CRITICAL MANAGERIAL CHALLENGES IN MACAO Alessandro Lampo, University of Saint Joseph, Macao SAR
[email protected]
ABSTRACT Macao is a unique and fascinating case of booming economic growth. The casino industry has presented this tiny territory with the unique opportunity for development, and managerial challenges have emerged as a result. Limited research has been published with reference to managerial challenges in Macao, thus this work is an exploratory study that identifies the critical issues facing management (human resources, working attitude, customer service and immigration policies) from the perspective of senior executives in business and education. The research analyzes primary data collected through qualitative research methods. The paper suggests that the government implement a framework that develops and diversifies the economy but also takes into consideration the needs of population and enterprises. Keywords: Macao, managerial challenges, casino economy
INTRODUCTION Macao is a unique and fascinating case of booming economic growth. A Portuguese colony for over 400 years, since its return to the People's Republic of China on December 20th 1999, the territory has become well known for its developed Casino industry. With a total population of approximately 460,000 and an area of just 29.9 sq km, by most standards Macao is tiny. The city is currently at a growth stage with new megaresort and casino projects opening, and visitor arrivals continuing to set new records; in 2011 over 28 million visitors crossed the border. In 2006 Macao’s gaming revenue surpassed the Las Vegas Strip to become the world’s biggest gambling center. The casino economy has presented Macao with a unique opportunity for development and also emerging out of it are managerial burdens. The lack of a skilled local talent pool, employees' working attitude, poor level of service and the faltering immigration policy still remain the major challenges that managers are confronted with on daily basis. Limited research has been published on managerial challenges with reference to Macao. The territory represents a typical micro-economy (Li, 2010) in which resources are more or less limited and is regarded as a unique and fascinating case study of economic growth and development (Lee, 2011). Industry observers concede that what we are seeing in present days Macao is a confluence of events that will never again be seen in our lifetime (Kale, 2006). The uniqueness of the case of Macao is valuable for making theoretical contributions by means of local insights into the field of management. This study is also relevant to practice in the sense that it provides basic understanding on the subject to those working or wishing to do business in Macao. Besides this study also sets the ground for further research in the area of the local business culture.
LITERATURE REVIEW After Macao’s handover to China, the government decided to liberalize the gaming market with the aim to transform Macao into a center of gaming, cultural events, conference and exhibition (Pao, 2004), thus positioning gaming as the leading economic activity of the territory. The government policy further stated that tourism and MICE (Meetings, Incentives, Conferences, and Exhibitions) were to be developed in a coordinated manner to strengthen the overall economic activity in the region. In 2005 the inscription of the “Historic Center of Macao” on UNESCO's world heritage list further boosted the hospitality industry. The recent massive expansion will impact on the supply situation of labor in Macao. Cheng and Lee (2008) noted that the new employment opportunities have attracted large numbers of foreign workers and professionals to satisfy labor shortages at all levels, and the management styles of this immigrant workforce may
influence and bring new changes and challenges to the workplace. Lam (2008) wrote that for a foreigner taking up a new supervision position in Macao, there is a tendency to judge employees, customers or business partners based on his or her own cultural values, a tendency that can lead to management disaster. Lampo and Lee (2011) noted that one of the critical issues for Macao is the development of local human resources. MacDonald and Eadington (2006) have observed that with the rapid expansion of the gaming industry severe strain has been placed on the local workforce. Lee (2011) noted that the pressure upon the local workforce is in terms of both quality and quantity of human resources. In a study on SMEs, Tian and Qi (2011) found that for most of the companies in Macao skilled employees are difficult to recruit and maintain. Despite high salaries and bonuses being used to attract staff the turnover rate of these employees is still very high. Lam (2011) argues that a combination of poor work attitudes and wide employment choices reduces work productivity and adds costs to employers. In particular the lack of competition “spoils” the local employees as some think that their employers need them more than they do, and discourages a work ethic seen in more competitive work environments (Lee). Thus employees tend to become arrogant and demand higher pay, if not faster promotion, being now in a better position to challenge their expatriate superiors (Lam). But if lowskilled labor is a scarce resource that companies need to deal with in Macao, to recruit experienced senior management becomes a real challenge. To quote Eadington and MacDonald (2006), "Macao is not seen as a family friendly environment to relocate to for experienced foreign gaming managers. That position is slowly changing with a number of seasoned American, Australian and European managers now taking up residence in Macao, however, it is still a real challenge” Other issues relate to the quality of service in Macao that is inadequate to support the image that the city should communicate. According to Lam (2010) the level of service in Macao is poor by any international standard. Below-par service provided to visitors can seriously tarnish the international reputation and discourage repeat visits. Further, Cheng and Lee observed that the adoption of English as an international language is slow as Chinese and Portuguese continue to be used by most people, leading to the slow internationalization of the Macao Mentality (2008). For Kale (2006), the opening of new casinos will offer customers a great choice of suppliers, and they will gravitate to those venues where they receive acceptable, if not exceptional, customer service. The shortage of casino workers will be aggravated by the shortage of quality workers. To compound the challenge of human resources and quality of services, there is government vacillation on the policy regarding immigrant labor that limits the ability to hire foreign personnel. Cheng and Lee (2008) noted that the new casinos and hotel developments, as well as supporting industries, are in desperate need for more workers, but the government's response has been muted.
