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AUGUST/SEPTEMBER 1996

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Developmenttlanagem6nt inAsia

. People-Centered Developmentr Innovations, Social Change. Excellence in Local Governance

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VOL, IX, NO,4 lnternet Address: tam@aim.edu.ph

THEASIANMANAGER

AUCUST/SEPTEMBER 1996

covDn sToRr 38Redefining The Global Development Paradigm 5

br1 Profrsor Eduado A. MornL6, ,truRediscover that people are the end of and not the means todevelopment.

MANAGDMDNT UPDATDS

Development 14ba Professor Emil P. Bolurynifa, ^rMTotal qualitv government leads to service quality andcitizen-customer commitment.

hu l'rutc'<,,r LJcl C . Cuizn. ,tv 19Calrrrg Pook winners prove that devolution worksin the Philippines

by Proltssor Towny B. Lt)ptz, AtM 27The citizen is the beneficiary in the developmentmarketplace.

by PrLtftssor Leonnrdo R. Si/os, et,v 30Organizations are "islands of conscious power in thisocean oI uncon.ciou5 cooferdlion.

by Prof*sor Solednd A.Hernn t ), AtM 35Development managers, AIM alumni, are change agents,breathing in new life to institutions, peoples, and nations.

fo Professor Mario Antlnil G . Llpez , AtMNew relationships have evolved among variousstakeholders as they pursue business and corporatesocial responsibility.

by Professor Emmnnuel A. Leycl, AIM 47LGUS meet the demand for socioeconomic inftastructure.

POLICY I'ONUM

Competitiveness Revisited: Back to Productivity 45by Professor Francisco L. Roman, uu and Mntt. L. MartinKrugman concludes that productivity is the keyunderlying concept behind continuing economicgrowth of nations.

ITAI| AGEMDNT COMMUNIOATION

My Father is A Doctor, My Mother is A Typewriter 49by Professor Milagros T. Carcia, ,qttrEmpathv and humor allow communicators to crosscultural barriers.

OPINION

Entrepreneur's Corner 50by Robert V. Chandrun, MBM'74Look into the mirror and ask yourself, "Am I playingan honest game with my partners?"

SAIMl r r ? \ \ \ \ ! l \ \ r ( L R - \ l \ ' b l i . n t n t r r i i t a ! . r \ ! i l ' s h l u t r ( r

Mnnngfnr.ntnnn th.FeLlerationof Ariif nFlrlLr f or\lanaBcm€nl Alunmi As\,.Dl1ors.

(oprnBhl o lee{r b\ lrr .,1n

M,!,r1, I ,^ll n .t\ n\d\ &li { . p f t r ] u . u o r n r n n v n D t r n . r 1 f n h , , l . o r n l r . , , ' L r E l i \ h 1 t rollrd lm!ur8cs pnnribifuJ lh. A:iir Nlin.! FNbiishedl ' ' N t r n h l \ l ! l h . , \ ! h I n t t i t u t ! . t \ l . r ! g ( ! $ t l i l ( o n i l

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Eug$ni L.F.z li)undahon, Jotcph It V.\1 ,ilnrg Cnnpur,l 2 l I ' d r . o . l . l { o \ a . , C i t \ o f \ l i L i h , P h r l i f p i $ T . l : ( . : 1 2 ) 8 e 2. r l ) l l 2 i r r c l L ) r r i 4 T r 8 ! 1 : l l l l | . r \ : ( h ] l ) . l i 9 l 1 r i I ' h . l o

l n p h s u u . . J t \ l h r , \ l \ l I r u i nl'nntd b! Trnlr Prnrt.r 11. I l.l, sifgn,rtrrT h . A s i r M . n . F . r M I T A ( t ) l e 6 , / l l l , / e

Publirhff Felipe ts. AltunsoLo-Publishfls 1:dilor-in{lhicf Ricardo A. Limlhmging ldilor Ma. T€resita Martin PaloDiftlor. {)Frdtii'ns ! llirt rli'nt Millie C. Ferrer0l\ig ! tlodn{tion (.on{dl{nt Fr.nco Patriarcal!!rx illr ldilorJudith Angela E. Alpav

Rts+rlTh |nd Prrdurlion Amy C. Espirituhenirina l$ishnl Vanessa M. laballas(iNulalion lssislsnt Eden S. CardenasP lishing Eord Rene t Domingo.lesurC. Uallegor.

Jr., Ricardo A. Lim, Victor S. Limlin8an, Eduardo A.Morat6, Ashok K. Nath

l,hilippnft\: l)cI,. (iutierrfT, F.\ {6ir2) 894 4lt09lLud\LiA F.d.n8in, Fn\ 161l) 032 2i5 Ili)8

ll{'ng tong: I'imfl.r (lrov, fix (ll5 2) ll3-15ell0\iogltxh: Teddv Ian, Far (6i) +J08i60.IndonN Rim.5hnet, Fi\ (62 2l ) 799!090, 7971711.1rhhrtn': C.f nr \8, l:i\ 1601) 717 il70Ind i { \nb- lo n ' .n t M$ l i . , sou lh A \ id lP) l - td ,

P irl,Nr: 5 L Salahuddin, Fnx (9221)a6iJ2271.tl'n{: Y K Ch!n, F.t (822) 738 7970JdFn: Tokuji Niinuma, Fax (1i13)3582-9104Tluil.trd: Dr Anthony shnrmn, F;! (662)331e303.I niled litr"dm: Brinn Taplin Asso.iates,

rnne Stdph.n .dc R inuet , [ax ( ]31)198 ' r6341

THE AsrAN MANAGER . y' ucusr-SEITEMBER 1996

{ i ince its foundine in

\ teoa, ntv lasiriaeaI / itself in providing a 40-course smorgasbord ofmanagement thought. Wetook Westem case shrdiesabout General Motors andSilicon Valley and mixedthem with our very ownAsian cases on Bueno Catsupand San Miguel. We tookframeworks by Prof. HenryMintzberg and Prof. MichaelPorter to contrast againstmodels bv Prof. Ed Moratoand Prof. Vic Limlingan. Addto that mix enough studentsfrom Asia and the rest of theworld to discuss the richcases and tools which wepaced at a rigorous rate ofthree per day-about 800cases and sundry readings intotal for a Master in BusinessManagement (MBM) student,for example, over tlvo years-and we produced a 24,000-strong body of learned menand women \a'ho are ready todo battle with the bestenterprises in Asia.

But the rigor was notenough. In the process, wealso discovered a sore gap inour body of knowledge. Somegovernment officials asked usa pointed question: lf AIMcould help urban corpora-tions make profits, could itnot also do the same for therurd poor? No doubt, ourmanagement tools couldbalance a production line orenergize a marketing cam-paign but the same toolscould not turn around abackwoods Asian communityin need of the basics: betterfood, better clothing, betterwater. And once we couldfind solutions to tum aroundthe communiry how thencould we sustain develop-ment? In short, our Westerntools had neglected the issuesof developing counhies:growth and equity, povertyalleviation, rural versus urban

4

Fnou Tru DnrronPROFESSOR RICARDo A. LIM

development orientation. Tothis dav, AIM prolessors stillfrei over thcsc cliffcrences; if.rnvthing, rvc haye agreed toclisagrt'e, but to keep pullingAIM tou,ards True North. lVciht'refore hacl t0 find sonemiddlc grouncl rhereclevel0pment and profitscoukl mergt in ,r rvin-rvinrvar,, long before it n asfashionablc or imperatir,e forcorporatiors t() be environ-ment- and communitv-frienclllr And u e.rre'lockit.tgsteps antl moving fonlard.

ln the past, fbr examplt', itrvas normal for an MBMprofessor b push ior bottomline i igures in class rvhilcigrroring the eifects ofpollution ancl populationciisplacement. Todar', thatsame profcssor has retooledinto tht' developrnerrtorieniati0n and knorrs that afactor,r cannot sustain iisprofits unless it c,rres for thechildrtn in the contmunitvincl treats the \\,aste it dumpsinto nearbv riyers. Anenvirorunenta) impact siud1,,lor ex.rmple, is nol rccluisitefor anv MBlvl malagemenlresearch report (MRR) thesispresert,rtiul.

This issue is de\'oted b arich and emotional bpic:deVelopn1eni managenrent. Itis an omnibus of n,hat AIM isdoing in the field todav Thisissuc is clcdicated kr all.rspiring and committeddeveJopment m;rna;;crs outthere. It is also cledicatetl krall of vou cnterprise, for-prolit man.rgers.

Read on ancl vou n ill besurprised about horv devel-opmcnt mana[iement is not sodissimilar rviih uhat you arecloing non. Just bctnginformecl aborri this subjectwill mean certain profits for

. ot l .Pr . l Rr, f t / , '1 . l r r hni l . r I T,r rJ, l,J l r r r ( r r f t ! r l aarrr r r l r , r r r l r rkrr l r t r r l r 'f t l ) , r rJ J,JFI l f , i , j , i1 , , ! / r r , r r r , r :

i996 . THr Asr,\\ MANACER

DelelopmentllanagbmenlAlM.discooered a iore gapin its body of knou.sledge.

development. The West hadneglected these subjects notout of selfish reasons butbecause thev simplv had nopractical experience base indevelopment. Surelv thevwent through their develop-ment stages too but prosper-ity had since erased thecollective memories ofWestem managementpractitioners: The time rvasnow and the West had tomove fonvard .

For AlM, the time wasalso now and we too had tomove forn'ard, albeit indifferent directions from theWest. We had to find our own"True North." Beginning rvithour Rural DevelopmentManagement Programs(RDMP) in the 1970s throughour Program for DevelopingManagers (PDM) in the 80s,we built our managementtools from scratch. We gothelp from agencies such asthe Asian Development Bank(ADB), the Canadian Intema-tional Development Agencv(CIDA), the Ford Foundation,the US Agency for Interna-tional Development (USAID),

the Konrad AdenauerFoundation, and generousothers. We traveled in pickup

trucks to the backu,atercommunities in Thailancl; n'espokc b farmers ancltor-nsfolk in the Philippines;u'e coordinated rvith non-goyernment organizations(NCOs) ancl governmentpcoplt- alike in Incionesia .rnciIndia; n'e built our olr,nunique f ramelr'orks thataliol'ed all these communi-ties to operaie W'ith lin.iteclrcsources. Our late DeanGastv Ortigas sptarheadeclthis movement, even throughhis temporarv exile in the USfrom the Philippine dictabr-ship in the 80s. All theseefforts culminated in theproud launch in 1990 of ouruniquc Master in Develop-ment Managemcnt (MD\'1)

degree under the aegis of ourCenter for DevelopmeniManagement (CDM). Todar,CDM can boast of nore than1,300 committed, energizedgraduates !\to are out therein Malavsia, Indonesia,Thailand, Bangladesh, andNepal rvorking to der,eloptheir own goycrnmentagencics, NCOs, and commu-nltres.

It n'as not easv lVe had toreconcile our natural profii-making orientation \\'ith the

AucLsr-SEPTENlBER

Cown Sronv1 r - _

3hl z

. l

By PRoFEssoR EDLrAnLro A. MoRATo, JR.

l i l l ,rsts ancl elisnr.rntle the rnonoli ihicstranglcholtl of largt and corrupt centralbure,rucr,rcies. Thev are redesigning tiremeasures of rltvclopmc'ni io pronoteboth grolth.rnd t 'cluitv and lo irtcirdrrr,rther th,rn erclucle the margin.rlized andpoor majoritri Thtv are reinveniing theirperspecti les about N,tother Earth-not asa l imitles: :ource oi n e.rlth but .rs a finiteresource that shall bc ktpi in b,rlance torhum,uiir"s ol n s,rkr'.

T l r i . , r r t i r ' e f rc -e r ) t . . r i r . rn te r r 'o rL io rreshaping tht global do'tlopment paracl ism. It ou tl ine: the ch,rracteristics of peo-plt'ctrittrt'cl vt'rsus production-centeredrlc.r'elopmtrrt, stctor vs,rrea-based der,el-opmcnt,rncl grohlhJerl versus equityJctlsustainatrlc rlo clopmcnt. lt also synthe-sizts this nol g)obal paracligm through anIntegr,rteci Strateer Developmcnt Motlel.

P.{)pl{LCe[l(rr(rd lfer elopntent[ 'eople centerer] developmcnt puts

p , r 'p l . . r . t l r r r t r . t \ ' r p r , 'pe l le r . rnd rn , r i l r

5

Redefining theGlobal Development

ParadigmRediscover that people aro lhe elrd ol'and not tho nleans to dorkrpment.

6 I , ' ' t t rn r le r ie re l , ' l cJ e ( , , r r , '? f nri.* .rrl r l l lrr;- irorn lh. t f-

d . $ ' . , ' ' " t . r t l e r " l , ' l ' r ' r r r r r l ' l r i. ? 1 , , . , ' f h r t h , t r n t , t \ t n I / , \ t , , -

t lav's procluction iviihout anr, t 'mpathvfor ihe future. They hale trad ecl their chilc1rt.n's l clfarc for thcir orrn. Countrics rnthe South have.rlkrn ed rr anton erploitation of their natural rcsources,rnel f,r loreclI , ' ; ;L r - . rn r r t , r . . , l r l , i ( , ' r l rn l ( ' r \ i . l l i r - l l | I ] :md[inatL.s io cxtr,rct ihe bonntit's of n,riurcat anv cost. Fort'sis have becl n'ipecl out,r\tter svstenls polluttt l bv nint tail ings,agriculture lancls poisoneel bv cht'rric,rls,l,rkcs clrit cl up, .rncl cora1 rccf s c1 t'stror,cclbv greed-a)l in the r1an1e of rievelLrp-rrcnt. Mealwhilt, majoritv of iht'pt'opleren.l in poor or nr;r rginalizerl. Nligrationfrom tht ruralart.as to thc cit its, and clt lrabro,rcl, rellect the high level of people's. l l r c r , r l , n l . ( l t t r n - . t r L l l l l J \ l l r , ' , r n l r l l r .

Morbidit,, ' is rising. Crime r.rtes.rre high.Kidnapping has become,r favorite sport.Economic activii iL.s nrc focuscd on ion'

Tr rE Asr.\\ M^N,\CFR . Atic;Lsr SFrrF\JBFR

r',r L-re aclclt 'el agriculturc, nanuilcturins,;rncl scrvices. (,rrlemments are ridr' l ler' l\\ ' i th huse debts,rnd l,rrgt f i.scal elcficrts.

This ble,rk picture of nranv rlevelop-i n L , , ' U n t r i ( . i n t l r i \ " l r t l t i . , , r t c , lcl isempon e red cit iztrrrits man,rgecl bl\ , r r r u f l f , , \ ( n . n t ( l - . i t i - r l r L r ' r r p r . -ture of a proel u ctio n -cttt it'rccl econonrtthal st't 's ptoplc as a siclt bcnti it of e1c-1 1 1 , ' p t t t e t t . l t i . l l r e I ' i . r L i r r ' , i , r - f , l " r - 1 . , -custtl parrrl ign thnt ia\'ors ceniral go\-t 'rnrncrrt burcaucracics olcr th,rt ol localarea govr.m.rnce. It is the pictrrre oi (iNP

rrorrlh i i \atio11 rvithout rcrarcl krr por-trtr ' ,rurl r.c}ritr: It is thc Picture of short-tun unsust,rinable g.rjus oler long-termsustainablt. bt ncf i ts.

Fortunateh; most global elelelopmentinstitutions,rnrl manr rlevelol-ring coun-tries arr'\\ 'akiuc up to auothcr p,rraclignr.Ther, are rer]iscor ering people ,1s thr. r/rr/of ,rn,,l not the nreans to tlelelopment.Thet',rrt ' rct 'ngirrccring gnYcnllncnt totlnpor!er pro\' inces, r ' l istricts, kl\\ 'ns,,rnd

1996

recipient of development. It is people first,people working for other people, andpeople fullyachralizing themselves as ful-filled human beings. This perspectivechallenges the mainstream concept ofdevelopment as one of maximizing eco-nomic growth with the fervent hope thatits benefits will tdckle down to the peo-ple. This perspective asserts that devel-opment is about people, for people, andby people.

The new yardsticks of people-centered development value health be-cause it provides a good life; nutritionbecause it enables people to work; edu-cation because it transforms charactetmolds minds, and builds skills; safety be-cause it allows freedom of action and of-fers peace; leisure because it liberates thebody and the mind; and happiness be-cause it suffuses the spirit.

Given this definition of development,shessful GNP rat races simply will not do.The operative word is total actualizationof the human potential. People-centereddevelopment endeavors to make eachmember of soci€ty a functioning con-tributor to overall development whilederiving full individual satisfaction inthe process.

lf people development is to be pur-sued, the focal points will be communi-ties, not industdes or sectors. There willbe a departure from the myopic thinkingof equaiing development solely with theacceleration of industrial and agriculturalgrowth towards development which har-nesses the full potentials of people livingin a given area.

Three concepts em€rge: First, devel-opment is a community or societal effort.Second, development is a collaboration,meaning the joint harnessing and utiliza-tion of resources by people adoptingmutually beneficial strategies. Third, de-velopment is not for the privileged fewbut for all. Central to the concept of peo-ple development is people empower-ment. People mustget involved and fullyparticipatein the social, economic, politi-cal, culhrral, and spiritual aspects of theirdevelopment. They must have access toresources, be they f inancia l , natura l ,physical, or human. They must then be-gin to control these resources for them tocontrol their own lives. Finally, they musthave the capacity to manage themselves,thet organizations, and their resources.

t)

Logic

DeliveryMechanism

Objective

SocialTechniques

People mustbuild their own capabilitiesto provide for their basic needs and more.

People-Oentered l)evelopmentversus Productlon-Centeredl)evelopment

Korten, in People-Centered Deoelop-ment: Toward A Frameloolk, contrasts peo-ple-centered development with produc-tion-centered develoDment. He claimsthat people-centered development fo-cuses on human growth and well-beingwhile production-centered develoDment

Summarized and interpreted by Eduardo A, Morat6, Jr,, Asian Institute ofManagement.Source Document: People-Centercd Deaelopmenf, Edited by David C. Korten and RudrKlauss, Kumarian Press, 1984.

People-Centered

Enhance human growth andwell-being, equity andsustainability. Balancedhuman ecology.

Individuals as actorsdef ining goals, controllingresources and directingprocesses that affect theirlives. Local initiative andparticipation.Self-organizing systemsbuilt around human scale,organizational units. Self-reliant communities.

Human growth in realizingfull potentials. High qualityof life. Community welfarefirst. Economic surplus asby-product.

Value system. Sociallearning processes.Territorial (area) perspectivedefine production.Human ecology frameworkthat internalize people andenv[onment.

stresses the maximization of goods andservices prod uced. The former relies on in-dividuals, households, and communitiesas main deliverers to themselves while thelatter is anchored on large corporationsand bureaucracies. The former seeks theflowering ofthe full human potentialwitheconomic surplus as theby-product whilethe latter strives for continuous economicgrowth with human welfare. The formerunderscores value systems and interac-tive, expedmental, and heuristic sociallearning processes in a teritorial setting

Exploitation of naturalresources to produce greateramounts of goods and servicesand create massified consumersocieties to absorb them.

Large organizations(corporations and bureaucracies)maximizing throughputs viacentrally conholled, functionallydefined, and globally linked

Processes.

Economic growth with humanwell-being as by-produci.Creation of wealth, trickle-downeffect on social welfare.

Comrnand system.Classical physical sciences.Functional definition ofproduction.Analytical tools that externalizepeople and. environment.

Aucusr-SEpTEMBER 1996 . THE ASIAN MANACER

while the Iatter relies on a hi-erarchical command systemthat utilizes mechanistic andalgorithmic phvsical sciencesin functionally defined devel-opment.r

The action themes of peo-ple-centered development are:enabling settings; self-organiz-ing structures and processesand territorially-organizedproduction-consumption sys-tems. In contrast, productioncentered-development f avorsprofessional bureaucracy as amonopolistic deliverer; thebluepdnt approach to develop-ment programming; and, amore global, national, indus-trial, and sectoral approach toeconomic growth. Korten pro-poses that in order to pushpeople-centered development,creation of a new social order,new st ructures, and newmechanisms shall be put inplace rather than destroyingtheold in a confrontational andradical way. A comparativeanalysis of people-centeredversus production-centereddevelopment , based onKorten, is summadzed in Ta-bles 1 and 2.

