Volume 2 Issue 9 - 2009
Technology Firms in Asia Hold the Line | Competition for Asia's Talent | Move to Leadership and Talent

Technology Firms in Asia Hold the Line as Economy Improves

By Richard Payne, Aon Consulting
and Sambhav Rakyan, Radford

Technology companies in Asia-Pacific are trying to hold the line on cost increases as fast economic growth returns to the region. While many firms view retention as their number one priority in the next 12 months, they are reluctant to give up the gains in cost control that they have made during the recession. According to a recent study conducted by Aon Consulting’s Radford, the Staff Turnover and Employee Communications survey, salary increases in 2010 are expected to rise only modestly from the low 2009 levels despite the economic uptick, and cost control is still the focus for many HR professionals.

Among many findings, the study, which surveyed 119  technology companies in Asia-Pacific, revealed that the economic downturn hit technology companies in Asia quite hard. More than half of respondents reported a decline in revenue from October 2008 to June 2009. Another 28% said that revenue growth was stagnant during this period. The worst off were technology companies in South Korea with 69% reporting revenue decline and another 19% saying revenue growth was stagnant.(Figure 1)

Technology companies have reacted quickly and aggressively to declining fortunes. Cost control has been the number-one priority for 32% of respondents while another 15% said that downsizing and redundancies have been their principal activity during the past year. More than half of respondents reported retrenchments during the past 12 months. South Korea reported the highest percentage of companies experiencing redundancies (66% of respondents).

Restructuring or elimination of operations and layoffs based on performance were the most common reasons for the cutbacks. Across-the-board reductions in headcount were also reported among 31% of participants across the region¹. About two-thirds of those engaging in redundancies reported a decline in employee morale as a result of the action.

Cost modifications also extended to salaries in 2009. A large proportion of companies have frozen salaries and those that have granted increases have made significant reductions in the rate of increase. According to the September 2009 edition of the Radford International Semi-Annual Summary of Industry Trends (ISSIT) report, the lowest diluted average² increases were in Japan (0.7%) and Singapore (0.9%) compared to 3.6% and 4.7% respectively for 2008. Salary increases in 2009 across Asia-Pacific were generally below 2.5% (see Figure 4).

The economic downturn has also dampened voluntary staff turnover, at least temporarily. Forty-four percent of respondents reported a decline in staff turnover in the past 12 months as compared to 12% that say turnover has increased (45% report no change) (Figure 2). According to ISSIT, companies in China and Malaysia have the highest level of voluntary staff turnover in Asia-Pacific with 12.1% and 15% respectively.

With the forecasts for economic growth turning bullish across the Asia-Pacific region, it is not surprising that HR managers are changing their focus. The Radford Staff Turnover and Employee Communications survey shows that retaining key staff is the number one priority for 29% of respondents. Another 22% expect to concentrate on maintaining employee morale and productivity in the next 12 months.

Nevertheless, HR professionals need to balance priorities. Brighter economic prospects are leading to only a slight loosening of cost controls as companies try to consolidate the gains that have been made in the past year. Reflecting a concern for cost, 39% of respondents say they are considering a salary freeze. Another 15% expect to make only selective pay increases.

If the Asian economies continue to pick up steam, the desire to hold back salary increases may simply be wishful thinking. The anticipated salary increases may rise, as we get closer to the year-end focal date that many companies have for their salary increases. Currently, HR managers anticipate salary increases to rise modestly in 2010 after a sharp drop in 2009. In 2010, technology companies are expecting to grant increases in the range of 2% to 7% across Asia-Pacific. While still modest (the increases are about one-half of historical norms), these numbers mark a doubling of rates from the 2009 lows. The highest average increases are expected in Vietnam and India (6.6%) while the lowest will be in New Zealand (2.1%) and Japan (2.4%). (see Figure 4)

Despite the revival of economic growth along with the continued emphasis on cost control, HR managers of technology companies are expecting that the rate of staff turnover will decline or stay the same in the next 12 months. India is the only country where a larger proportion of respondents anticipate that turnover will increase rather than decline. In China, 22% of respondents expect turnover to increase while 29% expect it to decline. The remaining percentage believes that it will stay the same.

Contact

Richard Payne is a Principal Consultant with Aon Consulting. Contact Richard Payne at rick_payne@aon-asia.com to learn more about how Aon Consulting can assist your organization with attraction and retention issues in Asia. For more information about Radford’s capabilities and experience in Asia Pacific, please contact Sambhav 'Sam' Rakyan, Consultant at srakyan@radford.com.

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