According to MacDonald and Eadington (2006) Macao is all about scarcity and abundance: the scarcity of licenses (in casino industry), land and labor against the abundance of a huge potential market. For the two authors, managing the challenges of scarcity, while staying within the rules dictated by law and international standards, requires substantial managerial effort and vision by both private sector and government entities. The research done so far has identified issues pertaining to human resources, customer service and government policy. This study attempts at addressing the stakeholders perceptions on the existing managerial challenges.
METHODOLOGY This study identifies the critical managerial issues in Macao by analyzing primary data collected through qualitative research. Creswell (1998) defines qualitative research as an inquiry process of understanding based on distinct methodological traditions of inquiry that explore a social or human problem. According to Flick et al. (2004) qualitative research claims to describe life-worlds “from the inside out”, from the point of view of the people who participate. In this study, by factoring inputs from experts in the field, the intention was to examine the perceptions and viewpoints of key informants in order to test the relevance of the findings in the literature review. The interviewee is significant for his or her capacity of being an expert in a certain field, as representative of a specific group (Flick, 2009). Open-ended questions were developed with the objective to capture the experts’ opinions based on their past experiences and their own perceptions of the managerial challenges in Macao. From the literature review it emerged that the crucial themes are to be found in the area concerning human resources, working attitudes, customer service and immigration policies. These factors helped inform the questions related to the perceptions of the key informants.
SAMPLING AND PROCEDURE The target population included industry stakeholders and academics from institutions of higher education offering business programs. Respondents for this study were selected from the researcher's personal network, and by making use of the snowball method (Flick, 2009). The following criteria were used to choose study participant: 1. Holding a management position in Macao. 2. Affiliation to an international organization.
By making use of the critical managerial challenges identified in the literature review, the respondents were asked to give their comment on the factors that, from a managerial perspective, translate into critical issues for managers. The interviewees were also invited to add and give comment on any additional element which they felt was important but not listed. A total of eight key informants were approached for this study. Basic personal data of the key informants is reported in Table 1.
Demographic Variable
Frequency Percentage
Gender Male Female
4 4
50.0% 50.0%
Occupation Aviation Education Entrepreneur Hospitality Legal Recruitment Training
1 2 1 1 1 1 1
12.5% 25.0% 12.5% 12.5% 12.5% 12.5% 12.5%
Macao Mgmt Experience years
1 6 1
12.5% 75.0% 12.5%
Demographic Variable Age 18-29 years old 30-49 years old 50 years old and older
Frequency Percentage
1 5 2
12.5% 62.5% 25.0%
High School College Postgraduate
1 1 6
12.5% 12.5% 75.0%
Ethnicity African Australian Chinese European South East Asia
1 1 3 2 1
12.5% 12.5% 37.5% 25.0% 12.5%
Education
Table 1. Sample biographic details. The interviews took place in the months of March and April 2012, each session lasting on average 35 minutes. Interviews were held entirely in English. Notes were taken during and immediately after each meeting. The following Table 2, shows the themes and sub-themes that were coded from interviews' responses. Table 2. Themes statistics. Themes and sub-themes
Lack of talent pool High turnover Attract/Retain Working attitude Customer service Immigration policy Other Perceptions
Number of respondents
%
Coded passages
Coded words
6 5 7 8 5 6 6
75% 63% 88% 100% 63% 75% 75%
18 10 10 9 9 8 8
695 395 327 598 450 484 384
DISCUSSION AND INFERENCES Several themes emerged from the discussion with the key informants. This section reports the perceptions on human resources, employee's attitude, quality of services, immigration policy and other issues relevant to the respondent's own experience. These perceptions will be described in turn.
