Thursday, December 31, 2009

We’re management . . .

. . . And answerable to you, being the shareholders!

The setting in a 5-star hotel mirrored the typical shareholders’ meeting of a Fortune 500 company. The business leaders were in awe: “Is this my country, really?” The new Bulgarian prime minister was reporting to the business community the progress of his first 100 days.

“We inherited a debt-ridden enterprise but I’m happy to report to you that in October we already registered a surplus. Efforts to raise revenues and reduce spending have begun to bear fruit. We have a mountain to climb but we’re scaling it with great resolve.

Foreign direct investment in 2009 is down 50% to Euro 3 billion, but excise tax collections from the grey economy are substantially up – with the linking of the databases of the Revenue agency and the Customs agency. Imports are down as exports. But efficient government administration is well underway; we are moving beyond the 15% reduction in government personnel – following the findings of a private auditing firm we retained and the vetting process we developed.” (This is what love of country is about – the greater good takes precedence? Or is it anathema to our culture of compassion and inclusion?)

More than half of the ministers are unknown to me – they were hired on the strength of their credentials, whether from the World Bank or private business. And they have a common understanding of how their engagements can end. And that is, even one euro of unexplained income will get them out the door.”

We’re running the administration like an efficient business enterprise. We came across 1000 proposals for renewable energy projects that were not even touched by the previous administration. In a matter of weeks we had contacted all the proponents and advised half of them that we would proceed with their projects, and prioritized them accordingly. Our goal is 16% green energy by 2020. And to accelerate and ensure execution, we’re delegating authority to the local government. We hired the Environment minister precisely because beyond her technical expertise, she’s a very efficient manager. She would make the local government play by the rules.”

You want to hear about corruption: We agreed with the EU that over 200 road projects were ridden with corruption and must stop. We’re losing the EU counterpart funding but that is the price of corruption. We have prosecuted the guilty parties and you know where they are today – the newspaper hosting this forum has been reporting on this.”

We are continuing to attract foreign investments because they see that we have the political will to fix the country. We are stepping up efforts to make doing business with us a pleasant experience and registering businesses like a breeze. We are also reducing payroll taxes. We’re working with Parliament to streamline the privatization of government assets; our best brains are deeply engaged with them.”

What you can do for your country? Pay your taxes and tell the rest of the business community to do as well. Our foreign exchange reserves are healthy and our currency is stable. Whatever else you need from us, you can expect a professional response delivered urgently. We’re in this together!”

Over the Q&A the business leaders were simply blown away. As they left the forum, the air of optimism was palpable. These are ex-socialists, new to democracy and capitalism, doing problem-solving not spinning wheels!

Sunday, December 27, 2009

An explosion at 30,000 feet:

Revisiting the discipline of science

Not long after the jumbo jet reached cruising altitude (after taking off from Narita) the passengers were jolted by a loud explosion, including the writer. It happened many years ago and is among the many travel tales that surface during social gatherings.

The explosion was followed by an eerie silence – like a pin dropping moment. The pilot’s reassuring voice calmed people’s nerves: “. . . one of the engines conked out; but this baby is a fail-safe equipment and can fly with just one engine . . .” – it had two more to spare! However, the remaining engines would be working extra and hence wouldn’t reach JFK (typically a 13-hour leg) and land at O’Hare instead. The flight attendants assured the passengers that connecting flights to New York were being organized, and lo and behold, at O’Hare the writer was directed to his plane to JFK in no time.

The couple of tech folks traveling with the writer came over to explain what the pilot meant. And given the many hours they’re to stay on the plane the group, as with others, turned into a small social gathering – partaking of cocktails offered by the crew.

The British colleague was most eloquent and gave an impromptu discourse on physics and science in general, beyond the technical innovations built into the 747: “Higher education taught us about hypotheses, e.g., Galileo overturned the earlier hypothesis that the earth was the center of the universe!

Europeans are credited for bringing higher education to America and at its core is the discipline of science and experimentation, e.g., employing scientific method in the investigation of hypotheses. Thus, it is not surprising that in the West they constantly stretch their capacity to renew themselves.”

The thought came back while reading the latest bad news about poverty in the Philippines: our economic model needs renewal?

One recent evening the writer and his wife attended the town’s (in a New York suburb) high school presentation of “Fiddler on the roof”. The opening scene made the writer reminisce about the Philippines: “Tradition . . . tradition . . . tradition . . . “

The stage-filling cast (culled from hundreds by a famed Broadway director) made the writer whisper to his wife that the diversity of the kids was a microcosm of America. One of the lead players, as the second daughter of the poor Russian Jewish farmer, was Filipino. But practically every nationality was represented.

