The worst of the global financial crisis appears to be over, but unknown to many organizations, another time bomb awaits. Employee goodwill has been worn down through working longer and harder during the past year, putting up with pay cuts and freezes and with little in return. And while many employees have taken the extra demands in their stride, most of them consider their efforts unsustainable, given the strain it puts on their families, relationships, health and wellbeing. More importantly, the lack of staff engagement and proper communication during the crisis has led employees to feel that an unwritten ‘contract’ has been breached, thus eroding their loyalty, commitment and ultimately, companies’ ability to truly recover from the recession. Sadly, the treachery will not end there. As economies revive, organizations are likely to face a talent exodus, as disengaged, over-stretched and under-rewarded employees look out for greener pastures.

1. 1
Recovery
without tears:
The first step to the upturn
Connecting the dots to reveal how reward and engagement stack up against
employee performance in Asia >>
The worst of the global financial crisis appears to be over, More importantly, the lack of staff engagement and proper
but unknown to many organizations, another time bomb communication during the crisis has led employees to feel
awaits. Employee goodwill has been worn down through that an unwritten ‘contract’ has been breached, thus
working longer and harder during the past year, putting eroding their loyalty, commitment and ultimately,
up with pay cuts and freezes and with little in return. companies’ ability to truly recover from the recession.
And while many employees have taken the extra demands Sadly, the treachery will not end there. As economies
in their stride, most of them consider their efforts revive, organizations are likely to face a talent exodus, as
unsustainable, given the strain it puts on their families, disengaged, over-stretched and under-rewarded employees
relationships, health and wellbeing. look out for greener pastures.
©2009 Hay Group. All rights reserved www.haygroup.com

2. 2
Recovery without tears
The frustration factor
According to an extensive study on employee engagement and
enablement conducted by Hay Group Insight (the employee survey
division of Hay Group), frustrated employees represent an
astounding 29 per cent, or nearly one-third of the Asian workforce
today (Figure 1). If nothing is done to deal with the frustrated
population, what usually happens is two in three will become
ineffective and the rest will just leave.
Sadly, only 16 per cent, or just one in six According to the latest Hay Group Insight
What is worrying about employees believe themselves to be effective research, the study shows that workplace
detached employees, in their jobs. In contrast, in the West, 21 frustration appears to stem from the lack of
despite the high level of per cent of the workforce was found to be employee empowerment and enablement.
support for success that frustrated, while two in every five employ- While work remains challenging, the lack
companies have invested ees considered themselves to be effective. of empowerment to make decisions and
in them, is that their the lack of enablement to perform
The highest percentage (35 per cent) of effectively is causing significant numbers of
commitment and Asian employees was found to be detached. employees in Asia to feel frustrated.
motivation to high These are the employees who perform the
performance remain low. bare minimum of what is needed and no What is the bottom-line impact? Hay
more. What is worrying about detached Group Insight research shows that
employees, despite the high level of companies that engage and enable their
support for success that companies have employees outperformed their industry
invested in them, is that their peers on revenue growth by 4.5 times. In
commitment and motivation to high terms of profitability, such companies
performance remain low. exceeded industry averages in terms of five-
year Return on Assets, Return on Invest-
With various innovative HR tools, ment and Return on Equity by 40% to
including pay, perks and career 60%. This level of performance is not to be
advancement prospects to engage today’s sneered at, in any sort of economic climate.
employees, why is employee frustration
continuing to impede performance in the
workplace?
How ae your employees feeling?
Figure 1:
Employee effectiveness Employee Engagement
matrix
LOW HIGH
West = 28% West = 39%
Employee Enablement
DETACHED EFFECTIVE
HIGH
Asia = 35% Asia= 16%
West = 12% West = 21%
LOW
INEFFECTIVE FRUSTRATED
Asia = 20% Asia = 29%
Source: Hay Group Insight, 2009
©2009 Hay Group. All rights reserved