Ar.e-a-Basedl)evelepment

Area-based developmentassumes a local governmentorientation where the integra-tion of an area's multifariousinterests are deemed para-mount. In area-based develop-ment, the overriding consid-eration is thebalanced integra-tion of various sectoral con-cerns which include political,economic, social, ethnic, reli-gious, and environmental in-terest groups. The perspectivetaken is the area manager's,whose primary responsibility is to all hisor her constituencies, present and future.The area manager's objective is to hamessarea resources (human, physical, eco-nomic, natura l ) by mobi l iz ing areastakeholders (individuals, businesses,social organizations, political institutions,

1. Professionalizeddeliverersof services using Three Es:Efficiency, Effectivity, andEconomy.

2. Blueprint approach ofbureaucratic monopolies.

a) Premised on economies of rale.

b) Hierarchical, depersonalized chainof command and delivery of services.

c) Government as neutral player indevelopment, sometimesco-exploiter of local areas.

3. National, Global, Industrial, and Sectoral

a) Meet national needs and givecontrol to those who can bestcompete nationally or intemationally

b) Global interdependence.

c) Stmses logic of poduct and producenof producls. Ownenhip and managemmtnot linked to place. Acmuntability toindustry/sector development.

church groups, communities) to increasearea productivity, provide equitable ben-efits toall, and assure quality of life of thepeople and continued sustainability of theenvironment. Area-based develooment isdifferentiated from sectoral development,industrial development, or economic de-

Enabling settings forpeople to meet their own setof needs.Deliverers and recipientsof services are one and thesame community.

Self-designing, self-organizingcommunities.Local governance. Systems,structures, and processes.

a) Premised on small isbeautiful and moreproductive.

b) Use of informal networks,mediating structures.Lateral as well as

v c ' u ( d , , , r ' ^ d E r ( D .

c) Government as defenderagainst assault of elite, ideabuildel catalyst, hainor,and advisor Source ofsocial support, innovation,and social action.

Territorial (local area)Production-Consumption.

a) Meet local needs andcontrol by locals oftellitorial resources.

b) Self -sufficiency, reliance.Community linkaging andinterdependence going upto national and to global.

c) Shesses logic of place,people in place. Ownershipand management linked toplace. Accountable totenitorial development.

velopment which all tend to take a lim-ited perspective.

The UNICEF provides a comparativeanalysis ofsectoral versus area-based de-velopment.'� Area-based developmenthasa multi-sectoral, integrated, location-spe-cific focus in contrast with the national/

THE AsrAN MANAGER . Aucusr-SEffiMBER 1996

sectoral focus of, sav, agriculturehealth, education, etc. The former isgeared torl ard loc,rl plannrng .rniimp lemcntJ t ion uh i l , rhe l . r r l t r i -designed for centralized governanccAre.r-b.r-ed m,rn,rsemynl Jc,tl- rr rl ll uc , i l i /ed i - :ue . . ta rg , r l . . . r r rJ pcrIormance critcria rr hilc sccror.rlrn.ur-agemeni relir. r 'n -t,rndarLijzcJ frlgrams and performance measures.The area manager i s morc o f , rgeneralist rvhile the sectoral manaseris more of a spccialist. Thc forntrdeals \\'ith local structures and communitv-ceniered institutions; thc lat-ter deals rnore $ ith ser!ice ertensionunits of national bureaucracies. Are.a-based deve lopment be l ieves inparticipatiVe processes/ people in-volvement, social mobil ization, andthe broadening of economic, social,and polit ical bases. Sectoral der,elop-ment atlheres to thc provision anddeliverv of services through stand-ard packages disseminated bv tech-nical manpon'er. This differentiationbetween area-based and sector.rl de-velopment is summarized in Tablc 3.

Area 0lanagcmcnlByand large, there is a lack ofap-

preciation for area management. Bvarea, \{'c mcan gcographic politicalunits such as countries, isJancls, pror,inces . c i t ies , mun ic ipa l i t i t ' s , an t lbarangavs. In pursuing econolnicgrouth, manv economic man,rgcrsdo not consider the area's "siancling

values or u.hat resources have beenretained in the area ancl rvhat re-sources have been lost forer,er" Ar-eas have just become playgroundsfor investors and rvcalth cxiracftrrs,wiihout great regard for the area'sclegradation, deprir,ation, and dcnu-dation. We must look at both thepresent productivitv of an area anclits abilitv io produce for tomorroiv's

Sectoral Development Area-Based Development

FOCUS

SITUATIONALANALYSIS

PLANNINC

MANACEMENT

MONITORINCANDE\ALUATION

FINANCIALMANACEMENT

CAPACITYBUILDINC

VOLUNTEER/COMMUNITYWORKER

SOCIALMOBILIZATIONPARTICIPATION

COING TO SCALE

REPLICATION

National, sectoral

A tool for centralmanagement

Ceniral government

Slandard fargets andperformancc; criteriaapplied through commonmeasures .1nd pr()i|drr,l lguidelines

Cuidelines/indicators

Centrally-directed

Technical manpowerancl organizational

Extended manpower armof service delivervmechanism

lnformation-sharing andprovider-orientedsen,ice uti l ization

Expansion according totechnical manporver/financial feasibilitv

Through standardpackages governmentdirection and resources

Lmd area specific; rnultisedoral-rntegrated

A tool for local planning

Consultative; decentralized withIocal govcrnment andcommunitiesi devolution

Locallv-determinecl targets andperformance criteria establisherlthrough relevant processinterventions

Cuidelines/indicators area-specific

Central + Local Covemment UnitCommunity-based financing

Local institution building andcapacity enhancement

Communitv-based link for verticalsen'ice integration, micro-macrolevel contribution

Broad-based social preparation,community organizing. andleadership mobilization

Ad\.ocacy in acti01 and testingground for rapid acceleration

Through social mobilization witl.rcost-sharing and Iocal communitvresources

needs. Present productiYitv reliesmore on economic analvsis, inr,estmenrs Senerauon, maxlmum Pro-duction of goods and services, .rndimmetliate benefits. Futurc produc-tivity emphasizes environmental accounting, human resources .rnalvsis, and areaasset build-up. Area management tracesthe inflol's and outflorvs of all v,rlues tonr t rom the loca l r rv . I l re , r r t - , r rn , rn , r { t - r .

Source: UNICEF, ABSD c/o Dr Victoria Bautista, UP-CPA.

task is the multiplicat(rn, circulalion, andrecvcling of resources within the area,avoiding massivt ltakages that tcnd toshriytl an arca's l.roteniialit ies.'

The prevail ing measure usecl bv eco

nomic managers is C\P or gross nationalproduct l hich is onlv partial development, at besi. Tht CNP grorvth fetish ofmanv €.cononists prevents them fromqualitatir.eiy analvzing its components.

Aucrusr-SFprE\{BER 1996 . THE AslAN MANA(;ER

Many growth factors Pertain tounbeneficial production, like arma-ments, cigarettes, cholesterol-ladenfood, pornography, and non-essen-tial luxuries. Moreover, productionis steam-rollered at the sacrifice ofvital area resources like clean air,safe watet bountiful flora andfaura, beautiful scenarios, andhealthy human beings. GNP doesnot include developmental activi-ties canied outby the informal sec-tor (like backyard vegetable gar-dening) or life-giving and sustain-ing human activities (like

breastfeeding and physical exer-cise). Finally, GNP utilizes moneyvalues and compares these valuesacross countries without adjustingfor their relative purchasing powerin each country.

The deficiencies in economicmeasurements have led develoP-ment managers to seek other Yard-sticks, such as employment levelsor min imum basic needs ( i .e . ,health, nutrition, education, lon-gevity, sanitation, water supply,and housing). The United Nationshas come up with the human de-velopment index composed of lit-eracy,life expectanry and income.These yardsticks focus on social indica-tors. More recently, environmentalistshave been advocating the use of environ-mental accounting to assess the qualityofnational resource endowments and theimpact of humanity's interface with na-fure.

There is a pressing need to synthesizethe economic, social, and environmentaldevelopment measures into an area bal-ance sheet which lists all area resourcesor assets on one side and the claimantsand users of these resources or assets onthe other side, Area resources or assetsintlude human caPital resources, mon-etary assets, receivables from other areas,nahrral resources, inventory ofgoods andservices, physical infrastructures, eco-nomic structures, social/religious/politi-cal structures, and intangible assets.Cla imants and users inc lude var iousstakeholders in the area, including thelocals or resident-stakeholders, "foreign-

ers" or "outsiders," and govemmentA comparison of an area's yearly bal-

ance sheet will reveal which resources are

fast increasing and which ones are fast de-creasing. One can then gauge whether thedirection of the increases or decreases willbe beneficial or not and for whom. Onecan likewise assess whether or not theoverall mix of the area's resources overtime has a healthy equilibrium that favorscontinuous asset regeneration withoutany one sector incurring siSnificant sac-rifices. Another interesting insight fromthe area balance sheet is the degree of con-hol that one claimant or group of claim-ants has over an area's resources. This in-sight captures the absolute or relative dis-tdbution of the assets in the area amongits claimants.

Susiainable lf evelopment:Interdepcndeney and Inlegra.tion of Peopler Their DconomY'and The EnvlronmenL

The World Commission on Environ-ment and Development Produced theirseminal work on sustainable develop-ment in 1987. The Commission definedthe term as "one that meets the needs of

the present without compromising theability of future generations to meet theirown needs." They recognized that thechallenges of sustainable develoPmentare both interdependent and integrated,requiring comprehensive approaches andpopular participation. Interdependencyand integration are critical because sus-tainable developrnent is not a fixed stateof harmony but rather a process of changewhere exploitation of resources (ftorn theenvironment), direction of investments(for economic well-being) and institu-tional change (for people and their organi-zations) are made consistent with futureas well as presentneeds. The World Com-mission Doints to a new era of economicgrowth,

-one that must be based on poli-

cies that sustain and expand the environ-mental resource base. Such growth, theCornmission postulates, is absolutely es-sential to relieve the great Povety that isdeepening in most of the developingworld. In essence, the Commission be-lieves that people can build a future thatis more prosperous, more iust, and more

rramewort< tor sFu'3tlrii"1bt" D"r"lopt"nt

Agriculture/Aquacultu€

IndustryServices

Intormal, Unorganized

LandForest

En€rgy

Prepared by Prof. Eduardo A. Morst6, Jr', Asian Instilute of Management 1993

PEOPLE

UplandLowlandCoastalUrban

/r\/ | \

GOVERNIEIIT

\Policies \Stralegies \Slructu€s \Programs \Proiecls \Laws and Reguiatjons \ \

\

ECONOIY

THE AsrAN MANAGER . Aucusr-SEPTEMBER 1996

secure and that the global economy andglobal ecology are locked together.r

What the Commission therefore visu-alizes is a model of development that in-terweaves the issues of poverty, 5ocial jus-tice, ecological balance, and economicprospenty.

The linkage between people, theireconomy, and the environment is stressedby Daly and Cobb (1989) where thel' de-mand a paradigm shift awav from look-ing at economic development as merebids for personal freedom and freeing in-dividuals from hierarchical authority.Instead of ftono ecoronrcus as pure indi-vidual, he or she is person-in-community.Thus the new economics of Daly andCobb becomes more consistentwith othersocial sciences. They aver that econom-ics for the common good is what ecologi-cal humanism calls for, and even more,what stewardship ofcreation calls for Theproponents of this new economicc believethat both market system failures (inequal-ity, inju5tice. inhumanity) dnd public sy\-tem failures (inefficiency, ineffectivity, andincompetence) shall be addressed.i

The t r iangulat ion of people. the i reconomy, and the environment may bedepicted in Figure 1. Government mustassume an active role in pushing for poli-

cies,laws, and regulatorv mechanisms toensure that the three component5 are inharmony and act svnergisticallv torvardsa more sustainable development.

Governmentas A lfevelopmont Instiauai0n

We can regard govemment as the keyinstitution that must espouse sustainablcdevelopment. Government is the man-ager ofthe countrv, prnr,ince, town, or vil-lage. It serves as the institution that mustdeterminepolicies,strategies,structures,programs, projects, laws, and regulationsthat would govern the area and its sus-tainable development. Government isboth harnesser and allocator ofresources,law-giver and law-enforcer, svnthesrzerand integrator of all development eftortsas well as the separator of functions anddisaggregator of sectoral concerns. (On

this last aspect the government, in itsdrive to reduce nanagement span ofcon-t ro l , sp l i t s i t se l f in to manv un i ts ,oftentimes with conflicting objectives andapproaches. Hence, the interdependencychain is broken and the integrative har-monization required in sustainable devei-opment i s lo . t . ) Covernment , in i t . ba l -ancing act of maintaining people, eco-nomic, and environmental sustainabilitv

must itself be sr.rstainable to ensure theproper execution of its mandale. If i t be-comes unsustainable, it r,,'ill suffer fromlack of resources, lack of moral and Iegalaulhoritv and lack of credible govern-ance.

The EnvironmentThc environment is the arena of sus-

ta inab le deYe lopment . I t i s the locusu'here people, institutions, econom\'; andecologv meet. lt is both a resource baseand a habitat. It gives sustenance but atthc same time suffers from abuse and mis-use. As both locus and resource, the en-vironment provicles land, forests, ait n a-tet energy, minerals, seas, lakes, rivers.As a habitat, it is home to men, animals,and plants.

The government is given so\,ereigntvand eminent clomain over the environ-ment. [n so doing it, must answer to thepeople at large or the public. It is the peo-ple that, in most ir.$tances, determine thelegitimacy of government. The govern-ment is mandated to uplift the quality ofl ife of the people uncler its jurisdictionrvhile at the same time ensuring that thequalitv of the resources provided bv theenvironment remain high and maintaintheir long-term sustainabilitv This nexusbetween people lvelfare and environmen-tal sustainabil itv is often broken becausethe people themselves are not one mono-l i th ic en t i t v bu t an organ iza t ion o fstakeholder.. vearning rnJ a.piring fortheir individual, their group, and theircollective goals.

PeopleRen€dbn: Evallation and

CincopudrEd by Prof Eduardo A. MoEr'6. Jr.. Aean Inshrute o, Manalenenr

People devekrpment has become svn-onvmous with economic development bymanv govcrnncnts although economicdevelopment does not encompass social,political, cultural, and spiritual aspects ofdevelopment. Hor,vevet since many gov-ernments vieu' economic development asthe harbinger ofall forms oftrickle-downbenefits. it has gained a promrnent rolethat has marginalized many, especiallvthe poor, outside the mainstream ofeconomy. It has also been pursued to thedetriment of the environment, leading toeco log ica l des t ruc t ion , de ter io ra t inghealth statistics and economic downfall.

It is important, therefore, to vie$' thepeople as critical stakeholders in the in-tegrated model of sustainable develop-

ALTGUST-SIprE\4BER 1996 . THE AslAN MANACER10

Growth-Led Economic Development

To accelerate economic development through maximumproduction of goods and services for marketconsumption

1. lndustry should maximize exploitation of resources asnecessary inputs to the outputs of development.

2. Focus on present needs and wants;present consumption bias.

3. Growth will generate enough wealth to alleviateconditions of those who are not in the mainstream likethe poor

4. Narrow-based but shong capitalist class. ExclusiviryPreference for thos€ who will survive as the fittest becaus€they a.e the strongest.

5. Shongly biased towards wants of aJfluent consumers.Non-essential goods and consumerism encouraged.

6. Undervalues natural resources and discourages theiiconservanon.

7. Values any increase in economic activity.8. Assumes laborer exists to s€rve the economy rather than

the other way around.

Table 4Comparison of Growth-Led Economic versus Equity-Led Sustainable Development

OBJECIIVE

1 . Creation of wealth through enterprises and industries bycapitalizing on competitive advantage and rapidexploitation of resouces to maximize profits. Wealthgenerated is often concenhated to allow faster growth.

2. Prcmote investments through fast capital mobilizationsuch as loans, large corporate savings, grants, forefnmvestments, taxes, etc.

3. Growth nodes, industrial centers, urban sprawl. Industrialenclaves. Export processrng zones. Inbsaz fuire.

4. To accelerate gawth, import capital goods, technology, andtechnical assistance.

5. Speciallze on industries and products where country hascomparative advantage.

6. Liberalization, deregulation but still selective protection ofstrong.

7. Capital concentrationLegrtimizes concentration of ownership and productiveassets in corponte structures and large bureaucraciesbut sep€ratres the control of these asseb from the communitiesthat depend on them.

8. Foreign ownenhip and conhol is encouraged.9- Export as main impetus is preferred, local needs rnet as a

result.10. Large is powerful. Intensive industrialization.

ll. High priority to sophisdcated te(hnology. Highproductivitlthrough advanced machineryand equipment.

12. Covemment is given the task of promulgating andimplernenting laws that pinpoint responsibilities andaccountabilities for various stakeholders.

Equity-Led Sustainable Development

To balance total development through integration andharmonization of ecology with people and economy

1. Eath has limited rcsources that must be used pdiciously

2. Future viability is just as, or even more, importantas present consumption.

3. Include those marginalized at the beginning to broadenthe base of development.

4. Broad-based ownership. Inclusivity. Provision ofeconornic, social, and poiitical lifeboats for all.

5. Strongly biased towards all p€ople getting the opportunityto pursue basic livelihood for themselves in the use of theearth's resources. Discouated non-essential consumption.

6. Highly values natural resources and encourages theirconservation.

7. Values maintenance of decent human living standards.8. Puts preeminence in rights of individual, family, and

communitv to own and conhol orcductive rcsouces.

1. Area-based developmmt which assures that one sector isnot sacdficed for another and the futur€ is not prpardizedfor the present. The shatety is to ensue that people haveproper values and orientation to manage resourc€s well sothat they are rcSenerated and not deshoyed or wasted.

2. Promote investments through community, equity, familysavings, self -help schemes.

3. Agropolitan economies, self-reliant cities, disperseddevelopment. Peoplds organizations tlnt are interlinked.Corporate citizenship.

4. Reliance on indigenous mateiialt own resources, andcapabilities.

5. Economic diversfication at all levels: Focus on oroductionthat would meet basic needs of local populahon.

6. Self-sufficiency Protection of disadvantaged.

7. Capital dispersalPromotes democratization of wealth and political decision-making. Broad-based distribution of capital, power, andassets.

8. Local ownership and conhol of rcsources is preferred.9. Surplus of high value local production is the one geared for

exDort.10. Small is beautiful. Intensive smallholder agriculture using

high productivity; bio-intensive trhnologies.11. High priority to educadory capability building of the

many to take charge of own r€sources and to participate inlocal, national, and global decision processes.

12. Shared responsibility for well-being of all communitymembers and rcverence for commucation betwem peopleand nahrre.

PREMISESANDVALUES

MAJORSTRAIEGIES

Sumarized ahd inte.ptuted bv Eduardo A. Morat6, Jr, Asian InstituteofManagment.SOURCE DOCUMENT: G.lr' ng to The 27st Ctntury, Dalid C Korren, Kumrian PEs, 1990.

THE ASIAN MANAGER . AUCUST-SEPTEMBER 1996 11

ment. Stakeholder analysis must vlewpeople as "inhabitors" and "stewards" ofspecific environmental areas, such as up-lands, lowlands, coastal areas, and cities.

EconomyStakeholder analysis must also take

business entities and livelihood pursuitsinto account. They are the pdme moversof and participants in economic develop-ment. A broad but convenient classifica-tion for this level of stakeholder analysisis the sectoral classification ofagriculhrre,industry, and seruices. Within the agricul-tural sector, one may include agricultureitselt livestock raising, fishery, and for-est-based activities. The industry sectorpossesses a broad spectrum ranging frombasic processing of agricultural raw ma-terials all the way to synthetic chemicalsand manufachrre of armaments. The serv-ices sector encompasses financing, trad-ing, government, communiry personal,business, political, religious, and otherforms of services.

Int€eFlat€d llevelopment ModelTo provide a Iramework for the new

global development paradigm, we pro-pose the Integrated Strategy Develop-ment Model which stresses thatdevelop-ment managers have the delicate task ofpropelling balanced growth, riding on thethree wheels of environmental, economic,and socio-poliiical (people) developmentvehicle. They must follow a wholistic ap-proach that will bring these three devel-opment wheels together in an integratedstrategy. Otherwise, the vehicle will notmove towards its destination (See Figure2).

Environrnental development involvesthe management of a geographic area, theindustries and sectors operating in thatarea, and the development agencies orinstitutions intervening to promotegrowtlL productivity, and quality of lifeand of natural and physical resources inthat area. The key to environmental de-velopment is brlance (where one aspect isnot sacrificed for the other) andsustainability (wherc the fuhrre is not sac-rificed for the present).

