“When you care about our world you simply have to manage better”

An interview with Marjorie Yang, Chairman of Esquel Group

If you’ve purchased a premium cotton shirt from the likes of Ralph Lauren, Hugo Boss, Tommy Hilfiger or one of many other well-known designers, chances are it was manufactured by the Hong Kong-based Esquel Group. Founded in 1978 by Marjorie Yang’s father Yang Yuan-loong, Esquel Group is today a global textile and apparel manufacturer with a vertically-integrated operation that starts in Chinese cotton fields and ends in stores around the world. With facilities in China, Malaysia, Mauritius, Sri Lanka and Vietnam, every year the company makes over 100 million shirts.

Initially focused on high volume and low prices, Esquel was once just one of many Asian companies serving mass markets in developed nations. But by the mid-1980s, the Yangs decided to differentiate themselves from the pack by concentrating on quality. To meet the standards of the most demanding designers and retailers, the company invested in spinning and weaving innovations and the cultivation of high-grade cotton in remote areas of China. In 2005, Marjorie Yang wholeheartedly committed the company to sustainability, slashing the use of water, chemicals, and energy and developing a unique reputation for corporate social responsibility in the industry. Recently, she sat down with us in her Hong Kong office overlooking the harbor to talk about the purpose of her business and the difference family ownership can make in a region undergoing rapid economic transformation.

THE FOCUS: You once said that you want to be remembered as someone who could not sew, but who made a lot of people happy making shirts. Does that capture your purpose as a manufacturer and as an employer?
Marjorie Yang:
Yes, in that we are trying to provide our customers with quality products. And we are trying to provide our employees with quality employment, particularly people who are in danger of being left behind by technology. There is much talk about technology replacing people, especially those who have not had the benefit of an education that prepared them for the future. Many of our employees fall into that category. Our challenge is to connect them with all the technologies that have benefited people like you and me and made our lives much more productive, so that they can stay gainfully employed and continue to improve their lives.

Some people think of your industry not as a provider of quality jobs but as a low-cost, mass manufacturing business that depends on cheap labor. How did you arrive at your view?
My maternal grandfather was in the industry, and it was actually his management philosophy that led me away from that low-cost labor model. He taught me that better management leads to greater productivity, which allows you to pay higher wages and improve the standard of living for workers. Thirty years ago people were begging for jobs, at any wages. Today, with a much stronger economy and more robust employment opportunities, people have choices about where they want to work. To attract them, you have to become the employer of choice, not only for ordinary workers but also for highly educated and experienced managers and executives who could work in more glamorous industries.

Apparently your approach significantly improved the lives of your employees…
In Gaoming, Guangdong province on the mainland we employ 17,000 people. Because of our ability to manage better and to use appropriate technologies, our workers’ incomes in that one place have gone up ten percent every year for the past ten years. And now they are beginning to buy apartments. We have 10,000 people who are in that salary bracket and above. So if they buy apartments, they become middle-class and become consumers. The Chinese dream of having Chinese consumers rise to the middle class is going to happen and it will be fantastic for all businesses.

What economists call the “multiplier effect.”
Yes, and if we are to continue to raise the standard of living and grow the economy we need to educate people about how it works. I first encountered it as an undergraduate at MIT and later at Harvard Business School. I always joke that the goal in my life is to justify the tuition I paid for two excellent schools.

In addition to introducing innovative technology, you decided more than a decade ago to pursue green manufacturing. What led you to that decision?
I was at one of our satellite dyeing factories, and I saw dead fish in the fishpond. So I asked why there was dead fish. One of the managers said, “Boss, hello. We’re in the dyeing business.” He told me that the dead fish was one of the unfortunate but inevitable environmental consequences of such a chemical-intensive process. When I returned home I asked my father, who is a textile chemist, if that was true. “No,” he said. “It’s not true; you can fix it.” So, I set out to convert people, but I met with a lot of resistance at first.

I believe that going green should not be limited to the workplace. A clean environment is good for everybody and for business, so I promoted both of those principles. We wanted to put in desulfurization equipment at a small power plant and we had approved the budget. Yet many months later the plant manager, who had a Ph.D. from one of China’s most prestigious universities, still had not installed the equipment. He told me that he was trying to save money. I explained to him that it was not about saving money but about value creation. And I reminded him that he had a daughter in kindergarten nearby. I said: “Doesn’t it make any difference to you whether your daughter is breathing in clean air? Now if you don’t put that equipment in, I’m going to have the kindergarten come and pick at you. And your daughter is going to be in the front row.”