3. 3
“
While CEOs make promises about what their organization can
deliver to customers, shareholders and other stakeholders, it
is the employees who keep these promises on their behalf. Do
we really want to put detached or ineffective employees in
”
front of our clients and investors?
Or look at it another way. While CEOs Walking around the offices today,
make promises about what their managers may feel the warm glow of team
organization can deliver to customers, spirit among their subordinates, having
shareholders and other stakeholders, it is battled through the downturn successfully.
the employees who keep these promises
on their behalf. Do we really want to put But managers should be aware of superficial
detached or ineffective employees in front engagement – where the levels of
of our clients and investors? discretionary effort and retention are
artificially inflated by redundancy fears
and a soft employment market, rather than
Lost in expansion genuine loyalty to the company.
How did this state of affairs happen? In Hence companies who have solely focused
the rapid growth of the last twenty years, on the bottom line during the recession
managers in Asia have been focusing so could easily fail to notice the “sweat debt”
much on managing external issues such they have built up with employees for their
as capitalizing on market opportunities, extra effort during rough times. They risk
expanding into new businesses, and falling behind their competitors that have
securing financial capital, that they have bucked the trend and kept true
overlooked the importance of building engagement high.
internal organizational strengths for future
sustainability and continued success.
The assumption is that we can always buy Can reward make a difference?
talent, so why bother to build? Of course, While one of the easiest ways to improve
straight away, we see that this is akin to employee motivation is by increasing their
growing a bigger body without building pay, is it necessarily the most effective?
the corresponding muscle strength.
What we have seen repeatedly is how this
The financial crisis of 2008-09 has not stop-gap measure creates a vicious cycle
helped matters as companies went into that encourages employees to be loyal
survival mode, asking employees to do to money, rather than the company, and
more with less resources and reward. Many abandoning their positions for better
employees understood the importance of paying jobs, driving salary benchmarks
pulling together and willingly put in upwards without any real benefit.
additional time (often without pay) at the
expense of health, relationships and family
life.
www.haygroup.com

4. 4
Recovery without tears
Figure 2: 30
Total pay index in Asia- Junior Mgmt Middle Mgmt Senior Mgmt
Pacific, United Kingdom
and South Africa 25
Total pay index (Clerical = 1)
20
15
Note: This chart shows the
10
total remumeration
differences of the various
management levels against
5
clerical staff. For example,
the total pay of 1 senior
Clerical = 1
manager in Indonesia is
equivalent to that of 27 0
clerical staff.
Source: Hay Group PayNet (August 2009)
And nowhere is this trend more compared to the average of ten years held
apparent than in hot Asian economies such down by their peers in other parts of Asia.
as China, India, and Vietnam, where the
willingness to pay premium for top talent And that is just at the average. It is not
is widening the remuneration gap between unusual to find managers quitting within
It is not unusual to find the top and bottom rungs within an one year. Just imagine, is one year on the
managers quitting within one organization (Figure 2). job enough time to start contributing
year. Just imagine, is one year on positively to the business or is it just the
the job enough time to start Unfortunately, the pressure to generate right moment to leave, before your
short-term revenue and profits has led mistakes have a chance to catch up with
contributing positively to the
many Asian companies to localize you?
business or is it just the right
management as a means to cost cutting.
moment to leave, before your Without doubt, the advantages to hiring
But the question to ask is: are there enough
mistakes have a chance to catch experienced, local senior managers in Asia locals for management roles are significant,
up with you? to go around? and these could range from language and
culture, to familiarity with local customs
and business practices. The bad news for
The loyalty deficit organizations hoping to do so in markets
According to the 2009 statistics from Hay like Vietnam or China, the shortage of
Group’s PayNet (a global online platform quality talent could only lead them into
for compensation and benefits a downward spiral – one where wrong
information), managers in Vietnam and candidates are being placed in senior roles
China, for example, are on average five that require higher levels of experience and
years younger than their counterparts in maturity to get the job done.
other parts of Asia. Companies that are caught in such a
A closer look at market realities in China predicament ultimately lose out, not only
reveals junior management employees because they have found themselves paying
usually stay for about three years with one higher salaries for younger workers who
company (Figure 3). However, when it do not bring the corresponding skills or
comes to senior management positions, performance, but also for the downtime,
Chinese employees tend to leave their posts effort and various investments into
as quickly as five years into the job, recruiting and developing new candidates.
©2009 Hay Group. All rights reserved

