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Volume 18, Number 3/2005 37

Achieving Business Success by Developing Clientsand Community: Lessons from Leading Companies,Emerging Economies and a Nine Year Case Study

Mariano BernárdezMBC Consulting Co.

ABSTRACT

Empirical evidence and recent revi-sions of conventional business doctrineindicate that companies that actively

promote social performance and devel-op their clients’ markets and skills aspart of business strategy have a betterchance of achieving sustainable profit-ability and growth than those that donot. This article discusses how land-mark companies, emerging economies,and in particular a Latin Americancompany sustained success over long

periods of time by developing socially-focused strategies. By applying the Megaplanning methodology to the de-

velopment of clients and the social environment during a three-year period,an Argentinean refinery developed itslocal and regional market, increasedits revenues and market share andreduced turnover and costs generatedby social conflict, outperforming itsprevious conventional, Macro-focusedbusiness strategies.

The social dimension is a survival

dimension. The enterprise exists in a

society and an economy. Within an

institution, one tends to assume that

the institution exists in vacuum. And

managers inevitably look at their

business from the inside.

—Peter Drucker (1989)The New Realities

IntroductionIs running a profitable business

incompatible with doing social good?Should businesspersons and man-agers stay exclusively focused onmaximizing quarterly results in thebelief that what is best for their stockis best for the long term survival andgrowth of their companies? Shouldperformance and managementconsultants “stay out of trouble” byconfining their work to improving ex-

isting process efficiency and resultsinside their client organizations?

Nowhere do these concepts moreurgently require a revision thanin addressing the challenges andunique opportunities created bythe emerging economies that char-acterize the beginning of the 21stcentury.

This article will try to respond tothese critical questions by analyzingcurrent economic and social data,the experiences of groundbreakingcompanies such as Henry Ford’s andthose in today’s digital India, and anine-year case of a Latin Americancompany.

Conventional Wisdom, Originsand Consequences

Mainstream business admin-istration theory has followed an

Performance Improvement Quarterly, 18(3) pp. 37-55



38 Performance Improvement Quarterly

“inside-out” planning tradition. Withfew exceptions (Drucker, 1985, 1995;Hope & Hope 1995; Kaufman, 1996,1998, 2000; Kaufman, Corrigan, &Johnson, 1969; Kaufman & English,1976, 1979; Kaufman & Thomas,1980), the performance improvementand management literature has fo-cused more on discussing internaltactics and techniques for improvingproducts, processes, quarterly profitand market share than on creatingand exploring external strategies todeveloping markets, clients and sus-tainable profitability.

The traditional business lit-erature (Friedman, 1970) considerssocial and environmental programsmore as defensive strategies thatinsure companies against potentialliabilities, rather than as activeingredients of the business formulato achieve sustainable growth andbenefits. Viewing business profit asincompatible with doing social goodsprings from a tradition of demon-izing for-profit enterprise that goesback to sources as diverse as thescholastic and religious thinking of the Middle Ages (Aquinas, 1273) andthe economic theories of Thomas Mal-thus and Karl Marx in the 18th and19th centuries (Weber, 1920, 1958).

Challenging this traditional di-chotomy, comparative global statisticson more than 120 countries show thatthose that develop entrepreneurialeconomies based on for-profit enter-prise clearly outperform those that donot in all indicators of social progress,well-being, stability and quality of life as measured by the United Na-tions (UNDP, 2003; Miles, Feulner, &O’Grady, 2005; O’Grady, 2005).

The expansion of India and Chi-na’s economies during the last decadenot only proves that entrepreneurial

practices generate economic growth,but also a spectacular expansion of consumption and rising quality of lifeamong the formerly poor. Accordingto Goldman Sach’s BRIC report: “Thenumber of people with an incomeover $3,000 (approximation of mid-dle class) should double within threeyears in these economies and withina decade over 800 million people willhave crossed this threshold” (Gold-man Sachs, 2004).

Those companies still driven bythe old paradigm that considers so-cial improvement and wellness as arisk factor and a limiting conditionfor profit will be at a competitivedisadvantage in this global expan-sion that will account for 10 to 17percent of global equity marketsby 2020 (Goldman Sachs, 2004).The experience in oil-rich countriesin the Middle and Far East, Latin America and Africa (Miles, Feulner,& O’Grady, 2005) demonstrates thatthose companies that enter emerg-ing markets driven exclusively bymaximizing short-term financial andcost-efficiency goals without defininga social strategy may in fact be tak-ing much higher risks in the form of market stagnation, legal insecurity,riots, damage to property and lives,and business disruption than thosethat link those bottom line resultsto proactive social value-added andimprovement goals.