Despite all its faults America remains the model of diversity – of culture and tradition. And in the process they attract the best and the brightest. These high school kids could give regular Broadway stars a run for their money! Over the years the writer has seen how kids he thought (his hypothesis) were rowdy (given his Filipino upbringing) turned into responsible citizens and generous to the less fortunate – their Protestant work ethic intact – beyond simply being well-off! Their hypothesis: “kids ought to be kids”.

Sunday, December 20, 2009

Manna from heaven:

It’s what we’re hoping for?

A family friend strongly feels that what we need is manna from heaven. But what options do we really have to overcome our economic woes? Unfortunately, we seem to have truly narrowed our playing field. Beyond our focus on our OFWs, what is our paradigm?

Our industry has geared their plans to meet the needs of the OFWs and their families: from shopping malls to low- to medium-cost housing and everything in-between. And to maximize their share of this income source, they have engaged in M&A Philippine style, with a strong emphasis on infrastructure development – a critical gap in our productivity efforts. The government is pushing infrastructure development as well but is constrained by our ballooning external debt. And infrastructure projects have become a breeding ground of corruption.

We are encouraging more SMEs (small and medium enterprises), country-side development, CSR (Corporate Social Responsibility), and have drawn an R&D and investment plan. Yet they’re mostly platitudes – they don’t spell out the incremental GDP they will generate. And presidential wannabes are on the bandwagon. But letting them to be wishy-washy will confine us to la-la land!

What do we hope to achieve? Get GDP growing by 7%? Can we sustain that for 30-50 years? That’s how deep a hole we’re in; yet our economic model is akin to that of a developed country (individual entrepreneurship) where a 3% to 4% growth translates to a big lift for the country and for the people given their high income levels. Entrepreneurship is coming out of our ears – Pinoy homegrown businesses are plentiful! Our inability to be competitive and thus industrialize is the issue – there’s no escaping it!

We’re not alone in our dilemma: underdeveloped countries generally struggle to revisit their assumptions, which the writer saw at close range in Africa and Latin America; while the developed world has a greater capacity to renew itself. A management guru called it tough-mindedness. Or simply, reality!

Unfortunately, our industry is uncompetitive regionally and globally. Our ability to put up 21st century infrastructure is limited. The types of foreign investment we are getting are meant to partake of the OFW-remittance bonanza. Why? Because we don’t have a coherent (joint public-private) plan to focus and prioritize economic activity; and that means prioritizing those that will generate the biggest returns. Global investors have a vast array of options – our economic model must be competitive, thus attractive if we are to draw major foreign investments.

Our challenge is development, not simply growth. And that means focusing on expanding our economic pie or GDP. It means pursuing coherent (a la FDR) planning; and as an intermediate goal, to double domestic output (unlikely!) or raise GDP by $ 100 billion (by raising our competitiveness) to address poverty – as the dynamics of Thailand’s economy demonstrate, i.e., we need that much more GDP to meet the needs of our large population. It will not happen overnight but we have to think big.

We need confidence to think big, and it starts with going back to the drawing board – if we are to renew ourselves. And that’s what the presidential candidates owe the country – what’s on their drawing board?

And we owe it to ourselves to put them through the wringer!

Thursday, December 17, 2009

Running for office . . .

Is love of country . . . ?

That is according to the gospel of Estrada and Arroyo? If it is simply ego they can be forgiven – leaders have huge egos; it takes a humongous ego to run and govern. But politics stinks (or sucks?) in our country. And the only way they can rise above is to spell out their intentions and what they will do for the country. But it will take generations to fix our mess; so what’s their point?

What are our options? Noynoy or Villar? Villar, unfortunately, is declared clean in part but not wholly? Noynoy is assumed to be – given the genes of the mother. But as we now know Bush 43 is not Bush 41! Our country needs help, big time. And it will not come from this pool of candidates? They’re more of the same?

Best-practice benchmarking is not inherent in governing as it is in private business. And given our focus on personality politics, we are letting our politicians get away with murder. The writer made a similar point to a conservative New York Times columnist before and during the tenure of Bush.

Bush was a product of American politics especially the conservative element – he had the right name, family tree and connections. But it did not make him the ideal candidate for US president. And it was easy to stick it to the columnist: “I told you so!” (Unfortunately, Obama isn’t keeping to the 80-20 rule – and his inability to deliver quick hits is glaring; the jury is still out if he can do the big bangs.)

The UK civil service system has been perceived as best practice in public administration. Many years ago though in private business, it was one of many the writer checked out specific to how they hired people. And he tracked down a principal consultant in Dublin. The exercise confirmed critical elements that must not be overlooked in recruiting. For instance: What trying conditions does the job demand? What conditions has the aspirant encountered in previous jobs? How do they match? How specifically did the aspirant respond to these conditions? How did he or she demonstrate upholding the integrity of job, say, presidency if that was the job? Did he or she pass the Caesar’s wife test? How did he or she demonstrate bold thinking and astute planning on a large scale; did he or she successfully execute? How did he or she demonstrate incremental thinking? How did he or she distinguish between the two? Net, it’s not enough to tout one’s leadership and success; we must dig deep into their critical elements to peel off the veneer.

