I thank Prime Minister for this unique opportunity to speak frankly with leaders of the business sector. Our tripartite partnership is built on sound principles, and a track record of co-operation and mutual trust. It is a major source of our country’s competitive strength.
Over the last 20 years, this tripartite partnership has been put to the test on more than one occasion. Each time that we’ve had to take painful measures to resuscitate or restructure the economy, we’ve pulled through without a major social upheaval. Each partner in this partnership realize that it is far better to work together, to co-operate than to confront, to pursue win-win outcomes, and to work towards the long term interest of each party.
This model of partnership has worked in Singapore because each of the social partners has learnt to look beyond their own interests.
Mr Guy Ryder, the general secretary of the International Confederation of Free Trade Unions (ICFTU) transited Singapore on the way to Melbourne, Australia, on the weekend of Prime Minister’s National Day Rally speech. Prime Minister had outlined the possible changes to the Central Provident Fund. Guy Ryder knew how he and union leaders everywhere else would have reacted had their government proposed something similar. They would protest, and organize demonstrations. Guy Ryder read NTUC’s response in our newspapers. He told Matthias Yao, who attended the same union gathering in Melbourne, that he just could not understand NTUC’s statement!
Last week, Government announced the details of changes in the CPF. No protest demonstrations have been held. Instead, workers have by and large accepted these changes. They trust that these changes are necessary to bring about future improvements in the economy. They are willing to trade short term pain, for future job security.
What one of them told me was: “We know it has to be done. We don’t like it, but what to do? Please do something to ease the pain for the lower income.” This shows our people are realistic and practical. This is the third time we have cut the CPF. This is the third time our workers have accepted it.
But it does not mean employers should take our workers for granted.
When industrial relations officers in the NTUC met grassroots leaders over the past couple of weeks, the question that cropped up was: what are employers going to do take advantage of this reprieve, to help propel the economy forward? When will better days return?
Reductions in the costs of doing business address only one side of the equation. The other side of the equation is revenue. How can you, as champions of industry, generate more business, so as to create and preserve jobs in Singapore?
This brings me to the question: What do companies exists for?
The conventional view is that a company exists to maximize returns for shareholders.
The bursting of the dotcom bubble, accounting scandals in Enron and WorldCom and the anti-globalization backlash led by non-governmental organizations have led to soul-searching and questioning of this view of capitalism that emphasizes shareholder values at the exclusion of everything else.
Now there is growing support for the view that businesses, as corporate citizens, have a wider social responsibility. Businesses exist not just for the sake of shareholders. They have a duty to other stakeholders: employees, customers, business partners, and the community at large.
There are successful entrepreneurs who would count as their greatest satisfaction, not the material success or the wealth that they have created, but the many families that the business has helped to feed.
Konosuke Matsushita, the founder of “Matsushita”, making products under the National and Panasonic brands, said that although profit is necessary for conducting proper enterprise activities, profit in itself is not the ultimate goal of an enterprise. More basic is the effort to improve human life through enterprise management.
Here was a businessman whose objective was to serve the public. He could only do so if the business was viable.
Businesses exist, to improve lives, to address the needs of people, to overcome inconveniences, to solve problems. Those who are able to do so effectively and efficiently earn a profit.
This is the same motivation that drives the world’s greatest innovators, and inventors.
The model of capitalism, based purely on maximizing of shareholder returns, is not sustainable.
Last year a human resource consulting firm, ISR, published a research finding which showed the level of employee commitment amongst companies in Asia, including Singapore, to be low. The study concluded that Asian companies need to improve the quality of corporate leadership, because leadership is a key driver of employee commitment.
NTUC’s own feedback supports this observation. Some workers have lamented to our union officials and industrial relations officers that they have lost faith and trust in the management. Not all; some. They feel that some management has been less than open and forthright. When the atmosphere of trust is lacking, industrial relations become difficult.
When a company wants to implement cuts or freeze in workers’ salary, but are unwilling to share accurate information on their profits or losses, how do we expect workers to come along? In some cases, figures produced by the management fluctuate and change during the course of the negotiations, which begs the question: do they know the state of the company? When the atmosphere of trust is lacking, it is hard to settle. This is the root of problems in most instances.
My union colleagues have said to me that they support linking pay to performance. They can accept when poor external conditions, or events like SARS, hit the bottom-line as these were factors not within the control of management. However, when business falter due to poor or inadequate planning, or bad business decisions, resulting in workers losing their jobs, they say it is not fair. The effects on their families are enormous. They also feel it isn’t fair when companies cut wages in a down-turn, but refuse to share with workers when the companies return to profitability.
It is not for trade unionists to tell employers how to do business, or manage their companies. But it is our role to look after the long term interests of workers. This is why, in NTUC, we’ve been a strong advocate of productivity, of workers’ training, and in creating a more flexible wage structure, so that we minimize retrenchments and job losses in any downturn.
