Sunday, November 30, 2014

“Bureaucracy must die . . .”

“There’s no other way to put it: bureaucracy must die. We must find a way to reap the blessings of bureaucracy—precision, consistency, and predictability—while at the same time killing it. Bureaucracy, both architecturally and ideologically, is incompatible with the demands of the 21st century.” [Bureaucracy Must Die, Gary Hamel, Harvard Business Review, 4th Nov 2014]

Given PHL’s cacique hierarchical system and structure, do we then have a prayer to be relevant in the 21st century? At every level of our bureaucracy power is exercised not necessarily for good but for ill as evidenced by our culture of impunity? Is it surprising then that we rank poorly in doing business? We can only pity the efforts behind raising PHL’s competitiveness. And we think a good salesman and good advertising will sell PHL? As marketers know, such idiocy has no place especially in the 21st century.

The solar system gave us the fundamentals of an “ecosystem” – i.e., that it is a synchronized system. And even Einstein would thus acknowledge that there is a Higher Being. Things don’t happen by accident, to paraphrase Speaker Belmonte. For example, while the CB is doing the right thing – “BSP grants full foreign voting rights in banks” – to attract FDI, if we do a rigorous benchmarking exercise and figure out why we rank poorly in this regard among others, the bottom line is we have yet to get our act together, and be in sync!

“It is the unchallenged tenets of bureaucracy that disable our organizations—that make them inertial, incremental and uninspiring.  To find a cure, we will have to reinvent the architecture and ideology of modern management . . . Architecture. Ask just about any anyone to draw a picture of their organization — be it a Catholic priest, a Google software engineer, a nurse in Britain’s National Health Service, a guard in Shanghai’s Hongkou Detention Center, or an account executive at Barclays Bank — and you’ll get the familiar rendering of lines-and-boxes. This isn’t a diagram of a network, a community, or an ecosystem — it’s the exoskeleton of bureaucracy; the pyramidal architecture of ‘command-and-control.’ Based on the principles of unitary command and positional authority, it is simple, and scaleable. As one of humanity’s most enduring social structures, it is well-suited to a world in which change meanders rather than leaps. But in a hyperkinetic environment, it is a profound liability . . . A formal hierarchy overweights experience and underweights new thinking, and in doing so perpetuates the past.” [ibid.]

“Ideology. Business people typically regard themselves as pragmatists, individuals who take pride in their commonsense utilitarianism. This is a conceit. Managers, no less than libertarians, feminists, environmental campaigners, and the devotees of Fox News, are shaped by their ideological biases. So what’s the ideology of bureaucrats? Controlism. Open any thesaurus and you’ll find that the primary synonym for the word ‘manage,’ when used as verb, is ‘control.’ ‘To manage’ is ‘to control’ . . . Managers worship at the altar of conformance. That’s their calling—to ensure conformance to product specifications, work rules, deadlines, budgets, quality standards, and corporate policies. More than 60 years ago, Max Weber declared bureaucracy to be ‘the most rational known means of carrying out imperative control over human beings.’ He was right. Bureaucracy is the technology of control. It is ideologically and practically opposed to disorder and irregularity. Problem is, in an age of discontinuity, it’s the irregular people with irregular ideas who create the irregular business models that generate the irregular returns.”

“As we learned with the Soviet Union, centralization is the enemy of resilience. You can’t endorse a top-down authority structure and be serious about enhancing adaptability, innovation, or engagement.”

But even ideology can be unlearned as the Vietnamese are demonstrating? “Vietnam has emerged as one of the fastest-growing economies in Southeast Asia. It has an open Foreign Investment Law, offering up to 100% foreign ownership . . . Open policies of Vietnam have brought about low trade barriers, fast custom clearances, and simple administrative procedures, thus, shaping a dynamic business environment for Vietnam nowadays. As of June, 2014, more than 16,300 FDI projects were active in Vietnam, pulling in US$238 billion. Manufacturers like Samsung Electronics Co., LG Electronics, Inc., Nokia Oyj, and Intel Corp., have set up operations in Vietnam, another option after China.” [Phoenix-like Vietnam, Floro M. Mercene, Manila Bulletin, 16th Nov 2014]

But how do we Pinoys keep pace with progress? Will Binay be the next president? And will PHL media continue with same old, same old? And so come the election of Binay, we will read more of the same? He will be the salesman-in-chief? And we will read more about PHL oligopoly? More specifically, business headliners will be Ayala, SMC, MVP, SM, Tan, among the chosen few? It is this picture that is our normal that has convinced the world that we simply don’t get it? Of course, given the global economic slowdown since the financial crisis of 2008, underdeveloped countries like us are being given the second if not the third look by investors, but as Vietnam and even Myanmar have demonstrated, we ought to lament that we are only getting the crumbs of these investments.

“Given the impoverished state of Philippine print and broadcast journalism today, there are not too many journalists I turn to for the nourishment of spirit and higher faculties . . . Which only makes more painfully obvious the pallid and insipid hogwash that is made to pass for journalism by those are best licking boots in high places rather that pontificating on issues far in excess of their less than modest intellectual endowments! Inelegant turns of phrase, non sequiturs strung together in some contemptible poor excuse for argument, bits of science artfully combined with voodoo and a generous dose of lower Philippine mythology—these are the morsels these quacks who pass themselves off for bona fide journalists regularly throw the way of their hapless viewership.” [Cheap shots (!),Fr. Ranhilio Aquino, Pensées, Manila Standard Today, 17th Nov 2014]

History and PHL fortunes would have been different if it was Padre Damaso – or a representation of the padre – that was hanged instead of Rizal? That’s more than a century ago yet it appears in 21st century PHL, Rizal’s currency endures? In the meantime, beyond the Age of Enlightenment and even the moon, man has tapped and explored Mars and Comet 67P!

