Download Unilab finds recipe for success blending legacy values

Unilab finds recipe for success
blending legacy values and
professional management
Grace Abella-Zata | Nov. 24, 2015
With a growth rate that places it among the top three markets in
Asia and a buoyant business environment resilient to global
shocks, the Philippines is on a growth trajectory and is, for a
change, dealing with the side effects of rapid growth. Retention
of talent, for example, has become a major challenge for
Philippine companies. United Laboratories (Unilab) has avoided
this problem, however, by embracing the best of Western
professional and Asian family cultures.
Many Philippine conglomerates were founded by “taipans”, the name used for rags-toriches Chinese immigrant businessmen. United Laboratories was founded by Jose Yao
(JY) Campos, originally from China’s Fujian province. He aspired to be a soldier, but his
father sent him to the Philippines to learn entrepreneurship instead. In 1945, he opened
a small drug store in Manila together with Mariano K. Tan that grew into the country’s
leading pharmaceutical company within 14 years.
National Leader to Regional Powerhouse
Unilab continues to be the largest pharmaceutical company in the Philippines, with
about 6,000 employees, including 3,500 in overseas operations. It commands about 20%
of the market, a share it has consistently maintained for more than 30 years. It develops,
manufactures and markets over 300 prescription, over-the-counter and personal care
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brands covering major therapeutic categories, from cough and cold medications to
remedies for chronic ailments.
The Phillipine market is still dominated by multinational pharmaceutical products,
which garner 75% of total sales. These global companies target those who can afford their
more expensive brands, a mere 12% of the population. Unilab’s fundamental strategy of
providing products at 20% to 70% below the cost of leading, multinational brands,
without compromising quality, is aligned with its mission to provide affordable medicine
for everyone.
Unilab fulfils an important role in a country
where most can’t afford expensive medication for
chronic ailments like diabetes and hypertension,
and to complete the treatment course for widely
prescribed drugs like antibiotics.
The company’s RiteMed brand of generics is
distributed throughout the country and has
leveraged strong Unilab branding to gain the trust
of doctors and patients such that even higherincome consumers buy RiteMed products.
The success of its growth strategy in the Philippines led Unilab to replicate its model in
China, Indonesia, Vietnam, Thailand, Myanmar, Sri Lanka and Cambodia.
The Campos family has retained full ownership since Unilab was founded. The company
has since successfully transitioned to professional management. At the same time, it has
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made a conscious effort to institutionalize the strong family-like culture, a legacy of the
company’s founder.
It Takes a Village
Campos stood out among taipans for being a benevolent employer. Unilab has never had
unionized labor - not even during the mid-1980s and 1990s when a strong labor
movement took root in the Philippines. In the 1950s Campos organized a junior board
composed of managers and employees after visiting the US and adopting the idea from
McCormick & Company. He established the Unilab Employees Council, tasked to look
after the welfare of employees and their families. The Employees Council drew from the
Filipino principle of “bayanihan”, a Filpino word originating from “bayan”, which means
village, nation, or essentially, community. Practically speaking, it means working in the
spirit of communal unity and cooperation for the common good. Bayanihan has become
synonymous with Unilab and is applied as “teamwork with heart.”
The understanding and practice of Bayanihan has evolved as Unilab’s vision and strategy
transformed to address the changing challenges and opportunities of the business. In
2006, Jocelyn Campos Hess, then Unilab’s Chairman of the Board and the mother of
current CEO, Clinton Campos Hess, announced management’s vision to join the club of
global multinationals and grow the company to USD 1bn in sales over the next ten years.
The Campos family knew that expansion and diversification would require stepping up
the professionalization of the company. New blood was needed, and over the next eight
years more than 60 senior executives were attracted from companies like Procter &
Gamble, Johnson & Johnson, Unilever, Mead Johnson, Nestlé, GlaxoSmithKline, Sanofi
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and PwC by competitive compensation and benefits packages and the mission to
transform a local giant into a multinational.
Imee was brought on from a regional human resources role at Johnson & Johnson to
lead major organizational development initiatives at Unilab. She recalled that all the
newly-hired executives were initially “quarantined” in a separate area. The Campos
family correctly anticipated veteran employees would have a hard time accepting the
newcomers and the new structures and systems being implemented to improve
performance and results.
One challenge was instilling a culture of meritocracy. The strong family culture negated a
culture of high performance. In an environment where employees would perform out of a
debt of gratitude to a kind boss, the latter found it difficult to be objective in performance
reviews and thus provided “superior” ratings 95% of the time. The company was also
generous to a fault; employees had come to understand bayanihan to mean everyone
received a generous share of the profits.
