Phl’s top CEOs: Part­ner up or part ways

The Philippine Star - - BUSINESS - ATTY. ALEX B. CABR­ERA

(First of two parts)

Part­ner­ships, such as the struc­ture we have in our firm, are tougher to gov­ern than reg­u­lar cor­po­ra­tions. In cor­po­ra­tions, the ma­jor­ity owner calls the shots in big de­ci­sions, and for day-to-day busi­ness, much power is vested on the CEO.

In the firm, re­gard­less of cap­i­tal or own­er­ship, it’s a “one part­ner, one vote” pol­icy. Maybe we re­spect each one’s more valu­able in­vest­ment of one’s own per­son – as an in­dus­trial part­ner. So de­ci­sions, if not the re­sult of a show of hands, is pretty much the re­sult of a con­sen­sus. I think that rea­son is on equal foot­ing with lead­er­ship when it comes to a play­ground where each one’s opin­ion counts.

I must ad­mit our firm’s part­ner­ship busi­ness model is not for ev­ery­one or for all oc­ca­sions. Part­ner­ships do hap­pen in forms that may be loose or tai­lor-fit, tem­po­rary or al­most per­ma­nent, pro­gres­sive or pro­gress­ing at break­neck speed. It will be fair to say that the pace of change of com­merce and man’s way of life owe much to part­ner­ships.

We had the re­cent op­por­tu­nity to talk to some of the coun­try’s top CEOs for the an­nual MAP PwC CEO Sur­vey. We did this as knowl­edge part­ner for the Man­age­ment As­so­ci­a­tion of the Philip­pines’ (MAP) 15th In­ter­na­tional CEO Con­fer­ence, which takes on the role of part­ner­ships in a fast-growth en­vi­ron­ment in the ASEAN.

I can­not miss shar­ing with you the in­sights of the CEOs we in­ter­viewed – on part­ner­ships, and on how to suc­ceed – be­cause what they shared are bat­tle-tested prac­tices that yielded the ad­van­tage they sought. Read on. 1. We buy a ma­jor­ity stake for con­trol, so that if it doesn’t

work, we can take them out. — MVP, Metro Pa­cific It’s not about im­pos­ing au­thor­ity but keep­ing up with the bench­marks of per­for­mance set for the group as a whole. MVP says when the man­age­ment team of an in­vestee com­pany is do­ing well, they are left alone, ex­cept for su­per­vi­sion on two key ar­eas: strate­gic di­rec­tion (that is, their plans should sync with First Pa­cific’s vi­sion for the com­pany) and fi­nan­cial gov­er­nance (dis­clo­sures are okay and num­bers re­ported are truth­ful).

Mak­ing sure they have con­trol­ling in­ter­est is one of the lessons from their part­ner­ships that “failed” or did not meet their ex­pec­ta­tions. As a mi­nor­ity, they need to deal first with the others be­fore they get to the prob­lem, if they get there at all. So they would rather be in a po­si­tion to come in to fix things if it’s not work­ing out. And the last re­course is to buy out the part­ner at a jus­ti­fi­able price. 2. If you can take ad­van­tage of what they built, do not

com­pete head on. Part­ner with them. — Ernest Cu, Globe Not too long ago, the telco in­dus­try’s rev­enues were all based on voice, SMS, and in­ter­na­tional calls. To­day, all those are de­clin­ing and are be­ing re­placed by a sin­gu­lar prod­uct, which is data. Their own net­work is be­ing used by dis­rup­tors. The telco com­pany’s pri­mary rev­enue stream has been dis­rupted by free ser­vices such as mes­sen­ger apps. What do you do?

Globe finds their place in an ecosys­tem that now merely in­cludes their own net­work. Face­book, the dis­rup­tor and com­peti­tor, is now Globe’s part­ner as they use Face­book to be able to spur the use of Face­book on the mo­bile, which later on led to mas­sive use of mo­bile data, al­low­ing Globe to cor­ner this pro­por­tion­ate ma­jor­ity of the users of mo­bile data. Another part­ner­ship ex­am­ple cited by Ernest is on mu­sic. While Globe is not keen on build­ing com­pe­tence to de­velop mu­sic apps, Ernest says “what we have is a great abil­ity to mar­ket and build a con­sumer base for the sub­scrip­tion fees of that ser­vice—so we part­ner with Spo­tify.” Globe now takes pride in help­ing change the way peo­ple con­sume mu­sic in the coun­try and help record la­bels in the Philip­pines get a piece of the ac­tion on ev­ery stream. 3. A part­ner must pos­i­tively in­flu­ence the pace of

growth. — Tessie Sy-Co­son, SM In­vest­ments Corp. She re­lates that the first Shoe­mart was a part­ner­ship with the owner of the lot in down­town Manila where the first Shoe­mart de­part­ment store was erected in 1958. When Tessie’s fa­ther wanted to ex­pand into Makati, the part­ner did not want to be­cause he is not as ag­gres­sive. So they parted ways.

How­ever, they can have part­ners who are more ag­gres­sive than them, and that is a pos­i­tive thing. If they feel they can keep up with the pace, they will be to­gether; if not, they will sep­a­rate.

As a listed com­pany, how­ever, she ad­mits that their in­vestors are their part­ners who con­stantly push them to per­form and do the num­bers. With­out this mo­ti­va­tion com­ing from public in­vestors, she ad­mits that they may have fewer branches than what they presently have. In the process, they are able to push their good sup­pli­ers to scale up. Ac­cord­ing to her, scal­ing up is the name of the game. 4. Find a kin­dred spirit in your part­ner. — Riza Man­tar­ing, Sun Life Fi­nan­cial Philip­pines

Fi­nan­cial lit­er­acy and fi­nan­cial in­clu­sion seem to be buzz­words. It all gets real though for a fam­ily that ac­quires a hum­ble home but noth­ing much is left for them af­ter pay­ing the amor­ti­za­tion. Or worse, they lose their bread­win­ner to tragedy.

For an en­tity that has been around for 122 years, Riza nar­rates that they are find­ing fresh ap­proaches to part­ner­ships, with some fresh ideas com­ing from the part­ners them­selves. For ex­am­ple, they de­vel­oped a prod­uct to com­ple­ment mid­dleto low-cost houses cham­pi­oned by 8990. The buyer of the house and lot, while pay­ing for the house and the mort­gage redemp­tion in­sur­ance, will not be wiped out af­ter full pay­ment. They have a pot of money, re­tire­ment money if you will, to build on and af­ter fully pay­ing up for the prop­erty.

Riza says the value of a part­ner who is a trusted in­flu­encer can­not be un­der­es­ti­mated. But what re­ally makes the part­ner­ship gel like a glue is that the part­ners have the same ad­vo­cacy over the same mar­ket seg­ment. Apart from com­mon pur­pose, for the part­ner, the fresh in­vest­ment/ in­sur­ance prod­uct is a so­lu­tion point for its clients. For the com­pany Riza leads, it is mar­ket pen­e­tra­tion. Read more about this next Sun­day...

** * Alexan­der B. Cabr­era is the chair­man and se­nior part­ner of Isla Li­pana & Co./PwC Philip­pines. He also chairs the Tax Com­mit­tee of the Man­age­ment As­so­ci­a­tion of the Philip­pines (MAP). Email your com­ments and ques­tions to aseasyasABC@ph.pwc.com. This con­tent is for gen­eral in­for­ma­tion pur­poses only, and should not be used as a sub­sti­tute for con­sul­ta­tion with pro­fes­sional ad­vi­sors.

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