Attendees from local SMEs gather to understand and discuss key issues and challenges related to enhancing productivity.
With small-and-medium sized enterprise (SMEs) making up 99 per cent of all enterprises in Singapore1, the SME community plays an integral role in growing our economy. Up against an increasingly competitive global market, the drumbeat of productivity has been sounding louder for SMEs to up their game. The diverse spectrum of SMEs across industries have always had to tackle unique challenges. Government initiatives resulting in numerous new schemes and incentive packages has been introduced since 2010 to drive productivity within the SME community.
The Singapore Institute of Management (SIM) has always taken interest in understanding key challenges and pertinent issues faced by SMEs. This year, SIM conducted the SME Productivity Survey to gather the views of SME business leaders on the issues and challenges faced in the area of enhancing productivity. The survey findings were revealed at the SME Productivity Forum held at SIM Management House on 24 September 2013.
Mr Jeffery Tan, SIM director of strategic plans and research, opened the forum to present highlights from the survey. After a networking session, the forum proceeded with a dialogue and interaction session with panellists Professor Sundaram Janakiramanan, a professor of finance at SIM University’s School of Business, Mr Simon Tiong, managing director of Simax Materials Solutions Pte Ltd, and Mr Nelson Lim, managing director of Tranzplus Engineering (S) Pte Ltd. What transpired was a lively discussion between the panellists and a floor of over 60 attendees.
The SME Productivity Survey was initiated to understand how SME management leaders in the manufacturing and service sectors perceive sustainable productivity. More specifically, it attempted to provide insights to five key questions:
• What do SMEs consider productive?
• What steps do SMEs take to increase productivity?
• What are the issues in relation to the hiring of workers?
• What are the issues in relation to the training of workers?
• What are the issues in relation to assistance schemes?
Responses were elicited in two phases, firstly through a series of focus group discussions and in-depth interviews, and secondly through an online survey conducted between July and August 2013. The survey findings were compiled from responses from a total of 170 SMEs.
Respondent SMEs identify six indicators of how they perceive productivity. By and large both the manufacturing and services sectors agree with the priority of the indicators, with top emphasis given to having efficient workers to complete assigned tasks and having them spend less time to achieve equal output. However, those from the manufacturing sector feel that the ability to multi-task is a more significant indicator of productivity than their counterparts from the services sector.
When it comes to identifying approaches to improve productivity, there is overwhelming agreement that having innovation in processes and procedures is the way forward. Changing mindsets of both management and workers, as well as training of workers are next on the agenda bearing similar importance. Though still low in priority, it is interesting to note that SMEs are beginning to link increasing workers welfare and improvement of productivity.
The survey also probes as to whether business culture has an impact on productivity. “We want to know if companies have inherent practices that show that employees are aware of the importance of productivity. More than 90 per cent feel that it is important as a business culture. But when we ask respondents how many actually have such practices, only around 78 per cent do. Perhaps, there is room to investigate what might be in the way of allowing organisations to actively promote productivity internally, “says Mr Jeffery Tan.
Given the government’s fine-tuning of labour policies, the issue of hiring workers is particularly acute for SMEs. One thorny issue is the debate between hiring of local or foreign workers. While press reports and internet chatter may give the impression that there is a bias towards foreign workers, the survey responses suggest that over 51 per cent of SMEs would rather hire locals compared to 14 per cent of companies which prefer to rely on foreigners. The remaining companies have no preference so long as the workers meet their requirements.
However, despite the positive statistics, an alarming 78 per cent of respondents claim that they are not able to hire workers easily. The challenges in hiring local workers boils down to the perception that the local talent pool is small and compensation demanded by locals is high. With latest government restrictions on foreign labour, an interesting parallel can be drawn when contrasting the challenges in hiring foreign workers. Two major challenges are the quota on number of foreign workers a company can hire and the rising cost of recruiting foreigners due to factors like levy. Hence, the cost advantage in recruiting foreign workers is now eroding, forcing SMEs to relook at engaging local workers.
Training and Innovation
As far as enhancing productivity is concerned, training and innovation ranks high up on the list of approaches that SMEs would take. Singapore has no shortage of training choices, and even schemes and funding to encourage participation. Nonetheless, the biggest challenge for SMEs is attaining appropriate training that is tailored to individual company and industry needs.
