open- mind, free,imaginative power, simplifying, and mutual help and development mind on business.
7.2 In Japan case
Although starting period on business compared with Korea, Japanese company had
developed quickly since 1950s. In 1970s, although a financial panic by an oil crisis,
Japan had been continued their economic growth. Amazing economic growth in Japan
can be said that the main cause was organization operation by human resources and53

CHAPTER 7
technology. Characteristic of human resources management is that lifetime employment,
promotion system by long-term evaluation, collective decision making, and humanbeing oriented.
Lifetime employment, promotion system by long-term evaluation and the seniority
system between organization and member have relation to Japanese traditional culture.
Relation between upper and lower person can be said that loyalty for upper person andbenevolence for lower person.
In order to keep sustain long-term relation among organization and member,coordination among them is necessity. Therefore, concept of wa based on humanism
and collectivism have been stressed in Japan. Promotion system by long-term
evaluation is focused on judge of humanism, not evaluate by short-term performanceability. The seniority system shows that wa and collectivism are important.
Communication among member in organization is free and open. This means that all
information on company can be shared under the humanism based on family system andcollectivism and can make communication free to go beyond simple performance.
7.3 In Korea caseCharacteristic of Korean company can be said that generally the centralizing system
based on the minor of core person including entrepreneur and manager and systematic
job specifications and also authority relationship between upper and lower and humanresource management based on inwha and the seniority. These characteristics in Korea
are affected by traditional Confucianism culture and the family system. So thesecharacteristics are cultural factors being shown one-way order, the centralizing system
to entrepreneur, staffing based on the seniority system, obedience for a senior and upper
person, and leadership based on humanism. Table 7.1 shows each country’s differencesby culture. Aim in Korea shows short-term management aim. Korean character likehurry up anything, which can be said that it is based on Ki. As promotion, rapid
evaluation for performance is based on Ri, but promotion is based on Ki. In decisionmaking, it shows that decision- making by individual, but actually by the minor. Thatshows behavior by Ki truly. Korean characteristic is based on Ki rather than Ri. But
proper balance of Ki and Ri is necessary to compete with the foreign construction
companies taking reasonable thinking. Table 7.2 summaries the dimensions of power
distance, uncertainty avoidance, and individualism/collectivism.

54

CHAPTER 7
Table 7.1 differences by each country’s culture
The U.S.A.

Japan

Korea

Long-term
management aim

Long-term
management aim

Short-term
management aim

Employment

Short-term
employment

Lifetime
employment

Lifetime
employment

Promotion

Rapid evaluation
for performance andpromotion

Promotion system
by long-term
evaluation

Rapid evaluation
for performance

Decision-making

Decision-making by
individual

Decision-making bycollectivism

Decision-making by
individual and theminor

Responsibility

IndividualGroup

Individual

A line of thinking

IndividualCollectivism

Individual and theminor

Compensation
systemProficiency salaryraise system

The seniority
systemThe seniority
systemValue pursue

Efficiency,
rationality, andcompetitivenessStability, help, andfeeling based onhumanism

Stability, help, andfeeling based onhumanism

Aim

Table 7.2 the dimensions of power distance, uncertainty avoidance, and individualism
Factor country