The economic development processinvolves conversion of resources into in-vestments, investments into goods andservices, goods and services into income,and income back into resources or ben-

72

efits distributed to intended beneficianes.Four processes are involved here: (1) themultiplication of area, industry, sectotand institutional resources; (2) the reduc-tion of factors that subtract economic ben-efits; (3) the addition of higher and highervalues to economic activities; and (4) thedivision of benefits generated on an eq-uitable and sustainable basis.

Human infrastructure and institutlonbuilding is the objective of the socio-po-litical development process. It is a socialprocess because it concerns individualsrelating to one another within an organi-zation and groups interacting with othergroups and the environment they live in.It builds socialsystems thaI are responsi-ble for determining the behavior of com-munities. It is a political process becauseit involves the dynamics of influencing,goveming, and empowering people. Bothsocial and political dimensions deal withthe art and science of people manage-ment, Hence the socio-political develop-ment process must encompass the total-ity of the human being-mind, body, andspidt. lt must embrace the totality of peo-ple's institutions. their ideology. organi-zation, and values.

Concephrally, the dynamics and inter-face of environmental, economic, andsocio-political (or people) developmentprocesses are depicted in the IntegratedStrategy Development Model as shotn inFigure 2.

Comparlson of Growth-l,edEeonomie versus Dqulf-LedSustainable llevelopment

In his book, Getting to The 2:1st Cen-t ,,y, Korten advocates for an equityledsustainable development versus the tra-ditional mode, pursued by most coun-tries, which is growth-led economic de-velopment.6 The author summarizes andintegrates the two paradigms of Kortenin a tabular comparative analysis.

On one hand, equityJed sustainabledevelopment bats for balanced total de-velopment through the integration andharmonization of the ecology with thepeople and the economy. On the otherhand, the objective of growth-led eco-nomic development is to accelerate eco-nomic development through maximizedproduction of goods and services for mar-ket consumption. The premises and val-ues of the two paradigms and their cor-

The socio-politicaldevelopmentprocess mustenGompassthe totalityof the humanbeing-rnindbody, andspirit.

responding strategies are laid out in Ta-ble4. The new global order demands thatthe growth paradigm per se must yieldto a new one that gives equal or more im-portance to equity. Crowth, however, isneither to be altogether laid to rest. Butgrowth must neither exarcebate povertynor rob future generations of their dght-ful claim to our planet's natural magnifi-cence.

FOOTNOTES:r David C. Korten, "People-Centered

Development, Toward A Framework,"Irom P eople-Centered Deuelopment, editedby David C. Korten and Rudi Klauss,Kumarian Press, 1984.

'� UNICEF, ABSD by courtesy of Vic-toria Baustista, Unive$ity of the PhiliP-pines, College of Public Administratron.

3 Eduardo A. Morato,Jr., Strategic ln-feraenfion for Deuelopment Manngers; Volume II-The Entironmental DeuelopmentPro.ess. Asian Institute of Management,1993.

a World Comission on Environmentand Development, Our Common Future,Oxford University Press, 1987.

s Herman E. Daly and John B. Cobb,Jr. The Common Good, Beacon Press, Bos-ton,1989.

6 Getting toThe 2Lst Century, VoluntoryAction snd The Global Agenda, David C.Korten, Kumarian Press, 1990.

Prcf. Eduardo A. Moratd lr., is the Inslilute's Gaslon ZOtligas Prolessor lot De\elo?menl ManagemPntIntel ef : <eamonto@aim.edu.ph>.

AUGUST-SET'TEMBER 1996 . THE ASIAN MANACER

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i:'t"

BY PROFESSOR EMIL P. BOLONGAITA, JR.

Total Qualiqt'-Govemance OQG)

Iheating The Citizen as CustomerTotal quality govemment leads to serYice quality

and citizen-customer eommifnent.

ten and respond innovatively and effec-tively to the customer. Yet while privateenterprise has made leaps and bounds insatisfying, even delighting, the custometmuch remains to be desired in how gov-ernmentdeals with their constituents. AsHenry Mintzberg (1990) poinis out, manygovernments view their people only assubjects (who pay taxes and obey laws),not as citizens (who deserve to be treatedequally regardless of rank or status), orcustomers (who deserve to be servedwell).

While this customer-odented processhas already been discussed in the litera-ture on the management of govemment(e.g.,Osborne and Gaebler, 1993;Crornpton and Lamb, 1986), it has yet topermeate the practice of govemments.

Few govemments in the world, view thepeople as citizens; much more as cus-tomer Exceptduring elections, when citi-zens are courted for their votes, manynational and local governments deliverbasic services late, poorly, and arro-gantly-as if government funds comefrom their own pockets and not fromtaxes levied on citizens.

Why tlie Cltizenls Ranely the Oustomer

There are at least four reasons whYgovemment agencies are, in general, rn-sensitive, even indifferent, to citizen con-cerns:r First, the budget of governmentagencies is not dependent on citizen sat-isfaction. Government agencies do notreceive their funds directly from the citi-

atisfying the customer is fundamen-tal to the success of any enterPdse.No customer satisfaction, no suc-

cessful business. Towards this end, firmshave developed different ways of hear-ing from the customet such as custornersr.rweys and interviews, customer follow-up, focus group discussions, suggestionbores, and various other means. By re-sponding to customer concerns/ cus-tomer-driven organizations satisfy theircustomers and strengthen their enter-prises.

The literature on total quality manage-ment (TQM) continues to attest to theimpact that customer satisfaction makeson corporate success. Since it was pio-neered by Deming and Juran, variousprocesses continue to be invented to lis-

14 Aucusr-SEpfiMBER 1996 . THE ASIAN MANAGER

zens but from the legislative assemblyand the treasurv When a business dis-pleases customers, sales decline and prof-its plurnmet. When a govemmentagencyfails to deliver services, nothingbad hap-pens to it. Government agencies aim toplease, not the customet but thebureauc-racy and its bosses. There is no incentiveto satisfy the citizen as customer.

Second, government agencies aremonopolies. They have no competitionthat will prod them to be efficient, effec-tive, and innovative. Their employees, inturn, can afford to be arrogant, compla-cent . and d i .paraA ing o f the pub l ic .

Third, national and local govemments(at least. democratic onesr are only re-placed through elections. For the Philip-piner and other pre,idential democracier.terms of office and election periods arefixed. Elected government officials can-notbe changed in between elections (savefor extraordinary cases). Thus, inbetweenelections, there are no serious disincen-tives for officials to seryecitizens with ex-cellence and innovation.

Fourth, majoritv of the citizens havehi:torically been accustomed to poor per-formance of governments and have notdeveloped a culture ofcomplaint for bet-ter seruice. The long lines in many gov-ernment offices are accepted as a matterof fact, the arrogance and incompetenceofmanv governrnent employees are con-sidered part of the process, and thesloppv and slipshod services are viewedas something that might as well be ac-cepted. To be served effectively, manycitizens know all too well that "pay-offs"

often do the t ck.Of these fourconditions, the first three

r t md in unchanged in the Ph i l ipp ines .Covernment agencies do not lose moneyeren uhcn they per fo rm poor ly , theyhave no rompet i t ion fo r the j r .e rv rces ,and the electoral rules of the country stillfeature fired term. and lqgu ld r .1.a11ar..The fourth condition, however, has:hon n sign' of change, in pdrt owing togrowing cit izen dissatisfaction. Facedwith arrogant and incompetent govem-ment agencies, many citizens no$' fumeat the disservice and clamor for change.

Dxamples of Cltizen.0rienledGovernanee

For instance, Osborne and Gaebler(1993) discuss cases of successful cus-

Iablo 1

The Priority Govornance Matrix

Perceived LowSeverity Problem

tomer-driven systems in local govern-ment aSencies in various areas in theUnited States. The features of these sys-tems are pattemed after business prac-tices, such ascustomer surveys, customercontact reports; customer councils, com-plaint tracking systems. These systemswere successful not only on the basis ofcitizen satisfaction but on other criticalaspects as well.

In India, Paul (1995) describes the de-velopment of a "citizen report card" onthe de l i very o f pub l i c serv ices rnBangalore. Using a variety ofcitizen feed-back mechanisms-random sample sur-vey, in-depth interviews, focus groupdiscussions, case studies, documentationof other information-Paul'g Public Af-fairs Centre identified eight public utili-ties most often dealt with by citizens,ranLed the:e agencie5 in term5 of cif izensatisfaction, and analyzed problems en-countered by citizens,such as comrption,excessbilling, and poorservice. The Cen-tre's report was published by the localpres: which forced two or three dgenciesto respond and remedy some oftheir de-ficiencies.

While customer-oriented govern-ment is not new to the Philippines, ner-ther is it common. The Gauarl Gnling Pookadministered by the Asian Institute ofManagement (in cooperation with theLocal Government Academy of the De-partment of Intedor and Local Govern-ment) has identified cases of excelentcit izen-oriented local governments.rHowever, in the Philippines and in manyother developing countdes, customer-driven systems are not institutionalizedin the operations of national and local

Area of Indifference{A0r}

Area of Satisfaction(A0sl

govemment agencies. The 1991 Local Gov-ernment Codecalled for the establishmentof local special councils to ensure popularpdrticipation but these councils, [or vari-ous reasons, have not been instifutional-ized (Bolongaita, 1995).'What bodes well,though, for the development of such cus-tomer-oriented systems in governmentbodies is the willlingness of various na-tional and local civic groups in the coun-try to push for greater accountability andperformance from their local govern-ments.

lloveloping Toaal QualltyGor ernan<"e ITQG)! TneatingThe Citizen as Cuslomer

The revolutionary impact oftotal qual-ity management (TQM) in improvingquality in the manufacturing and servicesectors may be adapted to the public sec-tor (Milakovich, 1995). The public sector-government agencies and non-profit pub-lic organizations-can learn much frominnovations in service delivery in the pri-vate sector. Government can learn muchfrom business. Business can also learnmuch from govemment, particularly inhow government agencies deal with mul-tiple stakeholders, conflicting interests,and in tense pressure l rom pol i t ic ian(Mitzberg, 1996).

There is no reason why service dimen-sions emphasized in the private sector-such as timeliness, accuracy, courtesy, re-sponsiveness, availability, variety, conven-ience, etc.-{annot be successfully appliedin the public sectoraThe methods for cus-tomer feedback used in the private sector,:uch as clstomer surveys and interviewsand focus group discussions, may be

Government not doinganything aboutthe problem

Government doingsomething aboutthe problem

Area of High Priority{AHP

Area of Lower PnorityIALP}

TI IE ASIAN MANAGER . AUCUST-SEPTEMBER 1996 1 5

adopted by public sector organizatrons(as demonshated bv Paul's experiencesin lndia and by innovative governmentorganizations in the United States).

In lhi5 regdrd. the Ptrl it i t. and Cov-ernance Desk developed a cit izen-cus-tomer feedback s1<tem designed h' as.istpublic scctor ortdnizdtions in ds5ei\ingtheir delivery .rf serr ice.. Unli le previ-ous and prevailing practices where as-sessment of the quality of service deliv-eryisbased on employee reports or someother mechanism, the citizen-customerfeedback system would solicit evaluationfrom the end-user of the service. If in thep vate sectot qualitv is ultimatelv deter-mined bv thc cu5tomcr, \o shouJd quality in the public sector be. The feedbacksy:tem would enable l heie orSan izdtionsto a\sess specil ic dimen'ion. r 'I serlicedelivery, such as transaction time, cour-tesy, responsiveness, and personalizedservice.

The feedback systern was also de-signed to identify and prioritize city prob-Iems and issues based on cit izen-cus-tomer concerns. More often than not,leaders ofpublic sector organizations relyon subjective mechanisms to identify andprioritize issues that their orSanizahonsneed to address. These mechanisms, suchas informal interuiews with key person-nel and staff, are likely to be biased, fil-tered b1 the prism of the leader's per.pec-tivc or th,lt o[ lhe dominant coalit ion inthe organization. The feedback svstemwas devised to correct biases inherent in

a non-scientific approach to identifyingand priorit izing, problems. Cr-rnsideringthe technologies of survey research, thefeedback system is able to identify andprioritize problems of citizen-customersmore preci'ely thdn personali.t ic per.pet -

tives could ever hope to do.The Politics and Covernance Desk of

the AIM Policv Forum, in the spirit otcombining lessons of management fromboth bus iness and government , hascoined a system called total quality gov-ernance (TQC). It mav be distinguishedby several principles such as meeting(even exceeding) citizen customer needs,markct-oriented mechanisms, missronrather than rule-d ven governance, focuson outcomes not lnputs, preventlon notcures, decentralization, participation, andteamwork.

TQG is fundamentally based on theoverridir.rg principle that the greater theparticipation and commitment of a gov-ernment emplovee in formulating organrzational goals to service cluality, theharder and better that employee wil llvork to achieve them. However, TQC isnotjust about empowering employees. ltis also about inspiring them through ex-perienced visionary leadership. Just asimportantlg it is about ensudng that citi-zen-customers and clients are involved inperf ormance evaluation.

The TQG model is being developedto apply to various forms ofpublic sectororganizations, such as national govern-ment agencies, local governments, and

govemment corporations. To test this sys-tem, the Politics and Covernance Deskapplied a TQC review of Makati City, thecommercra l cap i la l o i the Ph i l ipp ines .

The TQC revien of Malati wa: de-signed to measure the performance of lo-cal government officc. in dclivering ba-sic services. These performance measuresrvoulcl, in tum. be used as the basis forbenchmar l ing impro \emen15 rn .c rv ice

delivery. ln addition, the TQC revieu,r.asalso designed to generate a governancen.rap that identifies and prioritizes prob-lems and issues.i

The lDatabaseData collection came from a repre-

sentative random sample of 200 adultma le and iemale re : ident r o f Mdkdt i C i t ) .The sampling followed the sun'ev indus-trv practice of multi-stage random re-spondent selection. ln the first stage, thesurvev team made a simnple random se-lection of ten barangays in each of the trvocongressional districts of Makati. In thesecond stage, the team did a systematicsampling of ten households in each of theten barangays selected in each district. Inthe last stage, the team chose one quali-[ ied adu l t househ. , ld member u . ingKish's probabil ity selection key. Thus,there were 100 respondents in each dis-trict.

The citizens feedback survey was con-ducted bv district to note interesting dif-ferences in citizen perceptions betweenthe two dist cts, should there be any,

Table 2Priority Governance Matrix

(based on Citizen Feedback for Makati City's Districi 1)

Areas ol High Prioritv {AHP)

l. ll legal Drugs?. ll legal Gambling3. Prostitution4. Squatters5. Public Parking6. Public Housrng7. Police Abuses8. Fire Protection/Controlg. Hold-ups/fheft10, Flood Control11. Pornographyl2.Carnapping13. IndecenVBold Shows14. Police Assistance

Areas of Low Prioritv {ALP}

L Traffic2. Road Repairs

Areas of Satisfaction {A0S) Areas of Indifference {A0l}

l. Garbaoe Collection 1. Potable Water2. Road/Street Cleaning3. Control of Sidewalk Vendors4. lssuance of License/Permits5. Maintenance of Road Lights6. Maintenance of Neiohborhood Parks7. Maintenance of Rec;eational Centers8. Public Transportation9. Citv Beautification10. City Sanitation and Pest ControlI L Marntenance of Ciw Schools12. Maintenance of City Hospitals13. Maintenance of Public Markets14. Vandalisml5.Terrorism

t 6 ALCUST-SEPTEMBER 1996 . THE ASIAN MANACER

*

which might stem from their differentsocioeconomic characteristics. District 1covers affluent barangays while Dstrict2 encompasses less affluent barangays.

Dfficlency and Serr'fue nesultgof TQG Bevlew ol Dla}atl Olty

The fint part of the TQQ survey aimedto find out the usage, efficiency, and serv-ice quality of city govemrnent offices. Theresults show that city government officesare visiied frequently by citizens. How-ever, about a fifth of the respondents inDistrict t have not visited any office inthe past two years. This finding suggeststhat the city government should makemore known and available its services tocitizens in District 1.

The transaction time of Makati citi-zens to complete their visits to city gov-emment offices varies according to dis-trict and office. The results show that citi-zens in District 1 appear to be servedfaster than citizens in Dstrict 2. In thisregard, city govemment offices in Dstrict2 need to improve their efficiency bymatching the efficiency rate of Dstrict 1.The average hansaction tirne for both dis-hicts was about 30 minutes but the citi-zens of Makati want io cut this by half.

The City Treasurer's Office was foundto be the slowest serving office. This inef-ficiency is most unfortunate because thisis the office where the city earns signifi-cant rcvenues in the form of tax payrnentsand issuance of business permits. In thisand all otlrer offices, the city governmentmay want to establish a service excellenceprogram that will improve efficiency inDnases,

ln general, more respondents in Ds-tdct 1 cited negative experimces than re-spondents in Dstrict 2. About a fifth ofthe respondents in District 1 said that civilservants made them wait while doingsomething else. Slightly less than a fifthsaid that govemrnent employees passedthe buck to somebody else. Thus, al-ihough citizens in District 1 are servedfaster than citizens in Dstrict 2, they havemore negative experiences.

To increase citizen satisfactior! thePolitics and Governance Desk recom-mended to the Makati government theestablishment of a program that will in-crease positive experience ratings and re-duce negative experience ratings.

On ihe positive experiences, the city

govemment needs to tartet for im-provement the following with lowpositive ratings:

. employees saying, "Thank

you" to citizen customers after theirtransachon;

. greeting citizen customers,"Hello" or 'Good morning / after-noon;" and

r calling citizen customers byname.

On the negative experiences, thecity government needs to work onthe followint:

o employees making the citizen waitwhile doing something else;

. employees sending the citizen tosomebody else; and

. employees smoking, eating, ordrinking in the office.

The change in these experiencesshould proceed in stages. The city gov-emment should try to move, in the firstphases, towards reaching and thm match-.ing the average ratings. Then, in the suc-ceeding phases, the city government canwork to attaining and subsequentlymatching the best ratings.

Problems and Prlorltlerof Oltlzens nevealedby thc TQG trevlew

The second part of the TQG surveyaimed to determine the cihzens' percep-tion of priority problems. Citizens wereasked about their rating of se,i'erity for 32city services and concerns as well as theirperception of the govemment'b responseto each of these problems.

A high priority problem is one thatscores high in problem severity and lowin government action. A low priorityproblem is one ihat scores high in prob-lem severity but high in government ac-tion. An issue is in the area of satisfacuonif it is low in severity but high in govern-ment action. An issue is in the area of in-difference if it is not viewed as severe andthe govemment is not doing anythingabout it.

The TQG system, thus, includes a pri-ority index of city problems. The index ofeach problem is derived by muttiplyingthe intensity ratings of problem severityand govemment action.

For Dstrict 1, the survey identifies 14problems of high priority, two problemsof low priority, 15 issues in the area of

waste, and one issue in the area of indif-ference (See Table 2). The survey showsthat among the problems of high prior-ity, the most prioritized are the following:

1st Priority: Illegal Drugs2nd Priority: Illegal Gambling3rdPriority: Prostituhon4th Priority: EuattersSth Priority: Public Parking

For Dstrict 2, the suwey identifies 12problems of high prioriry two problemsof lower priority, 13 issues in the area ofwastg and five issues in the area of indif-ference. The top five problems of high pri-ority for Dstrict 2 are:

lst Pdority: Illegal Drugs2nd Priority: Illegal Gambling3rdPriority: Pomography4thPriority: Prostituhon5th Priority: Indecent/Bold Shows

With the exception of several prob-lems (notably illegal drugs, illegal gam-bling, and prostitution), citizms of Ds-trict 1 and Dstrict 2 identify different pri-ority problems.

Pornography ranked third priorityproblem in District 2 but only I 1 th prior-ity problem in Dstrict 1.

Indecent/Bold shows is ranked thefifth priority problern in District 2 but amere 13th priority problem in Dshict 1.

Squatters ranked fourth priority prob-lem of Dstrict I but not considered a Dri-ority problem at all in District 2 (lt is inthe area of waste).

Public parking is ranked as the fifthpriority problem in Dshict 1 but it is onlyin the area of indifference in Dstrict 2.

Fire protection and control is rankedas the eighth priority problem in District1 but it is considered in Dstrict 2 as anarea of waste.

