Gaining that extra edge

Gaining that extra edge
PHOTO: Gaining that extra edge
SINGAPORE - Home-grown outfit Charles and Keith has seen its sales grow by 16% per year between 2008 and 2011 while operating profit shot up 21% per year, on the back of investments in staff.

Companies that adopt good management practices are well-placed to outperform competitors as they become more productive and are in a better position to share such gains with their staff.

According to the Business Excellence Impact Study, which looked at some 220 organisations from the private sector that have received Business Excellence Awards and certifications, such firms have an edge over rivals in terms of labour productivity and profit margins.

The study was conducted from July to September this year by the National University of Singapore Business School as part of an ongoing effort by Spring Singapore to chart the performance of companies which have adopted the Business Excellence framework.

By enhancing operational processes, investing in automation as well as training staff and optimising manpower resources, organisations have proven to be more productive than their counterparts.

Higher labour productivity

The results, which took into account available data from 2008 to 2011, showed that labour productivity, as defined by value-added per worker, was 11.5 per cent higher for these organisations versus companies within the same industry, while profit margins were, on average, 13.5 per cent higher.

For the companies studied, every one per cent increase in productivity translated to a 6 per cent increase in operating profits and a 2 per cent increase in revenue growth.

Choe Peng Sum, a member of the Singapore Quality Award (SQA) Governing Council, described the Business Excellence framework as a system that could help companies become more competitive in today's business world.

Going through the process gives firms a real chance to improve, he said.

At the same time, Mr Choe recognises that small and medium enterprises (SMEs) may struggle with limited resources and funding, especially at a point when the economy is slowing down.

"It is a real situation. I empathise with SMEs. But they can start with small things like the People Developer, components leading up to SQA. These are very helpful," he pointed out.

The study also showed that organisations which have sought to boost staff competencies by raising training investments by an average of 15 per cent over a three-year period have achieved robust customer satisfaction scores of 81.4 per cent even as customer expectations rise.

Companies also appear to be sharing the wealth with staff, so to speak, which may also help with staff retention.

According to the study, for some organisations with higher productivity, wages for positions such as sales supervisor or production manager typically outpaced the industry average.

Staff development and staff retention have a big impact on productivity, emphasised Mr Choe. "(When) people in the team know what they are doing, they are (productive).

Happy, motivated staff translates into good business," he stressed.

On the flip side, companies which do not have a clear vision or strategic direction may also have a high turnover rate as staff may be uncertain of what is expected of them.

A high turnover rate also means a loss of productivity because time and money are wasted training new staff.

Speciality chemical solutions provider MegaChem, which has a manufacturing facility in Singapore as well as a presence in 11 other countries, received its People Developer certification in 2010.

It has worked over the years to leverage on its talent to differentiate itself from rivals in a highly competitive business environment.

It has also invested in upgrading its manufacturing capabilities and its manufacturing control systems.

MegaChem has also established an in-house Institute of Management to spearhead training activities while special efforts are made to recognise staff who help the company achieve target results.

Moreover, MegaChem has a Higher Learning Education Support programme, providing financial assistance to eligible employees so that they can further their education and training.

Boosting operational excellence

Efforts to boost operational and people excellence have clearly paid off.

Between 2009 and 2011, MegaChem's topline rose by 12.6 per cent, crossing the $100 million (122 million) mark last year.

The use of automation and ramping up training helped it to temper the need to add more staff, with manpower growing at a slower pace of 6

per cent. This translated to a 6 per cent productivity growth over this period, with the financial gains also being passed on to employees in terms of remuneration.

According to MegaChem, wages for its production manager are on par with the industry average, while those of its supervisors were 13 per cent higher than the industry last year.

Similarly, home-grown outfit Charles & Keith has seen its sales grow by 16 per cent per year between 2008 and 2011 while operating profit shot up 21 per cent per year, on the back of investments in staff. 

Labour productivity was also higher than industry counterparts by an 8.2 per cent average, while the local retailer was able to hold labour productivity improvements at 3 per cent per year.

Operational improvements include empowering staff by streamlining the decision-making process - outlet managers can now make a judgement call without having to wait for headquarters - and redesigning job scope.

Previously, retail staff were tackling multiple roles but by identifying specific roles for specific employees, such as storeman, cashier and retail support, working hours are shorter for staff and customers get more personalised service.

"Through the various coaching sessions and building a service culture within the organisation, staff understand the importance of providing excellent service to our customers and thus, we have noticed a significant amount of compliments from customers since embarking on the journey of Business Excellence framework," the Singapore Service Class certified retailer said.

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