SLID CEO Forum: ‘Walking a Tightrope’

Monday, 28 October 2013 01:03 -     - {{hitsCtrl.values.hits}}

By Kinita Shenoy “The role of a CEO is that of a balancing act. A good CEO is able to lead the company amidst the challenges of a demanding board, shareholders and an overworked staff. How does he do it?” Featuring a lively panel discussion, the SLID’s CEO forum for 2013 highlighted the delicate tightrope that the country’s CEOs had to walk by running their companies – handling their boards, customers, and employees whilst moulding strategy and direction. Delivering the opening remarks, SLID Chairman, Pravir Samarasinghe stated: “In its existence for over 13 years, the SLID has acted as an institute of directors for directors – spreading the message of good corporate governance as well as corporate stewardship and compliance to the regions. SLID now has over 550 members, mostly directors in the private sector and public listed companies.” Samarasinghe also outlined the Institute’s new varied tiers of membership, ranging from directors as fully-fledged members, senior managers reporting to directors and professionals as associates to, managers and post-graduate professionals as Affiliates. The panel featured Commercial Bank MD Ravi Dias, Hemas Holdings CEO Husein Esufally, Ceylon Tobacco Company MD/CEO Felicio Ferraz, and Dialog Axiata Director/CEO Dr Hans Wijayasuriya. Shamindra Kulamannage served as the panel’s moderator.   Unique leadership styles Touching upon the diversity of the panel, Kulamannage asked the members to define their own unique leadership style. Ravi Dias said that his approach involved a lot of interaction, adding that “a willingness to agree to disagree makes team work easier. It is important to identify diverse personalities and make the best of your team. Working with the board depends on how open you are and how good your relationships are. It is important to understand both your role and that of the board.” Esufally said that his role has been predominantly entrepreneurial, initially with a lack of formal structure or training. Due to this, he believes in understanding operational aspects in addition to the high level strategy. He relies on personal communication rather than emails and also like to get a first hand feel by walking around. Dr Wijayasuriya attributed the rapid growth of Axiata to a mix of inclusive innovation and successful competitive strategy. He added that leadership style is a mix of personal attributes and the situation at hand, and each leader’s personal style is different. He mentioned his approach to leadership and his view of the CEO’s role was largely summed out by verbalising the acronym CEO to be the Certainty Enabling Officer – which alluded to the central task of the CEO – which involves managing and handling uncertainty in the face of threats and opportunities. He emphasised that the head of the organisation needs to convert uncertainty in to certainty and at all time impart certainty via his communication to his team and stakeholders. Ferraz agreed, adding that leadership was also about managing various competing demands. Speaking of his own experience, he said there was “never a dull moment, with pressure from every angle. The beauty of the BAT school was managing to keep calm, and adhering to strict guidelines according to the mission and vision that empowers and leads every employee.” He added that this also makes the CEO’s job easier. “As a listed company, we need to balance the stakeholders. Results are most important; we are in this business to be profitable, but how we get there is important too. The people and the method are both key. With over 19 years in the industry, I’ve realised that a CEO needs to walk the talk, and behaviour needs to be concurrent with the vision and mission as you need to act as a role model.” Challenges of a family company Discussing the unique challenges of a family company, Esufally asserted that making the transition from management to ownership is one of the defining features of whether a family business can transcend a generation. He added that having to take yourself out of the game is one of the biggest challenges a family company can face and it can be a very emotional aspect. There is a gradual process from executive to manager to owner. Managing both the family and the company requires a great deal of understanding, and there needs to be a separation between the role of a manager and owner. Esufally explained that most advanced family businesses have a very clear and defined charter to handle both family and company and keep both running. Esufally extrapolated: “Our firm has several dos and don’ts along with a charter that governs our behaviour. The biggest defining rule is the family’s ethos. That determines how your associations within the organisations work. The charter is usually developed with outside help- there is a whole world of family business consultants. The fears, aspirations, successions have to be discussed and defined in terms of: (1) What family does within the company (2) How the family behaves as owners (3) Behaviour outside the company – philanthropic goals, succession plans.” Managing multiple stakeholders Addressing Commercial Bank CEO, Ravi Dias, Kulamannage queried, “As part of such a systemically important bank, you have to handle a variety of stakeholders. Which of these relationships is the most challenging?” Dias responded that unlike the other panellists, his company as a bank has a slightly different situation, as depositors bring in far more than investors. With over three million customers, it is difficult to pinpoint which is the most challenging although each is equally important and requires a fair amount of focus. Continuing on the challenges of juggling stakeholders, Dr. Wijayasuriya explained that the Dialog stakeholder is multifaceted spanning customers, the community at large, regulators and shareholders. “Since our diversification in 2005, from core telecommunications business to media and more recently to financial services, our regulatory relationships have expanded resulting in compliance and regulatory related imperatives taking up a position of significant importance in the company’s