#BetterWorld: The Aboitiz way

AEV chair Jon Ramon Aboitiz (first row, extreme left) and his son Eduardo (fourth row, extreme left), with delegates of the 11th Aboitiz Future Leaders Business Summit (AFLBS)

I once read an article in the Financial Times that stated that global leaders are not just born to be great leaders, but they develop over time.

They are big thinkers with global mindsets that allow them to connect across boundaries and navigate effectively through cultural differences; they are humble and aware that what they know is never enough and that they always have more to learn; they are sensitive to cultural diversity with an intense interest in the lives and cultures of others; they are global citizens inspired to contribute to the different communities they touch; and they are self-confident with no fear of failure.

The Aboitiz story is proof of how from simple beginnings, bigger and greater things can be achieved.

In the late 1800s, our great-grandfather Paulino opened an abaca trading business in Leyte. With a handful of employees, he also operated a store selling canned sardines, cooking oil and other basic necessities.

In 1920, Aboitiz & Company was incorporated but that same year, it experienced its first major financial crisis.

It had built a substantial inventory of abaca with borrowed money, expecting that prices would continue to go up after World War I.  But abaca prices took a sudden dive, leaving the company with heavy losses and a huge debt. It was on the brink of bankruptcy.

Don Ramon Aboitiz, Paulino’s son who had by then retired in Spain, was asked by his brothers to return to the Philippines to help save the company.  Upon his return, he took charge of Aboitiz & Company and led in its survival and rehabilitation.

His friends and advisers urged him to declare bankruptcy, so he could walk away from his debts and start anew.  But he said, “No!”

In a letter to his brother, Don Ramon wrote: “The biggest fortune I have is my word and reputation. Money can be lost and can be recovered but once your name and reputation is lost, one’s word is worthless and one is truly finished.”

He instead borrowed money from some banks and friends, promising to pay back his loans as soon as the business recovered.

Palabra de honor or word of honor was his guiding principle.

In time, every single centavo the company owed was paid.  Aboitiz & Company was successfully rehabilitated, turned around and was on its way back to growth.

Had it not been for their determination, hard work and commitment to honor their debt and their word, as well as the trust people had in the company, the Aboitiz Group would not be around today.

Expansion, diversification

After the rehabilitation of Aboitiz and Company, it grew and diversified into other fields of business. At that time, our entrepreneurial spirit was at its strongest. Our businesses flourished and continued to expand along with the progress of our young nation.

We diversified into shipping, ice plants, sardine canning, sugar plantations and milling, power generation and distribution, banking, to mention just a few.

There was no strategic reason for getting into any particular business.  If it looked good, Aboitiz would get into it. The only element of strategy was probably growth and diversification.

A major turning point in the Group’s corporate journey happened in 1994. We formed Aboitiz Equity Ventures to be our publicly listed holding company, put in our best companies and listed AEV at the Philippine Stock Exchange.

After AEV went public, we were poised for expansion but we needed a clear direction on how to go about it.

In 1996, we made the decision to focus on our core competencies and have more control over our destiny. We needed to shift from being entrepreneurs to being intrapreneurs, channeling our efforts to building and growing the businesses we labeled as our core businesses, namely, power, banking, transport, food and land. Subsequently, we divested our noncore businesses and channeled the proceeds to our core businesses, where we could add more value to, and control our destiny.

In 2014, the Board and senior management conducted a thorough review of the Group’s current and long-term strategic plan. This process enabled us to validate whether our four strategic pillars were still very much relevant and adequate to our future direction.

These pillars are to grow the business, increase stakeholder engagement, build human capital, and carry on execution excellence in everything we do.

In line with our first pillar to grow the business, we aim to diversify our earnings contribution. Two years ago, we ventured into our fifth core business—infrastructure—and have made major investments in this sector. We however do not want to grow for growth’s sake.  Our challenge is to find investments that make sense to us, that cover our cost of capital, that are within our risk parameters, and that create value for our stakeholders.