Power distance

Uncertainty
avoidance

Individualism

Korea
Japan
USA

High
High
Low

Medium
High
Low

Low
Low
High

55

CHAPTER 8
CHAPTER 8
PARADIGM SHIFT FOR CONSTRUCTION INDUSTRY IN KOREA.
Last economic crisis had made been occurred a shift in whole managerial environment.
After economic crisis Korean management pattern has been changing; profitabilityorientated management, e-business, a stockholder-oriented management, company
structural coordination (control), and improvement for financial structure etc.
Korean construction industry needs a shift for 21st century’s competitiveness. Most ofall, a drastic value switch in construction industry is necessary like that; manpowerintensive to technology- intensive; the central point of experience for construction to thecentral point of knowledge for whole construction; getting projects to finding projects
through development like total packages; protecting domestic construction market to
opening up oversea construction market. Second, a change in government’s role isnecessary.
To secure clarity and fairness in construction industry, government has to showframework. And structure under government has to be changed to free competition
system and has to be changed to private-initiated construction business system.
21st century that has needed much changes to whole industries can be said that
globalization, digitalization, knowledge-intensive, customer-intensive, and reduction oftime & cost.
These switches can be applied to construction industry. Let’s see some paradigm ofconstruction industry. First, application of global standard based on international
industry policy and laws. Second, relation/role of between government and privatecompany has to be changed from the relation of master and servant to relation of
responsibility each. Third, information of each project has to be shared and reutilized
through Internet or the other equipment in order to reduce time, cost, and make up foradvantages and disadvantages. Fourth, application of construction management skill inorder to strengthen management function. Fifth, diversification of contractual approachand strengthen of mutual cooperation among those who take part in construction. The
last is that reduction of time and cost on improvement of working process.
Many people have talked about paradigm shift and contexts that have to be a switch
may have common thing. But that new paradigm shift has been being talked every time
because of difficulty of their practice. Here, although all of you may know that, I willtalk about paradigm shift again.
From the middle of 1990s the rate of Korean economic growth has slowed. In near
future potential growth rate in Korean industry has been predicted by 6%. Industry
system also goes to the limitation and is facing difficulties. So that is difficult toovercome systematic difficulties not to overcome low- value system through basic
innovation on many aspects. The basic solution can say that current system has to bechanged, that is, from low-value system to high-value system.
56

CHAPTER 8
Currently, the world is changing rapidly to this kind of things such as globalization,
information, and knowledge. And globalization makes opening infinity-competition
period to whole industries. It can be said that competition principle like American style
applies to the world industry.
Technical development makes life cycle of products short and makes that competition
among each company is promoted. The center of industry changed to soft industry like
information-communication and software from heavy-chemical industries. It means that
information and knowledge is most important on industry by the origin ofcompetitiveness in the near future. And also it may decide competitiveness that how
much fast information and knowledge be used properly when they need. So in order toadapt to the changes needed in the 21st century, Korean industry needs paradigm thatcan be said that a mental attitude before doing anything.
Then, paradigm needed on Korean industry will be showed here again.
• Value-intensive management (proper-payment & high-value)
Managerial purpose in Korean industry was outward-extension rather than valuecreative. So Korean companies had set piecemeal aim like sale profit, percentage ofmarket, ordinary profit and so on. And they have been continued extension-policy likeoctopus and rely on a debt from finance agent, which is a major cause for high-payment& low-value creation. But substance and their real ability are a main cause forcompetitiveness by globalization. To do that, they have to invest at high profit rate
things and have to overcome a debt though improving financial system on company.
And they focus specialization on business.
• Customer-oriented management
Development of Information, communication, and technology has accelerated
customer’s need like diversification and their character. Therefore, Korean company has
to utilize these things by strategy.
• Knowledge-intensive management
In the past, Korea had thought success if amount of manpower and material resourceswere increased. And they had done like that. But in period of information andknowledge, information and related knowledge is a source of value added. In the near
future, if main ability based on knowledge don’t have been in their company, it is
impossible to be competitive company or profit-creative company or international
company. Managerial strategy that cannot copy their things has been needed in the
future.

57

CHAPTER 8• Human being-intensive management
Now, imaginative power and flexibility needs in whole company and industry.
Imaginative power and flexibility go out from people. Organizational management
focused on a one-way order and control and the order of rank cannot secure imaginative
power and flexibility. Company has to give right and responsibility to them in order tocarry out their role. People are the source of imaginative power and value added, not a
factor of production.
• IT –intensive management
Information is necessity for business and all industry. IT (Information Technology)
system in company can say neural network of human. So establishing the foundation of
information system that can use proper informatio n timely is a prerequisite to securecompetitiveness on company. Grasping of rapid managerial information and utilizing ofthat information improve flexibility and efficiency on company’s organization.
• Globalization
The world has become globalization and a unitary market in the 21st century. When thestrong in the world market, the strong in domestic market will be. Global managementmeans that whole process on a business be optimized, for example, from R&D todelivery of production and after service. In order to manage like that, it needs that first,
concentration of important ability to create efficiency and advantage on competitiveness.
Second, Branch Company in the world. It means that company has to cope withcustomer’s needs quickly. The last is that getting of global learning ability. As studying
global learning ability member of company can get flexibility and quickness for various
world customer’s needs.
• Environment-oriented management
In the past, the development of nature means high economic growth and environmental
pollution has been noticed by inescapable in economic development. But degree ofenvironmental pollution have reached at threaten in survive of people. Companies that
don’t do protection of environment and maintenance of nature should not do businessactivity anymore in the future. That is, companies considering on social, local,
international environment all should be winner in business.