activities.” Further discussing concepts of competition and progress, Dr. Wijayasuriya added: “What we would term as telecommunications today, vis-à-vis the consumer, is transforming rapidly. While traditional competitors in the telecommunications sphere keep us busy in today’s context, they may be our partners in the future where real competition may come from the internet players. It is important to continuously review one’s perception and understanding of one’s business, consumers, competitors and partners in order to react quickly to changes in the environment, in redefining and restructuring one’s strategic relationships in a timely manner.” Handle with care Admitting that he was in a fairly controversial business, Ferraz said that it needed to be handled with care. He explained further, adding, “Despite producing and selling a product that poses risks to health, we have been a very responsible business from day one. It is up to the consumer whether to smoke or not. It is better to have regulated quality tobacco products rather than smuggled products that will respect no rules. If legal tobacco products are banned, smuggling and illicit quality would be rampant and consumers, governments and legal institutions would suffer.” Ferraz mentioned that with over 100 years of experience, the company knows how to handle its stakeholders. He then went on to mention the four Key Performance Indicators CTC adheres to, including shareholder value via profit, and keeping a focused brand portfolio. He also explained the importance of cash flow for higher returns. “We struggled in a difficult environment, yet adept management has made it possible to be the highest market capitalised listed company on the CSE.” An audience member posed a question to Ferraz from a human point of view; “You highlight the risk factor to your consumers, but is that enough? The product is harmful to the end consumer, irrespective of whether he chooses to use it or not.” The CTC Head responded: “We are telling the consumers exactly what they are getting. There is risk involved, but there is also pleasure. “A life without risk would you call life?” There are health risks all over. Air pollution, for example, kills more than 2.5 million people a year.” Succession plan The moderator questioned the Hemas CEO, “Discussing the transition underway, how do you prepare your succession plan?” Esufally thoughtfully responded saying, “We think it is in the interest of the organisation, the shareholders and the employees to have the best people running the business. We want the best person at the helm, or in any other position- there is no point in having an incompetent person just because they are a family member. Building potential leaders is one of the biggest challenges I face. Keeping talented people on our shores is a huge problem, as people look for bigger markets or better opportunities. Knowing that you will lose good people is a reality you have to face.” Further questioned whether an external, merit-chosen CEO would find it intimidating to have significant shareholders (group family members) under him, Esufally replied that family members would be directing strategy. Also, he saw no dichotomy in the next generation of family members reporting to a professional CEO who has been duly elected based on merit. The CEO’s biggest challenge The conversation then turned to each of the CEO’s biggest challenge in their career span. Commercial Bank CEO Dias then discussed the travails of being at the top. He explained that the bank’s success has come through processes, keeping customers happy and transaction costs down. “It is impossible to think of one particular challenge. These days, customers have a wide choice – it is important to make sure that they come to you. They have particular requirements too. So what we’ve done is build both a strong corporate and personal banking stream. In that way, we can switch our focus depending on the current climate. This year for example, we’ve focused more on corporate as opposed to retail.” Esufally agreed, adding that building world class businesses when you are a conglomerate is a challenge. When you have a set of businesses, finding a successor with exposure to a range of industries and taking the family dynamics into account is difficult but very important. Weighing in to the discussion, Ferraz mentioned a previous boss in another region, who was not used to direct distribution, and insisted on third-party distribution which would cut down 70% of employees. Ferraz described his dilemma, and how he overcame it, by suggesting that almost 90% of the laid-off employees could move to the third-party distributor, who would now be in need of their skills in their expanded operation. And that was what happened! Difficult 2007/8 era Dr. Wijayasuriya in his capacity as the Dialog Axiata Head, stated that the 2007/8 era was the most difficult challenge he had encountered. “It was a perfect storm. We had just completed an aggressive phase of expansion and diversification including three acquisitions. Midway in 2007, inflation and interest rates reached the 25-30% range on the backdrop of the escalation of the hostilities, resulting in a contraction of demand and consumer spending. Simultaneously tourism arrivals and hence our international roaming revenues dropped, fuel prices increased and a general economic slowdown followed on the backdrop of the global downturn early in 2008. In addition to these external factors, the industry went down the path of an irrational price war. Starting at a 10 billion profit in 2006 and 2007, we swung to a nine billion loss in 2009, a major shock to the system which called for the re-engineering of the business at multiple levels. Within six quarters we were back on track and profitable again closing 2010 at five billion. A fundamental decision we took at the inception of the downturn was that we would not let it impact our customer. Employees were kept informed throughout the process of re-engineering and our principal and public shareholders were very supportive since our approach to recovery was both constructive as well as transparent. The downsizing and voluntary resignation exercise which was