Saturday, 13 April 2013

The Singaporeans-first CEO

A decade ago, Dr Moh Chong Tau, CEO of precision engineering company Makino Asia, started doing away with foreign workers and replacing them with older Singaporeans. He tells Susan Long how he did it, how he increased revenue five times and battled liver cancer, and his plans to make manufacturing sexy again.
The Straits Times, 12 Apr 2013

IN THE dusty grey desert of heavy industry factories and warehouses in Gul Avenue, Makino Asia gleams like a white oasis.

It is landscaped with gardens, its bonzai shaped into graceful domes. The air inside is crisp, humidity controlled and cooled to 22degC. The cafeteria, bearing little resemblance to other industrial canteens in Tuas, has mood lighting and stylish chairs. It has a clubhouse, too, with a fancy gym and basketball court.

As the foreign versus local worker divide rages on in the country and employers cry foul over ever rising foreign worker levies, one Japanese-owned, locally managed multinational's CEO is sitting pretty.

As far back as a decade ago, Dr Moh Chong Tau (second from right in photo), President and CEO of precision engineering company Makino Asia, made up his mind to do away with foreign workers.

The downturn made it hard to renew work permits, so he bit the bullet and sent home most of his foreign workers - mostly from China and India - who then made up about 40 per cent of his 220-strong production workforce, once their contracts were due.

About a quarter of his foreign workers were skilled enough to apply for permanent residency (PR), so he kept them and coaxed them to become Singapore citizens eventually.

He made his factory smell nice, automated it fully, instituted a four-day week, and aggressively recruited older Singaporean workers laid off in droves during the 2002 downturn. He paid them 50 per cent more than what a fresh recruit would earn. He simplified the job, broke it down such that one person would assemble a component, instead of the whole machine, to shorten the learning curve.

He also trimmed the 44-hour five-day week down to four days, having them work 7.30am to 7pm from Monday to Thursday. Friday was overtime day, which paid out 1.5 times the usual rate, enabling them to plump up their salary by another third.

He also streamlined processes and redesigned the layout of the shop floor, investing in state-of-the-art machines, like vertical carousels that brought down parts upon keying in a number, to reduce movement, lifting and bending.

Most of his middle-aged hires have stayed on, moving up the ranks to become supervisors and managers. Today, half of Makino Asia's 480 employees in Singapore are above 40. A fifth are above 50 and 6 per cent above 60. A quarter have stayed with the company for at least 20 years. His oldest employee, a lead technician, is 68.

Now 62, Dr Moh renewed his latest three-year contract with his Japanese employer last July and does not subscribe to an official retirement age. He keeps staff on the payroll as long as they can contribute. "Experience is more important than youth… The last 5per cent you learn on the job is more important than the other 95 per cent you learn in school," he is fond of saying.

His pursuit of his "Singapore core" strategy, which made him a Ministry of Manpower poster boy and a union favourite, has been a money-spinner too. It paid off fivefold, which is how much Makino Asia's revenue surged - from about $100 million in 2001 to $500 million in 2006.

It financed the company's expansion into China, India, Thailand, Indonesia, Malaysia and Vietnam, where it now hires a total of 800 people. Today, Singapore-based Makino Asia fully owns these subsidiaries across Asia, from which it derives about 98per cent of profits. These profits are retained here or ploughed back into the region, he says.

It now turns over about $600million, set back by the global downturn over the last few years, but Dr Moh has set the target of doubling it to $1.3 billion by 2016. To get there, he's set up a 100-strong research and development facility to design and build machines from scratch. It hires 70 engineering design and technical specialists from across Europe, America and Asia, with expertise not readily available here.

But he is upfront that he coaxes all his Employment Pass holders and PR employees to convert to Singapore citizenship. In fact, his condition for staff who want to make it to general manager is that they need to hold a chilli-red Singapore passport.

Next: Wooing the young

TODAY, only 25 per cent of his 160 production workers are PRs and Malaysians. The rest are Singaporeans. He also hires another 320 people - largely Singaporeans - in administrative, finance, sales and marketing functions.

Not content with that, he's now trying to reduce his reliance on Malaysians, who account for 20 per cent of his production workers, to no more than 10 per cent in three years. As Malaysia catches up and more Singaporean companies relocate there, wages will rise, creating less incentive for workers to cross the Causeway daily, he reasons.

To fill the shortfall, he's aggressively recruiting young people. In particular, he's working at stemming the "leakage" of Institute of Technical Education (ITE) precision engineering graduates to other "more glamorous" sectors. Each year, the ITE here turns out about 700 precision engineering graduates, of whom at least 500 flock to the service industry, casinos and hotels, leaving fewer than 200 for the industry.

He has reformed pay, progression and promotion structures. New ITE recruits, who used to start at $1,300 a month, will now enjoy quarterly increments and bonus incentives that will bring their salaries to a minimum of $1,650 within two years.