THE AsrAN MANAGER . Aucusr-SEpTEMBER 1996

Tabl6 3Priority Governance Matrix

(based on Gitizen F6edback for Makati City's District

Areas of High Priority IAHP)

l . l l leoal0ruos2. llledal canibling3. Pornography4. Prostitution5.IndecenVBold Shows6. Police Abuses7. Tenorism8. Hold-ups and Thefts9. Potable Water10. Public Housingl l . Carnapping,|2. Sidewalk Vendors

A.eas of Low Prioritv {ALP}

l. Traffic2. Garbage Collection

Areas of Satisfaction {A0S)

1. Boad/Street Repairs2. Road/Street Cleaning3. Maintenance of Road Liqhts4. Fire Protection/ContIol5. Maintenance 0f Recreati0nal Centers6. Flood Control7. Citv Beautification8. tity Sanitation and Pest Controlg. Maintenance of City Schools10. Maintenance of City Hospitalsll. lssuance ol License/Permits12. Maintenance of Public Markets13. Squatters

2l

Areas of lndifference {A0l)

1. Maintenance of Road Lights2. Police Assistance3. Vandalism4. Public Transportation5. Public Parking

' \ l \ 1 . . l . r n r r . r n l q ' , ' \ \ i r l r h r - J r ! F ( - rapprcciatjon to I 'roft 'ssor Ftlu,rr,. lo I .I lobcrto for lt is inr',r luablc ,rssist.nct' anllsupport in this projt 'ct.

Cronrpkrn, l. L antl(. \\. Larnb. I9ll7.MriItr ' l i t tq (ltrt 'r ' t ' t ttttr ' tt l attrl Srrctrt/ Sr't t ' tr r ' :.I-.ngJeurrotl Cliffs, N. f.: Prcntict ' Ha11.

Lipskl \ l ichacl. l9t(1. -Slr.rt I f i l18rr|rarir-rnt-V: l)r/r 'r irrrrrr ' t i Tlr Iudi| iLlual tuIrr|/ ic 5r'r.; ' i tr 's. Ncir' \ irrL, N\': I lusst' l ISage.

\l i lakovich, lt4jchacl E. 1995. ltttprtr, 'ir i ,q -Sr'r ' i ' lr 'r ' Qrarli lvr ,{ /r ir ' ; ' t trt I l lqlt 1l 'r l irt ' ttt' t lct itt Tlrt Itrbli,. rrrir l Pt'tt,rt ir 'Sr'r:/ot's. Sirt-gapore: SSN,1li.

\, l intrlrL.rg, Henrv. lv{ar'-June 1 996.' \ 1 . t t

. r : t t r ' - t ' ' ' \ , r I I | ' I ' I ' t . C ' ' t " t ' l i t r :

\ l . t n . t ; , r n , t r . / / . , ' . / / : . . ' i , . / l / ' .

7a ii3.Osbornt', Dar it l ancl lecl (,at'blt 'r

19c)3. Rfi// i ,. l i { Lir.r 'rrtttctt l: l1oa, ?lttLnlrtytcucrtrit l -(Tri l i l i ' Itrtttst 'rrlrrt ittt I/tr 'Pll, l ic -5r'r Irr '. \cu \irrk: I)lurle.

I ' ,ru1, 5amucl. Julv 19q5. ",4 Citi,frr Rf-

i,r,f l Crrfri or/ |Jritrr 5i f, 'r i i5: Mirl/ i ! i lr lrksLttul liift:?" I',rper prcscntccl ,rt thc l:orclI jould,rtion intL'rn,rti(nr,rl Confr'rence orrDecentralizatLon, AIivl.

l ' n ' t t , ' - . \ 1 . 1 . 1 ' . t ' . , r 1 , l ' . - , , '

l l ir ' 5l[ 'r1 I cr,r '1 / ir i,. l1]r.rri ir i /rtrlr ltr- -\r ' t t 'r c r B r r I t , t t r i t r i i t t s . I - f \ ing ton , \ lA :Lc\ingt011 Ilooks.

' _ , : .

, , r 1 , r r r , l ) 1 . r . , r i l i , 1 i ' , I i ' , I I , L / L ' I r , I r r / / L I r , , J , i ' i I I ' � J r I l

nr l ; ) , ' , r ' r i rx , , r l Jrr , / | !1, r11,r i i , , f r / ! l l , , i l \ i r ' r rJ i i r , l / ' iJ

i . , L / , ) l \ , , 1 r , . 1 ) , r , r , / , r , i r , r | , 1 / / , r l : ) l n r , r , \ l r ' t r . r l

/ , r t , r ' r l i l k ! J , r / / , r ! , i - i r j r , i r r \ r , 1 , , | \ ] t , f l l r r r L / i i r ! , r f r r

, 1 , r ' i r . ' , l , , r r i r r - r , r r . r . 1 / , r 1 , L , r / : r ' , ' l ) r ' i r r , i ' l r r r- r i - L 1 . r \ 1 r i . 1 , , , 1 r ' , r r r 1 , r x r / l r l r i r , / ' , ) i r , r 1 i , ' , r ' , i j

/ r , r l r , r \ I 1 / \ J / ' , ) / r , r / , , r r " r l i n r i i r j . l i l i r i ' , ) i ! h r J, r , i , r , J ' 1 r i . \ 1 , r t l ( r ( r r . / , r n ' r i l i , r , 1 , ' i r l , ' r , d r r . ' l r : ,

Floocl control is ranked as tht'tenthprioritv prob]em in District l but it is ir lihc ,rrea of wastc in District 2.

Police assistance is considered the l.lthpriori iv problem in District 1 but i i rs rnthe area ot indifference in District 2.

Contrarv to prt 'dictions prior to thcsun ev that traffic nould rank high in theTQG survev (Man i la , a f te r a l l , o f tcncomes closc to matching Bangkok's no.

torious gridlocks), traflic is not considerc'da prioritv problem at allbv citizcns of bothclistricts. Although it is considered a se-vere. problem in both districis, cit izensview the govt'rnment as alreadv addressing it.

ConelusionThc TQG rev ie rv o f Makat i C i tv

showed that cusbmer feeclback survevscommonlv uscd in ihe privat€'st'ctor mavbe applicd to public sector units, such asl , ' . . r1 to r e rnm, t t t . . to r ' \ . r lu , r te ( lu , l l l t v , ' l

sen'ice. The cit izen-customer teedbackrv . tem -u$$c- i . tha l TQV i . , t t ran- le r -ablc technologv to assess and improvcrcrr rce .lcl it l .rr in the puhlrc rt 'ct, 'r. irr

dimensions such as timelincss, courtesrircsponsiveness, and availabilitv The TQCrer , iew o f Maka i i C i tv revea ledcfficienciesand int'fficiencies of local gor'ernmcnt offices from thc point of vierv ofits cit irell-customers. The TQG identif iedprobiem areas that dcserve high and loivprioritv as t 'cl l as areas of satisfaction tocitizens. For the city govcrnment, the1QL r r r rew bc i . rme heJpfu l a . l m. t l t . t ccment too l . I i in fo rmcd c i tv o f { i c ia lslh r , 'uq l r . r . v . lem, r t i c p r , rc r * - , thou( P( r -ccp t ions and pr io r i t ies o f i t s c i t i zens

1 8

u'hich in some areas rl id not necessartlt 'coincidc u,ith perceptions and priorit ies' , 1 ( i l \ , ' l l r l , r l . l n t h i * r , r r ' r 1 r . T Q ( , r . -r,ici,r' ht'lpecl io ensure that supplv l'ouLlmeet demand (and thus, result in lcssu'astt). Btcause the TQC} rc'r ' i t 'u l 'rs c,rrried out in an irnpartial anel obiecti lorn . rn n r . r . i t dopo l r r i c i / rJ t l r " , \ . r l r r . r t r ' , r ' r ' i

the service deliverv proccss ,incl p()tcI1-l i , r l l r pu 'hLr l lhL ( l t ! l , ' \ \ . r rJ - In , ' r , i r lnovati()r and better servicL'for its cit i/en-cu5tonler5.

FOOTNOTES:F t , r i n - d ( p l h I n l r r J . l r l l ! . r l l J . , , l l l r i l . l i l l i

anrlyses of whl' this happcrrr. see Prottas( 1979) rnd l - ip \k ] ' . ( I 9 i to ) .I This asards plograrn is patlcfncd l l ler-thc I-orcl Foundation s Inno!llt ion A\\ 'arLlsr t t u t t i r L , . J h \ H i r f \ . r f L l I r r r \ f r \ r l \ ' \Kennedy Schoo l o l Go\c fn rncr t l . fh rFord Foundltion. togcthcr u ith olhct do-nor agencies. pror iclcd substanti l l suppotlIo Guv od Gu l i t tq l \ tok .' For a compaftrt ire l inrl\sis ol tht'prob-le rns in ins t i tu t iona l i z ing loc r l rpcc i i t l

bod ics in As i i i lnd ; \1 r ic r . sce N l l tnor( 1 9 9 5 ) .- For -a d iscuss ion o l -serv icc qua l i l v tssucs . sec Domingo { 1996) .' Thc rcsulls ol l l lc

-l QG rclicu u e'rc prc

sented i i l a (runcllablc conlcrencc 0n Nli ir12 . 1996 r t A IM.

REFERENCES:Bolongaita, Emil P 1995. "/i ' l l i i t tt i tr, l

Pit l ici lutt)rv Coi,L\urrrrir ' : / /tr ' Nrrit-/ttslt/t if io nLtl iznf ict n oi Locnl Dr'it'iolrrrtr'rtl Crrttttr-i/:."Policv Ilcscarch l)aper No.2, '\ lNl l)olio'Forum, Asian Instjtute oi Nli lnagcmcnl

,\LCL.sr'SEprL\rLll,R l99tr . TLlr Acl'\\ \ '1.\\,\( lFR

I}ImncnmENT-I,PDATT:Dnwrormnnr

BY PROFESSOR EDEL C. CUIZA

ManagingA local GovernanceAwards Program:

The Galing PookBxperience(Jaling Prxrk n'innt m prove thal derolution works in the Philippines.

ince its launchrnc three vt'ars ago,Crrrrird Caliu,g Pool or Excellence inLocal Cuvemance Au',rreis hacl al-

reaciV capturecl the ittcntion of manv 1(l-cal govL'rnment units (L(lUs) in the coun-trl,. Even Presicleni Fidtl \'. liamos notcclthat Cnli l{ Prrol-programs ancl projt 'ctsrJ r ' - ( r \ \ ' tu b r ' ( n r l r l , r t , r1 ; l , r h , r , ' l . i . tn . l r r -k)lci as models for other krcal gotertr-nrents in iheir continuing qucst k)r r.\cel-icncc.

Cn l i r tg Pook u ' inners i rac l beenslror,casecl in nriorrs local, natiorral, anclint!'rnational confererces as moclels ot er-ct'llt'ncc. Bcc,rust of thc rigor an(l integ-ritv of the selection prncess spcarhcadccibv a Nat io la l Sc l t . c t ion Comni t tee ,Cmt nLi Ctl itt;4 Pook has become a muclrcoveted award arrrong loca I goYernmen ts

anrl ,r rich source of information andteachinc mattrials on local l iovernmentprograms. Cr r / i rg Pook rv inners hadshol n thai clevolution rvorks in tht' Phil-r PPr nrrs.

'lhr. lmpr.lus: Thr. l99l l,oealG(|r'ernm('nl COd{.

DLr r r n t t l r c V . r ru r . aJmin i : t ra t ion .which spanned tn'o dccadcs, the Phil ip-pine governnent \\ 'as characterized bv a( ( n t r . r l r , / cd . r ' . tem , ' f Je t i . i , rn mak ing,rncl resources management. Thc prcvail-ing localgoVernment code then wasmoreregulakrrv th,rn cnabling in orientationanrl arlminisiration. LGUs had limitedpon,ers in their respcctivc jurisdictions.Deliverv of basic services, locai develop-mcnt, ccononic upliftment, industriahza-

tion, and other plans were stalled becausedecisions had to be made at the nationallevel before any substantive measureswere effected, particularlv when largemonetary considerations rvere involved.There was no decentralization and localautonomy to speak of. LCUs were prac-ticallv dependent on the central govern-ment.

Un. le r the Aqu ino ad m in is t ra t ion .which came into power in 1986, RepublicArt 7lb{1. entit led "An Act lroriding iorA Local Covernment Code," was signedinto law in October 1991. The code wascon:idered the mo:t comprehenrive Ieg-islation on decentralization and local au-tonomv to be passed by the fhil ippineCongress.

Unlike the previous law on local gov-

T H t A ' t \ \ V \ \ \ ( , t t i . A l , . L r - 5 t t \ ' t { , t i l u u o 1 9

ernance, the Code of 1991 devolvedsubstantive powers and responsi-bil i t ies to 77 provinces, 1,543 mu-nicipalit ies, 65 cit ies, and 41,293barangays in the countrv These re-sponsibilities include, among oth-ers, the administration of health, ag-riculfural extension, social welfareservices, local infrastructures, andmanagement and control of naturalresources. The objective of this newCode is to transform LCUs into self-reliant communities and active part-ners of the national government inthe attainment of national goals.

Consequentlv the implementa-tion of the Code, which took effecton January 1, 1992, drew mixed re-actions from local government offi-cials. With limited time for prepa-ration, some LGUs felt the approvalrvas untimely. Others felt it was longoverdue and the time had come tofinally prove their capabil it ies asworthy public servants and effectivearea development managers.

Backgr.nund / BationaleA confluence of need and opportunitv

gave birth to Cauad Galing Pook. Thepromulgation of the 1991 Local Govern-ment Code (LGC) and the recent prolif-eration ofcivil society organizations at thelocal level offered unprecedented oppor-tunities to promote good local govern-ance.ln the short term, however, the Codehas created enormous challenges for Io-cal public administration. Local officiaishave had little time and, in some cases,insufficient funds to prepare for thesweep lng changes mandated by theCode. Several LGUs tookup the challengeand initiated their own programs rvhileothers had some diff iculties with thedevolution. A mechanism lyas needed toinform local government officiais aboutprograms that work effectively and in'spire them to strive for excellence andcreativity in local governance. Such amechanism is Gawnd Caling Pook whichwas launched in August 1993.

The awards program is spearheadedby a l5-member National Selection ( om-mittee (NSC) that determines the criteri,r,design the selection process, and choosethe winning programs. The NSC includesleaders in government, the NGO sector,academe, and media, and represents a

20

Social Services 3Education 4Environrnental Management 11lntegrated Area Development 4Health and Nutrition 11Resource Mobilization 4Infrastructure Development 2Peace and Order 2Cooperative Development 2Culture 1Human Resources Development 1Agriculture 2Partnership Building 4Livelihood / Enterprise Development 3Housing / Human Settlements 4Upland Development 2TOTAL 60

healthv cliversitv of Viel's, genclcr, gco-

8ru ph ic , t l loca t ion . , rnd tec l tn ic , t l e rpertise.

[,,1,t/ f,ai 1r11 f,1' l 'relr r, ' recoAnizcLGUs u,hich har,c cndeavorecl to provethat higher levels of pcrformance andgreater impd( t m, rv bc . rc l ) rc \ ed t l r r i ' ughjr.rdicious cxercise of porvers thev har,ebeen vtsted \\,ith bv thc appioved 1991LCC. The trvo underlving goals of thrsprogram are: (1) to publiclv re'cognize io-cal government init iatives that succcss-fullv address prcssing social ancl eco-nomic needs; and (2) to ir.rspirc rephca-tion of such init iatir,es i l 'r other comnrunities in the countr\,.

lfanagcmenl 0f The .{N ardsThe fd(ultv .r nd ql,r i l of r he Centrr tt 'r

Devclopment Management (CDM) of theAsian Institute of Management (AIM)administcr the screening ancl sclcctionproccss in cooperation with the LocaiCovernment Ac . rdcnrv , l LA, , ihe r r , r ining arm of the Department oflnterior andLocal Covernment (DILC).

Eligibility and Selection CriteritlTo be eligible for thc arvarcls, the pro-

gram 1)must be init iated.rnd/or managed bv an LCU at the municipal, cit l ' ,

or provincial lcr,els; 2) must havebeen in operation for at least onevcar prior to their application; and3) must have shon n measurable re-sults.

At each stase of the screening

lrr \ (.\. the lroqr,t m i. er alua lc.i .tc-corcling lo five basic criteria:

1. l l tr 'rf i , 'crrcss of -Scll ict Dclitttnl-re'levarrce of ,r program in re-sponding to the pressing neecls ot ttst,rrget beneficiarics and the capacitvof thc LCLj to deliver sen ices

2. Positi i 'rr SotittL tnuuic audiorFt]r, irotuttctttt l InrLtsci the abil itv oftl.r!'program k) sisnificantlv in]provesocial,rnd naterial l iving conclit ionsof the client communitV and the out-conc'of the prograru in conscr\,lng,

Protectirfl, and rehabiliiating the en-yironmcnt.

3. PrLu t)liln 0l PNplL,'s EnrStoTl,gy-r/ldrl-the cxtcnt to \\ 'hich the pro-gram has facil i t,rtetl access and con-trol o[ rr '."urce- I 'r t lrc l, ' , al peop[ ;hu i l t t l r c i r r , rp , rb i l i t i r . rn n r . rn , rg ingthcir rtsources ancl organizing them-

seh es lo demand changts; and activelyparticipat!. in local government decrsrot]rnakilg, implemcntation, and evaluation.

1.Tt tusicrtbil i Iy and Sustnnnlti l i fy -the

clegrcc to ivirich the program l ill be con-tinuetl bevond its crurent admirl istrationand its pot€'nii.ll to get the support of thcsuccessor; the e\tent to rvhich tht bcncfitsoithe program l' i l l continut b flou, to itsb tn . [ i c r . t r i . * . le -p i l c . r L l r . r lge in leaJer -ship ancl funclinr arrangtmcnts; the cle-gree to u'hich the prol;ram rvill inspirc rcp-lication bv other LGUs.

5. Ct'cnli i ,r ' Llsr'of lt i lcrs as pioi, ir lrd lrrTTlrr'LCC-such as taxation, land use plalr-ning and \lr luation, resource mobil jzationand uti l ization, crpenditurc managcmcnt,Iocal tnlerprise developnrent, creclrt h-n a n r i n 5 . g r , r n l . L l o n n l i , , n , r ! , l i l m e n tl inkag ing \ \ ' i th NCOs anc l I 'Os , anc l- t imu l . t t ing , p r i r . t re .cc i , ' r P . t r t r ( ipn t i , ' r ) .

Scrcenirg and SelectionThe proct'ss starts rvith an applic..rtion

through the submission ofa in o-page pre-Iiminarvformby an LCU ora nominationbv Ian \GO orl anr. organization to AlM.Upon receipt of the nunination iorms,AIM acknorvleclges the nominators andsencls the prcliminarv application formsto the nominated programs. The prelimi

AL L L: I-SLt Ttr1B.R l99o . I r r. A:lA\ \4ANAL,LI(

1993-94

Kaunlaran sa P agkakais a(Cooperative Development)Province of BulacanGovernor Roberto M. Pagdanganan

Tax ComputerizationCebu CityMayor Tomas R. Osmefla

Bantny P erto(Watching the Portagainst Illegal Logging and Fishing)Puerto Princesa City, PalawanMayor Edward S. Hagedorn

Solid Waste ManagementOlongapo CityMayor Cynthia Cajudo

Metro Naga Development CouncilNaga CityMayor Jesse M. Robredo

Nutrition, Food, Environment,and MedicareBinrnaley, PangasinanMayor Jose A. Fabia

Build-Operate-Tiansf er:Commercial Center / Public MarketMandaluyong City, Metro ManilaMayor Benjamin Abalos

Peace ZoneTulunan, CotabatoMayor Rodolfo P Peiiafiel

K ab alik at fubb er DevelopmentProvince of CotabatoGovemor Rosario P Daz

Integrated Area DevelopmentIrosin, SorsogonMayor Eddie G. Dorotan

't994-95

Save The MangrovesKalibo, AklanMayor Dego M. Luces

Tiansforming Malalaginto A Provincial Agro-IndustrialCenter (PAIC)Malalag, Davao del SurMayor Andres B. Montejo

Community Primary Hospital /Community-Based ResourceManagementProvince of Negros OrientalGovernor Emilio C. Macias II

Acquisition of A CompleteEquipment PoolMuioz, Nueva EcijaMayor Efren L. Alvarez

Kapit-Bisig(Neighborhood Association)Sampaloc, QuezonMayor Agnes V S. T. Devanadera

Municipal Bond Flotationfor Low-Cost HousingVictorias, Negros OctidentalMayor Severo A. Palanca

Save The Marikina RiverMarikina, Metro ManilaMayor Bayani F. Fernando

Productivity ImprovementNaga CityMayor Jesse M. Robredo

Integrated Approachtowards Sustainable Development/ - . . ^ _ . ^ D ^ - . ^ . ^ ^

Mayor Manuel P Santiago

Cultural DevelopmentProvince of BulacanGovernor Roberto M. Pagdanganan

1995-96

Sustainable Food SecurityProvince of Davao del NorteGovernor Prospero I. Amatong

Marine ConservationMasinloc, ZambalesMayor Jessu E. Edora

Municipal Infirmaryand Health AssistanceSan Miguel, BoholMayor Segundino M. Hencianos

Govemment ComputerizationNaga CityMayor Jesse M. Robredo

Oplan Linis(Operation Clean and Green)Puerto Princesa Ciry PalawanMayor Edward S. Hagedom

Agora Mobile Schoolfor StreetchildrenCagayan de Oro CityMayor Pablo Magtajas

Ecological Waste ManagementSta. Maria, BulacanMayor Reylina G. Nicolas

Lote para sa Mahirap(Lot for The Poor)San Carlos City, Negros OccidentalMayor Rogelio R. Debulgado

AIay Paglingap(Volunteerism)Province of BulacanGovernor Roberto M. Pagdanganan

Eco-WalkBaguio CityMayor Mauricio G. Domogan

* The programs are arffinged according t0 thei respectire program npplication numbers.

