Creating an Entrepreneurial Spirit Through Culture free essay sample

This paper focuses on managing entrepreneurship, and entrepreneurship in the family business context. Through strategic leadership, a strong vision, mission and culture, we will study how Qian Hu Corporation Limited has transited itself from a modest family run business into a successful ornamental fish business employing 700 personnel. We will examine business management variables such as ownership, business organisation and the decision making process, and how the leadership of Kenny Yap and his management team developed a small family business into one of the world’s largest suppliers of ornamental fish. This study is based on information obtained from articles, company annual reports and existing academic journals. MGMT 104 Group Case Study – Qian Hu Corporation Ltd Content 1. Company Profile 1. 1Vision 1. 2Mission Statement 2. Company Culture 2. 1Core Values 2. 2Strategic Thrusts 2. 3Culture 3. Operations 3. 1Business Model 3. 2Human Resources and Talent Management 3. 3Corporate Social Responsibility 4. Kenny Yap – The Entrepreneur 4. 1 Profile and Background 4. 2 Instilling a mindset of change 4. 3 Going Public 4. 4 Embracing Technology and Change 4. Creating an entrepreneurial culture 4. 6 Learning from mistakes 4. 7 The Business Challenges 5. Management 5. 1 Decision Making Process 6. Family Run Business 6. 1 Problems 6. 2 Solutions from Qian Hu’s Perspective 7. References and Appendices 1 MGMT 104 Group Case Study – Qian Hu Corporation Ltd 1. Company Profile Qian Hu Corporation Ltd is a leading exporter of ornamental fish, contributing about 14% to Singapore’s total ornamental fish export. Together with other local farms, Singapore supplies more than 30% of the world’s aquarium fish. They have export links to more than 75 countries worldwide and the company ships about half a million fish per month from a variety of over 1,000 ornamental fish species. The company employs about 700 employees. 1. 1 Vision Qian Hu has adopted 4 vision objectives. 1. To be a world number one ornamental fish exporter, supplying 60% to 70% of world market. 2. To own the largest number of pet chain store in Asia by 2008. 3. To be the top 3 manufacturers of aquarium accessories in China by 2008. 4. To be the most profitable Dragon Fish Breeder in the region. 1. Mission Statement â€Å"To be the world biggest Ornamental Fish and Aquarium and Pet Accessories provider through innovative and Quality Products and Services. † 2. Company Culture Qian Hu is a company that is highly customer centric, and they will export its products and services to any place in the world as long as there is appropriate flight access and distribution infrastructure. The company does not distinguish between individual or retailer/wholesaler customers and they strive to maintain long-term distribution relationships, however large or minute the dealings. In all of their business dealings, Qian Hu aims for quality, timeliness, varieties, value for money and competent product knowledge. The company acknowledges that their competitive success has been due to their customer centric business and strong design capabilities, good quality, workmanship and competitive pricing. Innovative and continual improvements to their product design, breeding better arowana species and sourcing new fish species has been critical to sustaining their competitive advantage. Lastly, they recognise that leveraging on innovation and technology will improve their efficiency on procedures and services. 2 MGMT 104 Group Case Study – Qian Hu Corporation Ltd 2. 1 Core Values The company core values are Integrity, Value Creation, Entrepreneurship and Teamwork. 2. 2 Strategic Thrusts The strategic thrusts that the company has identified to keep them ahead of their competitors are: ? ? ? ? Customer Focus People Experience Quality Excellence Financial Strength 2. 3 Culture The company culture has been highly influenced by its chairman nd Managing Director, Mr Kenny Yap. Entrepreneurial leadership, incorporating the best in both management and knowledge governance practices are values he brings to the company. The essential components of Qian Hu’s business culture are belief in values such as hard work, employee welfare, family cohesion and skilful change leadership. The organisational culture at Qian Hu has evolved from a â€Å"family values† c entric one to one which encompasses more professional practices by instituting best employer practices. Appropriate measures are adopted to encourage value creation, entrepreneurship, organisational culture and the training and development of its employees. However the company recognises that for effective change management to take place, it is imperative to retain some elements of the family culture. The company also differentiates itself form its competitors through a high quality service culture and the use of technology. Qian Hu places high importance on product knowledge and training, and ensures that each of their sales staff is competent in their product knowledge. QIan Hu is differentiated from the rest of the competition in terms of tis integrated services, brand, distribution network, manufacturing capabilities, and most importantly, its quality, innovation and service culture throughout the Group. † – Qian Hu’s total value chain 3 MGMT 104 Group Case Study – Qian Hu Corporation Ltd 3. Operations