NERVES OF STEEL: Dmitry Lippa, CEO of Metinvest-SMC, talks about how not to die for the metal. At the market
Dmitry Lippa’s company can be called the most dynamic part of the vertically integrated holding Metinvest. On his desk, Lippa has market analytics and lists of metal-roll customers. His background includes the EMBA program of IMD, the best Swiss business school. All this together helps the company not only to sell its own metal-roll but also to bring the products of fellow companies to foreign markets. Leadership Journey asked Dmitry about how it comes and why a manager needs to expand his understanding of the world.
Leadership Journey (LJ): Dmitry, product sales, especially commodities, as a rule, means working in a very red ocean. This requires very high mobility at the market. Please, tell us how the company is structured and how your work is organized in the world and in Ukraine.
Large clients are interested not only in what is happening in their region, but also in how the industry is developing across the country.
Dmitry Lippa (D.L.): We sell metal-rolls of the Metinvest group in Ukraine, the CIS countries, including Moldova and the countries of the Transcaucasus, as well as to Central Asia. I am responsible for the Ukrainian market. Management and sales are organized by the industries. There are four market segments with four different managers responsible for each. The first one is the industrial segment, which includes enterprises of the mining and metallurgical complex and heavy engineering. The second segment is metalworking, that is, producers of welded pipes and sheet metal. The third segment is the construction. And the fourth includes small, medium business and retail. Such a system is more efficient than a regional branches division. Large clients are interested not only in what is happening in their region, but also in how the industry is developing across the country.
LJ: How do you prepare for deals? Or is the competition so low that you are sure the product will be sold?
D.L.: In the market of mechanical engineering and metal structures, we hold strong positions. Alternative suppliers are located abroad; therefore, most of the orders in the Ukrainian market are ours. No matter how you share this cake, you need to provide conditions that will satisfy the majority of customers.
We have many competitors in the construction industry, so a special trading company is involved in sales. Here you need the skills of the seller of a Canadian firm: to build relationships with customers, to negotiate and bargain.
We have special conditions for Ukrainian enterprises that want to enter the international market. For example, a metalworking factory wants to trade with the EU. We say, “Well, we are with you: you take the metal from us at the current price, ship, and we give you a substantial discount.” We want our clients to be successful because our success depends on it.
LJ: How do you manage to convince Ukrainian producers to enter new markets?
We want our customers to be successful because our success depends on it
D.L.: B2b means working with a large number of people in the client’s company. You need to understand their interests, not only business interests but also those related to their tasks within the organization. For example, the first task of a financial director is cost, the second is a reduction in working capital, and the third is to raise borrowed funds. In the b2b realm, the decision is made not by a single person. Therefore, you cannot just influence a person emotionally, even if you have access to the owner.
LJ: Please, share the principles you follow in sales. Which negotiation methods do you use?
D.L.: The seller’s main task is not to sell, but to find a mutually beneficial solution. We are determined to help the client make his business a success. If you are interested in a short-term profit, you may sell one or two times. However, a client will not be loyal to you, and you will not have a deep understanding of his business. You should ask a client, “What do you need?” Not just, sell.
In the b2b realm, the decision is made not by a single person. Therefore, you cannot just influence a person emotionally, even if you have access to the owner
About negotiations. There is a method to prepare and hold negotiations, starting with the first call and ending up with the moment you have completed the delivery, received payment and made a call to the customer to be sure he liked everything. However, customers make decisions rationally, based on economic prerequisites. Previously, there was a so-called asymmetry of information, when you sold to a person who knew less than you did. Now, if you do not know the prices, you can just google. Therefore, the client’s CFO is well aware, among other things, of what kind of supplier you are.
YOU SHOULD ASK A CLIENT, “WHAT DO YOU NEED?” NOT JUST, SELL.
About analytics. We analyze the price proposals of competitors, focusing on quotes that are used by the entire market. Our commodity product is just as volatile as, for example, oil. Therefore, we are very dependent on supply/demand ratio: demand goes up — the price soars up; supply surplus — prices instantly fall down. We follow these trends and analyze where we stand and why.
LJ: How did the company survive the war and crisis?
D.L.: In 2014–2015 there were difficult times. Not only because of the situation in Donbass, but also because of the overproduction crisis in the industry. China was reducing prices for metal significantly, and they were going down until January 2016. Then a miracle happened: the Chinese (communist) party had looked at the annual reports, seen the losses and forced the manufacturers to raise prices.
