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Haygroup Recovery Without Tears Oct09
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Haygroup Recovery Without Tears Oct09

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The worst of the global financial crisis appears to be over, but unknown to many organizations, another time bomb awaits. Employee goodwill has been worn down through working longer and harder during ...

The worst of the global financial crisis appears to be over, but unknown to many organizations, another time bomb awaits. Employee goodwill has been worn down through working longer and harder during the past year, putting up with pay cuts and freezes and with little in return.

And while many employees have taken the extra demands in their stride, most of them consider their efforts unsustainable, given the strain it puts on their families, relationships, health and wellbeing.

More importantly, the lack of staff engagement and proper communication during the crisis has led employees to feel that an unwritten ‘contract’ has been breached, thus eroding their loyalty, commitment and ultimately, companies’ ability to truly recover from the recession.

Sadly, the treachery will not end there. As economies revive, organizations are likely to face a talent exodus, as disengaged, over-stretched and under-rewarded employees look out for greener pastures.

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Haygroup Recovery Without Tears Oct09 Document Transcript

  • 1. 1 Recovery without tears: The first step to the upturnConnecting the dots to reveal how reward and engagement stack up againstemployee performance in Asia >>The worst of the global financial crisis appears to be over, More importantly, the lack of staff engagement and properbut unknown to many organizations, another time bomb communication during the crisis has led employees to feelawaits. Employee goodwill has been worn down through that an unwritten ‘contract’ has been breached, thusworking longer and harder during the past year, putting eroding their loyalty, commitment and ultimately,up with pay cuts and freezes and with little in return. companies’ ability to truly recover from the recession.And while many employees have taken the extra demands Sadly, the treachery will not end there. As economiesin their stride, most of them consider their efforts revive, organizations are likely to face a talent exodus, asunsustainable, given the strain it puts on their families, disengaged, over-stretched and under-rewarded employeesrelationships, health and wellbeing. look out for greener pastures.©2009 Hay Group. All rights reserved www.haygroup.com
  • 2. 2 Recovery without tears The frustration factor According to an extensive study on employee engagement and enablement conducted by Hay Group Insight (the employee survey division of Hay Group), frustrated employees represent an astounding 29 per cent, or nearly one-third of the Asian workforce today (Figure 1). If nothing is done to deal with the frustrated population, what usually happens is two in three will become ineffective and the rest will just leave. Sadly, only 16 per cent, or just one in six According to the latest Hay Group Insight What is worrying about employees believe themselves to be effective research, the study shows that workplace detached employees, in their jobs. In contrast, in the West, 21 frustration appears to stem from the lack of despite the high level of per cent of the workforce was found to be employee empowerment and enablement. support for success that frustrated, while two in every five employ- While work remains challenging, the lack companies have invested ees considered themselves to be effective. of empowerment to make decisions and in them, is that their the lack of enablement to perform The highest percentage (35 per cent) of effectively is causing significant numbers of commitment and Asian employees was found to be detached. employees in Asia to feel frustrated. motivation to high These are the employees who perform the performance remain low. bare minimum of what is needed and no What is the bottom-line impact? Hay more. What is worrying about detached Group Insight research shows that employees, despite the high level of companies that engage and enable their support for success that companies have employees outperformed their industry invested in them, is that their peers on revenue growth by 4.5 times. In commitment and motivation to high terms of profitability, such companies performance remain low. exceeded industry averages in terms of five- year Return on Assets, Return on Invest- With various innovative HR tools, ment and Return on Equity by 40% to including pay, perks and career 60%. This level of performance is not to be advancement prospects to engage today’s sneered at, in any sort of economic climate. employees, why is employee frustration continuing to impede performance in the workplace? How ae your employees feeling?Figure 1:Employee effectiveness Employee Engagementmatrix LOW HIGH West = 28% West = 39% Employee Enablement DETACHED EFFECTIVE HIGH Asia = 35% Asia= 16% West = 12% West = 21% LOW INEFFECTIVE FRUSTRATED Asia = 20% Asia = 29% Source: Hay Group Insight, 2009 ©2009 Hay Group. All rights reserved
