Family runs deep: Hans Sy Jr

It all began with a young Chinese migrant making the most of a bad situation. As a teenager, Henry Sy decided to stay in the Philippines after World War II instead of returning to China with his family. He tried selling used army boots to eke out a living. It’s a classic rags-to-riches story.

From that very humble beginning, Henry became one of the wealthiest Filipinos. He built the SM Group – among the most respected business groups not just in the Philippines but in all of Asia. In terms of market capitalisation, it has also grown to become the biggest real estate development company in South-East Asia.

The SM Group of Companies started out as a family business in 1958 with a humble shoe store in downtown Manila that was transformed into a department store in 1972 and later expanded into the retail, banking and property sectors.

Henry’s two daughters and four sons forged careers in the company and its subsidiaries. From their father’s vision, they grew the family business and were instrumental in professionalising the organisation as well as spearheading the listing of the company on the Philippine Stock Exchange.

Over the past six decades, the SM Group has evolved into a leading Philippine conglomerate. Its supermalls, cinemas, and food and non-food outlets have become lifestyle destinations, while its combined retail operation is the country’s largest and most diversified.

In banking, SM has the widest footprint in the Philippines through its interests in BDO Unibank Inc and China Banking Corp, the country’s biggest and one of the oldest banks, respectively.

SM’s property arm, SM Prime Holdings Inc, is one of the largest integrated property developers in South-East Asia with interests in malls, residences, office buildings, resorts, hotels and convention centres. Under the leadership of Henry’s son Hans Sy as its President from 1994 to 2016, SM Prime grew exponentially by offering innovative and sustainable lifestyle cities.

Today, the third generation of the Sy family is taking the SM Group to new horizons. Henry’s grandson Hans Sy Jr, commonly known as Chico, took over as President of SM Engineering Design & Development Corp (SMEDD) in 2018.

Formerly a corporate division created in 1991, SMEDD was spun off into a separate company in 2012 headed by Chico’s father Hans Sy as President. During that time, Hans was concurrently the President of SM Prime Holdings Inc and Chairman of China Banking Corp.

Since his retirement in 2016, Hans has focused on the bigger picture with his advocacy in the area of disaster risk reduction management. He now serves as Co-Chairman of the National Resilience Council and was also the first Filipino member of the Board of Directors appointed by the United Nations Office for Disaster Risk Reduction.

Meanwhile, Chico finished high school in Melbourne, Australia and obtained a double major in civil engineering and marketing management from the University of Melbourne in 2005. After graduation, he worked at project management firm Compass Management Group and later at Westfield, Australia’s largest shopping centre builder.

Spending his adolescent and early adult years in Australia was a learning experience for young Chico, and two things stood out for him. "First, the humbling experience that I was exposed to. No-one was above the other. I was treated like everyone else as a simple regular guy with no preferential treatment. I was able to question who I was, and so I got an honest assessment of my capabilities," Chico reflects.

"Second was learning to be inquisitive. I was taught to question everything; to understand the rationale behind what is said; to find out the truth and follow what is right. I took a lot of inspiration from that because your true value is more about your person and your knowledge, and not about your title or position."

In 2008, Chico was asked by his father to return home and join the SM Group as a management trainee. He underwent hands-on training on the total retail business enterprise – from designing the stores to construction to service delivery, and even customer engagement. He realised that the culture he was exposed to in Australia was different from how things worked back in Manila.

Always keeping abreast with technology, Chico saw an opportunity to introduce digital solutions that would seamlessly automate the business. However, critical to that success is the capability-building of stakeholders in adapting to the new system, which he recognised would take time.

All these have taught him that the learning process never ends. "One of my favourite statements is, ‘You’re in an industry where you have to learn constantly; if you can’t accept that, then you’re just not in the right industry,’" Chico says.

Four years into his tenure, Chico was assigned to the newly incorporated SMEDD as Vice President. This wholly owned subsidiary of the SM Group now has more than 500 employees primarily engaged in design, property management, and engineering operations servicing the conglomerate’s malls, department stores and supermarkets, as well as its retail affiliates including Uniqlo, Forever 21, Watsons, Kultura, Ace Hardware and The Body Shop.

