CEO award - more than just high recognition

AIRASIA boss Datuk Tony Fernandes is a well-known entrepreneur, with a string of awards behind his name, for making his popular low-cost carrier a household name in Malaysia and the region.

However, there is one award that Fernandes won in 2002-2003, that he will always remember well - the Business Times-sponsored Malaysian CEO of the Year Award, which he won when piloting his then fledgling carrier to greater heights.

"Winning the award then definitely raised AirAsia's and my profile. The timing was good as we went from a company viewed with scepticism to a widely accepted concept for air travel," he said in an interview.

Fernan-des rose to prominence by turning AirAsia from a fledgling government-linked commercial airline into a highly successful public-listed company.

The CEO of the Year Award recognised the fact that although AirAsia was a small airline when it first took off, it was starting to make a difference with Fernandes at the helm. It also noted that the unique management style practised by him certainly differentiated its business from others in the industry.

The annual award generally recognises high quality entrepreneurial and managerial expertise and performance among leaders of Malaysian corporations.

Fernandes, however, said that while CEOs of corporations win awards such as the one awarded by Business Times, there is more to gaining such recognition.

"For me, it is not just the CEO himself who gains. When I won the award, it was also received on behalf of my team and company and it spurred me to do more for them. You are only as good as your team," he said.
"Award winners must also share their experiences with others to enable more people to gain perspectives from them."

On suggestions that past winners of the CEO of the Year Award form an alumni to share their experiences with budding corporate leaders and give back to society and the corporate world, Fernandes said it was a good idea, but such an alumni must have specific purposes.

"It would be a good idea to have a get-together of past winners of the CEO of the Year Award at least once a year, but it has to have a purpose. We should use the group to share experiences for the benefit of others," he said.

He said his personal choice of activity for such an alumni would be to speak to schoolchildren and students to give them perspectives on career choices early in life and guide them to where they want to go in their vocation.

"I find it hard to lecture to others, but to exchange views with young kids would be a good thing," he added.

"My advice to corporate leaders aspiring to be award winners is that you are only as good as your team. That is why it is important that you have a strong team and because of the team you are also able to win an award."

Key components of effective strategic management

DEVELOPMENT MANAGEMENT (Part V)

MANY organisations still prefer to be measured solely on their bottomline performance, taking cognisance mainly of marketing, financial and operation management to represent the core operations of their business.

However, there is a growing number of farsighted and successful organisations incorporating "development management" as part and parcel of their mainstream management activity.

The predominant components of development management include, human asset management, research and development (R&D) and management information systems.

Human Asset Management

Human asset can be an enigma to an organisation in that it can be the most gratifying asset or the most insidious liability. Therefore human asset management has become particularly challenging for both local and international organisations.

There is an increasing awareness of how important human resources are to effective strategic management. They can be more involved and proactive to all activities undertaken by the organisation to ensure that actual operations conform as planned.

For the staff to be involved, they have to be motivated. Management must influence their staff convincingly without prejudice to work hard in order to accomplish specific objectives.

Communication plays a major component in motivation. Two-way communication is vital in gaining support for the organisation's objectives and policies. It also encourages staff to voice their concerns, reveal their problems, give recommendations and provide possible suggestions to solutions.

The next step after communication would be empowerment. A term which suggests the need to go beyond just communication; to that of decision-making. Therefore, authority must be given to this function to be effective, and the decision-making can be contained between the set "upper and lower" acceptable limits.

Without doubt, training of staff is absolutely important and must be continuous. Training should cover induction and on-the-job training on various new skills. With the ever frequent development changes in business practices, the workforce must be trained and retrained on new technology and methods of doing business in order to remain competent, competitive and relevant.

Research and Development

Not many organisations conduct R&D. Organisations who invest in R&D strongly believe that it will lead to producing superior products and services that would give them the competitive edge to address the changing consumer tastes and needs, new technologies, shortened product life cycles, and aggravated domestic and global competition.

The role of R&D in an organisation should support the execution of business, help launch new business, improve product quality, develop new products, improve production efficiency, and advance as well as expand the organisation's technological capabilities.