Revising the Old BusinessParadigm

Since its preliminary introductionin the article “Towards EducationalResponsiveness to Society’s Needs: A Tentative Utility Model” (Kaufman,Corrigan, & Johnson, 1969), RogerKaufman’s Megaplanning model(Kaufman, 1996, 1998, 2000; Kaufman




& English, 1976, 1979; Kaufman& Thomas, 1980) was unique in itschallenge to traditional, short-termbottom line oriented managementand process-focused HPT thinkingand practice. Kaufman’s Megaplan-

ning model has been successfullyapplied to government and for profitorganizations in different countriesduring two decades with interestingresults. However,it still generatesresistance amongthose managersthat follow a tra-ditional businessapproach and whoconsider it more orless idealistic andimpractical. Evensome of Kaufman’scolleagues in theHPT field (Sch-neider, 2003; Win-iecki, 2004) recom-mend HPT practi-tioners to “stay outof trouble” by lim-iting performanceimprovement tomore conventionalinternal processimprovement proj-ects. During thisperiod, however,respected manage-ment experts such as Peter Drucker(1985) and the British economistsTony and Jeremy Hope (1997) sidedwith Kaufman and his concernsabout the neglect of social contextand variables in business and orga-nizational thinking.

More recently, the business lit-erature has started to recognizethat short-term, inward-looking ap-proaches to business performance

are major factors in creating non-sustainable business models prone tofinancial and social collapses; two ex-amples are the cases of Enron in thecorporate world (Toffler & Reingold,2002) and Argentina in the publicsector (Mussa, 2002). In analyzingthose experiences, new developmentsin economic thinking and policy-mak-ing have demonstrated that strate-

gies and policiesthat neglect socialimprovement failor underperform inachieving sustain-able success andactually increased the intrinsic risksof emerging orrapid expansioneconomies (Sti-glitz, 2000; Rubin,2004).

Following thisgrowing trend,Harvard BusinessSchool experts Mi-chael Porter andC.K. Prahaladhave independent-ly published ar-ticles that adviserethinking the tra-ditional dichotomybetween businessand social good and

embracing an aggressive and proac-tive use of social strategies for sus-tainable business success.

In their 2002 Harvard Business

Review article “The Competitive Ad- vantage of Corporate Philanthropy,”Porter and Kramer define this newscenario:

It is true that economic andsocial objectives have long beenseen as distinct and often compet-

More recently, the

business literature

has started torecognize that

short-term,

inward-looking

approaches

to business

performance aremajor factors

in creating non-

sustainable

business models

prone to financial

and social

collapses…




ing. But this is a false dichotomy;it represents an increasinglyobsolete perspective in a world of open, knowledge-based competi-tion. Companies do not function inisolation from the society. In fact,

their ability to compete dependsheavily on the circumstances of thelocations where they operate. Inthe long run, social and economicgoals are not inherently conflictingbut integrally connected. Boostingsocial and economic conditions indeveloping countries can createmore productive locations for acompany’s operation as well as new

markets for its products. (p. 7)

And according to Prahalad andHammond’s 2002 HBR article “Serv-ing the World’s Poor, Profitably,” thegrowing economic phenomenon of the Chinese and Indian economies,traditionally considered bottom-of-the pyramid (BOP) markets, has

made a strong case for consideringhuman development not just asa humanitarian cause, but as anincreasingly attractive and highlyprofitable target for world-class cor-porations. In Prahalad’s words:

By stimulating commerce anddevelopment at the bottom of theeconomic pyramid, multinationals

could radically improve the livesof billions of people and create amore stable, less dangerous world. Achieving this goal does not re-quire multinational corporationsto spearhead social-developmentinitiatives for charitable purposes.They need (sic) only to act in theirown self-interest. Fully 65 percentof the world’s population earns

less than $2.000 per year—that’s4 billion people. While individualincomes may be low, the aggregatebuying power of poor communitiesis actually quite large, representinga substantial market in many coun-

tries for what some might considerluxury goods like satellite televi-sion and phone services. Becausethese markets are in the earlieststages of economic development,revenue growth for multinationals

entering them can be extremelyrapid. MNCs can also lower costs,not only through low-cost labor butby transferring operating efficien-cies and innovations developed toserver their existing operations.(pp. 1-2)

Lessons from Business Practice An analysis of the experiences

of standard-setting companies asdiverse as Ford Motors, Starbucksand Microsoft, and the enduringsuccess of some emerging economies,shows that entrepreneurs and busi-ness innovators frequently buildtheir business strategy not only onrevolutionary products or services,but following a vision of the socialconditions required for their utili-zation. Ground-breaking companiesactively intervene in introducing orfavoring specific social changes tocreate the conditions for lasting suc-cess (Drucker, 1985; Naisbitt, 1984;Peters & Austin, 1985; Peters &Waterman, 1979; Porter & Kramer,2002; Prahalad & Hammond, 2002;Toffler, 1990).