Qian Hu Corporation Limited has offices and subsidiar ies in 4 countries, including Singapore, Malaysia, China and Thailand. Together, they are involved in 4 types of businesses: Ornamental Fish, Arowanas, Aquarium and Pet Accessories and Plastic Bags. The organization has a proportionately diversified workforce with 49% below the age of 30, and a third of its employees are from Malaysia. Qian Hu joined the Employee Alliance (EA) 1 in 2006 and the company regularly participates in workshops, knowledge-exchanges and industry related events. The EA also provides a network of CEO-advocates that provides peer-to-peer outreach. As an EA member, Qian Hu has embarked and actively encouraged other organizations to understand the importance of integrating Work-Life initiatives into their people management. Its chairman and managing director, Kenny Yap, believes that building Work-Life values into the corporate culture is crucial. Major benefits of a Work-Life harmony for Qian 1 EA is a local association established to spearhead the adoption of Work-Life practices and make organizations aware of the business benefits in implementing Work-Life strategies 5 MGMT 104 Group Case Study – Qian Hu Corporation Ltd Hu include low staff turnover. Staff turnover is lower than the national average and the industry trends, and Yap recognizes that the key to managing turnover is employee recognition and appreciation. Some of Qian Hu‘s Work-Life initiatives include allowing employees to work parttime during crucial periods such as when employees need to prepare their children for major exams such as the Primary School Leaving Examinations (PSLE) or Singapore-Cambridge GCE ‘O’ and ‘A’ Level Examinations, providing Personal Digital Assistants (PDAs) for their salespeople to help them better manage their time, and enabling senior employees to work beyond the statutory retirement age. â€Å"Being an SME is an advantage because you can easily and quickly build a Work-Life culture. The small size allows us to be close-knit, informal and flexible. In Qian Hu, we treat each employee as a family member with love and mutual respect. I believe Work-Life strategy helps us create that conducive environment where employees can feel at ease and perform at their best. † – Kenny Yap, Chairman and Managing Director, Qian Hu Corporation Ltd Senior management is highly involved in communicating Qian Hu’s vision, missions and values and this is achieved through the flat hierarchical structure. Senior management regularly holds informal tea meetings with their staff, walk-abouts, and creating employee focus groups for feedback. The organization has developed and established human resource strategies derived from the environment, labor laws and practices, needs of the workforce, and business sector and management inputs. The objectives of such strategies are aimed at being a competitive employer, having a proactive learning and thinking workforce, and to nurture a family culture environment. Human resource practices at Qian Hu aim to fulfill five criteria; Manpower Planning and Staffing, Employee Involvement and Commitment, Training and Development, Employee Health and Satisfaction, and Performance Management and Recognition. Implementation of plans and subsequent reviews are done through meetings with line managers and senior management. The organization intensively studies best practices of other leading people-centric organizations in order to adopt relevant strategies for value creation, 6 MGMT 104 Group Case Study – Qian Hu Corporation Ltd entrepreneurship, organizational culture, people development and compensation. Organization models that they try to emulate include Robinsons, Development Bank of Singapore (DBS), and Philips Singapore, all of which have managed to generate high value creation and business performance through their human resource practices. Qian Hu’s senior managers also attend bi-monthly information sharing sessions and best practices seminars to understand more about people development trends. Qian Hu’s performance management system integrates organizational values and functions to reinforce positive behaviors and practices. Variables include on the job performance indicators, participation and contribution towards innovation, quality and team activities and expression of the Qian Hu culture. The appraisal would then affect the salary increment and annual bonus. The flexible bonus system is tied in to profit performance, while flexible wage issues are constantly being improved. In order to ensure that the performance and recognition systems are effective, Qian Hu’s senior management, HR team and line managers review the performance and recognition systems in the company regularly. A variety of formal mechanisms such as management review sessions, employee opinion surveys (EOS), 360 degree feedback, performance achievement, third party feedback, and turnover statistics are used which enhances job satisfaction, performance and employee involvement. Target set for EOS satisfaction level is a minimum level of 90%. The organization’s Total Learning Plan is reviewed based on training effectiveness, system relevancy and the impact on business results. Training Needs Analysis (TNA) is conducted based on inputs from departmental supervisors, annual performance appraisal and Qian Hu’s internally designed executives and non-executive competency matrix. While