Some grassroots unionists said to me recently: “Enough said about asking workers to change their mindsets. Someone must tell employers they too must also change their mindsets!” It is their way of expressing their sense of frustration and helplessness.
As captains of industry, what can you do?
You can help, by lending a listening ear to their problems and suggestions, and improving communications within your enterprises. If their problems are being looked into, if they understand the bigger picture, you will have a more productive, more competitive workforce. You must not assume that just because NTUC has stated its position and discussed certain issues with its affiliates, there is no need to engage the union officials. You need to bring them along, rope them in the change management process, and be open and transparent. Managers have to explain changes, not just leave it to union leaders to explain, after an agreement is struck. Instead, union leaders and IROs tell me that sometimes the executives not only do not help explain to workers, they criticize the union leaders for agreeing to the changes the top management had wanted!
Managers should listen to their employees.
Often, employees on the ground have simple ideas that may work. It may be worthwhile listening to these ideas. This may save you lots of money on systems that do not work.
Workers look to management and business leaders for a sense of direction: of where the business is heading, when the next project will start or the next contract will be signed. Now that government and unions have played their part to moderate wage costs, workers look to business leaders to make sure of the new cost structure to compete successfully for new work and new jobs.
To succeed in competing for a share of business against global competition, you need to create higher value added jobs.
To do so, you have to continue to invest heavily in workers’ training and development, in order to differentiate your company from your competitors. Furthermore, you should invest in generic skills, not just company-specific or industry specific ones. The system of lifelong employment is gone. The old compact is gone. This needs to be replaced by one where we can help individuals to strengthen their employability. You can help by giving opportunities for your employees to develop their skills so that they can do their jobs better, and be more employable. This is the new compact between employer and employee, if you expect workers to remain engaged in their jobs.
That is the compact at PUB. This public sector enterprise encourages and enables staff to attend courses, even if these are not directly relevant to PUB’s work.
What about other employers? Several union delegates lamented that their shift patterns does not permit them to take time off to pursue courses that will enhance their individual employability.
On this, I think it requires adjustment from three parties: First, the individual must be prepared to make some sacrifices. Second, we need to work with course providers to customize and modularize courses and teaching methodology to suit the needs the working adults. Many of them have years of experience, but without the certificates to prove it. They cannot be taught the same way as young students. Finally, we need your understanding and support, as employers, to be sympathetic to the needs of workers who are on shift patterns, to be flexible in the rostering and scheduling, so that they can attend classes.
NTUC has suggested that we help workers create individual learning accounts. This is to signal to workers that they have a personal responsibility to upgrade themselves to ensure their own employability. There could be some element of co-funding, between individuals, employers, and the Government. We should make the range of courses sufficiently wide, and allow the individual to choose based on what are his needs. The NTUC and unions would like to work with employers can help to kick start these accounts, on a pilot basis. We are confident that more workers will undertake courses to that will enhance their future employability.
You can help by giving older employees a chance, by redesigning work processes so that they too, can have a chance to be productive. They are plenty of examples where if we care to put our heads to it, we can help create more jobs for Singaporeans, and enable older employees a chance to stay employed for as long as possible.
Employers want workers to work on patterns they design. Sometimes, these patterns clash with the worker’s family responsibilities, or do not allow young people to have a social life. Then the wage levels are too low. Is it any wonder these cannot find workers? Can we redesign jobs to better suit workers?
A few years ago, I visited a factory of an MNC in the Czech Republic. The CEO, an expatriate, told me the factory works almost 24/7. Why almost? No one is rostered to work for a 12-hour period on Sunday. He told me “Every family needs to have the opportunity to be together regularly.”
So I wonder why we cannot work harder to design our work patterns for 24/7 operations and yet allow parents to fulfill their family duties, and young people can have a social life! Such patterns need not mean a 5-day week, though that would be immensely popular!
There are many jobs that are now carried out by foreign workers. Employers say Singaporeans will not take up the jobs at the low pay, or work odd hours. Workers say they cannot earn enough on those low wages, given cost of living in Singapore. The typical response by some employers is to lobby the Government for more work permits. The NTUC and unions do not begrudge employers having foreigner workers to augment the local workforce. But we would like you to also work with us to think hard about how we can attract Singaporeans to these jobs. For example, can we redesign jobs to raise productivity, so that the job is worth more and you can then afford to pay higher salaries?
And I am told that in one factory, foreign workers are rostered to work on the night shift, but Singaporeans are not. The Singaporean workers wonder why they are discriminated against by being disallowed to earn more working the night shift!
The NTUC will be working with a number of employers to explore these opportunities. The key challenge is to expand the value of the job so that the Singaporean worker has a more satisfying job, with higher pay.