The cost for R&D activities may vary by company and industry. However, it would be prudent that total R&D costs do not exceed the manufacturing and marketing start-up costs.

Management Information Services

Information links all business functions and provide the basis for all business decisions. An effective management information system collects, codes, stores, syntheses and produces customised information that addresses and improves important operating and strategic issues.

Data collected from the internal functional activities and the external business economic and technological environment are integrated to support management decisions.

Data can only become relevant if they are evaluated, filtered, condensed, analysed and arranged for a specific purpose/problem in a given time frame.

The benefits of an effective management system are improved understanding of business operations, improved communication, a better analysis of issues and more informed decision-making.

As business organisations are becoming more complex, decentralised and globally dispersed, the role of information systems is growing more in importance. Management information systems allow organisations to establish distinctive competencies in their respective industries.

Therefore, the importance of development management, though supportive in nature to an organisation's operations, cannot and should not be underscored.

Know buying trends to stay ahead

MARKETING MANAGEMENT
(Part III)

MARKETING management is the process of defining, anticipating, creating and fulfilling customer needs and wants for products and services. Therefore serious attention is required to focus on the marketing functions, to identify and evaluate the marketing strengths and weaknesses of an organisation, for any appropriate response for change to address customer needs and wants.

It starts with the products and services planning, which includes test marketing, brand positioning, design and packaging, features and options, and quality and customer service.

Test marketing is practised more often by consumer-oriented organisations than by industrial-oriented organisations, and normally conducted in shopping malls, hyper/supermarkets and public areas with high pedestrian traffic. It is effective in forecasting sales potential as well as avoiding possible losses from new products and services.

Selling of products and services must ensure that varying marketing activities such as personal selling and sales force management; advertising, sales promotions and publicity; and dealer and customer relations are well synchronised.

The effectiveness of the said selling activities may vary for different consumer and industrial products and services.

The current practice of selling through the Internet has been eating into sales of the traditional retailing marketing organisations. This trend is dramatically changing how business is done to stay relevant.

Pricing is a vital function of marketing management. Although the pricing of products and services is initially internally generated, it is also externally strongly influenced by customers, competitors, suppliers, distributors, and even the government. The latter may impose constraints on price-fixing and price discrimination on select products and services.

Also, it is necessary for an organisation to view pricing from both a short-run and a long-term perspective to be able to adjust to the vagaries of economic, political, social, technological and natural environmental trends.

Most "manufacturing" organisations do not market their products and services directly to their customers.

Even though marketing directly can often yield greater returns, such organisations may not possess the relevant expertise nor the financial resources for any forward marketing strategies. This is because distribution would include inventory and warehousing, transportation to sales territories, and wholesaling and retailing. Hence, the need to engage distributors, such as wholesalers, retailers, brokers, agents and vendors, among others. Selection of type and number of distributors should be determined on costs, control, reliability and efficiency.

Market research is the systematic collation, recording and analysis of information on issues relating to the marketing of products and services. It is essential for all marketing activity as it can reveal the strengths and shortcomings of the products and services, and the total viability of the organisation's marketing process.

Analysis of the research findings, if professionally executed, can indicate the direction and changes to be made for better performance and profits.

Another significant aspect of market research is conducting customer surveys to develop customer demographic and psychographic profiles and determine the optimal market segmentation and positioning strategies.

It is important to understand customer needs, desires and wants, by constantly monitoring present and potential buying habits and patterns. Only through these efforts can an organisation try to stay ahead of the competition.

Finally, it is critical to analyse the total costs, benefits and risks associated with all the marketing managing decisions before implementing marketing programme(s).

Financial stature is best measure of a company

FINANCIAL MANAGEMENT (Part II)


The three main decisions the Financial Management must undertake are: (a) Investment decisions (b) Financing decisions and (c) Dividend decisions.

The investment decisions would entail the allocation and reallocation of capital and resources to projects, products/services, assets and the functional activities of an organisation. This form of capital budgeting is required to translate strategic planning into strategic implementation.

Financing decisions determine the preferred capital structure for the organisation and the different methods to raise capital. Capital could be raised by selling stocks, taking loans, selling assets or a combination of the three. The financing decisions for working capital must take into consideration both short-term and long-term requirements.