5. 5
Perhaps part of the solution lies in re- 20.5% in Vietnam – meaning that one in
designing the manager’s job and parcelling five employees who started the year with
it out among several assistant mangers, in your Vietnamese operations will not be
thus taking advantage of the fact, for the there by the end of the year!
cost one middle manager, you can hire
three junior managers in China (as shown While good salaries can help
in Figure 2). organizations attract the best talent, it
is not the largest factor in determining
whether these talents would stay. From our
observation of leading multinationals, it is
Money can’t buy love
clear that there are distinctions between the
It is not unusual for the leading multi- tools used in recruitment and attraction,
nationals in Asia to dedicate a sizable and those that are used in engagement and
proportion of the total remuneration retention (Figure 4). A common oversight
package to non-monetary rewards and is the failure to distinguish between the
benefits. two.
According to Hay Group’s PayNet, in
China for example, compensation in the
form of statutory benefits, allowances for Case study: When it pays to “save face”
cars and other privileges, as well as short- In Asian culture, the notion of “saving face”
term incentives like performance bonuses, adds an interesting dimension to the
make up close to 30 per cent of the delicate equation that balances between
remuneration mix for junior to senior “stay” and “go”. In China, a top-paying MNC
post remained open for 12 months simply
management employees. In Vietnam,
because it did not offer a company car
employees enjoy similar benefits that range among its perks. Although salary
between 29 per cent and 42 per cent of the adjustments made by the HQ more than
total remuneration package. compensated for the drawback, it did
nothing to entice candidates to leave their
And yet, despite all the attention that existing jobs, which came with a car. As one
HR pays to designing and administering of the candidates puts it, “No one knows
bonuses and benefits, are we reaping the how much I earn; but everyone will see if I
corresponding returns in staff loyalty? In am not entitled to a company car!”
2009, staff attrition reached as high as
Figure 3:
How soon do they leave? 14
Junior Mgmt Middle Mgmt Senior Mgmt
13 How soon they leave? (median) 13
12
11
11
10 10
10
Average length of service (Years)
9
8 8
8
7 7
7
6 6
6
5 5 5 5
5
4 4
4
3 3 3 3
3
2
2
1
0
China Indonesia Korea Malaysia Singapore Thailand Vietnam
Source: Hay Group PayNet, 2009
www.haygroup.com

6. 6
Recovery without tears
Figure 4:
What are employees
looking for?
Why they join Why they stay
99 Compensation package, especially
99 Quality of leadership and managers
guaranteed cash
99 Opportunities to do exciting work 99 Respect and recognition
88 Working climate 99 Alignment of job and interest
88 Quality of leadership and managers 88 Compensation package
88 Organizational attributes like market
88 Opportunities to do exciting work
position, product quality
According to Hay Group Insight research, surveys, the study concluded that what
cash compensation and career advance- most employees truly desire is a
ment opportunities are primary factors challenging job, enough resources to
that attract candidates to an organization. accomplish it and for unhelpful managers
to get out of the way.
However, upon starting work, employees
shift their focus towards more “intangible” Hence, companies who invest heavily in
factors like the quality of leadership and team-bonding sessions, corporate retreats
management, respect and recognition, or development programmes should not be
alignment of job with personal interests surprised that the enthusiasm
and working climate. While compensation generated does not last in the workplace
Just imagine, is one year on the
and opportunities remain important, they for very long, if their corporate structure
job enough time to start rank lower on the list of retention factors. and policies do not encourage job
contributing positively to the Hence, our talent attraction tools cannot effectiveness.
business or is it just the right be used for talent retention.
moment to leave, before your
mistakes have a chance to catch The leadership factor
up with you? Engagement: All sound and no fury? Figure 5 illustrates how Asian companies
Yet, in the larger context of improving stack up against their western counterparts
organizational performance, both pay and when it comes to employee engagement
non-pay benefits are but hygiene factors. and enablement.
In other words, while there will be
dissatisfaction when they are not Note the common thread among the top
commensurable, higher increases will not three drivers for employee engagement: the
guarantee sustainable employee need for strong leadership. While pay and
engagement or the motivation to do more. benefits successfully engaged 40 per cent of
the Asian workforce, clear and promising
In fact, a Hay Group Insight study has direction (76 per cent), quality and customer
shown that motivated employees do not focus (72 per cent) and confidence in leaders
always bring about higher levels of (61 per cent) are far more effective as
performance. From extensive employee drivers for engagement.
©2009 Hay Group. All rights reserved

