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Phl’s top CEOs: Partner up or part ways

(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

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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 middle- to 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...

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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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