Gradually, employees saw the new system made sense and was fair to everyone. The
changes transformed Unilab into a more professional and performance-driven
organization. New blood fired up the organization and helped establish a highly
competitive environment where employees understood the need to excel. Employees also
accepted that rewards must be commensurate with the level of contribution. Innovative,
entrepreneurial mindsets became highly valued. Leaders rolled up their sleeves. The
bayanihan culture had no place for divas or superstars. Everyone was expected to
collaborate and work well together.
Contagious Compassion
While Western management systems and a performance-based approach have taken root
at Unilab, the benevolence of its founder and the importance placed on workplace
harmony and community spirit continue to permeate the organization. Compared to
other multinationals, Unilab has a higher threshold for mistakes and non-performance,
but not for fraud. In one company anecdote, upon learning that an employee was to be
fired, its founder asked the supervisor, “Have you evaluated why the person is not
performing? Is it possible that you have not provided the necessary support?”
The company has established written policies on performance improvement procedures,
but in practice, employees are given great consideration. Non-performers are trained and
mentored, and if that fails, the employee will be transferred to another area that might
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make a better fit. The Campos family is also known for its tact and consideration. Even
when a manager or executive may not be well suited for a particular role and needs to be
transferred, the owners are deliberate about providing support with encouraging
feedback, rather than chastising or belittling the employee.
Unilab’s internal and external branding tagline of “compassion and competence”
represents a deliberate effort to give equal importance to high performance and a culture
of caring. The culture of compassion means the company takes care of its employees;
employees in turn take care of one another and their communities beyond Unilab.
During the legendary floods of 2009 that struck Manila, employees didn’t hesitate to put
themselves at risk to rescue peers. When someone gets sick, it’s not only the company
that assists with its health benefits, employees often chip in to help their colleagues. The
Campos family has been known to send employees abroad for specialized medical
treatment when necessary. Unilab holds parenting workshops and summer camps to
expose children of employees to Unilab from an early age. Retirees are welcome to visit
the company and are given Christmas gift baskets. A Retirement Foundation has been
established to provide hospitalization benefits and offers scholarships for the children of
needy retirees.
Sustaining Growth
The business case for Unilab’s culture of bayanihan and compassion is clear. Employees
develop tremendous loyalty to the company and its owners. If employees perceive honest
compassion from their employers, they respond by going the extra mile. This results in
efficiency, cost savings and innovation and has a real impact on bottom-line results.
Moreover, the strong sense of ownership and common desire to stay and retire from the
company encourages decision-makers to strategize for the long term and aim for
sustainable growth rather than focusing on hitting numbers only for the short term.
As a family-owned business, Unilab has time on its side and is able to wait longer for the
return on its investments than a listed peer might be able to. This was the case when it
established its plant in China and had to be patient before seeing it turn a profit. Being a
private company allows Unilab to take a long-term view; its professional management
structure, meanwhile, encourages operational excellence.
Unilab exemplifies the blend of Eastern and Western values that Filipinos have acquired
thanks to their history; the Philippines was colonized by Spain for 300 years and by the
US for 50 years. Unilab’s credo of compassion and competence has its roots in the
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Christian values of Europe, the pragmatic and democratic values of the US and the
family-oriented, humanist values of Southeast Asia. Its success demonstrates how family
businesses can leverage the legacy of their founders and adopt professional management
practices without sacrificing the positive attributes of a tight-knit, family-like corporate
culture. In fact, striking this balance has enabled Unilab to outperform its peers in many
of the markets it serves. The proof, as they say, is in the pudding. Unilab has grown
annual revenue 27% on average over the past eight years and in 2014 registered sales of
USD 953m. The company is projected to hit USD 1bn in sales by 2016, up from USD
454m in 2006 when that growth target was established by the board.
Grace Abella-Zata
Grace is the President of IRC Philippines (the CESI group). She articulates the vision
and value proposition of the companies under the group to ensure that philosophies,
service lines and practices are sharply attuned to the evolving needs of business,
while remaining true to the core values of integrity and professionalism, excellence,
customer orientation and teamwork. Her professionalism expertise is in job/person
organization fit and human resource planning and acquisition. For many years, she
taught graduate courses in Human Resources Management. She also conducts
trainings and workshops on competency-based interviewing, executive teambuilding,
strategic planning and the balanced scorecard and is often invited to speak on HR
topics in conferences. She has provided leadership in research and thought
leadership in the human resources management field and was president of the
People Management Association of the Philippines in 2009. She has a Masters
Degree in Business Management from the Asian Institute of Management and
majored in Psychology in her undergraduate studies in University of the Philippines.
Together with her husband Vir, she remains an active and committed member of the
Marriage Preparation Foundation (Discovery Weekend).
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