How diversification, purpose and stakeholder power turned OCP around
The phosphate giant’s successful transformation shows how to do well and do good.
Making money and doing good are often portrayed as antitheses. But Mostafa Terrab, chairman and chief executive officer of Morocco’s OCP Group, says such apparent opposites can be reconciled.
OCP was a lossmaker until a transformation started in 2006 by Terrab, who holds a master’s degree and a doctorate from MIT, and his team. Crucial to the process were a diversification from core phosphate mining into downstream fertiliser production, and efforts to empower the workforce, now numbering more than 20,000.
“Our experience demonstrates the possibility of doing well financially by doing good for the world,” said Terrab, currently also President of the International Fertilizer Association.
OCP is one of the world’s leading fertilizer producers, with a roughly 25 per cent market share for phosphate based products. Its origins stem from Morocco’s vast resources of phosphate, a rock that is one of the three core components of the world’s fertilizers.
Terrab detailed how the group had turned from being a parastatal entity into a limited company, borrowed heavily to invest in its ambitious move downstream and then diversify into adjacent areas. In the process, sales, earnings and employment rocketed, generating valuable dividends for the state, the main shareholder.
The changes included a focus on Africa, OCP’s ‘home’ market, where low fertilizer consumption and swift population growth offered opportunities. With arable land per head declining and populations soaring, food security depended on greater fertilizer use to boost agricultural production from lows to levels closer to Europe, China and the US.
Massive investment went not just into production and the shift downstream, but also research into the soils of different African markets to allow scientifically customized products. Such ‘soil fertility maps’ meant phosphate, nitrogen and potash – the three core ingredients of any fertiliser – could be adjusted, and necessary additions, such as zinc, included for local circumstances.
OCP developed customized fertilizer that increase yield up to 37% at lower price. In addition, customisation avoided the danger of water pollution, a frequent danger when more fertilizer is used than plants can absorb.
Diversification also created an eco-system of linked activities. Terrab avoids the abbreviation CSR, as he sees this as a natural development of OCP’s business, rather than some grafted on initiative. “We built it because it was good business too.”
That now includes financing and services for farmers, training for OCP staff and others, and environmental and community activities. The group even incubated its own university – UM6P – with support from, among others, IMD, to develop future talent. “We saw this too as a competitive advantage,” said Terrab.
Empowerment is essential
Decisive to the transformation was Le Mouvement (the movement), an initiative to give greater responsibility to blue collar workers and lower level management.
“All these activities, you may think, came out of enlightenment by top level management,” Terrab said. “But often the toughest levels to convince were the top layers. Actually, the greatest enthusiasm came from blue collars and lower management. They understood ahead of us.”
“People kept telling us: don’t overmanage us. So we let them free, and often, amazing things happened.”
IMD President Jean-François Manzoni praised the initiative as a case study in listening to the workforce, rather than imposing ideas from above. Speaking of the energy and vitality of Africa, Manzoni depicted OCP as a shining light in harnessing a company’s human capital, but he wondered whether OCP had not been concerned about devolving so much power to its workers.
“It was initially scary for those involved,” acknowledged Terrab. “But in fact, our people did not see it as a free for all. They themselves demanded more organisation, more processes.”
Workers’ sense that top management trusted them was crucial, he said. That also involved intense and ongoing coaching to overcome resistance – to the extent of creating a coaching school within UM6P university.
Looking to the longer term
Manzoni also queried whether OCP had not feared short term financial damage because of the longer run investment in broader social, educational and other goals. “It is indeed accepting the benefit will only be in the long run,” he observed.
“We would never have been able to do this if we did not have long-term, bound shareholders,” Terrab acknowledged. “It is accepting short term trade-offs. Fortunately, some, at least, such as the push into renewable energy rather than relying on much more expensive grid power, paid off remarkably quickly.”