What are the biggest human resource related challenges faced by organizations nowadays in Philippines?

MANILA--The local business process outsourcing (BPO) market will remain robust despite the global financial turmoil, but it will face HR challenges--particularly talent shortage and higher salary demand--as the sector copes with surging growth.

This is the prognosis presented by Canada-headquartered IT research firm XMG, noting that the decade-high inflation rate in the Philippines--at 11.4 percent--may push BPO workers to turn to their employers or the job market, in a bid to increase their pay to compensate for the rising cost of living.

In a report released Friday, XMG said call center, IT and BPO companies in Metro Manila should brace themselves for increasing employee sentiments to have their salary reviewed to combat inflation.

Citing figures from the latest XMG Employment Lifestyle Index, the research firm noted that over 73 percent of respondents expressed a need for increased compensation from their employers. The index was conducted in the third quarter of 2008 and polled 100 ICT professionals working in Metro Manila.

"Of the 73 percent, over 70 percent are actively looking for better opportunities within the city or overseas. Only 12 percent are currently satisfied with their current salaries," the report stated.

Emerson Fababaer, research statistician at XMG, said the numbers indicated a genuine trend of employees demanding increases in the cash component of their remuneration.

Lauro Vives, XMG's Filipino founder and chief analyst, said in the report that there were "very few extrinsic options" for employers to address the challenges.

"Either provide a relief in the form of increased compensation, subsidy or allowance, or position the current compensation package as being above industry," Vives said.

Based on studies conducted in the past, XMG said, companies have been able to address this by performing regular compensation benchmarks, as well as "aligning employee attitude and value in building a sense of ownership in the company".

Vives added: "This means a shift from a monetary-based attitude, to a self-fulfillment outlook."

To raise employees' level of commitment and overall productivity, the XMG report suggested organizations frequently review their worker incentive programs. Companies should also independently monitor employee perception and behavior to accurately gauge employee sentiments toward the organization, the research firm said.

The good news is, the Philippine outsourcing industry will largely remain a bright spot in the next two years and continue to grow well into the next decade.

Global fall, local gain
In a separate report, XMG said the ongoing credit crisis will force financial and insurance firm to seriously consider selling IT and business process service units to third-party providers, in a bid to monetize assets.

"Captives in this segment will realize that it will be difficult to achieve the operational efficiency of a focused, well-managed and profit-driven third-party vendor," it said.

In 2007, XMG predicted global offshoring to grow 34.7 percent through 2010. However, due to the economic slowdown and expected recession, the research firm reduced its forecast to 24.2 percent--due in large to reduced investments by captive operations.

The Philippines' BPO market growth is expected to fall from 31.2 percent to 25.6 percent. Vives said: "The global financial upheaval will have a deleterious effect across most industries, but the IT industry and offshoring, specifically, will still experience double-digit growths."

A Philippine lawmaker echoed XMG's assessment, noting that the country's BPO industry is likely to benefit from JP Morgan's recent rise as the top bank in the United States.

House representative of Catanduanes Joseph Santiago, and chairman of the chamber's information and communications technology committee, said in a statement that the current development in the United States would likely mean that JP Morgan would "soon aggressively offshore more backoffice jobs to the Philippines."

Santiago noted that 119-year-old Washington Mutual (WaMu), the erstwhile largest American savings bank since closed by the U.S. government, and its banking assets have been sold at a fire-sale price to JP Morgan.

WaMu, incidentally, is a key client of PeopleSupport, a call center operator that employs some 8,000 Filipino workers. The U.S. company was acquired by India-based Aegis in August 2008.

Santiago said: "Among U.S. banks, JP Morgan is the most comfortable with the Philippines. The bank has been here for 47 years [and] has become totally acclimatized to our political and economic conditions.

"Our sense is, now that it has become larger, JP Morgan would be inclined to build up in a big way its contact centers and other backoffices here," he said, noting that the bank first outsourced customer support jobs to the Philippines in 2003, establishing a 900-seat contact center in Makati City. It recently opened a 1,400-seat contact center in Taguig City, he added.

After acquiring investment firm Bear Stearns in March, and WaMu last month, JP Morgan has emerged as the largest U.S. bank in terms of market capitalization, surpassing Bank of America and Citigroup.

Santiago, meanwhile, said he expects the American International Group (AIG) to sell its local outsourcing subsidiary, AIG Business Processing Services (AIG-BPSI).

AIG-BPSI provides backoffice operations and contact support services for AIG businesses worldwide.

