Michael Raphael is the chief procurement officer at JLL, a property management firm that is multinational, but he's based out of Asia. With 30 years of sourcing experience, Michael has worked with a number of global multinationals. He has previously led the procurement function for the largest listed property trust in the world, as well as running indirect sourcing for Australia's premier department store. Prior to JLL, he was managing director of the Hong Kong division of a U.S. promotional items company that focused its work within the pharmaceutical industry. Having been based in Asia for 11 years, he has a deep knowledge of the manufacturing base in China and, likewise, a deep knowledge of negotiation practices in Asia. And that's what we focus our discussion on. In the west we're sometimes guilty of being quite egocentric in thinking that our way of negotiating is the way people all over the world negotiate, and that simply is not true. So how should you negotiate in Asia?
Mark: Hello Michael, how are you?
Michael: Hey Mark, I'm really well. How are you?
Mark:Yeah, very good, thank you. And for the listeners, this is round two of our discussions with Michael. We had some audio problems the first time and this time we've got a good connection. So I'm really excited to have this conversation.
Michael: I've done a brief introduction of you so most of the listeners know who you are and sort of what you're doing. But maybe you could give us a background on basic personal history and sort of how you ended up in the property management world and being a chief procurement officer in general.
Michael: Sure, no problem at all. So originally I'm from Australia. And when I left school, didn't really know what I wanted to do, was it university just doing a bachelor of arts, and was working part-time through University at a department store. And after a year or so they had an executive training course and said, "Look, we'd really like you to join." I didn't really know what I wanted so I thought, "Yeah, I'll try it, I'll see what it is." There was training all around the country and it sounded quite interesting.
And I did some time in the buying office and I just loved it, like really, really, really enjoyed it, and realized it was something that I wanted to spend more with. So ended up staying with them, joining the buying office. Moved to a different department store after a couple of years and so I started doing buying for them. So I was actually doing assistant buyer for footwear. And it was one of the only groups at that time where we did a lot of work internationally as well. And that was something that really interested me. And in those days, because I'm quite old, I turn 50 this year, we used to work off telex and those kind of things. So translating people's abbreviations from telex when they were writing from Italy and Spain and things like that was an interesting experience. But that's how I got into the whole world.
And then after I think nearly three or four years of doing that I actually moved into indirect procurement for the same company. And so from there I went to work with another company which would be familiar to some of your international listeners, a company called Westfield. And they're an Australian-owned company but they own shopping malls in the United Kingdom, North America, and Australia. So I did all of the indirect procurement for them and their malls in Australia and New Zealand.
And then I think the challenge for many people in Australia is that Australia is a big geographic country but small from a business opportunity perspective. So I said I wanted to grow my experience and decided to look to Asia, and Hong Kong and Singapore are relatively easy, there's quite a few Australians in those countries, so the locals in those countries understand our qualifications. Most of the time they can understand our accent, which makes it easier to communicate. And so I was talking to a few recruiters, and at that time, especially in Singapore, there was very, very few. This is about 11, 12 years ago. Very few indirect procurement people in the region.
So, at one point, I think I was up for about 11 different jobs because there was just not a lot of candidates, and I ended up choosing Novartis, as well as them choosing me, obviously, and it was a global role to set up a new business for them. And I ended up working in 72 countries around the world for them, which was a terrific experience. Moved after that to one of the suppliers for the job that I was doing in Hong Kong. And then after, I think three and a half years of being the managing director for their business, came back to Singapore to work for Jones Lang LaSalle, JLL.
And so I run all of the procurement for all of our business lines here in Asia. But predominantly what we do is actually do procurement for our clients. So it's facilities management or facilities outsourcing. And so, on behalf of our clients, I spend around seven billion, billion with a b, U.S. dollars every year buying contracts and goods for our clients. And they're major clients, a lot of banks, we look after IBM, we look after Procter & Gamble, Google, Facebook, the major players around the world. So that's sort of the essence of what I do and where I came from.
Mark: Wow, that's super cool. And I think something that I found super interesting in the last discussion that we had was that when we spoke very briefly about the risk that's involved and seeing as though you've taken on the procurement role for many of these organizations, how do you manage that risk on an ongoing basis?