Outgrowing business convention-al wisdom, business entrepreneursand innovators have long succeededin overcoming the classical Kon-dratieff stagnation cycles (Drucker,1985; Alexander, 2002) and pre- venting the crises of globalizationprocesses (Mussa, 2002) by activelyusing social improvement goals as aguiding strategic principle (Drucker,1985). Such businesses have notonly studied but deliberately created

new markets and clients by starting




social trends and changes that inreturn supported the sustained suc-cess of their business models.

From Henry Ford to DigitalIndia: Integration of Businessand Social Progress

A review of the history of success-ful entrepreneurial business prac-tices (Volcker, Norris, & Bockelman,2000) provides additional evidence of how business leaders proactively pro-mote their visionof social progressas a key factor forsecuring their sus-tainable success

At the begin-ning of the indus-trial era, businesspioneers such asHenry Ford suc-cessfully imple-mented proactivestrategies to develop their busi-nesses not just byexploiting existingmarket opportuni-ties, but also bydeveloping mar-kets and clients fortheir new productsand ideas.

Ford always understood thatcreating a competitive product (Ford A) through revolutionary process

improvements (the assembly line andserial production) was not enoughto guarantee sustainable businesssuccess.

Ford viewed his business inbroader terms—as most business in-novators do—by creating a consumer

and a market for his product, andtherefore, a viable and sound busi-ness for years to come. He established

not only a sound “business case” butalso a systemic vision of his business

integrated into a vision for the larger

social system. In this case, the largesocial system was the United Statesat the beginning of the 20th century,which was transitioning from rural,isolated communities to a mobileand industrialized society (Kennedy,1999; President’s Research Commit-tee on Social Trends, 1933).

By analyzing the social context of his time, Ford en- visioned a strategythat tied his work-ers’ wages to hisproduct’s pricing,defining a revo-lutionary bottomline equation: in or-der to secure FordMotors long term viability and suc-cess as a business,Ford cars must beaffordable for itsworkers.

I n t u i t i v e l y ,Ford viewed hiscompany from an“outside-in” per-spective, and triedto actively manageand balance both

supply and demand sides (Keynes,1938). In order to create a mass mar-ket for cars, Ford not only improvedsupply by drastically reducing pro-duction costs through revolution-ary process improvements, but alsocreated demand by elevating hisworkers’ income, making Ford Mo-tors’ business model viable and sus-tainable. He improved his business’supply performance by establishingclose partnerships with criticalsuppliers such as Harvey Firestone

Ford viewed

his business in

broader terms—as

most business

innovators

do—by creating

a consumer

and a market for his product,

and therefore, a

viable and sound

business for years

to come.




and the steel barons and securedfuture demand by collaboratingwith local and federal governments,which were promoting employmentthrough the construction of roadsand highways.

Following this systemic thinkingprocess, Ford not only created carsand made record profits for his timebut also created a business system,an entire “industry of industries”that established the foundation forwhat we know today as the middleclass and the modern consumer mar-ket (Volcker, Norris, & Bockelman,2000). Ford and many others afterhim succeeded by not only creatinga product by way of a revolutionaryprocess, but most fundamentally, byenvisioning business as open systems

that aligned business performance

and process improvement to a broader

social vision.

Ford Motors achieved success bytransforming blue-collar workersinto middle-class consumers of mass-produced, affordable cars.

More recently, Starbucks has cre-ated a new market by introducingEuropean-style cafes to Americanconsumers. Starbucks cafés not onlysell coffee but also sell the coffee ex-perience, providing an environmentwhere customers can gather, studyor read in a personalized, communalcontext. In keeping with its systemicapproach, Starbucks secured sus-tainable suppliers of its high-quality,organically grown coffee by improv-ing the social and environmental con-ditions and business skills of thesesmall rural coffee producers in Latin America, Africa and Asia (Schultz & Yang, 1997).

Following the same line of “out-side-in” thinking, Apple and Micro-soft developed user-friendly, domes-

tic computers and communicationdevices by envisioning and empower-ing individuals and non-specializedusers as the center of a knowledge-based, digitally connected and moredecentralized society; this societywas very different from the one tradi-tional competitors served by provid-ing punched cards and mainframesfor centralized information centers(Moore, 1991; Gates, 1995; Hope &Hope, 1997; Volcker, Norris & Bockel-man, 2000; Guth, 2005).

