Sunday, April 24, 2011

TIME OUT

DEAR READERS, FAMILY AND FRIENDS:
I'd like to apologize to all of you for my absence in my blog for the next several weeks, as I will be travelling to Russia, Estonia, Lithuania and Latvia. I will be visiting Moscow and several Russian cities and villages on the shore of the great Volga River and Lake Onega, before arriving in St. Petersburg. I will be also visiting the three Baltic States that declared their independence from the Soviet Union in 1990, before returning to the US.
Upon my return, I will tell you things in my blog about those fascinating countries and will show you pictures of the most interesting places I will be visiting.
Please do not forget me, I beg you to understand that I need to take some time off my blog, so as to refresh my mind and have new interesting things to tell you about.
I'm already looking forwards to visiting you again sometime in June and wish you all have a very happy Easter.

Rafico

Tuesday, April 12, 2011

MODERNIZATION CREATES RESISTANCE

By mid August 1984, our children were back in school. From a large, physically and academically well organized school with over one thousand three hundred students in Salta Lake City, they were transferred to a very small school in the Lomas de Urdesa, in Guayaquil; The Inter American Academy was a school with only 200 students, most of them the children of expatriate executives who had been, transferred from their countries of origin, such as the US, Europe and Asia, to Ecuador. Ecuador was living in these days a time of relative economic prosperity resulting from a rare period of political stability and government openness to private business and foreign investment. President Febres Cordero had just taken over and he was a supporter of private enterprise and free market, therefore, opportunities were opening for foreign investment and several companies were coming to the country to expand and or open their businesses.
All but a very few teachers in the school were American, they were a mix of mostly young teachers coming from different places in the US who had been hired in a special fair in Minneapolis where American schools around the world were offering working opportunities to teachers who wanted to have an overseas experience which would allow them to know the world and simultaneously make a buck before returning to the US after two or three years.
In spite of the youth of most teachers, the school was good; it kept good academic standards and prepared students very well for their future attendance to US or other International universities, through the International Baccalaureate program. Spanish as a second language was taught by local teachers with an impressive, almost astounding success. We felt our children were in good hands academically. By mid school year, my wife, Fanny who had been a teacher for many years, was invited to join the school as a teacher of Spanish as a second Language. She worked there for seventeen years until the year 2001 when our daughter Angie, the youngest in the family, graduated from the school.
At work, my mission continued. Among the innumerous deficiencies Molidor had as a result of decades of poor management, the company did not have a policy regarding salary revisions for its 130 people. The Blue collar workers were given a raise once a year when the government, generally at the beginning of each year, raised the minimum salary through a law that would barely recognize the effect of the previous years’ inflation on the workers’ salaries. As a result, all its blue collar workers’ salaries were kept at the minimum level allowed by law. The rest of the employees only had a raise whenever the big boss pleased to do so, without a policy, without following a procedure, and without regard to the reaction of the other employees around, not to mention the market. It was a really chaotic situation with which nobody was happy, but nobody would complain about either, for fear of being seen as a trouble maker, and therefore, becoming a candidate for dismissal. In those days, as it is today, Ecuador is one of those places where most qualified and educated workers consider themselves happy to have a job, so, they care for it as a precious thing that places them among the “privileged” to have a job. That is not necessarily the case with blue collar workers, especially when they belong to a union. Unionized workers feel very secure in their jobs because of a very protective Labor Code that severely penalizes the employer and rewards the worker if dismissed. As a result, the quality and productivity of labor is very low and gets worse as seniority becomes an additional rewarding issue when a worker is dismissed.
