Innovation in Human Resource Management
Breakfast talk to Human Resource managers
March 2005
Paper presented by Tan Kin Lian, Chief Executive Officer, NTUC Income


1. INTRODUCTION

I wish to share our experience on HR management

NTUC Income started in 1970 with a share capital of $1 million. We have grown significantly over the past 34 years. We are now a leading insurance cooperative with:

  a.. 1,200,000 customers
  b.. $1,960 million in premium for 2004
  c.. Total assets of $13,400 million.

We are the largest general insurer with 15% market share and the fourth largest life insurer with 13% market share. We are a locally managed cooperative. We have to develop our own practices in managing people.

We adopt innovative approaches. We are willing to try new approaches and see if they work.

2. SUCCESS IN HR MANAGEMENT

We use the following indicators to determine success in HR management:

  a.. Low turnover rate
  b.. High employee satisfaction
  c.. High employee participation

Our annual turnover rate is 9%, compared to 18% in the financial sector and 27% nationally. Our turnover rate has generally been lower than the national average.

We measure our employee satisfaction at quarterly intervals. 95% of our employees indicate that they are happy to work in our orgnisation. This has been consistently high.

We measure our employee's participation in volunteerism and social activities. It allows them to get to know people in other parts of the organisation and outside the organisation.

These indicators suggest that our HR practices are successful.

3. KEY CHALLENGES FACING HR MANAGERS

The key challenges facing HR managers in most organisations are:

  a.. Recruit the right people
  b.. Measure performance
  c.. Pay the right salary
  d.. Develop people
  e.. Work life balance

I wish to share our innovative approaches in these areas.

4. RECRUIT THE RIGHT PEOPLE

It is important to recruit the right people into the organisation. They should be people with the right attitude and competency, and are likely to stay with us for at least a few years.

It is wasteful to have a high turnover rate, as it results in high cost of recruitment and training, and low productivity. It also caused disruption to the work. We adopt the following innovative
approaches to recruit the right people:

  1.. 12 month bond

We require a new employee to pay back one month's salary, if they resign within 12 months. This is to compensate us partially for the cost of recruitment and training. This practice started five years ago and has worked well. Employees who are not serious about working with us for the long term will decline our job offer.

We are able to recruit employees with the right attitude and are willing to make a longer term career with us.

  2.. 3 month full time specialist diploma

We require new employees, who do not have any working experience in insurance, to complete a three months full time program leading to a specialist diploma in insurance. This program is designed jointly by us and a local polytechnic.

We pay an allowance to the students during the three months. This represents about 50% of the salary that they can earn in the full time job. On completing the program, the employee is recruited into a full time job. They are bonded for two years for the cost of the training.

We have recruited three batches with a total of 60 employees under this scheme. The employees are able to fit well into the job. Their supervisors find that they are knowledgeable and easy to train for the actual duties.

We believe that an employee should invest in their own training to be competent in their job. They will have a better attitude towards the career.

  3.. New managers on special projects

We are prepared to recruit some experienced managers from outside, so that they can contribute to our pool of knowledge.

We place these managers on special projects for 6 to 12 months. This allows them to learn about the culture of our organisation and to know the people that they will be working with. It also allows us to learn about the values, knowledge and skills of these managers.

We will place them to manage our people, only after they learned about how things work in the organisation.

4.. Customer service for mature workers

In recent years, we have recruited mature employees in customer service jobs. They are placed on a 12 month contract. These mature employees are usually retrenched from other jobs, and have to make a career switch.

About 50% of these mature employees are absorbed into the permanent workforce on completion of the 12 month contract. They are happy to make a second career with our organisation. We find their attitude and knowledge to be suitable to us.

5.. Change job to fit people

Most HR practitioners identify gaps between the job requirement and the competency of the employee and will train the employees to fill the gaps.

We prefer to change the job to fit the strengths of our employee, if this is practical. If the employee has certain weaknesses, it is better to get someone else to do these areas of work.

6.. Recruitment Portal

We have recently launched a recruitment portal. We ask potential candidates to register their interest in the portal. When a job becomes available, we will identify the suitable candidates and ask them to submit a formal application.

We believe that this new approach will speed up the recruitment process and lead to better outcome. It should reduce the effort to process the application.

We ask our existing and former employees to register in the portal as well. This will ensure that they are not overlooked when a higher job becomes available. They are likely to be more suitable for the job, as they have the knowledge of our business and our culture.

5. MEASURE PERFORMANCE

We carry out a six monthly appraisal of our employees.

a) Supervisor appraisal

The supervisor appraises each subordinate according to three attributes, i.e. productivity, quality and attitude. For each attribute, the supervisor gives a score between 1 (poor) to 5 (excellent). The average score for the three attributes is computed.

All the subordinates under each supervisor are ranked according to the average score. The employees are grouped into 5 bands, i.e. excellent, above average, average, below average and unsatisfactory.

The head of department discuss with the supervisor to confirm the employees in the top two bands and the bottom band. This helps to moderate the appraisal by the supervisor.

Generally, the supervisor and head of department will look at the following data, before making the appraisal:

  a.. objective measures of productivity and quality, if available
  b.. peer appraisal of the subordinate

b) Peer appraisal

This appraisal is carried out for heads of units and higher levels. Each person is appraised by several people who work closely with him. The peer appraisal is carried out on the same indicators, i.e. productivity, quality and attitude.