“I think you can go green without losing money. It forces you to start by managing better.”

Can a sustainable business be a profitable business?
Most companies will say that going green is bad for business, partly because they’re looking for government subsidies to help them and partly because they do not believe it. I think you can go green without losing money. It forces you to start by managing better, especially to reduce costly rework, which has historically been the bane of our industry. When you’re paying low wages and don’t think about the environment you can get away with massive waste of labor, energy, water, and other resources. But when you’re treating workers fairly and you care about our world you simply have to manage better. You reduce rework, your cost goes down, your energy consumption goes down, and soon you’re making more money and you haven’t even made any capital expenditures yet.

Have the results you have achieved bolstered the case?
Over the past ten years, we’ve reduced unit consumption of water by 60 percent. We’ve reduced energy consumption by 40 percent. But the biggest, most immediate return has been in the attraction of talent. We believe that every good company relies on good people. And today many young educated people are looking for ways of doing things that are greener or can make a difference. So we benefit from getting some of the best and brightest who feel that we share their values—people you might not expect to see working in such an unsexy environment.

Today, it seems that pursuing a larger purpose beyond economic goals is becoming almost a requirement of doing business …
I don’t think that serving society and achieving business goals are incompatible. We’re not an NGO; we have to make money. For the worker to make more money, we have to make sure that the worker’s productivity improves. And that is what Esquel is trying to demonstrate—that if you are a good manager, if you respect your workers, and if you care, you will make more money from the enterprise than you put into it.

Turning now to family, your father and grandfather were also in the textile business, and your daughter Dee has joined, running the Group’s retail arm. Entrepreneurship seems to run in the family.
I didn’t want to go into the business at all. Even my dad didn’t want me to go into the business. He told me to get an education so I wouldn’t have to. After graduating from Harvard Business School, I had embarked on my dream career in investment banking in New York. But when my father fell ill with cancer and decided to launch Esquel anyway I returned to Hong Kong to help him. At the time, the company consisted of one factory and fewer than 100 employees and it was a long way from the glamor of New York and Wall Street. But in retrospect, I think I was destined to be in this business. Initially, my education seemed so irrelevant, but now it all makes sense. MIT, where I got my undergraduate degree, made me comfortable with technology, and Harvard Business School gave me the management skills. And so, it’s almost like fate.

“The most important thing to do is to identify and train talent who share our values.”

What core values do you want to impart to the next generation?
I want to make sure they become responsible owners, whether they choose to work in Esquel or to work elsewhere. I’ve always said to my daughter, my nieces, and my nephew that the most important thing that they need to do is to identify and train talent who share our values. And they must be sure to choose the right professional managers. They shouldn’t feel obligated to be managers themselves, if they don’t have the aptitude.

I think they will absorb our values just as I absorbed them from my father and grandfather. It happens in all of the exchanges of daily life, in conversations, and in the things they see you doing over the years. Once, when my niece was 13, she saw some workers on television picketing a factory that had closed and had refused to pay them. She was very angry and when she came to the dinner table she said, “We would never do something like that, right?” I thought, good for her!

Does your company’s status as a privately-held family business shield you from the pressures that publicly-traded companies face?
Being privately held certainly gives us the time to realize a longer-term vision. But it’s less a benefit of the privately-held company and more a flaw of the current publicly-listed system. The three-month reporting cycle that public companies face prevents a lot of good managers and CEOs from doing what they’re really capable of doing—building companies that create long-term value for stakeholders and create value for society.

“I really think that because I’m a woman the idea of a legacy just does not feel critical for me.“

Many owners of family business express the desire to build a legacy. What would you like to see as your legacy?
I think maybe that’s just a male thing. I have never really thought in terms of my legacy. It has never bothered me that my name is not shown in our family’s ancestral hall. My father joked, “We guys better put the girls’ names in there because they’re paying for it.” I really think that because I’m a woman the idea of a legacy just does not feel critical for me. I never had that chip on my shoulder.

“As a leader, I feel it is my responsibility to make this gender-neutral culture the normal state of affairs.”

