The article is published in the April – June 2015 Issue of the Human Capital Magazine.
A shrinking and ageing workforce has fuelled the country’s battle for talent. KPMG Singapore’s Miranda Lee believes the future lies in workplace flexibility and career development opportunities.
Rapid globalisation has drastically changed business operations. As a result of intensified competition, the need for companies to find their niche, make their operations lean and efficient, and derive value from innovation has amplified exponentially.
It is no wonder that organisational agendas today are centred on these imperatives. In Singapore, the challenges faced by organisations are magnified because of the constraints we face as a market with limited resources.
The direst problem Singapore faces is labour shortage, said Miranda Lee, Director of People and Change Management of KPMG Singapore.
The falling Total Fertility Rate coupled with an increase in life expectancy from 66 years in 1970 to 82 years in 2010 has resulted in a shrinking and ageing workforce.
The median age of Singaporeans is expected to increase from 39 years in 2011 to 47 in 2030. In addition, Lee believes that the tightening of foreign labour policies has affected companies reliant on foreign workers, especially small and medium enterprises (SMEs), which already face a labour shortage.
The slower growth of Singapore’s workforce was also evidenced in the White Paper on the population, which reported expectations of a 1%-2% growth from 2010-2020, compared to 3.3% growth in previous decades.
Lee noted that this labour shortage has been further challenged by the increased demand for workers in industries such as manufacturing, pharmaceuticals and information technology.
As Singapore becomes increasingly recognised as a key tourism hub, demand for staff in customer-facing roles and service lines will also grow.
A recent report published by the Ministry of Manpower (MOM) indicated a 9% increase in job vacancies from 2013 to 2014, of which the majority were from the service sector and customer-facing roles.
The severity of Singapore’s current and anticipated labour crunch has fuelled the country’s talent war.
Falling productivity growth
Another issue magnified by the labour crunch is Singapore’s falling productivity growth rates. Despite the Government’s emphasis on productivity, Singapore’s workforce has experienced declining productivity growth (refer to chart below).
While targets for productivity growth were set at an optimistic 2%-3% in 2011, the figure has consistently remained below 1% since 2012. SMEs have been badly affected by both stagnant productivity and labour shortage.
According to the Association of Small & Medium Enterprises (ASME)’s National Business Survey in 2012, 1% of SMEs were forced to close down due to these constraints.
Differences in Singapore’s past, current and future workforce have also brought about another unique set of considerations.
According to the MOM, current employees in Singapore search for workplace flexibility and career development opportunities. This is different from past generations who were motivated by continuing employment for financial reasons.
The management of such a multi-generational workforce will be challenging for the traditional HR department when it comes to attraction, engagement and retention of crucial talent.
HR professionals will need to bridge the differences between different generations and step up on retention strategies to cope with employee turnover rates.
SkillsFuture for Singaporeans
The recent Budget 2015 emphasised investing in people through the SkillsFuture initiatives.
The initiatives are underpinned by a lifelong SkillsFuture Credit, which aims to optimise the full potential of Singaporeans by encouraging them to acquire a broader set of skills relevant to their jobs through education.
Together with the introduction of the SkillsFuture Study Awards and SkillsFuture Fellowships to promote the deepening of skills, the Government hopes to address the challenges of a shrinking labour market with this up-skilling of the workforce.
To successfully develop a manpower-lean economy, both employees and employers must cooperate to identify the knowledge and skill sets needed so that the organisation can grow.
As the custodian of the human capital asset, HR functions will play a pivotal role in facilitating this process, said Lee.
Opportunities for HR professionals to help grow the capabilities of the organisational workforce lie in areas such as active career management, creation of flexible work arrangements and a mobile workplace, and the development of tailored learning and development plans.
The future of HR
Beyond performing operational tasks effectively, HR in Singapore needs to become a value-driver for the organisation, an enabler to organisational flexibility and a partner to both the business and employees.
Lee said the key tenets for a successful HR function include:
Getting management buy-in
Boardroom conversations together with active and visible sponsorship from the leadership are critical in creating the mindset shift to enable HR to play a greater role in the organisation.
Business leaders and senior management must be enlightened on the new role of HR and its value – both tangible and intangible – that can be created through well-crafted policies, targeted programmes and engineered processes.
It is crucial that leaders empower the HR function to take ownership in driving value for the organisation. The perception that HR creates a limited impact needs to change so that the shackles preventing HR from unlocking the human capital potential of the organisation can be removed.
However, this mindset shift will take time to take place in Singapore, where most local enterprises are SMEs. SME business owners typically assume multiple roles and it will not be easy to persuade them to relinquish decision-making pertaining to a certain aspect of the business to another individual within his or her team.
Nonetheless, Lee believes that this is a worthy endeavour. Gaining management buy-in will engender a corporate culture where HR is viewed as a partner across the organisation.
Leveraging on technology
KPMG has conducted several studies which identified how the HR function could deliver a differentiated strategy.
HR professionals must first be freed from transactional activities before they can focus on developing a strategy aligned to organisational goals.
Many businesses fall into the trap of assuming that the simple implementation of a technology platform immediately achieves a lean and high-performing HR function.
The reality is that leveraging on technology is not just about implanting the systems; it is about making the systems and data analytics yield results. Only then can profound change result.
Besides easing administrative work, technology and data can help HR become more empirical. It provides the hard evidence for their opinions, creating credibility at the highest levels of the business.
For instance, deep human capital knowledge about the demographics between different generations enables HR to design tailored recruitment, retention and engagement programmes.
The use of workforce analytics should also allow the demonstration of the return on human capital employed.
A well-designed, predictive workforce analytics could very well become as important to the CEO as the balance sheet and the P&L statement.
Recognising the importance of technology and the support SMEs require, the Government launched an online HR solutions platform that enables SMEs to outsource administrative HR tasks. This initiative driven by SPRING Singapore was open for sign-ups from this April.
Such a platform can also help to tackle productivity concerns. According to the Hunter Group’s HR Self-Service Survey, companies spend 7 to 50% of their time handling employee-related paperwork.
Re-thinking HR elements
As the labour market and manpower demands change, HR elements such as performance management or employee engagement will need to be re-considered.
For example, the new models of contracting are a response to the need to be more flexible and mobile.
The rising trend of hiring freelancers and contract workers allows organisations to meet manpower needs during business peaks and troughs. At the same time, such contracting models also enable leaders to work around the constraints set by cost pressures.
A recent survey conducted by HR consulting firm Hays Group revealed that two-thirds of Singapore employers who took part in the poll said that they engage temporary or contract staff. About 43% of these employers use such workers for special projects or workloads, and a further 24% employ them on a regular ongoing basis.
In the face of an increasingly mobile and transient workforce, Key Performance Indicators and the performance management process are examples of HR elements which need to be re-evaluated.
The increased use of a contingent workforce comprising a diverse mix of individuals has also resulted in diversity management emerging as an area of focus.
The increase in the resident labour force participation rate for women and older workers aged 55 to 69 since 2004 is another leading indicator of the rising diversity in our workforce. This translates into a slew of new focus areas for HR:
How does HR manage this diversity?
How can HR provide the appropriate incentives to the multi- generational, multi-cultural and multi-racial workforce to engender both productivity and employee loyalty?
With the current climate, HR must rise to the challenge and harness the opportunities that lie ahead to create change.
During this journey, organisations must take care not to blindly pursue best practices and benchmarks. They must understand that the start of HR creating real value begins in the boardroom, where focus is placed on aligning HR goals to the priorities of the business.
The article is contributed by Miranda Lee , Director of People and Change Management, KPMG in Singapore. The views expressed are her own.