Emerging Markets: ToSustainable Profit ThroughSocial and EconomicDevelopment

By taking advantage of the oppor-tunities presented by the emergingeconomies in the beginning of the21st century, local and multinationalcompanies are thriving by challeng-ing conventional business wisdom.By offering affordable cell phones torural areas in India, micro credit linesto slum dwellers in Rio de Janeiro orbroadband infrastructure to college-educated professionals in Mumbai,these companies are empowering lo-cal workforces and entrepreneurs totransform shantytowns in Dharavi,Sao Paulo and Mexico City into quick-ly-prospering manufacturing andknowledge-based services enclaves(Prahalad & Hammond, 2002). Suchproactive, socially focused strategiesleverage growth by transformingconventional BOP customers intoself-sufficient entrepreneurs withhigher purchasing power, as shownby the ongoing success of India andChina’s economies in achieving botheconomic and social expansion (Miles,Feulner, & O’Grady, 2005).

The demographics of the Unit-ed States and other fast-growing




economies show that an increasingproportion of consumers are alsoentrepreneurs developing their ownbusinesses and clients. As the differ-entiation between “B2C” and “B2B”approaches becomes less precise,pioneer companies such as eBay and Amazon thrive and create billion-dol-lar markets by enabling small busi-nesses and entrepreneurs to markettheir own products and services.

When applied as part of a systemic,socially-focused strategy in emergingor high-potential markets, businesstactics such as franchising, outsourc-ing and farming out to entrepreneur-ial clients can not only reduce costsand improve internal performance,but may also create new ongoing de-mand. This demand may be supportedby new and indirect customers thathave been created and sustained bythese communities’ development.

Socially-focused business strate-gies not only apply to large compa-nies or at the larger macroeconomiclevel, but also to smaller businessesfacing the challenge of succeeding innew, underdeveloped markets andcommunities. In these cases, socially-focused strategies are indispensablefor sustaining bottom line results be-cause they effectively anticipate themore complex and recurring businesschallenges to continued business suc-cess such as securing social stabilityand creating a hospitable businessenvironment.

A Nine-year Comparative Study:The Refinor Business Case

As a corollary to these historicaltrends and precedents, we will ana-lyze more closely the process and tac-tics for developing a social strategyfor business success. We will discussthe business case of a Latin American

company that covers a nine year pe-riod (1994-2002). During this periodthe company experienced the use of both traditional (1994-1996; 2000-2002) and megaplanning (1997-1999)approaches, so we will also comparethe performance results of both strat-egies in terms of conventional bottomline and social outcomes.

Refinor is a gas production anddistribution company located in thenorthwest of Argentina, in a develop-ing region that borders with Bolivia,Paraguay and Brazil, at the heartof MERCOSUR. The company wascreated in 1994 as a result of theprivatization of segments of YPF, alarge state-owned Argentine oil con-glomerate.

During the first period after priva-tization (1994-1996), Refinor’s newmanagement was the private Argen-tinean holding company Perez Com-panc. Our consulting team focusedon streamlining internal efficiencyby reengineering processes, investingin new technology and implement-ing a management developmentand cultural change plan to developentrepreneurial skills and attitudesamong Refinor’s management andemployees.

Although the company’s tradition-al bottom line improved significantlyduring 1994-1996 as a result of itsinternal performance improvementprograms, it was increasingly evidentthat the company’s conventionalgrowth had plateaued at a level thatstill could not guarantee sustainableprofitability. Improving internal per-formance was not enough to ensureRefinor’s future because the companywas growing in a market that wasnot growing.

After the long period (1945-1992)of subsidized public employment




and the subsequent privatizationprocesses (Mussa, 2002), former stateemployees in Refinor’s region whoreceived severance packages paid in1992-1994 as part of the privatizationplans represented a significant part of the region’s energy market. Althoughshort term energy demand was boost-ed by the increased purchasing powergenerated by this approximately $40million in paid severance, long termperspectives for the market remaineduncertain. In spite of receiving thislarge individual subsidy, living in oneof the richest agricultural regions of South America and owning poten-tially productive parcels of land, mostformer public employees were unableto generate new income because theirskill set and work culture were lim-ited to their former administrativeor oil-related jobs. The agriculturalskills and entrepreneurial mindsetthat were common among the prewargeneration had not been transmittedto these public employees who hadabandoned their parents’ self-sus-tainable small farms for the safety of public sector jobs.

In spite of significant achieve-ments in improving its internalperformance, Refinor’s turnoverrates started to climb, menacing thecontinuity of those achievementswith the loss of young and talentedworkers and professionals unwillingto commit to raise their families in anenvironment increasingly affected bysocial problems.

