Breaking boundaries: The Hemas way
Diversified conglomerate Hemas Holdings PLC is a business entity that stood out for making some bold decisions over the years. One such decision that caught attention was in 2013, when the family-managed company offered the Group CEO position to Steven Enderby, a complete outsider and the latest is the appointment of Kasturi Wilson to the driving seat, making her the first female Group CEO of a public quoted conglomerate in the country. While there were a number of other bold and creative decisions in between, these strategic moves by Hemas have paved the way for growth and a stronger balance sheet over the years. Despite their hectic schedules, Mirror Business was lucky enough to catch both Steven and Kasturi for an interview, where the duo shared their thoughts and sentiments on the past, present and future of Hemas Holdings. Following are the excerpts from the interview.
The move to bring into Hemas a complete outsider to steer the entity forward created quite a buzz back then. What has the journey been like, embracing that transition?
Steven: Not difficult. It played through well. The first six months for me were about contributing something meaningful for the business. There were aligned values with the owners and members within the business. I am a strong believer that if we have the values aligned, then the other elements would fall into place.
If you have different values to begin with, then there is a problem. One of the strengths of the group is the openness to outside thinking and ideas. Ten years before I got here, the group had been on a journey of listing the business and getting high-quality independent directors on the board.
Another plus about the group, we don’t pretend to know all the answers. We know we don’t have all the answers and that we are better off talking to people with different perspectives and experiences. That is pulled into the equation.
The mindset is to look outward for answers and have a great set of values. As long as you have those elements right, it is not that hard.
What have been the hurdles faced moving the entity to the next level?
Steven: Speed of change is a challenge that has always been around. When you are on this seat, the change is not taking place quickly enough but on the other seats, the question is why change is taking place so quickly.
Hemas changed the group in terms of its composition of business. That took longer than I would have liked to do. The rate of change is what was hard if at all.
Hemas has been rather innovative with key management decisions. What does that tell us about the manner in which the group chooses to carry out its operations?
Kasturi: I have been in the system for 18 years and bulk of the change I faced was because someone in the higher level was thinking progressively. It is all about merit and it is also about allowing people to navigate the corporate ship and move up the ladder.
One example is that when they were looking for a CIO, I was a boring accountant back then and was by Husein Esufally. The through process from the top was that I would bring about business outcomes and ask the right question.
The other creative decision taken was to change the designation to Chief Process Officer (CPO) that was a first in Sri Lanka. It is progressive, the way we think. As Steven said, we always reached out for assistance when needed, which was always with the intention of benchmarking with global best practices and pushing us to be better than what we are.
The other area, where I opine the company leadership is doing well, is that they do not keep a seat and profile the type of person they want. Instead, they list out the outcome wanted from the seat and offer the position to a person with the required competency.
Steven: I agree with that. You need to fundamentally recognise in any business that you cannot stand still; it is not an option. You have to find a way of moving forward and try to do things different. You have to be prepared to embrace that some outcome may be great and some not as expected. It is important to acknowledge that it is a must continue to test and push the boundaries of what can be achieved for the business.
The board always showcased the willingness to back the CEO. There is a recognition and desire to grow and for that new efforts are needed.
Steven brought in a series of initiatives to the group since he took over. What would be your areas of focus?
Kasturi: Steven brought about some key changes to the group. Some of them I will continue as they really worked well, such as doing new things, boldly changing and taking the company out of its comfort zone and being passionate about developing talent.
At Hemas, we always acknowledged that talent was important but he brought a rigor that we never had. Taking it on from here is something I will always battle with.
Steven brought about a purpose-led organisation, made us understand that it is not about only revenue and profits and that there is a bigger agenda.
We have always been purpose-led but we never thought of it that way. Now, every decision we make, every business we enter into, has to be something that relates to our purpose and help drive the purpose forward.
Innovation is another agenda that he brought to the table and that I will continue.
He has given me as a handout a portfolio, which makes sense for me to work on. We rationalised strong decisions in divesting; we acquired relevant businesses. Today, Hemas is not the business that it was six years ago. It is easier for us to drive growth from here. We are in very interesting spaces.