From childhood, Chico knew he would eventually work in the family business and was confident about where he was headed. "At a young age, I knew I was equipped to work with advanced technologies in programming and networking. But I had to pull back and rethink the path where I could contribute more. The growing size and scope of the family business made me decide to join the company earlier," he says.

Cultural expectations

Chico found a measure of hesitation to some of his ideas, pointing out that he had to earn people’s trust and respect first. "As my father would say, ‘Prepare to be frustrated.’ Indeed, the first five years were tough," he admits. "Trust is built over time. Building good business relationships is key to doing good business."

In time, he came to the realisation that his style of work was not effective in accomplishing tasks. "I had to adapt to the culture. I had to learn the balance of getting things done while earning their trust. The bamboo has to bend with the wind; I found a nice compromise," Chico says.

"I had to adapt to the culture. I had to learn the balance of getting things done while earning their trust. The bamboo has to bend with the wind."

At the same time, he had to learn to temper himself and self-manage his own expectations. "I should take things in stride but never downgrade my standards," he says. "Timing is key; getting people ready to move up to the next level is crucial."

Future aspirations

With a decade in the SM Group now behind him, Chico is acutely aware of the goals of the company – and his family. "Our medium-term objective is to sustain the growing requirements of SM Prime as one of the biggest real estate developers in the region," he explains.

The five-year performance of SM Prime since it became a fully integrated property developer in 2013 is astounding. Despite its size, the listed company still managed to grow its total assets by 80% in just five years, valued at PHP604.1 billion (US$11.86 billion) as of December 2018. These results were achieved amid the economic challenges that year, which included a higher inflation rate and a slowdown in GDP growth.

With an asset base of billions of pesos under management, it must be sustained with not just new construction, but also facilities and technical management support to many of the projects.

To date, SMEDD has more than 400 ongoing projects (big and small) and is targeting a completion of five to eight malls every year on top of its other expansion and renovation projects. "Long-term, the objective is to fine-tune the firm to the point where we can be proud to say that we are the pre-eminent construction delivery group in our country," he adds.

SM Prime has also expanded geographically and built seven shopping malls in China, with plans for more construction in the pipeline. Chico points out that their foray into the Chinese mainland is part of the strategy to look for value in the market and strike accordingly while ensuring that every asset is secure.

Still, the Philippines will remain the company’s major source of expansion according to Chico, who believes that it will take some time before the business in China becomes a sizeable portion of the company’s revenue.

Building a retail culture

The Sy family has a finely honed understanding of the retail industry after decades of pioneering experience. The success of a retail centre relies on much more than shops doing business; there is an ingrained cultural facet that must be cultivated and augmented as time passes. The mall must also act as entertainer, informer and even educator.

Because retail is at the heart of SM culture, every mall is viewed as a standalone store. SM Prime focuses on marketing, making sure that the shopping centre holds distinct points of interest. "It is essential that the shopping centre is treated as an individual store; always kept fresh, exciting, vibrant," says Chico.

Malls were once considered to be places of pure convenience, provided there was a variety of brands. "The emphasis then was merely on availability and accessibility, but as people’s tastes and activities matured, SM shifted its focus to a lifestyle segment and started providing more comprehensive services," he explains.

From the 1990s onward, malls have become the destinations of choice for many Filipinos. They have assumed the role previously performed by town plazas and city halls due to the lack of facilities for public use.

SM Supermalls made it convenient for people to avail of public services while enjoying the comfort of air-conditioning; in effect, they operate like community centres. "Every SM mall existing today is the hub of activity in its locality. SM Prime sees to it that its malls in the Philippines are the easiest and safest places for activities ranging from paying bills to posting mail or eating out," Chico says.

A smile and happy experiences are what needs to be fulfilled when a customer goes to SM Supermalls. They meticulously focus on providing the best service and convenience to each customer. That is why they provide full-service offerings that make these malls a one-stop shop for consumers.

