Role of Consumer Finance Companies

It was the American industrialist who developed and propagated the concept of mass production which has led to a mass consumption economy not only in America but through most parts of the world.  One important consequence of mass production was the rapid increase in the use of installment credit.  With its propagation, the America businessman was at least assured that his market – the consumer – would have the purchase “vehicle” with which to obtain his mass-produced goods.

 

                        What happened with cars in America in the 1920s and with automatic washers and television sets after World War II has been replicated in Western Europe, gradually in most Asian countries, and certainly now in Thailand.

 

                        Installment selling, in spite of its having been practiced elsewhere in the world for so many number of years, is relatively new in Thailand.  There is no clear record as to when installment selling was started here.  It has been observed that the practice caught up rather slowly but gained a more rapid momentum in the last 10 years, due largely to the greater degree of competition (entry into the country of more foreign goods) and the growing influence of the more sophisticated distribution system brought by the foreign businessmen.

 

                        Something has to be said about the culture of the Thais with regards to their response to the idea of installment credit.  It is perhaps the sense of apprehension for foreign-bred schemes, and justifiably so, that was responsible for its slow start.  There is, likewise, the element of giving out information on oneself that provided a resistant factor to its acceptance. Even now it is generally difficult for a trading company or financing company to solicit credit information from the prospective buyer.

 

                        The Thai consumers are a sensitive lot.  For one, they generally avoid being goaded into signing any kind of formal contract.  They feel that if you, the seller, trust them, then there should not be any need for elaborate contractual agreement.  Hence the strong resistance to fill up complex information sheets.  The apprehension for having anything to do with the legal implications of a formal contract is another reason for them to shun organized plans.  This is why most local retailers admitted that they really have not practiced any advanced installment plans.  Their credit sales could extend anywhere from one month to six months without as much as an invoice to support the transaction.  One has to be “flexible”, they would insist.  How much carrying charge does the retailer in these cases then add to his normal cash price?  This again is usually without any standard basis.  Between 10% to 20% mark-up for credit terms of up to six months is not uncommon.

 

                        Another side to the sensitivity of the Thai consumer is in the mild affront which he takes if he is queried to need some credit.  Sometime ago, we launched a direct-mail campaign to a selected set of professionals offering them financing service.  Much to our chagrin, some took offense and quickly disclaimed any need for financing.

 

                        In spite of all these, the impact of installment selling in Thailand could not be abated.  The demand for durable consumer goods was stimulated while the ability on the part of the consumers to acquire said goods has been greatly facilitated – thanks to the increased availability of consumer credit.

 

                        The commercial banks have heretofore played a major role in the financial structure of Thailand; yet consumer credit assistance has been left with much to be desired.  This situation has lent itself to the widespread use of the so-called unorganized money market in Thailand.  In fact, it has been estimated that of the financial transactions carried out during 1966 and 1967, 75% to 80% took place in the unorganized sector of the Thai financial system.

 

                        To some extent, the way the unorganized financial market has thrived could partly be traced to the innate preferences of the Thai consumers.  The flexibility and the informality of it all – not to mention its virtual secrecy, therefore avoiding any “loss of face” – were some reasons for this preference.  The matters of cost, or of interest, become secondary.

 

                        Apart from the commercial banks, the pawnshops in Thailand have been credited with having contributed as well to the country’s economic development.  It is they who have coped mostly with the specific demands of the average consumer.  It may be said that pawnshop transactions is at least one notch better than those availed from the private money leaders.

 

           The pawnshops, to be sure, are adequately regulated by the government.  The private money lenders, however, which consist much of the unorganized sector of the Thai financial system, are outside any official supervision.  It is generally known that such financial dealings were carried at an excessive cost to the consumer and with little, if any, protection to him.  Much of it has depended on the liberal use of post-dated cheques.  It used to be that to issue a bad cheque was a criminal offence – until August this year – when the law was revised.  The proponents of the law argued that to obtain credit information was next to impossible and only a grave penalty would secure the creditor.  On the other hand, those who supported its revision argued that reckless granting of consumer credit resulted from this very implication – and that it did not help in the proper development of credit structure in the country.

 

                        When Commercial Credit Corporation (Thailand) Ltd., otherwise known as CCC, was formed in 1964, it marked the birth in Thailand of a true consumer finance company – with the prime objective of serving the consumers’ needs.  In a way, it could also be said that it started the finance company era.  For just within a few years from then, finance companies have literally mushroomed.

 

                        Finance companies have flourished since. Ostensibly they have offered services which the commercial banks have considered outside their regulated sphere such as financing hire–purchase sales of durable consumer goods.  By the same token, they have carried on certain banking operations such as accepting funds from the public.  Since public welfare and safety – or as we would like to refer to as consumer protection – were now at issue, the government finally passed the Finance Company Law.  Henceforth finance companies would be regulated as from September 21, 1972.

 

                        One immediate good effect of these regulations is that it will enhance the consumer’s confidence in finance companies.  He would now perhaps be more acceptable to such basic credit practices as filling up credit application forms, signing contractual agreements, receiving payment notices and, hopefully, be more conscious of his credit rating.  Slowly but surely, a gradual shift to utilization of consumer finance companies is deemed inevitable.

 

                        As for the retailer, he is quick to admit that the continuing impact of consumer credit has shown favorably in his sales book. A doubling of volume between 1960 and 1970 were reported by the retailers we sampled.  Much was attributed in the introduction of installment credit.  Consumer credit has thus served as a potent marketing tool for the creation and building up of demand and penetrating into the markets.

 

                        Meanwhile the pressures of competition have led to granting longer credit terms, and lower down payments.  In the automobile hire – purchase market, 15% down payment, where it used to be 35%, is not uncommon. Thirty-six months term has become standard while the precarious 48-months term is believed forthcoming. In the appliance business, an advanced payment of the first monthly installment serves as down payment.

 

                        While selling terms have become more liberal, yet the consumers’ lack of exposure to standardized credit procedures have prevailed.  The gap widens.