Michael: It's definitely a challenge, and it's definitely a challenge in the developing world. In the more developed world, so we'll say western Europe, North America, and Australia to a certain extent, there are a number of tools and companies that you can either buy or subscribe to that will help you manage the risk. So identifying who the suppliers are, look at their financial risks, all of those kinds of things. The majority of those tools are run by two distinct areas of information. The first is publicly available information, so things that governments record, or statutory reporting requirements, so financial records, those kind of things. And then the second part is when they do audits of those suppliers. In the developing world there's not a lot of mandatory reported information and you end up dealing, in this part of the world, with far more privately owned companies. And in the end, they are privately owned, they can do whatever they want. If they want to give you the information, they can, if not, they don't.
So it's really about developing your relationships with those suppliers, identifying risk based upon country and service category, and then spending your time with those suppliers and in those countries. And you do have to be on the ground. I employ almost 85 to 90, maybe 95% of my people that employ, and I've got about 300 procurement people here in Asia, are locals. There are not a lot of expats. We do try and give people the opportunity to move from one country to another, but it's a tough call to take somebody from the U.K., for example, and then bring them into Asia where they're dealing, in our case, with 14 countries and to get good value out of them in the beginning.
So it's about having that local depth of knowledge, it's about managing the risk based upon the category and the country you're in. Because some countries, whilst perhaps to the rest of the world Asia is all the same, you've got phenomenally different countries at very, very different levels of development. So that's really how we look at managing our risk.
Mark: Very cool. And so when we speak about the unique regional knowledge and expertise that's required to negotiate and operate as a procurement professional within Asia, why is it that people from the western world may have a tougher time negotiating in those areas than maybe a local does? I mean aside from sort of the obvious. But what are some of the unique differences between negotiating in the west versus negotiating in the east?
Michael: So I think the first thing is language is not so much of an issue. The majority of business is done in English in pretty much all of the countries. So if you have a good, clear command of the English language then you've got a really good step up. And when I talk about clear command, you have to be conscious of the fact that people in other countries don't have the same frames of references, and we certainly discussed this the last time. In North America, in many countries, people use a lot of, for example, sports references. They talk about getting things across the line and these kinds of things. A lot of these kinds of expressions are simply not understood by a lot of people in these countries. So number one, talk clearly, talk simply. Try not to bring too much of your own slang or jargon into the discussion.
But I think probably one of the major difficulties is that people expect others in other countries to operate in the same way they do. So, for example, they want to go into a discussion, they want to get straight into it and they want to talk about price straight up. That's not the way it happens in most countries here in Asia. People want to get to know you. They want to know who you are, where you're from, are you married, if you've got kids. Things that people might consider way too personal for a business discussion. But that's what it's like here and you have to adapt. And so you talk to them, you understand what they're doing, you talk about their business, those kind of things. And so it ends up being a slightly longer discussion but you build a relationship, and that is the number one key to having successful business dealings in this part of the world, is developing your relationships.
And so if you want to be a procurement person and sit in New York or you want to sit in London or Paris or something like that and run the world, it's not going to be as successful. You have to get out, you have to go and meet people. A lot of it is done face to face. I mean you can't do all of it, but people want to get to know who you are and they want to see that you're committed to working with them as well as a person just walking in, asking for a price, and walking out. And you can do that, but you definitely won't get the best out of people and you're definitely not going to help that relationship and grow it.
Mark: Right. And do you think that's a result of... And last time we spoke, we spoke about sort of thousands of years of ways of doing business. And we discussed that in the west we're quite egocentric about... Obviously we have a certain way of doing business and we believe, therefore, that by extension everyone else probably has the same way of doing business. And essentially that's just not true because most of the world doesn't operate the way that we maybe operate. And I find that because of our egocentricity we go into those types of situations thinking that everyone else needs to operate the way that we have. But we forget, often times, that people have been operating a certain way for hundreds, maybe thousands of years in terms of business and business development and business relationships, and often time that's last on people from the west.
