Malaysia’s Untapped Competitive Advantage: HR Transformation

Richard Pain
Posted: 04/14/2015

"As Malaysia continues to transform itself from an input–driven growth strategy to be a growing knowledge and service–based economy, it will face challenges such as a lack in workforce planning and insufficient investment in staff training and development."

Kelly Services Malaysia – 2013-2014 Salary Guide

Malaysia is experiencing a period of sustained economic growth and significant change is an integral part of the process. This year a minimum wage in the private sector is due to be introduced, the Government announced plans to increase female workforce participation from the current 46% to 55% and the country’s GDP is forecast to rise by 5.5%.[1]

Whilst there are many encouraging factors that point towards continued economic growth, there are also causes for concern regarding inherent deficiencies in technological investment and talent management. This is reflected in a recent economic report from AT Kearney, which shows that Malaysia faces competitive business threats from regional competitors, such as Indonesia, China and India, particularly in terms of the education, relevant experience and language capabilities of its workforce. (See graph) [2]

[click to enlarge]

Consequently, Malaysian companies are predicted to face increasingly fierce competition for top talent from regional competitors. To overcome this threat, organisations are increasingly turning to their HR departments to alleviate these issues through strategic assistance and support, thereby prompting HR to transform its role from an administrative one to a strategic and value adding branch of the business. This is a business trend that has already taken hold in the USA, Europe and parts of Asia and it is now up to Malaysian businesses to transform their HR departments so to remain competitive and fuel continued economic growth.

How Transformed HR Helps Create Competitive Advantage

"Talent is more critical than ever to business success today. A company’s competitive advantage resides in its people. How an organisation attracts, retains, rewards, motivates, and develops its people can become an enduring source of competitive advantage."[3]

HR Transformation v2.0, Mercer Human Resource Consulting

When it comes to HR transformation, the overall goal is to create a more strategically-minded and supportive HR department. The importance of basic, transactional HR capabilities – relevant workforce data, employee self-service, integrated HR systems, etc – remain vital to the smooth running of any company and should not be ignored or sidelined. However, a transformed HR department can move beyond simple maintenance processes and can help the company adapt to Asia Pacific’s rapidly evolving business environment:

"HR can enable business growth by developing standard, repeatable systems, processes, and capabilities that make it fast and easy for the company to enter new geographic markets and integrate new acquisitions. HR can also enable business growth by developing new staffing models that fit a modern workforce, increasingly based on offshore talent, contingent workers, and global mobility."[4]

So, not only can a transformed HR department improve the mobility and efficiency of its parent company, it can also provide invaluable strategic assistance in terms of talent management through the development of a sound ‘human capital strategy’.

Developing Your Human Capital Strategy

"The business world is changing, and HR needs to adapt proactively. Although efficiency, effectiveness and compliance are still important transformation goals, they now represent the bare minimum that HR is expected to deliver." [5]

Human Capital Advisory Services Hong Kong, Deloitte Development LLC

Human capital strategy can be defined as a coherent and well-conceived set of management practices that:

  • Produces the right workforce for the business (acquiring and retaining the right talent) and
  • Manages it in ways that optimises overall employee performance levels

Whether this involves building leadership qualities and improving key skills of existing staff, adopting dynamic new staffing and retention models or devising new technology integration schemes, HR can and should be an integral part of the organisation’s human capital strategy.

Encouraging Flexible Working Conditions

"It’s vital that organisations develop the culture of trust, leadership support and sound middle management capabilities required to reap the benefits of workplace flexibility without having a negative impact on productivity."

Randstad World of Work Report 2013/2014

Increasingly, Asia’s employees value a manageable work/life balance, making employers who can provide that balance a more attractive prospect. Whilst technology remains a critical enabler in creating an environment where remote working, peer-to-peer review and teleconferencing is possible, a strategically enabled HR department can help ensure that the necessary working practices and orientation schemes are in place to help make the transition as smooth as possible.

According to a wide-reaching survey by Randstad, most Asia-Pacific workers find a ratio where they work 70% of their time in the office and 30% remotely (at home, off-site, in a decentralised location, etc) to be the most desirable option. Malaysian companies that succeed in achieving this can secure an ongoing competitive advantage as they enjoy greater levels of improved talent attraction, employee engagement, satisfaction and retention.[6]

Achieving HR Transformation in Malaysia

For companies in Malaysia committed to creating a strategically-minded HR department, three principal opportunities present themselves:

1. Technological Investment

Many parts of Southeast Asia – including Malaysia – have a history of underinvestment in HR technology. Given the relatively low cost and high availability of labour, it has traditionally been more attractive for companies to simply hire more administrators rather than undergo the lengthy and often expensive ordeal of implementing an IT system to automate a given HR process.

