Honest Inquiry Interview: Po Chung (Part 1 of 2): On Leadership

The Honest Inquiry Interview Series: A conversation with Po Chung

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Photographer: Yim Yuk Ping

This Honest Inquiry Interview features the legendary Hong Kong business leader and co-founder of DHL International, Po-yang Chung (a.k.a Po Chung).

In 1972, Mr Chung founded DHL International, which was the territory’s first international air express company. He remained as Chairman until 2001, following the acquisition of DHL by Deutsche Post.

As Chairman of Hong Kong Institute of Service Leadership & Management, Mr Chung has been dedicated in large part to advocating and promoting a service leadership mindset applicable to the 21st Century, which has evolved from manufacturing to service-dominated economies, by nurturing and educating leaders and young generations to lead with Care, Character and Competence.

 

Part one – On Leadership

Thanks to your vision and hard work DHL is a now household name around the world. Did you always have an ambition to build a large and successful organisation or were you a reluctant entrepreneur and business leader?

I was neither a reluctant entrepreneur nor an ambitious empire-builder. I was just a pond-builder and pond-keeper that worked on the business one city and one country at a time.

I was the Operation Manager with Topper Toys Ltd from 1969 to early 1972 and used DHL as a courier from Hong Kong to New York. When co-founder Adrian Dalsey approached me to join DHL, I was convinced that banks, shipping lines, trading companies, manufacturers and corporate headquarters had a real need for quick and accurate door-to-door courier services.

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1970s Hong Kong was a hive of global commerce

I started with building up DHL in Hong Kong, and was soon tasked with developing the Far East Region. A couple of years later, I was put in charge of building the international business – or everything outside of Hong Kong; around this time we found Dave Allen, our UK and European partner. This was when the ambition became real.

But the success of DHL was not because of my personal ambition, or luck. I would say that DHL’s success came from having the guts, the naïveté, the right design, and the right mindset to build an international network.

Since very early on, we had the guts to challenge postal monopolies all around the world. At the international level there was the Universal Postal Union, and at the national level there were postal monopoly laws. Postal monopoly laws were centuries-old regulations granting the government the sole ability to deliver letters and parcels. DHL sought to challenge just that. It involved legal battles, and occasionally even jail time, in places like the US and Hong Kong. Suffice to say, enough headway was made on this front that DHL now operates in 220 countries worldwide.

Our naïveté was in not knowing when to stop but keep on pushing.  Of course, we were lucky that all our clients were behind us. 

The right design and mindset involved significant decentralisation. While we had formulated an international strategy at the global level, local strategies were formulated on the ground in each country. Legal and competitive battles were fought in each country on their own terms: Hong Kong would be fighting its own battle, as would Korea, the Philippines, or Bahrain. By 1976 DHL was operating in 60 cities, with each responsible for its own survival.

This decentralised design pushed the responsibility for the business surviving down to the local office. As local Davids fighting their own Goliaths, local managers could rightly claim pride and ownership over their own successes. Rewarding workers not only through money, but also through pride – as a type of positive emotional income – was an important outcome of DHL’s decentralised structure.

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David vs. Goliath, the most famous "underdog story"

 

Do you think the attributes required to build a strong team and organisation differ from those required to lead within companies that are already well-established?

At the end of the day, I don’t see there being a big difference. As I like to say, “everything rises or falls on leadership”. The most fundamental job of a leader is to lead, and leaders without followers are just people on the street. And in order to lead, leaders must possess characteristics that people want to follow.

After 30 years of leading a global company, and 15 years of thinking about and teaching leadership, I’ve found that this can be boiled down to 3 essential qualities. These qualities are the 3 C’s – care, character and competence.

Character means having a good set of moral values, that allow you to build trust in others, dispel distrust, and function well among other people. Care means having an emotional, unselfish bond that communicates respect, concern and a willingness to act, as well as pride and ownership in the things that you do. Competence means having the right skills and abilities to do the job well.

I can assure you that strong leaders from community groups, to middle managers, to multinational CEOs, all have these three qualities. These traits mean that leaders are able to do the right thing, do things right, and think about more than themselves.

