WE stand proud as a nation for our economic performance, our                                                                                          
international competitiveness, our ambitious projects and for                                                                                         
our vision to be a fully developed country by the year 2020.                                                                                          
                                                                                                                                                      
But as we stride confidently forward we should also recognise                                                                                         
our vulnerability and the emerging signs of potential threat                                                                                          
to our capacity to maintain and sustain our development                                                                                               
momentum; and to be cautious enough to learn from the painful                                                                                         
lessons of history.                                                                                                                                   
                                                                                                                                                      
We are a trading nation and our prosperity is dependent on                                                                                            
global markets. Over the years we have been fortunate and our                                                                                         
transition from exporting primary commodities to exporting                                                                                            
manufactured products has been smooth. We are now structuring                                                                                         
for a higher contribution from the service sector by way of                                                                                           
import substitution and by industrialising services like                                                                                              
health and education.                                                                                                                                 
                                                                                                                                                      
The continuing success of exports is our ability to compete.                                                                                          
Our successful sale of the Proton car overseas is simply                                                                                              
because we are price competitive for the category of passenger                                                                                        
vehicle. To continue to remain competitive will demand that                                                                                           
our cost of production and distribution is kept within bounds.                                                                                        
                                                                                                                                                      
                                                                                                                                                      
It is because of this economic imperative that manufacturing                                                                                          
locations of multinationals have moved to lower cost centres                                                                                          
worldwide. While we are still a relatively lower cost centre                                                                                          
compared to Taiwan, Singapore and Australia, we are fast                                                                                              
losing ground to India, Indonesia and the Philippines.                                                                                                
                                                                                                                                                      
For most organisations, the most consuming cost item is                                                                                               
labour. The relocation of US and Japanese electronic assembly                                                                                         
operations to Penang in the 70s is principally because there                                                                                          
was an abundances of trainable young people from the rural                                                                                            
communities around the Bayan lepas region at very reasonable                                                                                          
wage rates.                                                                                                                                           
                                                                                                                                                      
The situation has now changed and it is becoming difficult to                                                                                         
atract labour, even at much higher rates That is why for many                                                                                         
multinationals the new pastures are India, Indonesia and the                                                                                          
indo-china countries .                                                                                                                                
                                                                                                                                                      
Our vulnerability to the vagaries of international trade was                                                                                          
forcefully demonstrated by the mid-80s recession.                                                                                                     
                                                                                                                                                      
Because our exports were low, the economic multiplier effect                                                                                          
worked in reverse and virtually all companies serving the                                                                                             
domestic market were severely affected to the extent of                                                                                               
requiring massive retrenchments to continue to remain viable.                                                                                         
                                                                                                                                                      
                                                                                                                                                      
The cycle is now reversed as virtually all organisations have                                                                                         
difficulty in recruiting suitable staff in the right numbers.                                                                                         
Hence the concern expressed by many economists about the                                                                                              
overheatedness of the economy and the corresponding danger of                                                                                         
a sudden reversal.                                                                                                                                    
                                                                                                                                                      
Importing migrant labour can never be the long-term solution.                                                                                         
Germany recruited labour from Turkey and Greece in the 80s and                                                                                        
had considerable social difficulties in managing this issue                                                                                           
when economic growth tapered.                                                                                                                         
                                                                                                                                                      
The official figure of 1.3 million immigrant workers in the                                                                                           
country is a source of worry, quite apart from the social                                                                                             
upheaval of deviant behaviour that increasingly find                                                                                                  
prominence in the local media. We need to be concerned over                                                                                           
the likely scenario of a slower rate of economic growth in the                                                                                        
future when the labour market is less tight.                                                                                                          
                                                                                                                                                      
The call to national duty by retirees and housewives can only                                                                                         
be a temporary remedy as it raises issues of quality of life                                                                                          
and effectiveness.                                                                                                                                    
                                                                                                                                                      
The tight labour market is causing a spiralling movement of                                                                                           
labour to the highest bidder, sometimes quite out of                                                                                                  
proportion to human competency. Even high-paying organisations                                                                                        
are losing staff because there is always an employer who is                                                                                           
prepared to poach rather than train. This, indeed, is a                                                                                               
remarkable about turn from the scenario 10 years ago when                                                                                             
engineers were walking the streets to get any job, even for as                                                                                        
low as RM500.                                                                                                                                         
                                                                                                                                                      
What are the options for Malaysian organisation? Do we raise                                                                                          
salaries to get the manpower and prejudice our competitiveness                                                                                        
in the long run.  Do we up our training and find that we are                                                                                          
in fact training for other employers? Do we consider                                                                                                  
recruiting all the cultural cruit part-time help? Outsource                                                                                           
part of our work ? Reorganise?                                                                                                                        
                                                                                                                                                      
Clearly there can be no one solution to our manpower woes. For                                                                                        
quite a number of employers, the balance has to be struck                                                                                             
betweeen short-terms expediency and long-term requirement.                                                                                            
                                                                                                                                                      
