[Gwanga in] Bank of Korea changes 'employee evaluation system' after 18 years... Seniority system continues

Prioritizing Individual Performance Evaluation Over Department/Team Group Assessment
Efforts to Break Away from the Rigid Organizational Culture Unique to the Bank of Korea
However, the Seniority-Based Pay System Unrelated to Performance Remains Maintained

The Bank of Korea is completely overhauling its employee evaluation system for the first time in 18 years. The key change is to abolish the competency evaluation, which involves significant subjective judgment, and the group performance evaluation, which depends on the department's results, while greatly increasing the weight of individual performance evaluations. The aim is to move away from the Bank's traditionally passive and collective organizational culture and create an environment that prioritizes employees' abilities and achievements above all else. However, despite the sweeping reform, there are concerns that the effect of management innovation may be diminished because the wage system centered on seniority, which is not linked to performance, will remain unchanged.

According to the Bank of Korea on the 21st, a new evaluation system based on individual performance will be introduced starting with this year's employee personnel evaluation conducted early next year. This is the first change in 18 years since the employee evaluation system was completely revamped during Governor Park Seung's tenure in 2005 (implemented in 2006). The Bank plans to invest about 1 billion KRW to build a new employee evaluation system soon. A Bank official explained, "This improvement in the evaluation system is the first since the 2005 reform that expanded relative evaluation," adding, "The purpose is to create a future-oriented system focused on employee development."

[Image source=Yonhap News]

'Individual Performance' Takes Priority Over Department Results

Currently, the Bank of Korea's employee evaluation is divided into qualitative competency evaluation and quantitative performance evaluation, but starting next year, competency evaluation scores will be abolished, leaving only objective performance evaluations. The strict relative evaluation system will also be relaxed, and instead of scores, performance will be rated on five grades. Previously, under the relative evaluation system, each employee was given a score, but the average score for all employees in a department had to be adjusted to 80 points. Because of this, even if there were several high-performing employees, not all could receive good scores. Going forward, there will be no need to be bound by the average score of 80, increasing the likelihood that multiple high-performing employees can receive high grades.

Along with this, the group performance evaluation for departments and teams will be eliminated to focus more on individual performance rather than the organization. Additionally, evaluation interviews will be strengthened to support continuous personal growth rather than just ending with the evaluation. Since personnel evaluations affect bonuses, personnel decisions, and promotions, dissatisfaction can easily accumulate, but the Bank expects that strengthening evaluation interviews will improve employee acceptance by facilitating communication about strengths and areas for improvement. Furthermore, the 'upward evaluation,' where subordinates specifically review their supervisors' leadership capabilities, will be enhanced to help managers themselves address their shortcomings.

This reform is part of the Bank's medium- to long-term management innovation efforts that have been underway for several years. In June last year, the Bank announced a comprehensive organizational improvement plan called the 'Management and Personnel Innovation Plan,' which included changes to organization, personnel, work procedures, and personnel operations. At that time, the Bank stated, "By reforming and operating the evaluation system in a way that increases employee acceptance, we will strengthen recognition of work performance and employee motivation," adding, "This will also increase job satisfaction by enhancing employees' sense of belonging and pride as Bank of Korea staff."

The '2022 Joint Recruitment Fair for the Financial Sector' held last August at Dongdaemun Design Plaza in Dongdaemun-gu, Seoul / Photo by Jin-Hyung Kang aymsdream@

Ability and Performance Focus... Will It Retain Departing MZ Generation?

The reason the Bank of Korea is putting its life on management innovation is due to a growing sense of crisis that the Bank's static and conservative culture?so much so that it is called 'Haneonsa (Bank Temple)'?is eroding organizational competitiveness. Once highly preferred and called a 'God's workplace,' the Bank has been shaken for several years as MZ generation (Millennials + Generation Z) employees continue to leave. Inside the Bank, voices point out that the organizational culture focused only on stability, low wage increases, and vertical work structures cause significant frustration among young employees.

The Bank expects that once a system objectively evaluating individuals based on their work and performance is established, work efficiency will improve, and morale among young employees will also rise. A Bank official said, "We anticipate that the employee evaluation system reform will influence organizational culture, making it less rigid than now and allowing employees to express their opinions more freely." Especially since Governor Lee Chang-yong took office, the Bank has set a goal to become a 'think tank' that provides practical help in government and community policy decisions, and it sees a culture focused on ability and performance as beneficial to this goal.

Bank of Korea Governor Lee Chang-yong is answering questions from the press at the monetary policy direction press conference held at the Bank of Korea in Jung-gu, Seoul, on the morning of the 23rd of last month. [Image source=Yonhap News]

Seniority-Based Wage System Unrelated to Performance... Will the Reform Be Effective?

However, there are criticisms that this reform is only half-done because only the evaluation system changes, while the wage system centered on the 'seniority system,' where base pay automatically increases with years of service, remains unchanged. Currently, the Bank applies a performance-based pay system for employees at grade 3 and above, with wages differentiated according to performance, but all employees below that level are on the seniority system. The seniority system guarantees stable wage increases, which results in high satisfaction among senior employees, but because it relies on length of service rather than performance, it causes significant dissatisfaction among young employees and is widely regarded as inefficient for generating performance.

In response, the Yoon Seok-yeol administration is actively promoting wage system reforms that replace the seniority system with job performance pay in public and private companies as part of labor reform. Generally, an organization's wage system is closely linked to its employee evaluation system, so they are often revised and supplemented simultaneously. The Bank of Korea also received a consulting report from the global consulting firm Mercer during its management innovation process, which included strengthening performance evaluation, leading some to analyze that the Bank might be planning to phase out the seniority system. However, the Bank maintains that it has not even considered reforming the wage system.

The Bank also applies some wage differentiation based on performance and work, but the proportion is very small. Critics argue that even if the evaluation system changes, if the existing seniority-based wage system and low wage increase rates continue, there may be limits to breaking away from the rigid culture. A Bank official said, "Currently, there are no plans to change the wage system," adding, "Job performance pay is not something we can implement alone; it requires a change in the overall social atmosphere, so it is not easy."