THE AsrA\ MANACEIT . AuGUsr-SEprEr.lBER 1996 21

Aside from the Gnaad Gnling Pook awardees, noteworthy entries made it to the finals-all winners in their own right.

1993-94 1-4.95 1995-96

Partnenhip for Comrnunity Health DevelopmentSulat, Eastem SamarMayor Ernesto A. Palines

LGU-NGO PartnershipCalumpit, BulacanMayor Raul V Mendoza

Task Force on StreetchildrenCebu CityMayor Tomas R. Osmefra

lntegrated Education SupportPilar, SorsogonMayor Manuel T. Sia

Propagation and Distributionof llang-Ilang and Sanpaguita/ - . . . - . ^ D ^ - . ^ . ^ ^

Mayor Manuel P Santiago

Emergmcy RerueNaga CityMayor Jesse M. Robredo

Provineial Environmental Protectionand ManagementProvince of Zamboanga del NorteGovemor lsagani Amatong

Family Income AugmentationHindang, LeyteMayor Aurora B. Mantele

Kaantab ay s t Kausut agan(Urban Poor as Partners in Development)Naga CityMayor Jesse M. Robredo

Hillyland ResouresManagement and DevelopmentCebu CityMayor Tomas R. Osmefra

Water System for Ev€ry BarangayBaybay, LeyteMayor Carmen L. Cari

Nasa Buwb Mo Ang Ating hogrem(Tax for Progress)Binangonan, RizalMayor lsidro B. Pacis

Barangay Buluangan FishportSan Carlos City, Negros OcidentalMayor Rogello R. Debulgado

Save The Maasin WatershedProvince of IloiloCovernor Arthur D. Defensor

Low-Cost HousingPuerto Princesa City, PalawanMayor Edward S. Hagedorn

Federated Women's Clubfor Primary Health Care

Surigao City, Surigao del NorteMayor Salvador C. Sering

Emergency Medical ServiceCebu CityMayor Tomas R. Osmeia

Mass Pmduction of TrichogrammaProvince of Davao del NorteCovernor Prospero S. Amatong

Primary Health CareBalilihan, BoholMayor Edgardo M. Chatto

Integrated Prognm forEconomic Enterprise DevelopmentD^:^Lt^--- r - -^^. ,^-

Mayor Alberta O. Quinto

Management of Human SettlemenbMuntinlupa CityMayor Ignacio R. Bunye

Satellite HospitalsPuerto Princesa City, PalawanMayor Edward S. Hagedorn

Satellite LibrariesPuerto Princesa City, PalawanMavor Edward S. Hagedorn

Altemative Sdremefor Sustaining Health ServicesMalalag, Davao del SurMayor Andres B. Montejo

Early Education and DevelopmentNaga CityMayor Jesse M. Robredo

Upland Agricultunl DevelopmentMagsaysay, Davao del SurMayor Jhun G. Reyes

Potable Water for All BarangaysClarin, BoholMayor Saturnino B. Salera

Sipaglalcs (Strength in Diligence)L 'Pd uL) , udrd , '6dr

Mayor Ruben L. Umali

Peace and ReconciliationProvince of Eastern SamarCovernor Lutgardo B. Barbo

Comprehensive CooperativeDevelopmentNew Lucena, IloiloMayor Buen S. Mondejar

* The programs are arranged according fo their respectiue program application numbers.

22 i \L (;LIT-SEPT E\1tst l i l t )q6 . Tf lr i \5r,\ \ \1 \ \ \cFIi

Gawad Galing PookScreening and Selection Process

PreliminaryApplicationScreening lirlt r l i ! rhr l i t \

igible?LCtr ln i l iLr ted /Mrnlgcd

- One Yeu in Opcriltior- At lc i r \ l $ i th Sisni l icant Re\ul t \

Erlensi re {onl i r r t ion fn ^ E

First Screening B\ rJr. sirccnc^( l ln f rLr n \hLfr l r \ r

Second Scleening B\ rhc sctucncA( l i r fu l : l f t lShon l n

il';:'ili:""'"'l'""i*l

Site Vi ' i t r r t ior r o t Semi F i rn l i . t . . f ii ; : \ r . 1 + . "

Select ion ol Tuentv Final ists

Inrcrv icn rnd Scle( t i ln o lTolT(n ; ' i i1 , ,1 r , , . l 4 f

THE ASIAN MANAGER . AUGUST-SEPTEMBER 1996 23

nary applications receivedare pre-screened based onthe eligibil i tv criteria bvAlM. AII eligibie programentries arc pror.idcd witha more extenslVe questron-naire tobe submitted on orbeforc the sct deadline.

Eligible program en-tries for screening are sub-jec ted to a p re l in inaryrank ing bv a g roup o fscreeners coming from theInternational Associationof Professional Der,clop-ment Managers (IAPDM),

AIM's Master in Dcvclop-ment Management(MDM) graduates , andrepresentatives from themedia, academe,business,national and/or local €iovernments, and NCOs.

The first screening ofprogram applicants is ashortlisting activity whereprograms arc assessed asA for potential rvinners, Bfor maybc potential win-ners but neecl more infor-mation, and C for thosethat are not Vet in the po-tential winners' leaguc.

MunicipalCityProvincial

Total ProgramApplicants

v59n6086117u

1t77271

72817727913

Total ProgramWinners

3171

1088

18675

TO115207

50

RegionsLUZON

NCR National Capital RegionI Ilocos

Ii CagayanCAR CordilleraAdministrativeRegion

IIl Central Luzonry Southern TagalogV Bicol

VISAYASVIVII

VIII

u

XIXT

ARMM

Westem VisayasCenhal VisayasEastem VisayasMINDANAOWestem MindanaoNorthern MindanaoSouthem MindanaoCentral MindanaoAutonomous Region for Muslim MindanaoCARAGA

T O T A L

A second screening is again under- on tht se.mi-finalists, the NSC agair.r mectstaken by a much smaller numbcr of b choose 2lj progr,tm finalists.screener. u.inS thc r,r me proceJure t,, lu r-ther assess the shortlisted programs to be Interuieut of Fintrlistsrecommended for sitc visitation to the and NSC DelibcrotionNSC. TheNSC reviervs the recommenclcd Tr.o representatir.es (tht local chiefex-programs and arrives at a consensus on ecutive ancl the program director) arc ln-semi-finalists to bc site visited. \'ited for ,r final intervie'rl in AIM. Thev

A select group of evaluators conducts arc rcquested to come a clav before thcan on-site e\.aluation and validation of the inten'ierv for a brieting on Callrrg Pook arrclsemi-finalists using a site visit report a n orientation on ho* ihe finalintervieuguide. The site-visited programsarcthen is conductecl. During thc intcrvic\\ 'calibrated in rel;t ion rr ith the prer iorr. propcr. t ,rclr progr.r6 11n611.1 i. qrr en 2qwinners and other programs n'hich are minutes, tcn ninutes fbr presentation andof similar nature. With the site yisit rc- f ifteen ninutes for the cluestion and an-ports as additional sources ofin{ormation srrer poriion. Aftcr the program presel-

tations and inten ieu's, the \SC deliber

27ZJ

8

atcs and selects ihe ten outstanding pro-grams.

Azuarls CerennmlThis clcnt is thc formal announc€.-

ment of th€'ten outstanding programs.The activitv is held at thc Ccrcrnonial Halloi Malacanan l 'alact rvith President Fidel

1,,059

V Ramos conferring the awards to the tenninners and the ten finalists. Each rvrn-ner receir.es a plaque and a cash grant ofPhP100,000 for the documentation, ex-

P, rn . i ( ,n . , , r r r f l i c , i t i t ' n o f the r r inn ingprogram. In 1995, President Ramos gaveeach n'inner an ambulance to shorv hisapprecratlon.

Th{. Program Applieantsand Winners: I Srrmnrarl

Caa'nr/ Cali l,q Pook has a total harvesto I mor , . th . rn . r th , 'u r . rn . l . rppJ ica t ion-cluring its three vears of implemeniation:2E5 on its f irst ve.a1 363 on its secondveat and .111 on its third vear. LGUs in16 regicus nation$'ic1e sent applicahonsof various program tvpes: agriculture/. r ( luacu l tu rH. eJucat i , ' n and t ra in ing . en-v i ronmenta l management , f inanc ia iman, tsement . hea l th an . l nu t r i t ion . infrastructure development, integratedarea der eJopmenr. p,lrlner.hip bu i lJ ing.public safctv- public cntcrprisc, socialu'elfare and services, burism, culture,

24 Au(iLsr-SEprEN,lBEn 1996 . THE AsrAN MANAGEn

and sports.Based on program origin by region,

the most number of applications receiveddu ng the past three years came from Re-gion VI with 117 applications, followedby RegionlV with 111, and Region lll with80. f rom a tora lo[ I ,05q program app] i -cants. Each year, 20 programs were rec-ognized in an arvards ceremony, a totalof 60 programs since its launching threeyears ago. The most number of programwinners came from l{egions lll and lV, fol-lowed bv Regions V, VI, VII, and XI.

lDoeumentationand Publications

For the past three years,Caiuad Calingfool has accummulated a wealth o[ in-formation/data not only about its pro-gram winners but also of the more than athousand program applicants nation-wide. These materials provide a rich da-tabase from n'hich case materials, teach-ing aids, manuals, books, and mono-graphs may be prepared and published.Documentation and dissemination of

these experiences may be of great valueto LCUs, NCO: . un ivers i t ies , t ra in ingcenters, students, and business groupswho are interested in varied concernssuch as community participation, re-source mobilization, capability buildingfor empowerment, development of alter-native financing and strategies for moreeffective governance,

Documentation and publication of thewinning programs aim to: 1) disseminateinformation about the winning programsthrough the printing of books, mono-graphs, case materials, teaching manuals,and aids;2) provide trdininB institutionsand universities with teaching materials/aids on local governance and other spe-cific functional areas of management; 3)assist local government officials and in-terested students/case readers in identi-fying and acquiring skills in developinginnovative concepts and ideas on localgovernance and public management; and4) assist in the design of capability build-ing programs for LGUs particularlyin themanagement of programs/ projects.

treplieationThe awardees of Galing Pookhavebe-

come the centerpiece of the IntegratedCapability Building Program (ICBP) ofthe DILG. ICBP provides venues whereLGUs, particularly Grfing Poo,t winners,can share their success stories with theirpeers to encourage replication.

Innovation laboratories were also setup to serve as models of innovations inlocal governance and informal "schools"

for LGUs on local governance strategies.Galing Pook winners can showcase theirbest practices to inspire other LGUs toemulate and replicate them. Study visitsto Grzling Poolr winning programs are or-ganized in support o I the Lakbay-Aral pro-gram to ensure sharing and transfer ofprogram rnnovatrons.

Other activities to ensure replicationof best practices include active monitor-ing and documentation of Galing Pookwinners, conduct of training/capabilitybuilding activities for LGUs, andshowcasing the best local govemmentpractices in local and international fora.

Prospoets for InstltutlonallzlngGawad Galing Pook

To ensure continued operations ofGnling Pook, the awards program is pro-posed to be hansformed into a founda-tion. It is, therefore, important to gener-ate suppo for the setting up of a foun-dation and endowment fund for the man-agement ofthe awards, and for thedocu-mentation, publication, and replication ofbest practices exemplified by the winningprograms. The institutionalization ofGaling Pook is an allirmation of the beliefin thecapacity ofthe LGUs to achieve ex-cellence in governance. More specifically,the purposes for the institutionalizationof Gallng Poot are as follows:

1. to continue to search, nurture, andrecognize outstanding programs of localgovemments;

2. to translate winning programs intocase studies, teaching materials, films,slides, ind videos for teaching and dis-semination purposes,

3. to ensure replication of the winningprograms through the oeation of learn-inglaboratories that will serveas sourcesfor policy agenda/reforms, theory/con-cept/model building on local govern-ance, and cross fertilization of learningsamong LGUs;

The National Selection Committe (NSC) consists of a distinguished group oI individualslrom the government, non-government organizations, academe. business sector, andmedia. (STANDING L-R: Dr Delfin J. Ganapin., Atty. Aquilino "Nene" Pimentel Jr, KaOca Santos. Mr Rene D. Garrucho, and Atty. Ramon P Ereieta Jr. SEATED L-R: Dr. EmmaPorio, Prof. Purita R. Sanchez, Prof. Edel C, Guiza, and Dr Erlinda M. Burton. NOT lNPHOTO: Ms. Carolyn O. Arguillas, Dr Ledevina V. Cariho, Dr Alex B. Brillantes Jr,, Dr.Cecil ia del Casti l lo, Dr Milwida M. Guevara, and Ms. Marites D. Vitug.

THE AsrAN MANAGER . Aucusr-SEPTEMBER 1996

EALTNG POOK

4, to act as a resource institution orrepository of materials on the best localgovemment programs and practices; and

5. to provide a solid base of supportfor Gallng Pook through the creation ofanendowment fund that will finance andsustain its operations.

The sustained implementation of theLGC depends on the continuous capabil-ity building and institutional strengthen-ing of LGUs-its executives, legislators,and their staff. Gnling Pook provides rn-puts, incentives, and inspiration to LGUsto continue giving theirbest in their part-nership with the national government inthe effective delivery of services and thetransformation of their areas into self-re-liant communities.

The following strategies are adoptedto ensure continuous operation andsustainability of the program:

7. Actiae Promofion and Direct Mnrket-irg. The continuous success of GaruadGaling Pook depends Iargely on its abilityto attractand encourage LGUs with goodor innovative programs to apply and par-ticipate in the program.

2. Cnrefu l Select ion of Cot ty tet t t t fScreeners ad Distirrguished NSC Members.To ensure the integdty of the screeningand selection processes, the programidentifies and invites onlv the most com-petent screene$/evaluators with the nec-essary erperience and e\pertise to screen,shortlist, and validate outstanding pro-grams. Likewise, distinguished NSCmembers are respected members in tari-ous fields ofendeavor who have commit-ted to support Cnlirr.q Rnt.

3. Production of User-Friendly Materinlson Winnhg P/ogrnrns. Selection of out-standing programs is only a means toidentify best practices in managing localgovemment programs. The documenta-tion, publication. and dissemination ofthese experiences inspire and encourageother LCUS to replicate such practices.Productron of materrals about the r,' in-ning programs is also valuable to NCOs,universities, training centers, and other

Sroups,4. StLpltort to Rtltlicttion Inifinfilcs 0f

LGUs, To facilitate replication of these out-standing initiatives and innovations,

training materials are prepared usingCnllrl Pr,ok rvinners' erperiences as in-puts to capabil ity building programs.Workshops and learning laboratories alsoshowcase successful programs that in-spire other LCUs to emulate them. It isenvisaged that the continuous capabilitybuilding and strengthening of LCUs willresult in the sustained implementation ofthe LCC.

5. 5/rnl, 1r / irrknl,:. Strategic l inkage.are nurtured and enhanced with all localgovernment leagues, academic institu-tions, NCOs, the media, the p vate sec-tot the church, national governmentagencies, socio civic organizations, anddonor agencies to ensure support in thepromotion ol Cnu:nd Gnling Pook and inthe search, recognition, and replication ofoutstanding programs.

Prot Elt:l Cui:n is n lturllv n tllt: C.|ttt fir Dcl,thvl\tl Mrt ptn\tln il tht: Dirr'clor oi i/rr' Gnaril Cn/rr r3

| )d/i. Irl11rrr1r <.!/./Orrs( rs@di'r>.

7 ManagementDevelopmentProgram (8u')

Hong Kong MAA Night

1O Jobo Femandez Center LectureS€ries (tentative)

NOVtrMBER

4 Basic ManagementProgram (4w)

4 Program for Development

21 APEC Business Forum

Legend: d - days

w - weeks

JULY{ MBM Registration starts

8 Basic ManagementProgram (4w)

I Program and ProjectDevilopmentManag6ment (4w)

I I MBM Classes begin

26 People's Forum on APEC(Geireral Consultation)Manila

29 Marketing StrategyCourse (2w)

AUGUST

12 AdvancedManufacturingManagement Course (3w)

22 ADSGM Conference (3 d)

Building Equiry: The Siate andDevelopment tif the SoutheastAsian Exchanges at The'Turnof The Centuri (3 d)(Shangri-La's EDSA PlazaHotel)

Advanced Bank ManagementProgram (6w)

2'J

26

SEPTEMBER

2 Basic ManagementProgram (4w)

l2 Bangkok l\4anagement AwardsoI Aiia (MAA) Night

O(]TOBER

2 Kuala Lumpur MAA Night(tentahve)

3 Singapore MAA Night

AUCUST-SEPTEMBER I996 . THE ASIAN MANAGER

M,mlcnntnNT UPDATI:Dnnropmnnn

B\ PROFE>SOR Tov T: B. LOIIZ, JR,

The Social MarketplaceWhere Government, Business,

and Development Institutions CompeteThr rilizen is the beneficiary in the de'velopmenl marketplace.

f l l h , r , i . , t ' r r . . ' l l r . t h ' r " l , l t . c t t ' * ion

| , , r r h * r " l . r t r , , n - h r l , , r r ) r { , l l s , I t d

I n '1 , * , l r r . r j ( , r f l . r \ i r - rn . i r ' r t l ,1 -nrcltt: goYCrnlr('r'tt, truslne5s, rlon-govr'rn-nrenl cler.ehl,mtrrt institutions, alld so-( r r ' r \ . \ l l t , r ' , , i t ( r r . l l r e p e r . f c ( l r \ i f r L -scrrtccl is orrlt,from one st'ctor. Friur iheno]r go!ernmcllt uc\\'poll1t, goVenlmelltis stur as ,r rneclcllesorle necessit\,andbuslress, an expkrltati l t ' ancl ruthle:s bc'ht rnoth. Covcrment sccs th('currcnt proliftration of ron tor'ernment i l tstitutions- , I t . r . l , r n . l n , ' f , \ i t \ ! r l l A o , ' u t , ' f \ , ' r - r r (

sotrn. But busircss is cli i ierent, govL'rn-mcnt says. Business is th!'catdlvst for econorlic gron th, to bc courted ancl u'ooeclso it c,rr rh()\\ 'er rts iargr.ssr. ir1 ta\cs arrrlr.mployncnt (ln socielv. For busincss,N(,Os ;rrc nuis,rnccs, sonleti l 'nes surren-

clered kr. Government is a necessarv evil,business savs, $'hich must be bought oravoided if business is to proceed. In themeantime, societv the citizen, ber.refici-,rrl', anci customcr-is left to fend for it-.e l t . t l rH ia rge t l f comnc l r l i tL 'p res \Lr r (s .at times intcnseand confrontational, otherl imr* conJc \cnd ing , , tu t a l r rav : omni -present.

Despite this "thenr and us" attitudeamong major development plavers, not asingle 5ect()r neither governnlent, non-govcrnnent, nor business can ignorethe eristenceof the others. Thev exist riththeir oun agenda; mobilizing and deplov-ing their own rcsourcesi affecting, influ-encing, and changing the behavior of thesame parts of societ\", which each onethinks comprise itsorvn exclusive market.

This paperdoes not espouse a particu-lar perspective. EnouFh treatises havebeen developed to promote an itleologyfavoring one scctor of societv. Rather, thispaper proposes an analvtical frameworkfor determining the curent state ofaffainin societv describing the forces at workwith societv so tl.Iat the manager, whetherhe is fron government, non-govemmeni,sector or business can identify strategicoppodunities in promoiing the interestsof his sector.