 

                        Much can be done.  In the direction, effects towards the upgrading of the credit profession have been started.  We suggested last year through the Thailand Management Association that the formation of a professional association to be called the Association of the Credit Managers in Thailand would be one way to achieve this goal.  It is gratifying to note that the TMA has already put this into action.  Within its framework, it is hoped that a fluid interchange of credit information can be practiced in a prudent and discreet manner.

                       

                        We believe that with passing of the Finance Company Regulations, consumers’ confidence in finance companies will increase; as much as it will lead to the development of standardized financing procedures.

 

                        The needs of the consumers are very many, while their financial resources are few and limited.  Those of us who are directly involved in the granting of consumer credit are trying to bridge that gap between needs and means.  To accelerate this process, we in the business must play a significant role in settling the standards so that he – the consumer – is not only served but protected as well.

The HR Head — The CEO’s “Life Support” In Times of Crisis (part 2)

The following captures my interview recently with Ms. Manalo about her own philosophy and approach to supporting her CEO and the company.  The interview has been edited.

Guillermo:   Is the HR function somewhat underappreciated by top management, compared with the other corporate functions such as sales and marketing and finance? Are there bases for such a perception?

Ms. Manalo: I have worked with CEOs and senior managers who have a deep appreciation of HR, and have worked with their Chief HR Person and his/her team to build organization capabilities and talents that deliver desired business results.  I have always maintained that business is ultimately about people.  Customers are people.  CEOs, boards, public servants and employees are people.  The right people in the right roles doing the right things with the right attitudes and mindsets are those that have the higher likelihood of succeeding. HR is that discipline, science, and art that enables the connection between business or organization strategy and what people believe, talk about, and do inside and outside the organization, right or otherwise.

Most CEOs when polled about what keeps them awake at night have among their top three concern (i) building and sustaining the leadership, (ii) adequacy of talent, and (iii) culture the business needs.  Those are precisely the domain of HR as it partners with the organization’s leaders.  Does HR deliver on this mandate?  That perhaps is the root cause of the perceived “appreciation gap” – unenlightened corporate leaders who fail to leverage on the competencies of HR to build the capabilities the organization needs to succeed.  The flipside of the coin is that there are HR professionals who simply do not deliver on their mandates or fail to anticipate and transform in ways more relevant to business, hence the forfeited appreciation from management.

Guillermo:  The true worth of the HR Head is put to a stronger test in times of business slowdowns, just as much as, if not more than, the other functional heads.  What are your thoughts on such a point?

Ms. Manalo: The effective HR Head sees and anticipates the people implications of business strategy and the business implications of people initiatives.  Decisions emanating from both points of view inevitably impact financial performance results. In a downturn situation, every role in the organization is put to a test, the HR function probably much more so.

In Jim Collins’s latest publication “How the Mighty Fall” where he studied the contrasts between successes and failures, he writes “Whether you prevail or fail, endure or die, depends more on what you do to yourself than on what the world does to you.” He also demonstrated through insights from his research that decline can be avoided, detected, reversed.  I checked for the term “human resources” at the index of this book and found none.  I didn’t even find the word people or talent. But I found, ever repeatedly, words such as strategy, change versus consistency, performance, core values, customer, leadership, right people in key seats, succession, culture or reorganization. Are these not the very same things we refer to when we talk about “human resources?”  And these are the very same variables that differentiate the best from the good, those who prevail and those who fall.

Net-net, it is HR’s role, partnering with the CEO and other leaders, pro-acting as trusted advisors, who will help ensure that the “right people are in the key seats,” and being there, fulfill their commitments to their constituents, especially at a time of great crisis.  These “right people,” empowered, engaged and energized by right people processes, led and enabled by HR, will lead the organization with missionary zeal into recovery and new success.

Guillermo:  If indeed the HR Head is a strategic leader/manager and thinks in concert with top management, what initiatives should the HR head do well in advance to help cushion the adverse impacts of economic and business downturns?

Ms. Manalo:  In Globe, we do not subscribe to “one size fits all” or to “across the board cuts.”  Even before Q3 of 2008, when the prognosis of government and economists still showed some moderate growth for the Philippine economy, our senior executive group already anticipated alternative scenarios and crafted concomitant strategies not only to mitigate the impact of the financial meltdown but to evoke opportunities for growth that can be pursued even in a downturn.  This called for a clear prioritization and re-allocation of resources. HR, being a business enabler, aggressively preempted approaches, communication tools and processes to help drive costs down while likewise helping drive up productivity.

Guillermo: What, from your own background and experiences standpoints, are the essential qualities the HR Head must possess to be able to help manage company crisis situations, working  in tandem with the CEO and the rest of the top management?

I believe the essential qualities that should be in place would be (a) a keen understanding of business, customers and markets, and strategy and how such will be implemented within the context and limited resources of the business, (b) foresight and the ability to anticipate the future, (c) the ability to identify and recognize risks and craft mitigating plans, (d) decisiveness to make tough calls when the situations call for them, (e) excellent communication skills – from strategy to actual execution, and (f) equanimity and calm during the crisis, openness and capacity to learn from the crisis and move on.

Guillermo: What were the sorts of company crises, whether internally generated or externally derived, that you have gone through before or during your long, substantive career in HR leadership?

Ms. Manalo:  I have encountered a rich combination of self-inflicted and externally driven crises.  They include:  (a) a divided senior leadership in a company I served many years ago, where strategic intents and directions were not clear at the outset, but where differences were ultimately threshed out; (b) a prolonged strike involving a highly  militant union but which was ultimately settled amongst the parties involved; (c) redefining strategic thrusts from consulting to business process outsourcing; (d) organizations that experienced leadership transitions for the CEO and other key roles; (e) and major re-structuring initiatives such as the integration of major strategic business units. Through all these, I kept to the principle that HR must rise above administrative spheres and be seen as a unifying factor whose reason for being is ultimately the good of the total organization.

