By Jarek Czechowicz
Terrorism, the war in iraq and the sars scare have come together at a moment when the tour operator tourific is bedding down several acquisitions.
In 2000-01, tourism to Australia provided 6% of total employment, or jobs for 551,000 people. It accounted for 11.2% total export earnings through international tourists who spent 17.1 billion and whose number reached 4.8 million in 2002. Australian Tourist Commission figures indicate that about eight million visitors will come Australia in 2012 and will account for $200 billion in the first decade of the 21st century.
Tourific, an Australian business-tour company, went out on a limb in July 2001 and bought several businesses in Italy, France, Germany and the United States. Tourific was optimistic because world tourism had grown 50% since 1992. One small concern was that the US share of world tourism, which was about $US537 billion in 2001, had been dropping. September 11 pushed the figure down even further.
Tourific was counting on an upturn in the market and was hoping to extend its interests into Egypt and the Middle East 2006. The World Travel & Tourism Council (WTTC) predicted that the travel and tourism industry in 2003 would account 7.6% of world employment, 195 million jobs, and 10.2% total GDP, or $US3.53 trillion.
Heading Tourific are chief executive Rashid Hafiz and chief financial officer Noriko Nagome. Hafiz made a modest fortune by wholesaling financial products in Japan in the 1980s, but his real passion had always been travel. He met Nagome in Melbourne in 1988 when she held a senior management position with a hotel chain. Nagome was surprised to find that Hafiz had spent 10 years in Japan. The pair established Tourific within 12 months of meeting.
The company began trading as a specialist consulting group that helped Australian businesses establish operations in Asia. Today, Tourific provides services that include private transport, customised corporate functions, multilingual secretarial services, accommodation, business migration information, information on opportunities in growth industries, and educational packages on languages.
Soon after September 11, Tourific experienced the beginning of a continuing fall in the number of tourists and convention delegates from the US. Then the war in Iraq caused a worldwide fall in travel from many countries. In the downturn over the 20 months since September 11, shares in Tourific fell from $2.73 to $1.47. Not long after the beginning of the war in Iraq, Hafiz addressed a management meeting to discuss the ramifications of an Australian Tourist Commission decision to postpone some of its international advertising campaigns, and similar developments in other countries.
Poring over the latest data, Nagome said that a prolonged war could lead to a loss of more than three million jobs in the global travel industry and a loss of more than $US30 billion of potential economic value in the present year. With a hint of uncharacteristic pessimism, she announced her concerns that the company might not survive long in its current configuration.
She said: “The WTTC predicts the US will lose an estimated 450,000 jobs and experience a decrease in the economic value of the travel and tourism industry of 3.7%. The European Union will lose 260,000 jobs and the travel and tourism industry will fall 0.7%. Although these figures are less than encouraging, what concerns me most is that in some places we have people who are scared to be at work.”
“What do you suggest?” Hafiz said.
Nagome continued: “Maybe we should cut our losses and refocus our energies on the Asian market. The Australian Tourism Export Council says Asian visitors are choosing Australia as a prime destination despite the current world situation. The Bureau of Statistics shows that Chinese visitors are up by 35%, Japanese by 11.4% and Korean by 14.5%.”
Suddenly, Samantha Niels, the international marketing director, who is pregnant, voiced her concerns: “What about the SARS virus? Your figures haven’t taken that into account. I’d be just as happy to get out of international operations and return to home base for the time being. We have plenty of opportunities right here. Listen to these figures …”
Hafiz interrupted gently: “I respect how you feel, but don’t you think that this reflects the concerns of so many people who want to withdraw from their activities? I think we should focus on keeping as much of this project alive as we can.”
That afternoon, Hafiz and Nagome attended an educational program that Tourific organised for its local staff. The program was led by their old friend Ethan “Yoshi” Adams, a motivator, martial arts instructor and practitioner of Zen Buddhism. Adams began his presentation by reading Tourific’s company motto, an excerpt from the Dhammapada of the Buddha:
“You are far from the end of your journey. The way is not in the sky. The way is in the heart … Give yourself to the journey.” Adams continued his session with questions and answers instead of his usual presentation so that staff could voice their concerns about current issues and tensions. He started with some questions.
“Where is our life happening? Here. When is our life happening? Now. The here and now is all we ever have to deal with. The more we focus on the here and now the more our anxieties dissolve and the easier our work becomes. The difference between our current situation and our desired situation can either be a source of inspiration or a source of suffering. For most people it’s a source of suffering because they struggle against their perceived misfortune. By fighting our misfortune we increase our misfortune.”
A junior manager said: “Are you saying that that we shouldn’t do something about our negative situations?”
Adams responded: “Do something about the situation but try not to hate it and try not to hate the people whom you suspect of causing it. You can’t really escape a negative situation unless you fully accept it as it is, free of dislike and free of any negative emotion. This may at first seem impossible but any other way leads to more struggle, more anxiety, more fear and more suffering. Accept the situation, then do your best.”
