Quality and Productivity

The two words Quality and Productivity not only ooze goodness in the same way as Motherhood, they are often as joined in verbal embrace as Love and Marriage. However, it was evident from this session that there is no necessary link between the two. Quality may increase value added per worker, or the marketability of a product at any given price. However, a significant difference of perceptions emerged.

Professional bodies, official organisations, and many academics tend to view quality as an end in itself. This was the predominant impression given by the panel. But evidence from the floor suggested businessmen and economists thought specifically of quality only when they saw it as a means to improve profitability or productivity. At the level of the firm, investment in quality needed to be judged in the same way as any other investment.

Those directly involved with training strongly disagreed. Commitment to TQM and ISO 9000 goals were essential if to the quality needed to maintain competitiveness. MTRC, Shangri-la etc showed the benefits. The Government also had a major role to play to make access to training more equal. At present employees of multinationals, large companies and Government itself had advantages. These could be extended by offering tax breaks and training subsidies.

Others however argued that the comparative advantage of Hong Kong might not be in service quality but in price or accessability. For instance, these would be more important than level of sophistication in exporting services to China, where many service industries were in their infancy. On the other hand, services competing globally needed to reach the highest standards.

It was generally noted that costs in Hong Kong were high relative to skills. However, two beneficial developments should follow from the establishment of the SAR. One was longer term thinking. A successful handover and the strategic approach being adopted by the Chief Executive would mean that business and Government were both able to plan ahead and invest for the long term. Technical education and housing were examples. Secondly, a self-governing SAR would be better able to develop a sense of community and identity than Hong Kong under a colonial regime.

The latter could be especially useful in helping the quality of the tourism industry, which was hurt by perceptions of rude service in shops and hotels and general lack of civic pride evidenced by dirty toilets etc. What was needed was not a Singapore-style nanny state, but community-based commitment to encourage tourism seen, for example, in Switzerland, Vienna. Another alleged an absence in Hong Kong of long term commitment to consistent quality shown by international firms like McDonalds.

Hong Kong did however have certain unusual strengths. Manufacturing may have shrunk but Hong Kong's expertise in many areas had not. By virtue of its mainland manufacturing investment, Hong Kong had blurred the distinction between services and manufacturing. It was providing services not only for others but for its own manufacturing in China and elsewhere. This should not be forgotten in the rush to support specific services.

Some thought that more Government attention be devoted to tourism. However, it was also noted that this industry was already an exception, having a promotional body well funded by an official levy.

On the quality front, Francis Ho, Director General of Industry, had outlined the initiatives the Government had taken in setting up accreditation and certification procedures to enable Hong Kong products to be credited with international quality standards. However, Mr Ho admitted that the benefits were mainly applicable to large companies.

There were now several private bodies in this field. No one disputed that Government initiatives had been beneficial but the private sector suppliers though it was unfair that criticised Government funded bodies competed with private sector suppliers of training and information technology services.

One businessmen spoke eloquently of the cost of meeting some ISO standards and of the dubious commercial value of doing so given the nature of his markets and the shortage of technically trained managers in Hong Kong, which made certain theoretically desirable goals impractical.

This same speaker also claimed -- and no one disputed it -- that despite some liberalisation in telecommunications etc established former monopolies still held the upper hand and this was hurting development of new services. Development of Internet based services was lagging far behind that of Canada for example due to industry structure, costs and technical skill shortages.

This view was not quite the optimistic picture of the same industry painted by David Tse, who saw Hong Kong prospering through combining globalisation and its own expertise in service and communications industries. If Hong Kong had become too expensive to attract tourists for actual shopping, why not shift to virtual shopping? Sell anything from clothes, to movies to regional travel packages, property management, timeshares etc on the Web.

He noted how the excellence by global standards of various Hong Kong service industries had already been exported, noting the success of the HK Bank in Canada, Watsons in Taiwan, Giordano in several locations, etc. Hong Kong had things to offer the world, and some too especially applicable to the thriving Chinese communities in many countries.

The Hongkong Bank itself was less certain of its own brilliance. A representative was noted for his honesty in admitting many problems but few answers. Quality was costly and implementation in a large organisation difficult. Small businesses might lack resources and skills but they could be more responsive to customer needs. So could big and small business help each other overcome their particular problems? That sounded a good idea. But how?

The reality, according to official data, was that big businesses had a better track record of improving manpower productivity than smaller ones. But that raised the issue of definitions. Throwing large quantities of capital at a problem could greatly increase value added per worker. But what about Total Factor Productivity, increasing the value out of given inputs of labour and capital? One participant also noted the increasing gap between high value added services such as banking, real estate and law and low ones such as transport, trading and restaurants. Data showed value added per person in finance and business services at more than twice that in transport and communications. However, there was no examination of why this should be. Was a partly a product of asset inflation? Or was there some particular problem raising productivity in some areas?

There was debate on the role of Government in laying down minimum standards in an attempt to raise overall quality. However the consensus seemed to be that quality evolved with the development of the economy and Government efforts should be concentrated on areas such as health and safety rather than trying to regulate, Singapore style, the way to quality enhancement.

The role of academia in raising standards was also debated. Was academic training sufficiently oriented to practical goals? There was a broad sense that there should be much closer coordination between academics and business. Academic training might be more useful after people had already some experience of business. Business internships for those doing business related courses could be beneficial. The Government could also do more, it was said, to use funds to encourage greater university/private sector cooperation rather than just building hardware such as the Science Park.

Academics engaged in considerable self-criticism suggesting that vocationally oriented training was regarded as intellectually inferior and there was a bias against research driven by business rather than intellectual goals.

In sum, there was some interesting and lively discussion of issues. The two apparent conclusions: role of Government and its funds needs closer scrutiny and perhaps more specific goals; academics need more contact with real business needs and issues.