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Faiz Khan Explains: How We Achieved Success

Fiji Pine Group had an operational profit turnaround of $26 million in four years. Airports Fiji Limited is forecasted to have an operational profit turnaround of $60 million by 2017.
22 Aug 2015 10:40
Faiz Khan Explains: How We Achieved Success
Fiji Pine Group executive chairman, Faiz Khan.

Fiji Pine Group had an operational profit turnaround of $26 million in four years.

Airports Fiji Limited is forecasted to have an operational profit turnaround of $60 million by 2017.

Both companies have had around 500 per cent turnarounds in profits in four years.

The executive chairman of both the companies, Faiz Khan, highlighted this during the CPA Australia-Fiji Branch Congress at the Sheraton Fiji Resort on Denarau Island.

He stressed if they would have had a mindset that their performance should increase every year by 10 per cent or 20 per cent compared to the year gone by, they would not have seen the 500 per cent turnarounds.

He spoke of three simple topics which led to this turnaround.

The first was the need to press the refresh button. Second was the choice between leadership versus backside protection. Third was decision-making.

 

Refresh button

Mr Khan said: “If we say that for decades, state owned enterprises (SOEs) have operated inefficiently then how can we benchmark against previous year’s profitability figures?

“If we do so, we would be comparing ourselves against poor performances and mediocrity.

“We would end up getting erroneous results. As such it is critical that we press the refresh button.

“Business (as life in many instances) is made up of relationships of mutual benefit between stakeholders.

“By its very definition the word mutual means a benefit for all parties involved, a win/win.

“It is a relationship between the company and its employees; between the company and its key stakeholders such as landowners, shareholders, all business partners.

“If we try to understand the dynamics and issues faced by our partners as well as ours, we can find ways to redefine our relationship into one of mutual benefit.”

 

Example of achievement

Mr Khan gave some examples to demonstrate how they successfully achieved this.

“In a single contract at Fiji Pine, we managed to derive a $16 million savings over a period of five years by making the relationship more efficient,” he said.

“To achieve this, we tweaked the contract just a little by taking out a condition of $2 million of bank guarantee.

“We took away areas of shared responsibilities and made it a sole responsibility of the contractor so that it could be solely responsible for productivity.

“A $16 million savings to Fiji Pine was not a $16 million loss to the contractor because of efficiencies derived.

“Today other potential contractors are fighting to work for us at even a further 10 per cent discount to existing rates.”

Mr Khan said they have also increased their costs in areas where they saw there was a need.

“In 2011 with our backs against the wall due to our dire financial state we wrote to TLTB to increase our lease ground rents so that we could increase the benefits to the landowners,” he said.

“You need to have courage to make such decisions. The result of this was that landowners started renewing expiring leases that was a problem for a decade.

“But we did not stop there. We introduced lease security bonus payments at a cost to the company.

“We needed to rebuild the trust in the relationship with our landowners and we did so by making the returns fairer.”

Mr Khan said at Airports Fiji, they increased revenues through understanding better the dynamics between the landlord and tenant at an international airport.

“Whilst we looked at comparisons between rents charged at nearby Namaka the greatest cue we got was from the advertising revenue our concessionaire was receiving at the airport.

“Some of our tenants were paying more to our advertising concessionaire to advertise on billboards at the airport than what they were paying us for 45 square metres floor space.

“We had never understood the power of branding at an international airport until we re-looked at something that was right before our eyes.

“We then researched and learnt that many top brands chose an international airport to launch their products in a particular country.

“Once they launched at the international airport by paying the highest rate per square metre they then spread to almost every shopping centre in the country.

“After the revenue restructure, in some areas we are going to receive 15 times the revenue compared to what we were receiving in the past.”

Mr Khan stressed you cannot benchmark against past inefficient results, or relationships.

 

Leadership vs backside protection

Looking at one’s choice between leadership vs backside protection, Mr Khan stated executives in state-owned enterprises are scared to make decisions.

