The Lopez Group Saga: Resiliency Under Pressure
I do not know whether the Management Association of the Philippines realizes it, but just for the record I want it known that this is the 4th time I am speaking before this Group in the past 9 years. The first time was in August 1997 when I delivered a speech on behalf of my older brother Geny, head of the Lopez Group of Companies then, who was undergoing medical treatment in San Francisco at the time. The title of his talk was “Public Service as Business Philosophy” which laid out one of the core values of the Lopez Group. The second was in November 1999, 5 months after Geny passed away and this Association gave him a posthumous Special Award for Management Excellence.The third time I cam here on my own behalf in January 2001 to receive your most distinguished award as Management Man of the Year for the year 2000; and now, for the 4th time, I appear before you to talk about the Lopez Group Saga: Resiliency Under Pressure.
The organizers of this conference must have read the 2-volume work of Raul Rodrigo entitled ‘Phoenix, the Saga of the Lopez Family. 1800-2000. Incidentally, I am also the historian of the Lopez family and the Phoenix is partly based on my early history of the Lopez family which I finished in time for our first big Lopez clan reunion in 1982 when a thousand members of the clan showed up in Jaro, Iloilo. I presume that the conference organizers want me to give you a short 20 minute summary of this 200-year family history, which Boo Chanco refers to as the country’s longest running teleserya.
Let me try anyway.
The word ‘Phoenix” in the title of the book refers to that mythical bird that has the ability to rise from the ashes to go on to greater glory than before. Those who have followed us closely know how apt the title is. We have been burned many times, only to rise again.
The first thing to know about the Lopez family is that it is an entrepreneurial Filipino family whose roots go back not to Spain nor to China but right here in the Philippines, to a small town called Jaro, in the province of Iloilo, in the island of Panay. It must be pointed out that before my father started our Group of Companies in the late 1920’s, there were at least 3 generations of Lopez entrepreneurs who helped shape the entrepreneurial culture of the Lopez clan.
Up to the mid-19th century, the Lopezes of Jaro were mainly engaged in the native textile industry and in trading. But with the opening of Philippine ports to world trade in the mid 1850's, the native textile industry suffered a disastrous decline since it could no longer compete with the cheap mass-produced clothing materials from the mechanized factories of Manchester, England.
This was probably our first taste of the severe impact of globalization on our country and the first major adversity suffered by the Lopezes in business. In order to cope with its consequences, the Lopez family was forced to refocus its attention on a new industry --- sugar production for the export market. The central Lopez entrepreneur in that era was the first Eugenio Lopez, who accumulated a lot of sugar lands and established the first steam powered sugar mill in the island of Negros By the early 1930s, the extended Lopez family had accumulated more than 5,000 hectares of sugar land and established 2 centrifugal sugar mills, in the provinces of Negros Occidental and Iloilo which were run by two strong-willed Lopez women entrepreneurs, both daughters of the first Eugenio Lopez, Doña Maria Lopez who never married and Doña Rosario Lopez de Santos whose husband committed suicide after helping his wife build her sugar central.
These two sisters were in fact engaged in strong sibling rivalry in the field of business. It was at this point that my father also named Eugenio, who was fresh from graduate studies at Harvard Law School and newly married, and his brother Fernando decided to shift the family business from agriculture to industry. This was a momentous decision in the history of the Lopez family business. When you follow the course of the Lopez family business during the past 78 years – from 1928 to the present time, you realize that there were many peaks and valleys in that business, and twice in its history the family lost practically everything ---- the first time was during World War II, when all the airplanes, buses, ferry boats, printing presses which constituted the hard assets of the Lopez transportation and newspaper businesses developed during the decade of the 1930s were completely destroyed during the 3 years of war.
The second time was during martial law, when most of our businesses such as ABS-CBN, Manila Chronicle, Meralco and its holding company, Meralco Securities Corporation now called First Philippine Holdings Corporation, were either shut down or taken over by the government or the cronies of the Marcoses, mainly due to the strong stand which my father and his newspaper, the Manila Chronicle, took against the graft and corruption of the Marcos regime. After my father died in San Francisco in 1975, the whole story of the Lopez business could have ended and died with him. And yet, after the martial law debacle, the family business managed to come back bigger and stronger than ever, primarily because my father had 3 sons whom he had trained well and who worked with him in all his companies. But it was not easy for Geny, Manolo and I to revive the old Lopez companies after 14 years of martial law. Furthermore, we were no longer spring chickens, Geny was 58, I was 56 and Manolo 43.