Michael: Yes. So I think there's very definitely an element of that and I think that the comments I made earlier about building a relationships, getting to know me, people talking about personal things, that is something quite different. In the west you would only end up having that personal relationship with somebody after many years of working with. So, for example, I remember in Australia I had one account manager for almost 10 years. Every organization that I went to it ended up that she happens to be looking after me, and we built up that relationship over a long period of time. And towards the end of that relationship I remember her daughter was getting married, she wanted to to invite me to the wedding, and for me that was like "appreciate the invitation", but for me that's sort of crossing the line from personal to business and I'm not comfortable in doing that.
I think in this part of the world you end up doing a bit more of a personal upfront, allowing people to get to know you, who you are. A lot happens around food. Taking people out to lunch, eating and sharing your meal with people. I think also, for many people in this region, they love to take especially foreigners out to experience what their culture, their country, their cuisine is like. And so I think you need to be a little bit adventurous. If you're that person that is a bit fearful of food that looks like it really was rather than, sort of a chicken breast as opposed to a chicken with its head on, you might have to sort of get over that. Because people want to share and experience, and a lot of that is done over food.
So yeah, it's about jumping out of your comfort zone and learning a little bit about others. And when you do that people definitely feel that they've been respected and listened to, and you'll end up getting I think a lot more out of it rather than simply talking about price.
And that's not to say that you can't bring a bit of that perhaps more western business sense to it because there are a lot of people that want to develop their own skills. But there is still those basics of getting to know people and building a relationship that is probably the most important thing.
Mark: Cool, that's very cool. So let's switch gears for a little bit. I'd like to dive a little bit deeper into your more personal background about and maybe some of the negotiation failures that you've had, one or two, specifically as it relates to maybe dealing in Asia or dealing abroad in general. Could you share a story around a negotiation failure or maybe a negotiation that hasn't gone as well as you would have liked? What did you learn from that experience and what would you do differently today, knowing what you've been through?
Michael: I'll tell you a story. I joined JLL six years ago. And when I joined we had some challenges with one of our clients in a particular country which is perhaps a little bit less developed. And the contract that we were negotiating was for security guards. And security guards are much more common here, especially on some of the big campuses and things, and they have to check people's passes and things. There's a whole range of differences, but it is far more common.
We have had not a brilliant relationship with this supplier for some time and the contract was coming up for renewal. And the procurement person, for whatever reason, had either missed it or just not got around to it, and the contract was literally set to expire in two or three days. And the supplier was using this as leverage to say, "Well, I'm not going to sign it unless I get what I want", which was significant price increases and significant reduction in some of the elements of the scope of work. And so, for example, scope of work required that all security guards speak English.
Now what you find in Asia, and especially in areas where people are working with multinationals, they'll speak simple English - hello, good morning, where can I go, those kinds of things. But they wanted all security guards to have full English. And that's not a skill set for security guards. It's different. Security guarding in many countries is a seasonal job. So they'll spend some part of the years harvesting crops and things, and when it's not bad then they'll go off into other jobs. So these are not highly skilled workers. So we were in a very, very difficult position, and it was a major, major global multinational. And we were in the position that in sort of two days time there were going to be no security guards onsite whatsoever.
And so I sat down with the supplier, and there was 14 of them and one of me. And interestingly I know full well that in these meetings everybody brings everybody to the meeting and it's expected that you bring all of your team as well. So you're all on one side, they're all on the other side. So quite purposely I went on my own because that challenged their perception of, "Oh, well, we've got 14 people in the room. What are we going to do? Who are we going to talk to?" So that was the first thing, is just challenge the status quo a little bit, especially when things are difficult.
We then spent literally six hours talking through the issues. And pretty much every issue was they felt that they were not respected. We'd not listen to them, we'd not address the issues. They didn't necessarily want to have everything solved in their favor, but they wanted to talk about it. And so we spent six hours talking about all of the issues and going through the problems.
