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Hai-O wins Forbes award for third year
Nov 09, 2009
Source: Business Times
Hai-O Enterprise's recipe for success is put down to collective responsibility and decision-making, according to its bubbly founder Tan Kai Hee.
When Tan Kai Hee rises to receive an award on behalf of Hai-O Enterprise Bhd from Forbes magazine in Singapore on Wednesday, the sprightly 72-year-old group managing director might actually do so with an extra spring in his step.

It is simply because of the elation that this is the third consecutive year that Hai-O Enterprise is cited for being among the best public-listed companies in the Asia-Pacific for profitability and growth of under US$1 billion.

The bubbly and enterprising founder of Hai-O Enterprise has been grinning from ear-to-ear in the last few weeks ever since he was informed that his company would be making a three-in-a-row strike, a special reason to be proud of since it was picked from among some 25,000 companies in the region.

"It’s all due to hard work from everybody associated with the company," he said in an interview in his Klang office.

Tan admits that after his company had won the award for the second consecutive time last year, he was determined to get his company to be in the running again for the award this year.

He is simply thrilled that Hai-O Enterprise rose to the occasion and won the award this year.

For the year ended April 30, 2007, Hai-O Enterprise made a group pre-tax profit of RM3.607 million and this increased to RM67.716 million in 2008 and RM75.887 million in 2009.

To show his appreciation for this year's robust results despite the global downturn, Tan gave about 500 employees in the company, irrespective of their rank, a financial reward of RM1,000 each.

He also threw a sumptuous dinner for them and let everyone off for a long weekend.

When pressed for his recipe of success, Tan put it all down to collective responsibility and decision-making and said "unity is strength when we all put our heads together."

Perhaps Tan’s once socialist leanings may be the clue why he promotes collective responsibility and collective leadership as a business philosophy in the company.

Ever the humble entrepreneur, Tan, often known for his broad smile and calm demeanor, said Hai-O Enterprise started when "he and few comrades" were unemployed and decided to do something useful to fend for their families.

"We didn’t have jobs then and we decided to start a business. In that way, we can find money to feed ourselves and our families," he recalled the hard times they endured about 35 years ago.

"So we started a 'kedai runcit' or sundry shop, selling medicinal products from China. We knew that there was good demand for such products as they were good and relatively cheap.

We also knew quite a number of people who wanted them. Most of our friends were poor, so we got products that were affordable for them.

"Fortunately or unfortunately, we became bigger. We then decided that if we became bigger, we would be able to help more people. And so here we are after more than 30 years. At first we bought from other importers (in the country), later we became direct importers as well when our reputation became known to leading pharmaceutical and medicinal product companies in China.

For the record, Hai-O Enterprise has also been exemplary in rewarding shareholders and the stock is highly regarded by stock market analysts if recent reports from OSK Research, RHB Research and Affin Securities are anything to go by.

What stands out has been its commitment to a 50 per cent dividend payout from its net profits. For instance, when Hai-O made a net profit of RM21.384 million in 2007, it paid out RM10.937 million in dividends to shareholders.

Similarly in 2008, shareholders received RM23.683 million of the net profit of RM48.535 million.

On this act of generosity, Tan explained: "Our philosophy is very simple. We must also give back to society what we have taken or benefited from. Today we (founders of the company) are no longer poor but we are simply rich on paper value. We value our shareholders and that is why we give them good returns.”

Tan is also especially proud of what he has done for the Malay and Bumiputera community and what they had done in return for the company. He is also touched by their respectful reverence of him by calling "ayahanda" or "father", adding that "that is their polite way of calling this old man."

Out of 100,000 multi-level marketing (MLM) distributors with Hai-O Marketing Sdn Bhd, the company spearheading the MLM initiative, about 90 per cent are Bumiputeras.

"I like their spirit of 'terkenang budi' or gratitude for what they had achieved after becoming successful distributors in Hai-O Marketing. But I must say that their marvellous performance had also turned around Hai-O Marketing that was once on the brink of collapse," he said.

Tan disclosed that the driving force of Hai-O Enterprise, the listed entity, has been Hai-O Marketing as the latter accounted for 80 per cent of the group’s revenue.

Bumiputeras in Hai-O Marketing, he said, had shown that they were capable of doing business in their own special way as MLM distributors because some 50 to 60 Bumiputera millionaires had been created in the process.

"And they are real millionaires with real money in their pockets, this group often known as 'usahawan jutawan sejati' or true-blue millionaire entrepreneurs. Many of them even earn more than me and I am proud of them. Their success makes me very happy. This is due to their sheer hardwork, nothing else.

"I also like their approach to the MLM business as Bumiputeras usually involve their family members as opposed to non-Malays who rather go it alone. Now that is the difference. Perhaps that comes from their 'gotong-royong' (volunteerism) spirit and wanting to 'berdikari' or stand on their own feet.

"They have started what I might call 'one family, one company' approach and they are doing very well. From just RM28 as a starting point, the sky is the limit. They don’t need to rent premises to do their business and there is also the flexibility of time," said Tan, who has been described by Tun Musa Hitam, Chairman of Malaysia-China Business Council, as being a role model among Malaysian Chinese merchants for his effort to produce many Bumiputera entrepreneurs.

"Among the many friends I know, I believe Tan Kai Hee is one of those who have the capability of breaking moulds. In the MLM business, many people are trying to imitate what the others are doing, but he has outperformed many in his field, creating unique know-how and methods and others are having a hard time competing with him,” said the former Deputy Prime Minister.

Tan said of the 100,000 MLM distributors in Hai-O Marketing, about 50,000 were active while 10,000 fell under the "very active" category with monthly incomes running into five figures. The majority of the active Hai-O Marketing MLM distributors have monthly incomes of several thousands each.

However, Tan did say that of the 4,000 to 5,000 who joined as MLM distributors each year, only a handful made it to the very top as a result of hard work.

"There is no short-cut. Success is sweeter when you know you had achieved through the fruits of your own labour," he said.

To repay his debt of gratitude, Tan is considering the listing of Hai-O Marketing on Bursa Malaysia to set the MLM distributors, especially Bumiputeras, to be more involved in business.

In addition, Tan has also embarked on an expansion to Indonesia since August this year, targeting to get some 5,000 to 10,000 MLM distributors within a year.

He likened the move into Indonesia as a natural progression as the cultures of both countries were almost similar and many Malaysians also have relatives in Indonesia.

"That’s a big bonus for our MLM distributors as well as they can reach out to a bigger market via their relatives," he said.
For the long term, Tan knows that he cannot rely on trial and error, goodwill or luck to sustain his string of successful high scores.

In the pipeline is a training college to "make sure that we have professionals coming in to tell us what is the best way forward," he said.

In other words, ensuring that the Hai-O Group becomes an even more potent force in the pharmaceutical and healthcare industry.