One of the office managers said: “What about relaxation? Isn’t that easier? Work is stressful enough as it is without having the worries of war and terrorism and not knowing if we’re going to be out of work in a couple of months. My partner is over there on one of our ships and I find it difficult to concentrate.”
Adams came back: “Sure, it’s complex. Learn relaxation techniques for a start. It may not solve all your problems but it can ease anxiety and even pain. Try meditation and be active to burn off excess adrenalin. Most importantly, aim to incorporate some of these activities into your daily routine. Think of some creative and discreet ways of doing these things at work.”
A voice came from the back of the room: “Do you really think they’ll let us?” Everyone laughed.
“Offer suggestions. Don’t assume that your managers have all the answers. These situations are challenging for everyone.”
After the presentation, Nagome said to Hafiz: “We’ve spent quite a bit of money over the years on training our people to think creatively. But have we allowed them to exercise their creativity? If we’re going to continue taking big risks, shouldn’t we allow our staff to apply the things they have been learning? Perhaps we should let go of the reins and encourage our managers to do the same and see what happens. It could boost morale.”
Hafiz, wondering when the war might stop, said: “At this stage, it’s certainly worth a try.”
Meanwhile, in Hong Kong, a competitor was considering Tourific as a possible acquisition. The summary before her read: “Like many companies, Tourific underestimated the drop in performance after its acquisitions. People in the organisation are too focused on internal matters, resulting in part from trying to make sense of the acquisitions and also in response to perceived industry and global threats.”
Should Tourific avoid breaking up the company? If so, why? Why do many organisations confuse economic growth with societal well-being? Is Tourific making the same mistake? What are other helpful ways for staff to deal with anxiety in these situations? Tourism is a resilient industry that indirectly promotes global understanding. Should Tourific consider lobbying governments for extra financial assistance?
Proposed Solution #1
Pawel Boczar has extensive experience in implementing business solutions in national and international organisations, particularly in the IT and finance industries. His focus is on international management issues, especially in the area of international project management, helping clients to implement their business objectives in a cost-effective manner.
Tourific is grappling with a number of separate challenges in the short to medium term. Two, which stand out, revolve around:
- Strategic and tactical changes required as a result of changing external forces in the industry.
- This required strategic realignment highlighting deficiencies in the organisational culture and management style at Tourific.
Although the consequences of each have common characteristics, it is important that they are broken up and tackled separately. Only then can Tourific resolve the causes behind the challenges faced by the company, rather than merely resolving the symptoms by justifying one problem area with the other. Tourific seems to be making just this mistake.
In looking at the first consideration, the company must first understand what forces are driving the tourism industry amid the uncertainty since September 11, war in Iraq, a slowdown in international travel due to SARS and a generally weaker global economy. Numerous methodologies and analytical tools are available for this that would allow Tourific to better understand the competitive forces driving the industry it operates in.
Another critical issue that Tourific needs to resolve is: what industry, or business, is the company actually in? The business model seems to have emerged over time, with the company starting out as a specialist consulting group helping establish operations in Asia, and over the years expanding its offering to a wider set of services. Has the company lost focus, or is it shifting to a different segment of the industry? It seems that the company has lost sight of its core business.
If that is the case, a strategy of consolidation, or divestment of noncore operations, could be pursued, with a focus on dedicating more resources to the development of the core business. Of course, Tourific has to first decide what core business it wants to position itself in before making such a decision.
The third issue is that of local versus international operations. According to the likes of Michael Porter, a company should first establish and stabilise local operations before expanding overseas. Although in many cases this may be true, there are also those who argue the opposite. The answer is often influenced by the industry in which the entity operates. Hence, the decision whether to develop local tourism strategies will be colored by the decisions made relating to Tourific’s core business direction.
Finally, Tourific will need to consider a big shift in its attitude to marketing and customer relations as it realigns its strategy. This will probably mean reconsidering existing supply and distribution channels, and also more innovative approaches. Creating demand, rather than just providing services to established customers will be crucial. With the expectation that international tourism activity will slow down further, the tourism industry as a whole needs to move away from conventional products and find innovative approaches that are more relevant in today’s economic and political climate. One way of doing this is to work with government and industry bodies to implement new ideas, not just in a company but in the industry as a whole.
After considering strategy, Tourific needs to consider its organisational culture to ensure that the social structure of the company supports such directions. One factor that should be given high consideration is the ability to entrench positive attitudes and communicate this philosophy to employees. Motivation and a sense of direction from executives are critical in keeping focus on a common goal.
Open and honest communication is also imperative to lead staff through times of turmoil and change. If staff can see and understand a common goal they are generally more willing to embrace change. To achieve this, Tourific will face two separate sets of challenges in the short term:
- For management, it will be to develop the ability to manage communication top-down to ensure that staff have a sense of direction and are working towards objectives.
- For staff, it will be to realise the importance of a bottom-up approach to embracing and managing change in their sphere of influence, through managing their own expectations, offering suggestions, and leadership in their daily jobs.
There is an important consequence of such an attitude change. Through providing a high level of direction, and a culture in which employees feel ownership of its implementation, creativity and innovation are born. The ability to apply innovation to non-standard business problems is what separates successful companies from the rest.
