Sunday, February 17, 2013

A microcosm of an economic system

A nation's economic output or GDP is simply the aggregate of the goods and services it produces. And while the characteristics of a country are definitely more complex than that of private enterprise, the elements of how goods and services are produced are universal. The profit motive is absent in the public sector yet efficiency and sustainability remain a mandatory. It is a lesson the Greeks learned the hard way after political lords had overloaded the bureaucracy with warm bodies. [In PHL, is corruption in the bureaucracy beyond repair?] And precisely because a nation is a more complex organism, much greater focus and prioritization is demanded. In one word . . . leadership.

It is common knowledge that leadership must be forward-thinking. Whether we call it a vision or a mission, the point is there must be a North Star. And successful leaders have recognized that defining the North Star succinctly is critical if everyone is to sing from the same hymnal. And Reagan ("It's morning again in America") and Clinton ("It's the economy, stupid") come to mind, and in the private sector Warren Buffett ("I will never invest in a business I don't understand"). And not surprisingly, President Aquino has defined his presidency with “Kung walang corrupt walang mahirap.”

To be guided by the North Star means to be focused and that may be where Juan de la Cruz starts to struggle – with the discipline? Focus demands discipline. Unfortunately, we Pinoys have a bias for "inclusion"? Or have we misunderstood what it means? Given our very low GDP per capita, to define "inclusive" as simply sharing the wealth won’t work – there is not enough to go around. And that is a lesson Europeans had to learn over time – or until the fall of the Berlin wall. And in the case of PHL, "inclusive" ought to mean the opposite of rent-seeking. And that is the argument of the book, "The Price of Inequality" by Joseph Stiglitz, a Nobel laureate.

Private enterprises especially transnational companies like nations in pursuit of their North Star must give priority to infrastructure or subsidiaries like villages would be isolated – and thus marginalized. And infrastructure can be both hard and soft, but then again, focus and prioritization is demanded. For example, we've pursued tourism yet our aviation infrastructure remains an embarrassment – thus sub-optimizing results despite great potential and hope? To focus and prioritize demands discipline. And absent discipline comes inefficiency, influence peddling if not corruption?

I have been away from Eastern Europe for over a month now, but because my friends haven't ceased working on the infrastructure of the business, every morning while having coffee in Connecticut or Manila I can log in on the company’s intranet and see reported sales from over 30 countries, how they stood against targets by brand as well as the projections for the month. And if there is something out of line, a simple email would generate a response: who will do what, when, where and how. And these are ex-socialists introduced to Western business practices only 10 years ago (though I had to run the sales function for 2 years to lay out its infrastructure.) Every month regional managers post their reports and a former rocket scientist (granted his training hasn't ceased) from Ukraine continues to amaze. He is responsible for 10 former Soviet republics. The first time I met him, because he spoke no English, I could not figure out what he was like. And he had no business background. But he proudly showed several pages of impressive statistics – though I was yet to be convinced of their value, i.e., it looked like art for art's sake.

Yet his discipline accelerated his appreciation of the drivers of the business and today he delivers revenue and profit plans, even surpassing them – and why he’s been rewarded with more countries to manage. (And now speaks and makes presentations in English. His reports are the equivalent of a best practice model illustrating how to pull together what marketers call the "marketing mix" as well as the "resource mix" and the "execution mix.") But more than the business drivers, he is able to take corrective action timely whenever plans are at risk. Indeed he can think, create and execute. Those Soviets knew who their talented people were! But absent discipline even Russia – one of the BRIC nations – missed those rosy predictions.

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