  • 3. 3“While CEOs make promises about what their organization candeliver to customers, shareholders and other stakeholders, itis the employees who keep these promises on their behalf. Dowe really want to put detached or ineffective employees in ”front of our clients and investors? Or look at it another way. While CEOs Walking around the offices today, make promises about what their managers may feel the warm glow of team organization can deliver to customers, spirit among their subordinates, having shareholders and other stakeholders, it is battled through the downturn successfully. the employees who keep these promises on their behalf. Do we really want to put But managers should be aware of superficial detached or ineffective employees in front engagement – where the levels of of our clients and investors? discretionary effort and retention are artificially inflated by redundancy fears and a soft employment market, rather than Lost in expansion genuine loyalty to the company. How did this state of affairs happen? In Hence companies who have solely focused the rapid growth of the last twenty years, on the bottom line during the recession managers in Asia have been focusing so could easily fail to notice the “sweat debt” much on managing external issues such they have built up with employees for their as capitalizing on market opportunities, extra effort during rough times. They risk expanding into new businesses, and falling behind their competitors that have securing financial capital, that they have bucked the trend and kept true overlooked the importance of building engagement high. internal organizational strengths for future sustainability and continued success. The assumption is that we can always buy Can reward make a difference? talent, so why bother to build? Of course, While one of the easiest ways to improve straight away, we see that this is akin to employee motivation is by increasing their growing a bigger body without building pay, is it necessarily the most effective? the corresponding muscle strength. What we have seen repeatedly is how this The financial crisis of 2008-09 has not stop-gap measure creates a vicious cycle helped matters as companies went into that encourages employees to be loyal survival mode, asking employees to do to money, rather than the company, and more with less resources and reward. Many abandoning their positions for better employees understood the importance of paying jobs, driving salary benchmarks pulling together and willingly put in upwards without any real benefit. additional time (often without pay) at the expense of health, relationships and family life. www.haygroup.com
  • 4. 4 Recovery without tears Figure 2: 30 Total pay index in Asia- Junior Mgmt Middle Mgmt Senior Mgmt Pacific, United Kingdom and South Africa 25 Total pay index (Clerical = 1) 20 15 Note: This chart shows the 10 total remumeration differences of the various management levels against 5 clerical staff. For example, the total pay of 1 senior Clerical = 1 manager in Indonesia is equivalent to that of 27 0 clerical staff. Source: Hay Group PayNet (August 2009) And nowhere is this trend more compared to the average of ten years held apparent than in hot Asian economies such down by their peers in other parts of Asia. as China, India, and Vietnam, where the willingness to pay premium for top talent And that is just at the average. It is not is widening the remuneration gap between unusual to find managers quitting withinIt is not unusual to find the top and bottom rungs within an one year. Just imagine, is one year on themanagers quitting within one organization (Figure 2). job enough time to start contributingyear. Just imagine, is one year on positively to the business or is it just thethe job enough time to start Unfortunately, the pressure to generate right moment to leave, before your short-term revenue and profits has led mistakes have a chance to catch up withcontributing positively to the many Asian companies to localize you?business or is it just the right management as a means to cost cutting.moment to leave, before your Without doubt, the advantages to hiring But the question to ask is: are there enoughmistakes have a chance to catch experienced, local senior managers in Asia locals for management roles are significant,up with you? to go around? and these could range from language and culture, to familiarity with local customs and business practices. The bad news for The loyalty deficit organizations hoping to do so in markets According to the 2009 statistics from Hay like Vietnam or China, the shortage of Group’s PayNet (a global online platform quality talent could only lead them into for compensation and benefits a downward spiral – one where wrong information), managers in Vietnam and candidates are being placed in senior roles China, for example, are on average five that require higher levels of experience and years younger than their counterparts in maturity to get the job done. other parts of Asia. Companies that are caught in such a A closer look at market realities in China predicament ultimately lose out, not only reveals junior management employees because they have found themselves paying usually stay for about three years with one higher salaries for younger workers who company (Figure 3). However, when it do not bring the corresponding skills or comes to senior management positions, performance, but also for the downtime, Chinese employees tend to leave their posts effort and various investments into as quickly as five years into the job, recruiting and developing new candidates. ©2009 Hay Group. All rights reserved