“Decisions in SOEs are mainly driven by a culture of audit compliance or backside protection,” he said.

“You do not have to compromise governance issues but at the same time your decisions should not be driven by simply covering your tracks.

“Simply because three quotes are obtained does not make the procurement right.

“Simply because a tender process is run does not make the tender result right.

“You have to look at how you have scoped the rights and responsibilities in the tender document.

“You have to look at possibilities of avoiding unnecessary risks, making the relationship efficient, providing clarity, issues of leverage, timing, supply chain constraints etc.

“If you have talented individuals don’t deny them the right to be paid more to retain them because the Job Evaluation exercise you did says the maximum benchmark is only $x.”

Mr Khan said you have to understand that we don’t have standard operating procedures (SOPs) or precedents for every decision you need to make.

“You make decisions based on the circumstances you are faced with at the particular point in time,” he said.

“Circumstances keep changing over time. Whilst hindsight is a benefit we don’t make decisions in hindsight.

“Have the courage to make informed decisions based on the issues you face. Have the courage to say these were the reasons for your decision at the time you made it.”

 

Decision-making process

On the third issue, Mr Khan said one must try to separate routine and complex decisions.

“For your routine decisions set up fair processes and systems, trust people and delegate. Quite often we get caught up with the tyranny of urgency,” he said.

“We can’t do everything ourselves. If you delegate effectively, you free up a lot of your time to make complex decisions.

“There are mainly two types of complex decisions we face in SOEs. First is capital investment and second is human resources.

“For capital investments we have been historically very poor. To build successfully we need to get involved in the project.

“We cannot just sign a contract and leave it to the contractor to build or an external project manager to look after.

“Seek external help wherever you need to but be involved. Today I look around at Airports and Pine and I see our people involved everywhere in projects.

“All departments at Airports are involved in the current upgrades, even HR. They sit every Wednesday’s and ask questions of why and contribute.

“Similarly at Tropik we are in the planning phase of our sawmill upgrade. We have an internal team that sits daily asking the ‘whys’.

“They are taking risks, making decisions, what to change, what not to change, how to integrate the new and old. You have got to feel proud of these.”

Mr Khan said in building construction, there is no such thing as a perfect decision.

“We have many risks. However, we continually work on mitigating the risks by thorough planning, identifying the challenges and working on resolving them,” he said.

“We will make mistakes along the way but we learn from those mistakes and build capacity.

“We have external project management help in all our contracts but we have our people involved in the project.

“We don’t make decisions on top and simply tell the people down the hierarchy in the org chart that here it is follow it.

“We involve them in the projects and this results in better outcomes.”

 

Human resource

This then brought him to the complex decision of human resources.

He said people make decisions every step of the way.

“ However, if you have an organisation of 800 people rowing the boat in a direction you will get to your destination faster than if only a few are rowing,” he said.

“We need to connect to our people and show that we care. We need to get their buy-in.

“Human resource is not just about hiring and firing people. Human resource is about building capacity, improvements and succession planning.

“If you look at a typical corporate organisation chart there are a few people on top and many people lower in the hierarchy.

“But the people lower in the hierarchy typically don’t know what’s happening on top. Connect through heart and technology.

“For the latter thanks to change in policy by Government connecting through phones are really cheap. Create a reporting culture with key measurables.

“Talk to your people regularly. At senior executive level put KPIs where 30 per cent of their time is spent in human resource development of their departments. Continually train your people on the job.

“Send the right signals to the rest of the organisation by what you do. Have good habits and 50 per cent of your work is done.

“And you don’t have to wait for end of the year confrontational log of claims by union executives for improving the lives of your people, creating an atmosphere of happiness and love for work.”

Mr Khan stressed: “We cannot bring about change management or shift gears or evolve at the pace we should unless we change the mindset of how we think in SOEs.”

Feedback: rachnal@fijisun.com.fj

 

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