Feeling the pulse of the market, they ventured into pioneering the introduction of unique services such as fitness gyms, ambulatory clinics, government agencies and chapels for worship, providing virtually everything in one place.

Online-offline war

Online shopping behaviour is making a dent in the global scene and maybe the future of retail. But Filipinos by nature are known to shop till they drop, to eat or munch on something every two to three hours, which is reason enough to just hang around with friends, family, colleagues and acquaintances. They want to entertain and be entertained; to be with people and to be seen by others; not missing out on the latest events and happenings, or being on the ground as it happens.

"It is true that the evolving Filipino shopper is engaged in ecommerce too," Chico acknowledges. "But our role is to provide the right venue for people to meet and connect while enjoying good food and entertainment. Online shopping is just an element to the rise of a totally new retail experience, making one not miss a thing.

"We have merged the two in a shopping experience called Click & Collect at shop.sm.com. This is an option where our customers do online shopping linked with the physical store experiences through omni-channels."

To make this happen, SM had to leverage digital marketing, encouraging more online shoppers to go and visit its malls. Technology then fuels the rise of the bricks-and-mortar retail. The mall retailing experience has levelled up, giving everyone more reasons to visit SM Supermalls. People still make their way to the physical store and get to experience what may be lacking online.

Despite the growing popularity of ecommerce, Filipinos continue to hang out in malls as part of their regular routine. "The bottom line is that human beings are social beings. We need to see people; there will always be a need to be with people. That is where the offline experience of the shopping centre comes into play; that sense of belonging to a community with a common interest and shared values," Chico explains.

The bottom line is that human beings are social beings … There will always be a need to be with people.

Visiting an SM mall is more than just to buy groceries or shop for the latest fashion apparel. It is a place to meet up with people, bond with family or colleagues, conduct business meetings, watch movies and concerts, play games, renew your driver’s licence or attend Sunday mass.

"Retailers are getting to know how to blend the two together. That’s the future of the shopping centre; making sure that, in the online space, we’re able to still be the venue of choice for a lot of people. That’s why we build lifestyle cities. If you’re only going to focus on the online experience, it won’t be a complete experience," Chico points out.

Putting the mall to paper

In the Philippines, the sophistication of shoppers has progressed exponentially, imposing new considerations for Chico’s area of responsibility to stay in front of public demand for a rewarding experience when they visit a shopping mall.

"I like to do a lot of storyboarding," Chico explains. "We get inspiration from our customers and ask ourselves, ‘What do they want to accomplish when in a shopping centre? If they take a walk through the mall space, what design elements and layout would impact their experience in the mall?’"

Chico believes the mall visitor’s profile changes constantly, and so do their preferences and expectations. That is why there is a need to keep connecting with them and providing their needs beyond expectations.

Space planning takes into consideration customer convenience, which drives sales growth strategically. For instance, SM Hypermarkets are strategically located either on the ground floor or basement parking areas for easier transport of goods to the customer’s car.

The all-day dining outlets and cafes are most likely found at the entrance of the mall where customers are in need of a waiting area when meeting someone or when waiting for their ride to arrive. Food and beverage retailers are located at the Sky Park on the roof deck where customers and shoppers can find a more relaxing place to enjoy quality time with family and friends.

Safety in the midst of climate change

In the boardroom where decisions are made, the evolution of shopping mall design, construction and maintenance is shifting in terms of fundamental parameters of infrastructure. There is more to it than just an aesthetically pleasing atmosphere that keeps up with trends.

"Critical to mall design, construction and maintenance are the interest of our various stakeholders, the community where we operate, our customers, our tenants, our employees and our investors," Chico notes. "Management decisions are based on insights into managing risk exposure and resilience performance as well as environmental and social governance."

Climate change has become a risk to people and assets. That is why design, construction and maintenance are taken seriously in the planning, implementation and monitoring stages when building a mall.