In the Ukrainian market at this time, sales have sharply shrunk. Because of the crisis, people did not invest but hid cash in suitcases. There were no new projects; businesses were following well-known paths. We had to revise business processes and structures. In particular, at a certain point, it was decided to merge two legal entities, one of which was responsible for wholesale supplies, and the other for warehouse sales.
LJ: What are your company’ values?
D.L.: We follow the general course of Metinvest: customer focus, professionalism, leadership, teamwork, health, and ecology. We spend a lot of time on labor and industrial safety. We have two categories of employees: warehouse personnel and administrative. For those working in a warehouse, labor safety is especially important. After the experience of working in our conditions, people do not adapt easily to other companies: they are used to a good workspace.
LJ: How do you choose and evaluate the personnel?
It is easier to train a young employee who suits you by personal qualities than to change the values of an already mature specialist
D.L.: I am an adherent of the Procter & Gamble company, which I had joined after my graduation. Now I take undergraduates and graduates as interns. One of our sales directors was once an intern at the company. At some point, we stopped hiring people from the industry. At all. It is easier to train a young employee who suits you by personal qualities than to change the values of a mature specialist. For example, our company does not pay bribes. You take a person from another company, and he says, “How will I manage to sell if I don’t bring anything to the purchaser?”
LJ: When you moved from P & G to this segment of the economy, what challenges did you face?
D.L.: At first, I went to management consulting, because at P & G you can make a career if you work in marketing or sales, and I was working in finance. After consulting company, in the quiet year of 2007, I had joined Metinvest. I became a strategic planning manager, later – head of a department. In 2008–2009, I was working in the operational area; we implemented efficiency improvement programs at our metallurgical plants. In 2013, even before the war, I moved to Kyiv to take my current position.
I AM AN ADHERENT OF THE PROCTER & GAMBLE
LJ: How do you in the company measure employee performance?
D.L.: Everyone has key performance indicators – for a month, a quarter and a year. Sellers have the simplest system: they receive a monthly bonus depending on the volume of sales. For sales managers, we count how much money a person brought to the company. We constantly evaluate everything. We regularly measure employee engagement using a special questionnaire.
LJ: What do you use to increase efficiency?
D.L.: A system of submission of propositions. People at the grassroots level often see problems, and, if you listen to them, will offer hundreds of ideas to improve efficiency. It is very important to hear and implement them. Of course, most of these propositions will have no effect, but one in a hundred can bring millions. We have a competition called “Lean-marathon”, in the course of which we select four-five best employees of the company by a number of criteria. These employees then visit Italy or England at the expense of the company to exchange experience. Such a trip is a nice bonus from the company.
People at the grassroots level often see problems, and, if you listen to them, will offer hundreds of ideas to improve efficiency
LJ: What are doing for team building?
D.L.: We have “visiting” quarterly meetings. For example, we visit one of the branches or go to our customers. The last time it was in Odessa and we visited the TIS group port. We usually ask our clients to show us around and tell us how they use the metal. In Odessa, we saw a crane that loads containers, container ships. Employees open their eyes wide because people from financial and legal services, for example, have never seen this.
LJ: Do you have generation Y people who are indifferent to office features and work holism?
D.L.: We have a very young team, and we try to organize events so that everyone would be interested, for example, to play sports. On Fridays, we wear jeans; during the rest of the week, smart casual is our dress code. A suit and a tie are not obligatory, but no torn jeans. I would say, “generation Y” topic is bloated. As a rule, these young people are either lazy or geniuses. These two types never stay long with us. The young people who work for us are quite normal: they are good in their studies, pragmatic in their attitude to the job, and set achievable, but ambitious goals.
LJ: You studied at the Swiss IMD Business School. How did this affect you?
D.L.: Business education expands the understanding of the world. It gave me an international perspective, which I really missed, because I was focused on the domestic market.
BUSINESS EDUCATION EXPANDS THE UNDERSTANDING OF THE WORLD
IMD emphasizes personal development. You come to understand yourself not only as a professional but also as a person. From a person who fulfills the tasks, you turn into a person to set the tasks. For me, the most valuable experience was working at my personal self. You write an essay and you go deeper and deeper in your thoughts until you finally come to interesting discoveries of things hidden deep inside you.