an outcome of restructuring and business simplification was painful but employees participated positively with the view of returning the company to profitability. I learnt more in those 6 quarters than in my whole career since 1994.” Competitive advantage Kulamannage then directed a question to certain panel members, “Both Dialog and Commercial Bank have been voted at the top of their game. How do you sustain your performance and keep the others at bay? What is your competitive advantage?” Dias responded stating “We have to keep meeting the customers’ demands, especially when standards keep improving. The service needs to always be top, while we keep our costs down. In this way, we have arguably one the best cost to income ratios in the business. In the business of lending, we should not only grow the loan book but maintain quality.” Dr. Wijayasuriya agreed on some points, adding, “I would put it down to focus on key success criteria and a deep understanding of the consumer. Companies who acquire competitive advantage and do better than others are those who understand their customer better.” Gauging short-term success The moderator then brought in the concept of looking at success in the short-term – how can a firm’s success be gauged on a daily/weekly basis? Esufally answered: “You can differentiate lead indicators from lag indicators. In the FMCG industry, it’s things like market share, product development pipeline, and the ability to keep winning new customers? For another particular business it could be sales, for another a big account, or the execution of the development project. Most CEOs have one or two aspects - mostly gut instincts that tell them how things are going on a daily basis.” Dias responded differently, stating: “We track our deposits, our savings increase, our current account increase, and the loan book on a daily basis. Every person is watching the inflow/outflow for NPLs. For both commercial and other banks, tracking feedback daily has become habitual. Therefore timely remedial action could be taken by monitoring the progress on a daily basis.” In terms of the CTC, Ferraz responded that they do track volumes, cash flow, global brands and profit which is checked monthly and every quarter. He added that it is not only volume but profit, and whenever there are direct distributions, they check the daily sales. Building the dynamics of a good team Moving the discussion along to a human resources angle, Kulamannage stated: “We seem to glorify the CEO but there is a team behind it. How do you build or choose a good team?” Dias said: “For us, it’s irrelevant who the CEO is as long as the team is great. One of the main roles of the CEO is perhaps to get people to work together.” Dr. Wijayasuriya elaborated: “Diversity is the key for success. I used the composition and competence diversity of a rugby team as a model when I started as CEO in 1997. A winning team needs a mix of planning, defence, risk taking, aggression, coordination, teamwork and continuous coaching to move towards a goal. In selecting a team, it is important to infuse that diversity in terms of the innate skills, attitude and orientation within the leadership team. A winning team needs those who spot opportunities and are fast and tactical in capturing them. Likewise you also need those who plan ahead and set the foundations for attack, and also those who create sustainability, and convert short term wins into long term success. Teams featuring diversity in culture, background and experience are all the more richer. The CEO’s job is to leverage on diversity, bring out the best in each person and orchestrate combined action towards a single goal.” Esufally discussed the importance of goal making, saying: “You need to ask yourself where you see the firm in five years. Once that goal is clear, you need to look at your team and question how they factor in. You may need to bring in one or two outsiders with specialist skills and to a large extent help each team member figure out his individual role in reaching the goal. You need to help them acquire the knowledge and expertise – via training, etc. You need to ask what kind of experience/capability they require, and how you can help them get there.” The importance of failure Agreeing with Dias’ point, Ferraz added: “I don’t think the CEO is the most important; he is just the biggest facilitator. The biggest role is the bottom of the pyramid; people directly in contact with the consumer or creating the product in the factory. In my experience in the Caribbean, I had seven different nationalities in my team. We had to respect the differences and got extraordinary results by facilitating them.” Kulamannage then redirected the discussion to what a CEO’s approach to failure should be. Responding first, Dias mentioned: “We need to look at things in the long run. We need to take failure in our stride, and see whether other areas can compensate for one area’s loss. The ultimate goal should be to win the war, even though battles may be lost.” Dr. Wijayasuriya added that team dynamic at the point of failure is important. “The wrong thing to do is, to disguise failure into some form of ‘middle of the road success,’ it is important to acknowledge failure for what it is and also to hold yourself accountable for the failure or less than optimum outcome, while in the sequel always attributing success to your team.” Ferraz looked at failure by comparing the differences in cultural mindset. He explained that people in the region, both Indian and Sri Lankan leaders were afraid to speak of their failures, whereas US leaders for example, publicly discussed them almost as a mark of pride of what they had overcome. He also stated that this was important as people learn more from failure than success. Agreeing, Dr. Wijayasuriya said: “Even whilst interviewing possible candidates for a high-level job, I often ask them about their failures. A successful person is someone who has experienced failure and has overcome the failures and also learned from them” Esufally concurred, saying “No failures means the person has taken no risk. And risk is necessary in business.” Handling the CEO: Employee relationship The panel then discussed