Modern Montessori International Group
HERE we have a Catch-22 situation where if we do not accord a good employee a reasonable remuneration, then we risk losing him; yet, if we do not curb rising staff costs, then this area of expenditure will eat into our bottom line and affect our business.
Apart from courting high-level professionals with proven track records and assigning them expanded portfolios (so that they can both add value to the company and assume the responsibility of major stakeholders), we can also consider re-engaging former staff members since they already possess the know-how and require little or no training.
Sam Yap SG
PhD (Entrepreneurship), USA
Group Executive Chairman
Cherie Hearts Group Int'l Pte Ltd
AT Cherie Hearts, our focus is not on staff costs, but the value that we get for the remuneration we offer. In other words, rather than struggle to contain staff costs per se, we emphasise employee training and motivation to enhance productivity and create value.
Of course, we recognise cost as an important component of the business success equation; however, we do not target these cost-cutting measures at our valued employees. Rather, we engage them to brainstorm better ways of doing things and channel cost cutting efforts towards procedures and processes, while maintaining quality. After all, more often than not, cost-cutting initiatives are most effective when they are driven from bottom up.
EFG Bank Singapore
"PEOPLE don't leave companies, they leave bosses!" I will never forget this answer from someone who left one company for another. Salary is obviously important, but money is only one factor. Hiring and training new staff is expensive and is often done at the expense of overall productivity. With the money companies save by simply retaining people, they should be able to handle the unavoidable increments. How to retain them? Demonstrate respect, communicate with them, lead by example, etc. Most of the secrets that make a workplace "the place to be" come for free!
Managing Director & Chief Executive
TO tackle escalating wage costs, we need to better manage turnover. Staff turnover is a very expensive affair, with the attendant replacement and recruitment costs. As such, staff retention becomes key in managing staff costs.
It's not just about paying more, but offering sustainable initiatives. We at ABN AMRO Bank, for instance, have decided to offer our employees a holistic employment experience. We partner them in achieving good health, work-life balance, career growth and development and volunteerism through our programmes called My Health, My Family, My Career and My Community. By adopting an approach that shows we are a caring employer, we differentiate ourselves from other organisations and thus gain a competitive difference.
Our My Health programme has helped employees maintain a healthier lifestyle through healthier diet and exercise programmes. A healthier workforce also translates to lower medical costs. Medical costs, which escalated 6.5 per cent last year, is another major contributor to staff costs. So the ability to contain medical costs will certainly help manage wage cost.
Ong Chee Beng
Managing Director, Singapore
MAKE the environment a great place to work! Raising pay is just one way to retain talent. At Sun, we live and breathe the vision of making our environment a great place to work by recognising that our staff are holistic individuals. We reward great performance beyond monetary terms and focus on developing employees by enhancing their skills, allowing them to grow in their career.
In addition, we leverage technology to enable them to work flexibly and telecommute for better work-life balance. These approaches go a long way towards making individuals working at Sun feel a sense of belonging.
Lim Soon Hock
PLAN-B ICAG Pte Ltd
I THINK CEOs have little choice . either pay competitive wages or face the dire prospect of losing talent.
Companies go through different stages as they transition from one "S" curve to another in their lifecycles. It may be timely for companies, given that manpower costs form a substantial portion of the budget, to embark on a revolution to stay viable and to grow.
Costs would have to be stringently managed on the basis of "must have" rather than "nice to have". No effort should be spared to review systems and redesign the organisation to achieve better efficiency and productivity, going forward.
CEOs would need to focus on higher margin products and services to increase sales and use the opportunity to divest those with thin margins or are loss incurring. These are tough but prudent decisions to make, given the trying times ahead with the prospect of a US recession.
It is often easier to cut that extra dollar from the expense budget than to generate an extra dollar of revenue. While the current business environment is compelling CEOs to adopt measures to cope with rising staff costs, they must be careful not to fall into the trap of denominator management: where assets of the business are inadvertently destroyed by simply cutting costs without fully understanding their implications on the business.
Teng Yeow Heng Michael
TR Formac Pte Ltd
RISING staff cost is a major concern for many companies. But thanks to our global leadership position in the manufacturing and supply of screw fasteners, we are able to cope with rising labour costs.