*          *          *          *          *

The HR function has obviously gone a long way from being mere administrative tasks (viz., hiring, firing, running payrolls, meting out disciplines, rendering benefits, negotiating labor contracts, providing advice to management on selecting and grooming key people for promotion to top posts or transfers, as well as providing analysis of the impact of demographic, social, and political trends on their organizations.).  The HR function is now evolving to do much more.  The HR of the future is expected to promote active learning; induce cost-savings and help upgrade revenues; help hatch, nurture and harvest ideas in the organization; connect people; and, above all, enhance employee engagement.  All these, the new HR will, in due course, be additionally immersed with; thus enabling top HR practitioners to be truly accepted as top management’s strategic partners.

*          *          *          *          *

About the author:  Manuel R. Guillermo is the President and CEO of KSearch Asia Consulting, Inc., an executive search firm which supports mostly multinational companies and large Philippine conglomerates with their executive and managerial requirements.  KSearch is a member and co-cooperative owner of the U.S.-based National Personnel Associates (NPA), a 400-plus worldwide recruiting network.  Mr. Guillermo finished the Program for Management Development (PMD-22) in 1971 in Harvard Business School.  He can be reached at mrg@ksearchasia.com.

The HR Head — The CEO’s “Life Support” In Times of Crisis

I wrote in this column just last May about the critical role of the Chief Finance Officer especially during these turbulent economic times. I would be remiss if I do not follow suit with an equally compelling corporate role, i.e., that of the Human Resource Head. In this I probably risk stating the obvious.  Human Resource or HR sits in the middle of the most important competitive battleground in business.  Finding and retaining the best talent, among its many crucial roles, have become an increasingly vital competitive advantage, making HR a truly strategic function for any company today.  So, why do some top managements sometimes fail to appreciate this critical component in any human undertaking, despite the oft-repeated seemingly lip service of many top executives who are quick to holler “people are our most important asset”.

I sought out a noted thought leader in corporate human resource, Ms. Susan Grace Rivera-Manalo, presently the HR Head of Globe Telecom, to elicit her views on the role of human resource and that of the HR Head, particularly in times of economic downturns.  With more than two decades of combined line and consulting experience in the broad field of HR in telecommunications, broadcast/entertainment and financial services, among others, her specialization revolves around organizational development, communication and training interventions in improving organization effectiveness.

Through a well-crafted change management and communication strategy, Ms. Manalo’s HR group in Globe Telecom supports management overcome the present crisis, particularly as it affects the welfare of its nearly 6,000 employees and as they, in turn,  execute management’s mandates to weather the economic storm. She has through the years always challenged herself to assume the role of being, first and foremost, a transformation initiator and catalyst and insists that the HR group’s reason for being is ultimately that of being the strategy enabler.

The following captures my interview recently with Ms. Manalo about her own philosophy and approach to supporting her CEO and the company.  The interview has been edited. (See next post)…

How to Manage your Business in Bad Times

According to Geoff Colvin in his article “How to Manage Your Business in a Recession” published in Fortune Magazine for January 19, 2009 issue, “There’s no script for running a company in this historic downturn.” So when economy is headed for even harder times, what simple set of business strategies you can put to work in order to survive and thrive during and after this downturn? Geoff offers 10 ways.

Reset priorities to face the new reality

Your company’s top priorities must depend on its view of the world. The focus during the good times may be expanding into new markets and hiring people. But during a crisis, to rethink about every expense and capital investment is necessary.

Keep Investing in the core

Even when reseting priorities, funding your most critical competencies should still be among the top list.  The best businesses never cut on product innovation, customer service, and employee development even on uncertain times. This assures them that the business remain competitive when upturn comes.

Communicate Like Crazy, balancing realism and optimism

Keeping quiet during a recession makes everyone more nervous. Good managers find that responding and communicating even more than usual pay off. Being honest about conditions, making clear your vision and making sure they know you care are ways to keep hope alive.

Your customers face new problems, so give them new solutions

Deeply understanding your customers’ needs and responding in sophisticated ways–redefining value for them– keeps customers happy and loyal, which in turn maintains company profit margins.

Don’t rush to cut prices

Though everyone wants to pay less, rethink before you chop your price. In order to pay for the cut price, your business must increase sales volume. If you aren’t certain that a cut back will increase sale, it is wiser to maintain the price.

Focus on capital -how you’re getting it and where you’re using it

“Earn a return of capital that exceeds your capital cost” is the most fundamental rule of business that must be followed now that market becomes tight.

Reevaluate people and steal some good ones

If salaries and bonuses need to be slashed, most companies do it across the board. But for Mel Stark of the Hay Group consulting firm, the best ones take extra pains to reassure thier most driven employees that they are the ones most important to keep — they are rewarded even in a recession. While other companies are spreading the pain equally to all their empployees, this is the time to steal their best performers.

Reexamine compensation–what is it offering incentives for?

Do your pay programs encourage too much risk? If your executives fail in their high-risk bets what do they have to lose? Make sure that your pay arrangements don’t encourage too much or too little risk.

Think twice before offshoring

If offshoring is cost-effective to some companies, ask whether this still makes sense to your business or not in a recession. Consider different factors like economic change, labor-cost, wage gap, etc.

Be smart about mergers and acquisitions

For financially strong companies recession is the great time to buy assets cheap, as according to Warren Buffet’s dictrum “be greedy when others are fearful.”

Get to think of it: Are your business growth strategies aligned to the needs of the current time? Feel free to comment.

Excerpt and input provided by Manuel Guillermo, an executive search firm president and ceo.

Why do good performers leave the company?

In today’s aggressive business environment, companies are reliant upon their human assets to survive and thrive. When several talented employees suddenly have an exodus and aren’t giving specific reasons of why they are leaving, what could be the best move to stop the talent drain? A Harvard Business Review Case Study titled “Why are we losing all our good people“, written by Edward E. Lawler III for HBR June 2008 issue, lays out a fictional case study and have four experts comment on it.