7. 7
Hence, sound and decisive leadership is and not hinder, productivity. This could
critical for improving employee involve shifts in organizational procedures
engagement levels. The message to Asian and having the right tools to measure and
companies hoping to ride the waves of manage performance.
economic recovery is this: hire the right
senior managers and appoint the right In a supportive environment, employees
leaders. Quality leaders are the key to would have authority and empowerment
better engagement and more effective to act within their areas of responsibility,
organizational performance. and full access to resources required (for
example, information, technology, tools
and equipment and budgets) to get the job
done. They are also able to focus on their
Setting employees up for success
mission-critical work without having to
However, engagement alone is not enough. negotiate obstacles in the form of non-
To get the most from employees, leaders essential tasks or red tape.
have a responsibility to ensure that
organizational systems and work In other words, to get the most out of
environments support individual and employees, companies would need to not
organizational effectiveness. only motivate but also enable them to
channel their extra efforts more
Enablement requires that employees must productively. Engaged employees need the
first be matched to their jobs, so that their confidence that their organization is not
skills and abilities may be put to good use. setting them up to fail but rather, it is
Secondly, enablement involves creating enabling their success.
supportive environments that facilitate,
Figure 5: Engagement drivers Asia West
The East-West divide:
Clear and promising direction 76% 77%
Engagement and
enablement drivers Quality & customer focus 72% 77%
Employee Engagement
Confidence in leaders 61% 67% Asia = 68%
(West = 74%)
Respect and recognition 60% 65%
Development opportunities 55% 60%
Pay and benefits 40% 53%
Employee
Effectiveness
Enablement drivers Asia West
Collaboration 76% 77%
Performance management 73% 77% Employee Enablement
Asia = 66%
Authority and empowerment 72% 76%
(West = 71%)
Resources 61% 63%
Work, structure & process 54% 55%
Training 40% 54% Source: Hay Group Insight, 2009
www.haygroup.com

8. 8
Recovery without tears
Case study: “Our hands are tied” of 16%. But the management had expected this figure to
Amy*, the Human Resource & Organization Development be even higher, given the highly talented and achievement-
manager of a local Singapore-based company, was worried oriented people they hired.
about an attrition trend in her company. As her company is Even though the frustrated employee was a small fraction,
a well-known and appealing brand in the market, attracting what was worrying was the high proportion of employees
the best talent was not a problem. Her gut instinct, which feeling detached and ineffective. The survey also showed
was shared by the top management team, was that that given their choice, one out of four employees will leave
productivity should be higher but wasn’t. And more over the next two years.
worryingly, staff churn was higher than the industry norm.
Further analysis showed that while the organization scored
In 2009, Hay Group conducted their employee engagement favorably for leadership and clear directions, what was
Company X
survey that showed the engagement-enablement lacking were authority, empowerment, and a real
distribution as follows: commitment to offering quality services and products.
Employee Engagement
LOW HIGH What this meant was that the highly talented and achieve-
ment-oriented staff felt like they were “highly paid
22% 34% messengers” as there weren’t many decisions that they
Employee Enablement
HIGH
DETACHED EFFECTIVE could make, without having to constantly refer upwards.
Furthermore, despite “delivering world-class service” being
a company motto that is proudly emblazoned within the
36% 8% premises, employees felt that “their hands were tied” by
LOW
INEFFECTIVE FRUSTRATED red-tape and internal processes, and thus unable to meet
clients’ expectations.
Amy was gratified to see that the proportion of effective
© 2009 Hay Group. All rights reserved 1
*names have been changed
employees, at 34% was more than double the Asian norm
A new deal • Regular and relevant training must be provided to
Having understood the factors that drive employee frustrated employees as they have a need to constantly
improve themselves and achieving their personal career
performance, companies will have to contemplate whether
goals.
their people management strategies can motivate behaviors
• Monitor the support levels on an ongoing basis and listen
that improve productivity and performance.
carefully when your frustrated employee speaks.
We recommend that companies adopt the following • Run managerial development programs which help
strategies to further engage and enable employees; and in managers understand the type of climate they are creating
particular, the talented but frustrated ones: within the organization.
As the economy warms up, the companies that race ahead
• “Walk the talk” when it comes to quality and customer
will be those with the largest bench of engaged and
service issues as frustrated employees desire to work in
organizations where these are not just empty statements. enabled employees. Will your company rank among them?
• Leaders must take into account how to support their
teams to succeed when assigning work.
This paper was presented at World at Work’s Total Reward Conference 2009 in Hong Kong on 9th October 2009, together with Mr Goh Hern Yin,
Compensation & Benefits Director, Asia-Pacific, Ingersoll Rand. Hay Group thanks Mr Goh for sharing his experience so generously. The views
and opinions in this paper do not reflect the views and opinions of Ingersoll Rand in any way.
Contact the Authors
About Hay Group Dr Stephen Choo
Hay Group is a global management consulting firm that
Regional Director, South-east Asia, Hay Group Insight
works with leaders to transform strategy into reality and to
E| Stephen.choo@haygroup.com
help people and organizations realize their potential. Visit Nidthia Chelvam
www.haygroup.com/sg. Asia-Pacific FMCG Sector Leader &
General Manager, Regional Expertise & Processing Centre,
Asia-Pacific, Reward Information Services, Hay Group
E| Nidthia.chelvam@haygroup.com
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©2009 Hay Group. All rights reserved