While both manufacturing and services sectors face similar challenges across the board, there are some variances in two particular areas. In the services industry, companies with smaller staff strength find that they cannot afford to send workers for training – an issue more prevalent than those from manufacturing. On the other hand, companies in manufacturing seem to have an issue with workers returning to their old ways of performing tasks even after training.
Besides looking at the challenges, the survey investigates how SMEs could use innovation as a productivity lever. Majority of respondents see improvement of their processes as key. The services sector sees installing of new software in their IT infrastructure to have bigger impact on rising productivity than their manufacturing counterparts.
Ultimately the biggest challenge for SMEs is costs and any attempts at innovation requires management leaders to be concerned about impending costs. “SMEs have limited resources. There’s always a contention in how you best utilise your resources. And the introduction of technology, software or equipment will involve training and in a way it is related to costs,” explains Mr Tan.
Is the Government Doing Enough?
When it comes to encouraging SMEs to take up training and innovation initiatives, there is no shortfall of assistance schemes available. The key challenge remains finding schemes that are applicable and useful to individual company needs. On top of that, the amount of paperwork needed is seen as a deterrent for companies to leverage on available schemes.
Of the respondents surveyed, three-quarters have applied to assistance schemes and the majority feel that they are useful. The question now is to address how the remaining SMEs can find ways to tap into these schemes, and how to make the schemes more impactful.
Overall more than half of the respondents feel that the government can do more to help SMEs. The manufacturing sector appears to be more satisfied with current efforts as compared to their services sector counterparts. This finding provides food for thought. Could existing schemes be showing signs of inadequacy as they may have been adapted since the early days of industralisation?
The half-hour presentation provided a backdrop for pertinent productivity issues faced by SMEs and served as a good stimulant for further discussion.
PHOTO: A WONG
(From left) Mr Nelson Lim, Professor Sundaram Janakiramanan, and Mr Simon Tiong led the dialogue session for the SIM SME Productivity forum.
Courting PMEs and Fresh Graduates
After a mingling session, the forum continued with a lively dialogue session in which Professor Sundaram Janakiramanan led the segment and dived straight into the issue of hiring workers. He first clarified with both panelists what SMEs mean when they say the local talent pool is small. Mr Nelson Lim and Mr Simon Tiong both shared sentiments that it is easy to hire rank-and-file staff but difficult to attract PMEs (professionals, managers and executives) into SMEs.
Mr Lim considers his company, which is a supplier of mechanical power transmission solutions, a typical small SME. He felt that a monthly salary of over S$3,000 which many fresh graduates expect is too taxing for business owners like himself as he has to consider long term costs like training and investing in new hires. Furthermore, he felt that fresh graduates are inclined to look toward multinational corporations (MNCs) to begin their careers, and that many scholars and top graduates are already bonded to civil service or MNCs.
For a business owner, whose company supplies pallet solutions to MNC clients, Mr Tiong had a slightly different view when it came to the appeal of SMEs. He shared that while he had no trouble convincing fresh graduates or PMEs to consider his company, the stumbling block is often being able to offer attractive remuneration. Having worked with MNCs for over 25 years, he understands how MNCs tick and knows that the challenge lies not in replicating competitive MNC-like human resource (HR) policies and perks but in matching their deep pockets.
To get around the challenge of hiring managerial level talent, Mr Tiong turns to schemes like the SPRING-SIM Business Advisors Programme (BAP) which allows him to engage experienced business consultants while footing only 30 per cent of the costs.
Professor Janakiramanan raised a point that with the government imposing new regulations on hiring foreign PMEs, and more specifically, raising the minimum monthly salary limit, what will become of labour situation then. He posed the question: “If most graduates want to go to MNCs, how do we change that mindset? I think this is a serious issue, especially for small SMEs.”
Mr Ong Teong Wan, managing consultant of a corporate training and consultancy firm, had a couple of suggestions. He empathised with SMEs’ financial situation and suggested that remuneration need not be paid upfront and can be distributed through revenue sharing if employees consistently exceed their targets. He felt that SMEs could also invest and groom talent who are non-graduates and offer to sponsor their higher education as the company grows.
