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CASE STUDY

THE AMAZING PEOPLE OF SMART:

Partners for Market Leadership

By Grace Abella-Zata
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“I do not know what the words boring or routine mean anymore. In SMART, we
have ambiguity and change for breakfast, lunch and dinner.” Annette Santiago’s quick
wit is the perfect foil to the somewhat ponderous question of “What is it like to be the
Head of HR of a company that is constantly undergoing changes?”

Consider the following. In just over 10 years, the company has gone through
three generations of mobile phone technologies, changed its CEO, won market
leadership twice, was acquired as a subsidiary of PLDT, transferred its fixed line
business to PLDT, acquired and integrated former competitor PILTEL, spun off its call
center operations, integrated a sales and distribution company, and is now expanding its
cellular business to include wireless broadband internet.

Change and innovation are hallmarks of the industry. With rapid technological
developments, a highly competitive market, and evolving consumer needs and
preferences, telecom players need a high degree of agility, innovation and intuition.

Intuition? “Yes,” Annette says “Even as you are working to respond to current
realities, you are already thinking that in a while, these things will no longer work.
Sometimes, you don’t exactly know what changes you should be making but you know
that the situation will evolve. So you have to respect your intuition.”

Annette knows whereof she speaks. She has been with SMART almost from Day
One and laughs at the recollection, “Doy Vea, then Smart president, probably was
hesitant to take another person in. They already had someone in HR. I was transferred
from Metro Pacific to this start-up company because they were probably worried that I
was getting bored and was going to resign. For my part, having grown up in Butuan City
where you had to wait for telegrams and rely on inefficient telephone services, I thought
it would be exciting to work in a company that promised instant connectivity!” Annette
says she volunteered to facilitate a mission-vision session for the management team and
perhaps, unbeknownst even to her, paved the way for the strategic role that the HR
group would play in the growth and success of SMART.

What is the value of HR to the organization? “Two things - getting the right
people in and putting the architecture and other processes in place to empower people
to do their best in order to achieve very challenging targets,” Annette says.

“I have been here for 12 years now and I firmly believe that the real competitive
advantage of SMART is its people. “This is no longer the HR Head speaking, but
Rolando “Olan” G. Pena, head of Network Services Division. “We had our acid test in
1997 when cloning almost brought SMART down. Our CEO gathered the team. We
banded together. Even people who were not with Customer Service manned the hot
lines. We assured each other that we were bigger than the problem. True enough, we
re-launched, using digital technology and recovered the market share we lost.”

“Isn’t it a bit too much to say that people are the real competitive advantage of
SMART? After all, there is also that partnership with PLDT which has given SMART a
significant headway over the competition.

Napoleon “Polly” L. Nazareno, President and CEO of Smart since January 2000
(and concurrently of PLDT since February 2004), answers in the affirmative. “The
success of SMART is a result of relentless, rapid innovation which allowed us to
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penetrate the market and gain critical mass quickly. Smart Load, for instance, which
overhauled the mobile phone business in the Philippines and won international awards,
was suggested to us over lunch at the canteen. One of our sales guys suggested the
possibility of prepaid credits. So while we have the technical and coverage advantage,
it’s still the creativity of people and the ability of our teams to morph ideas into something
workable for the consumer’s benefit that is responsible for our success. So Olan is right,
people are our real competitive advantage.”

“It’s the culture that is driving this company- a winning culture and a culture of
customer service. To the credit of our HR group, they have been very instrumental in
helping to build and sustain this culture. They also make sure that this culture permeates
all teams all over the country.” Olan says. “And HR has a role in the shaping of the
organization from the outset. They screen everyone who comes.”

Smart Recruitment

Annette remembers the very early days when they had no recognizable
employment brand and the best they could promise candidates was the exciting vision of
this company that would -almost improbably then- transform the way people
communicated with one another.

Today, SMART is an employer of choice. Just recently, to break the humdrum of

the tedious task of recruitment, the HR team turned recruitment into an event: a one-day
mammoth job fair where the entire HR team screened applicants for customer service
positions. “We had probably forgotten how popular SMART had become! “ Annette says.
“We got 2,000 applicants, and the lines were so long, they snaked through Ayala
Avenue!”

If you think they have it easy in recruitment, consider this. Out of the 2,000
applicants, only about 100 qualified. SMART is very clear about what they require from
the people they bring in to join the SMART team. Aside from the strict standards for
eligibility (intelligence, functional and technical competencies, education and
experience), suitability is considered equally important.

“We had atrocious turnover rates in the past. Some employees who had a good
track record of success in other companies did not thrive in the exceedingly fast-paced
and demanding SMART environment,” Annette recounts. HR compared the profile of
their high performers and those who resigned or left the company and identified the
qualities and traits that differentiated the two groups. This process allowed them to
tighten recruitment standards.

