McKinsey is one of the most important consulting companies in the world… For years it has provided consulting services to a large number of companies in Turkey and contributed to the changes they have implemented. Giorgio Bresciani, the company’s general manager for Turkey, says that recently it has appeared that companies desire major change. “In order to expand their businesses they need both to stay competitive and to attract investors,” he says, drawing attention to the roots of this change. He adds: “Turkish companies which seek to become leaders generally need to overcome four fundamental difficulties.”
McKinsey General Manager for Turkey Giorgio Bresciani was appointed to his post approximately three years ago. During this period he has studied Turkish companies closely and played a role in the application of corporate governance to companies in various sectors and the preparation of family constitutions. Bresciani draws attention to the improvements in corporate governance in Turkish companies in recent years. He states that this improvement has taken place on a corporate level, on the capital markets and on a national level. “In order to expand their businesses Turkish companies must both stay competitive and attract investors. For this reason, they have also felt the need for change,” he says.
In the last three years McKinsey Turkey has been providing support to the banking, energy, telecommunications and rapid consumer goods sectors in particular; as well as to some of the major privatisations realised by the Turkish government. Bresciani stresses that family-owned have made considerable efforts to restructure and professionalize their organisational and management infrastructures including in corporate governance. He notes that they have become used to working with these companies and helping them overcome difficulties arising as the result of the improvements they have made in their organisational structures and in expanding their businesses.
Capital spoke with McKinsey Turkey General Manager Giorgio Bresciani about the measures recently taken by Turkish companies and the risks that lie ahead on the way to globalisation.
WHAT HAVE COMPANIES IMPROVED? After the last financial crisis improvements in corporate governance in Turkey have been happening on three dimensions:
At corporate level, there have been an increasing transparency and disclosure of companies’ financial performance and managerial facts, more sensitivity to the minority shareholders, with a larger diffusion of financial information and facts related to company in order to protect minorities’ interests and a progression towards the separation of the roles of the shareholders and the management, with more independent board structures.
At the capital market level, the recommendation of the international accounting standards and the redefinition of the limits of minority investment have reinforced transparency and accountability. The effort made by the authorities and the regulators to “enforcing” the regulation in the recent very active M&A market is valuable and helpful to guarantee an equal treatment of all the shareholders.
At the country level, the reforms conducted and to be conducted in many sectors, including the one in banking, have been playing an important role to create a more investor friendly environment and a higher confidence to invest in the country.
THE FACTORS THAT FORCED CHANGE Turkish companies needed the change to remain competitive on one side and attractive to investors on the other in order to finance their business expansion. Among many, two forcing devices have stimulated the change: first, the process for the EU negotiations, which has called a general modernization of the corporate environment to close the gap with the international standards; second, the progressive presence of foreign direct investors which has put under pressure the corporate governance performance of the Turkish corporations and has progressively required the introduction of higher standards.
COMPANIES’ LIST OF PRIORITIES After the crisis, based on our point of observation, in general Turkish companies have been re-launching their performance working on 4 major dimensions:
• Restoring industrial performance, through operational improvements and growth, domestically and internationally.
• Improving organizational performance thanks to focused reorganizations
• Increasing financial discipline.
• Improving their corporate governance by progressively institutionalize the corporation.
Of course, challenges and courses of actions have been specific sector by sector, but in general results have been positive as witnessed by the today’s economic performance and the competitive position of a number of Turkish corporations.
THE RISKS FACING TURKISH COMPANIES
* What kind of risks might Turkish companies face from growth and globalization? What main things are missing? So far Turkish companies have been benefiting from some country competitive advantages such as: a considerable labour cost advantage, a growing market with a limited presence of international players, an extended access to international markets thanks to free trades agreement signed in the past. The progression of the EU negotiations combined with the increase in the foreign players operating in the domestic markets and the progressive globalization of some sectors are possibly going to erode the “natural country advantage” enjoyed by our companies, as observed in other market, and expose than to an aggressive international competition. This urge for a call for competitiveness of the Turkish sectors to maintain their leadership positions among the emerging markets. Maintaining competitiveness requires an increase of the factors productivity, both labour and capital, through increasing investments in processes and product innovation and more and more customer centric competitive strategies. As said before, companies will be more and more required to perform in line with the highest international standards: a challenge and a tremendous opportunity to lead the modernization of the country.