Ms Alvina Goh, a management associate with Sakae Holdings, thinks that SMEs are attractive for young professionals and shared that about half of her classmates have chosen to work in SMEs. “I worked for an MNC and am now with an SME,” she says. “The difference is flexibility and for young people like me, we like companies which give us the chance to grow and opportunities to bring in changes. I think SMEs have a good standing with young talent.”
Both Mr Lim and Mr Ong agreed with Ms Goh’s observation of SMEs. “I think we need to educate graduates that SMEs provide dynamic and flexible work environment,” Mr Lim says.
“Sometimes in MNCs, you’re just a cog in a big wheel, and if you work for a matrix organisation, the frustration level can be very high. With SMEs, there’s no rigidity of policies and procedures, and for young people, there’s where the job satisfaction is,” Mr Ong says. He further suggested that initiating internships to SMEs may change the perception that MNCs are the only good places to work in.
Mr Tiong is positive that the tide will turn in time. “I think there’s a trend for fresh polytechnic or university graduates to want to come to SMEs. Young people like to do what they like,” he says. Furthermore, he added that in the economic landscape of mergers and acquisitions, SMEs could well provide better job security as employees are constantly in touch with the boss.
Tailoring Training and Innovation to Meet Specific Needs
Moving on from the spirited discussion on hiring, the dialogue moved on to touch on issues of training and innovation. Picking up from the survey findings that SMEs find training to be generic and ineffective, Professor Janakiramanan noted that the problem could be compounded when SMEs want to tap on assistance schemes to subsidise their training programmes but find that trainers with specialised industry expertise may not be the ones approved and certified according to regulating standards.
In response to the point, Mr Lim shared his personal experience of engaging a highly experienced trainer who has yet met regulatory requirements, and he gave prospective trainers and consultant a word of advice.
“My latest trainer is not qualified by Spring, but he's a top-notch trainer who has trained the Matsushita Group,” Mr Lim says. “When we found out that I can't use the grant on his service, I told him to go over to Spring to understand how he can quality.” With that advice, his consultant is now on the way to qualify and will soon be able to offer his services to SMEs as they tap on to Spring Singapore awarded grants.
Mr Tiong felt that training has to be specific and immediately applicable. He says: “If we want training to be productive, I think it has to be specific, targeted, and project related. And as an SME owner, you have to personally spend time to see through and follow-up with your staff on the project.” He shared that he would spend at least an hour-and-a-half weekly with two of his employees who went for training to implement a digital marketing project.
Mr Ng Thiam Ser, an independent business advisor to SMEs, agreed that SMEs need specific and hands-on training, and suggested that employees who have received training could train the rest of the staff. “When a person who goes for training has to come back and teach, he is motivated to really learn,” he says.
Even as resources are tight, Mr Lim places emphasis on training as he sees training as a catalyst for growth. “It's only through training that you get wiser. As far as I'm concerned, training is an important aspect. I spend a lot of time and money on training because I want to build my crew,” he says. He believes that having the right mindset to invest in training is important for SME business leaders as training has been proven to produce results.
Mr Ken Wong, a leadership coach, weighed in on the importance of cultivating a healthy mindset. “In conducting seminars and workshops for companies, I realise that the mindset of business owners will influence the mindset of managers and workers,” he says.
Closely related to training is the topic of innovation. The dominant talking point revolved around getting workers to embrace innovation, be it through new technology or operational processes. There was a debate as to whether younger or older workers are more resistant to change.
Mr Ong shared his view that acceptance of innovation is tied in to how business leaders manage change. “When you come up with something new, you need to manage the change. We got to recognise that we are creatures of habit and the older you are the more embedded those habits are. Our past experience determines how we see things and we are fearful of the unknown,” he says.
The dialogue session and forum closed with Professor Janakiramanan summing up the landscape of government support which is currently available. He posed the question as to whether government agencies have done enough to simplify and create awareness of available schemes so that a greater segment of SMEs can tap on and benefit to enhance productivity.
The SME Productivity Forum was organised by Singapore Institute of Management (SIM) as part of the SIM Management Festival 2013.
1Performance Indicators, 2012, Spring Singapore, http://www.spring.gov.sg/aboutus/pi/pages/performance-indicators.aspx
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