Wednesday, November 26, 2014

“Development requires higher levels of productivity and capabilities”

“Poverty eradication is a desired outcome of development but its achievement is permanent only with the movement of a significant proportion of the population from traditional, subsistence jobs to productive, modern employment . . . Development requires not just higher levels of income, nutrition, education, and health outcomes but in the first place involves higher levels of productivity and capabilities. Higher levels of productivity and capabilities are possible only with structural transformation of the economy.”[‘International system’ works against development, Ben D. Kritz, The Manila Times, 17th Nov 2014]

This blog has talked about the imperatives of investment, technology and innovation as well as people, product and market development given my MNC background and development-work experience in Eastern Europe. And indeed can relate to the above treatise, i.e., that higher levels of productivity and capabilities within an enterprise are founded on said imperatives. And while industry can be the engine of the economy, government must: (a) create the environment and (b) erect the platform of an ecosystem. And it starts with good governance – which is a reflection of a people’s culture – the converse being a culture of impunity; while accelerating infrastructure development and opening (not closing) the economy to technology and investment especially in this day and age of innovation.

It is not rocket science if we look at how the Asian Tigers did it. But do we Pinoys think in terms of an ecosystem – or of personalities and hierarchies? Community sense and the common good [ergo, nation-building] has to be inculcated in Juan de la Cruz if we Pinoys are to have a chance of embracing “a shared context of values and beliefs”? Of course, the Asian Tigers had leadership to boot while in our case, we contributed two if not three to the list of most corrupt leaders?

“The association of development with poverty reduction created for the donor community the pride of place in economic policy in developing countries. But this place can be at the cost of reducing the responsibility of donor countries in helping to maintain an enabling international environment for development in trade, finance, human resource development and technology.” [ibid]

Certainly donor countries could have done a better job. But then again, that is why the Asian Tigers are to be admired. They knew where they stood and were able to leverage what the West had to offer. They demonstrated what the science of the mind calls the “hardy mindset,” which simply means that they realized it was incumbent upon them to be on the right side instead of waiting for others to change. And the hardy mindset would also characterize successful people . . . and explains why there are winners and losers!

The following would be of interest to us Pinoys. “As business educators [De La Salle University] in a Catholic institution, we have started to reflect upon the relevance of conventional business thinking in our present context. While concepts like profitability, productivity and competitiveness have taken center stage since the Industrial Revolution, we have become increasingly conscious about concepts such as social responsibility, humanistic management, and sustainability as well. More recently, we have even drawn inspiration from Catholic social teachings, which emphasize human dignity and the common good in the conduct of human affairs, including business.” [Rethinking business, Raymund B. Habaradas, The Manila Times, 17th Nov 2014

“Needless to say, these developments have led to some changes in the content of some of our business subjects. In the basic management course, for example, we have already introduced ‘multistream management,’ which is a marked departure from conventional management thought. While ‘mainstream management’ emphasizes profitability and productivity and prioritizes the interests of shareholders, ‘multistream management’ highlights the importance of various forms of well-being of different stakeholder groups, including their employees. This means that management must not only know how to develop the physical, material, and social well-being of their employees but their moral, emotional, spiritual, and aesthetic well-being as well.”

What about the hierarchical and bureaucratic character of Philippine business and industry? Does Catholic social teachings also mean reinforcing this character? For example: “Managers worship at the altar of conformance. That’s their calling—to ensure conformance to product specifications, work rules, deadlines, budgets, quality standards, and corporate policies. More than 60 years ago, Max Weber declared bureaucracy to be ‘the most rational known means of carrying out imperative control over human beings.’ He was right. Bureaucracy is the technology of control. It is ideologically and practically opposed to disorder and irregularity. Problem is, in an age of discontinuity, it’s the irregular people with irregular ideas who create the irregular business models that generate the irregular returns.” [Bureaucracy Must Die, Gary Hamel, Harvard Business Review, 4th Nov 2014]

“In this environment, control is a necessary but far from sufficient prerequisite for success. Think of Intel and the extraordinary control it must exert over thousands of variables to produce its Haswell family of 14-nanometer processors. This operational triumph is tempered, though, by Intel’s failure to capitalize on the explosive growth of the market for mobile devices. More than 60% of the company’s revenue is still tied to personal computers, and less than 3% comes from the company’s unprofitable ‘Mobile & Communications’ unit.”

“Unfettered controlism cripples organizational vitality. Adaptability, whether in the biological or commercial realm, requires experimentation—and experiments are more likely to go wrong than right—a scary reality for those charged with excising inefficiencies. Truly innovative ideas are, by definition, anomalous, and therefore likely to be viewed skeptically in a conformance-obsessed culture.”

Can Philippine business and industry overcome its bureaucratic and hierarchical character?

“Hundreds of consumers standing in line at your local Apple store. Thousands of protesters rushing to flood the streets of Kiev, Istanbul, or Hong Kong. Millions of fireflies blinking on and off in complete unison. Even the unconscious beating of your heart. These are all synchronized systems.” [Get your organization to run in sync, Greg Satell, Harvard Business Review, 5th Nov 2014]

“So it is curious that the institutions we build—and put so much conscious effort towards—are so rarely able to synchronize. Despite our best efforts, most organizations operate disjointedly. Fortunately, research into network science has begun to shed light on how synchronization happens and how we can make our enterprises function more effectively. Three elements are key. 1. Small groups. Most leaders tend to think on a macro level. That shouldn’t be surprising, because our efforts tend to be focused on our responsibilities. So if we’re responsible for an entire organization, then we tend to think in those terms and act accordingly. However, actions are influenced at the grassroots. As Solomon Asch showed in his famous conformity experiments, we tend to adopt our views from our peer group. In fact, his research showed that we conform to those around us even when their views are demonstrably untrue.”

