Singapore Calls On CEOs To Lead Productivity Drive
PM Lee Hsien Loong said that Singapore should now direct its tripartite efforts towards improving productivity.
He called on employers and business leaders to take the lead by adopting flexible labour practices and nurturing a positive working environment.
SNEF will launch a new initiative to run Productivity Leadership seminars for CEOs. This initiative will benefit SNEF’s 2,000 members, which employ over 600,000 workers.
Speech by Mr Lee Hsien Loong, Prime Minister, at SNEF 30th anniversary CEO and Employers Summit 28 July 2010 at Resorts World Sentosa.
“THE CEO’S ROLE IN LEADING PRODUCTIVITY”
Mr Stephen Lee, President of SNEF, Employers and Unionists, Ladies and Gentlemen:
I am happy to be here today to commemorate SNEF’s 30th anniversary. In a fortnight, Singapore celebrates our 45th birthday. So SNEF has been around for two-thirds of those 45 years.
Singapore has achieved a great deal in these past 30 years. Our GDP grew six-fold, from $40 billion in 1980 to $250 billion in 2009 (in constant 2005 dollars). The labour force expanded from just over one million in 1980 to three million in 2009. In other words, we created roughly two million jobs. Real per capita incomes have tripled, tremendously improving the lives of our people.
Strengthening Singapore’s Tripartism
Singapore’s rapid economic and social development is the result of our consistent, forward looking policies. Year after year, we have invested in education, upgraded our workforce and infrastructure, and progressively moved up the value chain. One of these fundamental policies has been tripartism. This partnership has been forged through decades of cooperation among employers, unions and government. We have faced challenges together, overcome successive crises, and cooperated to expand the economic pie and create good jobs for our workers.
Tripartism requires commitment and effort on all sides. Employers must do their part, and SNEF as the association of employers plays a key role. SNEF naturally reflects the views and concerns of employers on important issues, but it also guides its members on these issues. It works hard to build a constructive relationship with the unions, and together set a positive non-adversarial tone for industrial relations in Singapore. SNEF’s President, Mr Stephen Lee, is practically a full time public servant. Stephen has personally played a crucial leadership role – maintaining good relations with the government and the labour movement, and working with them in a spirit of give-and-take to formulate practical solutions that benefit all parties.
This effort must be sustained and institutionalised; we cannot ever afford to take the present harmonious relationship for granted. We must continue to nourish and strengthen the trust and habit of cooperation, especially among the newer business leaders and unionists. Companies which have operated in Singapore for some time understand how things work here. Usually, they and their unions would have established a mutually-beneficial working relationship. We need to guide and encourage newer companies and younger union leaders to develop a similar understanding with each other.
Our tripartism has been an enormous advantage to us during the recent financial crisis. Unions, employers and the government worked together to help firms cut costs to save jobs. Our efforts prevented what might have been massive job losses and retrenchments. Overall unemployment stayed low, peaking at only 3.3% (in 3Q2009). This has since dropped to 2.2% in 1Q2010. From our shared experience standing shoulder-to-shoulder against this latest storm, we have strengthened our tripartism, and hopefully renewed it for a new generation.
Raising Productivity to Remain Competitive
We should now direct our tripartite efforts towards a new challenge –improving our productivity. This is essential for us to remain competitive in a new environment. Singapore is located in the most dynamic region in the world. All around us, countries are transforming themselves, upgrading their capabilities and producing more sophisticated products. We too must raise our own standards and stay ahead of the competition. The key is to improve the productivity of our workers, move up the value chain and take on more skill- and knowledge-intensive work. Then companies can earn good returns, and workers can justify higher wages.
This year because of the strong economic rebound, we will see a significant jump in productivity, even without our making a special effort. In 1Q our productivity jumped 13%. But this is a cyclical increase, the result of a tight labour market and more overtime work. It is the reverse of what happened last year, when the economy contracted and productivity fell. We cannot be satisfied with this one-off blip, but must persevere to raise our productivity on a sustained basis in good years and bad.
The National Productivity and Continuing Education Council (NPCEC), chaired by Deputy Prime Minister Teo Chee Hean, oversees the national productivity drive. It is focusing on making productivity improvements in 12 priority sectors, and developing a comprehensive, first-class national CET system.
A large part of the responsibility for improving productivity falls on employers and business leaders. Many of you are gathered here today. You set the strategic direction for your companies, identify new markets and business opportunities, and keep operations running smoothly and efficiently. You provide the corporate framework within which your employees can work hard, learn new skills and be individually productive. You set the tone for how open the workplace culture is, and how closely your firms engage with unions and employees. Your leadership is vital for upgrading productivity in your companies.
Generating More Value
Being productive means creating maximum value out of limited resources. To raise productivity, firms must either use fewer resources to produce the same value, or else deploy the same amount of resources in different ways to generate more value. Singapore businesses cannot expect to save costs by employing more low cost workers. Instead, firms must utilise resources efficiently, develop new markets and innovate.
New markets overseas, as well as untapped domestic market niches, present new business opportunities. Companies which can spot such unmet needs, and design products and services to meet them, will gain a valuable first-mover’s advantage. In dynamic Asia, new markets are constantly opening up. The challenge for CEOs is to identify them, and move in before others do.
Businesses must also innovate relentlessly to achieve breakthroughs in value-add and productivity. Innovation is not just about developing new products and services, but also includes coming up with novel business models, e.g. a new use for a product or an unusual way of selling a service. Innovation is primarily a function of talent and culture – firms that attract the right mix of talented employees, give space to their creativity and draw their raw ideas into commercially profitable schemes, will be best placed to winning in the marketplace.