the role that employees’ differing viewpoints played in the CEO’s final decision. Esufally answered first, saying: “You always have to take other people’s viewpoints into account, but as a CEO you have to make the final decision. Having a herd mentality is detrimental and it is your job as a CEO to take the final call according to what you think is right.” Ferraz simply stated “You must treat others like you would like to be treated - be the boss you would want to have.” Expanding on the topic of the CEO-employee relationship, the panel discussed the gap that exists between the CEO and employees that do not report directly to him. Dr. Wijayasuriya said that this could be countered via a combination of structured tools such as skip level discussions as well as informal interactions. Dias agreed, adding that a good succession plan and sub-committees, along with meeting informally can also help. He stressed that there should never be a very big gap between the CEO and the senior teams. Kulamannage posed the next question to the panel, querying whether whilst facing a new project, they considered themselves entrepreneurs. Dr. Wijayasuriya answered that an entrepreneur was generally defined by an innate appetite for risk and the ability to create something big from scratch. “Generating entrepreneurial outcomes from within a large firm requires a tailored approach based on a ring – fenced environment for risk taking and innovation within the organisation. Potentially, an entrepreneurship strategy within a large organisation can deliver the best of both worlds. The innovation or entrepreneurship cells can generate the required culture and behaviour while the larger organisation can extend the required level of capital and other support which often alludes the bespoke entrepreneur. Large firms need to continue to invest in internal entrepreneurs in order to nurture innovation attributes.” Esufally said that from his perspective, it is important to encourage and manage the spirit of entrepreneurship, adding that it is the job of the board to put a few shackles on. Ferraz added, “We try to imbibe the entrepreneurial spirit in the business, and give employees the ability to carry out their enterprising inclinations as much as possible.” The elusive work-life balance An audience member asked the panel as to how they manage to balance their incredibly stressful role as a CEO and their personal lives, and the impact they have on each other. Dias responded that people need to learn to switch off, even though it may not always be practically possible. “Ensure time management is in play and you get out of office at a particular time. Spend time with family or hobbies. Personally I switch off as much as possible during weekends and holidays or the stress may really get to you.” Esufally suggested sports as a great way to unwind and de-stress. He added that Hemas actually has gyms and fitness centres within the company. He also mentioned the importance of managing technology, and to be able to turn off mobile phones, iPads and other devices during family time or relaxation. Dr. Wijayasuriya took a more theoretical point of view, advocating the differentiation between stretch and stress. “Stretch is working harder, pushing yourself against tight deadlines and expansive work volumes, whereas stress is mental pressure accruing most often from uncertainty or indecision. They need to be handled separately and differently and you need to be conscious of the two. Being in a position of responsibility doesn’t mean you need to be constantly stressed or stretched. The key is to delegate to reduce stretch and create space for yourself to address uncertainty and decision making challenges – hence reducing stress as well.” Walking the tightrope Questioned whether the role of the CEO gets lonely at the top, the panel light-heartedly replied that their jobs weren’t so bad. Dias responded: “If you’re uncomfortable with accountability, there are plenty of other jobs apart from CEO that you can aspire to. The main thing is responsibility to your team- making sure their happiness and careers are on track. In accountability, you’re responsible to your team, but accountable to your board and shareholders. That’s where it can get a little lonely.” Esufally added: “There are times when the CEO has to take a difficult call. It’s then that you need someone to talk to that you trust – a former mentor, a board member, perhaps your wife. This helps form a mind frame, bounce ideas, and come to a clear decision.” Further discussing the board’s role in decision making along with the CEO, Dr. Wijayasuriya responded that it’s usually a good idea to have a separation between board and management, so that the stakeholder views can be represented and addresses objectively. He added; “Personally, I believe in high level of board engagement, but I am also cognisant of my duty as a CEO and Executive Director to, in most cases, take a position backed with personal accountability, to the board for evaluation and consideration. I try and engage the board in decision making, but when necessary, I take a firm position on what I believe.” Ferraz jokingly added that it’s not just walking a tightrope, and that there is also some fun involved in being a CEO, and that he truly enjoys the challenges and situations it brings. Esufally concurred, saying that CEOs are also usually in their positions because they aspired to that job most of their lives. Dr. Wijayasuriya wrapped up the panellist’s session by stating that “walking the tightrope is by definition a balancing act – ranging from decision making to managing through a balanced scorecard and keeping away from extreme actions and positions.” The Forum was sponsored by Ceylon Pencil Company, Chatham Luxury Watches, IronOne Technologies and Senok Automobiles. Yes FM, Legends FM and MTV Sports joined hand with SLID as ‘Official Media Partners.’ It was announced that the next SLID event scheduled for 7 November would be the Entrepreneurs Forum and for the very first time SLID would be organising a Dinner Theatre scheduled for 25 November with excerpts from the finest from Broadway produced by the Workshop Players – ‘Memories from Broadway’.