If for competitive purposes private business would seek the best practice – wherever – in selecting its people, shouldn’t we given our sorry plight as a country, seek the best way to asses our candidates?

It can be the start of developing transparency in governing if we as a people put these candidates to a test? Media needs to be more aggressive and assertive? Private business and academia should join hands to develop the yardstick by which we must measure these candidates? And the media and the Church should focus the nation in scrutinizing them? And the Church and civic organizations should educate the vulnerable how not to sell their votes? Of course, politicians can also turn around and point a finger at industry, the media, the Church and all of us – it takes a nation as a whole to perform as badly as we have?

We can’t continue to feel good that we’re minding our own business, and thus be complacent about the plight of the country? We’re a disaster (if we assume for a moment that we won’t accept being the basket case of the region) and yet we’re behaving like we’re taking a walk in the park? Then we don’t have the right to scream how bad and corrupt our politicians are? In a democracy, we get the leaders that we deserve!

Friday, December 11, 2009

Resiliency, hierarchy and aristocracy:

“Virtues” that hold us hostage?

The writer hears the supposed virtue of . . . resiliency . . . in both developed and developing countries; but is it unwittingly a justification for inaction? And it’s masked in various ways; and to raise a contrary view is deemed sacrilegious, i.e., lack, if not absence, of love of country or of patriotism?

Juxtaposed with resiliency is the virtue we see in . . . hierarchy . . . which we describe as “respect for elders”. But is our definition of elders generously expansive? Thus what we really are respecting and calling a virtue is . . . “aristocracy” . . . as opposed to meritocracy? Behind all the faults the Brits see in the American system, they overwhelmingly point to meritocracy as the “competitive advantage” of the US over the UK, if not Europe. (The US, public and private, spends a bigger share of GDP in R&D and beats Europe in speed to commercialization. However, the US is producing more MBAs – thus the focus on financial engineering – than engineers. And California’s bankruptcy is starving the university system that has been a major source of innovation. Ergo, the US’s slip is showing!)

Thus, it is not surprising that in global companies, whether US- or European-based, meritocracy, not aristocracy rules: it’s not who you are but what you are. And one’s rank (where vice-presidents and graduate degrees are “a dime-a-dozen”) doesn’t influence performance assessments.

The writer was hosted to a going away dinner recently by an Eastern European businessman – who was born under and lived though communist rule. He was comparing two country managers: one would simply say yes to him and the other would present an opposite view but with solid arguments. His conclusion: he couldn’t leave the first one alone but the other would keep him sound asleep at night.

He is now into developing a 4th business unit, each with a number of categories. Bankers and proponents come to him to present acquisition opportunities – because they see a winner amid the global financial crisis. But like a disciplined student, his standard response is: my business model is grounded in competitiveness (meritocracy), not monopoly (aristocracy). Thus he sticks to their core competency such that while the business units are different, they are similar in thought process: from consumer insight discipline, product development, R&D, manufacturing, marketing and to sales and distribution. And it gives them the ability – i.e., increasing and accumulating knowledge and confidence critical to building competitive advantage – to reach across the region and beyond.

In the process, he keeps his thinking fresh and his ideas innovative. He laughs recalling that his thinking has evolved, as opposed to frozen, over the years – which is now into its 4th generation. And then quickly adds, “If Windows is into its 7th generation, I am falling behind! At evening’s end he quips: “I learned a great lesson over dinner: product portfolio – we must constantly rationalize our product offerings across the region and by country and that means generating a healthy product pipeline, to ensure we’re marketing compelling and high-margin products and thus sustain our competitiveness”.

Are we surprised why we are where we are? Why we are the economic basket case of the region? Why we are falling behind our neighbors in every global development measure?

A family friend sums it up: “what we really need is manna from heaven, to save us from ourselves”? But what about doing something about it – open our minds to fresh thinking and unlock the world of innovation, the key to progress and development?

Monday, December 7, 2009

Change is never easy

(Or why Pareto’s 80-20 rule is alive)

Do we belong to the 80% that account for only 20% of the world’s wealth? With a third of our population (67-33) in poverty, we have more than proved the reality of Pareto’s.

This is not only true of countries but organizations and families too. A third of the supposed excellent companies in Tom Peter’s 1982 best-selling business book are now extinct. The same has happened with scores of Fortune 500 companies. Why? Countries, organizations and people have their blind spots.

We know about Peter Principle and companies mirror it all the time – only 20% move up the hierarchy. The writer has witnessed this reality over decades in many parts of the world yet has also felt the immense reward of seeing organizations and people develop their potentials.