This appraisal provides useful information to the supervisor and the head of department in their own appraisal.

c) Objective measures

Where suitable, we will use objective measures:

  a.. productivity: measured by unit of output per day
  b.. quality: measured by customer survey, or other quality indicators

d) Rewards

We will usually provide a performance bonus for the top two bands. If the good performer earns a salary below the salary for the job, a merit increment will usually be given.

Good performers are also placed on a special list to be considered for promotions to a higher job, when it becomes available. They may be trained in advance for these jobs.

e) Poor performers

We will notify poor performers about the gaps in their performance. They are made responsible to suggest how they intend to meet the gap. They are encouraged to discuss with their supervisor on how to address the issue.
Their salary increase may be with-hold. In some cases, they may have to take a salary cut.

They are also asked to explore the option to move to another more suitable job in the organisation or outside.

6. RIGHT SALARY

We have to pay our employees the right salary:

  a.. The salary has to be competitive to retain the employee
  b.. The employee has to be productive, to justify the salary

We look at a low turnover rate to indicate that our salary is sufficiently attractive to retain the employees.
It is not the salary alone, but other parts of the employment package that make an employee happy to work with us.

We prefer to pay a moderately attractive salary and to provide a conducive and enjoyable work environment, with balance between work, employee welfare and family life.

We look at our business results. If we are able to run a successful business, it suggests that our productivity and salary cost are at a right level. If the business is unprofitable, we have to reduce the salary cost.

We avoid giving salary increase for the wrong reasons:

  a.. When an employee wants to leave at a critical time
  b.. When the employee asks to be paid what their peers earn elsewhere

We aim to pay the right salary, which is based on what the employee contributes to the job.

7. DEVELOP PEOPLE

We believe in developing our people, so that they can be more productive, contribute better to the job, and earn a higher income.

a) Manage our investment in people

We invest about 5% of our human resource budget in developing people. This is a major expense item. We pay priority attention to ensure that the budget is spent effectively. We do not want to spend money that does not produce a commensurate return. We ask our employees to help us manage the expenditure and to avoid wastage.

b) Bond for major training

We require our employees to sign a 12 month bond for major training, including overseas conferences or a training program involving more than a week. If the employee resigns within 12 months of the training, we require the employee to pay back a certain proportion (about 50%) of the training cost.

If the employee intends to resign in the near future, the employee is likely to decline the major training.
This allows us to give the place to another employee.

c) Interactive training

We conduct a high proportion of our training through in-house programmes. They cover our work practices, products and work culture. To improve the effectiveness of the training, we have recently implemented an interactive training approach involving:

  a.. Round table discussions
  b.. Electronic response

This interactive approach has proved to be successful and enjoyable. Our employees learn better using this approach.

d) Training Plan

We have an annual training plan for each employee. It comprise of:

  a.. Core training based on the requirements of the job
  b.. Self selected training (charged against a learning account)
  c.. Professional development

The employee has personal choice for the self selected training and professional development. The core training is determined by the supervisor and human resource function.

e) Evaluation

We carry out a half yearly evaluation of our training program. This is done by the supervisor in discussion with the employee. The aim is to ensure that the training program is suitable to meet the needs of the job and the employee.

f) Electronic Forum

We have an active electronic forum. Our employees actively read the postings in the forum and share their views. We are able to obtain many useful feedback and suggestions from our employees. They help us to identify and improve our practices.

8. WORK LIFE BALANCE

We want to make it enjoyable for our employees to come to work. If they are happy, they will be more productive and can provide better service to our customers.

a) Flexible work hours

We allow our employees to select the starting time of work from 7 am to 10 am. This allows them to select the most suitable time to fit their family commitments, e.g. to bring children to school and to come to work with the spouse. They are required to work 8 hours each day, from the starting time.

b) Part time work

We give an option to employees to work part time, if they have to take care of their family or to take an important examination.

We adjust the salary and fringe benefits according to the part time work. If an employee chooses to work half day, the salary is reduced by 50%. If the employee works 3 full days a week, we pay 60% of the salary.

The request for part time work is subject to approval by the head of department and human resource function, but is usually given.

c) Work from home

We allow employee to work from home, if they are able to meet the productivity and quality of work, and if the work can be measured. We have some part time employees that work from home. They are usually paid for the actual work that is done.

d) Social activities

We have an active social and recreational program that our employees actively participated. These activities are organised by our sports and recreational club and also by the welfare officer in the human resource department.

e) One month paid leave

We allow employees to have one month of paid leave every three years. They enjoy this leave in addition to the normal annual leave of 14 or 21 working days.

The one month paid leave cost an additional 3% of the payroll. It was introduced as a special way to offset the saving of 3% in the CPF contribution by the employer.  This special leave allows the employee to spend time with the family, or to learn a special skill or to go on an extended overseas vacation. This benefit is well appreciated by our employee.

9. CONCLUSION

NTUC Income adopts an innovative approach towards managing our people. We want them to be productive and be well remunerated. We want them to enjoy their work and be able to serve our customers well. We want to be fair to our employees. We expect them to contribute and to be fairly rewarded for their contribution.

In turn, we expect our employees to be fair to us. We are willing to impose a bond to protect our investment in training the employees. We do not want them to take advantage of our trust in them.

Our innovative approaches have worked well. We have productive employees and a low turnover rate.