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Exclusive HBS Interview with Marjorie M.T. Yang

One of the prominent recipients of the 2002 HBS Alumni Achievement Award is Marjorie M.T. Yang, Chairman and Chief Executive of The Esquel Group, the largest garment manufacturer in the world. Based in China, her company manufactures high quality garments for some of the world’s greatest designers, including Hugo Boss, Brooks Brothers, Marks & Spencer and Ralph Lauren. Ms. Yang’s leadership, innovation and commitment to quality have secured her a place as one of the world’s most powerful forces in the garment industry. In addition, Ms. Yang’s work promoting sustainable development and equitable treatment of workers has brought her to a new level. Her reputation as a thoughtful and engaged executive is changing the face of business leadership globally. The Harbus recently had the opportunity to sit down with Ms. Yang and discuss her views on effective business leadership and creating value in the global economy.

What were your expectations when you boarded the plane to return home to China, after having graduated from HBS and having just finished two years at First Boston?
My father had just been diagnosed with cancer and he asked me to come back to Hong Kong. I packed up my apartment in New York and really wasn’t sure what I was going to do in terms of a career.

How did you find your way to the garment industry?My father was supposed to retire. After three months, he decided that retirement was not his thing. So he started a couple of projects, one of which is now this company that I am now running. We started off with just a few factories and eventually grew into the company we are today with over 47,000 employees. We didn’t plan the company, but rather it developed over time.

Would you recommend to young people today to go into the garment industry?
To be in this industry, you really have to like people because an apparel company’s biggest asset is its people. If you don’t like people, you can’t really be effective in this business.

If you do like people, this is a great industry to join because you can have a global impact and know personally the people you impact locally, which is really a great feeling. I would like to see more MBAs go into manufacturing and other traditional sectors where a lot of people are employed. I believe MBAs can really add a lot of value to these industries and bring about a better living, not just for themselves, but also for a lot of people who are working in those companies. This is the real purpose of being educated in management.

Furthermore, every MBA should go into a business where they can be working directly with a product or with people who are making, buying or selling a product. Every MBA should also test to see if they can stand in front of a customer and actually get them to pay them for whatever product they are trying to sell them. This will tell you a lot about what your customers think of your product and if it does or does not meet market demand. In fact, I still go to our shop in Beijing and try to sell one-on-one with our customers.

The last time you sold in your shop in Beijing what did you learn?
I learned that flattery will get you everywhere. The last time I was there a lady came in with a little boy and wanted to try on some of our shirts. I took care of her little boy while she was trying on our shirts. When she came out, I told her what a wonderful child she had, which indeed he was, and she was incredibly grateful. She was so happy she wound up buying two shirts instead of one!

At the end of the day, selling is a service that can be delivered to your customers in many different forms. Sometimes we all go shopping just to feel good. Very often it’s the product that draws us into a store. But often it’s the other peripherals, including the basic experience of shopping that ultimately determines whether the customer winds up buying anything at all.

Your stated company mission is to create “A company of fun people serving happy customers.” What have been the critical factors in creating an environment in which your employees prosper and your customers benefit?
We want to sell to happy customers because we are focused on both service and quality. If our customer is happy, that means we have done a good job. If our customer is not happy, then we still have work to do.

Why fun people? When I first started working in the company, our workers were very hard working, and carried out orders very well. In those days it was a different market, we produced a cheaper product, and our representative employee base included very obedient and efficient workers who executed the orders that came from above.

Today, we live in a dynamic marketplace that requires our employees to be in constant contact with our customers and each other. Our current employees must be responsive, take initiative, and above all communicate effectively. We eventually had to change our entire mindset, culture, and employee base to match the changing needs of the market.

So by creating an environment that is more comfortable for your employees this results in a more dynamic and creative working environment?

Yes. We are not going to create the type of high-quality product we are looking for without treating our employees well and having them treat each other well.

For example, our factories are air-conditioned. Why? Because our workers are comfortable and produce higher quality garments as a result. Our employees are not going to make the quality of garment we strive for if they are sweating away in a hot room. Can you imagine a white shirt being made in a place where everybody has sweaty fingers? You will never get a happy workforce or a good product out of that.
We also strive to educate our workforce as we have a large number of illiterate workers. We initiated a comprehensive education program where we teach our workers English and enroll them in a variety of cross-training programs so that they can continue to increase their knowledge and efficiency. While this increases the employees’ ability to earn more money, the company also benefits from a more flexible workforce and a much higher quality of product.