People that possess qualities opposite to these – such as having a bad character, being uncaring or incompetent – possess what I call toxic qualities. There is no faster way to lose followers than to have toxic qualities!

Which of these qualities require greater emphasis and development in leaders changes depending on the context. The founder of a startup, for instance, has to sell their product and raise funding without the backing of a brand or a track record. They have to demonstrate clearly that they have competence, character and care in order to build trust, win customers, and secure backers.

A person promoted to lead a multinational corporation, on the other hand, has years of experience behind them, and a long track record to prove their competence in the field. In this case, showing that they have the care and character that followers look for is more important.

 

Big companies always talk about wanting their people to “think and act like entrepreneurs”. Is it really possible to do so in a hierarchical corporate setting, or is all this talk about entrepreneurship in MNCs just lip service?

What a company wants and gets depends heavily on the values and culture it is built around, and having an entrepreneurial mindset in a multinational company is not necessarily a contradiction. In DHL’s case, it was at the heart of how we managed our rapid expansion.

Over 20 years of international expansion, DHL grew fast and across many countries – 125 countries in 15 years, and 1 city every 8 days! We believed that DHL’s employees knew their work and their clients best, and at this breakneck pace relaying all decisions by the headquarters for approval would slow our business down to a halt.

DHL global expansion to 2015

DHL global expansion to 2015

A lot of DHL’s success internationally relied on driving growth through an entrepreneurial, bottom-up mindset. DHL was structured so that decisions were pushed to the lowest level possible, so that it forced independent and entrepreneurial thinking among our employees. Country and station managers were responsible for formulating their country or station strategies, and couriers were responsible for deciding on how to structure their pickup routes. These individual responsibilities were theirs to shape and make, and the system was such that they would not float to a higher decision level unless absolutely necessary.  We valued this independent thinking so much that if we found employees to be asking too many questions about how to do their job, particularly at the managerial level, we might even start wondering whether they were the right person for it.

 

Your personal philosophy is that there is a real need amongst leaders for Care, Character and Competence. Could you elaborate on the significance of these three C’s in today’s business environment?

The values of care, character and competence not only help a leader attract and retain followers, but are also essential for excelling in the services industry. Having competence to do things right is one thing, but having care and character mean that a business can do the right thing with the right heart. “Pure” services sectors, like banking, advertising, education, or couriers, rely more than just delivering a good product. Interacting with a client, engaging with them on a human level, and giving them a reason to come back again are just as important. Like leaders attracting followers, you have to be able to manage the human element in the relationship, and show that you can do the right thing. Not doing the right thing is toxic behaviour – behaviour that repels people, whether clients or followers.

In fact, we believe that care, character and competence hold the essence of human relations, and as such can be thought of as global values that apply to anyone, in any culture. (Similar to the notion of universal values, but we find that in recent decades this has been co-opted by the political west and has moved to prescribe political arrangements - such as representative democracies, or one-man-one-vote. Here, we refer to a purely moral formulation.)

These can be thought of as a type of family value – human families are present in all cultures throughout the world, making these the most common and fundamental type of values.

Care and character encourage cohesion, mutual understanding and empathy, and make staff and new hires feel welcome among their colleagues. Having competence as a central value to a business operation means that staff can take pride in their work, and strive to do their best.

In DHL’s case, the 3 C’s were operationalised within the structure of its business and in the nature of its operating system. This meant that wherever we went, we didn’t bring in a particular set of philosophical American or Western values; we brought in viable values fundamental to all families and human beings instead. In the 220 countries and territories that DHL operates in, not once did we witness a clash of values.

But recent research has begun to compile evidence that all businesses – whether product- or services-based – has a services element to it. A manufactured good needs services like research and development, design, financing, branding, advertising, wholesale, retail and logistics in order to get to the customer. Research by the Fung Global Institute in 2014 found that 72% of value in a humble loaf of bread can be attributed to services. This is a remarkable amount of human activity that goes into something that we might normally think of as mechanical or formulaic.

Add to this the increasing trend of “servicification” in the digitally connected economy, through channels like the sharing economy or outsourcing. Firms that want to grow and prosper in this new economy will need to master their 3 C’s – care, character, and competence.

