Fast track to national productivity

It has been a tale of contrasts behind Singapore’s economic progress. While the economy has been on a fast track to growth, national productivity has been inching along at a snail’s pace. The last decade marked a new low in business productivity of Singapore companies. Average national productivity growth was a mere 0.9% from 1999 to 2009 compared to 3.5% in the preceding 10 years as highlighted in the Economic Strategies Report, May 2009.

“Singapore has been following the labour- driven approach. We have been pursuing GDP growth of 5% per annum for the last 10 years through the employment growth model, particularly by importing foreign workers liberally,” says Gwee Seng Kwong, Secretary General, Singapore Manaufacturers’ Federation (SMa). Continued reliance on this growth model is likely to have serious long term social implications due to an overly expanded workforce in land scarce Singapore. For HR professionals, so far it has meant dealing with dual devils of talent shortage and higher turnover.

Now, the government wants to switch the focus by reintroducing efficient business practices and moving into a productivity-driven approach. And several sweetened policies have been introduced to ensure that companies adopt the new productivity drive.

Firing up the growth engines

In order to boost productivity and upgrade skills, budget 2011-12 has provided tax breaks of up to 400% while doubling the National Productivity Fund. This year’s budget allows businesses to deduct from their taxable income 400% of their expenditures in any of the six broad categories of investment under the scheme, for example, training or investment in automation equipment. This is up from the 250% tax deduction introduced last year. The budget also raises the cap for such claims for each category of investment from $300,000 to $400,000 of expenditure. The government has announced further enhancements to the Productivity and Innovation Credit (PIC) scheme. Launched last year, the five-year PIC scheme aims to boost productivity and skills-upgrade.

Moreover, in its effort to boost business restructuring, the government is doubling the investment in the National Productivity Fund (NPF) from S$1 billion to S$2 billion. The utilisation of NPF is expected to reach $150 million by this year, and based on plans for the various industries, will reach more than $800 million by 2015. This amount could grow, as more proposals come in over the next few years, Finance Minister Tharman Shanmugaratnam announced during the budget.

Switching lanes

HRM spoke to several companies in the manufacturing, services and financial sectors and found that companies have been applying newer concepts and leveraging on technology and innovation to raise productivity.

Lerk Thai, which serves Thai cuisine, now uses automated frying woks, noodle boilers and deep fryers as well as a standardised workflow process. All this has potentially saved Lerk Thai 20-30% in manpower costs. And now that food can be served faster, table turnaround time is shorter and sales have increased by an estimated 20-30%.

Another company that has seen productivity gains is Heatec Jietong, a heat transfer and piping system company which services clients such as Exxon Mobil and Neptune Orient Lines. The company makes and maintains heat exchangers. Heatec Jietong adopted the Kaizen philosophy of continuous improvement and saw its productivity rise due to improvements in its mechanical processes. It also partnered with a US firm, Chariot Envirobotics, to develop a cleaning robot which can remove paint 10 times faster than the traditional grit blaster that uses abrasive material to remove the paint from ship hulls. The cleaning robot has a vacuum system to contain the dust produced. This has translated into significant savings in time and also reduced the use of foreign workers.

While the government has been asking companies to achieve about 2% increase in annual productivity, many companies have been able to achieve much more. Gwee from SMa says that in the last one year more than 28 companies have come forth to implement productivity enhancement practices through the WSQ Certified Productivity and Innovation (CPI) Manager programme. “These companies have far surpassed the initial expectations. We are confident that most of them have easily achieved 20-30% improvement in productivity from their productivity projects,” he says.

It is not manufacturing companies alone who have been able to calculate the actual gains in productivity. Even the skill-intensive financial sector has been working towards enhancing efficiency at work. “Improving the effectiveness of the financial sector workforce would thus be an important means of raising the productivity of the financial sector as a whole,” says Ong Puay See, CEO, the Institute of Banking and Finance.

Recently, Swiss private bank EFG Bank sent all its frontline relationship managers for an assessment and certification programme under the national financial Industry Competency Standards (FICS) framework. This framework is supported and endorsed by the Monetary Authority of Singapore (MAS) and the Singapore Workforce Development Agency. More than 6,000 financial sector professionals have been trained under FICS as of end 2010. Being a Government-supported programme, FICS-accredited training and assessment programmes are heavily subsidised, with MAS providing 70% financial grant support.

Hospitality and service sector enterprises have also seen quantifiable benefits from their productivity initiatives.

“Saving a few minutes per task for every employee can have immediate business benefits,” says Elaine Toh, Director of Human Resource, Park Hotel Group. The hotel introduced a passport scanner for guest check-ins. With the passport scanner, the hotel will be saving 0.5 man-hour per day, per guest services officer only on the check-in process. “The main benefits to business are better time and cost management. By cutting out the need for the staff members to stay back after work to manually key-in data from the guest’s registration card. Employees will be able to finish work on time. The company will save on overtime cost too,” she adds.

Productivity is something that HR is often striving for by implementing mechanisms like a comprehensive performance management system. Not only does it improve the bottom line, it makes for happier, healthier and more engaged workers.

Springing to productivity Singapore’s Gross Domestic Product (GDP) grew by an exceptional 14.5% in 2010, as compared to a 0.8% contraction in 2009 and a marginal growth of 1.5% in 2008. Driven by the strong GDP growth, labour productivity increased by 11% in 2010. Singapore recovered faster from the recession than most other Asian and European economies. “To achieve long-term sustainable economic growth of 3% to 5% per annum, the government has set the target of 2-3% annual productivity growth over the next 10 years,” says Lam Kong Hong, Director (Enterprise Services), SPRING Singapore. Companies have responded to the government’s call to increase productivity. Based on the DP Information SME Development Survey 2010, 66% of small and medium enterprises (SMEs) have taken steps to raise productivity. Last year, SPRING rolled out several initiatives to help SMEs raise their productivity: the Productivity@Work portal, and the Productivity Management Programme (PMP). Both initiatives are under the SME Productivity Roadmap jointly driven by SPRING Singapore and the Singapore Workforce Development Agency. To date, about 443 SMEs have been trained under PMP.