Outside of Time
by Diane Claire J. Jiao
July 28, 2013 at 2:12pm
BusinessWorld Anniversary Report on 26 July 2013, p. S4-3.

In his novel Slowness, Milan Kundera wrote, “The man hunched over his motorcycle can focus only on the present instant of his flight; he is caught in a fragment of time cut off from both the past and the future; he is wrenched from the continuity of time.”

Jaime Augusto Zobel de Ayala quoted this passage when he talked about his yearly travels with his brother Fernando, riding motorcycles through the backroads of places like Tasmania, Baja California and South Africa. This year, the destination is Alaska.

“It’s liberating to have some time when the moment at hand is all that matters,” Mr. Ayala said in an interview with Harvard Business School in 2007, when he became the first Filipino to receive its alumni achievement award. “So often, in business, we are reflecting on the past or looking toward the future.”

Ayala Corp. is a company both steeped in the past and primed for the future. Mr. Ayala, who has been at the helm since 1995 – “more years ago than I care to remember” – is its present.

The conglomerate is one of the oldest, largest and most respected in the country. Nearly 180 years ago, it began as a trading house, farming sugar, coffee and cotton, and manufacturing liquor, metal castings and gunpowder.

Over the decades, Ayala Corp. has transformed itself, branching into telecommunications, electronics, utilities, finance, automotives and agribusiness, all the while keeping its stronghold in real estate.

Today, the firm has succeeded in pervading every aspect of Philippine life. People live in their home, work in their offices, shop in their malls, transact with the banks and communicate through their network.

Two Harvard professors, Krishna Palepu and Tarun Khana, have argued that conglomerates play a special role in emerging economies. With the market still inefficient, conglomerates take on the role of intermediary.

“In a country that lacks a functioning stock market, a conglomerate can channel cash from one business to another. If educational levels are low, it picks the brightest, trains them in one subsidiary and transfers them to another. If property, contract and liability laws are confusing and the courts venal, it substitutes the groups reputation in transactions,” the Economist said in a write-up of the professors’1999 study, curiously interspersed with a profile on Mr. Ayala.

Mr. Ayala, 54, is intermediating just fine. As the chairman and chief executive officer of the family’s holding firm, he fashions himself as the conductor in this orchestra.

“I find overarching themes within the group and encourage synergy to happen. That is the role I have to play,” Mr. Ayala said in an interview with Men’s Zone in 1997.

“There is another critical area I have to… make decisions on: creating the right environment for the success of each of these groups, creating the right management, the right atmosphere, the right capitalization.”

Deft leadership has enabled Ayala Corp. to become more than a sum of its parts.

In the 1980s, when the Philippine was hit by a foreign exchange crunch, the group’s importers like Purefoods Corp., couldn’t source enough dollars to bring in materials like packaging for products.

Ayala Corp. turned to its exporters, mainly in electronics, to bring in dollars while the Bank of the Philippine Islands was tasked with allocating the precious dollars to those who need it the most.

“And so we banded together, and we said to BPI, ‘Look, you’re handling our banking business; however, because of the shortage of dollars, we would like to channel the dollars coming out of our export-related group and channel them to the groups that need imports badly,’” Mr. Ayala said.

“While everybody else was scrambling to get dollars in the market, we managed to pull our group together to get these dollars and give them to the other group members.”

The Ayala companies, he believed, were at their strongest when they work together. “Although were in different businesses… we share a certain way of doing things.”

Given the wide expanse it covers, Ayala Corp. needs decentralized structure, Mr. Ayala said in a 1995 interviews with BusinessWorld for one of the earliest editions of the Philippines, Inc.

While he wants to know the conglomerate’s operations intimately, he also understands he can’t keep looking over the shoulders of his subordinates. The Ayala companies are led by capable people who deserves as much leeway as possible.

“So, it’s got to be a mix of never letting go of the details… but at the same time, knowing when you have to take a step back and let people get things done,” he said.

It is a delicate balance, but one Mr. Ayala personifies effortlessly. Those who work with him all say he exudes authority and charisma in equal parts. It’s hard to believe that he took the helm at Ayala Corp. at the tender age of 36, the seventh generation in a long line of business leaders.