We have also put in place measures that successfully managed our labour costs:
> We have the flexibility to move production among our various manufacturing plants in Asia. For instance, we had moved our low cost production to China and Malaysia several years ago. Singapore with its higher labour cost focuses on sophisticated engineering design and research and development.
> We ensure that costs are not excessive, in both bad and good times. High productivity is our way of life and doing more with less is our mantra. We try to retain good staff and our attrition rate is one of the lowest in the industry. This way, we cut back on recruitment and training costs for new staff. Talent retention is important as it is difficult to recruit good people.
> We try to reward our staff on commission/ performance based schemes so that good compensation comes only with good performance. This also keeps our fixed overheads low.
> We encourage cross-fertilisation of skills in the company so that employees not only can perform their own functions well but also acquire new knowledge and multi-disciplinary skills. Furthermore, the company practises good human resource management by providing training, job rotation and enlargement to promote cross-fertilisation of skills.
RISING business cost seems to be the only certainty today. It is more important than ever that companies focus on their competitive advantages, understand the unique values they bring to their customers and focus on their respective niche. For us as a creative and professional services company, staff cost is everything. Unless we are able to price right, to match selling price with rising cost, profits will be at stake. Pricing right is not that easy to do. It takes recognition of your core strengths and competitive advantages and commitment to maintaining price positions amid competitive pressures.
Best World International Ltd
IT is important to strike a balance. As CEOs, we need to protect employees' welfare and morale and at the same time, take care of shareholders' return on investment. One way is to grow the top line in order to gain a better margin for remunerating our staff and management team. Another way is to sell employees our vision and create a positive culture that bonds employees to one another and to the organisation.
Good employees with well-charted career plans, who plan to stay long term and who care for the relationships built within the company would not be easily attracted by external offers. Employees who stay are the pillars of the company, helping it to grow continuously.
Senior Vice-President of Asia-Pacific
Informatica SEA Pte Ltd
ADOPTING the right technology could be the answer to companies that want to reduce expenses and cope with the rising staff costs.
The management of composite knowledge, skills and experience of an organisation?fs employee is crucial in gaining the company a competitive edge. By taking advantage of technology, companies will be able to analyse trends in hiring, transfers and turnover. Through the analysis of such human resource data, companies can become more productive and efficient. This could be through better distribution of their existing headcount across units or geography.
HG Metal Manufacturing Ltd
COMPARED to a few years ago when staff costs were flat during the Sars period, I guess rising wage bills are a better problem to have. Higher wages are an inevitable consequence of a buoyant economy. While the jury is still out on the impact of a US recession on Singapore, I believe our economy is likely to remain strong this year. With more business from a strong economy, most companies should be able to cope with rising costs. If a company is doing well, it should be prepared to reward its staff accordingly.
However, over the longer term, it is not just how the company rewards its staff during the good times but how it treats them in bad times. Ultimately, the long term strategy should be the way a company fosters employee loyalty and creates work satisfaction for its employees.
Vice-President, Asia-Pacific & Japan
EMPLOYEE cost is not about compensation and benefits alone. The hidden costs involve training, skills development, lead time in understanding internal procedures, and development of customer relationships. These are significant and far exceed the visible costs of employing an individual. Add up all of these, then add on the talent-cum-value component and you begin to realise how expensive it is to lose a valuable member of the team and then replace him!
To prevent this, I believe in placing strong emphasis on people development within organisations. This not only augments knowledge and skills that help people stay motivated and productive but also grows them as professionals and individuals, progressively taking on larger challenges and roles.
I also see the value of recognising outstanding achievements and celebrating success. Employees need to know that their efforts have paid off and the organisation has the performers on its radar. Any organisation that consistently pursues these goals will create a first class workforce and build competitive advantage over its competitors by growing achievers and leaders at all levels more quickly than their competitors.
The flipside is employees that are unsuitable for the roles they are employed for. It is a cardinal sin to prolong these engagements - they hurt both the employee and the organisation. Organisational leadership should continually monitor these instances, provide opportunities for improvement and separate the ties (where that is the only option) as early as possible. This saves money, time and productivity for the organisation and forces the employee to seek alternative employment in an area where he might thrive.