At the one extreme is the American proposition described by                                                                                           
Charles Handy as the the 1/2 x 2 x 3 X 2 x 3 formula, which                                                                                           
proposes that you reduce the staff requirement by half, pay                                                                                           
double for those who remain but expect three times the                                                                                                
performance.                                                                                                                                          
                                                                                                                                                      
In theory, it is logical as it is a win-win situation for the                                                                                         
employer and employee. In reality it is doubtful that                                                                                                 
performance can be multiplied three-fold, even if employees                                                                                           
work two shifts. But the proposition underscores the theory                                                                                           
that people will be motivated by financial gain-which may not                                                                                         
be always correct beyond a point when quality of life becomes                                                                                         
severely affected.                                                                                                                                    
                                                                                                                                                      
At the other extreme is the Japanese proposition of a                                                                                                 
paternalistic employer offering a package of incentives in                                                                                            
which seniority is the important determinant. This proposition                                                                                        
attracts corporate loyalty such that the longer you are with                                                                                          
the organisation the less likely will you seek alternative                                                                                            
employment.                                                                                                                                           
                                                                                                                                                      
How do we position ourselves in Malaysia? Perhaps somewhere in                                                                                        
between the American and Japanese models, recognising both it                                                                                         
and loyalty.  Many organisations, including the civil service,                                                                                        
have introduced variants of a performance-based compensations                                                                                         
scheme and have also made tractive to remain in the                                                                                                   
organisation longer by adjusting perks (leave, insurance,                                                                                             
medical, EPF contributions, pension), more generously for                                                                                             
longer service staff.                                                                                                                                 
                                                                                                                                                      
While carefully laid-out schemes of service are defensible in                                                                                         
the turbulence of the employment market, it is under siege as                                                                                         
younger staff in particular are more attracted by immediate                                                                                           
financial rewards than by promises of career growth and                                                                                               
development.                                                                                                                                          
                                                                                                                                                      
The challenge for the employer is the retention of good                                                                                               
productive staff while welcoming the departure of poor                                                                                                
performers. A depletion of numbers should be viewed as the                                                                                            
opportunity to rationalise operations.                                                                                                                
                                                                                                                                                      
Just as retrenchment initiatives were preceded by                                                                                                     
restructuring exercises, there is no reason why the                                                                                                   
organisation should not re-engineer its operations to require                                                                                         
less numbers to produce the same result.                                                                                                              
                                                                                                                                                      
Over the years layers of fat and activities do creep and                                                                                              
become excess to real needs. We must resist the temtation to                                                                                          
fill the vacancy simply because it has been created by the                                                                                            
departure of an employee.                                                                                                                             
                                                                                                                                                      
IT can be aligned effectively, during the current tight                                                                                               
employment situation, for organisational development and                                                                                              
success. The issue is one of investment, no longer that of                                                                                            
employee resistance, fear and uncertainty that organisations                                                                                          
faced a generation ago when computerisation was first                                                                                                 
introduced to corporate life.                                                                                                                         
                                                                                                                                                      
In any case, it is rational policy to drive towards the                                                                                               
application of higher-end technology as we move towards Vision                                                                                        
2020. Learning from the lessons of developed e countries and                                                                                          
the newly industrialised economies the the trajectory for                                                                                             
development is to move away from labour-intensive industries                                                                                          
to higher value-added competence.                                                                                                                     
                                                                                                                                                      
As Malaysians become more educated with the liberalisation if                                                                                         
educational opportunities, are we ushering in an era of an                                                                                            
enlightened and knowledgeable workforce with the promise of                                                                                           
higher Potential for contributing to organisational purpose.                                                                                          
This transformation should see us depend less on kaki tangan                                                                                          
more on brain power as the driving force for continuing                                                                                               
prosperity.                                                                                                                                           
                                                                                                                                                      
Managing success is as important as managing a recession.                                                                                             
Raising salaries to match the competition buys short-term                                                                                             
relief; in the long term it can be injurious if it erodes                                                                                             
competitiveness.                                                                                                                                      
                                                                                                                                                      
The truly professional staff will be attracted not just by                                                                                            
salary but also by the total benefits package, including                                                                                              
insurance and medical, educational opportunities, corporate                                                                                           
culture, the sense of wellbeing and personal worth and the                                                                                            
feeling of belonging. A less-caring employer will only release                                                                                        
highly paid staff more recently recruited when a downturn                                                                                             
occurs. In a recession corporate loyalty does pay!                                                                                                    
                                                                                                                                                      
Contemporary management literature supports the proposition                                                                                           
that during economic prosperity human productivity can be                                                                                             
enhanced through co-operation, empowerment and enterprise.                                                                                            
                                                                                                                                                      
To treat employees as mercenaries is to devalue human                                                                                                 
contribution as a factor of production. It has been the                                                                                               
ongoing task of modern management thinking to elevate human                                                                                           
contribution to a partnership in which the employee is a                                                                                              
critical stakeholder who enjoys the benefits and protection of                                                                                        
the organisation.                                                                                                                                     
                                                                                                                                                      
To sacrifice this philosophy in our haste to pursue business                                                                                          
is to expose our Achilles heel.