Perceptions on Human Resources The concerns related to human resources surfaced in several of the respondents’ comments, thus confirming the literature available on the subject. The lack of talent pool and employees' working attitude were the most commented managerial challenges. With the economic growth of the territory, a large number of residents devoted themselves to the casino industry, an industry that is able to offer better a salary and conditions than any other sector. Among the respondents 75% concurred that competition for employees in Macao is high and, given the predominant service sector, organizations are in urgent need of people with a similar set of skills. “Service industry is very competitive, and getting good people is critical these days. There is lack of workers and, no matter the good deal you offer them, turnover is still high. We have to continuously train the newcomers instead of focusing on the business. Yet as soon as there is the possibility they leave us to work for casinos. Of course salaries there are higher than what we can pay.” (Chinese F&B Manager). Macao residents benefit from abundant job opportunities and a sharp rise in wages due to the competition in the job market. Casinos are the best employers in town. In 2010 the median monthly wage in the casino sector was recorded at MOP 12,000 (USD 1,470) against MOP 6,000 (USD 730) in manufacturing and MOP 7,000 (USD 850) in hospitality (DSEC, 2011). Short term earnings are now the main focus in Macao society. Thus there is the tendency to leave a company as soon as a better opportunity arises, especially if it comes from the gaming industry, an industry that is eager to recruit people with service training and background. “Casinos and hotels are always interested in people coming from the aviation industry because we have extremely well trained staff. Our sector suffers from lack of human resources when a new casino opens because people leave all at once for a better offer, and getting a blue card [work permit] for new employees is a long procedure that can take more than six
months.” (Chinese Marketing Manager). Consequently managers from non-casino related industries have great difficulties trying to recruit and keep people in their company. The real challenge is to entice them to leave a high paying job. “A dissatisfied casino pit manager earning over 40,000 patacas started to study psychology as she wanted to change her career. She gave up when she realized that the starting salary for her new profession would have been less than one third.” (Chinese Training Consultant). One of the direct consequences of the casino economy is that many young workers forgo further education for the prospect of immediate monetary returns. As Lampo and Lee (2011) noted, a fresh high-school graduate can easily become a dealer (a position that is restricted to the local workforce) and earn over MOP 13,000 (USD 1,600) as a starting salary without the need to pursue further studies that cannot guarantee a comparable pay after graduation. The interviewees mentioned that there is no better way to attract and keep employees in their respective companies apart from salary and benefits. There is a limited professional pool of candidates in Macao, and those locally available have already high paying jobs. As the packages offered by employers within a given industry is similar on average, many organizations will have become “the best” employer as an antidote to deal with the chronic employee shortages in Macao (Kale, 2006) to recruit and retain employees in a tight labor market. “Many [employees] are starting to see the benefits of a good corporate culture and longing for a sense of pride in companies that they worked for. They want to know that they are being 'valued' by their companies. In other words, they are becoming more 'matured' with their choice of employers” (Australian Professor of Marketing).
Perceptions of Employee's attitude When asked their views on working attitude of employees the informants opined that it is variable according to the employee’s position in the company. Local employees have the tendency to being less committed at junior positions. On the other hand, employees at higher managerial levels tend to be committed to the employer. Also, newcomers tend to forgo opportunities for growth inside the company once a better offer become available elsewhere. The lack of young worker's commitment towards their company is said to be caused by the abundance of jobs available in the market. The following quotations supports such statement:
“People in Macao have a different attitude compared to mainland Chinese or Filipinos. Immigrants are constraint to work for one and one only company by their blue card. As they cannot change job easily, they focus not to make mistakes, working hard in order to keep their job and hopefully getting promoted. Macao residents do not have the same attitude, they don't worry about changing job especially if it means better pay and conditions. For example when a new casino is opening they would apply, and as Macao ID holders there is no problem in getting hired.” (Chinese F&B Manager). “One general observation is that they lack a sense of job pride and loyalty. Foreign executives have stronger self-motivation, sense of belonging, and genuine interest to better their business results” (Australian Professor of Marketing). Local people tend to show a relaxed attitude towards life and towards their job. In particular they prefer family-friendly work environments and stable working hours. “Not many here would work like Hong Kong people: trying their best, pushing performance, working overtime most of the week to earn more money and advance in their career. No. Local workers would rather switch to a job with stable working hours as this gives them the possibility to spend more time with the family after work.” (African Small Entrepreneur).
