Research Study Based on Hyflux Ltd.
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Published: Mon, 5 Dec 2016
Singapore is one of the tropical countries in Southeast Asia that is surrounded by water In addition to that, Singapore gets a lot of water volume from the rainfall it experience. As Times Magazine stated, “an average of 7.9 ft. of rain falls on Singapore annually, nearly 2½ times the global average.” (Chowdhury, Singapore’s All Wet- TIME, 2009). However, the water that is being collected and surrounds the country is the salty kind and cannot be directly consumed and safe for human use. In order to maximize the use the use of this natural resource, the Singapore government goes to extent where they recycle and purify the water they capture. These “policies have developed an expertise in water management that has spawned a host of profitable companies” (Chowdhury, Singapore’s All Wet- TIME, 2009) and one of the major companies in this industry is Hyflux.
Hyflux is a Singaporean homegrown water treatment company that”purifies waste-, salt- and rainwater” (Chowdhury, Singapore’s All Wet- TIME, 2009). Hyflux provides a wide-ranging set of integrated services in water and renewable resources, from research and development, membrane manufacturing, process engineering, engineering, procurement and construction to operations and maintenance. Hyflux provides water desalination and filtration solution for its customers and is a global leader in membrane technology and applications for renewable resources and water solution. The company takes pride in its award winning membranes which is one of the company’s main core products.
To be the leading company the world seeks for innovative and effective environmental solutions.
To provide efficient and cost-effective solutions to meet our clients’ needs through innovation and technological advancement.
Boldness – Dare to dream, dare to do and dare to excel
Entrepreneurship – Nurture the entrepreneurial spirit, embrace challenge and master change
Satisfaction – Exceed internal and external customer satisfaction, take pride in work and deliver excellence
Testimony – Be the face behind the brand, excel in business conduct and embrace best practices in corporate governance
Hyflux has 2,000 staff worldwide (Hyflux Ltd. , NA) including “200 multidisciplinary membrane specialists, researchers and scientists” (Hyflux Ltd. , NA) in the company’s networks of innovative centers and plants. Employees are widely diverse not only in terms of the countries they are from but also in their previous working background, cultures and experiences. The diverse workforce of Hyflux contributed greatly to the success of the company through high productivity, creative thinking and effective and efficient decision making.
Hyflux started business and is established in Singapore in the year 1989 and since then it has grew and built 1,000 plants in more than 400 countries worldwide. Appendix 1.1 highlights some of the countries in which Hyflux operates in. In the countries they have plants and operate in, they provide different types of services and products. For example, in Dubai, they provide services in the sewage treatment industry and providing Kristal Membrane products while in Thailand, the company operates in both wastewater reclamation industry and chemical industry providing Kristal and FerroCep membranes.
The list of industry and membrane Hyflux provides based on the image in appendix 1.1 is shown in the table below:
The fame and reputation of Hyflux grew bigger in Singapore and in the year 2001, it became the first water treatment company in Singapore to be listed in the Singapore Stock Exchange.
To have a clearer view of the current financial standing of the company, a table is shown below comparing last year’s final year reports and this year’s reports
Source: Hyflux Year end news release 2010 and 2009 (Hyflux Ltd., 2010), (Hyflux Ltd., 2009)
The company has been increasing in revenue in the year 2010 because of major projects that are ongoing like the major plant in China that has been in halt for the past year due to the economic downtturn. In addition the company also earns high revenue from the public and industrial sectors.
Source: Hyflux Year end news release 2010 and 2009 (Hyflux Ltd., 2009), (Hyflux Ltd., 2010)
External and Internal Analysis
The SWOT analysis will be used in this report to understand the company’s internal strength and weaknesses and also its external opportunities and threats.
One of the root strengths that Hyflux has is their CEO, Ms Olivia Lum who started the business and its operation in the year 1989. Ms Olivia Lum set strategic directions and made effective and efficient decisions for the company which enabled them to grow a small sized company hiring only 3 staff with the capital of S$20,000 to one being of the “world’s fastest-growing technology driven water solutions company” (Hyflux Ltd. , NA). As a chief executive officer, they “develop and define the organization’s purpose, objectives, strategies, and long term plans” (Lussier, 2009). Ms Lum has accumulated several skills and knowledge in the hydro-chemical, chemistry, health and entrepreneurship which enable her to make effective and efficient strategic moves which leads to the company’s growth and success.
Secondly, Hyflux hires 2,000 staff worldwide, in which a staff of “200 multidisciplinary membrane specialists, researchers and scientists “(Hyflux Ltd. , NA) in their innovative centers in Singapore. Employees are great assets to any company and add more value when they are skilled, motivated and diverse. Even if Hyflux has all the advance technologies and machines, it would be of no use (or unproductive) without a human working behind it. Hyflux employs “passionate, talented and ambitious people who are constantly willing to push the boundaries of the possible.” (Hyflux Ltd. , NA). Employees who take the initiative and are driven are likely to add value to the company and its production compared to an employee who is being “forced” to do their job. According to authors John Ivancevich and Lee Soo Hoon “In most organizations in Asia, effectiveness is measured by the balance of such complementary characteristics as reaching goals, employing the skills and abilities of employees efficiently and ensuring the influx and retention of well-trained and motivated employees.” (Ivancevich & Hoon, 2002). In addition, having a diverse workforce who are specialized to do their task contributes greatly on the company’s productivity through the creative ideas given from employees who are from different backgrounds and society.
