In 2014, Agricom Group was reaping its harvest in the Luhansk region under artillery volleys. Petro Melnik, CEO of the holding, recalls that he and his fellow managers specifically came to the east of Ukraine to show by their example: the company would still harvest. No matter what.
The company was in need of such firmness after the move to the territories controlled by official Kyiv. Agricom Group not only replenished its land bank but also opened a technology-based production of cereal products.
But that was only the beginning. At Agricom Group, production technologies and human talents of each employee were put in the forefront. Now a computer is controlling the tractors in the fields of the company and the plant has become a favorite excursion site for those who want to see almost autonomic production.
Petro Melnik told Leadership Journey how his company went through the digitization phase of the business, and he stopped spending the nights at work and fell in love with delegation.
Leadership Journey (LJ): Last time we met a couple of years ago just before the launch of production. I have already managed to taste your products, I lost weight and I realized that everything would work out for you. Hence the question: how has the company changed during this time? I see there are fewer people in the office …
Petro Melnik (P.M.): Evolution is taking place. To control evolution is probably the only thing we can do about it. We also can influence evolution but to a lesser extent.
What do I mean? You see that the wage situation in Ukraine has improved — wages are is raising, thank God, but we witness a large labor emigration. Last year we analyzed where the company was and where we would like to be. We have realized that money in the company is made locally.
THE Money in the company is made locally
During four years, we were introducing digitalization. In the business, we have digitized everything that could be digitized. This year we decided to conduct an experiment — only those people who worked with certain software products remained. We have found out who was in the process, who was not; and fewer people stayed. Thus, we have abandoned the HR function.
To control evolution is probably the only thing we can do about this process. We also can influence evolution but to a lesser extent
LJ: This is the second time that I hear about the cut of the HR function. How will you survive now without these cute tests and funny questions for applicants?
P.M.: Yes, Alex and I (a reference to our interview with Alex Lissitsa. — Ed.) agree in this regard, and I do not even know who was the first to close the HR department.
Without the HR department, each manager became closer to his subordinates. The HR function still exists in the company, but now we are not putting HR into a matrix structure.
Delegation of HR issues to a specific person in agriculture does not work. I do not know why. Maybe because in agriculture there are no HR managers with a deep understanding of agribusiness. Although we had good people working in this department and we are in good relations with them. Nowadays, technology change is so rapid that an HR specialist has to spend a lot of time to understand what is happening.
We need employees to be capable to change with the company. I think if an agronomist was an HR specialist, he would a good HR for an agricultural company. But an HR specialist would never become an agronomist.
LJ: Yes, indeed, HR should be deep in agribusiness, and there are few such specialists on the market. But who is now looking for new employees for you? Or do you use the Dolly sheep approach?
P.M.: We certainly have a personnel office, but recruitment is on outsourcing. Everything is distributed between people who are in business processes. These people understand well how and what they are doing and what kind of employees do they need. The only thing to do now is to expand this experience.
Without HR department, each manager has become closer to his subordinates
LJ: What does digit look like in your company? How big was the digitization of vinyl?
P.М.: For example, now a tractor, which with the equipment goes across the field, transmits all the information to three systems at once. The data gets to Wialon (a software platform with a web-interface for satellite monitoring of vehicles), to a GIS card, to the production control system, and to the ERP system in 1C: Accounting.
One of the systems controls the speed, seeding parameters or parameters of other operations. The second system computes the salary and closes the work assignment. The third system creates a track across a concrete field. Each system requires the operation of only one person. In total, we now have 250 employees with the same land bank – three times fewer than before.
LJ: Such changes usually meet either open resistance or silent sabotage at the grassroots level. I remember stories of elderly agronomists crashing down the agricultural drones by hoes so that they would not reveal the stealing of fertilizers. Was there anything of the kind in your case and how did you cope with the situation?
P.M.: We faced everything you have mentioned. There were a misunderstanding, reluctance, and perhaps some easy sabotage. We were building an action plan in accordance with a case. To reach a critical mass of people who would like to change was our main task. How did we do it? We simply explained to the people that they would not have to go to the office and they could have more time for the fieldwork or even for their personal life. They could work more for the result. Eventually, 70% of employees supported us and became active participants in the changes.
When the majority joined in the changes, everyone else began to change. The employees themselves have deluged our programmers with recommendations on what exactly should be done in the system.
WHEN 70% OF EMPLOYEES SUPPORTED US, ALL THE REST HAS STARTED TO CHANGE ALSO
LJ: What was the economic efficiency of digitizing the business?
P.M.: We wrote software applications on our own, it was expensive, but not millions of hryvnias. In addition, the economic efficiency of introducing software products is very often non-linear. Of course, it is possible to calculate this efficiency. If we have got rid of the production clerks, then we understand that we have a reduction in costs. However, at the same time, instead of three production clerks, one specialist is added who serves the system. Here is the question: three production clerks receive a salary of 30,000–40,000 hryvnia, and one good programmer also receives 30,000–40,000 hryvnia. But the point is not in salary, but in speed, which is now becoming the main key to business success.
We see that the same operations that we have been doing for the last three years we are currently doing faster, better. There is a feeling the potential is building up.
If previously, four years ago, we were sowing 1000 hectares per day and considered this a heroic feat for our volumes, then yesterday we sowed 1200 hectares and we were sure we could do more with lower costs and with a different harvest.
LJ: In addition to production digital, were there any techniques implemented in the team? Agile, Scrum and the rest of the same incomprehensible to normal people notions?
P.M.: We have unveiled for ourselves all these terrible words. The dean of the Kyiv Business School, Mikhail Krikunov was our coach. Both the company and I have been partners with him for a long time. At one time, we implemented Scrum elements, and now, use a variant of it for decision-making. This is our version of Scrum with a production tint.
