Monday 22 October 2012

Who do you think owns your company?

It's hard to improve productivity unless employees feel a sense of ownership
By Han Fook Kwang, The Straits Times, 21 Oct 2012

Which is harder, raising Singapore's fertility rate to 1.5 or its productivity growth to 2 per cent a year?

Both don't seem like terribly ambitious targets - a 1.5 fertility rate isn't even close to replacing the population, and 2 per cent productivity growth will still put Singapore behind many other countries.

Yet, neither target will be achieved this year and perhaps for some years yet.

But if Singapore isn't successful on these two fronts, there will be far-reaching repercussions on its continued success as a modern growing economy, and may even affect its viability as a nation state.

So what's the problem and why isn't the country achieving two of its most important targets?

I will leave the babies issue for another day, except to make one point, that urbanisation is probably the most powerful contraceptive devised by mankind, which is really bad news for a city-state like Singapore.

But I don't think enough has been said about why Singapore has struggled with the productivity target and what can be done to improve it.

In fact, recent figures look dismal: Labour productivity growth for the economy was negative - worse than zero - in the last three quarters. It was even worse in the services sector, with negative growth the last five quarters.

The official explanation of this in Parliament last week was that the poor performance was because of a slowing economy. Companies tend to keep their workforce even when business declines and this brings down productivity in the short term. Better to look at the trend over a longer period.

I hope this is correct and there isn't a more serious underlying problem. The fact is that compared with many other developed economies, Singapore is a laggard in the productivity race.

According to the report of the Economic Strategies Committee in 2010, Singapore's absolute productivity levels in manufacturing and services are only 55 per cent to 65per cent of that in the United States and Japan. In retail, the average level is three-quarters that in Hong Kong and only one-third that of the US.

Productivity growth in the previous 10 years up to 2010 was a paltry 1 per cent.

That is why the Government has made an annual 2 per cent to 3 per cent growth rate one of its key strategies to transform the economy. Achieve it and Singaporeans will enjoy better and higher-paying jobs. Fail and the promise of a First World economy paying First World wages will recede.

And it is pouring money into solving the problem.

To date, $950 million has been used from the National Productivity Fund, and some 7,000 companies have been granted all kinds of incentives and tax breaks that some say require outside experts to help these firms work their way through.

A friend who runs a large international furnishing company here with a branch in Hong Kong tells me the office there was amazed at the level of financial support provided when it heard about these help schemes.

It sounded to them like state welfarism in the corporate world. In contrast, most Hong Kong firms do not expect their government to hand out such goodies.

Will these schemes result in real and sustained productivity gains? Or will it be money down the drain?

Can governments do much to improve a company's productivity? If the Government tries to do too much, especially with monetary incentives, will it make Singapore companies overly dependent on government help, always seeking the next new scheme?

To be fair, the Government recognises this is a long haul that needs to be tackled at each industry, trying out new ways of doing things and finding out what works and what doesn't.

From past experience, progress happens quickly whenever a game-changer appears and shows how it can be done differently.

It happened in the cinema industry when Golden Village entered the market here and introduced cineplexes which did away with ushers, and accepted phone and Internet bookings from movie-goers.

Local players like Shaw Brothers and Cathay were forced to follow suit and reaped the benefits.

The food business changed dramatically when fast-food giants such as McDonald's and Kentucky Fried Chicken showed how to serve large numbers quickly, cleanly and with consistent quality.

Singapore needs more home-grown game-changers who can make this sort of difference. If not, it has to continue to be open to foreign innovators to show the way.

But more important than innovation, or technology or government incentives, is the attitude of workers and management.

Productivity is getting the best out of the input you put in, of which human effort and organisation are usually the most important.

How can it be top-notch unless the people involved want it to be?

One of the best productivity lessons I have heard was delivered more than 30 years ago, in 1981, by then Prime Minister Lee Kuan Yew, who devoted an entire National Day Rally to the issue.

Yes, it's that old a problem, but I don't think the issues have changed much even though the world we live in has been transformed beyond recognition.

He said then that he wanted to understand the subject and had canvassed the views of international business organisations here - Americans, Japanese and Germans. Drawing from their insights, he boiled down the crux of the matter to one critical point - if you want your workers to produce their best, you have to win over their hearts.

"(Quoting a German manager working here) To be successful, you must instil a certain high-fidelity, feeling in something. That means a sense of loyalty, a sense of trustworthiness... Management's problem is that they should not forget, not only the brains and hands of the worker but also the hearts of the people should be working for the company.

"I want to end this story by telling you what Devan Nair (former NTUC chief and president) discovered when I sent him to (Singapore Airlines). Devan asked: 'Who does SIA belong to?' ...Many workers said, 'The Singapore Government'. Some said it belonged to Joe Pillay. No worker said it belonged to him.

"I have seen the Japanese workers... And every one is proud that he is a Hitachi, or a Mitsubishi, or a Marubeni, or whatever man he is.

"And if you ask who does the company belong to, (they will say): 'The chairman and me, all of us.'

"And Devan said he went to Hitachi Zosen shipyard, and he saw a man in overalls and a helmet, and he asked, 'Who are you?' And the man replied, 'I am the personnel manager.' And he looked just like the other workers. And so did six other divisional directors. And one of the rules of the Japanese management system is that everybody wears the same. We are all in the same boat... And if the ship sinks, all will sink and the captain must go down with the ship."

The question is still as relevant today: Do workers here believe that the company they work for belongs to them?

There should be a condition attached to all those tax breaks granted to improve productivity.

If the answer to the question is no, if workers do not believe the company belongs to them, and their hearts are not in it, the company doesn't deserve to be given taxpayers' money.

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