72% of the value in a loaf of bread can be attributed to services

72% of the value in a loaf of bread can be attributed to services

You are outspoken on the importance of getting a “quality education” and support a number of non-profits engaged in this endeavour. In terms of leadership learning, what exactly does a quality education entail?

I am a firm believer in a multi-faceted approach to leadership learning. This involves a technical “hard” component, as embodied by the grouping of science, technology, engineering, and mathematics (STEM). Leaders need this sort of education to develop the problem-solving, technical skills that allow them to do things right. This is complimented by a humanistic “soft” component, of service, soft power, trust, empathy, and moral competence (SSTEM), or the understanding of how to relate to other people, and how to do the right thing. Both are needed to develop the qualities of care, character and competence that are essential for good leadership.

A good education also involves learning analytical thinking and design thinking. Analytical thinking involves learning how to solve discrete problems, where solutions are possible – the math problem of “find x”. Design thinking, on the other hand, involves open-ended problems, such as finding out how to find x. Technical skill and learning to be competent in one’s craft is essential, and leaders cannot skimp out on this. But also being able to reflect on whether the approach is correct, or to be able to connect disparate ideas to formulate an entirely new approach, helps cultivate a sense of vision and longer-term problem solving.

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I think that a liberal arts education of psychology, sociology, economics, political science, geography, literature, philosophy, religion, art  or history is also very important, in that it has the potential for learning with both breadth and depth. Being exposed to lots of different ideas in the liberal arts paves the way for a wide repertoire of concepts and approaches that provide the building blocks for design thinking. Opportunities to dive deeply into these ideas also hones analytic thinking.

 

Much of your professional life has been dedicated to understanding how to provide superb service. Is this only relevant for companies in the hospitality and services sectors or is delivering superb service something leaders in every industry should care about?

“Life is an entrepreneurial journey.  No one lived  your life before you.  Your business is to serve the people you come in contact with,” said Po Chung

Services are increasingly embedded in all the businesses and industries we see around us. Consider the approach taken by academics studying value chains – it is widely agreed on that even in a field like manufacturing, traditionally seen as the polar opposite of services, there are huge numbers of service jobs embedded along the production chain. Upstream service tasks include the decisions undertaken by management, the financing involved, the research and development process, and the design of the product. Downstream, there are jobs such as advertising, brand-building, logistics, retail, and after-market services that are hugely services intensive.

Studies on global value chains show that the upstream and downstream services in manufacturing generate significantly more value-added than the manufacturing process itself – this is why brands like Apple or Nike are much more well-known, and much more valuable, than the manufacturing companies they hire to build and assemble their products.

In this way, being able to deconstruct your business to understand where and how services fit in, including personal service,  is an important step in design thinking. Understanding where there are services, and how to provide a higher quality of service, has the potential to grow your business by not only making your customers happier, but also your employees, too.

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Foxconn is far less well-known than Apple, whose products it manufacturers

 

A follow-up question: You are a great believer in the strength of ‘Service Mentality’ vs ‘Manufacturing Mentality’. Please elaborate!

I think that the manufacturing mentality is best captured in the notion of “doing things right”. Having the competence to manufacture products to the highest standards, doing it on time, and under cost, is ultimately what keeps customers coming back. It involves managing the process to an exacting degree, and making sure everything goes according to plan.

The service mentality is best captured by the notion of “doing the right thing, with the right heart”. It is having the care and character to best manage the human relationship between service provider and client, and showing them that not only can you execute the task that they want, but you can contribute to that relationship as well. Having the right heart is essential to the care dimension – this is unselfishly caring about your peers, superiors, subordinates, and your clients; it is about taking ownership of everything that you do. Human relationships are not managed by a book, but require values and empathy to successfully nurture.

These are two very different mentality approaches, but they each have their time and place. The world needs excellence in manufacturing – you cannot create high-precision aircraft components, for instance, through care and character alone. But similarly, you cannot create a world-class banking or airline service by sticking rigidly to a standards manual. What we need to realise, as I’ve articulated before, is the need for the three Cs – how each is necessary to create a competitive and sustainable business venture.