Those that came before him started young as well. Antonio de Ayala was only 29 when he established the country’s first trading house, Casa Roxas, with Domingo Roxas. Margarita Roxas de Ayala, Antonio’s wife, was also 29 when she entered the business. Jaime Zobel de Ayala, Mr. Ayala’s father, was 34 when he led the family’s group of companies in 1968 with Enrique Zobel.

Mr. Ayala was blooded in early, too, and he was not ushered into the company with the red carpet rolled out. He was made to work from the start, taking odd jobs as a teenager delivering newspapers in Spain and running tasks for a bank in England. Back home, he spent time on a Banana plantation in Mindanao and even helped at the company maintenance center to fix cars.

Along with Fernando, they earned their stripes in the different companies of the family conglomerate. For many years, they were not made to report to their father but to their assigned managers. This allowed them to develop at their own pace, moving up only when they earned it and not a moment before.

“When we came in, we were trained as managers and professionals, not as owners,” Fernando, currently Ayala Corp.’s president and chief operating officer, said in the conglomerate’s 175th anniversary report.

Fernando – a year younger and more handsome, Mr. Ayala always insists – is the perfect foil to his brother. Where Mr. Ayala brings in the structure, Fernando brings in gut feel, observers say. Where one is by the book, the other is off the cuff.

“Our relationship is all about teamwork and trust. Our environment is becoming increasingly complex, and working in unison enables us to cover twice as much ground at twice the speed,” Fernando said in a 1999 interview with Men’s Zone.
“We share and test thoughts, opinions and decisions. We temper each other’s more emotional impulses when they are unwarranted and encourage each other when the environment calls for boldness.”

The two brothers embody the dual forces driving the Ayala group of companies. The conglomerate is known for its stability and prudence. But at the same time, it cannot and has not lost sight of competitors pursuing aggressive growth.

While other conglomerates bank on high-risk, high-reward strategies, buying and selling billion-peso businesses, Ayala Corp. bides its time. Its moves are so gradual, it’s easy to overlook that the are also deliberate – tactical, almost chess-like.

Globe Telecom, Inc., for example, was purchased as far back in the mid-1970s, then the Globe-Mackay Cable and Radio Corp. In anticipation of the telecommunications boom, Ayala Corp. also bought the Clavecilla Radio System in 1992. As the decade unfolded, Globe led the evolution of the industry. It was the first to bring in text messaging and the mobile Web surfing in the country.

Many also doubted Ayala Corp. as it ventured into utilities in 1997, winning the bid for Manila Water Co., Inc. to distribute water and manage sewerage systems for the east side of Metro Manila. But in 2005, it was listing on the Philippine Stock Exchange. The initial public offering was recognized as the “Deal of the Year” by Banker Magazine.

Mr. Ayala steered these companies and many others to their steady rise, displaying the same visionary leadership as those that came before him. But the biggest payoffs are yet to come, in the industry where the family first made a name for itself: real estate.

With Metro Manila bursting at the seams, Ayala Land, Inc. has looked further south to Laguna, and in 2008, it launched Nuvali, 1,680-hectare, “large-scale, master-planned eco-city” – a central business district with sustainability at its heart.

Ayala Land also helped create Bonifacio Global City, an urban center in Taguig City, while Vertis North in Quezon City is in the works to expand the company’s presence in the north.

It echoes the same pioneering work of Joseph McMicking and Alfonso Zobel de Ayala when they brought Makati to life in the 1940s. With the country devastated by war, they decided to transform the sprawling riceland into a new development, building the exclusive subdivision of Forbes Park on one side and the Ayala Center, a commercial and financial hub, on the other.

Nobody could have predicted what a success the “Miracle of Makati” would become. It made the Ayalas captains of industry. The work of this generation makes sure they keep going forward.

So while the Ayala group of companies remains firmly rooted in its past, Mr. Ayala believes they are by no means confined to it. “Our interest is to have and Ayala that remains dynamic, that adds value and continues to grow with the time and remains relevant.”



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