The writer’s family traveled to China and Eastern Europe after they opened their borders. And realized how blessed Filipinos were. And when USAID/IESC tapped the writer to do development work in Eastern Europe, he knew that he had to dig into his reservoir of development experience to make a dent. And his core message would be: “you don’t have to be victims of circumstances; create your own circumstances, your own future instead”.

If businesses can be fixed and if people can be developed, there is the chance for companies and hopefully countries to develop as well? Friends – Filipinos and foreigners – have told the writer that the Philippines has already been cursed by Pareto’s rule. Hopefully like the good thief, we would overcome our blind spot?

Change is always uncomfortable. People get disoriented with change. The status quo is our comfort zone and we have a slew of justifications why we can’t change: tradition, culture, religion . . . and for the non-poor, “poverty is for them, but not for us; our way of life (our “senorito-muchacho culture”?) beats the rest of the world”.

This point was made (but did not register then) to the writer many years ago by a foreigner (who cared for Filipinos especially his Filipino daughter-in-law and loved to visit until his passing) who was amazed that the writer’s car had access to all the gated communities (including a military camp) from Alabang to Makati thus exempt from Metro Manila’s traffic jam: “A country cannot change if those who can influence change beat the system instead and get rewarded . . . and (the writer is now paraphrasing) everyone seems to have an answer for why things are, matter-of-factly defending the status quo – that acceptance equates to the virtue of resiliency”?

In the history of nations regimes changed either because people wanted change (e.g., our People Power, France, and Russia) or the regime wanted the change (to modernize, for example) and the opposition resisted the change because they had their own model and the people went with the latter (e.g., England).
We don’t have the chance to be like the good thief? Because it must be we, the people, that should want the change? It appears that despite all the global measures of development going against us, personified by 30 million hungry Filipinos, we remain conveniently stuck with the status quo, in one guise or another – i.e., we can’t go against our grain?

But as FDR said at the height of the Great Depression: “Nations like people make mistakes, but we must be big enough to change”.

Tuesday, December 1, 2009

Cause and effect . . .

Man (woman) is the true measure of himself (herself)

We’re victims of circumstances – we’re a small, poor country and had been pushed around by foreigners. But we can make do. We’re resilient! We’re victims of circumstances – we’re born in paradise, had everything and should’ve everything. We couldn’t resist partaking of the forbidden fruit! Either way man (woman) finds someone to blame except himself (herself)?

Yet Adam and Eve proved that man (woman) was the true measure of himself (herself). From total disbelief that they lost paradise to showing those that came after that man and woman were endowed with God-given gifts . . . to create their own future!

No one subsidized their “cost-of-living”; no one was tasked or expected to protect them. They had to survive and succeed on their own. And they did . . . and mankind thrived!

Everything we’ve said about our plight has been caused by something – and like Adam and Eve in Eden, we only have ourselves to blame? What we must not fail to do then is to live up to our God-given gifts?

Do we want to behave that we’re victims of circumstances . . . and thus not let our minds seek and create our own future? What we can think we can create; what we can’t think we can’t create? Like our CNN’s Hero of the Year demonstrated! (If the West created a multi-trillion dollar economic hole, and are throwing a multi-trillion dollar solution; shouldn’t we be throwing a hundred billion dollar solution to our hundred billion dollar economic hole?)

Do we want to behave like adolescents, not share our “candies and toys” (to protect our patrimony?) with others? Do we not foresee that others could have better “candies and toys” than we do?

Do we suspect the intentions of every foreign investor, every foreign seat of knowledge, every foreign idea, and every foreign product? Do we believe that our faith is meant for us to be holier than thou – that we’re the chosen few and they’re not, that we must protect our children from them?

Economists have compiled a body of knowledge that low-trust level is more common among underdeveloped countries; conversely, the honor system is more common in the developed world! Low-trust translates into looking over one’s shoulder, bureaucracy and inefficiency, among others. Yet a hierarchical society puts misplaced trust in authority (leader dependence – e.g., we’re putting our future in the hands of Noynoy or whoever when it will take more than a generation to fix our economic woes?) that translates into abuse? The bottom line: underdeveloped countries have unwittingly created a perfect storm: from low-trust level to inefficiency to corruption and thus decline!

On the other hand, the rest of the world are successfully leveraging their shared investments, their shared knowledge and ideas, turning them into much sought after products . . . and are growing wealthy in the process? Where have our assumptions brought us – shut out, confined to our outdated “candies and toys”, and outdated ideas? And we’re among the most corrupt – what happened to our holier than thou?

Do we continue to kick and scream and blame the rest of the world for our plight? Who brought this upon us in the first place? But we still have our God-given gifts – if we focus on using them, not on blaming others?