“2. Loose connections. Those close to us tend to have the same limited knowledge we do. They have similar experiences, are confronted with similar challenges and share many of the same personal relationships. So while our views tend to correspond to our peer group’s, the information most valuable to us usually lies outside of it . . . It is the combination of tight circles and loose connections that drives high performing organizations.  A study of star engineers at Bell Labs found that the most accomplished ones worked in a close-knit group, but also frequently reached out to people outside of it.”

“3. Shared context. In nature, the purpose of a system is hardwired. Nobody has to tell a pacemaker cell in the heart what it is supposed to do. However, in organizations it is incumbent on leaders to set direction [i.e., strategic intent.] Southwest Airlines has prospered by being ‘the fun low cost airline’ and seeks to be nothing else. Google strives to ‘organize the world’s information.’ Apple creates products that are ‘insanely great.’  It is the mission that drives the strategy, because that’s what defines what winning looks like. Yet a clear mission, although important, is not enough. There also must be a shared context of values and beliefs.” Simply put, in PHL, we can’t get our act together given parochialism and crab mentality in a hierarchical cacique system and structure?

Sunday, November 23, 2014

“The power of distrust”

“Most of us did not appreciate the corrosive power of distrust, and how long it would take to heal the mental scars caused by it.” [The Legacy of Fear, David Brooks, The New York Times, 10th Nov 2014] Twenty-five years after the fall of the Berlin Wall, the biggest surprise is how badly most of the post-communist nations have done since. There was a general expectation back then that most of these countries would step out from tyranny and rejoin the European club of prosperous nations.”

Does it explain why People Power in PHL didn’t turn us around despite bravely standing in front of those tanks? And after Marcos we would contribute one if not two more to the list of most corrupt leaders? Today we’re even in two different camps: is Binay a sinner or a saint? And we are reminded Binay was one of those Cory appointees supposedly to undo the sins of Marcos rule? Fast-forward to today, what about Enrile or Revilla or the other Estrada? Simply put, we’re back to square-one?

“These failures include Ukraine, Georgia, Bosnia, Serbia and others — about 20 percent of the post-communist world . . . These are countries with at least three to four wasted generations. At current rates of growth, it might take them some 50 or 60 years — longer than they were under communism! — to go back to the income levels they had at the fall of communism.” [ibid.]

And there are “nations like Russia and Hungary that continue to fall steadily behind the West — about 40 percent of the post-communist world by population. The third group includes those with growth rates between 1.7 percent and 1.9 percent. These countries, like the Czech Republic and Slovenia, are holding steady with the capitalist world. Finally there are the successes, the nations that are catching up. This group includes Poland, Azerbaijan and Kazakhstan. But . . . many of these nations are growing simply because they have oil, or something valuable to dig out of the ground. There are only five countries that have emerged as successful capitalist economies: Albania, Poland, Belarus, Armenia and Estonia.”

“Why did some countries succeed while others failed? First, leaders in some countries simply made better political decisions. Most of these countries enacted economic reforms, like deregulating prices and privatizing nationalized companies. Some nations like Estonia and Poland enacted reforms radically and quickly, while others tried to do them gradually or barely at all — with expensive security blankets for protected interests. The quick and radical group saw a slightly bigger output drop over the near term but much more prosperity over the long run.”

“Then there is the level of institutions. Many Western advisers focused on the headline reforms — writing new constitutions and creating stock markets. But . . . the Poles and Ukrainians . . . lacked the basic building blocks we take for granted. Before you have a stock market, for example, you have to have publicly available data about companies, credit records and accounting systems. Finally, and most important, there is the level of values. A nation’s economy is nestled in its moral ecology. Economic performance is tied to history, culture and psychology.” 

And even the Vatican struggles with change.

“Change is rattling the hierarchy of the Roman Catholic Church, as the American bishops hold their annual fall meeting here this week. The vast majority of them were appointed by Francis’ two more conservative predecessors, and some say they do not yet understand what kind of change Pope Francis envisions and whether it is anything more than a change in tone.” [U.S. Bishops Struggle to Follow Lead of Francis, Laurie Goodstein, The New York Times, 11th Nov 2014]

“There is no bishop who is standing up and being the real leader of a Francis faction . . . They grew up in conservative families, went to conservative seminaries and have been told not to talk to theologians who are creative because they’ve been labeled heretical. Now Francis is saying let’s go in a different direction and let’s have a discussion. The last two pontificates, there was no room for discussion, and this makes them nervous and confused.”

If in the church – an enterprise supposedly for good – change is not a given, what more of PHL where there is so much distrust? And how does the brain work? The scandals in the Church run the gamut, you name it. And the scandals in PHL run the gamut.

“Research on the brain is surging. The United States and the European Union have launched new programs to better understand the brain. Scientists are mapping parts of mouse, fly and human brains at different levels of magnification. Technology for recording brain activity has been improving at a revolutionary pace . . . Yet the growing body of data — maps, atlases and so-called connectomes that show linkages between cells and regions of the brain — represents a paradox of progress, with the advances also highlighting great gaps in understanding.” [Learning How Little We Know About the Brain, James Gorman, The New York Times, 10th Nov 2014]

In other words, efforts to understand the brain have yielded little. That means there will continue to be winners and losers. And in the case of PHL, can we be a developed economy in 36 years [or by 2050] if countries like “Ukraine, Georgia, Bosnia, Serbia and others . . . might take . . . 50 or 60 years — longer than they were under communism! — to go back to the income levels they had at the fall of communism”?