Over the past two years, he has hired five Singaporean women - previously unheard of in the industry - to work on electrical assembly. He's now piloting a scheme to deliver components to housewives looking to supplement their family incomes to assemble in their free time at home. This is being extended to several associations for the disabled.

Ultimately, he longs to remake the image of the manufacturing industry, often associated with grim and greasy workshops, and maligned by talk that it's a "sunset industry" in danger of "being phased out". He wants to make it an employer of choice again, offering a concrete, skills-based career with steady progression and shiny prospects.

Lifelong learner

THE bent, wiry man with bushy brows sees adversity as both "an opportunity" and "blessing" because of the hard way he came up in life. His mechanic father died of cancer when he was 12, leaving his housemaid mother with seven kids. That year, his older brother quit school to become a seaman, and he, the second-born, went to Kuala Lumpur to help his maternal grandmother run a shoe factory.

He learnt to be unwaveringly fair from her, his first boss, a lone woman making it in the world on her own. He was her employee first, then her grandson. He did the marketing and cooked meals for her 20 workers. He slept and ate with them, and made three pairs of lady's shoes daily, along with attending school and doing homework after 10pm.

"It was a tough environment which built my character and perseverance," he recalls. He returned here at 17, found work as a cafeteria waiter, clerk, advertising assistant, bookkeeper, then assistant accountant. He also moonlighted as an airport duty-free salesman by night and studied after hours to be a Certified Public Accountant from 18, qualifying six years later at 24.

In 1977, he joined American machine tool manufacturer LeBlond Asia as a finance manager and became its financial controller four years later. In 1987, it was bought over by Japanese Makino Milling Machine and he rose to become managing director responsible for group finance and business development by 1992. In 2001, the Japanese had left Makino Asia's management entirely to him and he was named CEO and president.

He's a big advocate of lifelong learning. His mantra: "Knowledge is like COE, it won't last long." At any point in time, up to 30 employees are studying for polytechnic diplomas or part-time master's in engineering or business, all paid for by Makino Asia, with no bond attached.

He himself has never stopped studying after hours, taking a distance-learning master's in marketing from Macquarie University, then a four-year business doctorate from the University of South Australia. He wrote his thesis on the future of the precision engineering sector on Friday nights and spent Saturdays and Sundays researching at the National University of Singapore library. He finally got his PhD in 2000 at 50, but didn't stop there.

In 2002, to refresh himself, he studiedfor a master's in accountancy with Curtin University. On the side, he was also conferred an honorary doctorate by Murdoch University, owing to his many contributions to the Singapore Manufacturers Federation, of which he is now honorary secretary, and many other trade organisations.

To do all this, the father of two "left everything" at home to his wife of 37 years, Jessie, a housewife. She raised their son and daughter, now a bank vice-president and magazine writer respectively. He "never knew how tall they were, just how long", because when he came home, he saw only their sleeping forms tucked under the covers.

The decades of red-eye flights and sleeping three hours a night took their toll. The non-smoker and non-drinker was diagnosed with liver cancer in 2011, which put him out for a year. He was operated on successfully, regained his weight (which dipped from 62kg to 50kg) and is now fighting back. The Buddhist tries to take better care of himself, does qigong four times a week and enjoys fine dining with his wife at the weekend.

But he's still as tough as nails. He wonders if Singapore is mollycoddling its people with too many incentives to do the right thing and if Singaporeans have gone soft.

"Do we need to give incentives to people to go to school to study? No, they do it because they want a better life. So why do we give incentives for people to start businesses?" he asks. "If they get it without expecting it, that's fine. But it shouldn't be that without it, they feel they cannot do it."

Moh Chong Tau on...

Why he puts Singaporeans first

"Some companies want to take the easy way out. They hire foreign workers because they want to get people easily, are not willing to train them and want to pay less. In our case, we don't look at salary as key. My direct labour cost is only about 8 per cent of my total manufacturing cost. So what if I get a foreign worker who is 30 per cent cheaper, it will only affect me 1 per cent net, but I lack the stability, quality and reliability. And he will occupy the time of my supervisors, human resource people and trainers. He is here to stay for two to three years and only interested in making money. Whereas (when) you have a local, their life is with you. If we do well, they do well, it's reciprocal."

False sense of economy

"I never believe in chasing costs. China and other countries may be cheaper in labour but the other costs of doing business are expensive: the unseen administrative costs, productivity costs and human relations costs. People always ask, why don't we go to China or India in a more aggressive manner and why Singapore still remains our major manufacturing base.

The bulk of our machines - about two thirds - are built here, China and India make the other one third, though they represent two thirds of demand. Why? Because we're able to effectively use our labour here in a way that is more productive. Today, some of the machines I produce here are cheaper than what I produce in China."

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