“THE CEO’S ROLE IN LEADING PRODUCTIVITY”
Mr Stephen Lee, President of SNEF
Employers and Unionists
Ladies and Gentlemen
1. 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 twothirds
of those 45 years.
2. Singapore has achieved a great deal in these past 30 years. Our GDP grew sixfold,
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
3. 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.
4. 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.
5. 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.
6. 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
7. 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.
8. 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.
9. 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.
10. 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
11. 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.
12. 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.
13. 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
14. 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.
15. 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.
16. 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.
17. 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.
18. 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.
19. 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.
20. 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.
21. 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.
22. 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
23. 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.
24. 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
25. 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