58

CHAPTER 9
CHAPTER 9
THE POINTS TO BE IMPROVED
Here, in order to cope with difficulties facing on, the points to be improved will beshown.
First, the Type Z model, as argued by Wiliam Ouchi in 1981, is an attempt to integratecommon business practices in the United States and Japan into a single middle-groundframework. He suggests that a few American firms have achieved great success byadopting a hybrid form of management, which he calls Type Z (Richy W. Griffin, 1990).
He shows in Type Z that American and Japanese firms are essentially different along
seven important dimensions:(1) Length of employment(2) Mode of decision-making(3) Location of responsibility(4) Speed of evaluation and promotion(5) Mechanisms of control(6) Specialization of career path(7) Nature of concern for the employee
Korea case also follows these dimensions. Here Wiliam Ouchi calls traditional
American firms Type A and traditional Japanese companies Type J. Therefore, Korea
will call Type K and some new Type K shows in Figure 9.1.
To introduce new Type K efficiently Korean companies have to work out solution likethat interest and love of member, friendly, loyalty, and unification for their companies.
Korean companies need to set aim for long-term orientation without regard to a shortperiod profit. When companies are managed by the social main group not to take shortterm profit, they can get confidence from their member and the other people. And
stability of company’s organization has to need. It means that if this new type K issettled well, employment stability for employee has to be secured. High unemployment
rate inflicts a loss on both of them. The main cause of high unemployment is lack of
unification between company and employee. Therefore, as giving proper salary, feelingof belonging to company, and chance can show their performance ability, stability andfeeling of belonging to company among member have to be taken. The last, new humanrelations and member’s sense of value have to be established. When the old generationand the new generation, their way of thinking is against, agreement and adjustment haveto be able to be established. It is thought that we have to learn rationality based on an
obvious responsibility, an obvious authority relation, and fair competitiveness from thewestern management style. And also, we have to establish our way of thinking basedharmony on traditional humanism in the Eastern.
Second, in order to apply new K theory properly to Korean companies, it is thought thatRi and Ki have to keep balance. Korean management focuses more on Ki based on
59CHAPTER 9
feeling rather than Ri based on reason, which bring out high-payment, but lowefficiency or profitability. For example, in Korean car’s export, lots of car is exported
every year, but its profitability is lower than the other exporting countries. That comesfrom management by Ki rather than Ri. It is the same in construction industry. Since Ki,
Korean characteristic, quality control on construction is low and great construction
accident is occurred. Also, unqualified construction companies have been increased.
These things concerned with Ki cannot only say that it is bad. But at least, keeping
balance between Ki and Ri is necessary.

60CHAPTER 9(Japan)(American)

Organization type J
1. Lifetime employment
2. Collective decision-making
3. Collective responsibility
4. Slow evaluation andpromotion
5. Implicit control mechanisms
6. Nonspecialized career path
7. Holistic concern for
employee as a person

Organization type A
1. Short-term employment
2. Individual decision-making
3. Individual responsibility
4. Rapid evaluation andpromotion
5. Explicit control mechanisms
6. Specialized career path
7. Segmented concern for
employee as an employee(Korea)Organization type K
1. Lifetime employment
2. Individual and the minor
decision-making
3. Individual responsibility
4. Rapid evaluation andpromotion
5. Implicit control mechanisms
6. Nonspecialized career path
7. Holistic concern for
employee as a person(Modified Korea -Hybrid)
Organization new type K
1. Long-term employment
2. Collective decision-making
3. Individual responsibility
4. Slow evaluation andpromotion
5. Both implicit and explicit
control mechanisms
6. Specialized career path
7. Holistic concern for
employee as a person
Figure 9.1 Hybrid form required in Korean organization
61