"In simple terms, it is all about sustainability and being responsible to our stakeholders," Chico says. "We take into consideration the climate-related concerns of the community and take action to address these. We identify the location-specific needs and take into account the safety of people. Our sustainability program is all about making people feel safe with us.

"As my father Hans says, ‘By investing in resilience, we minimise vulnerability, better safeguard our physical assets, reduce recovery expense and contribute to local government efforts.’ On top of doing all of these, the safety of the people is what matters most."

Sustainable mall design

SM Prime designs and builds malls with environmental sustainability in mind. In fact, SM Aura Premier in Taguig City is the first and largest mall in the Philippines with a Gold LEED Certification. Five other malls exemplify SM’s concern for the environment.

SM City Masinag is located along Marcos Highway in Antipolo City. Unlike any other SM mall, it has entirely revolutionised the approach to green design. Due to the mall’s proximity to a highly flood-prone area, the design incorporates a holding tank to reduce the impact of super-typhoons that plague the area.

Given the scale of this project, the water will be used for various mall purposes to prevent the negative impact of water consumption within the local communities. SM City Masinag’s holding tank can hold 17,681 cubic metres of rainwater and is completely filled within 12.5 hours. It is equipped with submersible pumps that will be used after the rain has stopped to pump out accumulated rainwater.

"As a responsible corporate citizen, SM Prime took the predisposition towards flooding in the area when it began designing SM City Masinag. Since the mall opened, it has helped nearby communities through its holding tank that not only collects rainwater from the roof deck and perimeter of the mall but also from neighbouring subdivisions like Vermont Park and Vermont Royale by allowing their drainage systems to connect to that of the mall," Chico says.

SM City Cabanatuan incorporates a new and vibrant appearance from the street that reflects SM’s innovative design approach. It has a transport terminal for public utility vehicles and houses retail shops, SM Store, SM Supermarket, a food court, cinemas, and two uniquely designed Sky Gardens.

According to Chico, SM Cabanatuan’s aquifer acts like an underground water table that allows overflowing floodwater in the property and serves as a temporary catchment basin to minimise flooding in neighbouring communities.

The building was elevated 2.2 metres from the road level, and pile driving was used to hit hard strata. Electromechanical facilities were placed on the roof deck level, thus making the building disaster resilient.

SM Lanang Premier is a four-storey shopping mall in Lanang, Davao City. The mall has a gross floor area of 145,173 square metres and can house more than 270 tenants aside from its retail affiliates.

"The mall also has a rain catchment system that can handle 546 cubic metres of water. The complex is designed to catch the rainwater before it reaches the creek to avoid overflowing," Chico says.

SM City Marikina is a six-hectare mall constructed in 2008 and located within the Marikina River Watershed, a flood-prone area. The World Bank identified this zone as a high-risk area that should be prepared for floods, earthquakes and topographical changes as it is highly populated and considered a major transportation hub.

SMEDD has designed the mall with these considerations in mind. Urban planners regularly study annual flood cycles of areas for possible development. SMEDD went beyond this as it considered longer-term flood cycles of the Marikina Watershed when designing the mall.

The team worked with the Laguna Lake Development Authority and built the mall on 246 stilts situated 20 metres farther than the standard regulations for buildings or 90 metres away from the Marikina River centreline. This distance helps reduce the risks of damaging the mall and harming the people inside during extreme floods.

"The safety of the customers, surrounding community, company employees and the mall’s structure are top priorities in SM Prime developments," Chico says. "Thus, these considerations were incorporated into the mall’s design as SM partnered with local and international specialists to create the structural plan for the facility."

The main roads surrounding the mall lay at the natural ground level. Thus, SM prudently constructed the lower parking level without any wall enclosures and built the upper ground level at an elevation of 20.5 metres – more than the maximum flood level during Typhoon Ketsana, known in the Philippines as Tropical Storm Ondoy, in 2009.

These features allow water to flow freely through the parking structure while business units and the mall area rest safely on the third floor lifted by the supportive stilts during extreme floods.