According to the Business Processing Association of the Philippines, the local BPO industry is expected to employ 920,764 Filipinos and generate up to US$12.2 billion in annual revenues by 2010.

Melvin G. Calimag is a freelance IT writer based in the Philippines.

HR Management

The HR function has been changing over the years. More businesses are realigning the role of HR so they can best manage and grow their company cost effectively. Some companies have decided that it’s best to outsource some functions to third parties so that internal resources can focus more time on strategic issues. It’s safe to say that companies today are constantly examining their HR function with a goal of figuring out best practices and best allocation of time.

HR deals with many issues, but probably the biggest challenges facing HR Departments today are Recruitment, Retention & Motivation, Leadership Development and Corporate Culture. As HR works to move to a more strategic role, addressing these issues has become a continual and time-consuming process. Here’s why.

Recruitment, Retention and Motivation

This may be the most challenging issue that challenges HR today. Human Resource professionals anticipate that retaining the best employees will be the greatest HR challenge in 2022, according to a November 2012 poll by the Society for Human Resource Management. 59% of respondents ranked this factor in their top three challenges, compared to 51% in 2010. Predictions indicate there will be a lot of people looking for new jobs when the economy improves. There is always the perception that the “grass is greener on the other side of the street”. In times of economic slowdown and periods when growth is slow, employees become more open to considering other employment options.

Employers today must find new methods to attract talent through social media, postings on job boards and even other traditional methods such as attending job fairs and sending out promotional mailings to generate interest. The new generation employees are looking for jobs that provide a balance between employment and family, and desire autonomy and the ability to make a difference within the organization. Companies are well advised to search for diversity that can generate new ideas, better productivity and a sense of equality that builds teamwork. Lack of technical talent has made it difficult for companies to fill specialized positions. Even during periods of high unemployment, technical and technology-driven companies find a shortage of employees with the training and competencies to perform in niche jobs.

Retention has become tougher than any time in the past and has become a heightened issue. Companies sometimes need to offer more in terms of benefit packages or incentives, because people increasingly look for jobs that reduce their risks in tough economic times. Employers are advised to identify their key employees from entry-level to upper-level management and take the appropriate steps that are unique to their businesses to retain these individuals. Employers should consider merit pay increases, projects that increase an employee’s responsibilities, and other benefits like flex time, telecommuting, or technologies to keep employees happy.

Building a workplace where employees are motivated is an ongoing issue confronting HR professionals. Offering positive reinforcement and feedback to team members has become an ongoing initiative for HR. Company managers must inspire employees and coach them to become top performers. HR professionals need to understand what motivates company employees and incorporate them into compensation or rewards systems. Finding out why people are leaving and addressing the issues is a role HR also plays.

Leadership Development

The SHRM poll and a similar one in 2010 by PricewaterhouseCoopers both indicated leadership development as a key challenge for HR. 52% of respondents indicated this factor was a concern, a significant increase over 29% in 2010. The workforce is aging quickly, leading many HR teams to consider putting formal succession plans in place and to begin more emphasis on developing future leaders. As companies grow and expand, developing leaders has become a major initiative. Successful companies that work on leadership development will also make strides with better employee retention.

Employees repeatedly say that poor leadership as a reason for leaving jobs. They also want a more active leadership role in decisions within their jobs, which may necessitate training. Unfortunately, businesses sometimes struggle to produce the budgets necessary for strong employee training and development programs that emphasize leadership and growth.

Culture

Research has proven that culture influences organizational performance, whether performance is defined in terms of customer satisfaction, attendance, safety, stock price or productivity. Human Resources plays an active role in the development of an organizational culture. Great workplaces with a great corporate culture are more financially successful than their peers. Great workplaces have lower employee turnover than their competitors and can recruit top talent that fits their culture and needs. The result is they provide top quality customer service and create innovative products and services that contribute to their overall financial success.

There is a strong relationship between cultures and hiring that comes into play with employee sourcing, selection, and retention. Cultural fit is the makeup of someone. It’s who they are and what they bring to the table. Generally, it can’t be taught. If your corporate culture is not in synch with your candidate, it will be difficult to change them. Most people can pick up new skills with relative ease if you have the time to train them. Most companies pay relatively little attention to culture despite its importance. It has been proven that actively managing and developing culture through hiring can significantly improve employee retention and performance. In the end, this directly influences organizational profitability and growth.

As companies recognize the need to evolve the HR function to address Recruitment, Retention & Motivation, Leadership Development and Corporate Culture challenges, outsourcing some or all of these functions allows them to take a strategic approach to these challenges while cost effectively growing their company.

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