Eczacıbaşı Group A S

Erdal Karamercan

Dr Erdal Karamercan

President and CEO

Erdal Karamercan holds a PhD in Chemical Engineering. He also obtained BSc and MSc degrees in the same field. He became President and CEO of the Eczacıbaşı Group in 2003. Prior to that, he held positions with Artema Sanitary Fittings, Ekom Foreign Trade, İpek Kağıt Tissue Paper and the Consumer Products and Pharmaceuticals Divisions.

 

Quotes

Erdal Karamercan

Dr Erdal Karamercan

President and CEO, Eczacıbaşı Group A S

We do not know how the Arab Spring will end or spread. We don’t know how the situation with Iran is going to develop. We are uncertain about the position that the US would like to take in the region – in North Africa and the Middle East. There are political uncertainties that make it hard to forecast, and these are of concern.

Erdal Karamercan

Dr Erdal Karamercan

President and CEO, Eczacıbaşı Group A S

In the EU, what is needed is a major structural change, not just a financial one. It is not something that we can fight only with financial means; therefore a major structural change needs to take place.

Erdal Karamercan

Dr Erdal Karamercan

President and CEO, Eczacıbaşı Group A S

Usually when we talk about talent, we talk about the management leadership of an organisation, but I don’t think that that is the answer to the question. You need talent at every level in order to be more dynamic.

Erdal Karamercan

Dr Erdal Karamercan

President and CEO, Eczacıbaşı Group A S

Although Turkey has a relatively high unemployment rate – around 10% – when we try to recruit qualified blue-collar workers, we don‘t have many of them around.

Erdal Karamercan

Dr Erdal Karamercan

President and CEO, Eczacıbaşı Group A S

We need to put more emphasis on technical education at the high school level and try to direct students not only to universities but to technical schools where they learn technical talents.

Erdal Karamercan

Dr Erdal Karamercan

President and CEO, Eczacıbaşı Group A S

We have many assets that a talent looks for; then there is competition from multinational corporations, which provide factors like global life, mobility, and a multi-cultural environment for career plans.

Erdal Karamercan

Dr Erdal Karamercan

President and CEO, Eczacıbaşı Group A S

How can you make sure that in five years’ time you are still the market leader with your brands? The only way to make sure is to become the leader in innovation.

Erdal Karamercan

Dr Erdal Karamercan

President and CEO, Eczacıbaşı Group A S

In the last four years, our innovation efforts have been focused on sustainability.

Erdal Karamercan

Dr Erdal Karamercan

President and CEO, Eczacıbaşı Group A S

We identified our own emerging markets six years ago as our e markets in the EU started slowing down.

Erdal Karamercan

Dr Erdal Karamercan

President and CEO, Eczacıbaşı Group A S

Now a generation span is reduced to almost four years, where as in our times it extended from father to son.

 

Read interview transcript

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 What is your o utlook for economy?

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Last year’s predictions were right. Eczacıbaşı had substantial growth last year, over our budget. For 2012, we’re still looking at growth, but it’s slower growth than in 2011. This is parallel to the growth forecast for Turkey — which is expected to be around 4% in 2012. We expect our business growth to be higher than this but  not nearly as strong as in 2011.
Our turnover does not stem from Turkey only. We are present in various EU countries. Looking at the overall picture, and I don’t want to repeat what all the economists are predicting, we expect a stagnant EU. If we’re lucky, growth in the EU will be extremely low, if at all, around 1%. We know that 2012 holds many challenges, and though there will be potential for stability in the future; there will also be elections in certain EU countries, so it is wise to expect mild growth. Still, I am hoping we can attain some growth in our businesses.
We are deeply involved in Germany and we have many interests in the UK, France, Benelux, Austria, and other countries in the EU. Therefore, any circumstances beyond what is happening or expected will have a negative effect on our business. The good thing is that we are in the process of increasing our market share in these countries. As it becomes more difficult for our competitors, I think we are gaining on their weaknesses and enhancing our market share. I am not an advocate of bad times, but in a way the EU crisis is helping us to grow in certain European markets because Eczacıbaşı has a highly competitive cost structure and strong financial base to grow on. We can create more added value in these countries than our competition.
Our main strategy is to capitalise on added value— to have a better cost basis than the competition. We also invest in our own brands, and we aim to acquire, through M&As, brands that are strong in their respective sectors and markets.