That’s the first time you’ve mentioned your gender during this conversation. How has your gender identity affected your leadership style?
My father was extremely liberal when it came to gender—he set the tone for the culture of the company. One of his two top people was a woman. Because of that culture, a lot of women see that there are opportunities in the company for them. And now we have a lot of very confident, very competent women working with us. As a leader, I feel it is my responsibility to make this gender-neutral culture the normal state of affairs rather than make it feel as if we need to meet a quota of women.

Besides recruiting talented people, how do you make sure that your company has the leadership it needs to continue to grow and compete successfully?
Leadership is the big challenge for us, and it will determine whether or not we survive as a company. My father was a charismatic leader. And I have been very lucky in that our current CEO is also a people magnet. But any company that has to rely on a single charismatic leader to hold it together has a problem. So we are working to create more leaders like that at all levels. That may sound wildly ambitious but I believe that a great company is one that provides a platform for ordinary people to become superstars. And that’s what we’re learning do—to talk less about order fulfillment and spend more time creating leaders throughout the company. And then we want to become a “team of teams” where people become networked, share passion, share the same goals, use the same tools, and work in synch.

Passion, clearly, is very important to you. What else do you regard as an essential characteristic of leadership?
The ability to respect people who are different from you. In our company, we have people with different educational backgrounds, different skills, levels of skill, religions, sexual preferences. We don’t have a common language. What we make matters less than our ability to respect other people and then work as a team—to harness that diversity and turn it into creativity. When you are looking at a problem, people come back with different bits and pieces of the solution. I can’t sew! Even if I come up with a fantastic solution, somebody else has to put it into action. I can’t do anything. I’m a theoretician. I only talk, talk.

What keeps you going?
I am simply very grateful for the opportunity to do what I am doing. It wasn’t always like that. For a long time, I thought I was missing out—missing out on being an investment banker, on being a master of the universe, on the excitement of New York. I was stuck with going to all the so-called backward places, where we have our factories. But that was when I was younger. Today, I’m probably more energetic and enthusiastic than ever because I recognize that I have the chance to do something that matters. And that is great fun.

Is there any one thing you really want to do, but haven’t had time or gotten round to yet?
Only one thing? (laughs) My bucket list is getting, like, longer and longer.

So what’s top of the list?
I’d like to start doing calligraphy again. It’s a wonderful means of expression. I liked that as a child, and now I resonate with it. So I’d like to retire and go back to some of the things I didn’t get to finish in childhood.

That’s wonderful. Thank you so much.

The interview with Marjorie Yang was conducted by Catherine Zhu, Egon Zehnder Hong Kong, and C.K. Tsang, formerly with Egon Zehnder.

Marjorie Yang

Marjorie Yang has both followed in the family’s footsteps and blazed her own trail: Based on the values shared by her father and grandfather she gave the business a new direction and achieved phenomenal growth while pursing the path of green manufacturing. The current Chairman and former CEO of the Esquel Group was born in Hong Kong and like her father and maternal grandfather, who preceded her in the textile business, she was educated in the United States.

After majoring in mathematics at MIT and earning her MBA at Harvard Business School, she began a career in investment banking in New York. But she returned to help her father to launch Esquel, putting her MBA skills to work in an industry where, as she says, she was sometimes regarded as over-educated. In the nearly forty years since then, she has helped build a $1.5 billion enterprise of more than 57,000 employees with a sterling environmental record and a reputation for creative business practices.

Esquel-Y.L. Yang Education Foundation was established to support and promote education. Long an advocate of environmental conservation and sustainable production, she also chairs the Shan Shui Conservation Center and is a member of the Advisory Council of Natural Resources Defense Council (NRDC) in China.

She has been named four times as one of Top 50 Most Powerful Women in Business by Fortune magazine. She serves on the boards of HSBC, Swire Pacific, the MIT Corporation, Harvard University, Harvard Business School, MIT Sloan School of Management, Tsinghua University School of Management, China Europe International Business School, and Shanghai Jiao Tong University.

Her daughter, Dee Poon, has already followed in Marjorie’s footsteps, graduating from Harvard and now serving as Co-Managing Director of Esquel Brands and Distribution. Marjorie and Dee have become passionate environmental activists, launching the “Integral Conversation” that aims to bring leaders from diversified fields together to discuss sustainability.

Photography: David Høgsholt