I’ve lived and worked with Eastern Europeans for most of the last 11 years and outside the group of people I’m involved with, my sense is [what my friends call] “the mentality” hasn’t really changed. And what would explain that in our limited group, which can be likened to an “experimental group,” people are leaving “the mentality” behind?

[But why in PHL we are where we are 28 years after People Power?]

My Eastern European friends resemble an experimental group because they categorically made the choice to traverse a totally different path. And so there is no distrust within the organization and among the people. And those who cannot embrace its vision and its ways have gone.

“After the years of disjointed neediness, the iron was beginning to enter her soul and she was capable of that completely justified assertion of her own dignity. You might say that this moment was [George] Eliot’s agency moment, the moment when she stopped being blown about by her voids and weaknesses and began to live according to her inner criteria, gradually developing a passionate and steady capacity to initiate action and drive her own life.” [The agency moment, David Brooks, The New York Times, 14th Nov 2014]

“So many people are struggling for agency. They are searching for the solid criteria that will help make their own judgments. They are hoping to light an inner fire that will fuel relentless action in the same direction . . . Agency is not automatic. It has to be given birth to, with pushing and effort. It’s not just the confidence and drive to act. It’s having engraved inner criteria to guide action. The agency moment can happen at any age, or never.”

If agency is not a given for individuals indeed it’s a much greater challenge for economies, peoples and nations. And that’s probably why in public administration, the idealists would make reference to MNCs for their ability to transcend borders, markets and cultures . . . and thrive. Of course, our ideologues want to think of MNCs as strictly Western. Yet we want to talk about the decline of the West, the Asian Tigers [and the Samsungs of the world] having given them a run for their money. Still, we take it for granted because our success model is that of an oligopoly. And so we value plutocracy . . . and political patronage . . . and crony capitalism . . . a vicious circle that we won’t shake off until we attain our own agency moment?

Wednesday, November 19, 2014

“Paki” system equates to rebid

Does that sound right or does it explain why the government’s PPP initiative – aka PHL infrastructure development that has been mired in rebids and controversies – leaves much to be desired? Justified or not, the preponderance of evidence especially to foreign investors translates to the issue of PHL chronic inefficiency, at best, or shady and fraudulent governance, at worst? But in our culture, compromise is a given? In other words, a compassionate culture must have a wide safety net? And how do we explain our culture of impunity? Did our “paki” system open Pandora’s Box?

Whether the accused or the accuser is errant or not, our top 3 officials – the president, the vice-president, the senate president – are all embroiled in the one common issue of transparency! And to make things truly opaque, beyond the “paki” system we throw in crab mentality to boot? Indeed, self-governance is beyond us?

The evidence: we get the least foreign direct investments. Because the global community is well aware that we are community-sense challenged and where personality trumps policy and why PHL is a “badly engineered” enterprise? That we have yet to emerge from the dark ages? How many contracts with foreign entities have we unilaterally cancelled – because we simply wanted the government to save money? But credibility is not on our side – given the Marcos loot and the two other presidents that made it to the list of world’s most corrupt leaders, and more recently the Napoles case that saw three senators incarcerated?

Did we not wonder when Vietnam and more recently Myanmar attracted more FDI? But then again, we are simply protecting our own? How out of sync are we with the rest of the world? Sadly, we like to invoke the high road because we have always been guided by our faith? That the West, if not the rest of the world, doesn’t get it?

Of course we’re a proud people. I also see that in my Eastern European friends. Over the last 11 years they have felt their egos crushed numerous times because they have a mind of their own. Yet they wanted an outsider to be around to tell them whenever they simply don’t get it. “We’re new to free enterprise, we need a mirror to give us a dose of reality.” Still they’re human, they have egos that are deflated whenever they realized they simply misread something.

In the case of PHL we don't like a mirror – because our elite class and plutocracy rule the nation and from their vantage point we believe we know best? But is that why we've been running away from competition that is fair and square? The evidence: we’ve invoked “Filipino first” to shut competition out? Of course we have created a few billionaires that can now buy brands and businesses overseas. But they grew up in a business environment that was protected? And during the period when our billionaires were gaining ground, our neighbors were zooming pass PHL?

How? In the same manner that Vietnam and Myanmar have shown us, the Asian Tigers seized Western investment and technology. And not surprisingly, both Lee Kuan Yew and Mohamad Mahathir lectured us to follow suit even when none of us liked to embrace Western culture. Early on Deng Xiaoping had sought their advice and not long after Deng himself pursued Western investment and technology.

In the process a Singaporean scholar concluded that the Asian Tigers have in fact traversed the trail blazed by the Europeans that started with the Age of Enlightenment. And which our own Jose Rizal espoused.

What is the point? Juan de la Cruz continues to struggle with these two elements that have played havoc in PHL human development: our “paki” system, which has undermined character-building as evidenced by our culture of impunity; and our inward-looking bias, which has turned us into a virtual turtle that sees retreating into our shell as a positive trait – even as the rest of the world has left us behind?