SPEED BECOMES NOW THE MAJOR KEY TO SUCCESS IN BUSINESS
At the plant itself, we work on the principle of lean manufacturing. In addition, our plant is fully automated – one dispatcher manages it.
We often have excursions. Governors are shocked: one person sitting at the monitors controls the production.
In comparison, our conditional competitors would have at least 350–400 employees. We have 110 employees in total, including those people working in the trading house. We have acquired a non-automated elevator; otherwise, we would have left 40 to 50 employees.
LJ: A rapid change is a serious stress for employees. Have you tested your employees psychometrically? Some of your counterparts even measure the level of happiness of their employees, whatever that means.
P.M.: Yes, I heard that some people put sensors, but we did not do that. We had our own weaknesses. We were developing d very fast and had no time to solve and adjust everything. No, we did not measure the level of happiness or stress, because we feared the measurement would produce even more stress.
Did we consider testing? No. Why, not? Most likely, because there are many unsolved problems related to people, which I think should be tackled in a human way. But the wages we did raise.
According to our strategy, the salary should be the market average plus 20%. We do follow this principle in the regions. However, the market average plus 20% is a hard target for Kyiv. In Kyiv, we provide other incentives. For people who work with us for a long time, for example, loyal credit programs are available. In the book “Business with a human face”, there is good advice: you do not have to be a gentle leader, but you should treat people humanely. And I think we pay more attention to this issue.
LJ: I see that you have the CEO Club community icon. We often write about people who lecture in the club or give advice. I need your advice – how to get out of an over engagement in operations?
P.M.: A good question. Only a month ago I was analyzing the issue for myself. Earlier I could never cope with my daily checklist of tasks. By the end of my working hours, I used to realize that I had to move 10 of 50 tasks to the next day’s schedule. Now I end up my day with 50 tasks on the agenda but I manage to delegate them all. This is an advantage.
An opportunity to check the fulfillment of at least half of the delegated tasks is the second advantage. I have time to think over how to help my colleagues so that the delegated assignments would not die. This is the third advantage.
In my view, we in the company used to walk slowly and stumble. Now we are already running. And we are running to the rhythm.
Digitalization helps a lot. Traveling, complicated schedules are not a problem anymore. If you have a tablet, you are in the process. You are in “theme” no matter what.
LJ: What is the place of business education in your life? I heard different opinions. Some people say that at some stage, for instance, an MBA may even make harm to a manager, take him in blinders, and set a frame. Others say that, on the contrary, you need to study when you have 15 years of experience to harmonize the new experience with the previous one.
P.M.: When I meet different people, read business books, I get food for my leadership. I am very focused on this. Apart from the CEO Club, I am also a member of the Young Presidents ’Organization (YPO). This is a world organization of the most influential tops.
Education does not necessarily mean learning something new. Sometimes you hear the same thing, but it falls at the right moment — when you are ready for it. It is like a grain — you can plant it in mid-June, but it will not germinate. If you plant it in April and to a depth of ten centimeters, you will have a result.
And there are such “grains” in YPO. For example, today (the interview was April 23, 2019 — Ed.) we have a meeting with Jim Bagnola, a guru in corporate psychology.
LJ: If everything turned out well with the digitization and the escape from the operations pit, I have the following the question. Do you manage to maintain a work-life balance? There were different answers. Someone is going away; someone stays in the flow.
Sometimes you hear the same thing, but it falls at the right moment
P.M.: I think that even when you have problems all around you, you need to turn off for 20 minutes and meditate. Then you come back and look at the problem from a different point. That is why if I need to do yoga and meditate in the morning, then I do yoga and meditate.
LJ: Do you switch by force of will?
P.M.: No, it is a habit. I am now finishing reading these books and I understand that at first, there was an effort of will, and then it became a habit. And you take it easy.
LJ: And by the way, what books?
P.M.: Now I finish reading and listening to “Hell Week: Seven days to be your best self” by Erik Larssen and “Awaken the giant within” by Antony Robbins.
I read a lot. I choose mainly motivating, scientific, business books. I listen to the same. I also read the “Principles” by Ray Dalio (An American businessman, billionaire, founder of an investment company. — Ed.).
I do not read fiction — I used to read a lot of fiction as a child and now I would like to, but I do not have enough time.
LJ: Since you outsource the HR function, have you considered engaging consultants and coaches to work with the team?
P.M.: Four days ago, I talked with Krikunov. Now he has a new program for developing skills for making unconventional decisions and breaking the limits by analyzing pieces of art. He shared this unique program.
Before that, we had a session on the management under pressure session for our senior managers. These courses were a success.
LJ: Do you have an icon in corporate governance? This may be a collective role model.
P.M.: The Bible says, “You shall not make for yourself an idol”. I am a believer; I believe that an idol is a good thing that can stimulate you. On the other hand, this may be limiting you.
I had several idols. For a very long time, I was developing as a leader while working with another leader, who had his 60 years anniversary just last week. He still pleasantly surprises me. I always enjoy talking to him, learning from him, and consulting him. However, I would not say I am an adherent of one leadership style.
To have an idol is good; it can stimulate you
I read a lot, so I have a collective role model. I have my own value model and my own vision, how I would like to work with people. I am impressed with Steve Jobs. There are certain parallels. Sometimes I even observe that, like him, I fall into nervous behavior patterns.
You have to develop yourself constantly, change yourself, analyze yourself, and personal experience is probably the most important. Therefore, I do not have one role model.
I am impressed with Ray Dalio. I have been reading his book for almost a month now and I am surprised that I do not want to hurry. Many conceptual things intersect. Perhaps that is why, of all people, Ray Dalio is now closer.
And Steve Jobs.