Helen, Sambian Partners CEO, could not decipher whether it is a sign or just a coincidence that several talented employees have recently left her company. The latest precious talent to leave refused to tell why he was unhappy. Worse, the company’s self-administered employee surveys don’t reveal much.  When Helen learned about the next possible flight risk, she promotes the employee instantly. Could her panicked reaction stop the bleeding? How can she interpret why her firm struggles to keep its most valued talents?

Anna Pringle, the head of international people and organization capability for Microsoft, thinks that Helen should take a hard look at her human resource head, who failed to retain the firm’s talents. But even if the HR were more effective, Helen must also become an attentive listener by holding small, open discussions with key employees. F. Leigh Branham, the CEO of human resources consultancy Keeping the People, a human resources consultancy in Kansas, thinks that Helen must go beyond the firm’s self-conducted surveys and instead provide a forum where employees can speak openly about their discontent without fear of repercussions. Hiring a third-party to assist in surveys may also help particularly when employees may not feel safe telling the HR about their concerns.

Jim Cornelius, the chairman and CEO of Bristol-Myers Squibb, once faced workforce turmoil as interim CEO of the pharmaceutical company. Taking from his own experience, he advises Helen to hold a lot of face-to-face meetings with her senior managers from all departments to assure them that she understands their concerns. She also needs to define with them what success means for the company and how they will work together to achieve it, thus fixing the alignment of each and everyone’s direction. He also advises writing bi-monthly emails soliciting anonymous feedback, suggestions, complaints and ideas from anyone in the company.

Jean Martin, the executive director of the Corporate Executive Board’s leadership council, encourages Helen to create a mission and culture to which employees will feel connected and commited. Updating the company’s mission to get disenchanted employees back on track is also important. She explains that although people join companies for rational motives like better compansation and opportunities, they stay for emotional ones.

A nagging issue: What makes your most valuable employee happy? What can possibly make him leave? Feel free to leave a comment.

Excerpt and input provided by Manuel Guillermo, an executive search firm president and ceo.

KSearch Expands English Language Oratorical Tilt at the Lyceum University

KSearch Asia Consulting, Inc., a reputable executive search firm which supports mostly multinational companies and Philippine conglomerates for their executive and managerial requirements, continues to collaborate with the Lyceum University of the Philippines in their common drive to promote English language proficiency among the youth.  KSearch first launched this joint venture with the Lyceum in February 2008 through the vehicle of holding an oratorical contest among its university students enrolled in the College of International Relations with the prime objective of improving their English language proficiency.  What started then as a two-year pilot project confined to the College of International Relations, headed by Dean Ambassador Reynaldo O. Arcilla, has now been expanded to encompass the entire university system which will include the Manila, Batangas, Cavite and Calamba campuses.  The third such competition will be held on December 4, 2009 at the Jose P. Laurel Hall of Freedom, Lyceum Manila Campus.

The prestigious Lyceum University of the Philippines, founded in 1952 by the former President Jose P. Laurel, has nearly 11,000 student population just in its Manila campus. Its academic courses include International Relations, Legal Studies, Mass Communication, Tourism, Nursing, Computer Science, Accountancy, Management and Engineering, among others. The university’s motto of “teaching experience” is given credence, particularly in the College of International Relations, where it boasts among its faculty some of the highly respected retired ambassadors and Foreign Service Officers.

The competition continues to carry the overriding theme of “promoting the importance of English language proficiency to the success and competitiveness of Filipino workers and professionals”, usually yielding eight finalists from several hundreds who enter the qualifying rounds.  The process entails the participants being asked to write their own speeches within a four-hour time limit, but the speech itself, when delivered, is limited to 10 minutes.  Attractive cash prizes donated by KSearch, as well as recognition at the university, are given to the finalists. Additionally, KSearch, starting this third stint, is offering any three of the eight finalists to take an apprenticeship program in the company.

This English oratorical project of KSearch, in partnership with the Lyceum University of the Philippines, is one of its avenues for its corporate social responsibility programs.

**************

Input provided by:

Manuel R. Guillermo
President, KSearch Asia Consulting, Inc.

Manuel Guillermo’s Leadership Talk

I am honored to be here, to be sure, for being invited by Anand to kick-start the Citi’s Leadership Series, truly a great initiative on the part of your senior leadership. Leadership development is not only nice to have, but an absolute must, something that a high performing organization like Citigroup would have in its competitive arsenal. It definitely provides a competitive edge; and for some, even survival, in what has become a fiercely competitive environment for most businesses.

For so long, company managements were quick to announce that “people are our greatest assets”, but some, in reality, maintain their office copiers better than they build the capabilities of their people. Times have changed. Company managements are now more serious, more sincere in their commitment toward developing their people.

There are, of course, the icons in this field of leadership development, the likes of GE, Procter and Gamble, Nokia, McKinsey, Hindustan Unilever, Motorola, and yes, the Citibank. I have a very soft heart for Citibank, having been affiliated to the global group, Citicorp, sometime in my early career and I’ve always been fascinated with its much-coveted in-house executive development program here in the Philippines even as early as the early 60s. Citibank had even then something like a two-year program where they assigned their executive trainees to all parts of the bank, after which they were given functional leaderships in the bank.

It is not a coincidence that most of the banks in the Philippines were eventually headed by Citibank alumni, products of such management development programs. I’d like to, at the outset, also thank and commend Frances and James for taking the time to provide me both an overview and insights on your brand-new leadership series. You should all feel privileged that you have caring and progressive-minded senior management teams who have made this critical and wise decision to invest time and money to have organized a leadership development program, one with assured long-range benefits not only to the company but to every individual participant to this program.

I deem it crucial that this series addresses the entire first-level leaders of the company as opposed to merely sending individuals to training programs. In this manner, everyone will be exposed to the same new ideas and learning, ensuring that you are all in the “same page” or aboard the “same bus” every step of the way. That said, we should all commend Anand, Frances and James for entrenching leadership development as part of the culture of Citigroup Business Process Solutions. Now, why me, of all people, to address you? Well, let’s leave that point to Anand’s good judgment. Having been around in the corporate life for so many years now, growing from the ranks, and having hurdled work-life challenges in many countries, invariably in management and leadership roles, probably makes me a good candidate to be able to share with you, young leaders, some pointers, if you will. Of course, all of us leaders should keep in mind the inevitable changing contexts over time.

