At 6:30 in the morning of January 27, 2009, about 15 members of the Board of Directors of AmBev and ABInBev met in the hotel lobby just a few blocks from AmBev headquarters in Sao Paulo's south zone. Dressed in jeans and T-shirts, they were ready for a ritual repeated after board meetings since the days of old Brahma - accompany the beer sales representative's routes. Before hitting the streets, they all watched the meeting held by the sales team that lasted about 40 minutes. In it, they had transmitted their goals for the day. A loud drum roll always indicates the time to leave. For almost 2 hours, each of the board members accompanied a sales representative through the normally chaotic Sao Paulo traffic until reaching the bars and restaurants spread about the city. The meeting was one of the first after Belgo-Brazilian InBev purchased American Anheuser-Busch in November 2008. Although apparently unpretentious, the routine intends to bring them closer to a fundamental aspect of AmBev culture, followed in every detail from the Chairman of the Board to the sales representative - management by walking around (known as mbwa). Or, as they say in Portuguese, "wearing out shoe leather". For the company's top management, this is the best way to truly to get to know the reason for being of any business - the good ol' market.
For some of the participants, this was something new - almost unprecedented. But for none of them, except for ABInBev's controllers - Jorge Paulo Lemann, Carlos Alberto Sicupira and Marcel Hermann Telles - are these meetings as routine as they are for consultant Vicente Falconi. He was the first outsider to comprise the board of former Brahma, in the 1990s. He participated in the first visits of routes and has carried out the ritual religiously ever since. At the age of 69, more than a mere veteran of the AmBev board of directors, he is the man behind the scenes of the company's culture of efficiency. Next to the countless references that AmBev has incorporated to its DNA, such as Goldman Sachs' meritocracy and the mbwa of Sam Walton, founder of Wal-Mart, there is the apparently unshakable obsession for the managerial method of this 5'6", white-haired gentleman, a true grandfather figure. The greatest manifestation of this is in the fact that today each of the 120,000 ABInBev employees in the world have goals - calculated and checked with an openly declared Japanese discipline of inspiration, under Falconi's influence. "We brought meritocracy to AmBev, but we owe Falconi for the method and discipline to put it into practice," says Telles. At the moment, there is no other Brazilian consultant with the same degree of influence as Falconi at large companies in the country. Throughout his career that spans nearly three decades, he has been offering something his clients want with increasingly more eagerness - management. Falconi doesn't get involved with the glamour of strategy. He promises to help companies better execute what they should be doing. That's all. Falconi and his consultants are not thinkers. They are workers. The consulting firm he founded with the also former professor of metallurgy at the Federal University of Minas Gerais, José Martins de Godoy - Instituto de Desenvolvimento Gerencial, better known as INDG - today coordinates a network of almost 800 consultants and 450 clients in and outside Brazil including large companies and governments. It is an army that propagates concepts of efficiency and continuous improvement at companies as diverse as Nizan Guanaes' ABC group, and pulp and paper manufacturer, Suzano, as well as the state governments of Alagoas and Rio de Janeiro. The summary of his theory can be found in the book, O Verdadeiro Poder (The True Power), which arrives at bookstores in December and which EXAME magazine was allowed to preview (see box on the next page). His prestige is evident in the list of "revisers" who co-sign the work. There are 14 entrepreneurs, such as Carlos Alberto Sicupira, shareholder at ABInBev; Fersen Lambranho, co-president of GP Investimentos; Pedro Moreira Salles, chairman of the board of directors at Itaú Unibanco; and Jorge Gerdau, chairman of the board of directors at Gerdau. (According to Telles, a translation into English should reach the hands of ABInBev's 500 main executives by the end of this year.)
At first, it may be surprising how Falconi transformed something without any apparent charm into a methodology that arouses interest in so many people. His clients look him up to create a routine of establishing, distributing and demanding goals. A common analogy used by them is that, after incorporated to day-to-day activities, the managerial method becomes as commonplace as brushing your teeth. Many of the initiates refer to it simply as "the method", in an almost Masonic tone. Its essence can be summarized as PDCA, for plan-do-check-act. It is what Americans Joseph Duran and William Edwards Deming, considered the gurus of total quality, preached in the 1950s to rebuild Japanese industry after World War II. "It is an absolutely simple, yet extraordinary, methodology in its efficacy," says Pedro Moreira Salles, of Itaú Unibanco.