overall average training per staff has been on a constant gradual increase, staff turnover has fallen with the execution of Qian Hu’s various HR strategies. The Employee Involvement Framework also involves the establishment of a Staff Participation Committee which is placed in-charge of leadership involvement, rewards and recognition, communication and training and development. The initiative resulted in the implementation of numerous creative ideas organizationalwide which played a significant role in driving overall business performance. The HR department plays a crucial role in championing a majority of the initiatives that helped engaged and involve employees. Examples include a Staff Suggestion 7 MGMT 104 Group Case Study – Qian Hu Corporation Ltd Scheme to encourage ideas for improvement from individual employees, Community Projects comprising of home visits and donations to help promote compassion and obligations of being good corporate citizens, and Staff Dialogue Sessions to promote two-way communications and bonding within employees, as well as between the management and non-management staff. Finally, to ensure that Qian Hu’s people management strategy supports business objectives, Kenny implemented a performance reward system together with his brother Andy, who was the previous HR director. In 2003, Andy handed the HR function to their HR manager, Raymond Yip. Staff performance is appraised on a 20criterion scale whereby staff receives points whenever they achieve the criteria. 3. 3 Corporate Social Responsibility Qian Hu has always believed that â€Å"all lives should be cherished and treasured† and has in place processes and initiatives to â€Å"walk the talk†. The company adopts a 3pronged approach to contribute; the environment, the community, and the business community. Environmental preservation Qian Hu currently uses an ISO-14001 certified environment management system where rainwater is recycled to be used to irrigate all of its farms. In addition, any waste produced by their fish is treated first before being released. Qian Hu personnel are trained to reuse and recycle any reusable items, from small items like rubber bands, cups and plastic bags, to larger industrial equipment like Styrofoam containers and packaging boxes. Giving back to the community Qian Hu believes in giving back to the underprivileged, and has an annual fund raising event for the elderly. The company matches dollar for dollar at these events to show and pledge their sincerity. Also Qian Hu conducts free tours of its facilities for underprivileged students, as well as sponsoring overseas internships for a few talented students. Additionally, Qian Hu is strong supporter in the Speak Mandarin Campaign. 8 MGMT 104 Group Case Study – Qian Hu Corporation Ltd The Business Community Qian Hu is committed to increasing the knowledge of ornamental fish breeders on techniques in fish breeding and care. The company organises talks on the subject regularly, and many can pick up a trick or two by visiting their facilities. In addition, Qian Hu is committed to developing young entrepreneurs and its CEO, Mr. Kenny Yap, is constantly open to talks and interviews. He is a regular speaker at SMU’s Lee Kong Chian Scholar’s Program dialogues, and often shares his success story. 4. Kenny Yap – The Entrepreneur 4. 1 Profile and Background When Kenny was seven, he bought a gold fish that cost 50 cents. Some of his brothers laughed at him when he brought the fish home because the gold fish had a broken tail. But to Kenny, his brothers’ opinions were immaterial as he thought it was a good fish. The recipient of the 2003 Ernst Youngs Services Entrepreneur of The Year Award now realizes how important such a trait is for an entrepreneur – to not be easily swayed by the opinions of others. His belief is that â€Å"as long as we can live up to our own conscience, we need not seek approval from others. Being the youngest of seven sons in the family, Kenny had the privilege of going abroad to study in Ohio State University, and obtained a first class honours in Business Administration. His elder brothers, on the contrary, had to help out at the guppy farm then. In 1989, a thunderstorm wiped out the farm’s entire stock of guppies and the Yap family had to start over. After returning from the United States, Kenny was appointed by his family to head the business in 1994. Having a degree was not equivalent to hands-on experience in the family business, and Kenny had to work his way through to gain credibility among his siblings. Together with his four brothers and two cousins, they teamed up to turn around the business and renamed the company â€Å"Qian Hu†, which means â€Å"a thousand lakes† in mandarin. Today, Kenny Yap is Executive Chairman Group Managing Director of Qian Hu Corporation Ltd, Singapore’s first integrated ornamental fish service provider as a breeder, distributor, manufacturer and retailer, Qian Hu has come a long way from being a medium sized enterprise to becoming a public-listed company with export links to more than 75 countries globally. 9 MGMT 104 Group Case Study – Qian Hu Corporation Ltd 4. 