Everyone has some kind of a life-changing turning point in one’s life. Some of you would have had one, and others would have their own turn in due course. I had my crucial point in my professional life as early as the age of 22. I was then with a fairly sizeable finance company, one of the leaders in the then young finance industry but quite ahead of its time with the many novel financing services that we offered in the 60’s.

Bored with the bookkeeping nature of my work at the time, I became uneasy and started telling myself that “I didn’t go to La Salle to be merely crunching numbers”. I mustered enough courage to approach our company President, one who was regarded as a terror in the company, and with knees shaking I told him that “I could be of better use to the company if I were given higher responsibilities”. He was dumbfounded, unable to respond other than to nod his head and say after a sudden seizure of disbelief with what he heard “I’ll think about it, Manny”. Well, I thought that was that and went back to my bookkeeping work station and did not think that anything would come out of it. Roughly 3 to 4 months later, the President called me in and pointed me to our then fledgling credit card operation and said, “Manny, I want you to supervise that unit”. At that time, Diners and our CCC Credit Card were the first and only credit cards in the Philippines. I grew that business very quickly and within two years, I was rotated around the company to head a variety of revenue-generating business units.

NOW, WHAT ARE THE LESSONS TO BE LEARNED FROM THIS EPISODE? WE COULD PROBABLY POINT TO THE ELEMENTS OF INITIATIVE, COURAGE, AND A HEALTHY DOSAGE OF AMBITION, DON’T YOU THINK?

Note that through that one daring stroke of initiative, or being proactive, I had caused to create my own future.

Then I was sent out to manage our then first franchise operation in Davao, thus becoming a full-fledged manager at the young age of 24. Being new in the community, I tried very hard to look older than my age. I would always be in my coat and even resorted to sporting a pipe, without, of course, appearing ostentatious. The challenges included being accepted and respected in the Davao community. The fact that I was invited to teach at the Ateneo de Davao and was an active member of the Philippine Jaycees helped. It was during this stint that I had my first taste of letting someone go. I discovered that my Collection Manager padded his expenses by P200.00, based on which, I asked him to leave the company that very day. He was 42 and a father of two. At that age of pure idealism, one saw issues as either black or white. If I would encounter the same kind of infraction today, I would still fire the guy – mainly because it is an integrity issue – but I may not be so cocky sure I’d do it in the same day.

THE LEADERSHIP TRAITS AT PLAY IN THIS CASE MAY BE THAT OF “CHARACTER”, “CONVICTION” AND “STICKING TO ONE’S MORAL PRINCIPLES”.

The test of character would be true today as it was then.

After only two years in Davao, I was sent to our joint venture in Thailand to be its Country Manager at the ripe age of 26. Now, that was truly an overwhelming challenge – being in a completely different culture and where the English language was then horribly alien to the Thais during that time. Tough as it was, I had no choice but to learn to understand and speak the Thai language. Otherwise I simply would not have been effective in my role. Our Thai partner, the figurehead Managing Director, was a Harvard Business School graduate, a good friend of my company president in the Philippines, himself also an alumnus of Harvard Business School. After four years of successful operation, we found ourselves attracting Citicorp in New York as they bought into our Thai operation to the extent of 33%, making us a full-fledged affiliate and part of its global reporting system. The bright Citicorp country representatives I dealt with were likewise typically graduates of Harvard Business School. It dawned on me, then still 28, that if I were to be treated at same level by these guys, that I should also endeavor to enter the Harvard Business School. And so, in 1971, at 31, the joint venture sent me to Harvard Business School’s Program for Management Development, a shortened MBA for executives with at least 10 years of managerial experience. Shortly after I was back from Harvard, I was elected President of the Rotary Club of Bangkok South, then the second English speaking Rotary Club of Thailand where heads of Thai and multinational companies converged. Amazingly, we had 80 members, of which there were 17 nationalities among its members. Imagine a young 32-year-old Filipino leading 17 nationalities? And, I should point out that one of the toughest tests of leadership is to be able to lead those whom you have no control over. As it were, our club succeeded to execute significant high-profile community projects, thanks to the willing collaborations among the membership of 17 nationalities. All told, I managed our joint venture for 10 years, representing the 10-year management agreement we had with our Thai partners.

IN LEADERSHIP TERMS, WHAT WOULD HAVE STOOD OUT WERE THE ABILITY OR SENSITIVITY TO WORK WITH A DISTINCTLY DIFFERENT CULTURE AND LANGUAGE AND ADAPTING STRATEGIES THAT WORKED IN THAT PARTICULAR CULTURE.

The Thais are, in general, very entrepreneurial and somewhat individualistic. Taking advantage of those traits, I succeeded in introducing a corporate strategy, structure, systems, people development and business expansion programs, making sure, however, that they did not go against the grain of the Thai customs and cultural heritage.

I returned to the Philippines in 1975, by then already 35, and was quickly invited to join an emerging conglomerate, the Herdis Group, by the president of the company whom I knew when he was Managing Partner of SGV& Co. Being a conglomerate, it owned and managed many non-related businesses. One afternoon when I was reviewing one project study for what would later become the first LRT, the president called me in and introduced me to the president of the Sterling Airways from Denmark. Our president had just asked me to be the Marketing and Administration Vice President for the Sterling Airways Philippines, whose core business would be to bring in tourists from Japan, Taiwan, Hong Kong and Southeast Asia. I cautioned the president that I had no working foundation about airline operation, let alone, marketing, as I was essentially a finance person. He quickly retorted that that was the whole idea; that is he wanted a Marketing executive with a Finance background. So I spent two months in Denmark orienting myself all about the charter airline operation. I set up a representative office in Tokyo and hired three Japanese staff. I would find myself at the slightest excuse to be in Tokyo or Hong Kong, entertaining or being entertained by business partners. Well, it worked. I successfully brought in thousands of Japanese, Taiwanese, and Hong Kong people on back-to-back charter flights into the Philippines, using our French-made Caravelle aircrafts.