Two of the companies we got back, ABS-CBN and First Holdings --- seemed like basket cases. There were good reasons to doubt their survival. First Holdings was bleeding to death. It had more than a billion pesos in debt. There were only 20 employees left. Simply making the payroll every two weeks was a challenge. As for ABS-CBN, its broadcast center was run-down pretty badly. Those in charge of ABS during the 14 years of martial law did not care much for maintaining it well.
Meralco and PCIBank were in slightly better shape. But the problem was that the Lopez family's control over them was fragile at best. It would have been easier for us to stay in the sidelines and live quiet comfortable lives. But we were motivated by values and forces, the strongest of which was living up to our father's legacy. As my brother Geny puts it, "being faithful to my father's values was and is important. That was one of the guiding forces when we decided to go back to business.
Much of the credit for the tremendous growth of the Lopez Group after the EDSA Revolution, must go to my late brother Geny, who was our "primus inter pares", who provided the leadership to make the Lopez Group grow in size and scope way beyond where it was before martial law. I had done my part in the miraculous resurrection of First Holdings from its completely demoralized and near bankruptcy condition in the 1986 and taking it to where it is today. Manolo had worked hard to restore Meralco to its old glory amidst a tough environment. I, of course, took over command of the Lopez Group after Geny's death in June 1999 just as the regional financial crisis happened.
In agreeing to the symbolism of the Phoenix to describe our family's saga, I do not mean to suggest that I expect the Lopez Group to be burned to cinders over and over again. But given the current condition in the country, the entire local business sector should in fact learn from our experience and be just as adept in rising from the ashes each time fate and circumstances burn you down. Philippine businesses must be ready at all times to undergo this severe test. Only those who are organized to survive such a test are expected to come out strengthened by the experience. And who are those companies?
Those are the companies which are, as the title of a best-selling business book by Jim Collins and Jerry Porras puts it, built to last. But how does one build one's company to last?
I thought, or would like to believe, that the reason the Lopez Group has been so resilient through two centuries of its history but especially in the past 70 years, is because we do have the kind of values that go beyond the mere earning of profits.
At the core of all these, is a set of timeless core values. Forty years ago, this mindset made possible the takeover of Meralco by a group of Filipino entrepreneurs and managers led by my father. Martial law brought us down but we had the confidence that enabled us, the 2nd generation Lopezes, to build up the business again because of these values.
The test of the true and effective manager of a company starts by asking the questions "what do we stand for" and "why do we exist". I would like to take this occasion to reaffirm our commitment to the core values that have sustained us through many difficult times in the past.
First and foremost is our commitment to public service. A passion for public service is the core ideology that drives the Lopez group. This is a way by which we make sure what we do in our business must always be in line with the common good. In a speech he gave upon being awarded Businessman of the Year in 1956, my father said: “The old business tenets have given way to the modernconcept which is not based in profits alone but rather on the service it can render and the contribution it can make to the prosperity and progress of the nation as a whole.”
My late brother Geny also articulated public service as business philosophy in a speech he prepared but which I delivered here at the MAP meeting in August of 1997. He said : " our reason for being in business is to render public service. Public service – doing well by doing good …. Profits are not the only reason we go to work each day. There is the fulfillment of being able to give back value to others who deserve the best for their money."
Public service may however seem too philosophical for the practical day to day concerns of running a business. So, we further define this philosophy with the attendant values of entrepreneurship, nationalism, team work, strong work ethic and corporate social responsibility. This is why we venture into the difficult and politically sensitive areas of public utilities. This is why we have made a conscious decision to totally invest our resources only in the country or in areas abroad where we can be of service to the large Filipino expatriate population. We exist to serve the Filipino, wherever he might be. The second important core value that guides us is family and corporate unity. In essence this means that the family must, relative to its businesses, move as one and with one voice. We also maintain certain rituals aimed at continually communicating and building consensus within the family. Corporate unity is nurtured in much the same fashion as we nurture family unity.
