By 2020, the Singapore workforce will start to shrink. The number of Singapore citizens and permanent residents of working age will begin to decline. This poses a big problem for local companies who rely on this quality workforce. It’s the big SME business productivity challenge.
With a relatively low unemployment rate of 1.9%, many companies are already having difficulty finding and hiring talented employees. With this bleak employment outlook for 2020, companies are likely to see increased competition for top talent.
How does an employee shortage affect SMEs?
While the upcoming employee shortage may be favorable for employees in Singapore, a big question remains: How can businesses – especially SMEs – remain competitive and grow their business in a tight labor market?
One option for companies is to ask their employees to work longer hours to keep up with increased workload. For many SMEs, employees are already working long hours. In fact, Singapore ranks first in the world for average number of hours worked per employee per year.
Additionally, recent 2016 Hays survey shows that for the workforce in Singapore,60% view work-life balance as key to staying in a job (p.19). This number will most likely go up, as the generation of Millennials prioritise work-life balance when evaluating job opportunities. If this trend continues, then Singapore SMEs must find another solution other than having employees work more hours to remedy the employee shortage.
In short, SMEs can no longer rely on the two traditional methods of handling workforce contractions:
- Expand the workforce
- Direct employees to work longer hours.
For Singapore SMEs to remain competitive, companies can only monitor and make adjustments to one variable: Productivity
As the chart above shows, Singapore is still relatively low on the productivity index. Together with Korea, Singaporeans are working the highest number of hours but worker productivity is lower compared to other industrialized nations.
How to improve SME business productivity?
Improving productivity metrics based solely on GDP is no simple task. However, by measuring productivity differently according to Multifactor Productivity, and influencing this metric through carefully implemented inputs, overall productivity may be raised.
According to Singapore Statistics, “Multifactor Productivity (MFP) is a broader indicator that relates output to a set of combined inputs, usually labour and capital. A change in MFP reflects the change in output that cannot be accounted for by the change in the combined inputs. MFP therefore measures the effects of changes such as technological progress, changes in the organisation of production.”
The Singapore government has long been focusing on improving Multifactor Productivity with local SMEs to keep the country and companies competitive both locally and internationally. Many companies have taken advantage of government grants like iSprint and PIC, which provide funding for businesses to adopt productivity-enhancing technology. Local SMEs are introducing new productivity efforts to help improve productivity and growth. Many small and medium enterprises are working with the SME centers and local business chambers like SCCCI to implement productivity concepts.
Productivity stats and everyday improvements
How can SME business owners, employees and citizens take a more proactive approach to improving productivity? One challenge is connecting productivity stats with everyday improvements. Most productivity indices and numbers are often too academic, which can make it a challenge to understand what specific actions an employee, team lead, or business owner should make to see real productivity gains.
Challenges for increasing productivity
- Understanding productivity numbers and how they are connected to everyday work
- Only things that gets measured is accomplished. How can we identify and implement metrics and KPI’s that everyone understand
- Understanding the various measures of productivity.
- Recognizing the measure of productivity that is most pertinent to your success.
Technology as a SME productivity tool
Technology can be an invaluable productivity tool if implemented correctly. Software can help reduce manual tasks and streamline redundant operations. For example, HR executives can spend less time maintaining employee records when employees use self-service applications. Back office departments can reduce payroll preparation times in addition to tax and statutory reports using an integrated enterprise software.
Utilizing streamlined HR management processes and strategies can boost business productivity from top-down. Good planning and team management can help employees spend their time more effectively. Implementing the best software is a vital factor in this equation.
Who is responsible?
Increased productivity goes beyond company profits. Employees, employers, shareholders and your family have a vested interest in making productivity improvements. When employees are more productive, it has a halo effect that can positively impact factors like job satisfaction and work-life balance.
Companies can invest in new technologies, change processes and train employees. However, employees also need to take ownership and be engaged. Find effective ways to handle each task that will create maximum value for the company and its customers. To get the halo effect from productivity improvements, we all need to take ownership to tackle the productivity challenge.