In many cases the short-term savings are now being outweighed by the long term costs of process inefficiency and bloated HR staffing. As Malaysian companies begin to compete with their more technologically advanced Asia-Pacific rivals, the need for more sophisticated and efficient IT support systems is becoming both apparent and attractive.[7]

2. Cross-border Talent Recruitment

Until recently, HR leaders generally only had the talent pool of their company’s given country to find and attract the right employees for their available jobs. However, top talent in Asia is becoming increasingly mobile and willing to cross borders in order to secure a promising position.

This is especially the case with the millennial generation of workers which are characterised by their openness to travel and technological proficiency. This means that Malaysian companies can actively recruit high-flyers from the likes of Japan, China and Singapore in order to augment their more strategically viable workforce. Competition for this talent remains stiff though, and in order to rise to the mobile talent challenge, Malaysian companies have to ensure that they present prospective foreign talent with a human capital strategy that is attractive to their modern work methodology, complete with flexible working opportunities and a technologically inclusive culture.

3. HR Shared Services

Instead of relying on a generalist HR approach to broadly cover all business needs, forward-thinking Malaysian companies have been adopting the usage of HR shared services models which allow businesses to draw on the resources and expertise of specially designed centres.

The most useful shared services centres allow for users to quickly and easily navigate their resources in order to find the answers or assistance which they are looking for. This is achieved through the use of well-conceived portals and management tools that are designed with an optimal end-user experience in mind.[8]

Ultimately, the model allows companies to improve HR capabilities but without huge expenditure, as their investment in shared services can be scaled up or down in order to suit their developing business needs.

Transforming HR into a Strategic Business Partner

Despite all these benefits and opportunities, HR transformation cannot occur until the role of the "strategic business partner" has been truly established. There needs to be a real organisational change that allows for the top HR decision makers to be separate from the operational and transactional side of the business, leaving them to focus on analysis and strategy decision making.

Three key tips from Mercer on how to get to this stage include:

  • The bulk of HR’s administrative, transactional and operational work should sit in shared services
  • Centres of Excellence need to let go of transactional work and instead focus on strategy and design
  • Business success relies on line managers who can effectively manage their employees. But further than this, a new role of People Development Managers need to be created, to develop other line managers.

Only by making these organisational changes will your HR function have the ability to become more strategic, analytical, cost effective and have the ability to execute HR fundamentals flawlessly.[9]

Transform to Compete – Compete to Thrive

"Innovation is survival."

Julio A. Portalatin – Mercer President and CEO

Given the current climate of technological adoption combined with encouraging political support regarding wage and employment equality, Malaysia’s economic future appears promising. However, due to the increasing competition for business and talent from regional competitors, it is essential for Malaysian companies to see beyond the basic functionality of HR. Malaysian companies need to drive change within their organisations to leverage the strategic benefits of HR transformation in order to not only compete but also thrive in the demanding and increasingly fluid business landscape that is developing in Asia.

[1]2013-2014 Salary Guide, p5, Kelly Services Malaysia,

[2]Offshoring Opportunities Amid Economic Turbulence, p8, AT Kearney Global Services,

[3]HR Transformation v2.0, p1, Mercer Human Resource Consulting

[4]Global Business Driven HR Transformation The Journey Continues, p15,Deloitte Development LLC

[5]Human Capital Advisory Services Hong Kong, p13, Deloitte Development LLC

[6]Human Capital Advisory Services Hong Kong, p13, Deloitte Development LLC

[7]Transforming HR in Asia, pp1-2, Towers Watson

[8]A New Strategic HR Model: Preparing for What’s Next, pp2-4, Towers Watson

[9]HR Transformation – It’s all about the Business, Mercer

Richard Pain
Posted: 04/14/2015


Join for Free


San Jose, Costa Rica
April 18 - 18, 2018
Doubletree Resort – Paradise Valley Scottsdale
April 22 - 24, 2018
DoubleTree by Hilton, Kuala Lumpur, Malaysia
May 6 - 9, 2018