Perceptions on Quality of Service The theme of quality of service provided by organizations in Macao appeared to be highly correlated with the availability of labor having the necessary skills and experience at a professional level. This pool of qualified and experienced professionals in Macao is currently limited. As Macao had a casino monopoly until 2003, it never developed an experienced and forward-thinking management cadre (Kale, 2006), and Macao people have not yet been trained in sufficient numbers to fill those positions that are still controlled by expatriates coming from the US, Hong Kong and Australia. With the booming service economy, the emergent opinion was that the sector will face a shortage of qualified and experienced professionals. This has led many organizations to compete with each other for the same small pool of people. Kale (2006) commented that during times of labor shortage, there is a natural tendency on the part of service firms to settle for something other than the best. One respondent commented: “The level of service in casinos and international hotels has improved a lot
during the past years. On the other hand, the situation of shops and retailers in the streets of Macao is different. The training and attitude of people working there is variable. Sometimes they do not even meet the minimum requirements. Those employers who can pay more eventually gets the best people.” (Chinese F&B Manager). Thus, the shortage of qualified and experienced professionals is critical for companies as this factor may affect the quality of the services provided. But also a cultural attitude towards customer service is considered important in the delivery of services. “In Thailand you feel the hospitality attitude. Here in Macao people perform well only what they have been trained to do, and nothing more. There is no mind-set for customer service” (Chinese Marketing Manager).
Perceptions on Immigration Policy In recent years Macao appears to be facing some labor woes as local workers have started to protest against a lack of labor protection and imported labor (Lo, 2008). The government has adopted an interventionist approach to tackle these social issues with a tighter immigration policy. Under local law, non-residents are forbidden to work in Macao unless they are granted the “blue card”, a special government-issued work permit. Lately, the government has tightened its policy concerning imported workers, as more and more local residents complained about losing jobs to the imported workers who usually get lower pay. The dominant opinion of the respondents was that it will be not possible to sustain the growth in the city if the government does not open up to immigration of qualified workers. One of the respondents felt very strongly on this point and commented: “The government should be more flexible towards expats, and not to be afraid to allow people with qualifications to come and live in Macao. They are not competing with the locals because their expertise at this moment cannot be find here [in Macao] . So when a company is looking elsewhere for people, there is in most of cases a good reason to do so. Expats are not taking local jobs, they came here to work, transfer knowledge and go back to their country after a while, leaving behind a better Macao. The government could increase the requirements for people coming in, but not listening to trade unions that are determined to protect a local unqualified labor.” (Chinese HR Director). As evidence of the situation that many business owners are now facing in Macao and example of the correlation between immigration policy and entrepreneurship,
one respondent said: “...and then there was the case of that restaurant. For some reasons the labor department did not renew the working permit of the employees and the company had to close after having invested millions in the business. Hiring entirely local employees means paying higher salary due to the competition in the job market. The margins are not enough to justify the salary”. (African Small Entrepreneur). The respondents felt that the government has to play an active role in promoting activities (such as specific training courses) aimed at raising the level and quality of the human resources in Macao, strictly speaking with reference to the less educated workforce emigrated in the past from mainland China. “Some people, especially those arrived from the mainland years ago, have no idea how to handle customer service and even behave properly in public. There is the need for more training that provides the skills needed to operate the service industry, and the government or other institutions should promote such courses”. (Chinese F&B Manager). To summarize this section, it can be said that what emerged from the interviews was that the top challenges that managers are facing in Macao relate to human resources management: the shortage of a qualified workforce and high employee's turnover. Subsequently there is the challenge to attract and retain skilled employees. It appeared that employees show a variable degree of commitment to the employer, and tend to become more demanding regarding their job and company to work for, that includes wanting more than simply monetary compensation. But when a talented employee cannot be found locally, organizations have to look elsewhere. Therein lie the challenge for managers to hire qualified foreign personnel due to the tightly controlled immigration policy that limits the potentials for growth and expansion of the business.