CEO, Wealth Management Asia
FEW companies today have the luxury of delivering results for just one group of stakeholders; rather they need to satisfy several audiences that have different needs. Businesses should not be distracted from delivering excellent service to customers and returns to shareholders because of rising staff costs. As a matter of fact, it should compel businesses to focus on the elements that help them to achieve results.
To deal with rising costs, I would advise business leaders to look towards improving efficiencies by assessing their businesses to appreciate the key drivers of success.
Rising staff costs also create issues like attracting and retaining good people so as leaders we need to build a work environment that helps people build exciting careers with strong development opportunities, positive company culture and a place where they feel valued. Building the company as a place where people truly desire to work will affect the business by reducing the costs of losing people and training new staff.
Senior Vice-President, Asia-Pacific
WITH the rising cost of transportation, food and utilities, employees are looking for fatter pay packets and companies are searching for ways to trim business costs. But raising salaries with no sound justification is not the answer to rising living costs. Neither is reducing headcount the way to rationalise business costs.
To manage salary expectations, set in place a performance management system to measure the performance of employees against key performance indicators. Communicate regularly to all employees how they can and are contributing to the company's bottom line. Reward star performers with a well-deserved raise or other incentives.
Manage business costs by outsourcing non-core operations and consolidating your vendors. Expend your energy on your core competencies and build on it. Outsourcing your secondary corporate functions to third party vendors improves your operating efficiencies and cuts back on your operating cost.
Also consider rationalising the number of vendors you manage through each business line to key vendors for the entire business.
Poh Mui Hoon
WHILE monetary reward is a factor in talent retention and attraction, Nets advocates creating a people- and service-centric culture. We look at smart ways to leverage on technology to improve and streamline processes, procedures and systems, increasing effectiveness in the organisation. We encourage our staff to be innovative at work to add value to our stakeholders, making Nets a valuable partner.
As Singapore's leading electronic payment provider, we constantly focus on developing new markets and services to grow the company. With growth, we create new and exciting opportunities for our staff to hone their skills and advance their careers.
Na Boon Chong
Director - Consulting, South-east Asia
Aon Consulting (Singapore) Pte Ltd
WHILE one has to face the market reality and pay to get the talent in order to deliver the business plan, just like buying a business, no one wants to pay excessively. It is, however, difficult to assess the value of an individual. Instead of paying everything in base salary, one should find ways to put more compensation in sign-on bonuses, annual and multi-year incentives, made contingent on certain desired outcomes. A recent example is financial institutions in the West who were hurt by the sub-prime crisis yet needed to protect their core talent. They paid their good performers partially in stock as opposed to an all cash incentive.
It is hard to keep this practice in boom times when the pressure to hire is strong, and candidates may compare only on the basis of the more certain fixed pay. On the other hand, we often find that with systematic pay structuring, communication and transparency, more people will come on board. It is, after all, the total earnings that matter.
Compensation is not everything, obviously. Recent research has shown that an attractive employment brand reduces the premium needed to lure a candidate by almost half. In other words, if you have to pay a 30 per cent premium to someone who doesn't find your employment brand particularly attractive, you?d need to pay only a 15 per cent premium to another person who likes your value proposition.
Investing in talent branding the organisation makes business sense, and it should be targeted at the desired talent, including the young as well as the mature, so as to widen the talent supply pool.
AT Nortel, we believe in putting the technology we develop to good use for our own employees - enhancing workforce productivity, reducing space and communication costs, and responding to employee needs for a better work-life balance. We have an office environment of free desking and shared resources so mobile employees always have an office space in which to work - but do not occupy expensive dedicated real estate.
And through the implementation of our unified communications technology - combining IP telephony, traditional desktop solutions and presence-based - our employees can effectively work from anywhere, define their connection needs, add flexibility to their working day, and reduce commute times and travel costs. Overall savings to the company are considerable, employees are responding positively to the changes, and we are helping to minimise the impact of inflationary pressure for the company and for our employees.
Charles M Ormiston
Bain & Company
MAKING the right calls on staff costs in an inflationary environment is a key challenge for a business executive ? too tight-fisted and good staff leave, too generous and the company can lose competitiveness and be caught off-side in a downturn.
I have a few guiding principles I use with both clients and companies I am more directly involved with.