The evidence: “The Philippines recorded a trade deficit (with) most of the Asean countries. The Philippines’ role in internal Asean production sharing is very much limited. Due to the underdevelopment of basic industries materials and industrial machinery, the Philippines imports commodities, base materials and automobile parts and components from other Asean countries,” [Park Bun Soon, a professor at the Hongik University in South Korea] explained in his paper. The Philippines . . . was one of the lowest recipient countries of foreign direct investments among Asean members. Such investments were considered almost negligible compared to what the Philippines’ neighbors were receiving. Last year, FDI inflow in the country was the lowest in the region at $3.86 billion.” [PH performance ranked ‘poor’ in Asean region, Amy R. Remo, Philippine Daily Inquirer, 6th Nov 2014]

Sunday, November 16, 2014

The best minds . . .

Bring a pot of gold? “[IBM chairwoman and CEO Ginni Rometty] on Monday dropped her profit target of $20 a share for next year and abandoned the five-year profit targets . . . First introduced in 2007, the five-year ‘road map’ was a key factor in Mr. Buffett’s decision to invest in the company, prompting him to say that he did not know of ‘any large company that really has been as specific on what they intend to do and how they intend to do it as IBM.’ ” [IBM shares tumble as profits and sales fall, Financial Times, 20th Oct 2014]

“The road map is dead, which is a good thing . . . They’ve got to remake the company. It’s a multiyear effort, there’s still a lot of pain to get through . . . Only about a third of the company’s revenues come from growing parts of the tech market, with the rest stemming from older technologies that are facing contraction . . .”

But IBM’s got the best minds in the private sector? International Business Machines Corp. (IBM) amassed more U.S. patents than any other company for the 21st straight year, helped by its push into big-data services, which glean insights by mining large quantities of information.”[Alex Barinka, Bloomberg, 14th Jan 2014] “IBM’s 6,809 patents in 2013 scored an annual record, the company said today in a statement. With inventors from 41 countries, more than 31 percent of the patents came from overseas. South Korea’s Samsung Electronics Co. and Tokyo-based Canon Inc. (7751) ranked second and third. While computer-related patents can take almost three years to process, the annual list shows where companies are seeking growth opportunities.”

Another American iconic brand, GM, doesn’t seem to be doing better: “Recalled GM cars remain unrepaired,” The New York Times, 3rd Nov 2014. Disclosure: In my old MNC company we had a technology center whose campus would embarrass the biggest PHL universities – well-manicured and all – and where we had a helipad to ferry folks to and from our Midtown Manhattan headquarters. We had PhDs across every science directly/indirectly related to the business and we had hundreds of them. Yet we still partnered with the best universities and entrepreneurial R&D labs. In a globalized world, to be inward-looking is the kiss of death?
I was relating this to my Eastern European friends while we were in New York recently and wanting to tap into the US science and technology community – and we did – as a way forward following a string of product development sessions. “Born in New York,” was how we labeled our efforts, only to find out that Tiffany’s shortly after would advertise the exact tagline. It’s a free country!

All the foregoing came to mind as I read: “Phl Economic Society holds 52nd annual meet,” The Philippine Star, 9th Nov 2014. “The Philippine Economic Society (PES) will gather the country’s top economic policymakers, market leaders, the academe, civil society and students to discuss and debate the theme ‘Forging Ahead: The Philippines as a Developed Economy in 2050’ . . . The theme addresses the forecasts of financial institutions such as HSBC and Goldman Sachs, which included the Philippines in their list of ‘new emergers’ and projected the Philippines rise to become one of the largest economies in the world in the next few decades . . . In addition to the plenary presentations, over 40 research papers will be read in 15 parallel sessions . . .”

And the last line reminded me of the then PhD candidate that I mentored [and she confidently hurdled her dissertation defense where I was proudly present] and we read through tons of research papers remotely from wherever either of us was courtesy of the digital world. “We’re doing this not only to see you earn your PhD but to see you succeed in your real-world efforts.” She didn’t disappoint. She moved from an MNC subsidiary to a headquarters global project and then was appointed regional manager covering several countries.

And what are we reading in PHL media? “Congress demands updated energy dev’t plan,” Myrna Velasco, Manila Bulletin, 8th Nov 2014.Investors and array of stakeholders have been batting for a ‘more concrete energy plan’ that must be laid down by the department so they can also be guided forward on how to time their planned projects . . . The 2012-2030 PEP is not only outdated, but even the policy directions and investment terrains are not as coherent.”

And there’s more: “Phl growth seen threatened by impending power crisis,” Iris C. Gonzales, The Philippine Star, 6th Nov 2014. “The solid pace of the country’s economic growth is at risk from the critical energy supply, a global energy expert said in a forum organized by the American Chamber of Commerce of the Philippines . . . The is going to be the powerhouse in Southeast Asia but high growth makes energy supply a problem, said Daniel Yergin, a Pulitzer awardee during the AmCham forum titled, ‘Quest for Energy Security: Perspectives for 2030 and Beyond – A Focus on the Asean Region.’ ”

And from the Europeans: “ADVICE FROM THE EUROPEAN UNION: Trade facilitation, customs modernization drive trade and growth,” The Manila Times, 6th Nov 2014. “The benefits of trade facilitation are enormous and might even be more important than a further reduction of import tariffs! For example, revenue loss from inefficient border procedures is estimate to be above 5% of GDP in some countries. Implementing the trade facilitation agreement that was agreed to in Bali last year would support trade in goods by improving transparency, streamlining customs procedures and eliminating red tape. Some studies (Peterson Institute) estimate the benefits to global GDP of such an agreement to be as high as US$ 960 billion. The OECD in its turn estimated that trade cost reductions from the Agreement would be over 15% for lower middle income countries like the Philippines. These benefits would come from measures related to documentation, automation and information availability as well as other simplifications.”