What are the risks as you see them?

There is the blurred picture of the economy, but that aside, there are also political uncertainties and tensions in our region. We don’t know how the Arab Spring will end or spread. We don’t know how the situation with Iran is going to develop. We’re uncertain about the position that the US would like to take in the region — in North Africa and the Middle East. There are political uncertainties that make it hard to forecast, and these are of concern.
Mainly, it’s our sales that are affected by what is going on in the region. We also have operations there, and there are places where we have had to pull out — Libya and Cairo, for example. Now, we’re going back. Markets are volatile. Look at what is happening in Syria. Months ago I was talking with a major business there about a JV, and now there is no longer any possibility for this venture, at least in 2012.
The region is politically quite volatile.

Does the fiscal position of domestic or foreign governments worry you?

The weak point of the Turkish economy is its current account deficit. My opinion is that in the coming year, the deficit will be lower because of the slowdown in the growth rate.
Essentially, what needs to be done is that Turkey has to increase its competitiveness and create more added value.  The economy leaders and the business community have realised that it is not a race against currency but added value. We should create added value and therefore we are hoping that the direction/vision of the Turkish economy will be directed more towards creating added value.
What is needed is a major structural change, not just a financial one. It’s not something that we can fight only by financial means; a major structural change needs to take place. We can do that in Turkey. We did it in Eczacıbaşı when defining our strategy for the future. We decided we needed to be a global player, and in order to be a global player we had to have global brands. There are two ways to go to achieve that:  one, you create your own brand. This is the long road to success, but in the end you can do that. You can invest and build your own brand. It takes time and effort — probably more effort than taking the short cut and buying a brand which is already successful in its sector/market. And there’s the second way to go: you buy a global brand — which may seem more costly initially but is a faster way to get to where you want to be.
We still invest in our own brands, but we also acquire brands that are successful in their home countries/sectors to get the added value.
 

How about governments elsewhere?

Looking at other governments and the EU, they have a lot to learn from how Turkey managed to survive past crises. Unfortunately, governments in the EU have gone the wrong way in trying to fight the crisis by financial means instead of by making structural changes. Turkey went through major structural changes after the 2001 crisis and succeeded in developing a sustainable economy that is now, based on current  indicators, in a better position than the EU average. So, the EU has something to learn from the Turkish case — how Turkey developed its institutions and how we managed the structural changes. If the EU doesn’t do that and tries to fight the crisis by financial means only, as they have in recent years, they may be unhappy in the end. The problem may become a bigger one to solve. The EU has to make the necessary structural changes. Cut an arm to save the body. Turkey had to cut arms in order to survive.
 

How can local governments help with workforce development?