Falconi and Godoy were professors of metallurgy in the 1980s when they first heard about the managerial methods applied in Japan. At the time, they provided consulting to the Christiano Ottoni Foundation, tied to UFMG, to increase productivity at metallurgical and steel mills. Through an agreement sponsored by the Brazilian government with JUSE (Japanese Union of Scientists and Engineers), they paid dozens of visits to Japanese companies to learn principles of total quality and to receive delegations of Japanese executives in the country. Their learning of a practically unexplored theme in Brazil allowed them to broaden the range of clients at their Belo Horizonte office. (One of the pioneers outside the Minas Gerais axis was Jorge Gerdau, with whom Falconi quickly became friends.) From the beginning, Godoy and Falconi shared the tasks. "As I began to dedicate more time to day-to-day consulting, Falconi became the technical coordinator with more direct involvement with clients," says Godoy, president of INDG.
First contact with the controllers of former Brahma was almost by chance. In the beginning of the 1990s, when he presided over the company, Marcel Hermann Telles went to then Minister Dorothea Werneck to get an increase in prices - which were then frozen by the government. "She asked why I didn't look up the professors at the Christiano Ottoni Foundation to invest in productivity rather than raise prices," says Telles. "I had never heard of them, but I decided to pay them a visit." But the meeting did not result in immediate empathy. "One of the biggest difficulties Falconi first had at Brahma was dealing with me and Magim (Magim Rodriguez, then marketing director at the company). We were shooters, and he proposed analyzing the situation first and only then deciding on action," says Telles.
Adoption of the method transformed the company when it hit every level of the organization - and not only the industrial area. Throughout the 1990s, dozens of directors from former Brahma, including then marketing director, Magim Rodriguez, visited Japan for a more in-depth study of the techniques disseminated by Falconi and Godoy. In Brazil, hundreds of other executives learned about the PDCA cycle in the classroom as well as other, at first not very user friendly terms, like "management by policy", which later became the basis for the formation and breaking down of company goals. "At first, I thought: 'Things are going crazy out there and I'm wasting my time in here,'" says Juan Vergara, executive at AmBev between 1996 and 2007 (his most recent position was director of marketing) and current partner at Galícia Investimentos. "Nothing was more convincing for everyone to accept the model than the results. Over time, planning goals with discipline became commonplace and no one even thought about it anymore." In April 1997, Falconi became a member of the board at the company. In 2003, AmBev was already known as the brewery with the lowest costs in the world.
Some clients refer to Falconi's methodology simply as "the method", in an almost Masonic tone
His first years working at Brahma actually represented a period of intense mutual learning. "Without that experience, I would never have understood the importance of financial bias so quickly. Today, all of INDG's proposals have an objective tied to a financial indicator," says Falconi. "I am convinced financial metrics are the most important, not only for companies, but also for governments and even churches."The visceral influence between the two parties only occurred thanks to the consulting firm's "hands on" style. At INDG, no one is a specialist in sectors. Everyone understands how to apply the managerial method. For such, they even accompany internal meetings to demand results from client company executives. They are all encouraged to create what Falconi calls a "culture of confrontment" in the organizations. "In extreme situations, this culture means pointing your finger at whoever did not deliver the result," says consultant Marconi Rocha, who spent part of the past four years disseminating the Cyrillic version of PDCA at ABInBev operations in Russia.
It is such a peculiar approach that it requires for most of the consultants to be trained in-house. About 70% of INDG's 768 consultants began their career right after the university. Although INDG has not had any ties with academia since 1998, when Godoy and Falconi stopped working at the Christiano Ottoni Foundation, many of the consultant training analogies still make reference to a university. (Beginning with the fact that Godoy and Falconi are still called "professor" in and outside INDG.) The trainee program, which recruits about 100 youths per year since it began in 2003, has the internal nickname of "Master's". The second level of the career, when consultants reach the senior level (which generally happens after five years) is informally called the "doctorate". In order to go from one stage to the next, candidates face a bench comprised of three experienced consultants and they need to expose the results obtained in several projects in which they were involved. "Although there is a metaphor with academic stages, all of the youths' training is geared towards practice from day one," says Bruno Maldonado Turra, director of development and business support at INDG.
INDG consultants do not normally knock on company doors. Its best sales representatives are its own clients
"He used to bring the board's discussions back to the real world," says Moreira Salles. One of the situations that he never forgets in this sense occurred during a director's presentation of the good performance by the bank's call center. After talking for half an hour about the service's qualities, Falconi said: "I'm not here to learn about what's doing well. I can only help if you tell me what your problems are." "He doesn't hide behind supposedly sophisticated talk," says Moreira Salles.