“We practice full disclosure. We tell qualified candidates what to expect. In fact
we almost discourage them from joining SMART,” Annette jokes. Tight screening has
worked wonders. Attrition has gone down dramatically. The recruitment standards and
process are respected by everyone in the organization, including Chairman Manuel V.
Pangilinan who, when he refers candidates, includes a note to emphasize the fact that
HR should not feel any pressure -”only if qualified.”
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Targeted Retention

Since technology changes every three to five years, the average employee
tenure of three years for jobs with simple tasks and five years for those with more
complex tasks makes sense for SMART. The entry of fresh talents at the right time
keeps the organization vigorous. What is crucial is for people leave at the “right” time.
Management can more or less predict when these resignations will occur, making the
pipeline for the replacements easier to manage.

Rey King Ong is a senior engineer with the Engineering and Planning team. He
has been with SMART for nine years and has seen quite a number of his colleagues
migrate with their families to America or take higher paying jobs in other Asian countries.
He himself says living abroad is not for him. Besides, he really enjoys his job, especially
now that it involves a lot of IT work. He says that his team prepares for the resignations
in advance by conducting lectures and workshops to keep the skills of new hires to par.
“The cadet engineers are quick learners because they are screened well by HR. And
they are so motivated to do well. Our system of partnering with schools, getting on-the-
job trainees, careful recruitment and team teaching compensates for the migration of
engineers, “King observes.

A crucial factor in SMART’s success is its ability to retain its core of homegrown
middle managers who have provided the much-needed stability throughout all the
changes and organizational transformation.

Annette says she keeps a close tab on hiring and on employee movements and
keeps her ear close to the ground about what is happening within and outside the
organization. “You have to know what the supply is like outside, how it is changing and
how likely these developments will impact your own recruitment and retention of talent.”

High Performance and Shared Rewards

SMART’s 18 to 21 months of performance-based compensation are legendary

and the stuff that employee’s dreams are made of. Their performance management
system is designed so that employees are motivated to deliver more than what is
expected. The net income target is set higher than what shareholders expect and are
cascaded to everyone. And does this work?

Dennis Manzarate, training supervisor at Customer Care, says that their team is
cost-conscious. Recently, they launched e-learning as a way of cutting training costs
while still achieving training objectives.

SMART has been able to achieve or even surpass its stretch targets every
quarter for the last five years. Eden Techico, Wireless Center Operations head, says,
“You literally hear rejoicing all over the place when the figures come out!”

Nyke Bedua, supervisor in Finance, joined SMART in 1997. He asks, “Where

else can you get this? That’s why you want to stay here. You do not want take a risk
and look for greener pastures.”
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Aside from the bonus scheme, SMART allocates a budget for employees to
celebrate in teams when targets for the year are met. Under the Team Celebration
Program, teams or departments may choose a destination anywhere in the Philippines
for rest and recreation.

But Polly, who has steered SMART to its present position as the market leader, is
quick to tell people not to be complacent. It’s a war out there, and SMART takes time to
rally the troops – not just the sales people as is the practice in many companies but
everyone in the organization. The SMART leadership recognizes the fact that is the
people’s spirits that will carry the day. Employee rallies are thus important venues where
the company’s competitive situation, the challenges it faces and its strategies are shared
with employees.

Polly started this practice at a critical time in SMART’s life, during the switch from
analog to GSM. At that time, competition had a five-year head start in the GSM
business. The goal to become number one in two years was cascaded to all groups for
27 weekends, with Polly and at least one member of the management committee always
present to energized the people and get their commitment. And in two years, or by
March 2002, SMART indeed became Number 1. It has retained this position to this day.

Salary increases are performance-based. There are no tenure-based increases.

A significant portion of the salaries is variable – and therefore at risk – as it is dependent
on the company’s performance. Incentives are also uniform: everyone in the
organization gets the same number of months of salary as bonus.

The upside is that with everyone rowing the boat in the same direction, there is
teamwork and unity. The downside, however, is that freeloaders get the same benefits
as the high performers. Because of this reward system, SMART makes extensive use of
the normal curve method. Non-performers are encouraged to try other work
opportunities. “People who cannot cope with the pace will simply get tired and bid us
farewell for some more compatible climates,” Olan says.

Teamwork and Agility

A high performance culture is complemented by teamwork, agility and speed in

responding to both internal and external challenges. To ensure speed in decision-
making, the SMART organization is flat. Aside from the president and CEO, the rest of
SMART falls into four layers. At SMART, there are no SVPs, VPs, AVPs, and such; there
are only “heads,” Be it a division of hundreds or a small department, the top person in
the unit is simply designated as “head.”

As there are no job descriptions but only job roles, people are more flexible in
taking up responsibilities. Forming ad-hoc teams for a project is a usual practice.
Hence, an engineer can find himself working with team members from marketing, sales,
and customer care. Olan says, “To thrive in the SMART culture, you must be a team
player. There are very few star players here in SMART.”