Talent is required at every level of the organisation. Usually when we talk about talent, we talk about the management or leadership of an organisation, but I don’t think that that is the answer to the question. You need talent at every level in order to be more dynamic. We are facing difficulties. Although Turkey has a relatively high unemployment rate — around 10% — when you try to recruit qualified blue-collar workers, you can’t find them in significant numbers. You can find unqualified workers and try to train them, but that takes a lot of effort and time and creates inefficiencies.
Turkey is very proud to have a dynamic, active, and efficient blue-collar workforce, but we still lack the necessary talent. We need to put more emphasis on technical education at the high school level and try to direct people not only to universities but also to technical schools where they learn technical skills.
A second thing is our educational system. Our educational system urgently needs reform. We need to have people who ask questions instead of people who repeat answers. Of course, our culture also has a large responsibility for that. We don’t like too many questions or too much criticism, yet we need people who ask questions and challenge the status quo.
Third: universities. We have numerous universities in Turkey, but the quality of education in these universities varies broadly. We have very high quality universities but also low quality ones from which you do not want to draw your talent. Only certain institutions are providing the talent base for many of our industries.
On the other hand, talent does not come to you, of course. You have to identify talent. Once we identify talent, we have to develop systems for keeping this talent in our organisation and directing it to serve our vision. We are establishing systems that are unique to our organisation to identify talent, do career planning for them, and ensure that they know their potential and develop into higher positions in our organisation.
Talent is not restricted to the sector you operate in, so any sector that is looking for talent is a competitor to us. In that respect, a lot of factors come into play. Eczacıbaşı is highly recognised in Turkey. It is known for its values, successful businesses, quality, social responsibility, and etcetera. We have many assets that talent looks for, but then there is the competition created by multinational corporations, which provide further factors like global life, mobility, and a broader perspective for career plans.
Abroad, the reputation of Eczacıbaşı may not be as highly recognised in Germany, Russia, India, or Ireland as it is in Turkey, and therefore looking for talent there is more difficult. We need to create our own USPs in order to compete on the talent front. We are one of the very few companies or groups in Turkey which has been able to develop systems on a global scale to attract talent, to encourage them to stay in our Group, and to create a path for them to move up the career ladder.

How has your strategy changed?

Our vision is to become a global player and then a global leader. To be a global leader, you have to be a global player first. We have identified certain sectors where we are global players and where we want to become global leaders.
Our strategies over the past years have put innovation at the top of the list. You can have beautiful brands. You can buy them if you have the means and power to buy the brand. You can have a low-cost operation and increase added value, but how do you make it sustainable? How can you make sure that in five years’ time you are still the leader with your brands? The only way to do this is to become a leader in innovation. So, we have focused on innovation. We have developed systems to transform ourselves into an innovation-based organisation. Our Chief Innovation Officer reports directly to me. We have an innovation process in our Group. We recently opened an innovation centre for the Building Products Division. It is the biggest centre in Europe for innovation, as far as our industry is concerned.
During the last four years, our innovation efforts have focused on sustainability. In every product and service that we develop, in every technology that we develop, we prioritise sustainable development. That means anything we produce should utilise fewer resources. Anything we give to our consumers should help the consumer to utilise fewer resources. In the value chain as a whole, we should utilise fewer resources and work with companies who utilise fewer resources.
We publish our sustainability report, which which has consolidated energy consumption and emissions data audited by PwC. It is the first sustainability report in Turkey to be audited.
So, our strategy is to become a global leader by focusing on innovation that incorporates sustainability principles and by driving as fast as we can – mainly in our bath and tiles divisions. 

Where is innovation coming from?

There are two types of innovation. First, there is in-house innovation generated by ‘family members’. Family members are our employees and have to be well trained. We have structures to train members of our Group on how to become more innovative and put their ideas into project formats — into formats that help the innovation process. We have developed a process called Blue Ocean that we have incorporated into our system. We have adapted an education platform that is based on the principles of Blue Ocean. Most of where we operate is in red oceans, so we have to create our own niches or search for blue oceans.
There is a lot of training going on in-house.
Additionally, we are working very closely with academic institutions, research institutions, and government institutions to establish networks. For three years, we have worked very hard on creating an industrial cluster. In the cluster, we have our competitors, academic institutions, logistics companies, and a ceramic research centre developed with our competitors in the region. The common research centre is financed by the industry and by Eskişehir Anadolu University, and is now open to the use of the industry. We have also tried to develop a social environment where we can educate the industries in our cluster. The current head of the cluster, which is recognised by the Ministry of Science, Industry, and Technology, is one of our managers.
Our cluster is also working on creating networks and on operating outside Turkey.

How is your approach to managing enterprise-level risk changing?