2 Instilling a mindset of Change Kenny’s education in business administration at a American university led him to have different perspectives in running a business and he went on to explore new management concepts such as customer relationship management and ISO quality certification. Several organizational reforms have taken place under Kenny’s leadership such as the Strategic Business Planning exercise in 1997, Corporate Restructuring in 1998 and the National Cost of Quality Program in 1999. The objectives of these programs were to work towards business excellence and diversify both products and export markets. Kenny also initiated other change measures such as implementing technological processes, modifying the organizational structure and human resources management, to support the firm’s strategic direction. These concepts and programs were rather new to managers of small and medium-sized enterprises, but Kenny capitalized on the first-mover advantage and successfully led Qian Hu through this transition process. 4. Going Public Yap’s entrepreneurial spirit wanted to prove to the world that the ornamental fish breeding business could be a thriving and profitable industry. In November 2000, Qian Hu launched its IPO and was listed on the Singapore Exchange. In preparing for the IPO, Kenny’s greatest challenge was in persuading his family members to change their mentality from that of a private limited company to a public listed company, a corporate st ructure in which management was separate from the owners. Previously, he also had to change their mindset that they were going to be a private limited company nd no longer a family partnership entity. Yap said that one of the main reasons for his push for the IPO was to keep his siblings’ children from taking over the company, as well as forcing Qian Hu to adhere to transparent business practices. One of the biggest changes of becoming a listed corporation was that the business had an additional group of stakeholders to manage – the shareholders. Voting rights had become more diluted, and decision-making could prove to be a difficult process as both the shareholders’ interests and the company’s business had to be considered. . 4 Embracing Technology and Change The first step after taking over the business was to convey the message that the company was a separate entity from the family members. This was crucial so as to 10 MGMT 104 Group Case Study – Qian Hu Corporation Ltd develop a management structure that supports the execution of company strategies. Everyone had to be responsible for the performance and welfare of others, if they wanted to bring relatives in to work for the organization. Kenny capitalized on advanced technological processes to build the fish farm’s infrastructure. Qian Hu adopted high-tech farming methods, such as a temperature controlled packinghouse, computerized system of trading records and a laboratory for fish examination and water analysis. Specialized equipment helped to increase operational efficiency, and a mobile distribution management system (DMS) helped streamline sales processes and enhance the time spent with customers. Qian Hu also began leveraging on mobile IT system in 2003 to manage its customer accounts and distribution. Over time, Qian Hu realized that the system was not able to manage the increasingly complicated business and customer expectations. Sales orders for stock code that were previously not captured in the mobile system had to be filled out by hand, resulting in billing delays and manual re-entering of data into the accounting system. There was an established discount structure, but the system was unable to compute customer discounts accordingly and the van-sales representatives had to constantly refer back to a printed price list, which defeated the purpose of the technology. With the new MEVO Mobile DMS, the van-sales team was able to meet customer needs in real time and no longer be immersed in paperwork rone to human error. Qian Hu’s investments in research and development have aggressively propelled its success in manufacturing plastic bags, which are used to pack ornamental fish for sale. Qian Hu spent more than S$200,000 and developed the world’s first automated packaging machine for ornamental fish. The machine increased output as much as 80% and reduced the amount of labour by 66%. Kenny embrace d the Western corporate structure by delineating roles and responsibilities for each family member. This caused tension among his siblings, since Chinese family enterprises seldom trust outsiders (see Family Run Business – Problems). But Kenny made a bold step to hire managers that were non-relatives. Through changing the familial mindsets of his family members, Kenny was able to transform Qian Hu from a traditionally run family business, into a world class player in the regional aquarium fish market. 11 MGMT 104 Group Case Study – Qian Hu Corporation Ltd Qian Hu, like any other business, also faces the challenge of attracting, developing and retaining talent. The lack of financial resources means that Qian Hu can only differentiate itself by its organizational culture and HR practices, so that employees can be motivated to provide good quality products and services. While the compensation may not be as attractive, Qian Hu can be an employer of choice by having a transparent and equitable corporate culture, a compassionate working environment, and open communication channels for everyone to have direct interaction. A strong management team serves more than just a differentiating factor for Qian Hu, but also ensure that the organization is responsive to a changing environment. . 