I SURMISE THAT THE LESSSON HERE , AMONG OTHERS, WAS ONE’S ABILITY TO INTEGRATE AND SYNTHESIZE MULTIPLE COMPETENCIES, TOWARD ACHIEVING A GOAL THAT IS GREATER THAN ITS PARTS. ONE SHOULD NOT BE A CAPTIVE TO ONE’S PREVIOUS EXPERIENCE, BUT BE OPEN TO EMBRACE CHANGE AND FLOURISH FROM IT.

After three years with the Herdis conglomerate, I joined the Management Consulting Group of SGV& Co. Because of my previous extensive foreign exposure, I was quickly typecast to join the so-called Foreign Legion team of SGV, invariably working on projects in developing countries that were funded by the World Bank and the Asian Development Bank. For 10 yeas I had experienced practically the entire spectrum of World Bank/ADB funded projects, encompassing project appraisal missions, supervision missions, post-evaluation missions and project execution covering urban development, airport development, fishery, electricity generation, plantation management, urban development, water supply, and institutional development in such places as Burma, Bangladesh, Thailand, Indonesia, and Malaysia. I experienced being a team member as well as being a Project Team Leader, leading 10 to 12 consultants of different nationalities.

I had interesting experiences of being under different leadership styles depending on the nationality of the project team leader which varied from Japanese to Korean to British to American to Scandinavian. One major turning point anew for me during the early stages of my SGV stint was when I headed for SGV the World Bank funded Water Supply Project in Surabaya, Indonesia, easily a one-hour flight by jet from Jakarta. We had at that time a senior partner of SGV who simultaneously supervised out of Jakarta as many as seven projects. He would meet us quarterly at a central point in Jakarta and there he would announce to all present that Manny Guillermo leads a project that was farthest away from him, yet he knew more about my project than anyone else’s project. This was because, without him asking for it, I made sure that I gave him, unfailingly, a weekly progress report. It was 1982; and the PC was still unheard of then. I would type my reports with my trusty portable Olympia typewriter.

IN EFFECT, I WAS CONSISTENTLY GIVING A FEEDBACK TO MY SENIOR PARTNER, MUCH OF IT ON MY INITIATIVE.

I like to think that that was what accelerated my admission to partnership in SGV. This Senior Partner nominated me to partnership, only after four years as a Manager, quite a feat for the much-coveted partnership in the firm. 6. In 1988, I was seconded, goaded by my own volition or initiative, by SGV to Andersen Consulting, now Accenture, in Lagos, Nigeria to head its fledgling Change Management Service practice area. I considered that move to be one of the best professional decisions I made, because then I became a full-fledged international consulting partner of Andersen Consulting.

Now again, I was thrust into a new cultural environment, pretty harsh and very confronting. But the real challenge, quite aside from the rather uncomfortable living conditions, was the very, very high professional standards of the Arthur Andersen and Andersen Consulting firms, led by an uncompromising and tough American from Kansas, who was assisted by expatriate partners from UK and the US, as well as by a few locally groomed Nigerian partners.

I had to prove that a Filipino professional could not only cope with their stringent professional standards, but could actually excel along with them. The Nigerians, in general, were never lacking in timidity. They were a very outspoken people and were quite disposed towards arguing any issue under the sun. I saw this same type of behavior among our Nigerian professional staff. Given the very rigorous selection standards the Arthur Andersen and Andersen Consulting applied, I had very bright Nigerian professional staff working under me, and this was true throughout the entire organization. I was thoroughly impressed with the high level of intelligence of the Nigerian professional staff. And, so in this sort of cultural environment, a leader had to be tough, consistently firm, unflinching, and goals directed.

I remember a Nigerian senior consultant under me whom I asked during one of our quarterly performance evaluation process what he would like to be in the future. Without batting an eyelash, without a moment of hesitation, he confidently said, “I would like to be the Managing Director of this firm”. I have not kept abreast with the firm, but if this guy is still with the firm, there is a good probability that he would be managing the firm by now, which, incidentally has since 2003 been absorbed into Ernst & Young.

To me, the stint with the Andersen Consulting in Lagos was a major turning point from a professional standpoint. I thoroughly learned a lot from their superior professional standards, particularly those of Andersen Consulting. There was so much training, so much learning to do. Globally, the Arthur Andersen and Andersen Consulting as a group spent as much as 8% of its gross revenues on training.

THIS WAS WHERE IT WAS INCULCATED UPON ME ABOUT THE IMPERATIVE OF TRAINING TOWARD PEOPLE DEVELOPMENT. NOT ONLY DID WE PROFESS THIS PHILOSOPHY TO OUR CLIENTS, WE WERE ACTUALLY BOUND BY IT AND APPLIED IT TO OURSELVES.

As most of you would know, Andersen Consulting is now called Accenture and has consistently maintained its strategic position as a high-performing-organization. In one of my consulting projects then for the Nigerian National Petroleum Corporation (the equivalent of our PNOC), we identified a number of US companies with excellent training philosophy and training centers to serve as a model for our Nigerian client. I actually brought four client senior executives to visit the likes of St. Charles, the training center of Arthur Andersen and Andersen Consulting, Motorola, IBM in New York, AllState Insurance, South Bell and McDonalds University. 7. As most of us did in Andersen Consulting, I took an early retirement at 55 in 1994 and was to be back to the Philippines for good after roughly 25 years of expatriate life. Why 55? Well, it was the best point where we enjoyed the most optimal retirement benefits — old enough to take it easy or still young enough to take on more challenges. 8. I was not ready to hang up my gloves, so to speak, as I still had so much so-called “fire in my belly” that I was only too anxious to take on new challenges.