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Fish are living creatures

Your degree in fisheries management proves that you don’t have to study business to be a great business leader. What are your views on the benefits and drawbacks for aspiring leaders of a formal business education such as bachelor’s degrees in management, MBAs and the like?

Studying fisheries management taught me that fish are living creatures, no less than human beings. Leading DHL had a similar bearing to managing fisheries – it was the question of how to best create an environment of functional and beneficial relationships to make all the actors and moving pieces work together.

I think the core lesson of a formal business education is learning to manage human relationships, and to provide a human touch that things like automation or AI will never be able to produce. Programs like the BBA or MBA that teach students to understand various aspects of what makes a good leader or follower help produce great leaders and workers.

But I would be wary of other business programs that have histories grounded in manufacturing, or purely in production management. These are more common than you think, and even extend to some of the big-name business schools. While learning technical competency is important, I think that some of these programs over-emphasise the purely problem-solving, analytical thinking components – they train students to be good problem solvers, but not good thinkers, let alone strategic thinkers.

At the end of the day, what makes for a good leadership education is a strong balance between technical competence and humanistic awareness; between care, character, and competence.

 

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Hong Kong Arts Centre is an arts and culture incubator for Hong Kong

Over your career, you have struck an impressive balance between professional achievement and contributing to society. Do you have any advice for leaders who are so caught up with the former that they don’t allocate any time or energy to the latter?

A lot of this comes down to the nature of your job – when your are in a better workplace that makes you happier, then you will naturally be more interested in things outside your job. But it was also about finding the right spaces and opportunities for me to apply skills that I already had.

I had a lot of opportunities to develop my interests outside of work in education, leadership, and the arts as a result of the way DHL was organised. When I was leading DHL full-time, we always pushed decisions to the lowest level possible – this kept our operation close to the ground, and helped us better understand our customers and markets. This meant training people to solve problems, at their level, on their own; as a result, only the big, often philosophical issues came up to my level. Because of this arrangement I was able to find time to contribute to the community.

Finding overlaps between my professional skills and what community organisations needed was also important. One of my first community engagements was with the Community Chest in Hong Kong, as a board member overseeing operations. I used my corporate experience to help create new fundraising projects – this included a charity golf tournament, and approaching companies that had just listed on the stock exchange with a congratulatory plaque and solicitations for donations. The latter was particularly effective; turning down a charity after you had just listed on the stock exchange might seem like an invitation for bad luck!

My hobby is art.  It led me to chair the Hong Kong Arts Centre.  My degree in Fisheries led me to serve in Ocean Park and so on.   

 

As if your success in business wasn’t enough, you are also an accomplished calligrapher and artist specialising Chinese landscape painting. How important is it for business leaders to pursue their passions and hobbies outside of the office? Has your passion for painting influenced your leadership style?

Chinese calligraphy is like handwriting, but the characters are larger – I took something that every student in my generation had to learn, and worked at it. Initially, it was nothing more than hand-eye coordination. Later on, you learn to see how a character is composed, so that it sits well and is balanced. In this regard, there is no bad calligraphy – so long as things look consistent, you have an art piece. Most don’t think this way, but I think it’s absolutely true that consistency in ugliness makes a piece look good.

The so-called “King of Kowloon” in Hong Kong became famous for covering public places in lines and lines of Chinese text. I think his calligraphy is terrible, but at least it is consistently terrible. That might explain why he’s become such a cultural icon.

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Samples from the King of Kowloon, Hong Kong

Creative pursuits are like design thinking – you have to study and be inspired by a wide range of influences, and to try to piece together techniques and styles in order to create something that you can call your own.

Relating this to leadership, I think it makes you more bold, and less afraid of trying new things – colours, shapes, configurations. Art has taught me to prototype early and fail early, and to learn from my mistakes. Most importantly, as Proust reminds us, creativity and inspiration come from looking at old things with new eyes. This is as applicable in art, as it is leadership, business, and life in general.

 

Coming Soon...
Part 2: On Hong Kong, China and the wider region