Considering the above, I started a program of periodical evaluations of the white collar workers, and encouraged the mill’s operations’ manager to start a program geared to reward productivity among the blue collar workers in the mill. A totally uneducated, quasi-illiterate operations manager, an American red neck from the Deep South, who considered the mill his private ground, and the workers in the mill like slaves in a Southern Cotton plantation, did not like my suggestions at all. He considered my suggestions as an unwelcome intromission in HIS private ground. I suspect he did not like me at all because I was ONLY an Ecuadorian, and as such, in his mind I was not qualified to make suggestions to him, a descendant of some kind of Lords from the South. That created a tense situation which led in a certain occasion to a confrontation of ideas, a field in which he had none, and he could only say that he thought I was “on the take”, something he brought abruptly and of course was never able to substantiate.
My evaluations program for the human resources started, as a sample format, I used the evaluation sheet we had been using at Northwest Pipeline, with some needed changes, of courses. Personal evaluations were to be made to all salaried white collar workers, at least once a year, on the day of the employee’s anniversary. Special care was put in making sure that the person was evaluated in all aspects of his or her work, placing special emphasis in their ability to create ideas and suggestions, to follow instructions and demonstrate leadership. The person’s weak as well as strong points had to be clearly indicated and the evaluation was to be personally discussed with the person being evaluated by the evaluating supervisor. A training program was to be suggested for the employee to work on his/her weak points and the person in charge of such training had to be suggested in the same sheet of paper. The evaluation sheet would be then delivered to me for a review, and then to the general manager for the final approval of the salary adjustment suggested. Soon things started to move forward, people started to work with an additional motivation; their expected salary adjustments would now be the result of a well thought of, and carefully prepared and discussed evaluation, which they will be very well made aware of. This created the need for a “Human Resources Department” replacing the existing “payroll desk” which did nothing but pay the people on the due time.
Back in 1984, the medical care provided by the Ecuadorian Social Security to its affiliates was very poor, and most often their doctors took the easy path of ordering the workers to go home and rest for three days to two weeks for a minor problem. This produced a lot of unproductive paid time to the workers, which I thought could be reduced, if the company paid a privately provided health care through an insurance policy. This is on top of the fact the company had an in house part-time doctor to take care for the workers’ minor health problems. Unproductive time could be reduced, I thought, and prepared an analysis of the lost time costs vs. a company paid private medical insurance for the workers, It was a no brainer, therefore, by 1985 such medical insurance for the workers was established and worked well for many years until the company was liquidated in 2008. The workers were happy to have a much better medical care for them and their dependants, while the company gained good will and reduced its lost time costs dramatically.
Believe it or not, up until 1984, Molidor, a wholly owned subsidiary of American companies, did not have its monthly financial statements translated to dollars as it has always been required for a reasonable understanding, by the shareholders, of the numbers therein. The monthly Sucre –denominated financial statements, as was the procedure, were mailed monthly to the Kansas City parent company office with no comments or footnotes whatsoever, and I guess, were placed somewhere in somebody’s files to never be looked at, or analyzed. A total waste of time and paper, as well as a total lack of information about the subsidiary’s operations for the entire year, until the external auditors did the translation of the year-end financial statements, on their own and without anybody in the company knowing how it was done, before submitting their annual auditors’ report to the shareholders in KC. That seemed to me one of the most important priorities I needed to work on. By September 1984, I had started already the process of conversion of the financial statements to dollars, following the regulations of the American Institute of Certified Public Accountants (“AICPA”). It took about three months of hard work to compile the historic dollar costs of all PP&E and Long-term Assets and Liabilities, for purposes of their translation to dollars using the corresponding historical exchange rates, but, as of December 31, 1984, and for the first time in the company’s history, we were able to submit our financial statements to the parent company, as prepared in-house, by our group, without any external help, following the rules and regulations of the AICPA. Our work was fully validated by the external auditors and, KPMG did not have to do that for us anymore. The general manager of the company, whose involvement in the day to day activities of the company was near nil, limited himself to applaud our achievements without a clear knowledge of what we were really doing.