Innovation and digital is also an area he started and one that I will continue. So, nothing different from what Steven started; some of those are done with, some we have brought back and it is much about transforming and extracting more.
Year 2020 changed overnight the dynamics in which entities operate. With Hemas representing diverse sectors, what are the areas that require revamping and reassessment to adjust to the unforeseen new scenario?
Steven: It has been a remarkable year. Everything ever taken for granted and thought to be permanent, be in terms of the thought process or response to a problem, are all out of the window. The realisation is that we can take decisions much quicker and respond to situations much faster than what we thought was possible.
It is also an encouragement for us to take some of the harder decisions. In many respects, what crisis does for everyone is that it sharpens you up.
Kasturi: It showed us the fighters we were. We saw that the things we took for granted we could do no more. We did see this one year back as well after the 21/4 incident. The ongoing crisis has given us further opportunities in the spaces we are in. Opportunities to be more agile in how we think and bolder in how we make our decisions.
What are the sectors the group would focus on, so that it continues towards a positive growth trajectory?
Kasturi: So the gift Steven has given me is a rationalised sector. We can proudly say that we are the leaders in healthcare, a domestic expert in consumer brands and we a mobility sector that supports everything we do here. Hemas touches most families in Sri Lanka and we would be building on that.
What are the challenges identified in maintaining the momentum?
Steven: It is about keeping pace with the opportunity that surrounds you. All of a sudden we are living through a remarkable period. In the recent history known to mankind, there has never been a dramatic impact on the consumer. It is about who can think and get that sense where the consumer is at and who can look at what the consumer is looking for today, as it is different to what it was in the beginning of the year.
In a Covid-19-impacted world, healthcare means more than what it meant six months ago. The concerns and anxiety for every man, woman and child in the country, are different and for us to answer those needs is what it is all about.
The change has opened so many opportunities. One of the challenges for Kasturi and the team going forward is where can they play into those spaces. All of a sudden there is an awful lot and everything cannot be done. It is about maximising within this whole new environment.
Then you combine that with political change. There is much higher certainty about political and economic direction in the next few years. A lot is falling into line, which is positive.
Getting into the company specifics, Hemas raised Rs.4 billion via a rights issue in 2015. How has that been utilised?
Steven: The purchase of Atlas about two and a half years ago was from that fund – a key step i n broadening our consumer portfolio. We now have a market leading brand in the school and office stationary space.
At the same time, we have been growing many of our other businesses and a major event is the opening of the Morison Factory out of Homagama, which is the first EU Gmp-compliant pharmaceutical plant in the country.
It is our desire to build and develop our portfolio within the healthcare space to ensure that everyone within the country has access t o high-quality affordable pharmaceutical products.
Those are the two main areas where we have spent our money.
The leisure business hasn’t delivered as expected. What are the plans in this regard, also given that the local tourism sector was hit with a double whammy in just a year?
Steven: Following the 21/7 setback, till March 2020, the industry was growing dramatically. For us, leisure is not a very large part of what we do, either from an invested capital or a revenue perspective.
So, as a direct consequence of the portfolio choices made, we are not overexposed. We also have a very strong balance sheet. Therefore, we are in a position where we can continue to ride out the storm and see where opportunities open up in the future.
Plans were conceptualised to increase the number of hospitals under the Hemas brand. What is the progress in that regard?
Steven: The best operating model for us was to build and grow the Wattala and Talawatugoda facilities. We increased the number of beds, services and therapeutic activities of these hospitals. It was our desire to do a better job by focusing on building real centres of excellence across Wattala and Talawatugoda. It is about getting more capital at work and building excellence in those hospitals.
Kasturi: We have not taken the accelerator out from there and we will increase our offerings t o patients, which is still i n the agenda.
What is happening to the partnership with SLINTEC?
Steven: A great element of our relationship with SLINTEC is the new Morisons plant located at the SLINTEC park. We have a memorandum of understanding (MOU) with SLINTEC, to assist us with the R&D requirement at Morisons.