We focus mainly on financial risks at the management/board level. We have 39 companies and most of them work in different sectors against different competition, so there are many different variables. We have models for financial risk for every company, for every division, and for the Group as a whole. We have assessment measures for every company. Our multi-industrial structure provides leverages. On a corporate scale we leverage ourselves.

In what ways is the attractiveness of different countries or regions changing, either for sales or for operations?

We identified our own emerging markets four years ago when our existing markets in the EU started slowing down slightly. We have thankfully taken measures to grow in these markets and are ahead in many, such as North Africa, Russia, India, China, the Middle East, and Caucasus. We have developed our marketing and sales activities. In Russia, we have also started tile production. In India, we have a strategic partnership in marketing, sales, and distribution. Once the climate is right, we will increase our cooperation in the form of a JV. India is a market where it is very difficult to go green field; you need some sort of local help. In Kazakhstan, we established a tissue paper production facility. Kazakhstan is well positioned to serve the region.
Our strategy for entering or exiting markets has not changed and we do not foresee a change. As long as we can create more value and our visions are aligned, we look favourably on JVs.

Tell us about the importance of the younger generation as it relates to your talent pool.

The new talent, the newcomers in the business world, are certainly exposed to a different educational and communication system than our generation’s, mainly due to technology.
Today, a generation span is reduced to almost four years, whereas in our time it extended from father to son.
The youth have basically the same feelings, but what is different is the way they have been educated and the way they have been exposed to and are utilising technology and incorporating it into their lives.
We manage many generations in our company. In any case, I still find that emotional intelligence is more important than academic intelligence alone. Emotions rule the world, not numbers. You cannot run a family by numbers; it’s emotions. We do not love our children with numbers; it’s emotions. And it will be so in the future. Of course, there will also be new habits and new models for doing business. We, as managers, have to adapt ourselves to the change. When I became the CEO in 2003 I had a meeting with our IT managers and said, ‘Do not let any technology slip by us.’ It was my only request. ‘We may decide for or against it, but do not let any technology slip past us.’
You cannot fall behind in technology, or you will die.
Our newcomers are more advanced in using technology. But, is all technology useful? We have to have the right answer, or else we may waste resources on unnecessary technologies that don’t improve our competitive position.
In the past, when I was on vacation, I would re-connect with business from time to time via fixed phones; now I’m connected 24/7. We’re also adapting ourselves to the new competitive requirements. We have to understand what the new generation wants and sees, how to keep them motivated, how to keep them in the organisation, and how to keep them climbing the ladder.

How are you managing those younger workers?

Our HR system starts before someone is recruited —at the early stage in their academic institutions. We select the institutions. We monitor what is coming out.
The old approach was, ‘We are here – come and get us.’ Now, you have to identify your own talent. Before, people looked for jobs. Now, companies look for talent.
Our HR system ends way after retirement. For entry-level talent, we have a campus programme called Career Test Drive. The programme focuses on identifying talent and taking them in at an early stage, when they have to do their summer internships. We take them in and put them into summer training programmes. They get to know the company, and we have a chance to monitor them. For young men, we offer part-time positions before they complete their military service, with the option of becoming full-time employees afterwards.
We recently started an affirmative action programme for women. We’re encouraging HR to recruit women among candidates of the same calibre and qualifications.
And, as part of our strategic plan, we look at the talent turnover and talent engagement index KPIs on company scorecards.
Our sustainability efforts and values also help to attract the new generation. We are trying to develop a model through which we can recruit ‘green’ employees. We need more green-thinking people to enable us to focus more and more on sustainability. To this end, we are trying to develop a model — a gateway — through which we can push the talent to see who is green and who is not, and the greens will be preferred in certain fields and positions.
I have also tried to incorporate emotional intelligence into recruitment criteria, but the algorithm is not yet fully developed. Emotional intelligence is difficult to identify. The metrics are not fully analytical.