CHAPTER 10
CHAPTER 10
CONCLUSIONSThe Korean construction industry had achieved a remarkable advancement in the entire
world for a short period of half a century. Due to small country by territorial division,poor resources and civil war, nation economy had been in bad conditions. But Korean
people based on national characteristics had taken-off construction industry in the world.
Recently, in rapid changing environment, Korean construction industry is facing manydifficulties with bringing out many problems.
As construction industry has the big weight next to the manufacturing industry and theservice industry, we must overcome difficulties and many problems. In order to do that,most of all we have to understand our difficulties and problem calmly and have to findsolution of that. As stated previously, here many direction for solution of difficulties
and problem that Korean construction industry is facing, which can summarize asfollow:
1. As Korean construction market is opened to the world, management pattern of eachcountry has to understand in order to compete with them. So we can know that
according to five managerial functions, planning, organizing, staffing, leading, andcontrolling for each country are as follow:
Planning
The USA management: individual
Japanese management: group
Korean management: group but a few
Organizing
The USA management: clear responsibility
Japanese management: ambiguous responsibility
Korean management: ambiguous responsibility
Staffing
The USA management: employment of function of human being
Japanese management: employment of human being
Korean management: employment of human being
Leading
The USA management: order by top-down communication
Japanese management: motivation by employees, themselves
Korean management: order
Controlling
The USA management: X theory
Japanese management: Y theory
Korean management: X theory
62

CHAPTER 10
2. Although Korea and Japan show similar points much, difference by culture in theconstruction industry shows that as follow:• The USA: rapid decision- making; simple and unique aim; simple organization systemand form; commonly open- mind, free, imaginative power, simplifying, and mutual help
and development mind on business.
• Japan: organization operation by human resources and technology; lifetime
employment; promotion system by long-term evaluation; collective decision- making,and human being oriented; loyalty for upper person and benevolence for lower person;
concept of wa based on humanism and collectivism.
• Korea: the centralizing system based on the minor of core person; authority
relationship between upper and lower; human resource management based on inwha
and the seniority; traditional Confucianism culture and the family system.
As mention above, characteristics of 1and 2 can be said that traditional culture of eachcountry like power distance, uncertainty avoidance, and individualism/collectivism isdifferent. The dimensions are likely to table 10.1:
Table 10.1 the dimensions of power distance, uncertainty avoidance, and individualism(Before)Factor country

Power distance

Uncertainty
avoidance

Individualism

Korea
Japan
USA

High
High
Low

High
High
Low

Low
Low
High

It can be said that Korea has many different things to compare with the USA. The USA
can say that they have international managerial style. At least, Korean managerial stylealso has to be closed by international managerial style like the USA style.
It is necessary for these weakness points in Korea to be changed in order to competewith deve lopment countries in 21st century. As for power distance case, it has to be low
in order of each people to show off imaginative power and personality. With respect touncertainty avoidance case, it has to be changed by low. As society is being complex
more and more, we may face on much uncertainty situations. At that time, we have tosolve difficult situations positively, not to avoid those situations. As far as individualism,
it is better to change by medium. World has been being globalization, which has been
needed harmony, cooperation, competitiveness, and responsibility simultaneously. So
balance of between individualism and collectivism is needed. It can sum up as follow:

63

CHAPTER 10
Table 10.2 the dimensions of power distance, uncertainty avoidance, and individualism(After)
Factor country