Other Perceptions on Managerial Challenges When asked for their views on critical managerial challenges that were not mentioned in the interviews two themes emerged: the level of bureaucracy responsible for slowing down company actions, and the importance of relationships in order to do business. The two are strictly connected as relationships are important to circumvent what bureaucracy hinders. One comment reads: “The first thing that comes to mind is the level of bureaucracy, rules and regulations. There are a lot of procedures that delays and obstructs everything the whole time.” (European Legal Adviser).
With reference to the importance of relationships, it has to be noticed that Macao is a small city characterized by a large number of associations representing specific interests in the population. People are organized into groups based upon birthplace, trade and interest. There are today around 4,000 societies, which make Macao the most intensive area of associations in the world (Wang, 2010). These associations are very influential on the society, both economically and politically. “Macao is a small place, and everybody is somehow connected to each other. Managers need to pay attention in relation to whom they interact with, which include hiring and firing. This is because of the connections they might have with influential people or to one of the many organizations in Macao.” (African Small Entrepreneur). It was also commented that to establish good relationships in the community, managers (especially if foreign) should pay attention to “giving face” to the important people in local organizations. This includes inviting them to opening ceremonies and sending cards or small gifts (such as moon cakes) in occasion of traditional Chinese festivities.
LIMITATIONS AND FURTHER DEVELOPMENTS There are limitations to the findings. A qualitative approach has been adopted for this exploratory study. As such, the results can be further verified with quantitative data. Also, the number of experts interviewed for this study is small (eight participants) and limited to a particular time-frame. Another limitation is that this study does not compare the interviewee's responses according to their profession. In any case, this study should provide a foundation for more research within this area.
CONCLUSION This paper is an exploratory study that identified the critical issues facing management in Macao. A number of factors were exposed through literature review and grouped into broad categories (human resources, working attitude, customer service and immigration policies) that formed the basis for formulating open-end questions with industry experts. The availability of jobs offered by the booming economy benefited the local workforce and was a pull-factor for immigrant labor. The number of jobs available in casinos has attracted many young people to work for salaries and benefits that commonly exceed those of the other sectors. Immigrant workers were then necessary to fill those positions that could not be found among the local pool due to lack of expertise or which local residents did not want to take. It emerged from the interviews that the foremost
critical managerial challenges for Macao are the shortage of a qualified workforce and high turnover. The difficulties for companies to attract and retain employees when new casinos are opening often results in salary increases and benefits that do not limit the tendency to move elsewhere once a better offer is put on the table. Tin addition there is the tightly controlled government policy regarding immigration that limits the ability to hire qualified foreign personnel. In this study it was then noted that the employees’ attitudes towards their job are variable in relation to the position held in the company. Employees have the tendency of being less committed to the company at junior level, and focus is given to short-term gains. At middle and executive levels, employees are relatively committed to their organization, and salary is not the primary concern. For young workers the lack of commitment is due to the abundance of jobs that the casino economy provides. Given the abundance of jobs and the possibility to switch between them easily, local people also tend to have a relaxed attitude towards their occupation, preferring family-friendly companies and stable working hours. When it comes to quality of service in Macao the situation is also variable. The degree of service provided by organizations appears to be highly related to the availability of manpower with skills and experience at a professional level, the level of internationalization of the company, and the compensation package offered. Thus quality of service in international casinos and hotels is higher than local standards by all means. It emerged that it is not possible to sustain the diversification and growth of the city if the government does not recognize the needs of industry operators. At management level, immigrants are not seen to be in competition with the local workforce for the reason that the expertise required by employers cannot be presently found in Macao. The concerns were addressed to the government: legislators should begin to view the gaming industry as the catalyst for other types of economic activities rather than an end in itself. There is the need of an agenda for Macao to create the conditions where entrepreneurs can pursue new opportunities with confidence. It is suggested that Macao works on its qualified workforce shortage to ensure that service quality does not decline. For this purpose, gaming revenue could be used to develop the local talent pool by means of training courses especially designed to provide the basic skills (such as specific knowledge, language, communication, social graces) needed to operate into the service economy. The fact is that until Macao becomes self-sufficient in terms of professional qualifications, companies will always need a steady flow of immigrants to supply their labor shortage at all levels. The role of the government is essential to define the strategy leading to growth and diversification or potentially hinder the future economy of the territory. The opening of Macao's casino industry has offered the unique opportunity for development but also managerial challenges have emerged as a result. How the government manages to operate within a framework that develops the economy but that also takes into consideration the needs of population and businesses, will impact on the fortunes of this tiny region in the years to come.
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