The starting point for setting compensation is a fully informed view, involving all of your key executives, of how each employee is performing. Great companies, big or small, spend a significant portion of management time discussing the performance, development objectives and potential of their subordinates. The results of these discussions are put on paper, shared with the employee, and used to make key decisions on compensation, new responsibilities and promotions. This information is critical to manage your wage costs in any environment.
Look for ways to concentrate the wage increases in your stronger performers. Too many companies give the same increases to everyone ? ensuring that your top performers will have better prospects if they leave the company, and your bottom performers are more than happy to enjoy the ride.
Try to offset some of the payroll increases that are required in an inflationary environment by out-placing your poor performers. In any organisation there is a distribution of productivity levels. If your normal wage increase in a given year is 2-4 per cent, and this year your firm feels compelled to offer 6-8 per cent, seek to offset this inflation by reducing your headcount by 3-4 per cent, thereby reducing the overall increase in staff costs.
Ensure that some of the increases are one-time. This is a good year to be more generous with bonuses, but seek to keep the annual increment at or below inflation. It is critical to accompany the higher bonus with clear guidance that "this higher level of bonus may not be sustainable given the uncertainty in the economic environment".
Look for non-wage alternatives for rewarding employees ? a budget for training courses, a company trip, a gift certificate, etc, that is a one-off rather than an increase in the base compensation.
K&C Protective Technologies Pte Ltd
FACED with rising staff costs and all-round inflation, companies are naturally tempted to pass on costs to customers. However, this approach offers little leeway. Too much and one risks being uncompetitive or alienating customers.
Turbulent economic times present both dangers and opportunities. Companies should look out for new market share while keeping an eye on increased productivity and costs. In a tight labour market when companies are wary of taking up big new commitments, the lean and well-run ones should, however, seize market share.
Companies should also look at bringing forward implementation of productivity systems. New or upgraded IT solutions which previously looked expensive or were awaiting commitment may now look attractive and urgent. Where granting higher salaries is necessary, companies should definitely package it with enhanced job scopes.
In summary, cut waste, watch costs, get more out of less and seize new opportunities in this dynamic business landscape.
President, Asia-Pacific (excluding China and Japan)
RISING labour costs erode profit margins and cut into earnings. Companies need to respond with stringent cost cutting and improved productivity. They need to also look at how the existing workforce achieves business strategies. If there are gaps in this respect, recruiting tactics to attract talent become a must. The situation becomes more complicated from a global perspective ? in terms of expatriate assignments and local market knowledge.
Explore leveraging technology to boost productivity: whether it is providing the infrastructure to support a mobile workforce or reducing unnecessary travel through video-conferencing. Companies thereby display better talent management and hopefully, emerge with higher returns.
Gold Matrix Resources Pte Ltd
IF the staff costs go up faster than growth in top and bottom line, it is a worry. An even greater worry is if it is not accompanied by any enhancement in staff skills set. Keeping these indicators in tandem with staff costs is the challenge. Changing our mindset from looking at staff as mere costs to seeing them as investments will turn this problem into an opportunity. R&D, knowledge management, multitasking and the like are now part of core business activities. Staff recruitment and retention are therefore crucial.
By investing more in employees, we can mould them into more productive assets. This will enhance a firm?s competitiveness so that rising staff costs will not be an obstacle. And while it may sound paradoxical, greater costs can propel and motivate a firm to enhance its earnings.
Peter KY Chai
Vice-President & General Manager, Asia-Pacific
IN 3Com, we have a simple Score acronym that we use as hiring guidelines to keep our organisation streamlined.
"S" is for Staff. Staff hires must be business-driven and every staff must be a clear and measurable part of a business process.
"C" is for Control. Control of headcount, which is a major overhead cost, is crucial as staff overheads can be a few times higher than actual salary.
"O" is for Outsource. Any backend tasks that deviate from our core competency in secure converged networking solutions are outsourced so we don't carry the headcount overhead.
"R" is for Reduce. Reducing the management layer and keeping a flat organisation empowers our staff to adopt an entrepreneurial spirit.
Finally, "E" is for Employee. We have a key employee retention programme that includes incentives and recognition initiatives.
COMPANIES need to adopt long term strategies to cope with rising staff costs, not short-term tactics to overcome certain challenges such as inflation.
Rather than just developing a more attractive pay package to draw talent in a tight labour market, a company should have a sound human resource programme in place that boasts a few essential elements.
