The Asia Leaders Series® continues its 2018 campaign with an honest and thought-provoking commentary on business transformation and failure, delivered by Idris Jala, former CEO of Malaysia Airlines, and President and CEO of PEMANDU Associates, a global consultancy firm focused on public sector transformation.
Jala is no stranger to hostile business environments; his unique style to business turnaround within large corporations has cemented his legacy as one of the leading transformation experts in South-East Asia.
Before his tenure with Malaysia Airlines he spent 23 years at Shell, where he held several senior management positions. In 1998, he became CEO of Shell Middle Distillates (SMDS) Bintulu and Shell Sri Lanka, which had collectively lost money for 20 years straight. In his first month he had to make radical decisions in order to free up capital. “There was nothing in the Shell manual that taught me how to deal with this,” explains Jala. Despite many seemingly insurmountable obstacles to profitability, he managed to turn Shell Middle Distillates (SMDS) Bintulu and Shell Sri Lanka into some of the corporation’s most profitable business units.
In the second Asia Leaders Series event of 2018, Idris Jala takes us through his most daring business turnaround yet: Malaysia Airlines. He took over the company as CEO during its worst financial period in its 50-year history; Malaysia Airlines had reported losses of USD $400 million in the 9 months leading to his entrance. Despite adverse market conditions, he managed to lead the company back to remarkable profitability in only two years.
His talk on business turnaround, transformational leadership, and dealing with failure could not come at a better time. The global economy, especially emerging markets, are experiencing a tremendous rate of change. This type of business climate is propelling Asia’s middle class towards greater prosperity.
Jala shares with us the importance of stepping out of the comfort zone in order to pursue new opportunities. For him, pursuing the impossible is what lies at the heart of business transformation.
In December 2005, the Malaysian government appointed Idris Jala as CEO of Malaysia Airlines due to his proven track record at Shell. With only two and a half months’ worth of cash on hand, Jala had to act fast in order to save the national airline from bankruptcy and safeguard 20,000 jobs.
“I had no time to go and learn about the business in this time,” said Jala. “I had to make radical change, and I had to make it fast.” Jala had never worked in the Airline industry before, nor had he ever worked so closely with the Malaysian government.
His first act as CEO was to compile Profit & Loss statements based not only on all routes within the airline, but also for each individual flight. This attention to detail quickly set MAS (Malaysia Airlines) apart from other airlines, which conducted their financial statements on a route-by-route basis. When Jala initiated the go-ahead for the P&L statements on all flights for the past four years, his CFO said it could not be done. With no time to spare, Jala had to remove long-standing members of the senior executive team who were resistant to change.
At the time, Malaysian airlines had over 110,000 flights per year, which meant an equal number of P&L statements. This seemed to be an extremely high number of statements to analyse at the time, but it proved to be pivotal in terms of identifying the specific flights that were unprofitable. Ultimately, his relentless attention to detail is what gave Malaysia Airlines a fighting chance to counter pending bankruptcy.
Jala’s push for this detailed analysis was the first step to completely turning around the company. “The first thing that struck me was that we were losing money on flights to London: about $10 million USD per year. Two flights per day on this route were losing money, so we immediately acted to remove those flights, whilst keeping the route.” This segmented P&L analysis allowed the company to identify the specific flights that were losing money. They could then determine whether to try and salvage the flight or get rid of it altogether. The decision process was efficient, detailed, and cost effective, saving the airline millions in lost profits.
Jala trademarked the BFR (Big, Fast, Results) ideology to implementing business turnaround. When he took up his role at Malaysia Airlines, he noted, “we could not make incremental changes because the losses were debilitating. It had to be big and had to be fast. You cannot see results unless you act fast and act big.” he said. Jala notes that he, “couldn’t sit around for 6 months and digest what we are going to do,” since he found himself in a high-pressure situation with very little time to make decisions. “I didn’t change anything else; I didn’t change the culture of the people, I didn’t change the food offered, I didn’t change the uniform of the crew.” He simply looked at where the profits were. This simplistic approach was what the company needed, and was what allowed him to implement transformational leadership across the company.
“In order to ensure profitability, you need to evaluate it from the lowest common denominator,” explains Jala. He says that understanding the company from the ground up was the first step to ensuring profitability in Malaysia Airlines.
The second thing he did was identify the most profitable company in the industry, and then study their business with as much detail as your own. “When you know who the number one person is, be their best friend and do exactly what they do; how many hours do they study? How hard do they work? Once you know what they do you incorporate their strategy into your own and make it better. In our case, we studied Singapore Airlines.”, Jala explains.
“Transformation for any business has two components,” explains Jala.