The successful implementation of a corporate strategy is heavily reliant on commitment from all staff. This cannot be achieved unless the social and corporate cultures are cultivated – by senior management encouraging such an environment and by staff embracing it day to day. Such an environment further stimulates employees to use creativity and innovation in conquering challenges and turning them into opportunities for the organisation.
Many companies in the tourism industry are facing issues similar to those facing Tourific. Understanding the industry, and its effect on the positioning of Tourific’s core business operations, will allow the company to excel relative to others. Promoting an open culture will assist this, not only through increased staff participation and reduced anxiety levels, but also in supporting the organisation as a whole in achieving its objectives.
Proposed Solution #2
Eleanor Davidson is area general manager for the Carlton Group of Hotels. Recognised as a leader in the field of hotel management and executive training, Eleanor has had more than 18 years’ experience in the tourism industry in Australia and overseas. She is a Senate Member of the University of Queensland and is also a Fellow of AIM.
The problems tourific faces are the result of a drop in International tourism. However, this is masking some deeper problems that will affect Tourific’s ability to overcome these more immediate problems and to fully maximise its potential, in its current format or as a business of which parts can be sold for a profit.
Whenever companies merge it can be a challenging time for employees as they cope with the changes. This is true even with the best-managed mergers.
It seems that the team members at Tourific are still finding their feet in this post-expansion environment and need to be fast-tracked through the stages of team development until they reach the performing stage. Teams still in the storming/forming stage struggle to cope with challenges such as those faced by Tourific.
Given its falling share price, Tourific certainly needs to take action, but breaking up the company will not necessarily offer the best outcome. There does not seem to be any evidence that the company is facing extreme cashflow difficulties. Any decision to break up the company could well be a costly knee-jerk reaction, as the company would not yet have had the opportunity to recoup the set-up costs of the recent mergers. To maximise the sell-off price for any part of the business, Tourific would benefit from operating its way out of the current challenging environment, grow its business base (resulting in greater profit) and then, if it chooses, sell the business units at good prices.
A range of alternatives is open to Tourific and it needs to engage its management team to explore them. Tourific reports that it has invested in training its people and we certainly see two examples of Tourific bringing its people together: one at senior management level and one at the local level for training with Yoshi.
However, Tourific would benefit from Hafiz and Nagome making an assessment of the sizeable and geographically diverse organisation that they are now overseeing.
First, they would benefit from having a clear understanding of the climate in their company. We hear that there is a lot of concern and worry among the staff due to internal and external issues.
It is hard for staff to focus on work in this type of environment, so the company would benefit from efficiently working through the issues. Efficiency is a key here, as they don’t have a lot of time to waste on chitchat. Strong, participative, engaging leadership will help a team to fast-track their way to cohesiveness and confidence.
Hafiz and Nagome have invested money in calling the management team together, but do they do so with a clear goal in mind? They use the forum to flag their concerns about the downturn in the industry and the future of the business. However, they seem to fail to use the management team to help them think through the issues facing the company in order to come up with an action plan to resolve them and move the company forward.
When one of the senior managers offers some input, Hafiz quickly quietens her. Without keeping an open mind and listening to his key managers, who may have valuable insights to offer, he directs them by telling them that they should focus on keeping as much of this project alive as possible. Such interjections from seniors cramp the input of team members, as few are brave enough, in a public forum, to say that the leader may be wrong and that there may be other options.
This is a flaw in Hafiz’s leadership, as he is failing to maximise his human assets which, no doubt, were paid for as part of the cost of the acquisitions. There is no sense assembling a team if you are not prepared to listen to what the members have to offer.
Instilling confidence, job security and empowerment at all levels of the company would be a big step forward and provide a strong foundation from which to move on. By overcoming the employee issues and putting them behind them, they will be able to refocus the staff and resolve the business problem of gathering revenue and ensuring the long-term viability of the company. With all staff working together on this problem, results should soon start to flow.
Management needs to decide on a clear direction, involving the staff in this process so that they take ownership of the strategy. They will then feel more confident and have a sense of belonging. Once the team is focused, Hafiz and Nagome can move on to the bigger picture.
I would recommend that Hafiz and Nagome then examine their business interests one by one in terms of profitability and make decisions based on their financial predictions for each of these business units in comparison to current performance.
If Tourific manages to trade through these trying times I would recommend that for future growth opportunities management revisit the due diligence process and ensure that they have considered the effects of various scenarios on their business and their ability to face and overcome such challenges.
Many use a risk-management process termed “imagineering”. This simply involves teams thinking about the worst possible scenario likely to face the company and formulating an action plan ready for implementation should that scenario become reality.
Had this type of exercise been performed at Tourific, there would be less indecision now. Hafiz and Nagome would be ready to provide clear direction and strong, confident leadership. I highly recommend imagineering as a management tool, as it is always easier to think about how you might overcome a particular problem when you are not actually in the quagmire of having to manage the problem and related issues at the same time. Imagineering helps to take the pressure off and gives you safety nets and coping mechanisms.