In the end we were able to sign the contract. And we have to give a little, but absolutely nothing like what they've been asking for. And again, it really just got down to that element of mutual respect, which was that if you're going to use your size and your presence... JLL, as I said, $7 billion is a huge amount of money. I mean we're probably the biggest organization that I think 95, 98% of our suppliers will ever work with. We have a certain amount of power and strength, we can throw our weight around. And if you're going to do that and not listen to your suppliers then you're going to put yourself in a very difficult position.
I guess part of the big challenges in the developing world is that there's not 15 suppliers to turn to that work at the level that you want. There's maybe one or two that can deal with you at the corporate level that you want. You can help other suppliers to get up to that level, but you don't have the choice that you do of having 5, 10, 15 suppliers in every market.
So I think that was probably my greatest surprise. Number one, that that procurement person had let things go so badly. And then, also to remember, that just because you're big and have a lot of money and you're powerful, it doesn't mean you're necessarily going to win. You've got to be a little bit respectful of the situation that you're in.
Mark: Sure. Wow. Okay, and so in thinking about that and thinking about how important expiration terms are and agreements and things like that, what advice would you give in terms of leverage? I mean we spoke about just because you're big doesn't mean you've got all the power in a negotiation. How would you have approached that differently today?
Michael: So I think one simple thing which I will say... The job that we do at JLL is we take on client's areas of activity. So the main areas that we look after are engineering, janitorial, catering, landscaping, transport in some cases, getting their workers through. That's the area that we work in most frequently. And one of the first things that we do is the procurement team, is we sit down with their procurement team and we say, "Okay, give us all of your contracts." And in most situations we act as principal. So what that means is we are going to sign the contract with the vendor, we take on all of the risk, but we need to understand what the scope of work was previously to make sure there's no lapse in service.
I will tell you that the single greatest problem is that almost every organization, big or small, does not really have a good handle on what contracts are in place. So what I'd say to you, first of all, is build a register and keep it up to date because you want to know how many contracts you've got and you want to know when they're expiring. And it sounds simple and it sounds like procurement 101, but I will guarantee you that in six years of doing this, working with some of the biggest organizations in the world and some medium-sized ones as well, there is nobody that has a 100% handle on them. And some of them, it's really averagely looked after.
So I'd say that's your priority first of all, get your information correct. And that way you can manage your time and you can balance your time and say, "Okay, in the next 12 months I've got 10, 12, 14 contracts expiring," however many it might be, "that's where I'm going to prioritize my work." And ending up talking to those suppliers to make sure you understand have they been paid on time, are they getting what they need, have you got what you need, where are the service caps? Doing all of those kind of things. But without having that basic information together it makes it really difficult because things will fall through the cracks and they do, very regularly.
Mark: Super interesting. I've never thought of the whole concept of the challenge that it must be to take on someone else's procurement on an ongoing basis and trying to figure out exactly what's going on and exactly understanding what the expiration terms are or whether or not there's a good or a bad relationship in place and how that's going to affect your negotiations on an ongoing basis. I can only imagine how challenging it is within the first 60, 90 days to figure all that stuff out. So I almost feel like tipping my hat to you, saying, "Good for you for taking this on." I don't know if I would have the courage.
Michael: Yeah, so the other interesting thing is, and this sort of adds to the complexity, is you remember that it's probably the procurement team that was running the RFP that hired you. So the procurement put together the documentation. You did, you've won, you've been through, and these are very big contracts. I would say that they take anywhere from 6 to 12 months to do from beginning to end. They take a long time because they're big, they're multi-sites, all of those kinds of things. Procurements run it, and then you say, "Okay, well that's all done." You did a good job with that. And now we're going to go in and look at your specific information, and you can't find any of your contracts or in this particular country the procurement person left and everything got deleted, and those kind of things. It's uncomfortable and embarrassing for them. We try not to make it embarrassing because we say, "It happens to everybody."
The only times that we really have the problems is when they don't want to admit that there's a mistake and so they put up all of these walls and these pretends as to why we can't have access to information. And we know what the situation is because we do this for a living.
But it can be a great challenge and we try and do it as a partner, because in the end that's what we have been hired to do, is to be a partner, to help them and deliver better services and at a cheaper price.
