PM Lee Hsien Loong at SNEF 30th Anniversary CEO and Employers Summit

The CEO's Role In Leading Productivity 

Mr Stephen Lee, President of SNEF

Employers and Unionists

Colleagues, Ladies and Gentlemen

I am very happy to be here today to celebrate SNEF’s 30th anniversary.  This year, Singapore is 45 years old, we are celebrating National Day in a fortnight’s time, so SNEF has been around for two-thirds our existence.

In these 30 years, SNEF has achieved a great deal. And Singapore has achieved a great deal.  Our GDP grew six times, from $40 billion back in 1980 to $250 billion last year, (in constant dollars).  Our labour force expanded, in fact tripled, from just over one million to three million.  In other words, we created roughly two million jobs.  In real terms,  per capita incomes have tripled, and the lives of our people have tremendously improved.

Strengthening Singapore’s Tripartism

Singapore’s rapid economic and social development is the result of our consistent, forward looking policies, pursued 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 which has enabled us to do all these sensible things is tripartism.  It is a partnership that has been forged through decades of cooperation among employers, the unions and government.  We have faced many challenges together, overcome successive crises, and cooperated to expand our economic pie and jobs for our people.

Tripartism requires commitment and effort on all sides. Employers have to do their part, and SNEF as the association of employers plays a key role. SNEF naturally reflects the views and concerns of employers on issues important to them, but SNEF also guides its members on these issues and helps them come to a constructive and pragmatic solution. It works hard to build a constructive relationship with the unions, and together set a positive non-adversarial tone for our industrial relations. SNEF’s President, Mr Stephen Lee, is practically a full time, unpaid public servant. Stephen has played a crucial leadership role – maintaining good relations with the government and the labour movement, working with them in a spirit of give-and-take to formulate practical solutions that benefit all parties. It is a critical responsibility, and one which must be sustained and carried forward, whoever is in SNEF, in the unions, or in the government.

We have to institutionalise our working arrangements and our tripartite relationships, and we can never afford to take the present harmonious state of affairs for granted. We have got to continue to nourish and strengthen the habits of trust and cooperation, especially amongst newer business leaders and union leaders, and I might say newer Ministers, office holders and Members of Parliament too. Companies which have operated in Singapore for some time understand how things work here. Usually, they and their unions would have established a mutually satisfactory working relationship. But we have to guide and encourage newer companies and younger union leaders to develop a similar understandings and rapport with each other.

This tripartism has been an enormous advantage to us during the recent crisis. Unions, employers and the government worked together to help firms to cut costs and save jobs. These efforts prevented what might easily have been massive job losses and retrenchments. Our overall unemployment stayed low, peaking at only 3.3% in the 3rd quarter last year,  and has since gone down to 2.2% this year. 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

Now we should direct our tripartite efforts on a new challenge – namely, improving our productivity.  It is essential for us to remain competitive in a new environment. We are 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, improve productivity and stay ahead of the competition. This is the key for us to move up the value chain and take on more skill-intensive and knowledge-intensive work. Then our companies can earn good returns, and then workers can earn good wages.

This year because of the strong economic rebound, we will see a very significant jump in productivity, even without our making a special effort. In the first quarter this year, our productivity jumped 13%. But it does not mean we have fulfilled our objectives and we can all go home. 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 productivity actually shrank and we had a negative number. We cannot be satisfied with this one-off blip, but we must persevere to raise our productivity on a sustained basis in good years and bad. 

We have set up the National Productivity and Continuing Education Council (NPCEC), chaired by Deputy Prime Minister Teo Chee Hean, to oversee the national productivity drive. It is focusing on making productivity improvements in 12 priority sectors, and developing a comprehensive, first-class national continuing education and training system.

A huge part of the responsibility for improving productivity falls on employers and business leaders – in other words, our audience today. You set the strategic direction for your companies, you identify new markets and business opportunities, you make the critical decisions 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 your 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

Being productive means creating maximum value out of limited resources. If you want to raise productivity, you can either use fewer resources to produce the same value, or deploy the same amount of resources to more productive purposes and generate more value out of that.  Singa pore businesses cannot expect to save costs by employing more low cost workers.  Instead, you have got to utilise resources efficiently, develop new markets and innovate.

New markets could be overseas; new markets could be domestic, in unfilled, undiscovered niches, but they 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, with a constantly changing situation, new markets are constantly opening up. The challenge for CEOs is to identify them, and act on them before others do.

Businesses must also innovate relentlessly to achieve breakthroughs in value-add and productivity. Innovation does not just mean new products or services, but also includes coming up with novel business models, for example 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

Companies have to be nimble and adaptable to respond to changing market conditions. You have got to shift your resources to where they are most needed and most productive. When growth can be negative one year and more than 10% the following year – this is happening to us now – you need enormous flexibility to anticipate changes, adapt and do well. In other words, to underpin your improvement in productivity, you need enormous flexibility. Flexibility in skill, flexibility in wages, flexibility in mindsets.

