Naver is pushing to introduce a 'level-based employee evaluation system (hereinafter referred to as level system)' ahead of the return of its founder, Lee Hae-jin. The company is moving to build a new personnel system that promotes internal competition amid the artificial intelligence (AI) upheaval. However, there are concerns that Naver's new personnel system could exacerbate the departure of internal technical staff and become a hurdle in attracting external AI talent.
According to the industry on the 27th, Naver recently announced through an internal notice that it will hold an explanation session for the introduction of the level system on the 5th of next month. The level system evaluates employees' capabilities and expertise and assigns levels regardless of length of service, with the long-term goal of linking it to a performance compensation system. For instance, an employee with 20 years of service could receive a lower level than a second-year employee.
This system was planned for introduction by Naver in 2020 but was shelved due to internal staff resistance. Naver explained that "the level system is a system aimed at effectively concentrating organizational capabilities in a rapidly changing business environment and providing members with visible milestones for growth."
Over a decade ago, Lee Hae-jin criticized in an in-house lecture, saying, "I was shocked and devastated when I saw a post on the company bulletin board saying, 'I came to Naver from Samsung to live comfortably.' Many employees think of the company as a neighborhood soccer club," demonstrating his concerns. Perhaps the level system is a reflection of these concerns from the former chairman. Given the intensified global competition in the face of the AI upheaval, a corporate culture that remains complacent without competition is not appropriate. Considering the recent situation at Naver, where there is a sense of crisis that 'we can no longer fall behind', this decision seems inevitable.
Currently, Naver's internal ranks consist of only 'regular employees' and 'leaders (executive level).' There has been criticism due to the limited number of available ranks, resulting in no internal competition. There are also expectations that the level system will serve as a type of compensation system replacing rank promotions.
However, personnel experts point out that while the level system may have positive effects, its negative impacts must also be considered. If internal competition intensifies due to the classification of employees' levels, it could hinder attracting talent from outside. There are significant concerns that the departure (job change) of internal technical staff could intensify at Naver, where the proportion of technical staff exceeds 60%. An HR expert noted, "Technical personnel may leave the company if their pride is hurt and morale declines. Developers from Naver have an external perception of proven ability, so they can be readily recruited by other companies."
In the past, Microsoft (MS) experienced a large-scale talent exodus after introducing a personnel system similar to the level system. From 2000 to 2014, former CEO Steve Ballmer implemented personnel policies that strengthened internal competition among employees. They evaluated employees based on five levels and established allocation ratios by tier. It is reported that during this time, excessive internal competition and dissatisfaction with the evaluation system led many MS employees to choose to resign.
In a 2011 survey conducted by Glassdoor, 60% of MS employees responded that they were dissatisfied with Ballmer's leadership. After Ballmer's retirement in 2014, his successor Satya Nadella took over MS and abolished the 'five-tier relative evaluation system (stack ranking).'
There are also concerns that the level system could be misused to reduce unnecessary personnel under the guise of 'workforce optimization.' The fact that big tech corporations are now cutting jobs to focus on AI investment backs up these concerns. In January, Meta dismissed 5% of its workforce to concentrate on AI investment. At the time, Mark Zuckerberg, CEO of Meta, said, "We will strengthen performance management criteria and expel employees who do not meet expectations more quickly."
Han Jun-ki, a professor at Dongmyeong University and former chief personnel officer at Microsoft Korea, pointed out, "The employee level system can foster self-interest where individuals focus on personal success, leading to increased internal competition. It may lead employees to concentrate only on short-term results to appear favorable to organizational leaders, intensifying internal politics as well." He added, "To eliminate the side effects of internal competition, CEO Nadella of Microsoft abolished annual evaluations and stack rankings. Instead, he emphasized continuous peer feedback and manager coaching for the individual growth of employees, stressing 'the process' of how work is done rather than solely focusing on results, which serves as a lesson for us."
So far, the specific details of the level system that Naver is pushing for have not been disclosed to the public. However, it is known that the level system Naver attempted to introduce in 2020 categorized employee capabilities into seven levels. Around the same time, Kakao introduced a similar system called 'Growth Stage,' where individuals are assigned stages based on their roles, capabilities, and expertise, and rewards are linked accordingly. The number of stages at Kakao has not been publicly disclosed but is believed to be fewer than ten. The stages at Kakao are determined by assessments from organizational leaders and HR teams, and an employee's stage can be lowered if their role changes. Coupang, which introduced the level system for the first time in Korea in 2015, has assigned a total of 12 levels to its employees.