Power distance

Uncertainty
avoidance

Individualism

Korea

Low

Low

MediumWe recommend that K theory should be applied in Korean companies properly bycountermeasure. Also, to do that, it needs that keeping balance of between Ri and Ki.
As mention before, K theory, new theory can be shown by direction for the points to be
improved, which is that Long-term employment; Collective decision-making; Individual
responsibility; Slow evaluation and promotion; Both implicit and exp licit control
mechanisms; Specialized career path; Holistic concern for employee as a person. Mostof all, Ki, Korean characteristic, influence on many aspects in Korea. Sometimes that
influence good condition on management or bad condition. So balance of between Ki
and Ri is required.
Generally, paradigm shift in 21st century is necessary to Korean construction industry
after changing mentioned above. Paradigm shift required coping with recent difficulties
for construction industries in Korea is as follow:• Value-intensive management (proper-payment & high-value)• Customer-oriented management• Knowledge-intensive management• Human being-intensive management• IT –intensive management• Globalization• Environment-oriented management
It is expected that if Korean construction industry gets out of difficulties as soon as
possible, competitiveness of Korean construction industry should be high. And this will
provide a basis for discussion of possible directions for the solution of current problems.
Though practically applying these directions in Korean Construction Company, thestudy will provide a basis for discussion of being suitable and dimensions that how
much differences it is.

64

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66

APPENDIX: ANALYSIS OF MAIN MANAGEMENT INDEXAnalysis of main management index
1) The rate of growth comparison with manufacturing industry.
1990

1991

1992

1993

1994

1995

1996

1997

(Unit:%)
1998

1999

(5)

(6)

35.7
29.9
19.3
20.8
11.1
-11.2
-7.4
2.8
(1) 32.9 32.2 28.3 19.6
29.9
22.7
35.4
31.2
32.2
18.9
12.5
-0.1
35.7
-37.7
23.5
37.0
(2)
9.0
24.3
31.7
43.8
15.7
5.2
-5.6
0.7
(3) 35.4 40.9 32.2
7.1
25.5
23.9
25.4
11.5
-10.1
3.4
2.8
8.0
(4) 43.1 47.4 34.0
Note:(1) Increasing rate of whole funds(2) Increasing rate of funds on hand(3) Increasing rate of sales(4) Increasing rate of sales on construction(Sales on constriction means completion construction)(5) A pure construction without construction firms that the rate of a subsidiarybusiness is over 20%.
(6) Manufacturing industry
Source: Construction & Economy Research Institute of Korea

2) The rate of stabilization(Unit: %)
1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

(5)

(6)

(1) 116.8 116.0 113.2 119.1 115.3 112.1 108.9 105.3 110.3(2) 77.7 77.9 80.8 76.1 79.8 83.1 87.0 92.9 90.0
(3) 431.3 472.7 435.0 388.0 391.7 441.2 476.3 569.3 437.7(4) 18.8 17.5 18.7 20.5 20.3 18.5 17.4 14.9 18.6
Note:(1) Current ratio(2) Fixed assets to stockholders’ equity and long-term liabilities(3) Debt ratio(4) Net worth to assets, stockholders’ equity to total assets
Source: Construction & Economy Research Institute of Korea

106.0
93.7
605.9
14.2

154.9
58.6
341.3
22.7

92.0
105.1
214.7
31.8

1998

1999

(4)

(5)

2.8
2.7
2.5
2.3
0.7
0.1
-1.0
-3.1
(1) 1.9
2.4
2.3
2.0
1.7
0.5
0.1
-0.8
-2.7
(2) 1.5
8.1
13.5
12.5
9.8
8.5
2.7
0.4
-5.6
-14.3
(3)
Note:
(1) Ordinary income to sales(2) Ordinary income to total assets(3) Ordinary income to capital adequacy
Source: Construction & Economy Research Institute of Korea

-11.1
-10.1

-2.3
-1.7

1.7
1.4

-71.2

-7.6

5.0

3) Profitability(Unit: %)
1990

1991

1992

1993

1994

1995

1996

1997

4) Productivity(Unit: %)
1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

(5)

(6)

25.7
18.8
17.5
16.9
18.9
11.5
5.1
(1) 23.7 223.6 25.9
134.7
149.8
166.0
158.7
107.9
98.6
89.2
102.5
48.9
22.8
(2)
29.2
25.3
23.3
20.0
21.6
13.6
5.6
(3) 29.9 29.2 30.2
53.8
54.4
56.6
57.4
66.8
60.6
144.0
(4) 56.8 56.1 55.5
Note:(1) Gross value added to total assets(2) Gross value added to facility investment(3) Gross value added to sales(4) Ratio of compensation of employees to NI (National Income)Source: Construction & Economy Research Institute of Korea

13.4
107.2
18.2
66.7

19.3
46.8
23.5
41.7