  • 5. 5 Perhaps part of the solution lies in re- 20.5% in Vietnam – meaning that one in designing the manager’s job and parcelling five employees who started the year with it out among several assistant mangers, in your Vietnamese operations will not be thus taking advantage of the fact, for the there by the end of the year! cost one middle manager, you can hire three junior managers in China (as shown While good salaries can help in Figure 2). organizations attract the best talent, it is not the largest factor in determining whether these talents would stay. From our observation of leading multinationals, it is Money can’t buy love clear that there are distinctions between the It is not unusual for the leading multi- tools used in recruitment and attraction, nationals in Asia to dedicate a sizable and those that are used in engagement and proportion of the total remuneration retention (Figure 4). A common oversight package to non-monetary rewards and is the failure to distinguish between the benefits. two. According to Hay Group’s PayNet, in China for example, compensation in the form of statutory benefits, allowances for Case study: When it pays to “save face” cars and other privileges, as well as short- In Asian culture, the notion of “saving face” term incentives like performance bonuses, adds an interesting dimension to the make up close to 30 per cent of the delicate equation that balances between remuneration mix for junior to senior “stay” and “go”. In China, a top-paying MNC post remained open for 12 months simply management employees. In Vietnam, because it did not offer a company car employees enjoy similar benefits that range among its perks. Although salary between 29 per cent and 42 per cent of the adjustments made by the HQ more than total remuneration package. compensated for the drawback, it did nothing to entice candidates to leave their And yet, despite all the attention that existing jobs, which came with a car. As one HR pays to designing and administering of the candidates puts it, “No one knows bonuses and benefits, are we reaping the how much I earn; but everyone will see if I corresponding returns in staff loyalty? In am not entitled to a company car!” 2009, staff attrition reached as high asFigure 3:How soon do they leave? 14 Junior Mgmt Middle Mgmt Senior Mgmt 13 How soon they leave? (median) 13 12 11 11 10 10 10 Average length of service (Years) 9 8 8 8 7 7 7 6 6 6 5 5 5 5 5 4 4 4 3 3 3 3 3 2 2 1 0 China Indonesia Korea Malaysia Singapore Thailand Vietnam Source: Hay Group PayNet, 2009 www.haygroup.com
  • 6. 6 Recovery without tears Figure 4: What are employees looking for? Why they join Why they stay 99 Compensation package, especially 99 Quality of leadership and managers guaranteed cash 99 Opportunities to do exciting work 99 Respect and recognition 88 Working climate 99 Alignment of job and interest 88 Quality of leadership and managers 88 Compensation package 88 Organizational attributes like market 88 Opportunities to do exciting work position, product quality According to Hay Group Insight research, surveys, the study concluded that what cash compensation and career advance- most employees truly desire is a ment opportunities are primary factors challenging job, enough resources to that attract candidates to an organization. accomplish it and for unhelpful managers to get out of the way. However, upon starting work, employees shift their focus towards more “intangible” Hence, companies who invest heavily in factors like the quality of leadership and team-bonding sessions, corporate retreats management, respect and recognition, or development programmes should not be alignment of job with personal interests surprised that the enthusiasm and working climate. While compensation generated does not last in the workplaceJust imagine, is one year on the and opportunities remain important, they for very long, if their corporate structurejob enough time to start rank lower on the list of retention factors. and policies do not encourage jobcontributing positively to the Hence, our talent attraction tools cannot effectiveness.business or is it just the right be used for talent retention.moment to leave, before yourmistakes have a chance to catch The leadership factorup with you? Engagement: All sound and no fury? Figure 5 illustrates how Asian companies Yet, in the larger context of improving stack up against their western counterparts organizational performance, both pay and when it comes to employee engagement non-pay benefits are but hygiene factors. and enablement. In other words, while there will be dissatisfaction when they are not Note the common thread among the top commensurable, higher increases will not three drivers for employee engagement: the guarantee sustainable employee need for strong leadership. While pay and engagement or the motivation to do more. benefits successfully engaged 40 per cent of the Asian workforce, clear and promising In fact, a Hay Group Insight study has direction (76 per cent), quality and customer shown that motivated employees do not focus (72 per cent) and confidence in leaders always bring about higher levels of (61 per cent) are far more effective as performance. From extensive employee drivers for engagement. ©2009 Hay Group. All rights reserved
  • 7. 7 Hence, sound and decisive leadership is and not hinder, productivity. This could critical for improving employee involve shifts in organizational procedures engagement levels. The message to Asian and having the right tools to measure and companies hoping to ride the waves of manage performance. economic recovery is this: hire the right senior managers and appoint the right In a supportive environment, employees leaders. Quality leaders are the key to would have authority and empowerment better engagement and more effective to act within their areas of responsibility, organizational performance. and full access to resources required (for example, information, technology, tools and equipment and budgets) to get the job done. They are also able to focus on their Setting employees up for success mission-critical work without having to However, engagement alone is not enough. negotiate obstacles in the form of non- To get the most from employees, leaders essential tasks or red tape. have a responsibility