You have stated that “one of your greatest joys is providing employment,” and in a country where cheap labor is generally considered to be widely available, you have been quoted several times as saying that “you don’t aspire to keep your employees poor. Why is that important to you and the success of your company?
If our employees make more money, the company makes more money. If you keep trying to underpay your workers, how can they do good work? If you are not responsive to your workers needs and do not look for ways to increase their productivity, the company loses out.

For example, I have a factory where I recently changed the entire management team because they were not sensitive to the worker’s needs. Traditionally, Hong Kong workers welcomed the opportunity for over-time pay. But today, because society is much more affluent, many women have joined the work-force because Hong Kong has a shortage of workers – not because they are interested in working overtime hours.

Instead, they want to go to the market, head home and cook dinner for their husbands. However, our management team did not respect the changing profile of our worker and just assumed that they were lazy.
There is nothing wrong if a worker feels they have enough income and instead wants to enjoy the time off so they can cook dinner for their family. So, we brought in a new management team and created two shifts for the workforce instead of one, which solved the problem.

You have often referred to your vertically integrated supply chain as one of the secrets to the Esquel Group’s success. How did this strategy begin and evolve over time?
We started off as just a sewing factory. We then expanded into making both woven and knit shirts. While
we were making knit shirts we realized that 70-80% of the success of a knit shirt is in the fabric. If you buy a knit shirt and it shrinks, that is a sign of a lousy shirt, not due to the sewing, but due to the quality of the fabric. So we got into the knit fabric business. Next, our traditional supplier of woven fabric was going out of business. We didn’t want to switch to a lower quality supplier or be dependent on the highly expensive suppliers in Italy – so we went into the woven fabric business.

As we became more quality conscious, we decided that we had to control the yarn quality as well because defects in the fabric were caused not in the weaving process, but as the result of a breakage in the yarn during the spinning process. So we went into the yarn business.

Thus, our vertically integrated strategy was principally driven by our focus on quality. If we could find a vendor that met our quality requirements we stay out and outsource instead. But often, our commitment to quality has driven us down the supply chain and into new businesses.

In 1999, you took on the additional commitment of building modern, high-capacity wastewater treatment plants near your manufacturing centers in China. Why did you make this decision and how do you believe your customers and others benefit from it?
I once walked past a fishpond next to one of our operations and noticed there were dead fish in the pond. When I pointed this out, the response I got was “Oh yeah.” As if it wasn’t a big deal!

I gradually managed to convince enough people that we were not going to go around polluting like this. We then centralized all of our operations that might create a discharge and made a major investment in a wastewater treatment plant that we built next to our operations.

We are highly committed to sustainable development and have sponsored several conferences to promote the cause. We have, however, found it to be very frustrating to sponsor a big conference and then realize we are preaching to the converted. We need to find instead the people we have yet to convince.

Thus, we are now focused on educating the children because we believe they will have the greatest influence on their parents. If a parent hears a message promoting sustainable development directly from their child, they are much more likely to recognize that their efforts will help preserve our natural resources for their children to enjoy and benefit from in the future.

This has to happen in our generation. The longer this drags on, the more damage there will be, particularly here in China. It will be a lot easier if we can get control of this now, rather than to need to correct it later, which will be a very expensive proposition.

What is your advice to current HBS students graduating in the Class of 2003, on how they can pursue valuable careers that can also have a positive impact on their communities?
Times are tough. Look out, however, for the different opportunities that emerge during tough times. When times are good, everybody becomes an investment banker or a consultant. They make a lot of money but they may not be having as much fun. If I had not left investment banking and gone back to Hong Kong, I do not believe I would have had the experience I am having today of making a clear, sustainable difference. Today, if I do the right thing, I can benefit all of my 47,000 employees, and that’s a wonderful thing. Of course, I can also do the wrong thing, and adversely impact the same number of people.

Too often we measure our performance simply by looking at our salary as a reflection of our value to the organization. It should instead be your impact on other people and the total good you create that should be your take-home. Many problems that are happening in traditional industries are problems that can be solved. There are better solutions that MBAs can bring to the table that will have a tremendous impact on others, and that will make them feel great. Going out and doing something that makes you feel good is ultimately what each of us should strive for in life.

November 12, 2002
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