Aren’t these very serious indictments of Juan de la Cruz? If we can miss the simple, how do we do the complex? For example, beyond strategic planning which we seem to embrace is the imperative of problem solving and execution. And problem solving starts with problem-definition. And the science of the mind says we can't be spot on in our problem-definition if we carry our biases to our problem-solving. [Recall how ideologues brought gridlock to Washington.]

Problem solving is undermined when we defer to sacred cows, for instance, because it limits the reach of the brain. The evidence: PHL ranks poorly in innovation and creativity. Even design thinking in today's age of innovation is about problem solving. And the design school at Stanford demonstrates that. And their starting point is to assemble a cross-discipline group, which goes back to the egalitarian principle of openness, transparency and diversity. But we Pinoys like to talk among ourselves especially the elite class and plutocracy? Have we in fact subordinated the values of freedom and democracy to our culture of impunity?

And are we more likely to get it wrong from the get-go because the first imperative in defining a problem is to empathize with those facing a problem or a need? And understandably those in the elite class will define a problem from their perspective? For example, to empathize with a housewife is to feel for her and her needs (for user-friendly products for the home.) And if we translate that to the challenge of poverty, defining the problem – or to empathize with the poor – is not about giving alms. It is about rapidly developing a functioning and growing economy – given our per capita economic output is that of a poor impoverished nation. And thus alms-giving is unsustainable as we’ve witnessed with CCT – and is in fact patronizing and reinforcing of subservience and hierarchy.

It is also not about capping the returns on capital and spreading them to income earners. [If we trace the dynamics of investment, it has a far greater multiplier effect than consumption, and so capital – which is risk-taking, by definition – generates greater returns.] That may apply to Wall Street where because of greed – expressed in financial products designed to be opaque as opposed to transparent – the global economy imploded. While in the case of PHL, we simply shot ourselves in the foot, stunted economic development by deferring to our cacique masters. While Singapore, Malaysia and Deng Xiaoping solicited and embraced “Western money and technology.” In a globalized world, to be inward-looking is the kiss of death?

We can assemble our best minds but if we keep taking problem-definition for granted we will be prescribing cures to a misdiagnosed disease? See IBM and GM above.

Thursday, November 13, 2014

“Feudal at their core”

“Most organizations are still feudal at their core . . .” [The Core Incompetencies of the Corporation, Gary Hamel, Harvard Business Review, 31st Oct 2014] “The performance of any social system (be it a government, a religious denomination or a corporation), is ultimately limited by the paradigmatic beliefs of its members; by the core tenets that have been encapsulated in creeds and reified in structures.”

“Reflect for a moment on the development of constitutional democracy. Ancient and medieval societies were predicated on the ‘divine right of kings.’ The sovereign was answerable only to God and royal edicts could not be countermanded. Society was ordered in descending ranks of royal privilege and everyone from dukes to peasants ‘knew their place.’ To most of those who lived in this pre-democratic world, the idea of self-government would have been ludicrous, if it could have been imagined at all. Thankfully, a few brave souls like William Penn, Thomas Paine, and Patrick Henry not only imagined self-government, but devoted their lives to making it a reality. Today it’s the imperial alternative that’s unthinkable.”

“Until we challenge our foundational beliefs, we won’t be able to build organizations that are substantially more capable than the ones we have today. We will fail to build organizations that are as nimble as change itself. We will fail to make innovation an instinctual and intrinsic capability. We will fail to inspire extraordinary contributions from our colleagues and employees.”

“Most organizations are still feudal at their core, with a raft of institutionalized distinctions between thinkers and doers—between the executive class and everyone else. And most leaders still over-value alignment and conformance and under-value heterodoxy and heresy. Until this changes, our organizations will be substantially less capable than they might be.”

If most organizations in the private sector can be feudal at their core, what more of nations? “The protests against [President Blaise Compaoré] were provoked by his attempt to change the Constitution so he could run again in elections next year. At one point, he seemed on the brink of succeeding in securing support from lawmakers, but protesters surged into the Parliament building on Thursday and set it ablaze, forestalling a vote.” [Military Backs an Interim President, but Burkina Faso Remains Unsettled, Herve Taoko and Alan Cowell, The New York Times, 1st Nov 2014]

Sound familiar? Did we not entertain the possibility of President Aquino running for another term? Having done business in Africa, it felt like yesterday when I was in the Ivory Coast and met business leaders from Burkina Faso and understood very quickly how government and industry there were intertwined. And I was glad it was the first and the last time.

We’re supposed to be better than Burkina Faso? [But will the Binays rule Makati longer than Compaoré did?] And does it bother us to read something like this? “Almost in chorus, players in the energy sector are emphasizing that ‘entering a competitive sphere with ASEAN neighbors’ may have been desirable – ‘but that is only if we know how to address our own problems first before we go out in the field to compete.’ Sure, there are feasible laws and policies governing various segments of the industry, but various stakeholders averred “we are terribly failing in enforcements.” [PH energy sector: Will it be left out in the AEC (?), Myrna Velasco, Manila Bulletin, 2nd Nov 2014]

“In many instances, investors in the Philippines were shocked with drastic changes or flip-flopping in policies that are being triggered either by ‘political pressures’ and even judicial interventions.” Does that come close to being feudal if not exactly? But the following line makes the point as it relates to PHL? “Society was ordered in descending ranks of royal privilege and everyone from dukes to peasants ‘knew their place.’ ”

Not surprisingly, “The Philippines appears to have stalled in its quest to improve its business environment. After being hailed as the most-improved economy in the 2014 World Bank survey on the ease of doing business, the country’s ranking slipped in 2015 (under a new methodology). The findings, reported in the World Bank’s flagship publication ‘Doing Business 2015: Going Beyond Efficiency,’ indicate how hard it is still for businesses to operate in the Philippines compared with more developed countries.” [Stalled, Editorial, Philippine Daily Inquirer, 4th Nov 2014]

