Arik Raichman loves to quote Al Ries.
The first impression Raichman creates isn't that his hobby is reading books on management in general, and marketing in particular, or that he can declaim from memory entire sections of books by his guru, Al Ries.
His appearance, bluntness, body language and clothes all scream kibbutz, farmer, man of the land; but behind that earthy mien hides an aggressive, savvy, forceful businessman, deeply respected by even his bitter rivals, Ofra Strauss and Dan Propper.
Raichman took the reins at Israel's dairy monopoly, Tnuva, seven years ago, following the scandal of silicon being found in the company's long-life milk that forced out his predecessor, the all-powerful Yitzhak Landsman. Nobody had a clue about the revolution Raichman would spearhead at the dairy cooperative, which had come to symbolize economic decrepitude.
Raichman transformed Tnuva from an organization whose main goal was to absorb produce from its farmer-shareholders, into a an organization oriented toward the market, the consumers and marketing. He led the veteran cooperative, which was founded 75 years ago, to worship the new-millennium god of the markets - brand name.
The make of a manager
Slowly but surely, Raichman branded most of the cooperative's operations. Later, having gained confidence, he broke Tnuva's wink-wink, unwritten, non-compete arrangement with rival dairy Strauss, and went to war.
As far as marketing is concerned, Raichman won most of his battles, most notably the campaign for Yoplait yogurt. Tnuva hit Strauss where it hurt most. It caught the Nahariya-based dairy totally unprepared; and for the moment, Tnuva seems to be on top.
But awe of Raichman as Manager, as Conqueror of Market Share and as Drummer of the Brand-Name Beat should be liberally tempered with acknowledgment of his tremendous edge over his rivals.
To date, Raichman has been judged solely by Tnuva's market share, scope of operations and achievements regarding branding. He has never been judged by the most important criteria of all, by which most managers are made or broken - profits. Tnuva is a cooperative belonging to 620 kibbutzim and moshavim (agricultural communities). It did not habitually pay dividends, never published financial statements, and none of its members ever expected it to generate handsome earnings.
If Raichman had had to report period earnings or pay significant dividends, his wiggle room would have been severely limited and the task of managing Tnuva would have been commensurately more difficult.
He knows it, too. He knows that cooperatives are largely a relic of bygone times, and he's been watching the ugly battle between the members and managers of the Blue Square retail cooperative with horror.
Raichman decided that changing Tnuva's corporate structure should be handled rather differently.
Four years ago, he initiated the process of turning Tnuva from a cooperative into a regular company, limited by shares, that would be issued on the stock exchange or would bring in a strategic investor. The first stage of the process was completed two years back, when Tnuva completed the politically and legally complex stage of distributing the ownership of the cooperative among all its members, ahead of an equity allocation.
If Raichman keeps his explicit, publicly-stated promises, then by the time Tnuva's assembly convenes in November 2003, the cooperative should have turned into a regular company, limited by shares, that publishes periodic financial statements and is ready to hit the public market, to bring in a strategic partner, or both.
Ostensibly, Tnuva has another year of grace to continue operating in blithe obliviousness of its bottom line. But Raichman knows that time is pressing, and that market conditions will not suffer delay. Dan Propper and Ofra Strauss are waiting with unsheathed claws for Tnuva to turn into a regular company, so they can pounce and beat it to a pulp.
The news that Tnuva plans to cut hundreds of jobs and slash operating costs by 30 percent may not surprise people who've kept track of Raichman. Yet from the standpoint of history, the announcement is an even bigger benchmark than the 900 layoffs at Bank Hapoalim.
Israel rustled and rumbled when its biggest bank decided to fire 10 percent of its workforce. But Hapoalim is privately owned. Five years back, the state sold its controlling interest to a bunch of private investors, some of whom borrowed huge amounts of money. As of now, they have lost money on their investment, and they are stressed by their leverage and by the Bank of Israel's voiced fears about the stability of the banking system. The bank's need to streamline its operations was clear to all.
Tnuva, on the other hand, is a cooperative that still belongs to the kibbutz and moshav movements. Despite its sliding profits in the last year, it is still a formidable cash cow in no existential danger whatsoever.
The cooperative's 4,000 employees, who make the highest salaries in the entire food sector, are protected by a powerful union. If a cooperative such as Tnuva is considering a massive efficiency drive, including significant dismissals, then perhaps real change is coming to the culture of Israel's marketplace.
If Raichman wants to turn Tnuva into a regular corporation, to bring in a strategic investor and also to remain the company's chief in the new era, he has no choice but to substantially streamline the company's operations - before its privatization, not after.
Raichman has proved his mettle in the consumer market. Now he faces a far tougher managerial test, where pithy quotes from Al Ries will not help him one bit.
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