After being with my friend’s executive search firm for roughly 4 years, we parted ways in 1999 and in the same year put up my own executive search firm in partnership with a former colleague from SGV. This firm was to be called KSearch Asia Consulting and the rest, one might say, is history. KSearch is now 8 years old and I am proud that I have developed a healthy group of high-potential successors whom I hired practically fresh after graduation. If one takes a closer view of KSearch, one may be tempted to refer to us as the big little company. We are at this point 20-strong but are clearly poised for continuous growth. We have practically everything that a big company does: a well articulated mission statement, a quantifiable vision statement that is constantly examined for its relevance, a tested search and selection methodology, competency-based compensation and benefits strategy, semi-annual performance evaluations, core curriculum training, competency enhancement programs, foreign trips, corporate social responsibility activities, and leadership development program.

THIS IS ALL BECAUSE WE HAVE DEFINED OURSELVES AS NO LESS THAN MANAGEMENT CONSULTANTS, IN WHICH CASE, THE PROFESSIONAL DEVELOPMENT OF OUR PEOPLE IS PARAMOUNT AND A PRIORITY.

I guess I have this bias because of my long consulting background. I know that if I have a formidable consultant-minded team, the superior execution of our client service will be assured. Consultants prosper or perish on the strength (or lack of) their client service.

If you are going to take away just one lesson from the many anecdotes that I have relayed to you this afternoon, I think that that should be the leadership aspect of Initiative. Put broadly, it’s through initiative that you create your own future. If you don’t, others will create it for you, the outcome of which you may not like, in any case.

As I told Frances and James, through the many people who worked with me and have assessed over the years, the one important trait that I look for and would always rank highest, it is Initiative. Initiative makes for being creative. If you possess a high level of initiative, you could gear yourself up to anticipate, address and manage change. Anticipating and managing change effectively is, after all, what leadership is much about — in any era.

Is It Greed 101 All Over Again?

We are at the edge of our wits.

With what looms as an imminent worldwide financial meltdown, precipitated by what is now deemed as an inevitably forthcoming recession in the United States, we begin to question why, despite the preponderance of highly skilled financial managers worldwide, these leaders have “managed” to cause what we now see as a financial quagmire of colossal proportion.  Why have the best of the best failed? The best bankers, the best investment houses, the best analysts: how and where did they fall short of so dismally, to say the least?

We find it puzzling because the more advanced economies are moved by the best-educated executives, managers, and leaders. Where did they go wrong? Finding ourselves confronted by what has evolved to be a gigantic crisis of confidence in the global financial system, it compels us all to want to analyze the problem and reflect, look back, look around, and look for answers. 

What had gone astray when Drexel Burnham Lambert, the once-dominant Wall Street investment banking firm, was driven into bankruptcy in February 1990? What was wrong when Enron, a giant multinational corporation collapsed in late 2001?  Enron was named by Fortune as “America’s Most Innovative Company” for six years in a row.  And now, we feel sorry for the innocent people who got caught up in the demise of Lehman Brothers.

What caused this mess afflicting the world’s financial markets? Workers being laid off, trade deficits skyrocketing, more and more companies turning belly-up, and people gone anxious mulling over which companies are going to get hit next. Who did what to whom? Where was the incompetence?

Seeing that technical competency and know-how are insufficient, we are tempted to provoke a collective soul-searching and inquire beyond the conventional prerequisites for what qualifies for a manager or a leader. 

Educational institutions have been providing industries competent and competitive talents. Around a quarter of all graduates in the world are in the field of business administration and related courses. Another quarter is in the field of mathematics, Information Technology, and IT-enabled services. If there is such an overflow of skills, knowledge and technical know-how, and if the educational systems and training institutions have prepared their graduates to be proficient in their respective fields, what could be missing in the overall behavioral makeup of those so-called financial icons? 

The current U.S.-triggered global financial crisis might have given more than a clue and points to where the top financial leaders and managers have failed.  The modern economies are propelled, to a great extent, by an insatiable surge for consumerism.  And who can deny that greed has reigned supreme when making corporate financial decisions – all in the interest of amassing more profits. When it comes to money versus principles, numbers are usually run first. Greed, hidden beneath a veneer of ingenious and sophisticated financial instruments that allowed superficial values to flourish, is arguably the culprit for the financial woes afflicting us all.

A good friend, Dr. Bernardo Villegas of the University of Asia and the Pacific, offers perhaps a “way out”, so to speak, from a narrow focus of mere technical training in educating our financial leaders.  He suggests that the new [effective] professional is one who has technical training, communication skills, social responsibility, and servant leadership qualities and one who cannot be satisfied with doing things in the right way but is equally concerned with doing the right things.

Whether or not the financial leaders have lost their sense of mission because of greed is now academic.  That the various government leaders of the Western countries have acted quickly to prevent further lasting widespread damage is to be commended, to be sure.  But where does it all end – this business of greed?

Clearly, going back to basics is in order: the basics of what is good and what is right.  We have seen how our corporate leaders’ accountabilities have been reduced to mere “figures” or “percentages”, more in the form of ROIs.  And when shortfalls against targets become imminent, their first recourse is to lay off several hundreds or thousands from the workforce.  So-called reengineered financial and organizational systems have also served to understate or even gloss over the fact that at the very core of the corporate leader is an emotion-laden human being, vulnerable to the luxurious trappings to which the modern executive can now seem unable to do without – all at the expense of the stakeholders.

Could it be that academic institutions and corporate training grounds have left no room for imbuing future leaders and managers with the importance of prudence, frugality, and even the virtues inherent in a sound sense of risk aversion?  In fact, it is disconcerting that the notion of “not taking any risk is the greater risk” has earned the status of becoming the mantra for the modern corporate leaders.

Periodic economic bubbles will continue to shake our lives, as though they have become inevitable. But while that is probably a constant that we have to face up to, do we not owe it to ourselves, and yes, to our succeeding generations, that we equip our economic and financial leaders with a better armament that is founded on something more profound and deep-seated that can mitigate greed?  Or is it naïve to even suggest that such human frailty can ever go away at all?

We cry for answers as we remain at the edge of our wits.