The newest and broadest testing ground for Falconi's ideas is the public sector. One of his first experiences in that area took place in 2001, at the invitation of then Minister of Planning Pedro Parente. Parente had met the consultant a few years before at a lecture in Brasília about management by policy. "I was in awe with that business," said Parente. He says that when he was given the task to manage the power blackout, he immediately thought of calling him to comprise the managing committee for the crisis. "In order to solve the problem, we basically had to distribute goals to every citizen," he says. According to Parente, Falconi's collaboration was clear when it came time to choose a single and easily understandable indicator - in this case, the water level at hydroelectric plant reservoirs. The other was when it came time to break down the goals by family. Those who consume under 100 kilowatts per month earned a 2 real bonus for every real saved. (One of the enthusiasts of the "method", Parente contracted INDG's services as soon as he assumed as president of RBS in 2002. Parente set up a meeting for mid December, when he hands over control to his successor, Eduardo Sirotsky Melzer, to introduce him to Falconi. It should take all morning.)The newest and broadest testing ground for Vicente Falconi's management method is the public sector.
But nothing compares to the scale of new projects resulting from a sort of pilgrimage through the states organized by Jorge Gerdau, president and founder of the Competitive Brazil Movement, and by Beto Sicupira, creator of the Brava Foundation. Throughout 2007, the three visited countless elected politicians - including President Lula and a series of governors from north to south of Brazil. In this triumvirate, Gerdau opens the doors and Sicupira helps collect money from entrepreneurs willing to sponsor the consulting firm's work. Falconi enters with his consultants, today spread about eight states, nearly 40 municipalities and the Ministry of Planning. In every case, the results are accompanied in quarterly meetings between the governments' teams and the group of sponsors, like banker Gilberto Sayao and Paulo Cunha, of the Ultra Group. In the first year alone, the state of Rio de Janeiro turned a deficit of 102 million reais in 2006 into a surplus of 795 million reais in 2007. "Today, we have between 80 and 90 reais of return for each real invested in these projects," says Gerdau. "We have a gold mine under our feet if we know how to apply concepts of management."On the eve of his 70th birthday, Falconi has become more selective in relation to the projects he wants to work on personally. For example, in October, he resigned from a seat on the board of directors at Brasil Foods (after seven years as a member of the board of directors at Sadia, Falconi was the only one invited by Furlan and Walter Fontana to occupy the third of the three chairs they held on the board at BRF). However, he maintains the habit of waking up every morning at 4:30 to think about new ideas or to reread his favorite books. He says that one of the new projects is to develop a meritocracy system to promote civil servants in the state of Rio de Janeiro.
Now the challenge for the consultant and his partner is to successfully carry out their succession.
Another topic that has occupied his time is to prepare his own successor. The starting point for this took place in 2006, with the signing of a shareholders' agreement between him and Godoy (together they share 100% of the consulting firm's ordinary shares 50-50). According to the contract, they must stop their operational activities at INDG in April 2010. In practice, as technical advisor, Falconi already takes no part in most of the projects. Godoy, also about to reach 70, still controls a large part of the operation. Two years ago they contracted the Egon Zehnder recruiting firm to find their successor to occupy the presidency. "We interrupted the process because of the crisis," says Godoy. "But we have recently contracted Egon Zehnder again." However, some executives close to the company say Godoy has denied leaving his position and has deliberately postponed his own succession. This year, two of the consultants who were internally seen as possible candidates for the presidency left the firm - Otto Levy, who became a director at Magnesita, and Aloísio Carvalho, who went to Gerdau. The delay in the succession process may have also generated misunderstandings between Falconi and Godoy, who, according to close executives, have stopped speaking to each other over recent months.
Both deny any problem and say the succession plan is being followed. "We have moved up the distribution of preferred shares among consultants," says Godoy. "Starting in 2010, we will begin to distribute ordinary shares." The shareholders' agreement determined the distribution of 20% of the company's preferred shares among the consultants, a level already achieved this year. Now, according to the bylaws, all ordinary shares must be in the hands of INDG employees by 2020. The efficiency in transferring control to new generations shall be a determining factor for the firm's perennity - an issue the clients are following up close. This in part explains their support at the release of Falconi's new book. And even the participation of some of them, like Jorge Gerdau, Marcel Telles and Beto Sicupira, in INDG's board of directors. "The work by professors Falconi and Godoy is a legacy for Brazil," says Beto Sicupira. The good news is this legacy has left apparently irreversible marks on a generation of the country's entrepreneurs and politicians.
With a report by Cristiane Correa