Th(. B[siness Markelplaee:The Customer is l(ing

The framt'rvork is rooted in the mar-Lctrng paradrgm rlhere the cu:tomer isking and rvhere the enterprises, in ser\'-icing his needs and u'ants, trv to eke out

THl,Asr,\\ N4,\\.\cFn . AL(;L sr-S! l, l E\,IBER 1996 27

f:Li,:"n""7@

@ 1rr,*^^"The Business Marketplace

a rnutually satisfying and dynamic rela-tionship between them. The enterprisedevelops and markets products andservices to satisfy consumer needsand wants. If and when the productssatisfy these needs and wants ad-equatel, the consumer respondswith his pahonage of the productsand services in the market and thecompany then benefits with profitsgenerated from the exchange.

Ihe Martet forGovernaneer The Oltlzenfu the Oustoner

There is the citizen as custometwith govemment providing basicfacilities and services for his needsas a tax-paying member of society.This "marketing" relationship be-tween tovernment and society iscurrently being studied through quanti-tative research methods.r Initial resultsshow that citizen satisfaction runs highwhen govemment take6 on a customersewice stance and designs its service de-livery systems and policy formulationprocesses with citizen satisfaction as thekey oliective. If a fit exists between theseactivities and the citizenry's needs, thenthe citizen speaks. In governance, cus-tomer satisfaction translates into politicalmandate.

Ihe llevelopment MorkeqrliaesThe Clilzen ls the Benefrelaryol Soclal Change

Even non-governrnent institutionsand people's organizations are findingout that marketing skills and processes di-

28

rected at andevolved from theirtarget beneficiariesand members are atthe heart of socialchange.

In Thailand,concerned citizensrealized that the de-terioration in thecountry's environ-ment was com-pounded by com-munity apathy. Tocombat this indif-ference, the groupembarked on an all-media campaign to

promote anti-littering among children.Using a magical cartoon character called

Magic Eyes, the campaign successfullyraised environmental awareness of Bang-kok children so much so thatthe children themselves (80%as shown in a post-campaignsuruey) actually threw litterinto garbage containers.2 Nu-trition planners in Indonesiahave discovered that mothersshift to nutritionally enhancedrecipes for their babies whenthey themselves participate inthe formulation of enhancedbaby foods using commonand readily available ingredi-ents,

While the framework rec-ognizes the dimensions of thecustomer, citizen, and benefi-

ciary of socialchange in the market, it alsoproposes that these distinctions are not ex-clusive; that society is all of the above andresponds to change stirnuli as all of theabove; that government must look at thecitizen as the consumer and target of so-cial change; that non-government devel-opment institutions must also accept thatbeneficiaries are citizens and consumers;that business must address its customersas citizens, and beneficiaries of socialchange and consumers. This is because so-ciety is at once, and at the same time sub-ject to simultaneous, ongoing pressuresfrom govemment, social change institu-tions, and business.

The generic customer is society andcompeting for his attention and loyalty aremajor institutions-government, Iargescale non-government social instifu tions,

and business. Therefore, to be totallyeffective, government as provider ofbasic services, business as providerof products and services to satisfyconsumers' needs and wants, and de-velopment institutions as interven-tion mechanisms for social and eco-nomic change-these main societyinfluencers must, at the very least,understand society in every aspect,as customet citiz€n, and change ben-eficiary They must recognize and un-derstand the shategies being imple-mented by other influencers as well.

In some instances, the relation-ship among these influencers is in-deed competitive and confronta-tional. Social historians have chroni-

Basicm\i:T."Fffi

The Market for Governance

cled classic struggles among socialplayers.Inthe case ofthe environment forinstance, government and development

The Development Marketplace

AUGUST-SEPTEMBER 1996 . THE ASIAN MANAGER

institutions act as society's watchdogsand audit the impact of business activities on the environment. NGOs criticizegovernment's performance and competefor resources, both public and private, totake over government's role as providerof society's basic services.

In the case of socially undesirableproducts, enterprise and development in-stitutions actually compete, to influencenot only society but government as well.In the face of massive attacks from health-oriented development institutions, ciSa-rette and alcohol manufacturers spendenormous dmounts for communicationsand lobby efforts to forestall more strin-gent government regulations in the pro-motion of these products.

Soclely lfetermlnesIts Influencers

In the end, it is society that finally de-termines which of the influencers will pre-vail. As environmental advocates suc-cessfully convince society to accept moreradical environmental norms for businessto follow, business will comply. Onlywhen there is finally a geen customer willgreen products succeed in the market-place. For as long as society is uncon-vinced of the ill ef{ects of alcohol and ciga-rettes, business will always try to 8o at

Society as Customer, Citizen,and Social Change B€neficiary

make farmers bankable. In time, farmersbecome viable and lucrative customers.Development institutions, as they enableless privileged communities to be eco-nomically competitive and profitable, ac-tually create community-basedmicroenter-prises and become involvedin enterprise development. Business andgovernment actively collaborate whengovemment grant incentives and benefitsto theearly risk+aking enterpdses in sun-rise industries. Government and develop-ment institutions engage in communitydevelopmentpartnerships where govem-ment resources or caDabilities are not ad-

equate to deliver substantive interven-tions in the communiry

Despite each player's unique agendafor its sector, collaboration and comp-lementarity become viable shategies be-cause of the needs of society at the time.The inadequacy of one player to fr.rlfill itsmission does not make for the dominanceof the interests of another; rather, it Pro-vides for an opportunity for comp-lementarity or collaboration. Because inthe end, what is at stake is not the Pre-eminence of govemment, nor of business,nor of development institutions, at stake.It is society's self interest-nothing more,nothing less.

REFERENCES:'Emil P. Bolongaita and Eduardo L.Robeno, Ihe Citizen as Customer: Citi-zen's Feedback and ktcal GovernmentPe rformance, Policy Research Paper Se-ries (Philippines: AIM Policy Forum,Asian Institute of Management,l996).'�Eduardo A. Morato Jr. and Ver F. M.Penar�ar'da, Mogic Eyes, (Thailand: AsianInstitute of Management, 1990).

Prof.Tomas B. Lopez,lr. is a core facull! oflhe Mos'ter in Derelopme ! Managenent (MDM) pro|tuffi.His arcas ol specializstion include social m|rketinS,enltepreneurship, and straleStc monagefient.Ih t e t h e | : 4 ommy@aim.e d u.ph>.

great lengths to satisfy society'spreference for these products.America's traumatic expedenceofthe prohibition clearly showsthat government regulationswithout popular support willnot work and will usher in theproliferation of other ills, likecorruption and crime.

But at times too, influencerscomplement and collaboratewith one another Industries inthe rural areas find that theyhave to provide the most basicof services-water, health andsanitation, powet educationwhich govemment should beproviding. Finance institutionsand agriculture-based banksprovide economic interuentionto improve the quality of thelives of farmers whenthey crea-tively go around the traditionalfinancing hurdles, Iike collaferal, rigid repainnent terms, andhigh interest rates in trying to

Society

Business Doing Advocacy-

Developmentlnst.Becoming APolitical Force

Development lnst.Doing Businesafor Development

Development BeingMoreDevelopmental

BusinessesEmb.acingDevelopmentas Stralegy

THE ASIAN MANAGER . AUGUST-SEPTEMBER 1996 29

ilIaruncnnIENT fPDATE:Dnwropm[vr

BY PROFESSOR L[o\ARDO Il. SlLos

closed svstem of intc.rrlependent p.rrts.lVhen tht org,lnir. it i()n is vielt 'cl in thtconte\t of ,r larecr sr,str.nr, it is an opensvstcn n'ith less prtcisc organiz,rtionalboundaries. The organizational purpost'is vien'ed not aftrmisticallr as a go.rl ofthis organization but,rs perforrl ing otrhone function amonq manr'.

Set in a larger contc\t, orgnnirnti(nral

l.rurposc'becomes a bit norc complc\ th.tngoal raiionalitv mieht.rt i irst m,rkc rrs be-lieve. Defining tffccii leness,rkr I.,r 'comesmorc complicatecl. l i becornrs clcrr rlrort 'complicated in thc contc\t oi qlrbaliza-tion considt'r ing cnrss-cultural environmcnts.

With this picturc, dominant morlerntradition offer:,r sim pli i ica tit rn. It rs t itdup u,ith sptcialization l hich is irr:rpar,tble from the functi irrral vit ir ' . Thai,t l or-ganization is p.rrt ol a larger sr':tt r l of interdcpcndent functions ciocs not cl 't,rngr.its special mission. Tht bcttcr ,ul ()rgnn

lunctions, thc hctir,r it \|Irf! thf orgarlisn. Br .tnaLrgr', an organizaiion senr'slhc lalrrr sr str.m l ell br pcriorming itssl.t 'cializcd firnciion l t l l .

- l hus org,rnrz,r-

L , r n \ . t r ' 1 . 1 , 1 1 , l - ' i , , ' 1 1 . , 1 , 1 r r 1 r , ' r r , ' i t r

this ()rf,rn ot unconscious cool.cr,lt ion,'. r n , \ f ( r r L n \ l r I | , l l , j \ . l . r r r r < r r r i l l r - i r r r i :iblc h,rnd.

l l aoopcr,rt i()n is thc \\1)rk (it uncoll-scious nlnrkets inste,rtl of conscious ar.ln t i t t r . l r . r r , ' n r l ' ' r , r - I r r l , r r r , , l . r l . r r r r " -

thc ()rg,rni/. i ion kr c,rl ibr,rtt ' i ts urissrorrwithirl t irr. larger \\ stcnr. It nr,rr t 'r ' t 'rt be. , r '1u , ,1 r l r , r l - l r . l r ' . r . i l . \ , t r ' . r ' - . r r r i ' , r

t ion nrat t itpttrcl on hirtr '.tuhrnontirusivit can rtlt trn jts trrln rcsorrrci 's,tnd protect its ()\\ 'n intercsts. r\tomjstic goal rn-tionalitv rt ' t 'mt rgt,s rr ith a r t,nge,rnct'.

q r i l l , t ' , 1 . ' r r . r l l . t , r r r t , ' r , r r t r , r . l r ' , . -p l iuan coofer , r t io r r , n rorc c ross fu r rction,rl si ntrgi; lnorL. t(.anlwork, morcn , r t r , ' r l t r ' - . l l , ' r , - l r . ' r \ ' - t . , r l l t . r r r , , - i r r- 'ch()rt, r11()r(' ar)r/ ja/r)r1! aolrpf ratron.

0rganizationalAssessment as

A Development Tool0rganizations aro 6'islands of ronscious poner

in this ocean of unronsrious rooperdlion.!!

.* -! ur asscssement of ()rg, tizations

$ 6 1 . r . l ' a . , r l , , n , ' r r r r ) , ' l i o n , ' l t l r c , . r

$ f f t , r r r r z r t i ' ' r r ( ) r r . e t l i f u r f L r \ ' o l- i t . t I t , ' r ; , r t t i z t t r . rn r . r * l . tL r l r . l r rJ a .the entire rationalc for its cristence, it be-concs thL'kc\' \ ariable krr er',t luation. Wccan rationallv r. lttt 'rninc whether or notrcsourcts art bcing tff icientlv ancl effec-tive'lv used. Organizational capacitv andperf ormancc, mtmbers, stmctures, proc-esses, strategies, evcn culture mav all bec la lua tcd . rga ins t o rgan iza t iona l pur -pose. It scrlcs,ls,r rrnilers.rl framertorkf()r ortanir.lt ional asrcssntcnt.

T l r r . i r . r r r , r r , ' r l l . , t t t , t fp l r i , t t i , ' r r , ' i . rmore gencral fr, lmerr orki goal r,rt ional-itrr rreans-encl rationaii i\,, or functionalrationalitr,. \\hat "iunctional" (in tunc-tional ration,rl it\ ') arlcls to goal (in goalr,rt ionali iv) is c()ntext, trthtr intcrnal orerternal. l\ hcrr iht' f irrrctional vieu is er. lu . i r , l r f , ' L r r .L r l rn ! \ . r r ,J - , ,n t l r r o r ! , . l r iza t ion , i t v ie i !s the 0rgan iza t ion as a

30 r \LGLsf -SL |Tr \ rBFR 1996 . T r rF A \ r . \ \ \ ' 1 . \ \ \ ( i r ,R

I shall relate these concems for moreconscious cooperation with a develop-mental approach to organization to itsassessment.l shalldo so by first highlight-ingcertainbasic patterns of the traditionalinformal trading system. I shall then showhow these pattems are replicated in twoexamples, in the giant trading firms ofJapanand the experimental Rural Uruver-sity in Colombia.

The lnformal SeetorThe usual assessment of the informal

sector is far from sympathetic even indeveloping countries. Profiteering andusury often command most of the atten-tion so that the entire system is viewedas fundamentally exploitative. It is per-ceived as reinforcing a feudal relationshipof master and serf. The rational frame-work, like a switchman, tends to steer as-sessment along the iron track of goal ra-tionality, This tendency can precludeanyreal insight into the workings of the rn-formal system as it leads to a dichotomybetween formal and informal systems.

The relationship among actors in theinformal system, say, between the rrcetrader and the farmer is rather straight-forward. The trading cycle is simpleenough: the trader buys rice from a sup-plier and sells it to a buyer However, tocomplete the cycle, several activities fol-low a pattem.

F insncial lntermedialion. The farmermust have resources to produce rice. Thefirst intervention of the trader takes placeat this juncture. He provides credit to thefarmer which may constitute a series ofinteruentions. The farmer may requirefunds for fertilizer, pesticides, fuel forrunning the irrigation pump, parts forrcpain, etc. He may even require fundsfor domestic needs. Note that the tradermay provide credit not only to the farmerbut also to the wholesalers at the otherend ofthe trade channel. The trader-mon-eylender, thus, links the producer to thebuyer

Technical Infermedialior. Since thetrader-moneylender wants a good har-vest, he might, besides providing credit,pass on technical information for increas-ing the harvest or improving its quality.He may even invest in a warehouse or agrain dryer or a rice mill.

Markethry Intermediafior. Credit is usu-ally provided on the condition that the

produce be sold to the lender at harvesttime. Upon taking possession of thegrain, the trader pays net of the loan tothe farmer As far as the farmer is con-cemed, the cycle isnow complete; he hasproduced and sold his product. But thetrader still has to transport the grain andsell it to buyers in the marketplace. Thetrader creates and develops trade chan-nels for the producer

These three maior types of interme-diation have a cost though there rnay beno strict talk of interest or fees attachedto loans or services. They are taken intoaccount in the form of a discount on theprice of the farmer's product. Here, thehader is accused of usury or profiteering:He buys low and sells high at the expenseof both producer and consumer At thispoint, we may completely misread theinformal system.

Formal models might point to the in-equity of the structure, especially theperpetual cycle of dependence of thefarmer on the moneylender Dependencehas been institutionalized. Part of theblame is placed on the farmers them-selves, on their complacency, on therrIack of entrepreneurial spirit, above allon their culture of dependence.

The remedy is typically conceivedalong two sets of changes: empoweringfarmers and disempowering traders-moneylenders. lt seek to remove the in-termediation functions of the trader-moneylender either by placing them inthe hands of the farmers themselves orby mainstreaming the farmers into theformal system. Either way, it envisionsradical structural and cultural changesthrough education and training of thelarmers and creation of modern instihr-tions to replace traditional ones.

The mystery is why the farmer con-tinues to depend on the trader-money-lender despite the existence and accessi-bility of a cheaper formalsystem. But themystery is dispelled when we realize thatthe interuentions of the trader-money-lender are perceived as services by thefarmer In reality, the trader-moneylenderis a customized, one-stop shop and thatis what the farmer is apparently willingto pay for

Systeffis Management The trader-mon-eylender links the entire value chain forthe farmer from production to point ofsale. Just as Moli€re's gentilhomme was

pleasantly surprised upon leaming that hespoke prose, the trader-moneylendermight be as surprised to leam that he is asystems manager

No single agency, in the functionallydifferentiated formal system, is norrnallycapable of providing such a package ofmultiple services. The idea, after all, isfunctional differentiation. In the formalsystem, if the farmer wants a loan, he hasto go to the bank. But he cannot go to thebank to sell his grain; for that he has to gosornewhere else. If he needs technical serv-ice, again he has to seek it from some othersource,

Without the trader-moneylender, thefarmer will have to bring his product tothe marketplace and all that it implies. Thecondition of farm-to-market roads can addconsiderable cost to the marketing activ-ity. Also, the trader-moneylender does notusually ask for collateral while banks do,as law requires. What serves as collateralfor the hader is the produce promised tohim and so he hies to makes sure that hegets a good harvest. The farmer can payback his loan in kind and does not have toaccomplish the battery of forms before theformal system can even begin to move.

Furthermore, bank loans from the tn-formal sector are generally uneconomi-cal since transaction costs are usually thesame whether the cedit provided is bigor small. Ifbanks were to take additionaltransaction costs into account, theywould, if they were not constrained byregulations, be charging higher than nor-mal interest rates. If all these costs andrisks are quantified, the usury of thetrader-moneylender becomes somewhatless usurious.

It is not our intention to make a heroout ofthe trader-moneylender or deny theexistence of abuses but to learn about thesystem his intermediation helps tooperationalize. To have a better grasp ofthe system, let us turn to another institu-tion in a modemsetting, the giant tradingcompanies in iapan.

The Sogo Shocha I

Shos/ra is theJapanese term for a trad-ing company. Sogo shosha, on the otherhand, refers to giant trading comPaniesof Japan, although literally it merelymeans "a general trading comPany."Only nine companies have so far earnedthe title of sogo sios/u. In the order of salet

THE AsrAN MANAGER . Aucusr-SEpTEMBER 1996

they are Mitsubishi, Mitsui, Marubeni, C.Itoh, Sumitomo, Nissho-lwai, ToyoMenka, Kanema tsu-G osh o. andNichimen (Yoshihara, 6).

Even in lapan, "the sogo sfiosira is re-

garded as a somewhat mystedous entity,difficult to know about or understand butuniversally acknowledged as a powerfuleconomic force. In both Japan and over-seas, outsiders know relatively little abouthow and why they operate as they do"fioshino and Lifson. 3).

The sogo shosha is probably mysted-ous because we try and fail to locate it ina functionally differentiated model. Weautomatically seek to classify it as elfftera commodity trader or a merchant banko/ a manufacturer or a mining companyor an import-export firm or a forwardero/ some other category We are at a losswhen we find it operating not like any oneof them but like all of them. The func-tional mindset automatically reactsagainst this diffuseness of purpose. If ithad a say in the matter, it might even sug-gest, in the name of efficiency and effec-tiveness, to break down and distribute itsmany functions into so many autono-mous organizations.

If we want to know how and why thesogo shosha operates as it does, we havebetter chances of success by looking foriis prototype in the humble trader andmoneylender of the informal sector withhis integrated approach to trade.

The ierm sogo sftosfta began to be usedonly around 1954. To be a sogo shosha, thetrading firm has to be a giant operation;engaged in foreign trade with offices invarious parts of the world; deals withmany products of many companies; pro-vides financial marketing, and technicalservices. But its principal activity muststill be trading. The sogo sftosfta has beendistinguished from Jardine Matheson, forinstance, on this point.

Jardine Matheson started as a hadingcompany about acentury agobutby 1979its hading together with light industryoperations constituted only 307o of itsprofits. The rest came from other majoroperations: services, financial operations,nahrral resource development, and realestate. It was not clear from the reporthow much hading alone contributed toprofits but what was clear was thatJardine Matheson could no longer be clas-sified as a hading company.

On the other hand, when in 1971"Mitsubishi Shoji changed its Englishname from Mitsubishi Trading Companyto Mitsubishi Corporation, 797,' to 80Vaof its profits stil l came from trading"(Yoshihara, 12{3).

lt is a genernl trader, therefore, notmerely a marketing arm of a manufac-turing firm, such as Toyota Motor Sales,which is not considered. a sogo shosht al-though its sales are comparable withthose ofa sogo sfioslra.The sogo shosha isahading company like the Hudson's BayCompany of Canada but, unlike the lat-tet itengages in a lotmoreancillary and,at first glance, non-ancillary activities.

It has long been observed that the fi-nancial function plays an important rolein Japanese hading companies. Similarrties have been noted between Britishmerchant banks and the sogo siosl?r. Pe-

In thetrickle-downrnodel,sarvloe raa "many

thing."

ter Drucker has observed thdt the sogoshosha isnol a trading company but a fi-nance company. ln a survey of 100 peo-ple in different levels ofa sogo s/rosfta, thelargest number of respondents repliedthat their company was "a moneylenderwith knowledge about commodities"(Yoshihara, 175).