The first is helping employees feel positive about their career advancement, by ensuring that growth and learning opportunities are available. Cultivating a workplace environment that respects every individual?s autonomy, value and contribution is of equal importance. In addition, both long and short-term incentives, such as bonuses for employees, should be based on clear key performance indicators. Such a strategy helps companies to identify, manage and retain top performers.
A flexible compensation structure, with components such as a tied-to-inflation cost of living adjustment, will also allow companies to address staff's concerns about external challenges like rising inflation.
President of Asia-Pacific & Senior Vice-President
DESPITE popular belief, coping with rising staff costs is not just about offering higher salaries. There are other ways for companies to position their compensation packages correctly. At Lenovo, we have a performance management and bonus programme called the "P3 Programme" which stands for priorities, performance and pay, where we identify and reward top performers and allow them to raise their total compensation to a significant level. In addition to compensation, there are three things that companies can do to attract and retain talent in Singapore.
Firstly, it is about providing a unique offering - making employees feel like they can make a difference in the company. Lenovo provides a unique offering for potential employees because even though we are a multi-billion dollar company, we still operate like a start-up. A lot of people join Lenovo because they want to be part of something unique, and to make a real impact.
Secondly, it is about the community proposition the company can offer. Companies must create an environment that fosters the employees' capabilities, interests and backgrounds. At Lenovo we have an employee-driven club called the Lenovo Club which is responsible for creating opportunities for all our staff to engage in various activities. These include language programmes, activities such as "Kidz at Work" day where employees can bring their kids to the office to learn what their parent does at work, yoga classes, and group movie outings.
As a final note, with Singapore's economy doing well, there is fierce competition to secure the best talent and this is putting pressure on the supply side. Therefore, companies need to look outside the local talent pool to secure the best candidates. For example, our Singapore office currently resembles the United Nations with nationalities from all over the globe - Japan, China, Australia, Thailand, Korea, the US, France, Canada, South Africa, Britain, the Philippines, India, Malaysia, and of course, Singapore. Hiring foreign talent is an effective strategy in Singapore, with the local government having a history of welcoming foreign companies, investors and labour, to increase economic competitiveness.
Country General Manager
AT&T Business, Singapore
THE key goals for any organisation should be maximising return on investment for every dollar spent and reducing costs without hurting business objectives. With every planning exercise, managers usually start off by defining business strategy and the expected workforce contribution required. Once these basics are understood, cost management becomes a more effective exercise.
At AT&T, direct costs are controlled by constantly improving programmes in compensation, benefits, staffing, training, etc, for more targeted results. We also invest strategically in automation to improve productivity and decision-making.
From the sales staff perspective, one maxim rules ? pay for performance. This win-win formula optimises returns to both the employee and the organisation. Indirect costs, on the other hand, are controlled by developing or improving vendor management, shared services or outsourcing. Extreme steps like layoffs or reducing compensation are the last option as they can hurt the business and the employer brand in the long-term.
NextVIEW Pte Ltd
AS a Singapore company operating direct offices in six cities (Kuala Lumpur, Bangkok, Ho Chi Minh City, Hong Kong, Shanghai and Mumbai), we are constantly reviewing our operations to look for cost arbitrage opportunities from different locations to manage the challenges of rising staff and rental costs in Singapore.
One of the strategies we will implement in the first quarter is to move more of our business operations (IT, software development and marketing) to our newly expanded regional centre in Kuala Lumpur. The relatively low business costs (office rental near Petronas Twin Towers is five times less than that in Raffles Place!), availability of experienced professionals and our ability to attract qualified talents has made Malaysia an attractive place for business process outsourcing. We can offer relatively better pay and career opportunities than Malaysia-based employers.
Motor Image Enterprises (Subaru)
AS the demand for talent tightens in Singapore and Asia, managing staff costs becomes more of a challenge. However, I don't believe that retaining staff is just about salaries. We need to better understand what employees want and I think we will be pleasantly surprised to find that while cost of living is a concern for Singaporeans, most take a long term view of employment.
Beyond salaries, companies must look at non-financial benefits such as staff welfare, working environment, career development and work-life balance. As employees spend a vast majority of their waking hours at work, it is essential to provide them with a dynamic and conducive working environment where they can be motivated and fulfilled. It is this combination that will better retain employees in the long term.
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