How businesses in Singapore can cope with labour reforms

As the Singapore Government tightens its policy on foreign labour in light of public dissatisfaction over high costs of living and immigration, Singapore is shifting its economic growth from being manpower-driven to one of sustained productivity improvement.

Concomitantly, labour costs for companies will continue increasing and the trend is likely to remain. This is a result of higher levies, foreigner quotas, and “bidding wars” among local businesses for cheap employment.

Another likely reason why labour costs increase is because more firms in Singapore now have to turn to locals to fill open positions, many of which do expect higher wages. Unsurprisingly, local businesses are badly hit and have to respond in new ways to the challenges of the current labour market.

Given that the foreign labour situation is unlikely to change in the near future - a message clarified by Acting Minister for Manpower and Senior Minister of State, Ministry of National Development Tan Chuan-Jin, what can local businesses do to adapt to the new business environment involving this hotly contested issue of human capital?

Besides conventional solutions such as training and encouraging innovation, here are some practical steps companies in Singapore can take to improve their immediate hiring situation. The basis for these tips highlights the importance of a company’s operating model – optimal organisation of its internal parts for higher performance.

Firstly, firms have to be strategic by being willing to adapt to the changing business environment. Companies cannot afford to be rigid with both their hiring process and the way they operate because their plans for the future are likely to be affected as employment policies change.

For example, a tightening of labour policy may slow down expansion and hiring for a business’ initially decided strategy. If wages increase (and they probably will), firms must be both willing and nimble to tweak their strategies or operating models, or develop new approaches which requires less manpower.

This idea is best illustrated by Peter Drucker, a renowned management expert, who said,"The greatest danger in times of turbulence is not the turbulence; it is to act with yesterday’s logic.” Although it is possible for a company’s overarching strategy to remain the same, the current organisation and implementation approaches are uncertain and inefficient when based on yesterday’s information and failure to adapt could mean ruin for the business.

Necessarily, a company’s hiring must form the right workforce in quantity and quality with respect to their strategic objectives – these are signs of an effective operating model. Speaking with local business owners, I see that smaller enterprises appear to have a stronger emphasis on the “right quality”, where hires with the right skills and competencies are required for the company to meet P&L demands and other short-term goals.

Medium-sized businesses might focus more on the “right quantity”, where there is more “hiring room” and managers have to ensure there is an appropriate number of hires operating in the correct roles to meet the specified business targets. Keeping these variables in mind allows managers to reduce underperformance and redundancies, increase employee collaboration, cross-portfolio synergies, and their alignment to the company’s goals.

The final tip is probably the most important, and yet apparently the most basic one. Companies need to be more astute in their hiring processes by accurately evaluating their prospective hires, and going through the job vacancies with respect to their business strategy and both their short- and long-term goals.

A holistic assessment of prospective hires is more than just zooming in on technical skills – it involves taking soft skills and traits seriously. How does he affect team culture? What else is he bringing to the table –a willingness to learn, a hardworking attitude, or does he bring along a wealth of personal networks? While this comes across as commonplace advice, it pays to look at these forms of intangible capital that can potentially value-add to a greater extent, justifying the hiring of a less technically qualified individual.

Strategic hiring also involves an accurate assessment of the job vacancies. An accurate evaluation of job positions will help businesses clarify if the allocated job responsibilities are aligned with the company’s strategy, attract the right group of employment seekers, appropriately remunerate and reward employees accordingly to industry benchmarks.

As Singapore moves into growth that is characteristic of developed nations, it is crucial for managers to examine their operating model seriously, seeing how best to organise their teams, maximise the value of their hiring activities and ensure a leaner and fitter organisation.