Dividend decisions determine the amount of funds paid out to the stockholders, compared with the amount retained in the organisation. Dividend issues are concerned with the percentage of earnings paid to stockholders, the consistency of dividends being paid over time and the repurchase or issuance of stock.

Financial ratios are "dip-stick" readings of an organisation's financial performance at any point in time. It's true value is not in the individual ratio itself, but when it is viewed relatively under three separate circumstances.


How has the ratio changed over time - this provides an avenue of evaluating historical trends. It can be observed whether each ratio has been increasing, decreasing or remaining constant over time.


How does the ratio compare with competitors - financial ratio analysis among direct competitions can reveal a more accurate scenario. For example, an organisation's profitability ratio is moving up over time, but it may be trending down relative to its leading competitor. This is a cause for concern.


How does the ratio compare with the industry - for example, if an organisation may appear to have an impressive growth ratio, it may pale when compared to industry norms and standards.


Financial ratios are grouped into five categories:

Liquidity ratio - measures an organisation's ability to meet short-term obligations.

Leverage ratio - measures the extent to which an organisation has been financed by debt.

Activity ratio - measures how effectively an organisation is utilising its resources.

Profitability ratio - measures the organisation's overall effectiveness on returns generated by investment and sales.

Growth ratio - measures the organisation's ability to maintain its position in the industry and economy.


The organisation's financial performance is not only dependent on the functions of finance, but is also influenced by the functional activities of the company; competitors, customers, creditors and suppliers/distributors; and the economic, political, social, technological, and natural environments as well.


By Bernard Thamboo, Business Times

CEO credits mum for business acumen

Tenaga Nasional Bhd president and chief executive officer Datuk Seri Che Khalib Mohamad Noh attributes his business acumen to his mother.

An accountant by qualification, it was Che Khalib's mother who gave him his first taste of running a business.

"My dad passed away when I was 13 years old. So my uneducated mother, living on my father's pension, decided to start a small home business selling ais kacang and laksa," he said.

The business then grew into a sundry shop in his hometown in Bayan Lepas.

"As the second child of four, I would help my mother with the business. She would also give me things to sell at school to pick up business skills," he said.

Known to many at TNB as the kedekut (stingy) CEO, Che Khalib said his mother played a pivotal role in developing his business skills.

Che Khalib became TNB's head in July 2004, just as TNB was searching for a new CEO and the Prime Minister was unveiling the GLC Transformation Programme.

"While some believe I was chosen by the finance minister, TNB had engaged an international head hunting agency for its search. Several candidates, including myself, were identified and interviewed by the board members," he said.

His appointment drew many congratulatory wishes and also an equal number of curious comments.

"I still remember Tan Sri Chua Ma Yu asking me why I chose TNB instead of opting for another GLC. TNB is not an easy business due to its complexity in terms of managing expectations of leaders, consumers, and staff.

"I wanted to take on this challenge because it is the only time I can repay the government. I'm a direct beneficiary of government assistance and wouldn't have been able to pursue my education as I came from a poor family," he said.

Che Khalib took on the job with sheer determination to see a change in TNB. His basic rules are; he does not want to leave the company feeling embarrassed having worked there and adhering to three guiding principles which are discipline, integrity and dedication.

Since becoming the CEO, TNB has rolled out its 20-year strategic plan and gone on to receive many accolades including the Prime Minister's Award.

However, the father of five, without hesitation, says his greatest joy is spending time with his family. "I don't go for teh tarik or golf sessions in my free time. I'd rather spend it with the family because I don't want to miss seeing my children grow," he said.

Excellence at the top

MALAYSIA CEO OF THE YEAR

THE Malaysia's CEO of the Year award was launched in 1994 as a result of the collaboration between Business Times and American Express.

The idea was mooted by Hardev Kaur (then Business Times editor) and the late L.S. Chew from American Express to introduce an annual prestigious award to recognise top CEOs in Malaysian corporations.

They approached Bernard Thamboo (then general manager of Business Times) to design the criteria and mechanics of the judging process.