Eden talks about the partnership between Sales and Customer Service. “The
SMART culture empowers people to make team decisions at their level to respond to
issues in a timely manner. For instance, we have formed in each region a group
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composed of people from customer service, sales, engineering, etc. These teams can
resolve issues at their level so there is no need to escalate workable concerns to the
head office. It really strengthens coordination, even at lower levels. Each group is also
open to feedback from each other. When customer service does audits and we have
observations about Sales, they don’t say “Why do you encroach on my territory?”
Similarly, we welcome their suggestions for customer service improvements in the
Wireless Center.”

Perhaps SMART is one of the few Philippine-based companies where work in

Finance is organized around departments rather than processes (account receivables,
payables, etc.) Nyke handles Marketing Operations. “I get to see the entire picture of
Marketing. Before this account management set-up, our orientation was just control;
now we also look at budgets and expenses in the light of how productive people are and
how to serve customers better.”

Finance people attend Marketing events so they can understand the situation in
the field. “This has led us to be more flexible. Sometimes, we suggest a re-evaluation
of the financial procedures because we realized the need for quicker action for SMART
to be more competitive.” Nyke says he likes this set-up. “It develops our judgment,
decision-making, and leadership because our perspective becomes wider and we are
empowered to make decisions even at supervisory levels.”

Jun D. Calica, financial controller says, “This helps SMART to be more agile.
Also in SMART, the mindset is that everyone is accountable for costs and is therefore a
‘controller’.”

Leadership with a Heart

Olan stands up and raises his arms. “Look at me. Is there anything extraordinary
about me?” He does not think that SMART leaders must be exceptionally brilliant or do
anything really extraordinary. “But you need to have a heart for people. All of us in the
ManCom move around and go to the sites. We eat with the people in the canteen.“ He
gets thoughtful, ”In the ManCom meetings, employee benefits and welfare are top-of-
mind and decisions about these are made easily. These are the reasons why, when you
ask people to go on the offensive, they are always battle-ready.”

Dennis says, “We have family events which I like very much because we can introduce
family members to our officemates. My SMART colleagues are also like family to me.
There is no red tape here at SMART. Our bosses are approachable and we really work
as a team.”

The Internal HR Strategy

While Annette Santiago talks about the importance of respecting one’s intuition in
the face of ambiguity, it is clear that SMART has a deliberate HR strategy, including an
internal HR strategy.
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In the mid-1990s when SMART was just beginning to create a mark in the
telecommunications business, the HR department focused on the traditional HR
processes such as recruitment, facilitating operational training requirements, processing
salaries and developing and implementing benefit programs.

“But as SMART grew,” Annette recalls, “it became clear that we needed to
reorganize HR to be more effective in delivering services to our various clients”. An
account management set-up was established in 1997 and HR Managers were assigned
to address the needs of different client departments.

Eden says that she can make a comparison as SMART is not her first employer.
“What works here in SMART is that the line is empowered to recommend and make
decisions, HR role is to align everything to the strategies of the organization and to teach
us the HR skills we need. This set-up started when we did the competency model;
instead of HR just handing us the competencies, it was really the line who actually drilled
down everything – technical competencies, minimum skills, hiring requirements, etc.,
with HR’s inputs on industry practices.” She talks about her HR account manager, “I do
not think of Dot Sobrevega as HR. She’s with us; she knows my problems. She is able to
define our issues.”

Alex D. Ibasco, who heads the Convergence Platforms Group, puts it this way,
”The walls between HR and our group are not solid anymore. We do not look at HR as
another group, but as an extension of our team. Maybelle Santos, our account manager,
sits in our meetings. She understands the dynamics of our work and our group. She
can plan for our manpower requirements way ahead of time.”

Olan affirms the productive partnership of HR and line. “We have a partner HR,
not a reactive HR,” he says. “How many HR departments will tell you, ‘Don’t you think
you already need more people in your area?’ They challenge us and we challenge
them. We ask each other ‘Will this improve the business and our customer service? Will
this help to bring the company to where we want it to go?”

Annette credits her line partners with the success of SMART’s HR programs.
“Do you know what I found out?,” she asks enthusiastically. “Line executives do want to
participate in the conceptualization and formulation of HR programs. They have a lot of
good ideas and enjoy sharing them.”
“In SMART you will see decision-makers attend HR belongings or presentations
on major policies or programs,” Annette says. She hastens to add, “Of course, we in HR
make sure we don not waste their time. We do our homework, making sure that all
issues and concerns have been addressed before we make any presentation or
proposal.

Providing HR Solutions

Olan observes, “Our HR is now always involved in change and transformation.

