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Reengineering
Singapore
By Michael Alan Hamlin
February 8, 1999
Corporate restructuring in Singapore
is not a matter of forcing entrenched taipans to compete. It’s
getting government attuned to new realities. Take labor, for example.
This tiny nation’s union movement is, like most everything
else, government-managed. As a result, the National Trade Unions
Congress, or NTUC, is itself an impressive business conglomerate,
operating a frightening array of businesses ranging from supermarkets
to taxi services.
One of the less positive — for
business at least — by-products of Singapore's success was
tight labor conditions. Extreme demand for all kinds of labor resulted
in absurd organizational and productivity anomalies, such as a janitor
with 25 years’ history with the firm pulling down pay equal
to that of college-educated front-desk personnel, according to John
Segreti, general manager at the Shangri-La Hotel. But it was even
worse than that. Mid-level executives — holding the same position
for a decade or more — were being compensated at increasingly
higher levels that did not reflect their contribution to the organization,
or profitability. Just longevity.
And it got even worse. Because employees
and executives like these knew that there was virtually nothing
that could be done to reprimand them or to provoke improved performance,
the quality of service — Shangri-La’s pride — began
to deteriorate during the final years of the Asian miracle. As crisis
set in and tourism began to falter, the low productivity and out-of-sync
cost of these employees became painfully apparent. "In Singapore,
the longer you’re around, the more you make," Segreti
says, "but lower productivity means more benefits expense"
for the hotel. It also resulted in some "pretty crazy titles"
as the company struggled to differentiate roles of new and long-term
employees doing the same jobs.
But the problem for companies like
Shangri-La was, what to do? Although some multinational technology
firms had fired large numbers of workers, particularly disk drive
manufacturers, in the days leading up to the crisis, no respected
Asian company — especially a fixture of Asian success such
as the Shangri-La — had ever retrenched significant numbers
of employees for any reason. And like most other Asian conglomerates,
the Shangri-La was "a very patriarchal company," according
to Segreti. However, when the choices came down to profitability
or continuing losses, it was clear that changes would have to take
place.
Segreti had his mandate, but it was
not one he relished. He first had to ask himself, "Who can
I trust to help me with this?" And as he looked around at his
executive committee, it was clear that the entrenched interests
it represented would quickly undermine the reforms he had in mind.
For close to a quarter of a century many of these employees had
watched general managers come and go. For them it was fine if the
GM wanted to act like he was in charge, so long as he didn’t
really try to take charge. These folks could run their lives —
and the hotel — very well thank you.
That situation was allowed to go
on for so long, Segreti says, because "if you’ve never
known bad times, you’re not used to reacting. Labor was never
an issue. If you had a problem, you threw labor at it. But over
the years, of course, the cost of labor skyrocketed." Two mission
critical functions became "hotbeds of union activity,"
Segreti observes, "engineering and kitchens." These are
critical because they require special training and skills. It is
far easier to find replacements for rooms and front-desk personnel
than it is to find people capable for performing these jobs. In
other words, that’s where the leverage was, and it was applied
consistently.
In Asia, Segreti learned however,
not to force change down through an organization, but to empower
his executive ranks. "I don’t compromise. But I put things
in the local context. I get a local group to implement by empowering
them to accomplish goals." But to assure that he would have
full support of his executive committee for the hard decisions he
would have to make in Singapore, Segreti decided to replace the
entire committee. He explains, "Employees see the logic, but
may not agree with the result. I had to change the entire management
executive committee to assure unity from management. I couldn’t
afford deviation."
Once assured of the support he would
need to implement drastic reform in the way the hotel was operated,
Segreti then set out to make Singapore history by retrenching 188
employees at a cost of US$7 million. That move made Segreti the
subject of relentless media attacks over several months. Media in
Singapore is closely aligned with government, and as we’ve
said the unions and the government are one and the same. The attacks
therefore, didn’t come as a surprise. But despite the attacks,
the retrenchment was upheld by the Industrial Arbitration Court,
which also saw the logic, and agreed with its results.
Segreti says he was able to stand
fast during the most difficult period of the retrenchment because
his bosses, "will be the first Chinese family to embrace a
much more corporate outlook" toward business as a result of
the crisis. "You can see this in the people they hire. They
are not afraid to embrace new ideas," he says. As a result
of that commitment to a new style of corporate management, Segreti
has been able to make significant investments in productivity enhancing
technology, as well as redesigning systems and procedures. Just
as fundamentally, he’s established a tradition of pay for performance
in Asia’s most important — and impressive — hotel
chain, in place of the old system of rewarding loyalty. After all,
what’s loyalty worth when the benefits work only one way?
Copyright © 1999 The Events
& Awards Managers of Asia and
Hamlin-Iturralde Corporation. All rights reserved.
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