During 1994 to 1996, as formerstate employees’ savings started todisappear into unsuccessful businessinvestments, social problems such associal protests that resulted in prop-erty or productivity loss, alcoholism, juvenile delinquency, substance abuseand preventable diseases grew rap-

idly, creating a hostile environmentfor Refinor families. Refinor’s workersdescribed their situation as living inan increasingly isolated “island” of prosperity surrounded by a sea of so-cial unrest and an uncertain future.

The ChallengeOur consulting team had first

hand knowledge of the social and environmental challenges; during theimplementation of Refinor’s initialinternal performance improvementprogram (1994-1996), team mem-bers lived with the people they werecoaching and training in four smallcommunities at the heart of the MER-COSUR region, 1,200 miles awayfrom Argentina’s main cities.

In 1997, after a series of fol-low-up meetings that revealed therelevance of the social challenges forthe company, Refinor’s CEO askedour consulting team to propose anon-conventional social strategy forthe local communities and the regionthat would secure the company’s longterm sustainability.

We selected Roger Kaufman’smegaplanning model (Kaufman,1996; Kaufman et al., 2003) as ourstrategic planning approach becauseit provided a systemic and compre-hensive framework for aligning socialand business goals and processes aswell as for linking all the key inter-nal and external organizational ele-ments. We selected General Electric’sworkouts (Ulrich, Kerr, & Askenas,2002) and University of Michigan’sboundaryless organization model(Ulrich, Kerr, & Ashkenas, 1995)as our tactical approach to involveand commit employees and com-munity leaders in the company andcommunity-wide assessment, prob-lem-solving and decision-making




processes required for implementingKaufman’s methodology.

The application of the mega-planning model and tools helpedRefinor’s management and leader-ship realize that sustainable growthand long-term performance improve-ment would require the company tomove beyond internal, individual ororganizational improvement towardimproving Refinor’s clients’ perfor-mance and the conditions and per-formance of their communities andsocial context.

According to Kaufman’s strategicmodel, sustainable business successdepends on improving not just inter-

nal performance, such as individual,team or organizational competenceand efficiency, but more critically, onimproving the company’s external

performance, linking clients andclients’ clients’ success to social, re-gional and global performance. It was

clear that improving Refinor’s clientsand clients’ clients’ performancerequired improving the social perfor-mance of the communities and regionwhere both Refinor’s employees andclients lived. Moreover, it was criticalto envision the company’s clients andthe community and region’s progressand goals as mutually dependent andaligned instead of mutually exclu-sive; this would also transform tra-ditionally adversarial relationshipsthat had led to conflicts such as fuelpilferage or riots, into strategic alli-ances between business and societythat could further support sustain-able success (see Figure 1).

Following Kaufman’s model, quan-tifying the cost of ignoring the socialenvironment in terms of fuel losses,social conflicts and potential disrup-tions of productive processes helpedestablish the benefits of the new busi-ness model in bottom-line terms.

sustainability

INDIVIDUALPERFORMANCE

TEAMSPERFORMANCE

ORGANIZATIONALPERFORMANCE

CLIENTS AND CLIENTS’ CLIENTSPERFORMANCE

SOCIAL ENVIRONMENTPERFORMANCE

GLOBAL AND REGIONAL PERFORMANCE

Figure 1. Megaplanning approach to sustainableperformance improvement.




Our first decision was to identifyfour local communities (Tartagal, Aguaray, Pocitos and Mosconi) in thenorthwest region of Argentina as thestarting point and primary marketfor our performance improvementexperiment. Refinor’s strategic planwould reach outside the company’sboundaries for developing thecompany’s primary clients—formerpublic employees transitioning tofarming and new agricultural smallbusinesses—and their clients andcommunities. Refinor’s strategywould not only be to provide fuel andenergy, but also to train and coachthe communities’ entrepreneurs inthe business and technical skillsrequired to generate sustainableincome and profits. Finally, Refinorand non governmental organization(NGO) teams would also help com-

munities organize and train self-di-rected social work teams in order toimprove their environment and thatof their clients.

Using Kaufman’s minimal ideal vision (MIV) model as a frameworkin a series of internal and socialworkouts, the company’s manage-ment, staff and community leadersidentified gaps between the MIV and the company and communities’realities, thus generating consensusfor action plans.

Table 1 shows the gaps betweenMIV and reality detected by morethan 350 workout participants in fivedifferent communities.

As a consequence of this firststep, Refinor’s leadership developeda new vision and mission for thecompany that was discussed with andapproved by the CEO (see Table 2).

