Andrew Merrilees from Lockton Companies Singapore on how to make the best of a bad situation.
The uncertainty and blood-letting in the shipping and oil and gas sectors is hardly news these days. Hundreds of thousands of workers all over the world have been affected and the situation looks to be more of the same as we move into the second half of 2016. With shipping rates, oil prices and profitability heading south, company leaders and their human resources teams are faced with a difficult balancing act.
Costs have to be cut, but employees still need to be engaged and high-performers rewarded. There is no question that staff morale takes a beating in any organisation undergoing restructuring and redundancies. And make no mistake – you only have to read industry blogs to get an idea of the fear, uncertainty and feelings of unfairness to understand how this is affecting not only the staff who have been directly impacted, but also the people who remain.
But in shipping and offshore, the remaining staff need to be on their game. The consequences of someone not being engaged and focused – or worse, disgruntled – can be catastrophic.
Making the most of a bad situation
So how do you make the most of a bad situation? How do you still offer good/remaining employees a carrot, when there are pay freezes and finances are stretched? It has surprised me there has been a lack of discussion in shipping and offshore around the status and structuring of employee benefits – certainly in Asia.
Benefits are, naturally, an easy target for unsophisticated corporate cuts. However, generally we have seen little strategic HR planning on how benefit programs can be reworked, streamlined, and developed into something that is actually appreciated more by staff and costs the company less.
Partly this is because the role and potential of employee benefits (EB) is either poorly understood by management or is seen simply as an overhead that can be easily cut. This is evidenced in the way we have seen changes in EB policies being implemented, or badly developed pitches being called for. It just comes down to cost. And, in this sense, companies are missing out on an easy win.
Call now and save 20%
It is a rough figure, but I would estimate most shipping and offshore companies are overspending on EB by roughly 20%. This may come down to just paying too much – not testing the market, or sticking with the same provider due to personal loyalty. The things I have seen in the pitching process! However, this 20% also comes down to how your staff and HR teams are actually using and leveraging off the packages they already have in place. In the vast majority of cases there is plenty of fat in the system.
And why is this important? First, yes, there are cash savings to be made. But secondly, and perhaps more importantly, benefits are one of the key factors identified in employee satisfaction surveys. EBs, when explained and marketed properly to staff, are seen as a positive part of their remuneration package.
With pay freezes the ‘plat du jour’ across the industry, benefits can be used as a replacement for wage increases and bonuses. If your benefits provider knows their stuff, and works hand in glove with your HR team, most companies can actually decrease their corporate benefits spend, and increase the feeling of value staff feel from the benefits packages they are getting.
In a bad situation, your employees feel like they are still being rewarded – and management can feel like they are still looking after their people and stakeholders as best they can.
What should management look to get out of EB providers?
Very simply – more than just cost reduction. If this is the knee-jerk reaction of a provider then something is badly wrong. Undoubtedly, when it comes to shipping and O&G at the moment, cost has to be front and center. But a smart provider should want to understand what is going on in the rest of your business: Management should be looking for (or asking themselves) key questions:
- Are jobs being cut/wages frozen?
- What do employees actually want out of their benefits? What benefits are actually being used?
- What are my competitors offering; do we want to be inline, ahead or slightly lower than them?
- Is there scope to use EBs as a way of rewarding performance and encouraging staff engagement?
It is very simple to view benefits as a ‘nice to have’ extra – and perhaps both management and staff have been guilty of viewing them in this way in the past. But rather than simply casting this ‘extra’ aside, shipping and offshore companies should consider if they are using benefits to their full potential. From what I have seen, this is far from the case.