Hence there are rituals to be observed, geared towards promoting consensusbuilding and greater unity across the Group. In both Benpres and First Holdings, I hold bi-weekly meetings of chief executives and operating officers so that there is constant interaction and communication among the top executives of the Lopez Group. At least twice a year, at mid-term and during the annual budget time, we hold a more formal forum for all CEOs and Operating Officers of all the Lopez companies and affiliates, again, to inform each other of how we did the previous year and what we expect to do the coming year. There are other ways we promote unity within the Group. Once a year we give out Lopez Achievement Awards to deserving teams and individual who perform outstanding service and work for either their company or to the Lopez Group as a whole.
We also hold annual sport fests for the entire Group as well monthly hiking events in different parts of Metro Manila. We also have a monthly Lopez publication where employees can keep track on what is happening within the Group.
Our third most important core value is our commitment to our employees. My father said it well in a speech to Meralco employees: "Human values are above and far superior to material values …. our success should be measured not by the wealth we can accumulate, but by the amount of happiness we can spread to our employees".
Our fourth core value which my father constantly stressed is human development through education and the concept of continuous learning and improvement in our companies. My father firmly believed that young talent must be nurtured by the best education possible, perhaps because as a young man, he went to the best schools here and abroad (Ateneo, U.P. College of Law, and Harvard). Later on, he sought to provide other young Filipinos the opportunity for a Harvard-quality business education by donating the edifice of the Asian Institute of Management here in Manila.
It is this emphasis on upgrading professional competence to world-class standard and sharpening our competitive edge that led me in the past 7 years to insist that as a Group, our companies take the necessary steps to be certified according to the world class ISO 9000 quality standard, and the complementary ISO 14000 and OHSAS 18000 standards coupled with our own internal rating system for environment, safety, health or ESH program for environmental practice and occupational safety. We have also instituted other internal quality awards such as the Lopez Achievement Award and the so-called Oscar Award for Business Excellence, adopting the Malcolm Baldridge framework and Six Sigma, which help drive organizational change and develops a high performance management system. Five of our operating units were recently awarded Investors in People status, recognizing how effective training and people management contributed to the achievement of corporate goals.
It is also in pursuance of this core value that we made sure the third and succeeding generations of Lopezes get the proper training and education to carry on the family mandate for the Lopez Group. There are now 12 3rd generation Lopezes who are working in the Group. This will ensure continuity of the Group in the context of the traditions and commitment initiated by past generations.
How do all these apply to the companies in the Lopez Group and in particular, to BayanTel, one of the sponsors of this conference? Indeed, BayanTel is a good example to cite by way of illustrating in practical terms, the symbolism of the phoenix in the Lopez Group context. BayanTel was born out of my late brother's vision to take the deregulation of the industry as an opportunity to bring world-class telecommunications services to every corner of the country. At a time when it took years to get a telephone service even in Manila, we had this lofty vision to change the telecoms marketplace and we matched it with resources.
But unfortunately, we made a bet on the wrong technology. And the economy did not grow as fast as we expected it to support our marketing efforts. And as if that was not bad enough, the Asian financial crisis struck. We found ourselves in Bayantel with a heavy debt burden of more than US0 M including interest, and we were forced to seek debt restructuring by January 2001. The process of debt restructuring is never easy and it took us 3 years before a Philippine court finally approved our 19-year debt restructuring plan in July 2004. But we didn't let our debt problems get in the way of innovative and responsive service for our customers and markets. We worked to deliver positive EBITDAs and it is a tribute to the creativity and determination of our BayanTel management and staff that not only did the company survive the tough years, it has bounced back enough to become a disruptively resilient competitor in the difficult competitive environment of Philippine telecommunications.
The way I see it, BayanTel today is the classic example of a Lopez company that is fast rising from the ashes. Perhaps it should even change its logo to incorporate the Phoenix. One of the most badly hit by the Asian financial crisis, BayanTel is definitely on a clear path to leadership in its chosen markets.
To summarize, the secret of our group's ability to weather crisis and like the Phoenix rise from the ashes is largely because my father made sure that our companies are built to last… by having timeless values…our reason for existence beyond profits. The most important of these values include, first of all, a commitment to public service; second is the importance of family and corporate unity; and third, a commitment to our employees; and finally, my own contribution to these timeless values these past 10 years is a commitment – commitment to business excellence and world-class quality standards as a way of life for the Lopez Group of Companies.
Thank you and have a good day.