Typhoon Ketsana affected more than 4.8 million people across the Philippines and resulted in a total of more than PHP11 billion (US$216 million) worth of damage as it submerged nearly half of Marikina City. However, SM Prime’s investments in making SM Marikina resilient saved almost PHP1 billion (US$19.6 million) in loses from business sales alone.

"This only proved that costs from building a disaster-resilient mall were more than recouped in avoided losses. SM Marikina also sheltered around 1,400 people stranded in the floods. The successful implementation of the business continuity plan helped tenants to operate and serve the needs of refugees," Chico says.

SM City Baguio is an enclosed shopping mall in Baguio City, the Philippines’ summer capital. It is the largest SM shopping mall in Northern Luzon with a floor area of 107,841 square metres. It occupies a land area of 80,000 square metres on Luneta Hill on top of Session Road, overlooking Burnham Park and downtown Baguio.

An investigation was conducted on the soil properties for the validation of the geotechnical report on seismic parameters and soil-bearing capacity. A diaphragm wall at the rear periphery was recommended to stabilise the structural integrity of the structure in the event that an earthquake occurs while the soil is saturated.

"During a downpour, rainwater that falls on the mall’s roof and deck are directed to a catchment tank with a capacity of 6,900 cubic metres or 6.9 million litres of rainwater," Chico explains. "This means floodwater is redirected away from surrounding communities into a reservoir, helping ease possible flash floods and landslides."

The new leadership equation

Migrating SMEDD to a new era of digitisation was a significant project that was destined to meet some level of resistance. With every project, though, Chico confronts enormous complexity in design and its applications in engineering. According to him, as each project progresses, one needs to have the composure to remain level-headed, to have an eye for detail and the confidence to delegate responsibility to trusted lieutenants.

As President of SMEDD, where does Chico stand on the fine line between oversight and micromanaging? "My leadership style is adaptive. It is highly situational depending on the need and the development level of the people," he says. "For example, if I have a lot of lead time and we are still in the very early stage of the project, I would emphasise consensus-building. I say to my staff, ‘Speak now. Tell me your ideas, let’s work it out.’

"And I always tell my people, ‘If I ever say no to you, I will always owe you an explanation. I will tell you what I think about your idea and why I have to say no. If you see my point and you want to try again, make sure you address why I said no. As long as you do that I’ll entertain you again.’ These are the kinds of rules I have in my office, and my team members know they are entirely free to speak their mind."

"If I ever say no to you, I will always owe you an explanation."

But when it’s crunch time and the strength of leadership is needed, he employs a less consensual style because of the precision and speed required to get a project done and over the line, especially when problems start to crop up as a result of poor planning.

"It’s not like I relish doing it myself," Chico says. "I always tell my people that one of my key roles is to be an educator. I’m constantly teaching my people to find a leader who will be the best for a project. There has to be a balance; there is no one strong archetype that I would constantly choose."

"I always tell my people that one of my key roles is to be an educator."

Capability building

Chico is concerned that the Philippines’ construction industry is at a crossroads when it comes to talent acquisition. This poses a challenge to companies like SMEDD to find the best talent and augment their careers with proper work opportunities, on the job training, as well as formal advanced training.

He cites the government’s ‘Build Build Build’ flagship program as having created a high demand for technical experts, particularly in the fields of construction and project management, along with the tremendous growth in the real estate and infrastructure sectors, both locally and throughout the Asian continent.

"The scarcity is even more prevalent in our provincial projects that require talents from nearby locations," Chico says. "On the other hand, this is an opportunity for SMEDD along with the government’s efforts to employ local talents or even repatriate engineering and design talents based in Manila or abroad who would like to go home to their provinces and work in our multiple projects across the regions."

One of the biggest challenges facing most engineering firms in the Philippines today is the middle management gap. There are many veterans who act as mentors, but not enough young people to whom those highly experienced experts can pass on their knowledge. Chico wants more millennials to pursue careers in engineering, project management and design, but they should remember that this is an industry where blood, sweat, tears and experience are the keys to success.