Table 1Social Workouts Findings

Minimal Ideal Vision element(Kaufman, R., 1995, 2000)

Gaps detected by Refinor’s workouts

A. All children will have access to and willattend school regularly, will be physicallyand mentally healthy and will learn anddevelop those skills that will enable them to

have access to jobs above the poverty line.

• School’s curricula not responding tosocial demands

• Child prostitution• Dependency on government

subsidies

B. All those receiving training must obtainthe knowledge, skills and attitudesrequired to be self-reliant and have a highdegree of self-confidence as citizens and asworkers. (All schools must be in a positionto provide first-class education to thepoor.)

• Lack of basic skills for self sustaining forms of life (70% of theworking population was living from voluntary retirement funds afterprivatization of the state-owned oilcompany)

• Isolated improvement efforts

C. Reduce the levels of alcohol and drugdependencies to zero in a one-and-a-half-

year term.

• Drug trafficking (border zone)• High alcoholism rate

D. All unemployed will have an opportunityto get the skills that will enable them toget a productive job and keep it.

• Indigenous population segregation• Poor education level• Isolated improvement efforts




Eighty percent of Refinor’s natu-ral market, the region across theborders of Argentina, Brazil, Boliviaand Paraguay known as MERCO-SUR, consisted of small businessesin a mostly agricultural regionthat required agricultural fuel for vehicles and power plants. The keyto Refinor’s new business strategywas training and coaching of localentrepreneurs to develop self-suf-ficient small businesses, which inturn would expand the demand forfuel and develop a self-sustainablemarket. Our complementary busi-ness hypothesis was that by adoptingsuch a social strategy for the region,Refinor would increase its marketshare, not only as a consequence of general economic growth, but alsoof business differentiation and theconsumers’ identification with a wellregarded regional brand.

Refinor’s macro-level businessgoals were linked to societal goalsand actions. As a first step in thelearning strategy, the consultingteam made business groups aligngoals from their more familiar Macroindicators to Mega (Table 3) and tolater reverse the analysis from Megato Macro (Table 4) developing a stra-tegic, outside-in goal sequence.

Among the social problems erupt-ing in the region as a belated con-sequence of unemployment and

dependency on subsidies were childprostitution, alcoholism and socialconflicts ending in property or pro-ductivity losses.

ImplementationDuring the 1997-1999 period,

joint community-company projectteams of Refinor’s managers, em-ployees, families, school, hospital,and union leaders, and local electedauthorities tackled the different crit-ical areas defined in the workouts.

1. Developing self-sustainable

businesses: Local communities’ teams,promoted by Refinor, helped formerunemployed families to start smallbusinesses based on local agriculturalresources. Refinor’s cultural changeplan, implemented internally during1994-1996, was the basis for launch-ing a community-bound program todevelop entrepreneurial skills amongthe company’s local clients and smallbusinesses in the region. Refinor’ssupervisors and managers workedas instructors and facilitators for thesocial training programs.

2. Workforce reconversion: Threeagro-technical schools sponsored byRefinor started programs to developthe new skills, knowledge and at-titudes required by the former stateemployees to develop self-sustainablebusinesses. Many of the instructors,

Table 2Refinor’s New Vision and Mission

We conceive REFINOR’s mission as the achievement of the region’s development

(MERCOSUR), regarding the improvement of the standard of living of its inhab-

itants, through providing our skills, people, services and products to help create genuine jobs and opportunities for professional and business development for our

employees, clients, and suppliers.




Table 4 Aligning Business with Social Goals (from Mega to Macro)

If our community and market achieve these goalsOur company will achieve these

business goals

qNew successful small businessesqRegional awareness and identification with

program and companyqReeducated and reconverted workforce

• Sales and market sharesustainable growth

qCrime and substance abuse reductionqOpportunities for community involvementqCommunity and employees sharing positive,

realistic future goals (consumer and employee’s

sentiment)

• Reduce or eliminate turnover

qSpecial supply for entrepreneursqEnvironmentally conscious populationqEducated workforce

• Reduce fuel and product lossproduced by pilferage

Table 3 Aligning Business with Social Goals (from Macro to Mega)

To achieve these business goalsOur community and marketshould achieve these goals

qSales and market sharesustainable growth

• New successful small businesses• Regional awareness and identification with

program and company• Reeducated and reconverted workforce

qReduce or eliminate turnover • Crime and substance abuse reduction• Opportunities for community involvement• Community and employees sharing positive,

realistic future goals (consumer and employee’ssentiment)

q

Reduce fuel and product lossproduced by pilferage • Special supply for entrepreneurs• Environmentally conscious population• Educated workforce

former graduates from the schools,were training their own parents tomanage their new businesses ontheir own land. Refinor drew fromadditional consulting resources andexpertise from agricultural com-panies also belonging to the Perez

Companc conglomerate. During theperiod 1997-1999, former state em-ployees started 160 new small andmedium agricultural businesses inthe region.

