The importance of having the right team
It is natural for businesses to evolve over time, as they tweak their business strategies to meet the ever-changing needs of consumers.
However, we live in rapidly changing times and there are various factors that can disrupt the niche that owners have carved out for their businesses, many of which they have no control over.
Businesses cannot afford to rest on their laurels just because they have enjoyed satisfying returns in the past, because they risk becoming irrelevant if they do not keep up with the evolving markets.
It is said that the only constant is change, and it is far better to seek change than to be forced into it.
Adapting to change
Segamat Panel Boards (SPB) is a company that originally specialised in high quality, thin panel medium-density fibreboard (MDF) when it was first established in 2002. These were more difficult to make at the time, and commanded a premium price.
However, the business climate has changed with fierce competition coming from neighbouring countries such as Thailand, Indonesia and Vietnam, and the product has become commoditised.
With the market no longer being niche and business cycles getting shorter, the company realised a few years ago that its business model was maturing – and more worrying is that it was in outdated.
This is in part due to the dwindling availability of rubber wood – the raw material used to produce MDFs and other wood-based products – which has become one of the major obstacles faced by SPB.
Hence, the company embarked on a mission to seek an alternative to the rubberwood and tropical timbers which – up until a few years ago – was their primary source of raw material, as they knew it would not be sustainable in the long term.
While SPB has been successful in identifying an alternative (i.e. oil palm trunks) through collaborations with researchers from several European universities, this brought on its own set of challenges.
Managing director Peter Fitch shares that the company’s profit margins are a far cry from what they were five to ten years ago, making it difficult to justify new investments and secure financing for new projects.
“When people look at our recent performance in the current business, they will ask a lot of questions such as, ‘Are you sure that what you want to do is really going to generate money and yield returns?’”
This issue is not unique to SPB; it is a challenge for the Malaysian timber industry as a whole, which has been classified as a sunset industry. “It’s quite commonly known that all the banks have put an overall restriction on the amount of funding and investment they are willing to put into this industry, because they classify it as an industry that is decline,” says Fitch. “That’s why funding for this industry is always extremely challenging.”
People and company culture are the core
While SPB’s initial obstacles were related to technical issues and creating a market for its products, the ongoing challenge is to ensure that the company’s employees possess the correct skill sets to sustain its markets and keep it at the forefront of product innovation.
“This is why the recruiting, training and nurturing of the relevant skill set to run our business is very crucial,” says Fitch.
Fitch shares that being based in Segamat (a district in the north of Johor) poses a challenge when it comes to recruiting senior management, because many tend to gravitate towards major cities such Kuala Lumpur or even Singapore. “Once they hear that they will have to move to Segamat, they’re not interested,” he says.
As for the middle management, Fitch says that many lack the appropriate skill set. “Even though candidates say they have a degree or diploma, we find that their education level and skill sets don’t match up – in fact, it can be surprisingly poor.”
The company’s distance from metropolitan areas, however, is a blessing when it comes to attracting general workers. “It’s relatively easy, because we’re able to recruit workers from the (Segamat) town and the nearby villages and Felda areas,” says Fitch.
It is because of this that SPB is not dependent on foreign workers to operate the machines in its factories, unlike many other small and medium enterprises (SMEs) in Malaysia.
“We need to move away from a dependency on unskilled, low-salaried workers, and move towards a high-skilled, highly educated, and inclusive workforce. We need a workforce that shares our company culture,” says Fitch.
SPB certainly walks the talk when it comes to this – with the exception of a few Burmese workers who have been with the company for almost seven years, all the workers in SPB are locals.
Empowering people through learning
To ensure that all employees possess the skills that match the requirements of their roles, SPB reviews its training needs analysis regularly to identify gaps in competencies. “We have a continued commitment to both internal and external training,” states Fitch.
For example, any manager or supervisor who has gone for external training is obliged to transfer their newly-acquired knowledge to the others by becoming an internal trainer in this skill. Likewise, any internal training is shared from the top down and is inclusive of all workers.
“When we carry out training, we tweak the theme to ensure it fits in with our company culture of Integrity, Innovation and Sustainability,” says Fitch.
Fitch adds that not only does the company benchmark itself against domestic and international peers within the industry, it also looks to other industries for inspiration as well.
We look primarily at the people within the wood industry, but why not look at other industries such as the electronics, automotive, or even the service sector as well? There’s much to learn about what we can improve, and how we can bring our business up to that level.
Fitch also believes that it is important to empower employees, but first they need to become more confident in their roles. This is critical as the company’s factory operates 24 hours a day, seven days per week.
Senior management may not be on site early in the morning, late at night, and on weekends, so supervisors, line leaders and operators must possess the necessary skills to make critical decisions autonomously and work with confidence.
To achieve that, Fitch says that the company needs to encourage employees to take more responsibility for their own actions and find ways to continually improve skills and develop positive attitudes. Another key way that this is done in SPB is by having the more senior staff mentor the junior staff.
When asked what other SMEs should keep in mind when trying to evolve with the market, Fitch had this to share: “We have a check sheet to see if we’re on track or not. First, is it technically and commercially feasible?
“Is it something you can scale? Is it something where we’re the first ones, and there’s nobody else in the space? Is it something that is beneficial for the company, the country, and the environment?”
“If you tick all those boxes, then you should go ahead with your innovative idea and business model,” states Fitch.