Thursday, August 29, 2013

The left hand never knows . . .

And that is, what the right hand is doing. “A study by the International Monetary Fund undertaken last year shows that the existing tax structure applied in the Philippine mining industry for financial and technical assistance agreements “is not competitive internationally.” [Manila Standard Today, 17th Aug 2013]
 
But don’t we have the economic cluster within the cabinet in order to ensure alignment in policy direction all the way to implementation and, bottom line, drive economic growth and development? “But people don’t always follow a cost-benefit logic . . . The problem is basic human psychology.” [Sendhil Mullainathan (economics professor, Harvard University), When a Co-Pay Gets in the Way of Health, The New York Times, 10th Aug 2013]
 
I would only smile while reading The New York Times. It reminds me of my MNC experience and sitting with a group of managers while our CFO was presenting the “expectations of the analysts” as we were gearing up for the budget cycle. In my head, while Wall Street was concerned with the fundamental and technical dimensions of the numbers, our role as managers was to provide the flesh – which is where the rubber hits the road. And this reality may or may not match Wall Street's perspective. In short, we knew the business better. (It’s not a surprise that Jeff Bezos, a former Wall Streeter, turned into selling books and today, everything else besides – it is where tangible value is created, not through financial mumbo jumbo. Disclosure: my daughter and son-in-law come from Wall Street.) I would later organize a meeting in Asia for our new Asia Pacific team: “this is your baptism of fire,” I said in jest to the new president. But she was game and we all trekked to an island resort, with a group of us flying from New York – including those from support functions that we had to get on board and buy into our plans and budgets. And the new president would be rolling her eyes: this is so dramatic, now we know we must very quickly get everyone aligned. I would only smile.
 
Fast forward: Our model caught the attention of the president of the company and it became my claim to fame in the organization – the father of goal alignment. I've said this before and the emphasis is because it is a very crucial point if as a nation and as an economy we want to move forward. Isn’t it about time we demonstrate self-respect – and show the world that we know our economy better than Wall Street or the IMF? What has happened is we’ve been using their endorsements like a "Good Housekeeping" seal even when we haven't truly provided the flesh that would indeed drive the economy – i.e., fixing our failings in power, basic infrastructure, a modern airport, etc.; and a strategic and competitive industry base that will attract investments and the requisite technologies that will in turn trigger innovation, product development and market development. Ergo: garbage in . . . garage out.
 
And to be aligned means making trade-offs: Technically, deciding to do something new without killing something old is not a decision at all. It is merely an addition. Research has shown that making tradeoffs is so mentally exhausting that most people try to avoid them whenever possible . . . But this change-by-addition approach can be a death blow . . . [It] undermines [people] alignment toward the change. It is highly unlikely that [people] will independently arrive at the same conclusion about what to do and what not to do. Part of the [population] will choose to move in one direction while the other part moves in another direction — the very definition of misaligned . . .” [Nick Tasler, To Move Ahead You Have to Know What to Leave Behind, Harvard Business Review, 7th Aug 2013] 
 
But back to the economic cluster in the cabinet: Beyond the imperative of alignment is the prerequisite of benchmarking. It should not be the IMF doing the benchmarking for us if we were doing our homework? And that means tossing our parochial blinders and looking far and wide as the ‘parable of the talents’ taught us? But basic human psychology, as the Harvard economist points out, says people don’t always follow logic!
 
One of my protégés in Bulgaria was invited to speak before an industry group, and he asked: tell me again why consumers keep buying branded products even when they are more expensive? And my response: the ego will always be bigger than the mind. And he would smile and repeated it, saying, that will be my topic sentence.

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