3. Healthcare and wellness: jointteams involving company volunteers,




families and Department of Healthstaff from hospitals and other medicalagencies launched two major cam-paigns to prevent juvenile substanceabuse and promote healthier lifestylesbased on self-sufficiency skills and job,sports and educational opportunities.

4. Youth programs: Two day-longsoccer sports programs organized byRefinor employees, community lead-ers and instructors from the Depart-ment of Education provided two dailymeals, and in some cases, a place tosleep, for 6,000 adolescents, keepingthem off the streets and away fromhigh-risk situations.

One key factor for tactical successduring the needs assessment, plan-ning and implementation phasesinvolved Refinor’s families and localinstitutions.

Our consulting team partneredwith Asociacion Conciencia, a wom-en’s volunteer NGO dedicated, since Argentina’s return to democracy in1984, to the promotion of the partici-pation of women in community and so-cial development. This was a decisivestep for involving Refinor employees’spouses and families, and throughthem, reaching educational, healthand political institutions.

Conciencia and other women be-came decisive change agents and footsoldiers for the project, opening doorsfor families, children, doctors, teach-ers, union leaders and representativesunder a non-partisan frameworkbased on the Minimal Ideal Vision.

As a direct consequence of thewomen’s involvement, social work-outs included not only adult membersof families, but also K-12 age childrenand adolescents, which constitutedone of the main risk groups. Thechildren and adolescents surprised

parents and business leaders withtheir sharp insights on communities’problems and future prospects; thisbecame an emotional turning pointin obtaining the commitment andsupport of traditionally splinteredand antagonistic community sectorssuch as labor unions and governmentrepresentatives. With the momentumof social workouts, Kaufman’s ideal vi-sion (Kaufman et al., 2003) worked asa common denominator and cohesivefactor.

The non-partisan nature of NGOand company facilitators was an-other major asset in a region wherepolitical credibility was plummetingto historically low levels. The socialprotest movement known as piquet-

eros (picketer) originated in Refinor’sregion. During the 1997-1999 period,picketers attended and participatedpeacefully and productively in socialworkouts and project teams.

After the initial social workoutssessions, which were celebrated astown hall meetings, multi-sectorproject teams made up of Refinor em-ployees, families, community leaders,teachers, doctors, union and politicalrepresentatives met in homes, schools,hospitals and public offices during thenext two years under the coaching of Conciencia and Refinor facilitators.

ResultsDuring the period when it carried

out its socially-focused, Megaplan-ning strategy (1997-1999), Refinorobtained positive results in all threeMegaplanning levels (Kaufman et al.,2003) as shown in Table 5.

Strategic PerformanceIndicators

Refinor started utilizing a new setof strategic performance indicators




Table 6Strategic Performance Indicators (SPI)

Indicator (SPI) Definition

Hours of Social Work Hour of social work included the time invested in community

projects by the company and volunteers

Market share Refinor’s share of the regional fuel market

Local unemployment rate As defined by Statistics from INDEC and governmentof Salta for Aguaray, Pocitos, Tartagal and Mosconi, themain communities surrounding Refinor’s refinery andmain infrastructure.

Riots and incidents As reported by local police

Property loss As reported by local authorities

5

10

15

20

25

30

35

1994 1995 1996 1997 1998 1999 2000 2001 2002

Conventional

Macro-Planning

Mega planning

intervention

Conventional

Macro-Planning

10 K hours of

social work

Market share

Localunemployment rate

Property loss

Riots & incidents

Figure 2. SPI evolution chart.

unchanging levels of market share(4.43% for 1994-1996 and 4.36% for2001-2003).

The 1997-1999 period reflectsthe new strategy, with higher levelsof social investment (14,000 hoursper year versus 8,400 for 1994-1996 and 4,800 for 2000-2002) anda 6.33 average market share, with

steady increases each year of theperiod. The higher level of socialwork hours in the 1997-1999 perioddoes not reflect higher costs, becausea significant proportion is volunteerwork of Refinor staff, families andcommunity members and reassign-ment of internal training hours tosocial training.




