acreinc@20: growing pains (1989 to 1994)

Growth in business is something that all enterprises work for. In challenging times like the present, few businesses in fewer industries are able to rise above the difficulties. During periods of economic growth, like in the first few years of the 20th century, there were relatively more enterprises able to grow and expand. Some in fact over-expanded and became victims of reckless growth.

Acre, Inc. benefited from the growth during the early years of that decade fueled by the boom in the power industry and foreign investments. Growth had its challenges, as we experienced. It was during this period when we changed our corporate structure from that of a single proprietorship to a corporation, a move that was in fact dictated by the growth in business and in the company’s organization. That decision was the least stressful. All other business decisions were either very risky or swaddled by too many variables.

We had to make painful decisions on three businesses -- our people-heavy data conversion division, our research and consulting division which was then our core business, and software marketing division featuring SPSS, a business that I felt had a lot of potential.

Data Conversion

Data conversion in the early 1990s was a growth industry. That industry provided employment to many Filipinos and earned dollars for the Philippines at a time when dollars were scarce. Acre, Inc. moved into this business via data encoding. We were contracted to encode arrival-departure cards, about 600,000 cards per month or 7.2 million per year. Data encoding was the most basic of all data conversion procedures. The engagement provided Acre, Inc. with the human resource, technology and financial muscle to look at other opportunities in data conversion.

To handle the volume and at the same time manage fixed investments, we decided to work three shifts (or what we now call the 24x7). Our data encoding operated like an assembly line and required skilled and dedicated encoders. At any given time, we employed close to 100 people spread out in three shifts who were managed by two supervisors and one manager. The volume grew from month to month, tourism being a growth area as well. We were therefore caught in an endless catch-up mode: capacity was always calibrated based on the last three months’ requirements.

As we grew in volume and in number of personnel, two major pains started to manifest. These were people pains and financial pains. We experienced people pains because of fluctuating productivity (therefore increasing cost) and the usual behavioral problems. We decided to keep our core staff instead of implementing a planned employee turnover. Employees who had been with the company for years were thus holed up in one area working 12 hours (including overtime) seven days a week. That decision meant higher salaries each year. Moreover, it led to staff familiarity which, in retrospect, became the bigger problem.

People pains led to some financial pains because of the cost burden. Fluctuating productivity and regular increases in compensation (including benefits) bloated the operational cost and put a strain on profitability. Moreover, payment was delayed which added to the cost burden because of the very high cost of money at that time.

People and financial pains became so severe that we decided to move out of this business after five years of productive work. It was a painful (and probably an ill-advised) decision. Although the profit was thinning out, it was still a profitable business. It provided the company with the kind of skills that we needed for our consulting and sharpened our people management skills. After five years, we attempted to venture into this type of business again with no success.

Research and Consulting

I recall that our research and consulting business was really thriving. Consulting engagements were literally falling into our laps without the need for solicitation and promotions. By word of mouth and the internal commitment to deadlines and quality reports, Acre, Inc.’s consulting business became very competitive. We received many invitations to submit proposals. Other times, the company’s services were engaged without the benefit of bidding. Sadly, because of commitments to deadlines and quality, we had to literally give up many project engagements which limited our growth.

As an organization that thrived on challenges, we brainstormed to discuss our desired future – whether we would grow faster to take advantage of the growing demand for our services, or keep growth manageable and steady.

We decided to grow faster and take advantage of the opportunities presented before us. In short, we took all projects that came our way. As a result, there were many painful moments. That decision altered the life of the organization. Like the data conversion business, we had to work 24x7 to deliver quality results on time. We completed more projects than we ever planned for. Each month, we needed new filing cabinets to file proposals and reports. Each day (including weekends), staff members had to work 12 to 16 hours (sometimes 24 hours).

Those were fulfilling but painful moments. I enjoyed seeing more satisfied clients. But I felt empty whenever employees gave up their weekends and their daily routines for the sake of corporate growth. There were financial rewards. But financial rewards could never fully compensate for lost weekends and family time. There had to be a balance. As we approached the end of our fifth year, we decided to manage growth and to keep that balance between work and personal time.

Software Marketing

Our mission of driving the widespread use of data-driven decision making was magnificently aided by our decision to promote analytics through SPSS. With SPSS, Acre, Inc. was able to offer a package – the service plus the tool. Because it was a mission and an advocacy, we had to invest in educating the market. That decision became a heavy burden on our financials during the early years.

Analytics needed skilled people in the field of statistics and data processing. Fortunately, these were skills that were available in our consulting division. Unfortunately, they were fully engaged in the projects that they were managing. While we brought in new talents to handle the analytics, the consulting engagements proved too tempting that we had to rotate people in analytics to handle consulting services. Juggling people across divisions was probably practical from a financial perspective but not productive from an organizational perspective. The need to juggle people became even more rigorous in the next five years of Acre, Inc.’s corporate existence.

(This is Part 2 of a series of articles on the history of acreinc@20. Part 2 talks about the start-up years from1989 to 1994. What is the main purpose of the business? What are the secondary purposes of the business? What markets and customers will the enterprise aim to serve? In what processes should it excel in a business where systems, methods and technology are victims of obsolescence? In what way should the enterprise position itself in an industry dominated by multinational companies or companies that have been operating for many years? This part discusses the important decision-making days and documents the impact of these decisions on the future of the enterprise. Some are book-line strategies and decisions. Some are blue ocean scenarios. For comments, write to abfontanilla@yahoo.com or nick.fontanilla@gmail.com)