But you do end up uncovering things that can be a bit uncomfortable sometimes. We had one financial institution in Asia, we've been with them for a long time but we have been working with them for a long time as an agent. And we were moving the relationship to principal, which meant we took on all of their contracts. And we did a due diligence on all of their supplies, because in the past when we were agent we just managed them, we didn't have any responsibility for them.
So we did our due diligence, and one of the suppliers came up with connections to North Korea. And because this was a banking organization, they're not able to have connections with North Korea because their operation is in the United States so all of these rules and laws come into place. And we went back to them and said, "Look, this supplier that you've had a very long time runs a hamburger shop in North Korea." And as I think most people know, there's probably not too many hamburger shops in North Korea. So there's a reason why they're doing business there and we won't be able to take them on. And I think that was very uncomfortable for them that a supplier they've had for a long time had those connections and they've not picked up on it. Because if they've been audited it would have been a very uncomfortable situation for them.
So again, we try and do things in this nicest way possible, but again, that's what people are hiring us for, our expertise, to hopefully do things a little bit better than they do.
Mark: That's a bit uncomfortable for them.
Michael: It was very uncomfortable for all of us, I will tell you that.
Mark: That's very interesting. Okay, and so I mean you've got such a wonderful career background with so much experience, especially sort of in the Asia Pacific area. If you are going to give advice to another westerner coming to do business in Asia, what are the top three things that you would tell them to think about or to learn about when coming to do business in Asia?
Michael: Okay, very good question.
The first thing that I would say is hire tools around you. In other words, get to know some people. Understand what their style is, try and sit with them and learn and those kind of things. One of the first things when I came to Singapore for the first time, and this is number one, take people out for a meal. That is your best trick and secret to getting information out of people, to making them feel comfortable, all those kind of things.
And in my first role I traveled heavily. And so every time I'd come back I'd always take the team out for a big meal, a nice good quality expensive meal, because it allowed us all to connect in a more casual way.
And so one of the things I first said when I came was I said, "Look, if ever I do something or say something that is rude in this part of the world or those kind of things, please tell me. Don't be polite and just sit there," I said, "because I want to learn." And so one of the ladies said to me, "Well, if you're really asking," she said, "you point your finger a lot." And I was like, "Oh, okay." And she said, "Here it's really rude. We point using our thumb." And it was just one of those things that I happened to pointing, waggle my finger, whatever the case may be, and it's very rude. Very, very, very rude. And so if they point to something here they point using their thumb. Part of the Chinese culture, that's what people do. So interestingly, whenever I do it now, whenever I point with a thumb, you can see people's eyes widen, it's like, "Oh, he knows." So little things like that.
Learning how to give your business card to somebody is probably the most important thing to building an element of respect. When you have your business card and you give it to somebody, you give it to somebody with two hands. So you hold onto it, both hands, and you give it to them so that it's facing them so that they can read it. When somebody throws a business card down on a table, that shows a complete lack of respect because your business card is meant to represent you. So you hand it with two hands, you read it, and you then look at them and say, "It's a pleasure to meet you", those kind of things, because their business card is representing them.
And it's funny, I think I've been in Asia for too long because like two years ago I was in New York for a meeting and this guy just threw his business cards around the table and I though, "Oh, My God, how rude is that!" And then I sat back and though, "I've definitely been in Asia for a bit too long when I'm being offended by those kind of things."
But it's those kinds of things that make so much difference. People feel that you've understood them, that you've taken time to be respectful in their community.
And then my comment earlier on about speaking clear English. Speak slowly. One of the criticisms of Australians... And it was very funny when I first came to Singapore, the head of the country for my employer was Swiss and he spoke Swiss German. And we're talking and he said, "I must complement you on your English, it's excellent." Australians speak really quickly, we join all of our words together, and we use a lot of slang. And people just don't understand that. So again, what I would say is, no matter where you're from, slow down, try and speak clearly, and again, try not to use too much slang or jargon or things from your country because people won't necessarily understand it in the beginning.
And I think if you can do that, if you can do those few things of trying to get to know your staff, understand what the drivers are for them, being polite, you're 50% of the way there. And then all you're doing is you're using your own techniques and your own negotiation style that you've brought with you.
