(First published in Nov-Dec 2000)
AURORA: Why were you chosen to be the CEO of Reckitt Benckiser?
Sabir Sami: Reckitt had been through a major change given the merger with Benckiser. Although Benckiser is a much smaller company than Reckitt, it is really Benckiser that has taken over the management of the company. Benckiser has a strong marketing focus, and in terms of the key local person running the business anywhere in the world, they prefer someone with a sales or marketing background because they believe this is the strategic direction needed for the business.
A: As opposed to?
SS: A financial, technical or legal background. It is a given for them that the person running the business must have a sales or marketing background, and I have a marketing background. So that's one factor. Secondly, in many markets they primarily look for youth.
A: Is hiring young a deliberate policy?
SS: They don't have any age barriers, let's put it this way. They're very keen to attract young people and bring energy into the system. So another factor apart from my marketing background was my age, and also the fact that I was around at the right time. Apart from myself, they interviewed many other people as well.
A: Was the fact that you were based in Singapore, and therefore had international exposure, also a plus point?
SS: Yes. They initially wanted an expat for the job. When one of their headhunting firms got hold of me, they only agreed to interview me because of my international experience. They said if he's a Pakistani that's fine but he must have international experience. So during my interview, they focused a lot on my experiences in Singapore and Vietnam.
A: How will the merger with Benckiser affect Reckitt in Pakistan?
SS: Over the last two to three years Reckitt & Colman went through a bad patch globally making it a prime merger opportunity. Benckiser is primarily a US/Western European company. It's a Dutch company based in Holland. Reckitt, because of its British base, was strong in regions once under the British Empire. With the merger, Reckitt has been able to gain a foothold in markets like the US for example, or even Western Europe, where it wasn't very strong, and for Benckiser it was an opportunity to go global. So it's been a win-win situation. The new company's vision statement is "Better solutions for households and personal care" with the ultimate aim of enhancing shareholder value.
A: Benckiser is hardly a household name in Pakistan, what does it make?
SS: Benckiser is strong in products like automatic dishwashing and surface cleaners and water softeners. These sell under various brand names like Calgon and Vanish, which are very strong brands.
A: The brands are better known than the company?
SS: Yes, it's also typical of P&G or Lever's, where people don't know the companies but they know the brands. The same thing applies to Reckitt as well. Consumers have heard of Dettol and Disprin and Cherry Blossom, but not many people know that these brands are produced by the same company. In Pakistan, Benckiser did not exist. So while we've had a name change, we haven't had a financial or a physical merger of two companies. Nevertheless the merger has been dramatic here in terms of the culture changes we are undertaking. Reckitt was a very British company, which had been in Pakistan for 50-odd years. Benckiser, although a Dutch or European company is very aggressive and operates like an American company. It is results-oriented, has no time for politics, and is casual in its approach. And that culture has already taken over at Reckitt Pakistan. Although in Pakistan it hasn't been a case of a lot of Benckiser people coming into the business, nevertheless they've had to change the culture.
A: How does this culture change translate itself?
SS: We have four value systems in the company. One is entrepreneurship, which means taking calculated risks. Don't indulge in endless discussions. Get on with it and make things happen. The second is achievement and teamwork. Do what you say you will do. It's pretty different from what Reckitt Pakistan used to do, which was to discuss a lot. Since I've come on board we've relaunched Cherry Blossom and reduced the price by 30%. We've also reduced the price of Robin Blue and redesigned the packaging. Prior to the merger, the monthly management committee meetings used to last three days. These meetings are no longer held here, but at the plant. The people there used to feel isolated, there was no teamwork. It was a situation where the people at the head office sat in an ivory tower and didn't know what was happening. Now after the meeting we have lunch with the workers in the canteen and discuss issues with them. We're getting on with things and spending time in the field. I spend two to three days a month in the marketplace, and I encourage every function to go out and be more hands on. Our third and fourth values are achievement and commitment.
At meetings the culture is 'if you have an issue, raise it now, and when you walk out of this room get on with the implementation. You are accountable, you have made a commitment to achieve a goal, and unless I hear from you I expect you to do it.' We've also hired external consultants, and we're taking all management staff through a programme aimed at building on our core values. Like teaching what it means to be a team, that unless everybody gets going at the same time, nobody moves. We are also implementing some structural changes to change the culture as well. Our compensation structure has changed dramatically as well. For example, if your salary structure was one hundred rupees, of which 10 rupees was your bonus, now you're earning 80 rupees, but you could earn 20 rupees as a bonus, getting you back to your original 100. Or you could earn 60, getting you to 140 rupees. But the delivery of the results is the same for me as it is for the production supervisor or anyone else on the team. So either we all deliver and get the bonus or nobody gets it. It's not as though I get it and you don't. We all sink or swim together. Last year, the company posted significant losses so we have to turn around the business this year.
A: Were these losses due to external factors such as the economy or internal factors?
SS: I wouldn't like to comment too much on that because I wasn't here. I think it was a combination of factors. Reckitt globally was not doing too well, and there were pressures on Pakistan to take some short cut actions to help the global picture but which ultimately hurt the Pakistan business. Also, over the years, the business had stopped investing in the brands, allowing them to live on their earlier momentum, and then of course there was the overall economic slowdown in Pakistan.
A: From the consumer's point of view what does the merger mean? Does it mean a better product?