In my next posting: CHANGES CONTINUE

Sunday, April 3, 2011

THE FAMILY AND I BEGIN TO ADJUST

By June 1984, my family and I had moved from one place to another five times in the last nine years, First, it was from Guayaquil to Quito in 1975, then from Quito to Salt lake City in 1980, then from Salt Lake City to Houston in 1982, then back from Houston to Salt lake City in 1983, and now, in 1984, from Salt lake City to Guayaquil. Thinking about it, we could have been seen like a Gipsy family, but we were not.
It was just a series of changes from which we learned a lot, from which we enriched our lives and those of our children, for each change there was a good reason, in each change we moved ahead and strengthened our family ties, wherever we went, we grew some roots and flourished, in every place we lived there was a reason to be comfortable and there were many people we liked and were very much liked by. For many reasons we began feeling that we were citizens of the world. In one single way we definitely made headway, we became definitely bicultural, by respecting and maintaining our values and our culture, we honored our homeland and our forefathers, while by absorbing the American culture and values we bettered ourselves enormously.
Even twenty seven years after we left America to return to our country, we love America in the same way we loved it when we returned to Ecuador. Even after such a long time living in Ecuador, we appreciate the people around us not for the amount of money they have, for the fancy house they live in or the fancier car they drive, but for their personal and family values. As an example, we always keep in mind that the lack of punctuality is one of the facts that distinguish Ecuadorian from Americans, even if we sometimes are criticized by our friends we keep our acquired sense of respect for everybody else’s time by being punctual to our appointments, be they a doctor's appointment, a birthday party or a simple get together for a drink. That, we learned from our American friends, that we feel very proud about, and it is because of that, that we will keep in our minds that if we are called for an eight O’clock meeting, that means eight O’clock, not eight thirty or nine O’clock, it is because of that, that we won’t ever have to look for excuses to justify not being punctual to a meeting. In this respect, we are culturally Americans, and are very proud of being so.
Now that we were back where we belong, there were many reasons to be grateful and to be happy about. Our children didn’t take long to get adjusted. During the first two months after our arrival, they were on vacations from school, Mariuxi was 8, Rafael Jr. was 6 and both were fully bilingual, so they didn’t have any language problems to deal with. Little Angie was only 2 and a half and because her big sister and brother spoke English to her, she spoke mostly English but understood Spanish fairly well. It was amazing; in a matter of 30 days she was also speaking Spanish as she spent a lot of time with her Spanish speaking cousins.
By the time we moved out of the Oro Verde Hotel to our new home in Urdesa, she was already speaking and even screaming to her cousins and siblings in fluent Spanish. She was just like a little sponge, absorbing every bit of language she was exposed to. In the meantime, her big sister and brother began to adjust, while liking it very much, the concept of the larger family, which includes as members of one single family the cousins, the nephews, the nieces, the aunts, uncles, grandpas, grandmas, etc., which is a beautiful way of seeing someone's family.
Meanwhile, I began to learn about the rhythm of work at the mill, where an old style of management had prevailed in spite of changes in the management - which had included at least two expatriates at the top and one at the comptrollers’ level. Things had not changed very much in terms of management since the times of the old owner and founder of the mill, Mr. Francisco Illezcas. After all, this was one of those businesses where the management did not have to do much of an effort to promote the sale of its products. Selling wheat flour in Ecuador until just very recently, had been like selling hot bread in a good bakery. Customers not only used to make lines to buy the flour, but they actually used to pre-pay and wait in line for days so the mill would “make them the favor” of shipping the pre-paid sale.
Under those circumstances, it was no wonder that the previous two guys at the top, where just golfers and socialites who were concerned more about what was the next big party at the Union Club or what was the next golf tournament at the Guayaquil Country Club, than about how to improve the company’s sales or its bottom line, which was going to be good no matter what, unless someone smart and dishonest enough would play around with the money that was the only thing the company was not short off.
It was under those circumstances and business environment that I had to start my monumental task of putting Molidor on track as a modern, internationally owned business entity, first by planning and then by implementing policies, procedures and internal controls geared to make the company an organized corporation. When I look back at what I had to do at the time, the human team I had available to me, and the time frame I imposed myself to do it, I think I was extremely overly optimistic, however, as the time went by, and as I was little by little, but consistently advancing in my task, I realize how much one is able to achieve when you work with all your heart and mind put at the service of one cause.
I was able only then to realize that I was not alone in the task of doing the impossible things, I had a man behind me, whose honesty and knowledge of the company, because of his many years of service to it, was like an old, wide open gold mine, I was able to dig into, and extract almost pure, quasi elaborate gold for the purpose of my work.
That man was Jorge Luis Lazo, at the time a 42 year old man (same as me), who had worked for Molidor for over twenty two years in many positions, starting at the bottom, and who was the company’s head bookkeeper at the time of my arrival in Molidor. Jorge was the type of man who would put his heart in anything you asked to do, and he did it never challenging your ideas (his weakest point and one he was never able to overcome). Therefore, having him as my lieutenant was a great advantage because he was always a pusher, a leader who was always in the front, at the head of his group, but at the same time it was a great risk, because he would blindly follow the orders and the time lines without weighing the possibilities of the collateral risks involved, especially when making changes that would have long lasting effects in the organization.
Jorge had in his staff a group of four assistant bookkeepers, all very young and smart, and as such, very open minded, they had recently graduated from Colegio Mercantil, a well known local secondary school, reputed as the best business High School in Guayaquil, all of whom were, at the time, attending business school classes at the University of Guayaquil. That was another great advantage I found in the process of accomplishing my mission to transform Molidor into a modernly organized and well managed business entity. As my plan of modernizing Molidor advanced, getting to better know the people I had to work with, made a great difference, because before that, I thought to myself, almost literally, that my mission was going to be like going from the middle ages to the modern society, without having to go through the Renaissance and the Enlightenment stages of our Western civilization, with the little support of people who would not have a real understanding or sympathy for what I was trying to do.
After three months of working in the indoctrinating process with the accounting team, I felt very encouraged, and I was now ready to jump into what was going to be one of the most challenging and most rewarding missions I had ever faced in my whole career as a professional, Modernizing Molidor, taking it from the first half of the twentieth century to the fast developing management policies and procedures of the end of the century.
While going through the planning and execution of my plan, I thought many times, how rewarding for my ego would have been to show Don Robhom, that deformed mass of human fat in Kansas City, how much I was doing for the subsidiary of the company he was the VP-Finance, and for which he had done so little. Never mind, I did not have the chance to do that, because that physically and mentally deformed man, had been fired less than two months after I took over the comptrollership position at Molidor.
In my next posting: MODERNIZATION CREATES RESISTANCE