As the judging had to be credible and beyond reproach, the process needed to be quantifiable and measurable, and based critical success factors on the expertise of the CEOs and the performance of their organisation functional activities. This would facilitate a holistic evaluation for effective comparison.

A panel of independent judges is appointed every year from "captains" of key government agencies and the corporate sector to ensure professional and unbiased judging. For consistency and accuracy of the judging, a moderator intimate with the judging mechanism will guide the judges.

The judging is based on six critical areas:

* About the CEO - for outstanding display of visionary leadership qualities; outstanding ability in leading the company.

* Financial Management - for outstanding management of the company's assets, liabilities and equities.

* Marketing Management - for outstanding and successful marketing and positioning the company into an outstanding company at home and abroad.

* Operations Management - for promoting awareness of quality and excellence in productivity.

* Development Management - for promoting staff excellence through training programmes; creative use of technology to give the competitive edge.

* Corporate Social Responsibility - for community/environmental projects and activities that contribute towards nation-building.

The judging criteria was further fine-tuned in 1997, 1998, 2000, 2001, 2003, 2004, 2005, 2006, 2007 and 2008 to reflect the economic changes and give more focus on relevancy and currency.

The number of critical success factors has grown from 29 in 1994 to 54 this year (22 qualitative and 32 quantitative).

The judging process starts by inviting the public to nominate eligible individuals. The nominee should be the one who has the ultimate management responsibility for an organisation, be it a public-listed, private-listed or partnership company.

The CEO reports directly to a board of directors, accountable to the company's owner(s). Some CEOs are known to have other designations such as managing director, executive chairman, president, managing partner, etc.

The next stage is sending a detailed questionnaire to the nominees. Once all the completed questionnaires are received, a shortlisting process based on relevance and completeness in addressing the critical success factors will be carried out.

Finally, the panel of appointed independent judges will evaluate the shortlisted nominees individually.

The judges will award points to each answer in accordance with the established judging criteria and scoring guide. Using the scoring mechanism software designed for this award, the weightage and ratings from all the judges will be computed, summarised and ranked for the said judges to verify, review and decide on the winner.

The recognition of the most outstanding CEO would be an endorsement in the business community on the excellent quality, leadership and management skills. From past observation and feedback, new opportunities would ensue for the winners in one way or another.




Bernard Thamboo
November 2008

Fortunes of 40 richest Malaysians decline

THE fortunes of Malaysia's 40 richest shrank by RM75.6 billion from RM171.9 billion a year ago to RM96.30 billion as at January 16 amid the global stock market meltdown, according to a survey by Malaysian Business.

The magazine's survey revealed that half of them recorded declines of 50 per cent with only 14 billionaires this time round, five short of last year.

Malaysian Business in its February 16 issue named "Sugar King" Tan Sri Robert Kuok as the richest Malaysian with a fortune of RM26.6 billion.

However, Kuok wealth which stood at a record of RM58.1 billion last year, had declined by RM31.5 billion.

His closest rival, T. Ananda Krishnan clocked in at RM20.1 billion.

At third-placed was Tan Sri Teh Hong Piow with a wealth of RM8.15 billion.

Meanwhile, Tan Sri Lee Shin Cheng was fourth with a fortune that has halved to RM7.4 billion.

Taking the fifth spot at RM4.5 billion, down from RM11.1 billion previously, was Tan Sri Quek Leng Chan.

Others in the top-10 ranking were Puan Sri Lee Kim Hua, widow of Genting group founder, Tan Sri Lim Goh Tong (RM3.5 billion), Tan Sri Syed Mokhtar Albukhary of the Albukhary Foundation (RM3.2 billion), Tan Sri Vincent Tan (RM1.8 billion), Tan Sri Tiong Hiew King of the Rimbunan Hijau Group (RM1.6
billion) and Tan Sri Azman Hashim of Amcorp group (RM1.4 billion).

The magazine said besides Genting's Lee, the other new entrants in the richest list were siblings from the YTL group, Datuk Yeoh Soo Min and Datuk Yeoh Soo Keng.

AirAsia's Datuk Kamarudin Meranun made a comeback to the list after a one year absence. — Bernama