In conhast with financial institutions,the sogo sftos/m lends to enhance tradingoperations and many other activities out-side trading are undertaken for the sakeof trading. Just as the dce trader mightinvest in a rice mill or warehouse or trans-port vehicles to support his trading ac-tivities, so the soSo sftosfra invests in ship-ping, warehousing, raw materials devel-opment, mining, manufacturing, as partof its strategy "either to protect the tradechannels already established or to createnew ones" (Yoshihara, "12-13\,

Every sogo shoshahas special relationswith a large commercial bank which isits major source of credit. The bank, inturn, uses the sogo shosha as conduit forloans or investments in firms whichmight be financially too weak to havedirect access to commercial banks. Thesogo sftosfta can take financial risks banksare not allowed to take, such as extend-ing credits to small and medium-sizedcompanies without collateral. The sogoshosla is quite capable of handling suchaccounts. The business relationship be-tween the sogo shosha and its satellitefirms is typically a close partnership. al-most a family relationship.

Like the money lender in a smallerscale, it makes it its business to be closelyinvolved with client firms, able to provideservice for them in almost any aspect ofthe business. It sources materials for them,provides industry and market informa-tion, brings together buyer and sellelmediates ioint ventures, creates new tradechannels, and looks for business oppor-hinities. It acts as broker, purchasing man-ager, financier, marketing arm, technicaladviser-generally a link to the outsideworld. Its global network allows it to bemore than adequately informed aboutmovements in markets and industriesworldwide. The sogo sftosha, more clearlythan the informal trader-moneylendelacts as a systems manaSer.

Strueture and CultureFirms within the system are clearly

interdependent. None of them wouldprobably survive or prosper without theother: the firms without the sogo sftoshnor the sogo shosha without them. What issustainable is none of the parts function-ing autonomously. On the contrary, mu-tual dependence is the life of the system.The sogo shosfta thus retains and what inthe informal system has been called a feu-dal system ofdependence. That is the firstpoint I would make.

But unlike the trader-moneylenderwho is adjudged the villain of the infor-mal system, the sogo sftosfta has earned thetitle of being "the vanguard of the Japa-nese economy." Although the sogo shosftnhas sometimes been accused of greed andprofiieering by the Japanese public it hasbeen more generally recognized as anengine of development. The system istypically developmental in character.

Aucusr-SEpTEMBER 1996 . THE AsrAN MANAGER

The functional model from a develop-mental perspective is a trickle-down de-velopment model. Like banks, it providescredit to those who are already bankable.The sogo s/rosfta and the trader-money-lender make their clients bankable. Theinformal system is especially designed forthose who are typically in need of assist-ance in some aspects of their business.

The sogo shosha is, in a strict sense,developmental while being, inan equallystrict sense, a business. It is its business,to assist even the nonbankables. In thetrickle-down model, service is a "many

splintered thing." Different services neednot normally come in one package; eachfragmented service is sought separately.It is the business of th e sogo shoshn to pack-age these services for the client.

In the informal system as with the sogoshlsha, strate1y follows structure andstructure follows culture, reversing theusual logic according to which organiza-tional culture and structure follow strat-egy (since shategy follows organizationalpurpose).

Organizational culture is viewed dif-ferently in two approaches. An organiza-tion must have a culture that promotesits mission and strategy. In an organiza-tion governed by goal rationality, organi-zational culture, as everything else, is con-ceived and used instrumentally as ameans to an end, that is, organizationalculture ls goal rationality.

The culture of the informal system, onthe other hand, is identical with ihe cul-hrre ofthe community itself, that is, a cul-hrre of solidarity. The basic culture withinthe sogo shosha family of firms is identi-cally the culture of Japan and its basicstrategy isbuilt on the traditional culturewhich is nothine more or less than theculhrre of communiry Although compe-tition is not absent or discouraged, themotivating force in the sogo shosha famrlyis not competition but cooperation; notcompetition, but competitiveness.

There is no need to prove how com-petitive the performance of the sogo sftoshrand their satellites can be. Even bankshave difficulty competing with the hader-moneylender Unlike the trickle-downframework, the system does not leave theactors to their own ingenuity but looks totheir reciprocal interests. The system ofdependence apparently can motivate anddoes not necessadly lead to complacency.

Tlte sogo shosha plays a role in accel-erating economic development. Becauseit mobilizes an already existing system,development does not have to be pre-ceded by any radical structunl or cultumlchange. It has the advantage of hiiting theground running. Not wanting to sufferihe fate of China which was dominatedby foreign hading companies, Meiji Japanused and assisted its own hading firms-the first to be so commissioned wasMitsui in the 1870s-to engage in foreigntrade as a means of accelerating economicdevelopment. Japan was thus able tomainstream its haditional hade patternsmore quickly by hitching them whole, asit were, to global trade.

If we are correct that the soSo sftosld ismerely the corporate counterpart of thetrader-moneylender, then there is noth-ing mysterious about the sogo sftosftr; in-deed, there is nothing really Japaneseabout it. The sogo shosha is merely a mod-ern corporate version in global propor-tions of the trader-moneylender. That thesogo shoslu has been able to manage suchcomplexity in such a large and globalscale is a glorious achievement of Japan.But the basic model is not a Japanese in-vention; not even particularly Asian. It issimply a traditional model.

The Bural UnlversltyConveniently, we find from another

continent, a report on the experiment ofthe Rural University ifl Colombia(FUNDAEC).'� The trader-moneylenderand the sogo shosla apply a developmen-tal approach to business. The Rural Uni-venity experiments on making educahondirectly developmental. One cannot readit without noticing a qirnilarity of issuesand approach between the Rural Univer-sity and the informal system. (The paperreports the university's experience of tenyears until the middle of 1982. As I writethis, I achrally do not know how the ex-periment has fared since then. However,since I use the Rwal University in orderto evoke its approach relative to that ofthe informal system, it serves the pupose,whatever its prcsent status.)

The Rural University decided on aninterdisciplinary approach io communitydevelopment. ln its assessment, the "ha-

ditional" university was noi helping mo-bilize knowledge for counfyside development; on the conhary, it reinforced the gap

between traditional and modern sectors.With its division into different disciplinesand "inflexible functions," it producedfunctional specialists who, finding lit0e usefor their professions in the countryside,naturally Bravitated to urban areas.

The Rural University sought to be acatalyst for economic and social devel-opment by linking education directlywith rural community needs. To this end,it recruited students from the communityitselt taught them to be promoters, tech-nicians, and engineers of rural well-be-ing, with skills to mobilize communityaction and to seek and apply alternativetechnologies relevant to production. Be-cause its traduates had their work cutout for them in the community, theywould not have to mi$ate to the city tofind work.

The exDeriment was deemed to be asuccest wi-th many adiustments along theway. For instance, because the Rural Uni-versity was inwardly focused on the com-muniry it spent much time settling suchquestions as which technologies andwhich production processes wene to beintroduced? The Rural University Pro-duced a new set of professionals respon-sive to the needs of the community butwho would hire them and pay for theirsewices? The engineers developed tech-nical irnprovernents that would benefitthe community but where was the capi-tal to produce them? Having producedthem, who had the resources to apply orbuy ihem? Apparently, the communitydid not necessarily have the capacity orresources to use the services or productsit actually needed.

The informal hading system and thesogo shosha have a built-in advantage inthis regard. They add important variablesin the muation: markets and resources.They areable to link and dircct technol-ogy and production with the needs of themarket and to develop markets and re-sources for the needs of the community.The Rural University linked educationwith community developmmt while thesogo sftos}c linls community developmmtwith markets and resources.

Nonetheless, differences in detail andemphasis do not detract from thecommonality of approach. What the Ru-ral University was seeking to producewas some kind of systems manaSement:conscious cooperation.

THE AsrAN MANAGER . Aucusr-SEpTEMBER 1996 JJ

Organlzatlonal AssessmentWhat distinguishes an organization

from other human associations is the pri-macy of odentation to the attainment ofa specific goal. The orientation of othersocial types such as family or communityis not so specifically determined but issaid to be dl.flirse. We can see why goal ra-tionality is the basic framework for assess-ing organizations. We can also see howthe orgalrization simplifies assessment.The purposive organization is perfectlysuited to be assessed instrumentally, thatis, in its ability to serye and promote itsspecific mission.

The purpose of a family or commu-nity is diffuse because its purpose is thefamily or the community itself in its con-creteness as its people. The communityis the farmer who has to plant and sellhis crops, the family who needs shelterand food to eat and clean water to drink,the youth who go to school, the men andwomen who need jobs...

The specific purpose o[ an organiza-tion is extracted and abstracted ftom thediffuse purpose of the community atlarge. That is another way of saying thatdifferent organizations serve specificneeds of the community.It is the purposeof purposes; it is the common purpose orthe common good.

The integrated approach of the infor-mal system-the sogo slosftn and the Ru-ral University-does not negate func-tional differentiation but presupposes il.The informal system takes it for grantedthat the farmer performs one function andthe trader another, just as the sogo shoslagroup takes it for granted that its mem-bers have their respective functions toperform. Assessing the organizationagainst its purpose is essential and nec-essary But organizational purpose is notappraised in isolation but in relation withthe system or subsystem it serves.

Thatan organization must be assessedin its context is not a platitude.lt rcmindsus that an organization may be adjudgedexcellent in fulfilling its given mission andstill be irrelevant to the community it issupposed to serve because, for instance,it might presuppose a technical or socialinfrastructure that is not there. That wasthe grievance of the Rural Universityagainst the "traditional" universitywhich, as a producer of functional spe-cialists, might be doing an excellent job

34

yet only tangentiallv serving the actualneeds of the community.

The call for interdisciplinary andcross-functional cooperation in the formalsystem suggests that this integrated anddevelopmental approach is not a paro-chiaJ concern peculiar to communitie5 ursocieties that are not yet "modern." lt alsoclarifies the nature of the desired coop-eration for it evidently wants to go be-yond the analogy ofa natural system thatoperates unconsciously. The pursuit of thecommon purpose is not left to uncon-scious markets but is made the concernof conscious administration.

The informal system suggests a basicshategy for opera tiona lizing thir cooperd-tion. Instead of trying to change it, thestrategy relies on and mobilizes the ex-isting structure and culture of mutualdependence and reciprocity andoperationalizes its essentially develop-mental character By means of strategicalliances and linkages, it creates oppor-tunities for growth and development. Thesustainability in question is then less thesustaindbility of each organization in iso-lation than the sustainability of the sys-tem of interdependence,

The community is sustained by or-ganizations that serue its specific needs.Organizations are sustained by the com-munity that legitimizes thefu existence.The development circle must be kept inmind in assessing any organization.

FOOTNOTES:1. Principal sources for the s0,q0 slosln:Yoshihara Kunio, Sogo Shosha: The

Vanguard ofThe lapanese Econony ('[okyo:Oxford University Press, 1982).

Yoshino, M. and Thomas B. Lifson, TlrInt:isible Link: lnpan's Sogo Shosha and TheOrganimtion of Trnde (Cambridge, Massa-chusetts: The MIT Press, 1986).

The Unique \ttlorkl ol The Sogo Shosha(Tokyo: Marubeni Corporation, 1978t.

2. Farzam Arbab, Rural Uni'oersify:Learning about Educntim nnd DeuelopmenfAn unpublished material (IDRC-231e,1982).

Prci. bona la R Silos halds tfu PLDT Pr)fcssorinl Chnifot Busilrss Mnwgtne t at tht Asinn Lt*ihn e of Mna\orcnl Intentt: 4easil@aim.&1u.l1h>.

1996 PHILIPPINESGOVERNMENT

DIRECTORYWilh an ndex, lhrs drcclory co.ta ns nam.s,

addr.ss€s, la and phone n!mb.6 ol ofiies in lh.lh.6e bra.ch$ ol qovernmnl, incl!ding pfovncial,city, h! nicDal authoriii.s, emb.ssi$ and ens ulateso l lh6 Phr Ipp ines , government corpo .anons,consl ulpnal bodEs, slale @lleges and unive.sities.P550! copy h lh€ Phlllppln... USS30 a @py toroveBe.s ord66, inclusta o/ natttng and hahdling.

1996 DIPLOMATIC &CONSULAR DIRECTORY

Onlh .or6ss June 10 , l996wth ldA lebDhon6nomb66, th€ cohprehensiv€ &-pEg. dn€doryconlarns upn.ied 6ls ot 1) embasses. @nsulales,in le rna l io .a o rOanr2a l rons in Me l ro Man i la , 2 )emb.ssr6, consulal.s, honor.ry co.sulal.s ol lh.Phi rppi.es, 3) OFA ofi rcr€ls, OFA anached a9.nci.s.otlic.s in lh6 province; a.d 4) ambaesado(.1

lncludes the Dlplomrilc 56ltl Urlg€, 6 gudelor U. S. Repr.s6nlalivcs andth€irtahili$ Doblish.dby rh . Foro isn Servce t .s t r tu te , U. S . S ta teD.p6rlrent. Washingron O. C. This p.ot@ot guiii.may aiso be lsetullo olh€r dplomats, gov6mm€ntotlicials, r.l.rnslional bu.iness exccltves. schoololticials, l.achers and students ol ror.ign seryice.

P250.copy h lh . Ph l l lpp l . . r . us$15a copyioroverseasordeb, nclrrlwol na hg aod hahdhng.

I996 AD.MEDTA.PRDIRECTORY

With an Ind6x,lhis is a 06-page dnecloiy ot li-media and all€d orgEnizations h th. Philippines,includr.g Filipinoli-med a based m other @untnes.

P35,0 . copy In lh. Phllrppln... US621 a copytorovers.as ordeE, /rclusr6 of mi ljn g and han dl h g.

THEDIPLOMATICPOSTThis is . rcnihly seruc6 n.wsDaDer that

pubksh.s w€lul inlo.mtion about olhe. @uniiosincludrng visa regulat@ns, dircctori.e, buiietns and

P20O .nn|r.l .|]brcrlpilon In lh. Pnlttpph...US$20 lor oveE€s s0bscnDlions.

For oyer3gas otdersPayment shouldb. r.nittedthro!gh t.tesraphic

l rans le r roU,S,Do l l . rA@ouniN lmber5294-000944, Th. Diplomatic Posl P! bli5hing Corporat ion, BP IFamrly Bank, EDSA, Malib6y granch, 16 C- Jos. Si.coher EOSA, Mailbsy, Pasay City, M.tro Manrta

For orders In the PhilipplnesPl.ase add P60lo cov.r pne tor miling end

handling, P.ymenr may b. in I ) demand draft to Th.Diplonalic Posl Publrshing Corpo.anon, P-O. 8o(4216 MCPo 12A2, Makatr Cityi o. 2) t.t.gaphicl.ansl.r lo Ac@unl Nomber 5?9-30-5556-6, TheOiPlomaticPoslPublEhng Colporalron, BPI FamitySan l ( Ma ibay Bra ich , l6C. Jose St .6he. EDSA,Mahbay, Pasay City, Metfo Manrla 1300 Phitrppines.Alto.Y.l l.b l. 1 n M.tro ut n Il. book eto Bt, hot el.,altPofL.r.l othat outlat.ln ludtDg792 F. Ctu,St,, U. bah P.t.y Ctly,

What to do after palm€nt ls sentFaxlo 833-3858 or e-har (dDOmzeh.comt

l r l lo o l pub l i ca lons ord . rsd and copv o l lank.emnanc6 lo the crculalron Manes6r. upon recelFtot rcnllt.nE., copte. w t b. rul.d tmm.dtilctywllh olll.l.l r€celpl. Foreign ofde6 attow iwo tolhre6ws6ks delNery. L@.1 ordeF onelolwoeeeks.

ForC.ll: {632) a33-281 I, 433-9a50 . F'I: 833-3!58

E-m.tt : TDPomolcom.comorw r. P.o. Bor 42a6 itcPo i282, xlkrU clty.Vltlt ow homep.ge on th€ IntsrmtHltpr vww,mor.om,corwu.€rndp/hoh..ntml

Ar.rcusr-SEpTEMBEn 1996 . THE AsrAN MANACER

M�TCnMENT UPDATA:Dwnropmnrur

BY PItoFESsoR SOLEDAD A. HERNANDO, PH.D,

eet the Asian DevelopmcntManagers a t the c res t o fchanges taking place in themost dvnamic region of the

world. They arc the graduatt's of the De-

velopmcnt Management Program of theAsian Insiitutc of Managencnt.

V ql,nli-; irt l |wrll r. VDV lqq4. Henorks rviih lndia's foremost developmentfinancial institution, lndustrial Develop-ment Bank of lndia (IDBI). Vt'nkat is man-

agrng IDBI - p r ' r r io l io o [ in \ e . tment t inshares and otht'r capital market invest-ments of ioint stock companies.

In a reccllt visii b India, we learneclthatlDBI holds equity shares in more than800 companies and debt illstruments olmorc than 170 companies. Thc total ac-cluisit ion valuc of these portfolios is tn

excess of Rs25B (about US$700M).Venkat bclicr,es that the crur of his job

in the bank is in tl.re rigorous implemen-t.rt ion ol the b,lnk - d( \el,,Pmenl obiec

The Development Manager:Riding the Crest of Change

Derelopment managerc, AIM alumni, are change alienls,breathing in nerv life to inslitutionso peoples' and nations.

t iver "to enhance the quality of lateralsen'ices to sustain the market." IDBI tookvadous steps to develop market interme-,.1iarie: to encou rage entrepreneu rs to tdPthe capital market for their resources re-quirement. At the primary market level,the min imum number o f .harer per , rp_plication in an IPO is kept at a bare n.unt-mum. As a large section of the popula-t ion i . poor , .uch smal l . imuunt pcr . ip -plication permits and encourages them to

invest in shares traded on capital market.

Similarlv the trading lot in the second-arv narkct is kepi small. This helps evcnthe smallest of investon take part in ac-live tracling in the capital markct."

Dao Vnn Huug, MDM 1995. Hungteaches banking ancl f inance courses atthe N, r t i ( ln . r l Fcon. rmic - [ 'n i te r ' i t v inHanoi, Vietnam.

Once he is out of the classroom, Hungis preoccupied with attending to simul-taneous concerns, all brought abor-lt bY re-

cent developments in Victnam's fledglingmarlet econonrv. He i. a much sought-after consultant among bilateral donor

agencies who are keen on taking advan-tage of the governmenl's policv to eftecta smooth transition in the country's eco-nomic :ys lcm. He hn . cho 'en lo tc tdeeplv steeped in developing models andsystems that wil l institutionalize micro-enterp se credit mechanisms within the

country's banking systcm. One such pro-

totvpe is the modcl he designed of ashareholding bank to be owned by poorrvomcn in Vietnam.

Hung n.raintained that the poorest ofthe poor wcre the rural women andu'omcn-headed households. With l itt le

access to social selvices and production

factors, thev had become margir.ralized inthe process of structured reforms. He bc-

lieves tl.rat access to credit is a key inter-\,cntion forpoyerty alleviation in rural Vi-

etnanl.

TrrE AsrA\ MANA(;ER . ALCLST-SEnEMBER 1996 35

Dao van HungNational Economics

UniversityHanoi, Vietnam

lla PuspadewiYayasan Lembaga

Konsumen lndonesia Zaim UchlowiRepublika Daily

Newspaper, lndonesia Robert NebridaJaime V Ongpin

Alongside SAM, Robert introduced and Ira in consumerism.the Positive Values Integration and Ira is presentlv Head of Business De-Behavioral Enhancement Support Pro- velopment in Yayasan Lembagagram (+ VIBES), an organizational re- Konsumen Indonesia and also works fornewal program 4imed at creating a cul- Women in Politics project of theAsia Foun-ture supportive of the principles that the dation. Zaim has been promoted frominstitutional strategy rests on. Managing Director to Deputy to the Edi-

Zaim Uchrowi and lra Puspndewi. tor-in-Chief of the Republika DailyNews-MDM 1995. Ahusband and wife partner- paper with the largest circulation in Indo-ship that has gone beyond the confines nesia. Both are firebrands in their ownof the home to the exciting arena of ad- way-fighting for what they believe in.vocacy, Zaim and Ira were classmates at They win some battles; they losesome butAIM. After the program, both returned this does not stop them from carrying onto lndonesia to resume their colorful ca- with their crusade and makins some dentreers-Zaim in professional journalism in the consciousness of a people striving

to achieve political matu-fity.