Maintaining Flexible Labour Practices
Companies today have to be nimble and adaptable, and respond quickly to changing market conditions. They must shift resources to where they are most needed and most productive. When growth can be negative one year and more than 10% the next, companies need enormous flexibility to anticipate changes, adapt and do well. In this environment, flexibility in skills, wages and mindsets are a key prerequisite for high productivity.
Skills flexibility means training workers to master multiple skill sets, and be able to perform different tasks. To achieve this, firms have to strongly support workers’ training, and properly recognise workers who make the effort to acquire additional skills. Firms with flexible workers can deploy them to different areas depending on changing business demand, and thus have an edge over their competitors.
One example is GlaxoSmithKline (GSK), which operates 24/7 with four rotating shifts. Demand for pharmaceutical products is volatile. GSK thus decided to multi-skill its technicians, with the support of the Chemical Industries Employees’ Union (CIEU) and the Workforce Development Agency (WDA). To-date, it has trained a quarter of its technicians. In the past, GSK technicians could only operate equipment in a particular production building. Now they are trained to work in several production buildings. The productivity gains, projected at about 10%, will enable GSK to pursue new growth opportunities.
Wage flexibility is an area we have worked on since the mid-1980s. After years of patient hard work, many companies now structure their wages with monthly and annual variable components. The unions support this as an important tool to buffer workers against economic downturns. Flexible wage systems fully demonstrated their worth during the recent downturn, when more than half the companies froze basic wages, and many reduced bonuses. Along with SPUR and the Jobs Credit, this helped firms manage their costs and hold on to most of their workforce.
Let me cite one specific example. Last January, when the outlook was bleak, CapitaLand management and executives took wage cuts of between 3% and 20%, with deeper cuts for management. Throughout the downturn, CapitaLand worked with its workers and the Singapore Industrial and Services Employees’ Union (SISEU) to cut costs. When CapitaLand’s performance and business outlook improved towards the end of the year, it reinstated and later raised employee wages. This is the model of labour relations that we must aim for – sharing benefits in good times and riding out difficulties together in bad times, with management leading by example.
This year, with record growth being projected, we should be equally mindful of the need for wage flexibility. We should not lock in higher wages which may be justified this year, but cannot be sustained if conditions change, which they will. Wage settlements should also factor in the 1% increase in CPF contribution rates this year. Mr Lim Swee Say has already reminded workers to split any wage increases this year between the basic salary, the monthly variable component and the annual variable component. I hope that in a tight labour market, employers will be similarly prudent in their approach to wage settlements.
But the most basic and critical flexibility is that of mindsets. In a dynamic environment, management and staff alike need to adopt a positive attitude, and be willing to do different things to get the job done. They need to quickly hoist in new situations when conditions change, often unexpectedly, and be able to respond. They cannot simply go strictly by what is explicitly spelt out in employment contracts, or worse work to rule.
Singapore is more flexible than many other economies in this aspect. Our unions and workers take a pragmatic approach, and do what makes sense to deliver good service. Let me cite an example from the hotel industry. During the recession last year, Ritz Carlton’s management and staff decided to multitask to reduce costs and save jobs. Business was slow, but the hotel’s Chinese restaurant still drew in the crowds at wedding banquets and during the Chinese New Year period. All employees, including the General Manager and administrative staff, helped out in the restaurant so that the hotel could save costs by hiring fewer temporary staff. Room attendants also agreed to be deployed to do laundry work, since room occupancy was low. Some employees were understandably concerned about handling very different tasks from their usual jobs. Ritz Carlton hence put in place a structured training programme to enable workers to pick up new skills and better understand the other functions within the hotel.
Workers will adopt flexible mindsets only when there is high trust within the firm. They will go the extra mile for the company only when they are confident that management will uphold their end of the bargain, and not forget workers’ sacrifices in bad times when things improve later. As employers, you must foster a corporate culture that emphasises openness and trust. You have to engage your workers and unions, communicate your strategies as well as concerns, explain what they mean for individual workers, and of course deliver on your promises. Only then will workers be ready to follow your lead into new areas of work. And only then can your companies thrive in a rapidly changing world.
SNEF Productivity Initiative
I am glad that SNEF will launch a new initiative on Productivity and Trust Leadership, aimed at CEOs. SNEF will work with the Singapore Management University to run Productivity Leadership seminars for CEOs. It will also develop workshops to help SMEs hire, retain and develop talent. In addition, SNEF is coming up with a trust leadership programme. It will work closely with MOM and NTUC on this, drawing on our strong tripartite relationship.
The Productivity and Trust Leadership initiative is a substantial scheme that will benefit SNEF’s 2,000 members, which employ over 600,000 workers in Singapore.
Conclusion
As CEOs, you are not only responsible for the company’s good performance. You must also have in mind the interests of your workers and fulfil your broader obligations to society. Naturally your first job is to make the business successful, so that the company can provide good jobs to its workers. This depends on raising productivity, which means doing the right things, doing things right, and also doing right by your workers. I hope CEOs will continue to lead your companies to seek new markets, develop breakthrough capabilities, adopt flexible labour practices and nurture a positive working environment. Working hand-in-hand with your workers and the government, we can overcome any future challenges, develop our economy and deliver better lives for Singaporeans.
Topics: 2010, Asia, business, CEO, CEO and Employers Summit, economic development, economic growth, Economy, education, employers, employment, Governance, government, jobs, Lee Hsien Loong, moniter, monitor, news, productivity, Singapore, skills, SNEF, society, training, workforce
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