And there’s more: “Why do people run for public office nowadays? Do you really believe they still have the compassion to lead and serve? Sad to say, only a few are sincere. Majority are there for the money. In short, many public officials are fueled by kickbacks. They thrive on government funds.” [Kickbacks are what they live for, Sara Soliven DE Guzman, AS A MATTER OF FACT, The Philippine Star, 3rd Nov 2014]

That is some brave journalist given, “In an extended discussion on the ‘Terrors of a Free Press,’ [Dean and currently a co-faculty member in the UP College of Mass Communication Luis V. Teodoro] pointed to scary statistics on journalists killed in various parts of the country, while many more of them are threatened with being jailed or oppressed. “Living dangerously” has come to describe the journalistic profession, and Dean Teodoro underscores the need for government for a tough policy to protect journalists.” [Know the higher calling of journalists, Dante M. Velasco, Philippine Daily Inquirer, 2nd Nov 2014]

Are we frozen and unable to fix what’s wrong with PHL? For example, why can’t we fix power supply? We defer to plutocracy? We worry about the poor? They will forever be poor if we don’t fix PHL because PHL is one humongous problem – as in we lag the region in investment, infrastructure and competitiveness!

Can we learn something from the church? “There were gasps and tears at Holy Rosary Church in East Harlem. At Sacred Heart in Mount Vernon, congregants shared mournful embraces. And at Our Lady of Peace on the East Side, parishioners pledged a fight. Across the Roman Catholic Archdiocese of New York, a day of reckoning arrived on Sunday, as Cardinal Timothy M. Dolan announced how scores of parishes would be affected by the largest reorganization in the history of the archdiocese.”

“I can well understand the frustration, the anger, the confusion of our people, and I apologize for it, because I am the agent of it . . . But this is about the future, this is about strength and renewal, and we will get through this.” [Heartache for New York’s Catholics as Church Closings Are Announced, Sharon Otterman, The New York Times, 2nd Nov 2014]

Disclosure: At my old MNC company I was involved in restructuring. Restructuring, as part of a strategic initiative to attain sustainable profitable growth, will yield the common good. Even with my Eastern European friends where as a first initiative we automated the packing lines in the factory; yet as we pursued sustainable profitable growth we increased the employee population five-fold. And as we went west attracted highly qualified talents from Western MNCs, i.e., they realized meritocracy isn’t confined to the West, but where we've tapped Western science and technology. Our manufacturing facilities today are state-of-the-art, and we’ve been training people constantly not only in the original location – where we’re among the major employers – but in different parts of the world.

There is no feudalism. Nor political patronage and crony capitalism. It’s free enterprise as it's meant to be, competitive and progressive. It’s a commitment to drive and sustain a high-commitment team – not a hierarchical structure weighed down by bureaucracy – no matter the size. For example, we’re at the height of this year’s budget review and my Bulgarian friend is not even in the meetings. And I would just drop in every now and then. The people own the budget process and plans so they are committed to deliver them – and, of course, they know what’s in it for them.

In PHL we remain feudal at the core – to be egalitarian being too foreign? To be egalitarian is what human development is about. While the science of the mind says poverty reduction efforts make us feel good even when we’re perpetuating our hierarchical cacique system and structure. If we haven’t noticed yet, both as an economy and in human development we’re laggards? And who will fix our sorry state?

Tuesday, November 11, 2014

Change needs a platform, not just a program

And better yet, if it is engineered as in engineering: the action of working artfully to bring something about. Or engineer: skillfully arrange for (something) to occur.” [Google]. And from Wikipedia: Engineering (from Latin ingenium, meaning “cleverness” and ingeniare, meaning “to contrive, devise”) is the application of scientificeconomic, social, and practical knowledge in order to inventdesign, build, maintain, and improve structures, machines, devices, systems, materials and processes. The discipline of engineering is extremely broad, and encompasses a range of more specialized fields of engineering, each with a more specific emphasis on particular areas of applied science, technology and types of application.”

Do they explain why the world appears to be in a funk? Mired in Mediocrity,” Vanessa Friedman, The New York Times, 31st Oct 2014.“Neda’s Balisacan: PHL must work hard to diversify growth drivers,” Bianca Cuaresma, Business Mirror, 1st Nov 2014. “The embattled Pope Francis,” Elfren S. Cruz, BREAKTHROUGH, The Philippine Star, 2nd Nov 2014. “Good stories are better news,” Babe Romualdez, BABE’S EYE VIEW, The Philippine Star, 2nd Nov 2014. “Binay et al. warned on ill-gotten wealth,” Federico D. Pascual Jr., POSTSCRIPT, The Philippine Star, 2nd Nov 2014. Identifying the Biases Behind Your Bad Decisions,” John Beshears and Francesca Gino, Harvard Business Review, 31st Oct 2014. PH to focus on economic issues in APEC Summit,” Genalyn Kabiling, Manila Bulletin, 31st Oct 2014.

Is it any wonder why Google hires tons of engineers? One thing I noted when I first arrived in Eastern Europe was the abundance of engineers and quants among the people that invited me. And I thought they will make their mark. I remember asking if they had the gross margin numbers for their different products and everyone around the table downloaded them by brand, by product and by SKU. And the numbers revealed why they were unprofitable thus the risk they faced – and why they were seeking help. They were born and raised socialists, the profit motive was not instinctive. “And first things first: we shall focus on driving margins; and ideally in this business, so that you are able to compete in the marketplace, is to get to 50 margins.” And their jaws just dropped!