Moreover, Hyflux owns award winning water-machinery and advance technology which increases their popularity and the quality of their reputation. This encourages more customers to partner and/or purchase from Hyflux and also encourages more investors to invest in the company.
High cost on employees has accumulated a significant increase in the operational cost of the company. in order to motivate employees, Hyflux has to train and financially reward their employees. However, the company is focused on employees too therefore they are not looking at it as a cost but as an investment instead.
Moreover, the company is experiencing high cost in the operations itself and the fluctuation of exchange rates contributes to this problem notably and that includes high loan rates from banks as well.
In Singapore, water treatment facilities are encouraged by the government to supply the country with more of the natural resource and “The first of the water agreements with Malaysia, which expires in 2011, is not likely to be renewed” (Chowdhury, 2009) therefore the government is supporting the growth and operations of Hyflux. As a matter of fact, the company has PUB, Singapore’s national water agency, as a customer and has built 4 major water desalination plants under the management of PUB. PUB has become one the largest clients of Hyflux which reflects the company’s good and sustainable relationship with the government.
In most countries that Hyflux go into, the government has always looked upon them with favor and a good relationship is formulated. For example, building the “world’s largest membrane-based seawater desalination project in Magtaa, Algeria.” (Hyflux Ltd., 2009). This is supported by the local government and allowed them to be financially supported by national banks in Algeria.
As mentioned on the latest news release by Hyflux, one of its threats is the unpredictable change in the currency markets (Hyflux Ltd., 2010). An instability in the currency (especially in those wherein the company operates) could accumulate losses for the company. In some parts of the world, the supply, for example, could be more costly than expected in the budget due to unstable exchange rates. In addition, operational cost of the Hyflux Group as a whole can also be unpredictable because of fluctuations in the currency. One month’s operational budget and cost can be lower and the following month, expenses could just shoot up.
Another threat affecting the global operation of the company is the “persistent high unemployment rate” (Hyflux Ltd., 2010) in key markets in the US and EU. If this goes on, the economy of those markets will definitely be affected mainly on the interest rates. As more people are unemployed, GDP decreases, leading to a decrease in the prices of goods and services. This in return will affect the exchange rates and investors will be encouraged to invest in Hyflux, however in a smaller amount but then will be paid higher dividends and returns if the economy picks up.
Object of concern for the company
One of the main objectives and strategies of Ms Olivia Lum is to be able to achieve growth in the company by expanding and reaching to all its key markets globally. But in contrast, it is also a challenge for the CEO to sustain its rapid growth” (Smith, 2004).
As the company is expanding, it also needs to hire and recruit new employees to manage certain task to increase the company’s productivity. Currently, the company is experiencing a third quarter increase in the quantity of employees by “10% to more than 2,200” (Hyflux Ltd., 2010). CEO, Ms Olivia Lum, predicts and believes that there will be an upward trend in the water solution industry therefore recruiting and hiring productive, creative, effective and efficient employees is an ideal task for the company to undergo.
However, according to the latest news release from Hyflux, the company’s spending has gone up by 10% to S$121.0 million and one major cause of an increase in cost is because of a higher spending on the workforce. This creates an issue of interest because if the company wishes to expand more locally and globally, it needs to maintain or monitor its spending on the workforce in order for the company to spend wisely on the area.
Outline Plan and Strategic Plan
An upward trend in the water-solutions industry could mean that there will be more players in the market and competition might increase therefore Hyflux should look through at their existing competitive advantage and build and improve it so that it will be beneficial for the company as a whole. In this report, the competitive advantage that will be tacked is the human resource of the company in relation to the growth of the company and its increasing company cost.
The machines used, product sold and services provided by Hyflux can be possibly imitated by other companies, but the process and the people behind all the technologies and machineries care more difficult to copy .That particular factor could lead to an increase the value of the company’s products and services. This is considered as one of the company’s competitive advantages and having effective and efficient human resource is a stepping stone to growth. But how can the problem of increasing cost while increasing the workforce be solved or at least relieved?
In a business level, one of the proposed strategic solutions is under external growth strategy- strategic alliances. This strategic alliance could be in the form of outsourcing some work to other companies in the country of operation or in other words, subcontracting. But those jobs can be on the lower level of operations like managing basic machinery or delivering of the goods. And the decision makers and a higher level of management could be attained in the company itself as they are more trained to work toward the strategic goal of the company.
Outsourcing a low/no value added operation such as maintenance of machinery, janitorial or constructing will be cheaper compared to hiring and recruiting for those areas. Agencies that provide human labor for outsourcing are usually specialized and trained in a certain area of work. That, in itself, would decrease the amount of money that will be used to train new recruits. This will also decrease the cost of giving fringe benefits compared to giving extra housing allowance to full time employees in the company. Moreover, instead of hiring employees at a the lower-end of the organizational chain and operations, the company could benefit from the amount of money saved and then hire a few highly specialized and educated employees or managers such as a R&D specialist.