You will note the number of senior managers who call Annette, who want her to attend
their meetings. From being process or transaction-focused in the early days, HR has
become business-oriented in providing technical and consulting services to line.”
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Olan cites the example of how he partnered with HR to develop a multi-skill

program among the engineers. “I think SMART is one of very few companies where
engineers own the process end-to-end. The multi-skill program is anchored on
delighting the customer. Each one can solve the problem of the customer.” HR helped to
craft the program and to select the people for the multi-skill program.

For the Convergent Platforms Group, HR provides programs and consulting for
talent retention. SMART also partners with colleges and universities to build and keep
the group’s pipeline of technical talent full.

Eden says, ”People issues are immediately addressed. When there are changes,
we thresh out with HR what the possible impact will be. We prepare for FAQs. Last year
for instance when key people left and there was a major reorganization, some people
were naturally anxious. Our President got their sentiments and since there was an HR
Account manager in charge who knew the people and the dynamics, issues were
immediately addressed.”

Annette reflects on the results of the partnership. “We have managed to make
things work. Management can concentrate on the tasks at hand because the basics
have been well-taken cared of. There is no time wasted in putting out fires as far as
people management issues are concerned.”

Polly sums it all up. “HR is my prime mover for execution. It’s easy to make
plans and to crunch the numbers. But you need each and every individual to be aligned
to your goals and to translate your plans to required actions in their own area. HR aligns
the hearts and minds of our people to understand our business goals and the strategic
intent of all action plans, and to successfully implement plans at their own level. That is
why I never fail to accept invitations from HR. Every time I go around the country, HR
brings people together from different departments – Sales, Customer Service, and
Network. HR plays a very important integrative role so that people do not work in silos.”

Lessons for HR

But lest you think Annette and her team have had it easy all the way, think again.
The evolution of the HR function was not without its share of difficulties.

HR had to establish credibility through administrative efficiency. “Before you can

hope to be strategic, you really have to take care of the most basic needs because that
is what people expect, first and foremost!” She relates an incident very early on when a
colleague told her, “You know what? HR has very good programs but I am not impressed
because there are still problems in the basic delivery of services.”

So what do you do when tat all too familiar lament is verbalized? “Clearly,”
Annette says, “you have to roll up your sleeves and get to work. That’s good because
you will get to know your HR processes by heart.” This intimate knowledge has
undoubtedly helped her and her team successfully launch the HR Shared Services unit
and the SAP-HR Information Systems which metamorphosed into “Camp Smart,” an
intranet portal that assures administrative efficiency not only of the traditional HR
services but also of the online processing of cash advances, liquidations, etc.
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As HR transitioned to a more strategic role, some HR team members found

themselves needing to make skill and psychological adjustments to the evolved and
more business-oriented role of HR.

There is also another important lesson to be learned, says Annette. “It is not
enough for HR to be well-loved. You know the PR aspect, that is necessary, but HR
earns respect on the basis of how well it plans and how it gathers support for business
goals in a massive way and how it is able to get support for its advocacies from below
and above. HR plays a very crucial role here at SMART.”

Current Challenges

Polly refers to himself as the Number 1 Customer Service Officer of Smart. He

tells his people that he personally receives customer service complaints and therefore
knows there is a need to continuously engineer business processes to make them more
customer friendly.

Polly also cites the need to deepen the bench of middle managers. “Remember
we are a young company that grew so fast. Our organization is also flat. Our managers
are only in their 20s and early 30s. They need to hone their people skills.”

Moreover, SMART has become a favorite poaching ground for headhunters

looking for engineers and accountants for overseas and regional BPO positions, paying
salaries that are way out of line with industry or even Philippine standards. Retention of
talent is becoming an urgent issue.

The advent of broadband and 3G technology brings major changes once again.
“We are in the process of reinventing ourselves,” Alex says. “There will be a totally
different infrastructure and we need to realign people once again to these changes.”

But the biggest challenge comes from the fact that the market is maturing. “From
subscriber acquisition, the focus will now be on revenue enhancement. This shift in
strategy will require another reorientation,” the SMART president says. “Four years ago,
I would not have been this confident that our people are up to this new challenge. Now I
know the fundamentals are there and our people will work with the same dedication and
focus they have shown in the past,” Polly adds.

Clearly, HR’s work is never done. “We have stopped saying that things will get
better. You know, we used to think that after this reorganization or after this wave of
change, the pace of work will slacken and we can relax. No, things will never get better!”
Annette laughs.

For someone who joined the company to escape boredom, this will probably be
as good as it gets.
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PREPARE A WRITTEN CASE PRESENTATION BY ANSWERING THE FOLLOWING

GUIDE QUESTIONS: THIS WORK IS WORTH 40 points

 Briefly discuss the corporate profile of SMART

 What were the business challenges faced by the company in the 90s?
 Identify and explain the business and HR strategies adopted by SMART.
 How important was the strategic HR PLAN in the success story of the
company?