We have had the example of “patient greeters” in our hospitals, and cleaners at our hawker centres. Let me cite another example. In a typical restaurant, the captain takes orders, the waitress serves the dishes, and cashiers collect the money. The Silk Road Restaurant in Amara Hotel has redesigned the jobs. The waitress now carries a small black pouch slung across her chest; takes orders using an iPAQ pocket PC. She just needs to tap on the screen to call up the menu, select the dishes, beam the order by wireless routers to the hot or cold kitchen, bar and base station. Mistakes such as serving the wrong orders are minimized. The waitress can serve any table, and can check the status of orders. So now the waitress takes orders, serves dishes, handles bartending and cashiering. The results:
There was a bonus: the restaurant was named by Wine and Dine as the Best Restaurant of 2003.
Such projects will only succeed with the strong support and will of the CEO. My colleagues in the NTUC will be most happy to work with you.
You can help by making our wages more flexible, so that your business will respond better to business environment. I thought it should be obvious to employers why a flexible wage system is beneficial. Not so! When one employer was approached by the union to discuss wage restructuring, it urgently asked the SNEF what was the union’s hidden agenda! We have no hidden agenda. We want companies to be able to ride the business cycles and retrench only as a last resort.
Of course, a more performance based system means a need for robust performance appraisal systems, and willingness to share information. Having a flexible wage system is harder work. This is why some have been slow in taking up the proposal to have a monthly variable component. But it is necessary if we want to create greater business flexibility.
To get workers to accept a lower fixed pay, employers must demonstrate that workers have a fair share in the upside: when the company makes more profits. This is a principle adopted in the restructuring in PSA. Fair play is paramount to winning the trust of workers.
PSA management knew what it wanted to achieve in reducing unit costs. The unions and management in PSA agreed to reduce the fixed monthly salaries by 0% to 14%. In return for the savings, management introduced a gain-sharing plan. If the company achieved a certain percentage of the costs reduction target within two years, there will be a bonus payment.
Management also converted the Annual Variable Component (AVC) into a Performance Incentive. They agreed that once certain targets are achieved, the variable bonus under the new Performance Incentive scheme could even be higher than what workers used to get before.
In this example, there is an upside for workers. They know that when they make certain sacrifices, they will be rewarded if targets were achieved. They do not feel being short changed.
Consider this other example.
The management of this company wanted to set a 15% reduction in costs, and asked the union to agree to a 15% reduction in basic salaries.
The management was not able to give an account of the costs structure of the company. After some consultation and probing, the union was able to help the company achieve a 12% costs reduction with only a 5% reduction in the monthly variable component of the basic salaries. The other 7% were achieved with savings in other wage and non-wage items, such as re-computation of shift allowances using a flat rate, and adjustments in transport and housing allowances.
There are other examples.
There are expatriates in the service industry who are here on short management terms, and therefore not interested in long-term solutions that make their period of stewardship look bad. At least that is how it looks like from the workers’ perspective.
Others have no clue as to what they want when they talk about wage restructuring.
Restructuring the wage structure requires competent human resource practitioners, who understand the issues, and able to help the CEO manage the change process. Sadly, human resource management seem to rank low in priority to top management.
It is much easier to retrench, than it is to reorganize. This is why the natural tendency is for companies’ management staff to favour the retrenchment option. But retrenchment comes with it huge social costs. If possible, adjust wages, or allow for natural attrition, rather than cut jobs. Better still, plan ahead, build a sustainable business model, so that such abrupt changes becomes less likely.
We’ve allowed the seniority based wage system to go on for too long. If we do not restructure, older employees will be the ones who are most at risks of being made redundant. It is difficult making these painful transitions.
The hotel industry, have created a bonus payment that has accentuated the seniority based wage structure. We now have a difficult task to restructure. In some hotels, the cumulated variable payment can be as high as 3 months.
Often, changes take place too little too late. When bad times come, companies use the occasion to retrench. But this is precisely the time when it is most difficult to find another job.
In these trying times, you as corporate leaders have a heavy responsibility.
The fate of your crew depends on you. Your success or failure determines not only the worth of your companies in dollar terms, but the livelihood of hundreds, if not thousands of your employees.
I urge employers to strengthen communication, listen to the problems and suggestions of your employees, and help built an atmosphere of trust. Just as we have done so at the national level, we need to nurture and develop the relationship at the firm level. Looking after your stakeholders, especially your employees, makes good business sense. It will pay dividends in the years to come, and help built sustained growth for your business.
Thank you for your patience and forbearance in listening to me. If I have sounded somewhat critical, it is because you should know how your employees feel. They want change, so they can work better, and your companies can do better. I look forward to your continued support and close partnership, in building a better life for the people and workers of Singapore.