“Outsourcing is contracting with another company or person to do a particular function” (CTQ Media, 2010) Outsourcing is a type partnership via a contract with other companies. Companies would outsource their technology to companies who are more effective in the area or some of them would outsource because they want to learn from the knowledge and information that the other company has to offer, however in this case, Hyflux is suggested to outsource their low and/or non-core value errands to agencies that supplies such human resources. Outsourcing some of the basic work functions of the company will save the company some costs in time and money. But instead the cost saved could be used in something more valuable like hiring a very skilled and specialized manager for instance.
To implement the strategy, managers and the human resource management should look into the main goal of the company and its strategy. One of the goals of Ms Olivia Lum is “to capture the growth opportunities in our key markets” (Hyflux Ltd., 2010). One way to reach this goal is to increase the capacity of the human capital in aims of increasing productivity, more creative ideas, more effective and efficient decision makers.
Moreover, the human resource manager should have an idea of the current capacity of the workforce. Is there an excess in demand for employees or is there an excess in supply? As Ms Lum pointed out, she is trying to increase the company’s human capital for growth and to prepare the company for an uptrend in the water industry (Hyflux Ltd., 2010). And this result in an excess in demand and a possible shortage in supply which will lead to recruiting specific employees and, as a suggested solution, outsource the company’s human capital.
Next step is to look into the companies where Hyflux could outsource their human capital. A low/no added value functions in the company could include the construction workers of the new plants, janitorial operations or delivery truck drivers. In all those industries, there are several agencies that supply those labors. In Singapore
The task of the management and human resource management does not stop there. In order for the subcontracted employees to be more effective and efficient, they have to be oriented about the company. Even if those workers are temporary and not a “real” part of the company, it is important that they know the company’s values and culture in order for them to blend in and work with existing employees. And at the same time, the leaders, managers and employees should be noted about the temporary workers and try to be more welcoming towards the bunch. By doing so, the outsourced employees can learn from existing employees and vice versa. This opens a platform of sharing of creative ideas and knowledge in the company.
Once the employees who are contracted out starts to work, a leader under Hyflux could be assigned to look after the group to manage and observe how the group is carrying on with their task. Also, this would bridge the communication gap between them (outsourced) and the management because they have a direct leader they could consult with regarding problems at work and working issues.
To sum it all up, the company should examine its human resource first and then outsource those “low/no value added to the core business of the company” (Ivancevich & Hoon, 2002). This would be a more cheaper way of getting the additional man power needed and gives the opportunity for the company to invest more and focus more on hiring several highly skilled employees who will greatly add value to the company’s core business, for example a highly skilled and educated hydro-chemical scientist, who would contribute to the development products and in return add to the growth of the company.
Controlling and evaluation
To evaluate whether or not the strategic plan implemented is a successful one, the assigned leader of the outsourced group and the group itself has to report back to the managers and give feedback. In addition financial reports regarding productivity of the area along with the cost is also observed. Is the cost that is generated by outsourcing worth their production?
Feedbacks are important to have an idea on what is happening at a certain area of activity. It allows managers to have an idea on how the operations with the outsourced group is doing and if what they have done achieved what it is supposed to do in the first place which it to decrease cost but increase productivity and growth of the company. The assigned leader of the group continuously observes the behavior and actions of the group which is accumulated until a specific time frame then it is passed on to the managers or the human resource management. This also allows gives the managers an impression about what the group has achieved and its flaws which can be improved at a later stage.
Another form of a feedback is the financial analysis or ROI at the end of a financial year/quarter. This will reveal if outsourcing a low-no value added operation actually decreased cost and have improved in growth and productivity. The ROI will highlight the budgeted amount, the actual amount spent and the outcome (production) of the “investment”. If the productivity calculation of the outsourced group is to exceed the cost spent on hiring and increases the returns on investment, then this is likely a fine indication that the decision made to outsource is a success. However if the activity generates more cost and is not productive enough, then it is a sure sign of the decision being ineffective.
Hyflux is moving and taking on more composite water solution projects that will allow them to gain more sustainable and long-term returns, higher revenue and profits (Hyflux Ltd., 2010). This can be done with the competitive advantages such as strong workforce, innovative ideas and expended resources. The company is looking at more innovative ways to treat water and develop their products so that it can reach a much greater market.
In order for managers to reach this goal, they have to look into their excising resources and maximize them in hopes of gaining and achieving economies of scale in the company too. Moreover any strategic or operational decision that has been taken has to be communicated to the entire company because this also acts as direction for the company. Taking outsourcing for example, if existing employees are not aware that there have been additional workforce in the company that could help them, and then they would tend to do the task by themselves instead of maximizing the outsourced human resource.
Lastly, strategic management has to go according to the main goal of the business and acts a a direction in which the company has to follow.
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