Adcorp Holdings Ltd : Adcorp launches "the definitive guide and analysis of labour market trends"

Adcorp explains why companies have been slow to promote blacks to managerial positions

Weak relationships between corporate profitability and most affirmative action dimensions explain why companies have been slow to promote employment equity.

This is one of the findings of Adcorp, the JSE-listed provider of staffing, human capital management and business processing outsourcing services. Adcorp is widely acknowledged for its authoritative monthly Employment Index, reflecting the country's key labour trends.

As a corollary to its Employment Index, Adcorp is poised to launch what it calls a Labour Market Navigator, which it identifies as "the definitive guide and analysis of labour market trends".  The Navigator will be published quarterly.

Loane Sharp, Adcorp's labour market economist, says that The Navigator will contain the views and opinions of various labour professionals, and will be of particular interest to HR professionals and employers.

The first issue will deal with the following hot topics:

1: Are South Africa's CEOs Overpaid?
Adcorp finds that CEO remuneration is not justified by several appropriate metrics, including, most importantly, company profitability. However, this finding belies a significant degree of variation between companies. Investec's CEO remuneration is R60 million above the economically justifiable level, whereas Anglo American's CEO remuneration is R16 million below par.

Two factors appear to have conspired to raise CEO remuneration in South Africa:

• immigration laws, which have created an artificial shortage of company executives; and
• new technologies, which have raised the demand for executive expertise.

2: Productivity based approach to wage escalations:
Productivity is the sole rational basis for wage increases as productivity-based remuneration maximises company profitability, raises living standards, reduces prices, and promotes consumer variety and choice.

Adcorp demonstrates how a productivity-based methodology might operate in practice by applying this method to a selection of JSE-listed companies.

It finds that the average annualised wage increase secured by trade unions in 2011, totaling 9.2%, is well in excess of the average percentage increase in productivity levels, across all sectors, which totaled just 0,45% over the period.

Two key factors appear be driving inappropriate wage increases:

• dismissal protections for non-performing workers which limit managers' ability to adopt productivity-improving initiatives; and
• enforced collective bargaining which ensures wage escalations are entirely unrelated to actual changes in overall labour productivity.

3: The Economics of Affirmative Action in South Africa:
Affirmative action is the South African government's primary instrument for addressing racial inequality in the workplace, and yet the economics of affirmative action as applied in South African is poorly understood.

Adcorp raises the veil on affirmative action in two specific areas:

• wage differentials between blacks and whites; and
• the relationship between economic transformation in the private sector and corporate profitability.

Adcorp makes two key findings:

• a sharp decline in wage differentials in the face of income equality, such that the income gap between blacks and whites will be eradicated by 2020; and
• the existence of a generally weak relationship between corporate profitability and most affirmative action dimensions, indicating why companies have been slow to promote blacks to managerial positions.

4: Can South Africa create 5 million new jobs?
The New Growth Plan aims for 5 million additional jobs by 2020. But how many new businesses will this require, and by how much will existing businesses have to grow?
Adcorp calculates these figures by sector and discusses ways that new businesses can be created and existing ones grown. Adcorp argues that to create the large numbers of businesses that are required to meet this jobs target will need politically contentious structural reform.

5: Case Study Abstract:
Overall labour productivity in South Africa declined to its lowest levels in recorded history at the end of 2011. The macro-economic reasons for this decline are being increasingly explored and it is generally accepted that South Africa's restrictive labour regulatory environment is a primary contributor to declining labour productivity levels.

However, less well understood, is how current work force management practices of private sector firms, which have been sluggish to respond to declining labour productivity of their workforces, may also be contributing to declining labour productivity and undermining corporate profitability.

This case study therefore documents an alternative workforce management approach known as "distribution-based management" and demonstrates how the approach, developed by Adcorp Analytics and currently being implemented in a number of top 100 JSE listed companies, can achieve significant productivity improvements and substantial cost savings for private sector firms.

On behalf of: Mandy Jones, Group Marketing Manager, Adcorp Holdings