Our second pillar is to increase stakeholder engagement. We think it is fundamental that it is not only our shareholders who benefit from our value creation efforts, but also our other stakeholders, including our host communities.   We put great emphasis in earning our stakeholders’ trust and confidence in our enterprise.

To build human capital is our third strategic pillar.  We realize that availability of the right talent, and not financial resources, may be the stumbling block of the Group’s continued success and expansion. Thus, we focus our human resources efforts to attract, retain and optimize the best and the brightest.

Lastly, we need to ensure we execute our plans in a timely and effective manner.   Leading practices and best-in-class processes are being adopted across the Group to ensure we sharpen our competitive edge.

To satisfy the increasing expectations of our various stakeholders, we have put in place corporate governance best practices, and a more formal and holistic risk management framework.

The Group continues to be recognized by local and international institutions as one of the best-managed companies in the region. More than anything, these affirmations assure us that we continue to enjoy the trust and confidence of our various stakeholders, and they inspire us to do even better.

Developing leaders

To support our growth aspirations and for us to remain relevant, it is imperative that we continue to strengthen our organization and build the management team that will take us into the future.

We believe a major factor in our Group’s success over the past 100 years has been the seamless passing of the baton to the next group of leaders, allowing for the continuity of policies and execution of strategic plans.

While we have had many capable and very valuable professionals working with the family, top management has been predominantly family.

This, however, is changing, and today we consider ourselves a family-led, rather than a family-run, enterprise, with non-family professionals taking on very senior leadership roles.

Meritocracy is a core belief institutionalized in Aboitiz. Promotions and salaries are not functions of ownership, or how old you are, or how long you have been with a company. Rather, we look at your capabilities, the value you bring to the company, your achievements and contributions.

Aboitiz has always taken pride in its leadership excellence; we have produced leaders from our ranks, and today 80 percent of our top executives are homegrown talents. This is a trend we wish to sustain into the future.

In 2014, we identified six leadership dimensions as the most critical behavior and skill sets for an Aboitiz Leader.  These dimensions are: Mentoring and Developing; Fostering Teamwork; Courageous Authenticity, Achieving Results, Sustaining Growth; and Integrity.   We believe these are the most relevant to leadership effectiveness of a high-performing organization.

Mentoring and developing is the leader’s ability to develop others by sharing knowledge and actual experiences, maintaining growth-enhancing relationships.

Fostering teamwork is the leaders’ ability to foster high performance teamwork among team members who report to them, across the organization, and within teams in which they participate.

Courageous authenticity is the leader’s willingness to take tough stands, bring up the “undiscussable” and openly deal with difficult issues.

Achieving results is the degree to which the leader is goal directed and has a track record of goal achievement and high performance.

Sustainable growth refers to the leader’s ability to achieve results in a way that maintains or enhances the overall long-term effectiveness of the organization.

Finally, integrity is how well leaders adhere to the set of values and principles they espouse; that is, how well they can be trusted to walk their talk.

The Aboitiz way

We in the Aboitiz Group have nurtured and strengthened our core values and beliefs that guide us to be the best at what we do, and embolden us to uphold our mission of creating long-term value for all our stakeholders. We refer to this comprehensive system of values and beliefs as The Aboitiz Way, the distinctly unique way we do things.

We keep alive our passion for better ways.

Driven is what we are … driven to lead, driven to excel and driven to serve.

We are guided by our time-honored values of integrity, teamwork, innovation and responsibility.

We value our fellow team members and celebrate our successes.  Our leaders lead by example, mentor and foster teamwork, speak what’s on their mind and deliver results for sustainable growth.

Today, we have embedded a sustainability mindset throughout our organization.

Our thinking is clear:  Sustainability is at the core of our growth story anchored on our philosophy that we can do well by doing good, always making the right long-term decisions that balance the interests of people, planet and profit.