Comparing the Strategies’Results at Mega, Macro andMicro Levels

At the Mega level, Refinor’smarket welfare roll, pollution rates,infant mortality and crime statisticswere significantly reduced comparedto the previous (1994-1996) andfollowing (2000-2002) periods of traditional Macro and Micro-focusedplanning. As a consequence of the im-proved social conditions, at the Macrolevel the company reduced turnoverby more than 50 percent, and thecommunity developed more than 160new small and medium-size agro-businesses, reducing the unemploy-ment rate (12.33% against 20% withMacro-focused management). ThisMacro effect in turn generated anincrease in fuel consumption in thearea, expanding the overall marketand generating a premium growth in

Refinor’s market share (from a previ-ous average of 4.43% to an average of 6.33%—an almost 50% increase) asthe region’s brand of choice.

At the Micro level, the company im-proved its core infrastructure—a 1200km-long poliduct—while reducing theinvestment in maintenance becauseof a significant reduction in damageproduced by fuel pilferage. Self-di-rected community teams improved thecommunities’ health and educationinfrastructure by generating self-sus-tainable agro-technical business.

Results ComparisonComparing the Megaplanning

period (1997-1999) with two tra-ditional, Macro and Micro-focusedmanagement terms (1994-1996 and2000-2002), the evolution of the Stra-tegic Performance Indicators (SPI)supports the following conclusions:

Table 7Strategic Performance Indicators (SPI) evolution 1994-2002

YearK hours of

social work*Marketshare

Localunemployment rate

Propertyloss

Riots &incidents

1994 8 4 25 8 20

1995 8.5 4.5 23 7.5 40

1996 9 4.8 21 7.3 50

1997 12 5 15 4 35

1998 14 6 12 2 15

1999 16 8 10 1 20

2000 4 4 25 6 50

2001 4.5 4.5 28 8 145

2002 6 4.6 32 7.8 60

n 82 45.4 191 51.6 435

Mean 9.1 5 21 6 48

Median 8.5 5 23 7 40

*Each unit represents 1,000 hours of social work




1. The investment in social workproduced a statistically significantimprovement in all other SPI, show-ing a strong positive correlation withthe increase in the company’s marketshare and a strong negative correla-tion with the levels of unemployment,riots and incidents and propertyloss.

2. The Megaplanning strategyoutperformed the conventional,Macro and Micro-focused strategiesin terms of market share (6.33% ver-sus 4.43% for 1994-1996 and 4.36%for 2000-2002), local unemployment(12.33% versus 23% before and 28%after), riots and property loss (36%reduction on average compared to theconventional strategy).

During the 1997-1999 period, othermajor regional companies, attractedby Refinor’s success in expanding thelocal market, joined as co-sponsors of social projects such as workforce andsmall business development, thusmultiplying the programs’ effect.

The significant worsening in so-cial indicators observed during the2000-2002 period, however, may notonly be attributed to the abandoningof the social strategy, but also to ageneralized worsening of Argentina’seconomy. In 2001 Argentina’s na-tional government collapsed andPresident De la Rúa resigned amidstgeneralized social violence and loot-ing across the country.

Even though the existence of non-controlled associated variablessuch as general unemployment andsocial turmoil during the 2000-2002 Argentinean crisis might have con-tributed significantly to the extentof the failure of the conventionalbusiness strategies, results duringthe nine-year period clearly demon-

strated the superior effectiveness of a Megaplanning approach over conventional Macro-focused strategiesin improving both business resultsand social indicators and generatingrenewed interest in the strategy bynew management.

EpilogueFor those involved in the experi-

ence, the Refinor project representeda significant milestone in our consult-ing experience and a significant yetinvoluntary quasi-experiment thatheld our professional and personal

interest for nine years.We still have to learn and explore

how to overcome the most criticalchallenge to long term, sustain-able performance. We have learnedthat this challenge comes not fromexternal conditions, but from theprevalence of business planning andmanagement models focused on pro-

cess improvement and conventional,short-term bottom line indicators.

At the beginning of the 21st cen-tury, operating in an increasinglyglobalized market economy, mostcompanies face the challenges of sus-taining business growth in emergingmarkets and societies.

Our hope here is to have dem-

onstrated that developing socialperformance around our companiesis not only a humanitarian goal, buta basic principle of sensible businesspractice supported by historical andempirical evidence.

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MARIANO BERNÁRDEZ is aninternational consultant on or-

ganizational change, businessdevelopment, and performanceimprovement. His 25-year careerhas included working as a man-agement development expert forthe United Nations and Fortune500 companies and as a strategicbusiness consultant to leading com-panies in Europe, Latin America,

and the United States. He has ex-tensive experience in new companystart-ups in Europe and emergingcountries. He is a Board Memberof ISPI and founder of ISPI inter-national chapters in Argentina,Mexico, and Spain. He is an activespeaker at conferences in Europeand the United States. He holds

a doctorate in Education from theUniversity of Buenos Aires. E-mail:[email protected]

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