Six months from the opening, we hope to be in full commercial production. For us, it is about exploring the innovation capabilities so that we can look at producing pharmaceuticals within Sri Lanka. It is an important relationship and something that we
would want to build on going forward.
How is the FMCG arm coping with the decline in demand due to COVID-19?
Kasturi: We all expected a dip but the numbers said otherwise. The company struggled with getting back to production while maintaining strict safety measures.
Getting back on track t ook about a month, after which we ramped up into full production, adhering to the MOH guideline. During lockdown, most of the channels were blocked and our observation is an increasing consumer uptake, which is growing monthon-month.
Also, what are the plans to tackle the sachet ban that comes into effect in 2021?
Steven: The impact on the environment is something that we take very seriously as a group. We are actively looking to push t his sustainability agenda within the organisation. The decision by t he government is a good challenge and we now need to work towards responding to it. To an extent, it is about embracing the decision, engaging with the government and making sure we have a sensible trajectory. Collectively, we need to see what the right timeline is for this.
Both within Sri Lanka and globally, significant progress is being made i n terms of alternative packaging material and biodegradable plastics as well. There are options. Therefore, needed is good engagement with the government.
Kasturi: This is an intention. For most corporates, such as Hemas, it has been an agenda. However, regionally and globally, it has been a journey to come out of it. Typically it would take about four to six years to get out of it, which is why it is important to have the discussion and embrace best practices.
Timeline-wise, t he government and industry have to work together to set a realistic deadline.
What is the take on the government’s new policies, namely the import ban?
Steven: The ban has come about as a direct consequence of what COVID has done to the economy and the foreign exchange implication. From where I sit, all evidence points to state t hat t he government’s decisions are perfectly sensible. They have found ways and are open to discussion. Across our business we haven’t seen it as a major concern at all.
Any regional expansion plans Hemas will be embarking on?
Kasturi: Sri Lanka has been managed better in the pandemic although the region is certainly more affected. Having said that, the agenda of regional expansion is still on but we have to wait and see how the recovery takes place. It depends on the recovery process, which we have no certainty about.
What is the short, medium-term outlook for the entity?
Kasturi: What we learnt, not only during COVID but also when we were unfairly bashed, following the 21/4 incident, is that we have a set of soldiers who are resilient. We saw the recovery picking up and then COVID happened. The trajectory was in a good direction.
COVID taught us that we can be agile, if we want to, be more efficient and embrace digital when necessary. We will build on that.
Medium term looks better than what we expected, purely because those lessons along with the trajectory that we had will get us there.
The mindset is to look outward for answers and have a great set of values. As long as you have those elements right, it is not that hard – HEMAS HOLDINGS OUTGOING GROUP CHIEF EXECUTIVE OFFICER STEVEN ENDERBY
I have been in the system for 18 years and bulk of the change I faced was because someone in the higher level was thinking progressively. It is all about merit and it is also about allowing people to navigate the corporate ship and move up the ladder – HEMAS HOLDINGS INCOMING GROUP CHIEF EXECUTIVE OFFICER KASTURI WILSON
What is a key takeaway from Steven’s stint as group chief?
Kasturi: For us he was the first non-family member, who came as a boss. He taught us how to own empowerment. He is one of those people who would ask the right questions but not prescribe an answer to the managing directors, not that he didn’t know to prescribe it but it was his way of building talent.
His passion of building talent was his way of building leaders. That was an essence he brought and one that I would have to continue to practice in the way I know. I wouldn’t know to do it the way Steven did.
He brought the wellness culture and we embraced it wholeheartedly. He changed our ways of thinking.
Last is that he does some radical things. He brought an outside-in perspective. When he is a believer of certain things, he won’t budge from it, so we have to just work around that. It ended up being successful.
There is also a thing of being non-political. He came from out, so he didn’t know the baggage and there were no politics involved.
Any message to Kasturi as you pass on the steering wheel?
Steven: Be Kasturi. I am a great believer in the uniqueness of human beings and each one of us is a result of our upbringing, DNA, experiences, education and others. So, be yourself and be what you believe. Leadership change is ultimately about how do you refresh and start to build on what has already been built on.