Employee success

SMEDD promotes the welfare of its human resources by fostering camaraderie among them and encouraging their development. For that to succeed, it needs the support of the government sector in expanding management education possibilities for both trades and professionals.

"Our key areas of focus to improve over the next 6–12 months are operational processes because that’s really where all our challenges stem from," Chico says. "You cannot rely on the rule book for everything in construction. I tell people that 80% of a project will be ‘cookie-cutter’ – it’s going to be a cut-and-paste approach – but the remaining 20% would depend on onsite conditions.

"Now, I wish we could build 80% of the project first and then focus hard on the last 20%. But, unfortunately, it doesn’t work that way because 20% is distributed throughout the project, so what do you do?

"The rule book doesn’t apply anymore, so this is where culture comes in. You have to teach your people how to make the right decisions, which is not the easiest thing to do. So we have decided to concentrate our efforts on values and culture. Is it safe? Does it work for our stakeholders? If all these values are in place and we’re satisfied, then we’re on the right path."

"You have to teach your people how to make the right decisions."

SMEDD looks for more than education when it comes to hiring and keeping talent, though. There is another dimension to a successful employee, and it boils down to a commitment to see a project through, making sure it is the best it can be.

"For me, passion is number one. We love what we do," says Chico. "When you love what you do, you put a lot of care into it, you check a lot of details, and you care about things that most people would gloss over. It’s the passion that I deliver to a project, and that’s what I share with my staff – you have to love what you do because it becomes innate to do your best and give your best at all times," he says.

For me, passion is number one. We love what we do.

Chico views his role of SMEDD President as a constantly mobile function, depending on circumstances in running the business daily. That can vary from burrowing down to the smallest details to acting as overseer. "I can go all the way down to minute details, but I also pull up and out to see the overall strategy," he says.

"It’s not the easiest thing to do – it’s extremely tiring, but soon enough you can get the hang of it. As my father would say, ‘It’s what makes us successful, and it’s that level of care that you just have to put into a project.’"

Collaborative partnerships

The successful construction of large projects is dependent on a complex web of teams working in tandem and in concert to ensure that the final project is fit for its purpose. Bringing those teams together effectively can be a mind-numbingly complicated process.

That’s where SMEDD has spent endless hours in cementing relationships with its suppliers so that logistical mishaps are not the bugbear of any projects. In some instances, that means assisting them in updating their systems to work seamlessly with each other.

"I’ll be the first to say that we would not be where we are if we didn’t have strong relationships. Partnerships in the SM Group are very sacred," Chico says. "We were told by our founder that our relationships and our reputation to our partners are paramount. It is because of those relationships that my grandfather took SM to where it is today. And the same applies to our engineering business, from our contractors to our consultants and our suppliers, who we help to analyse everything to make themselves better."

We were told by our founder that our relationships and our reputation to our partners are paramount.

All in the family

What would Chico like to leave as a legacy in the family business? Is he content to continue in the current mould of design and construction of shopping malls and other large projects such as arenas, or does he have a bigger picture in mind?

He’s unequivocal that he doesn’t hold much stock in his achievements so far, although many would be very pleased with what he has achieved. He takes a longer view, as his father Hans and grandfather Henry taught him.

"My father would always tell me that you never say that you’ve done your best because your best is yet to come. So, to be honest, I still believe there’s a long way to go. But in terms of relative achievements, for what I’ve done today, the fact that my father hasn’t fired me is an achievement on its own," he says, laughing loudly.

From his grandfather, Chico learned how a simple man with big dreams and bold ambitions could make a difference in this world. "My grandfather realised that hard work, discipline and creativity were not enough to turn one’s vision into reality," Chico says. "He faced many obstacles every time he embarked on a fresh venture, but self-determination and sheer perseverance made him overcome the odds."

When Chico does take time away from work, he has a simple requirement – it has to be time with his family. He’d not have it any other way. "I enjoy my kids. My family is my other passion. I consider my family to be my next biggest investment because when I retire, my kids will have to do the work at some point."

And so the Sy family business endures.

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