Probably the one thing that doesn't work here is shouting and getting angry. You're seen to sort of have lost control. So if you can sort of keep that under control you're doing well.
Mark: That's super interesting and those are great tips. One thing I think that we struggle with in the west is the understanding of the whole concept of saving face in Asia. Maybe you could talk about that a little bit and what does that mean and what should we pay attention to when thinking about our dealings in Asia.
Michael: So I think, talking about saving face, about being polite, those kind of things, calling people out publicly, especially in front of their subordinates is a very, very rude and difficult thing to do. And I'm going to temper all of this by saying there is sometimes a time and a place where it has to happen, when things a really that bad that you do have to do that. But, for example, when there has been a service delivery problem, if you bring the boss in and they've got three or four subordinates with them and you sit there and say, "You're useless! You didn't do your job! You've all failed!", all those kind of things, you will highly, highly embarrass people. And in many situations, and I've seen it happen to people in the past, that supplier will walk out and never come back again. They don't care about the contract, they've just been humiliated and they won't do it.
So one of the slightly different ways of doing things is to ask the question. So in other words, instead of saying, "You failed!", you say, "There seems to have been a problem with service delivery. This didn't happen, can you tell me why?" And if you can do that for the bulk of the situations that you're in then you're probably going to get a much better result. Screaming, calling people out, embarrassing people, those kind of things, does not work terribly well at all and you'll end up failing in almost all situations.
But to be honest with you, there's not a great mystery around it, I think if you go back to sort of the old ethos of the way most people have brought up which is to treat other people with respect, you're pretty much there. I think that's probably the most important element of it.
Mark: So basically just be a decent human being and be respectful of other people's cultures.
Michael: Exactly, that's exactly right. And there are certain things that are very specific in some cultures that you will learn. And I remember, and this one sort of drove me a little bit crazy when I started working in Japan quite heavily. I was taken to a meeting and one of the things I did not know at that time was because I was the buyer, I'm the one with the checkbook, so I was the most important person at that meeting, that everybody were needed to wait for me to sit down at the table and then everybody would organize themselves around me. So my subordinates would be to my left and right, and on the opposite side of the table would be the most senior person. And they fan out like that, that's the way things are done. Nobody told me that when I first got there. And so I walk in and the head of the company is an 85-year-old man and I'm trying to be very respectful and ask him to sit down and he's trying to ask me to sit down because it was all based upon where I sat because in that situation I was the most important person.
So there's those kind of things that I think you can learn. And I said to my team afterwards, "Why didn't you just tell me?" And one person was, "Oh, we thought that you knew and we didn't want to be rude" and all those kind of things.
So ask your colleagues. There's obviously a few guides and things that you can read to ethic, those kind of things. And look, you can't know it all. And to say that to me was a frustrating and annoying experience because I felt it made me look silly and foolish when I was trying to be polite to somebody else.
So yeah, just take a bit of time to get to understand the markets that you're working in, find out if there are things that you shouldn't do, and that will help you as well.
Mark: Very, very good advice. Okay, well Michael, thank you so much for having the patience to do round two with me, I really, really appreciate it. I think the listeners are going to get a great deal out of this. There are many of us that do business offshore and certainly it's becoming more and more prevalent as we become more and more globalized. So I think knowing this information is only going to help people. If people want to find out more about what you're doing and what you're up to, what's the best way for them to potentially see what you're up to?
Michael: Probably the easiest way is just on LinkedIn. So I'm there, you can search for me under JLL, my name Michael Raphael, it's easy. And I'm more than happy for people to reach out, ask questions, those kinds of things. From my perspective it's about helping people to be the best that they possibly can. I mean no one wants to be in that uncomfortable, difficult situation. So yeah, please feel free to reach out, it would be great to connect.
Mark: Awesome. Well thank you so much, again, for spending the time. Welcome back from vacations and enjoy the rest of your week.
Michael: Terrific. Thank you very much, it's a pleasure talking to you.
Mark: Thanks, bye-bye.
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