Change needs a platform, not just a program. “Transformational-change initiatives have a dismal track record. In 1996, Harvard Business School professor John Kotter claimed that nearly 70 percent of large-scale change programs didn’t meet their goals, and virtually every survey since has shown similar results. Why is change so confounding?” [Build a change platform, not a change program, Gary Hamel and Michele Zanini, McKinsey & Company, October 2014]

“In most organizations, change is regarded as an episodic interruption of the status quo, something initiated and managed from the top. The power to initiate strategic change is concentrated there, and every change program must be endorsed, scripted, and piloted before launch. Transformational change, when it does happen, is typically belated and convulsive—and often commences only after a ‘regime change.’ What’s needed is a real-time, socially constructed approach to change, so that the leader’s job isn’t to design a change program but to build a change platform . . .”

In other words, if in the private sector transformational change has had a dismal track record, what more in the public sector and the bigger structure of the government – and more so an economy and a nation? Coming from the private sector and having been involved in such initiatives, I can relate to said reality. And thus it gives me the patience to stay with this blog, now going through its sixth year.

And as my Bulgarian friend commented when he opened the company’s budget review process very recently, that 10 years ago I made the point that “brand management is general management” – and it was a fitting transition statement that I used to wrap up the two-day exercise: “10 years from now the team will still make the point that execution is a state of mind.” That it was nice to listen to everyone proudly presenting their plans yet “The best laid schemes of mice and men often go awry” [Robert Burns]. And thus went on to discuss the fundamentals of the business for the umpteenth time using real world examples – from their own markets – of do’s and don’ts.

“WELCOME to the ‘new mediocre.’ It’s not quite the New Look, or the New Deal, but it is the new normal. At least according to Christine Lagarde, managing director of the International Monetary Fund, who coined the term a few weeks ago. She was referring to the global economy, of course, which she thought could use a jolt lest it ‘muddle along with subpar growth,’ but her words, uttered during a relatively small-scale speech at Georgetown University’s School of Foreign Service, have had an impact far beyond the school’s borders and the world of economists (though said economists were very het up about it), reaching into the Twitterverse.” [Mired in Mediocrity,” Vanessa Friedman, The New York Times, 31st Oct 2014.]

“[T]he Philippines was one of the leading candidates of being a manufacturing investment hub of Japanese investors. However, subsequent political unrest blew that opportunity . . . This time, as the country becomes an outlier in terms of growth comparable to its Asian peers . . . the Philippines must grab this opportunity to finally ramp up its foreign direct investment  numbers.” [“Neda’s Balisacan: PHL must work hard to diversify growth drivers,” Bianca Cuaresma, Business Mirror, 1st Nov 2014.]

“By now the message from decades of decision-making research and recent popular books such as Daniel Kahneman’s Thinking, Fast and Slow should be clear: The irrational manner in which the human brain often works influences people’s decisions in ways that they and others around them fail to anticipate. The resulting errors prevent us from making sound business and personal decisions, even when we’ve accumulated abundant work experience and knowledge.” [Identifying the Biases Behind Your Bad Decisions, John Beshears and Francesca Gino, Harvard Business Review, 31st Oct 2014]

“What’s the solution? Behavioral economics — the study of how people make decisions, drawing on insights from the fields of psychology, judgment and decision making, and economics — can provide an answer. Since it is so difficult to rewire the human brain in order to fundamentally undo the patterns that lead to biases, behavioral economics advocates that we accept human decision-making errors as given and instead focus on altering the decision-making context in ways that lead to better outcomes. . . [I]nsidious biases are often the main cause of ineffectiveness in organizations. But they also highlight that knowing about the existence of these biases and how they operate can lead to effective solutions to organizational problems.”

“President Aquino will . . . focus on pushing for closer regional economic cooperation as well as highlight the importance of good governance and structural reforms to sustain growth. . . The agenda is like shaping the future through Asia Pacific economic partners so it’s really all economic.” [PH to focus on economic issues in APEC Summit, Genalyn Kabiling, Manila Bulletin, 31st Oct 2014]

The following line should alarm us: “highlight the importance of good governance and structural reforms to sustain growth.” Why? Do we have the credibility to speak to these reforms? “A national embarrassment waiting to happen,” Francis Ed Lim, Philippine Daily Inquirer, 31st Oct 2014. “Sometime in 2015, the Philippines will host the first-ever awarding ceremonies for the winners in the Asean Corporate Governance Scorecard. Top publicly-listed companies (PLCs) in the Asean will be recognized based on their compliance with international best practices, following the OECD corporate governance principles. . . There appears to be a big problem for Philippine PLCs. If the latest Country Reports and Assessments (2013-14) is any indication, none of our PLCs will receive an award.”

“IMF says Phl should focus on key structural reforms,” Kathleen A. Martin, The Philippine Star, 27th Oct 2014. “The story of the Philippines has improved in the last 10 years and something very striking is that growth has been domestic-led . . . the country still lags behind other economies in Asia in terms of investments, infrastructure, and even in competitiveness.”

Beyond the issue of credibility re good governance and structural reforms, do we in PHL have the platform for change when “the country still lags behind other economies in Asia in terms of investments, infrastructure, and even in competitiveness”? Should we focus on first things first? What platform do we need to rapidly erect? For example, where are we in the power sector? “Sadly for now, the prospects are not that bright.” [PH energy sector: Will it be left out in the AEC (?), Myrna Velasco, Manila Bulletin, 2nd Nov 2014]