1. The profit/loss statement at the lowest common denominator. “That’s an inside-out way of transformation.”
2. Then, if you look at the best competitor, that’s an outside-in transformation.
“If you take these two components, it can lead to a phenomenal outcome,” mainly due to the fact that they put you in a position to understand your business from an internal and external point of view. Ultimately, having different perspectives on business processes will be extremely helpful when attempting to turn around any type of company.
Jala took many radical steps to transform Malaysia Airlines into a profitable company. The P&L segmentation strategies offered a quantitative overview of all company operations, but did not account for the management of human capital within the firm.
These strategies have served Jala exceptionally well in the short run, but can only go so far in helping a company in the long term, that is what human capital is for. His goal was not just to turn Malaysia Airlines into a profitable company, but to transform the way they conduct business. “You cannot transform an organization with an old way of working,” says Jala.
His second step to securing long term profitability was to inspire transformation among the employee base. He had to introduce an entirely new way of working and solving problems if the airline was to succeed in a rapidly changing global business environment.
During his first three months at Malaysia Airlines, Jala launched a series of innovation labs. These consisted of groups of 15 or more individuals from various areas of the company that would meet daily to find solutions to specific problems. If they did not find a way to salvage a given route or ensure a flight’s profitability, then it would be cancelled, and jobs would be lost. “We never met to discuss success, we were only concerned about solving problems”.
This type of teamwork and collaboration is common among modern businesses, but what made Jala’s implementation of these labs so successful that the results stemming from their work over a six-week period had real and direct implications.
What makes Jala such an effective leader is his ability to inspire action by holding people accountable to their actions. His motto, “Big Fast Results,” really is a ‘go big or go home’ approach to business turnaround, and in Jala’s experience, has worked time and time again.
“I am a huge believer in the idea that regardless of how bad you think your staff is performing, they can always do better than what they are currently doing, if only you introduce a new way of working.” For Jala, this ‘new way of working’ consisted of increasing demands and responsibilities for every employee. By focusing on problem solving and establishing accountability for each individual, he was able to maximize the productivity of his employees and obtain tangible results within a short timeframe.
Jala refers to business goals as “measures of true north.” In business, it is crucial to define success. Flexibility to adapt and embrace opportunity is often key to reaching targets. In Jala’s words, there are only two important measures of what true north is: profitability and revenue growth. Conquering both goals simultaneously however, is not easy.
Jala explains that the main question in business turnaround is: “How much effort are you going to put into growth versus profitability?” In the case of his Malaysia Airlines turnaround, he had to initially focus on profitability by getting rid of unprofitable routes. But once the business grew and worker productivity improved, he set his sights on expanding the Airline in promising, well-researched domains that proposed new opportunities for growth.
Idris explains that “knowing your measure of success,” is one of the most important aspects of sustaining effective leadership. You must know your end goal, and you must be able to accurately decipher whether you should pursue greater profit margins, or higher revenue growth opportunities. “You need to focus your energy on what is most important rather than getting caught up in the small things,” which means constantly taking a step back and looking at the big picture. “Always have your end goal in mind when making day-to-day decisions and always plan for disruption.”
Among Jala’s business tips during his presentation in Zurich, his comments on failure provide a powerful piece of introspective thought. Like any successful CEO, Jala has made many decisions throughout his career in the face of doubt. In the late 1990’s he had a secure job working for a crude oil company, and lived in what he described as a lavish home in London, provided to him by his company. However, when the opportunity to become the CEO of Shell in Sri Lanka emerged, Jala explains that he had to take it, not because it was a highly promising opportunity, but because he knew it would be an extremely challenging ordeal.
With Malaysia Airlines, he knew that the chances of turning around the company were less than favorable, and he was told by many of his colleagues that it could not be done. But Jala explains how, “if you live life always fearing failure, you will confine yourself to mediocrity.”
Only two years after starting at Malaysia Airlines, he had successfully led them to their most profitable year in history, reaching profits of more than $200 million USD in 2007. Jala had cemented himself as one of the leading business turnaround experts in South-East Asia, a reality that would not have materialized if he had not embraced the opportunity.
“In this game of transformation, if you only set targets where you are guaranteed success, then you are never going to fully complete them. But there is one guarantee when you take risks: regardless of whether you fail, that experience alone will be transformational for you and for those around you.”
Jala purposely set targets at Malaysia Airlines that he knew were not attainable. He did this because it was better to set his sights high and fall short rather than aim low. “In a leadership position, you have to find a way where you must conquer the fear of failure, and instill that confidence in your colleagues,” which he did by setting the bar high not only for himself, but for everyone in the company.