SS: It will vary from category to category. In certain categories, we may give more value to the consumer in terms of better pricing. In other categories this could mean better quality. We are investing in packaging, in quality control systems and we are focusing on improving the quality of our manufacturing and the quality of product. This has all been done in the past year. Now we are looking at the marketing and distribution side. Value means more than just how much do I pay for this? Value also means where do I find it? Do I have to walk 300 kilometres to get it or can I just walk into my neighbourhood store to find it? We are also focusing on service. We don't have a hotline for incoming complaints. We have a system where customers can write in, but this is bureaucratic, and we want to cut through this and get back to the customer and address his or her concerns. All of that to me is value. The entire offering to the customer, the whole experience he or she has in buying and using, and then re-purchasing our product. We're also looking at bringing in new categories. The merger has given us the opportunity to bring in Benckiser products, and there are many other Reckitt brands that we aren't in yet in Pakistan.
A: Would you agree that compared to many P&G or Lever products, Reckitt brands have a rather staid and stodgy image?
SS: Many of our brands have a very strong functional image but a very unsexy or un-glamorous image. You don't need to be a glamorous product to have a glamorous image. Our advertising history has been focused on the functional benefits, which is 'you have a problem? Use this and you'll be okay.' We plan to jazz up our advertising and make it more image focused.
A: So can we expect to see exciting new advertising emerge from Reckitt Benckiser?
SS: We will definitely be looking at re-energising the creative side and the media side as well. We have been rather poor in terms of the amount of investment we have put into our brands.
A: Are you as a client prepared to make the kind of investment required to produce quality advertising?
SS: I believe that sometimes no ads are better than poor ads, a poor ad can hurt. My perspective throughout my marketing career has always been that the copy has to be of the best quality. Only then put media behind it, or else don't bother. Yes, we are going to be investing in the creative talent we have behind our advertising. I believe in operating a fee-structure rather than working on commission. When you work on commission what happens is that the agency is earning as long as you are running media. The moment you stop the media, the agency stops earning. What happens then is that they assign the talent (account servicing and creative) that was working on your brand elsewhere. This usually happens in the second half of the year when the budgets get tight. Come January and you have a new budget and are ready to start working with your agency again, you're told that the account director you worked with last year is busy on another account, so here's a new person. Suddenly, you've lost all the talent and with it all the knowledge, the understanding and the experience of your account that came with it. Under a fee structure you come to an agreement with the agency that for your business you need this team, and you will pay their salaries, their overheads, and a certain amount of profit over and above that. So for the agency their income is guaranteed, whether you run one ad or 2,000 ads it doesn't matter. This is where we're moving to here. With this system if the advertising stops it doesn't mean the team moves because we "own" the people.
A: What happens if the client decides to switch agencies?
SS: The client has to pay off the existing agency because you've made a commitment for a certain period of time.
A: What about the team the client is paying for?
SS: They can resign. The beauty of it is the fact that if the agency cannot motivate the team, it doesn't matter. You as a client can do so by involving them in your business. Take Orient-McCann, I have offered Masood Hashmi (the Deputy Managing Director) two cubicles here and told him two of his people can sit here whenever they want. I want them to be based in this office to spend more time with us. If I hold a strategy meeting on Robin they can join us both at the creative and the account service level, so that they know what our thinking is. You cannot capture a whole strategy in a brief. You can't give a two page brief and expect the creative director sitting at the agency to know exactly what our vision is, what the problems are, what the consumer thinks. What usually happens is that the agency team spends a couple of hours with the client, goes away and returns in the evening. I'd much rather they sat here. What I'm providing is a facility, so that they don't feel awkward walking down the corridors. They can use the phone, send faxes to the creative people in the agency, direct the art people, write a brief.
A: Has Masood Hashmi agreed to this?
SS: Masood knows the fee structure very well because we used to do that at Coca-Cola too. It's not an alien concept to him and he knows it works for him. He has a guaranteed stream of income. If tomorrow I stop the media, he still gets paid. He knows that in 2000 he will earn this much from Coca-Cola or from Reckitt Benckiser. The team's salaries, overheads and travel are covered, and I've giving him a profit above that. The beauty of it is the retainership of the people.
A: Can these people work on other accounts?
SS: Not without my approval. Here's another advantage of the system, and this is where investing comes in. Masood may pay let's say, Rs 50,000 a month for an account director, and he'll bring me five or six candidates. These may not be the kind of people I'm looking for because I want quality people. In which case he says that's the best he can get for 50,000 so I'll say okay pay 100,000. I've told Masood, give me the people based on these profiles and tell me what the cost structures are, and I'll invest in them. Part of the problem with the advertising industry in Pakistan is that although they have multi-national affiliations, they're actually run by local businessmen, and they don't have the type of salary structure and benefits that attracts the best quality people. It's changing now. In the past three years things have improved slightly.
A: How do you think the competition will react to the changes at Reckitt Benckiser?
SS: Unlike Lever's or P&G we don't have a single competitor. With Disprin we compete with Panadol, which is a Parke-Davis product. With Cherry Blossom we compete with Kiwi, which is a local company, with Robin Blue and Dettol liquid we don't have a competitor, but with Dettol soap we compete with Lever's and P&G. With Mortein we compete with SC Johnson which is coming to Pakistan as well. Therefore, our plans for each brand are different, which is why it's very difficult for one company to look at us as an entity. They probably look at us as a brand, and therefore we look at ourselves in that way too. We don't say to ourselves 'what is P&G doing?' but we might track Safeguard to see what's happening in that area. When I first came on board I had to master the breadth of our portfolio. We have about 12 categories and approximately 25 brands. I spent the first two to three weeks looking at this portfolio trying to identify the cash cows, the stars, the dogs, and at the financial structure and the consumer base of each brand. Because the priorities of each of our brands are so different, I have to constantly switch gears, going from Robin Blue to Mortein to Dettol. The seasonalities, the manufacturing processes, the finances, the taxation systems, the margins, the pricing, the consumer motivations -- all are different. However, I think that the competition which perhaps perceived Reckitt as a laid back, easy-going company may suddenly find that the giant is now beginning to wake up.