Financial Times

Tips on creating value in Sri Lankan companies
Common sense issues that escape companies
It started with quick-fire questions, which were a great way to get the attending senior executives’ attention, some of whom were still munching on their breakfast (elegantly supplied by the Cinnamon Grand, Colombo).
“Hands up if you’ve worked more than 60 hours last week? 50 hours? How many worked over the weekend? How many didn’t take their full leave entitlements last year?”

It was all a little tentative at first, but with Martin Fahy leading the way as far as arm-raising was concerned, more and more joined in. And it seems that is the problem with businesses in Sri Lanka today. There is too much working and not enough thinking being done by senior management. As Dr. Fahy said, “CEOs should be paid to think up smart ways to improve their company and share prices; others should be paid to do the hard word [like coming in at weekends and/or working 50 hours a week.”

Dr. Martin Fahy was a senior lecturer at the University of Ireland in Galway. He is now the development director of CIMA (Chartered Institute of Management Accountants) for the Asia-Pacific region, and was in town to deliver a talk on “Improving Shareholder Value through Improved Decision Making”, organised by the institute.

Coming from an island himself (and one that is also next to a populous continent), Dr. Fahy saw a number of similarities between Ireland and Sri Lanka, and thought the latter could learn from the former’s success. He said as far as Ireland was concerned, the country learned to survive on its wits; where it learnt to be smarter in particular areas, producing innovative products and services that offer unique extra-value benefits to customers in world markets. To find out what is needed, executives need to answer a few questions, such as: Which parts of the company create value? What are the real drives when it comes to performance? Is the performance relative to the competition? Which customers are delivering the bulk of the profits? And it goes on.

As seen by these questions, it’s not rocket science. But as Mr. Fahy admits: “After 15 years spent in consultancy it never ceases to amaze me how some organisations fail to follow common sense.” “They seem to struggle to keep focused on the simple issues and get caught up in the complexity of markets, products and systems. Why is Ryanair making so much money while Swiss, Sabina and Alitalia go broke? How can two guys make a fortune from Red Bull in the face of global giants like Pepsi and Cadburys Schweppes?
Many senior managers, I feel, lose touch with the changes that have taken place and overall they seem to lose touch with simple business management ...”

With most companies there are unvaluable business units that drag on profit margins or lost money. In these cases, management teams have to look at what can be done; either to change the sysytem by which they are run or get rid of them. Mr Fahy was also surprised by the fact that some companies don’t even know which units are making money.

He also had an interesting way, say in the financial sector, to deal with the 30 percent (his figure) of customers that lose shareholder value — improve ‘em, move ‘em or lose ‘em. On top of this, the Irishman said there was too much analysis; where more effort should be put towards strategic planning; where the decision-making progress should be ongoing, not periodic. More hands needed to be taken off the day-to-day running and that energy saved used to think and plan ahead, Dr Fahy continued, adding that there was also the need to “better determine how to better compete” to serve each market.

“Sri Lankan company leaders have the ability to talk their products to the markets and they weren’t afraid of globalisation, both admirable qualities that can only lead the country forward. But they still have to be done,” Dr Fahy said.And on a lighter final note, he said he would love to ban book stores at airports, especially those that sell those on “How to better yourself (or your company) in …”.

The reason: it’s a lot of hot air that doesn’t really say anything, or if it tries, it fills 300 pages that just complicate matters. He would also like to see individual compartments in business and first class, so executives who have read such books can’t talk about them to fellow CEOs while in flight. All-in-all a very confident talk on a worthwhile topic, but will Sri Lanka’s CEOs listen?

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