to ensure that organizational systems and work In other words, to get the most out of environments support individual and employees, companies would need to not organizational effectiveness. only motivate but also enable them to channel their extra efforts more Enablement requires that employees must productively. Engaged employees need the first be matched to their jobs, so that their confidence that their organization is not skills and abilities may be put to good use. setting them up to fail but rather, it is Secondly, enablement involves creating enabling their success. supportive environments that facilitate,Figure 5: Engagement drivers Asia WestThe East-West divide: Clear and promising direction 76% 77%Engagement andenablement drivers Quality & customer focus 72% 77% Employee Engagement Confidence in leaders 61% 67% Asia = 68% (West = 74%) Respect and recognition 60% 65% Development opportunities 55% 60% Pay and benefits 40% 53% Employee Effectiveness Enablement drivers Asia West Collaboration 76% 77% Performance management 73% 77% Employee Enablement Asia = 66% Authority and empowerment 72% 76% (West = 71%) Resources 61% 63% Work, structure & process 54% 55% Training 40% 54% Source: Hay Group Insight, 2009 www.haygroup.com
  • 8. 8Recovery without tearsCase study: “Our hands are tied” of 16%. But the management had expected this figure toAmy*, the Human Resource & Organization Development be even higher, given the highly talented and achievement-manager of a local Singapore-based company, was worried oriented people they hired.about an attrition trend in her company. As her company is Even though the frustrated employee was a small fraction,a well-known and appealing brand in the market, attracting what was worrying was the high proportion of employeesthe best talent was not a problem. Her gut instinct, which feeling detached and ineffective. The survey also showedwas shared by the top management team, was that that given their choice, one out of four employees will leaveproductivity should be higher but wasn’t. And more over the next two years.worryingly, staff churn was higher than the industry norm. Further analysis showed that while the organization scoredIn 2009, Hay Group conducted their employee engagement favorably for leadership and clear directions, what was Company Xsurvey that showed the engagement-enablement lacking were authority, empowerment, and a realdistribution as follows: commitment to offering quality services and products. Employee Engagement LOW HIGH What this meant was that the highly talented and achieve- ment-oriented staff felt like they were “highly paid 22% 34% messengers” as there weren’t many decisions that they Employee Enablement HIGH DETACHED EFFECTIVE could make, without having to constantly refer upwards. Furthermore, despite “delivering world-class service” being a company motto that is proudly emblazoned within the 36% 8% premises, employees felt that “their hands were tied” by LOW INEFFECTIVE FRUSTRATED red-tape and internal processes, and thus unable to meet clients’ expectations.Amy was gratified to see that the proportion of effective © 2009 Hay Group. All rights reserved 1 *names have been changedemployees, at 34% was more than double the Asian normA new deal • Regular and relevant training must be provided toHaving understood the factors that drive employee frustrated employees as they have a need to constantly improve themselves and achieving their personal careerperformance, companies will have to contemplate whether goals.their people management strategies can motivate behaviors • Monitor the support levels on an ongoing basis and listenthat improve productivity and performance. carefully when your frustrated employee speaks.We recommend that companies adopt the following • Run managerial development programs which helpstrategies to further engage and enable employees; and in managers understand the type of climate they are creatingparticular, the talented but frustrated ones: within the organization. As the economy warms up, the companies that race ahead• “Walk the talk” when it comes to quality and customer will be those with the largest bench of engaged and service issues as frustrated employees desire to work in organizations where these are not just empty statements. enabled employees. Will your company rank among them?• Leaders must take into account how to support their teams to succeed when assigning work.This paper was presented at World at Work’s Total Reward Conference 2009 in Hong Kong on 9th October 2009, together with Mr Goh Hern Yin,Compensation & Benefits Director, Asia-Pacific, Ingersoll Rand. Hay Group thanks Mr Goh for sharing his experience so generously. The viewsand opinions in this paper do not reflect the views and opinions of Ingersoll Rand in any way. Contact the Authors About Hay Group Dr Stephen Choo Hay Group is a global management consulting firm that Regional Director, South-east Asia, Hay Group Insight works with leaders to transform strategy into reality and to E| Stephen.choo@haygroup.com help people and organizations realize their potential. Visit Nidthia Chelvam www.haygroup.com/sg. Asia-Pacific FMCG Sector Leader & General Manager, Regional Expertise & Processing Centre, Asia-Pacific, Reward Information Services, Hay Group E| Nidthia.chelvam@haygroup.comThe content in this report is provided solely for informational purposes. This report does not establish any client, advisory, fiduciary or professional relationship between Hay Group and you.Neither Hay Group nor any other person is, in connection with this report, engaged in rendering accounting, advisory, auditing, consulting, legal, tax or other professional services or advice.©2009 Hay Group. All rights reserved