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The author :  Manuel R. Guillermo is the President of KSearch Asia Consulting, Inc., an executive search firm which supports the executive and managerial requirements of mostly multinational companies and large Philippine corporations.  Follow him on Twitter http://twitter.com/manuelguillermo
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KSearch team and school heads distribute the newly crafted workbooks for the St. Mary Elementary School student participants under the Synergeia program.

We Can Make a Difference, Small as We Are (KSearch’s Modest CSRs)

Start Them Young To Read and Be Better In Life

“The happy faces and excitement of the more than 100 Grade One students of the St. Mary Elementary School in Marikina City when receiving their brand new workbooks were so thrilling for us ourselves it would remain embedded in our fond memories, knowing that we have done something edifying…something really important…modest it may be,” exclaimed Connie Ross Suarez and Mae Ann Saguano, both search consultants of KSearch Asia Consulting, Inc.  A few months earlier preceding the distribution of the workbooks, a KSearch team headed by its senior management, Manny Guillermo and Karmeli Kintanar, working in close collaboration with Synergeia Foundation, launched in October 2006 a long-running partnership to help children in Nangka, Marikina do better in school, particularly in upgrading their reading and math skills.

The goal of the program is to enable students to read, write and understand simple English.  These skills are critical in developing the comprehension, communication, and thinking capabilities of children. By developing their English proficiency at a young age, these children will become better equipped for higher learning and for the competitive job market in the future.  All 170 grade one students are participating, including their parents and teachers.

 The program has to deal with, and address them to every extent possible, the typical shortfalls in basic education in public schools, such as:

 

• Large class size – average class size ranges from 60 to 70 per class
• Poverty – a good percentage drop out of school to help their families earn a living
• Lack of “pangarap” (dreams or ambition) – low motivation , complacent at staying where they are
• Poor/inadequate study habits –  spends time to help out families or merely hanging out uselessly
• Lack of reading materials – even if children had interest in reading, there are no available books in school or at home
• Lack of parent support and guidance — often through no fault of parents, unable to supervise or monitor progress (or lack of it), of their children’s work in school as all their waking time are consumed earning a living. Some parents are non-readers themselves, therefore unable to help their children with their homework.
• Teacher competence – retraining or retooling of teachers to cope with new teaching requirements was deemed essential to the success of the program

 In response, the KSearch program included the conduct of a school education summit, teacher training, parents’ training, performance assessment and the conduct of enrichment activities such as storytelling and sharing in collaboration with the Museo Pambata.

 Synergeia is a non-profit organization that aims to improve access of students to quality basic education.  It does this through systemic programs that are collaboratively undertaken with local governments, parents and the private sector.  Its Reading Proficiency Program serves as an entry point for making basic education as the centerpiece of the governance agenda of local governments.  Among others, it is implemented in the provinces of Bulacan, Nueva Viscaya, Negros Occidental, Benguet and Iloilo. The other participating LGUs are Lipa City in Batangas, San Fernando in Pampanga and Libertad, Antique.

Synergeia is governed by a Board of Trustees chaired by Fr. Bienvenido Nebres, S.J.  The other trustees are Mr. Washington Sycip, Bro. Rafe Donato, FSC, Mayor Jesse Robredo, Sec. Rafael Coscolluela, Dr. Antonio Torralba, Bro. Bob McGovern, and Mrs. Pilar Habito.  Its founder/CEO is Dr. Milwida M. Guevara, formerly Undersecretary of Finance and previously Country Head of the then Ford Foundation (Philippines).

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 English, Spoken and Written Properly – A Path to Professional Success

The primary objective was to spread the good word to the youth, especially to those enrolled in the more inexpensive universities, as opposed to the likes of Ateneo, La Salle, and the University of Asia and the Pacific, where communicating in good, proper English has long received priority attention and consequently has gained for them an enviable reputation for their graduates.

Being in the business of providing talents to corporate organizations, KSearch is one among the first to be critically alarmed with what has been widely observed as an unabated decline in the ability of our university graduates to express themselves in the English language at the level acceptable to corporate employers.

It was in such context that KSearch took the initiative in mid-2007 to partner with the Dean of International Relations of the Lyceum of Philippines University, Ambassador Reynaldo Arcilla, to sponsor initially a college-wide oratorical contest with the theme of highlighting the need to promote the proficiency in the use of the English language among the youth of the country, but starting the groundswell, hopefully, at this particular college where Dean Arcilla has been “notoriously” known to be doing precisely that, i.e., requiring the students under him to speak English.  

Already in its second year running, the competition has generated the much-desired awareness and urgency among the students of the Lyceum, as well as yielding truly excellent English speakers among the top seven winners of each year’s competition, who were judged according to being articulate and substantive and possessing the poise and self-confidence.  KSearch Managing Director Manny Guillermo chaired the panel of judges, composed of some of the faculty members of the university, among whom were Ambassadors Alfredo Almendrala, Jr. and Josue Villa.

It is heartening to note that in each of the two years of the competition, the cash prizes provided by KSearch turned out to be life-changing gestures as the first placer in the first year of the competition needed the money to be able to pay her tuition for the ensuing year, while the second year’s first placer very badly needed the money to alleviate a family’s economic crisis.

The ripple that KSearch stirred two years ago, in partnership with the Lyceum of the Philippines University, has loomed to create waves — considering that the university president, Mr. Roberto Laurel, upon witnessing the success of the oratorical project, has urged for broadening the competition to encompass the entire Lyceum educational system.  Making the whole scheme nationwide in due course may not be a far-fetched idea, it seems.

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The lessons derived from the above contributions attempt to illustrate that performing one’s role in Corporate Social Responsibility is not the monopoly of large multinationals and local conglomerates. One can be a small company, such as the 20-man KSearch Asia Consulting, Inc., and still make a difference.  The basic ingredients needed, obviously, is to want to care enough, take the initiative, and do something about it.

Above inputs provided by:

M. R. Guillermo, Managing Director and CEO
KSearch Asia Consulting, Inc.