In order to truly be a transformational leader, you too need to be held accountable, not only for your actions, but for your words. “If you say you are going to do something, you have to be very detailed about the actions you are going to take. If you list out each individual step towards achieving any given task, you are more likely to accomplish it.”, explains Jala.
Jala notes how, “when you have a large company with people in many different areas (finance, marketing, sales), you have to detail every single step that each individual must take in order to keep the company running smoothly. You must have an in-depth understanding of how every piece of the company fits together, otherwise you will not be productive.”
Everyone in Malaysia Airlines, regardless of seniority, was held accountable for their actions and guided towards their goals. “Every single employee has a role to play, and they have weekly objectives to meet. If you did not complete your weekly objectives by the time the Friday report went out, management would be notified,” Jala says. “Leadership is about sitting down with individuals at all levels of the company to identify and resolve problems. Because without problems there are no clear identifiable objectives and there is no progress.”
Weekly progress reports weren’t the only strategy used to keep employees focused. MAS also used inquisitions: if a problem remained after 6 months, they would identify the root cause, name the person who was standing in the way of it being resolved, and get that person to come forward and explain why they are not solving the problem. When called up, 70% of problems are resolved before the meeting even takes place.
The Q&A session consisted of many interesting questions from the audience as well as some more unique insights from Jala himself.
He was first asked how he sees the future for Malaysia Airlines. Jala firmly believes that the government should act as a facilitator rather than being on the front lines. “The government should limit its owning of business as much as possible, leave this to the private sector. The job of the government is to govern, and to create an environment where the private sector can flourish,” Jala states.
This line of thought transitions into the next question, where he is asked how to retain talent in a company. Jala explains how the acquisition and sustainability of human capital within any company depends directly on the macroeconomic conditions of where that company is operating. “The role of the government is to create flourishing conditions, and the role of the management is to pay salaries that are competitive. Both employers and government must play their part. Apart from that, you have to create an environment where people can become entrepreneurs. Young people want to create their own future. So, you have to create the conditions for entrepreneurship to happen and create conditions for private companies to create and invest in more high paying jobs.”
Jala describes the new Malaysian government as providing, “a new dawn for Malaysia.” After 61 years of single-party leadership in the country, Malaysia needed a fresh start, a new face to their leadership; he hopes that Mahathir Bin Mohamad (the current Prime Minister of Malaysia) will provide this fresh start.
Jala then proceeds to answer a wide range of questions on how to deal with digital disruption and how he has needed to change his leadership style in order to adapt to technology.
Jala’s success as a transformational leader goes far beyond his ability to analyse large amounts of data and make decisions with conviction; he is successful because he knows how to inspire his colleagues to accomplish more than they previously imagined possible. Jala speaks of turning around a company by analysing P&L statements and being adaptable to change. But the true significance of his leadership abilities stem from his uncanny ability to hold everyone in the organization accountable to their actions.
By placing more responsibility in the hands of everyone in the company, as well as allowing them autonomy in their decision-making process, he successfully created a culture of leaders within Malaysia Airlines; a company filled with individuals dedicated to turning around a nearly bankrupt company. This proved to be the most effective corporate culture transition that Jala could have ever hoped of implementing.
The second event of the 2018 Asia Leaders Series was full of practical business tips from a man who has done the seemingly impossible time and time again. Idris Jala understands what it takes to truly be successful in the relentless world of business, and the stories and advice he shared at this conference are a testament to how much valuable knowledge this man has obtained over the course of a long career in challenging leadership roles.
This evening was about transformation; transforming not only high-profile companies, but transforming people. Jala notes that in order to transform oneself, you must step out of your comfort zone. You must actively chase “impossible opportunities” in order to progress, because “You will never fulfill your full potential unless you are willing to overcome the fear of failure.”
Callam Fletcher, founder and director of the Asia Leaders Series, notes that in 2009 in Asia there were 525 million middle class citizens from a total population of 4.5 billion. In 2020, that number more than triples to 1.7 billion, and further doubles to 3.2 billion by 2030. He states that businesses and business leaders must prepare today for the significant rise of the middle class in Asia. The value of economic output in terms of higher quality goods and services will skyrocket in the coming decades as economic power shifts towards the East.
The question of how to prepare in Europe for this tremendous rise in household wealth throughout Asia is not an easy one to answer. However, if one theme holds true throughout the several Asia Leaders Series keynote presentations, it is that embracing change with an open and non-judgmental approach is absolutely key to a successful exchange.
“We believe that effective communication between influential leaders in Europe and Asia is going to become crucial in the coming years,” explains Callam. Economic growth in Eurasia is inevitable, but only with seamless cooperation between the two regions can opportunities be realized to their fullest extent.