5 Creating an Entrepreneurial Culture Yap is a prominent entrepreneur in Singapore and was recently appointed by National Youth Council as the Chairman of the Youth Award (Entrepreneurship) Committee. Business Week also voted him as one of the 50 Stars of Asia in 2001. Qian Hus role in establishing Singapore as the ornamental fish capital of the world has distinguis hed Yap to be a remarkable business leader in the Chinese market. He feels that leadership stems from being able to trust one’s employees and being able to delegate. Yap also cautions that delegation comes with responsibility. Far from being the typical authoritarian leader whose power revolves around a patriarchal founder, Yap strongly encourages his employees to make suggestions. This is done through employee opinion surveys (EOS), third party feedback, and employee involvement. Be it during their monthly meetings, informal gatherings, recreational activities or formal employee opinion surveys, he likes to ask his employees to think about new ways of doing things. He aspires for Qian Hu to be a thinking organization, like General Electric and Citibank, one that sustains growth and is able to keep pace with changes. Yap hopes that both the young and old can learn from each other. While youths have novel ideas and can create new trends, the veterans possess a wealth of wisdom and experience. Old ideas can be new again, and new ideas should contain old truths. All employees who work for the company must be interested in tropical fish, because they need to understand the company’s products in order to manage operations well. As for top management, Qian Hu offers more than just a career, but also a vision of what they managers want to achieve in their own lives. Kenny 12 MGMT 104 Group Case Study – Qian Hu Corporation Ltd places significant attention on a strong company culture and a good management system, because employees will stay on with the company if they perceive themselves to be treated fairly and share a common vision with the company. Kenny developed a performance reward system so that the highest achievers can rewarded accordingly, symbolically as well as financially. Entrepreneurship is one of the four core values of integrity in Qian Hu. This comes about from creating a unique organizational culture and is expressed in the HR handbook, which includes the corporate vision, mission, values and strategy. What Kenny has done in Qian Hu was to put a human face to the corporate culture and transmit and instil it in the organisation. 4. 6 Learning from Mistakes The road to success was not without failures. In 1989, after the flood washout, the Yap family tried to rear high-fin loaches. This breed of fish was a popular fish during that time, but competence in that breed of fish was inadequate. Vibrations from the power tools used to install new fish tanks killed 4,000 four-inch high fin loaches, worth a total of $270,000. The company learnt that they needed to know their products well and the importance of risk diversification. This lesson proved to be so valuable that the high-fin loach is now the mascot of Qian Hu. 4. 7 The Business Challenge When a customer spends $1 on fish, he typically spends another $5 on accessories. Qian Hu has identified the accessories business to be a potential driver of the business growth strategy. They established a joint-venture in Guangzhou, set up a new subsidiary in Thailand and a new fish division in Malaysia. Despite setting up these manufacturing bases to gain access to low cost and human capital resources, low barriers to entry in the fish accessories industry has seen new entrants fighting for market share, causing Qian Hu’s profit margin to fall 8. 9% in 2003. 5. Management The primary figures who make up Qian Hu’s Management team are Kenny Yap Kim Lee, the Executive Chairman and Managing Director, Alvin Yap Ah Seng, Deputy Managing Director, Andy Yap Ah Siong, Deputy Managing Director and Teo Boon Hock, the General Manager. The Management’s key responsibilities revolve around the day-to-day running of the Group as a whole, and providing the Board of 13 MGMT 104 Group Case Study – Qian Hu Corporation Ltd Directors with a continual flow of relevant information on a timely basis so that it may effectively discharge its duties. On a monthly basis, Management furnishes the Board with up-to-date financial reports and other information on the Group’s performance for effective monitoring and decision-making. Qian Hu Corporation’s Management also works closely with the Audit Committee (â€Å"AC†) in evaluating the adequacy of internal control systems of the company and holds discussions with the AC concerning the significant internal audit observations, together with the management’s responses and actions to correct any deficiencies. The Group’s Executive Chairman and Managing Director, Mr.Kenny Yap, plays a vital role in the development of the Group’s business and provides the group with strong leadership and vision. In addition to the day-to-day running of the Qian Hu Corporation, he also serves to ensure that all members of the Board of Directors and Management work well together with integrity and competency so as to achieve the greatest amount of success for the Group. His responsibilities include setting guidelines on quality, quantity, accurateness and timeliness of information flow between the Board, Management and shareholders of the company.