Skills flexibility means training workers to master multiple skill sets, and be able to perform many different tasks. To enable workers to do this, firms have to strongly support workers’ training, and properly recognise workers who make the effort to acquire additional skills. Then, if you have flexible workers, the firms can deploy them to different areas depending on conditions, depending on business demand, and this will give you an important edge over your competitors.

One example of a firm which has done this is GlaxoSmithKline (GSK), which is in Singapore with many plants operating 24/7 with four rotating shifts. Demand for pharmaceutical products is volatile, one quarter it can go up by 30, 40 or 50%, the next quarter, that batch is over, you come correspondingly back down again. Therefore you have to be able to shift your workers from one product to another, from one line to the next; or in the way the industry is organised, from one building to the next, where each building is a different line, a different product. So GSK decided to multi-skill its technicians, with the support of the unions, the Chemical Industries Employees’ Union (CIEU), and the Workforce Development Agency (WDA). So far, it has trained about three quarters of its technicians. Previously, each technicians could only operate in one particular production building. Now they are trained to work in several production buildings. The productivity gains will be about 10%, will enable GSK to pursue more growth opportunities, and of course we hope will encourage GSK to bring more production buildings to Singapore.

Another aspect of flexibility is wage flexibility. We have been working on this for a long time, since the mid-1980s. After years of patient hard work, many companies now structure their wages not just with a basic wage, but with monthly and annual variable components. And it has become part of the vocabulary for wage bargaining, for collective negotiations. The unions support this as a tool which will 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 Jobs Credit, this helped firms manage their costs and hold on to most of their workforce.

Let me cite one specific example – CapitaLand. Last January, when the outlook was bleak, the CapitaLand management and executives took wage cuts of up to 20%, with the deepest cuts for management, but everybody being affected some, 3% maybe, but everybody chipped in. Throughout the downturn, CapitaLand worked with its workers and its union, the Singapore Industrial and Services Employees’ Union (SISEU) to cut costs. When performance and business outlook improved towards the end of the year, it reinstated and later on it 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.

This year, we project record growth, but we should be equally mindful of the need for wage flexibility. We should not lock in high wages which may be justified this year, but will cause us difficulties if conditions change, which at some point they surely will. Wage settlements should also factor in the extra 1% in CPF contribution rates, which is happening in September this year and then next year in March. Mr Lim Swee Say has already reminded workers to split any wage increases this year three ways between the basic salary, the monthly variable component and the annual variable component. I hope that in a tight labour market, employers will be equally responsible and similarly prudent in their approach to wage settlements.

So to be flexible, you need to be flexible in your jobs, in your wages, but especially in your mindsets. It is the most basic and critical flexibility, because we are in a dynamic environment, you cannot tell exactly what the demands will be, we cannot tell exactly what we need to get the job done tomorrow, which will be the most urgent, the most critical task. We have to quickly hoist in situations when they change, often unexpectedly, and be able to respond. And we cannot simply go strictly by what is explicitly spelt out in collective agreements, or individual contracts, or worse, work to rule, because however we try to anticipate and spell out and be explicit, there will always be unanticipated situations, and then we will have to use our good sense.

We are more flexible in Singapore than many other economies in this aspect. Our unions and workers take a pragmatic approach, and do what makes sense to deliver good service. Take an example from the hotel industry: Ritz-Carlton, but probably others too. During the recession last year, Ritz-Carlton’s management and staff decided to multitask to reduce costs and save jobs. Business was slow, occupancy rates were low, but the Chinese restaurant still drew in the crowds at wedding banquets and Chinese New Year.  It did not make sense to hire workers just for that period, or just for those parts of the hotel. So, all the hotel employees, starting from the General Manager and administrative staff, helped out in the restaurant so as to save on temporary staff and short-term hires.  Room attendants also agreed to be deployed to do laundry work, because occupancy was low.  Some employees were understandably concerned about handling very different tasks from their usual jobs, but Ritz-Carlton put in place a structured training programme to enable workers to pick up new skills and better understand the other functions within the hotel. And I think it not only helped them through the crisis, but helped with their teambuilding, and helped with their sense of camaraderie and corporate loyalty.

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 have to 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 for the company, 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

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.

The Productivity and Trust Leadership initiative is a substantial scheme that will benefit SNEF’s 2,000 members, which together employ 600,000 workers in Singapore. I hope you have set the tone for the other employers in Singapore to focus on productivity and strengthen trust with the unions and workers.

Conclusion

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 your 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, trusting working environment. Hand-in-hand with your workers and the government, you can overcome any future challenges, develop our economy and deliver better lives for Singaporeans. Thank you very much.