Five vignettes of the de-velopment manager func-tioning in four differentworlds. Wherever they are,developmentmanagersputto good use their broadknowledge of the social, po-litical, and economic forcesat work in their environ-ment. Like a grandmaster,they proceed to choose thepath they have to take thenmake their moves, one at atime, carefully and deliber-ately, as they achieve theends that truly matter. Theyhave learned the intricaciesof change management andso they go about their mis-sion of infusing new lifeinto institutions and organi-zations with empathy anddiscernment. They are not

Venkaisswar J.yanthyI nd u st t i a I Deve I o pm e nt

Bank of lndia

Robert Nebrida, MDM 1994. Robertheads a leading Philippine-based corpo-rate foundation. As Executive Director ofthe Jaime V Ongpin Foundation Inc.(JVOFI), the social development arm ofone of the country's biggest mining firms,Benguet Corporation, he strives to harmo-nize the business interests of Benguet Cor-poration and the needs of various com-munities the corporation has to workwiih.

The corporate foundation uses theShategic Area Management (SAM) modelas the basis for establishing and develop-ing relationships with mining commum-ties in three areas: inItogon, Benguet, a high-land agrilmining town;in Masinloc, Zambales, acoastal agril fishingpower-generating town;and in Buhawen, SanMarcelino, Zambales, anupland agri-mining andlahar-affected area. SAMrepresents a radical de-parture from the tradi-tional mode of viewingthe corporate founda-tion's community in-volvement as a "philan-

thropic," one-way rela-tionship to one that fo-cuses on the mutual andinterdependent use of re-sources and opportuni-ties by all stakeholders-the mining company, thecommunity,and the local

JO

Prof. Hernando with a crosssection of MDM graduates, now allpracticing development managers in different parts of Asia: (Lto R) .Purwoto Ruslan Hidayat, Forestry Regional of West Java,Indones ia .Yadab Kumar Chapaga in o f Nepa l . La l Fernando o fSarvodaya Moratuwa, Sri Lanka. Venkat Jayanthy of the Indus-t r ia l Deve lopment Bank o f Ind ia , Bombay, Ind ia . Jo Mang i la o fNational Power Corporation, Phil ippines. Bari Chowdhury, Com-munity Development Center of Bangladesh. Shawkat Hossain,International Centerfor Diarrheal Disease Research, Banoladesh.

AUCUST.SEPTEMBER 1996 . THE ASIAN MANAGER

foolhardy ancl hastt'. Tht'v are considcratc ancl sensitive. Trained in theclisciplint of tliscor,ering and enrich-ing rclatronships insteacl of isolatingand alien.ri ine, thev ar€'able to prc-dict thL. outcomcs of actions and derisjolrs that cone \\ ' i th changc.

Ther t ' a re n ran l o thers l i ke\ienkat, D.ro I Iung, I iobt'rt, Zaimand Ira...clc.rring tht' path, leadingtirt' rvar,', breaking nen grounds.

There is (, ittrt lopt':- l lov, \IDM1993. Her efforts to popularize sci-cnct' t ' ,. luc.ti iou among thc I 'hil ippint's' populous public -school chil-rlren through an innovativc tcle!i-sion progr,rm markecl a majorbreak-through in clevelopment communi-catlon.

hr Nepal, pioneering n ork in t'f-fccting coordinaiioll anrong non-p,ovL.rnn.rcntitl organizations in thecountrv has been taken through theSamuhik Abhivan (Organization forDt vc lopmt n i ln rova t ions) bvRallrrn' R. Rr,trli and B itt tLtl Cl tLrytLrgLtitt,boih NIDM 1996.

I-iverv vear, Bangladesh sends toAINl stltral dL.\ 'clopmcnt pracii-t ioncrs rvho har,e beel immersed inrehab i l i ta t ion and recons tmct ionu'ork among thc countrv's vil l ,rgtrs.Evtry vtat Bangladesh nelcurnesback a r'ore oi ,..1evelopm€.nt ndnag-ers bnrrging horne rr' i lh thern a neuoutlook in der,clopmcnt u'ork.

Fr. Josc..t lt Ptttt lPc: heads the Scrcictr, of Itsus in Bombar.. He is seenbv his Jesuit colfrere! is a manager(leternined to bring his org.lnizatiorlto,r rr.n,rissancc of sorts.

The rlevekrl,nent scene in thcpas t feu 'vedrs in As i . r has beens\\'cpt b\' \'arious [ro\'('nlcnts anc]revolutions all expres:ions of at-tenpis nt breaking social, polit ical,,r nc1 cconomic problcms bcscttinglhe peoples of Asi.r. i

Dc ! r ' lop m en t n ranagers , asshapccl br ,\l\1, art txptctccl io bc,rt the helnr of these eflorts to intro-rluct rtforms ancl build up support for ing. Thel :hould be able to bring institu-change: th,rt uil l make life beiter for t ions, organizations, groups,,rnd commuAsi,r 's tecming poplrlations. Tht'v arc t 'x- nit ies to rise above their present inad-pectcd to offer "superior strategy in the ctluacics,rnd i leaknesses .rncl fact ch,rl-face oi inftrior rtsoLrrcts" (a quott from lenges thai.rbound irr ihe en\' ir0rrment.CD\4's Proiessor Vick)r S. Limlimgan) [)evclopnrcnt nranasers are neverborl of carelul studv and groulclecl sens fcarful of changc; thcv crcatc changes ancl

IHI. AsI.\\ N1,\N.,\CI.R . ALCLST SFPTF\IBFR I996

The Development ManagerDevelopment has to be managed consciously. As a goal, it must be constantly nur-

tured, the vision kept clear and pure. Thus, the development manager.

Development managers plan. They think. They strategize. Development manag-

ers lead, at the same time, they develop people, multiplying themselves through oth-

ers. They network, linking with others involved in the same work.

Development managers are integrators ofskills and resources, of hard-nosed busi-

ness tools, and an abiding vision for the betterment of people, of communities, of na-

tions in harmony h'ith their culture, environment, and dreams.

Prof. Eduardo A. Morato Jr.

ROOTS...In 1975, just seven years after its founding, the AIM faculty and board of trustees

and governors decided that for AIM to be truly relevant to the development ofAsia, it

could not iust be involved in business management. Given this mandate, AIM im-mersed itselfin development issues by doing consultancy, haining, and research with

tovernment, non-government, and funding organizations. Through thefinancial sup

port of funders like Ford Foundation, the Canadian International Development Agenry,

and Konrad Adenauer Foundation, some professors led by our cunent president, Pro-

fessor Fil Alfonso, went to the villages, talked to farmers, communist and non-com-

munist activists alike, and started to learn about people's needs, conscientization, or-ganizing-what development was all about. Soon, the rag tag group called the Rural

Development Management Program or RMDP was training managers of organiza-

tions like the National Inigation Adrninistration, the Ministry of Agriculture, Minis-

try ofAgrarian Reform and Natural Resources, and other agencies both in the Philip-

pines and in ASEAN like Malaysia, Indonesia, and Thailand. RMDP also advisedNGOS on how to systematize their activities with the grassroots.

Ten years later, in 1985, the RMDP offered its non-degree program, the Program

for Development Managers (PDM). In this one-month formal training program, AIM

began utilizing training materials that it developed in its ten years of hands-on expe-

dence in development. Four years later, the first degree program in Development

Management-the Master in Development Management-first not only in the Philip-

pines but in the whole o{ Asia-Pacific was offered to 48 students from differentAsian

countries. By 1991, another development-oriented non-degree program was offered

by AIM, the Program and Project Development and Management (PPDM).

To date, AIM'S Development Management Program, now known as the Centerfor Development, has produced close to 2,000 trained professional development man-

agers from all over Asia and other regions. Fittingly in 1995, AIM was conferred the

Ramon Magsaysay Award (the equivalent ofthe Nobel Prize inAsia) for International

Understanding for "setting regionwide standards for excellence and relevance in train-

ing Asian managers for Asia's development."Prof. Victor E. TanAssociate DeanCenter for Development Management

scc to it thai the change breathcs in ncrvl i t c r , ' i r r * l i l r r t r , ' r r . . F r r l . l , * . rn . l na t i r ,n .

I ' r , l 5, ,1 ,1,r ,1.1 / / r , ' i , r i i , , l r rJ / , . . , , I i ,n . l ] r l l f Of. r / { ) l r r . I l 'Un,mqf l , l r '1 l l / ) r , \ r ' i , , r , ) i i l r f .15/ /n / , r ! i / i l rk. i ,urrr , r { ,1I f i r1. f / , r i r , t i15, ,1 5f f , r l i r , , r i r , , , r , r ( l r i l ' d fi I l { } , rx . , r l f r l r ! r i r l ) r l rJ J, r i i r t r / i r l ) l l , ] / J f i r ' / r ] r rk l r ll rn\ i t t : . :n lar r , t l t |11>

37

ilIaruncEmENT UPDATU:Dnmopmnnr

Bt l t tot t-r-t 'n \4 \ Rro A\ rr, \ 'o C. Lo|uz

Social Responsibilit)'The New Business Philosophy

Nerv relationships harr: evolved among rarious stakoholdenias they puniue business and forporate social responsibilih:

usiness ancl morc afflutnt ncm-bers of societv have the respon-sibil i tv io use their blessings tohclp matcriallv poor community

members out of povertv and to developtheir full human potcntials.

This is the cmerging, and cnlighttncd,phi]osophv of business. Living out thisphilosophf is diff icult. It is diff icult dis-carding the old and simple philosophv ofmaking profit as the onlv responsibil i tvofbusiness. It is diff icuii defining neu're-sponsibil i t ies.

What keeps us continuouslv searching for rvavs of helping our fellorls is iheknon ledge that rve all need a minimumof l ifc-sustaining matcrial rcsourcts bt'fore. u't can use all our hunan faculhesf u l l v a n d r i 3 l r r 1 r . T h , r l n r i r i r n u m h , r 'elude.d ..r majoritv of our people. \\'e rc.r1-izc that rr'r. art part of thc l'cb of lifc.Whatever happens in ancl to anv part oithe web affects all of us soontr or latt 'r.There is much selfinterest in "enlightened

selfinterest." But more oi it resulted fromgcnu in t cn l igh lenrn , n t lo . r n t r r Jc f in i -

38

t ion of our relati(Dships to evervthinr intne unr\.erse.

This nov philosophv rvas behind thesocioeconomic deveiopment plans thatgave us thc Dragon Economies oi Asia,lhc \e r r Er , 'n , 'm i , I ' o l i . v o f V . r l .n : i , rancl the cali from Presicleut Suharto forthe Indontsian kouNlonrrnt to help mralcooperatrYes.

For more th,u 25 vcars norr,, Philip-p in , Ront . tn C. r lh , '1 ic l . i J t , 'p - , tnJ hu . r -nessnen (collaborating ivith manv cxpa-triatr ', non-Catholic managers arcl religious) havt bcen lorking at rlefining amore complete set of social rcsponsibil i-t i c . o l h r t - i n , ' r . T h c A . i , t r r I r ' . t r t r r t L , ' lManagement, u hich includecl l lusinessLeadership ancl l l( 'sponsibil i tV in its lrstof courses sinct 1968, has been inlolr erlirt thi: continuing joumtt, inclcpt'ndcntlvand as part of the Technical Conmitieeof ihe Bishops-l3nsintsslncn Confcrcnccfor Hulnan Deve'lopnrent (BBC) and iheConrnrittee orr Tt'achirrg Social I itsponsr-bil i tv (TSIt).

lVidesprcarl povertv ancl iack oi. le

velopnrcnt ,r nronr nrajoritr, of the Fil ipirropcoplc continue to lrc i l 'najor nationalconcern.

-fhe concern leri to thc i,sLrblish

menl of thr LIUC in 1971 io :t ' t 'k nlvs ofgettin{ the mirrc prir i lcgerl nnd nlatcri-allv bltsscci stgmtnts ol tht [: i l ipino rrco-plc k) i ike an,rcti lc rolc in "theaclvance

ntent of out pqlrplq krr\arrls a i lr l l t 'r hn-nan litc,"

In 199i1, BBC rtu orrlcrl i ts rrl issron. l , l l L | ] r u n l 1 , . r , . r L i , r - l ' , l l . , r r - t , ' h r t t t -, r h , ' u r r h l u [ ' l i l l i l i , , 1 l l ] ! ( l L r . r l t \ , ' r l i i c ' ii l r , f i l i f i r r , ' l l r r , ' t r ' : l r l l r , l , r ' ' r r t o r i l r t , i - ' 'ci.r l jrrsiice.rnd through in incrL..lsc of thL.nation's l ' t 'alth th.t ir equ it. l l ' l \ ,distrrhutcrl in hrlrl rcjcction of po\'r.rt\, in thiscoulrtr\r"

I ' �a r t o f th is cor l i i r lL l i r lg n r iss ion hastrr.tn tht consisttnt ,rttr. lnlt k),urs\\ 'cr thcrltrcstions, " l ir whorl (arrcl for whom)arcn e resl.onsiblt ' to, for i lh.tt, .tncl whr'?"r\r 'rsivcrirrg thtst't lucstlons has been theconsistent themt' oi all BBC sponsort'clfora an,.l thc olcrricl irrg corrcern of .rl l i tsprolccts.

ln 1976, the first fonrlal .rttr. lnpt to d&

AL (;L sr-SFprE\rBER 1996 . Tlr!;\srA\ Nl,\\.\ctR

fine (for BBC members) variousstakeholders in the develop-ment process took place. TheTechnical Committee designeda spec ia l con ference tha tshowed the impacts of govern-ment and business activities oncommunrtles.

Panel members thoughtthat negative impacts of largeprojects on communities wercnot l imited to governmentprojects such as the construc-tion of the Pantabangan andChico dams. Despite their bestintentions, private corporatronsin several instances mountedprojects which fostered ratherthan alleviate poverty. The de-pendence on the sugar centralsby the surrounding communi-ties was a pdme example.

The 1976 conference participants hada chance to discuss fiveexperiences whichhad poverty alleviation and people devel-opment components from the govern-ment and business sectors. They exam-ined the dynamics that led to less thansuccessful, often dreadful, results of theprojects. One case, a local government ini-tiative, was seen to have brought longerlasting positive results even as they lackedthedramatic impacts of the large projects.

The model that emerged from the dis-cussions, which was later used in the firstAsian Business Conferences for HumanDevelopment is shown in Diagram 1

The model maps out relationshipswith various stakeholders any govern-ment or business entity had to considerin putting together a project.

This model goes far beyond the origi-nal and more l imited Llefinit ion of busi-ness and corporate social responsibilityas only that of making money for stock-holders and other owners while provid-ing jobs to people and the expected prod-ucts or services to customers.

These new relationships, includingmany of those spelled out in the oldmodel, are as follows:

1. Between Corporation and Cus-tomer (the pdmary relationship). The re-lationship retains manv of its originalcomponents:value for money, delivery aspromised, prompt pavment of financialobligations. But it now includes a st ctercompliance toAdam Smith's original con-

...:t::''Q-i::::::

ployee welfare and growth. Anewunwritten contract has emergedthat corporations have the respon-sibility of assuring people of con-tinuing employability througheducation and training programsand of full human developmentby making available venues forphysical, mental, emotional, andspi tual growth.

There was an attempt to dif-ferentiate between regular em-ployees and managers and execu-tives because of the perception ofquantum differences in the treat-ment of the two groups. The ex-ecutive group wields inordinatepower over non-executives whileexercising heavy influence onowners.But to stress a more e8ali-tadan approach, all were put to-gether in the category of em-

ployee.5. Beh,v€en Corporationand The Gov-

emment.The relationship expects corpo-rations to pay appropriate taxes on trmewhile government continually providesthe atmosphere where businesses canprosper, including front-ending invest-ments in good physical infrastructure.

These relationships had been formu-lated under certain conditionsnow under-stood to have undergone changes. Themajor stakeholders discovered other rami-fications of their relationships to all theothers in the diagram that had not beentaken into account. Other relationshipsthat demanded attention had been omit-ted. Thus, a second set of relationships wasadded (See Diagram 2).

6. Betw€en Corporation and TheCornmunity. Over many decades betweenAdam Smith and the birth of the modemcorporation, people assumed that by tak-ing care of employees. the corporation in-directly took care of the community.

Wi th changes in the natute andmagnitudes of urbanization, the old as-sumption, erroneous from the start, beganto show some dramatic anomalies. Morepeople flocked to urban centers in searchfor opportunities which often were notavailable. Many people were in need ofresources but had no means of securingthem. Poverty, cdminality, and disgruntle-ment with the existing systems becamewidespread. Rebellion was in the air.

Many businesses protected the system

+ - o' , \ , V r t t' t \ , , / /

' r \ . t ta. t\ ,' ,, t. 'a

,' ,'. . \.., '.

-j- ,, t 't

i i

- Cdition of access to all pertinent informa-tion. To the old, more cynical admonitionof cat eaf emptor (buyer beware) has beenadded the equally strong admonition of"seller beware." Dramatic cases of de-fective products aggressively sold to themars marlet dnd with dire results, in-cluding death, made people demand forgrealer l idbil i t ies for the producer Cur-rent definitions, in many cases willinglyadopted by corporations, further includethe responsibility that their pdmary goalis customer satisfaction and recognize theprimacy of the customer inbusiness.

2. Between Corporation and Suppli-ers. The same relationship exists as be-tween corporation and customet withthe corporation now in the position ofcustomer Financiers and lenders are of-tenconsidered suppliersaswell althoughthey often take primacy over others intheir claim to corporate funds.

3. Between Corporation and Own-ers/Stockholders. The relationship rn-volves assuring stockholders of fair re-turns while e\pecting of them a mini-mum level of risk{aking in investingtheir money and a commitment to theperpetuity of the corporation. The divi-dends are enjoyed with the attendant riskof loss.

4. Between Corporation and Em-ployees. The relationship remains to bethe principal obligation of a fair day'swage for a fair day's wor[.. But to it hdsbeen added other dimensions of em-

THE AsrAN MANACER . AUGUSr-SEI'TEMBER 1996

and prospered with amore deliberate sharingof its bounty with thosewho could not. Corpora-tions like Johnson &Johnson 0&J) singled outcommunities where J&]operated and took activeresponsibility for them.

7. Between Corpora-tion and Ite Competi-tion. Old specificationsof colporate responsibil-ity did not include any-thin8 on competition, ex-cept to beat it out of ex-istence in a Darwiniandefinition of fitness.Firms resorted to ques-tionable tactics not onlyto lift themselves up butto put competition down.People found the resultsof this cutthroat practices repugnant andbegan to insist on honorable behavior.

In the late 1960s, a serious concern forglobal ecology was articulated in RachelCarson's Silent Spring and dramatized byThe Club of Rome's Limits to Growthstudy. This led to two additions to the dia-gram (See Dagram 3).

8. The Corporatiorj Ecology, and Sus-tainable Development.Growth requires the con-sumption of greateramounts of ultirnateV fi-nite resources. The ex-citement over the invali-dated Malthusian "natu-

ral checks" gave way tothe sobering acceptancethat the checks did existafter all. A ravaged en-vironment becornes thebreeding ground for allkinds of pollution-air,water, soil. Poor environ-ment contdbutes to low-er human body defensesas they help propagatedisease-causing mi-crobes and help bringabout "subdinical infec-tions." People get sickbut not sick enough tostay in bed. They goaboui their normal af-fairs with reduced pro-

4n

ductiviry At worst, the conditions bringabout epidemics. The ravaged ecologyalso cannot help us produce life supportmaterials-water, food, raw materials-as much as we need them. All thesethreats to our survival lead to a more criti-cal, but admittedly more hazy, responsi-biliry

9. The Corporation and The Future.

Most people have difficultyconceiving the future.Dealing with the present isdifficult enough. Having tothink about something thatis not too conffete and nottoo imminent and thercforenot too compelling is oftenseen as an added burden.Many cynics take consola-tion in the words of LordMaynard Keynes-"In thefuture, we are all dead."-so why bother?

Several people pointedout emerging inconven-iences and problematicconditions--such as haffic,flash floods, inflation,among many-as symP-toms of the future must beremedied now. Otherscited the marketing disci-

pline's practice of "putting a face" to ananon)'mous mass to focus attention andachon.

The most compelling irnage for the fu-ture for most people is that of their chil-dren and grandchildren. In all of us is thewish to turn over to our children andgrandchildren a world better than whatwe lived in. For many, ceating that world

becomes the focus for takingresponsibility for building abetter fuhrrc.

The iourney is far fromover. Debates continue andheat up. The target moves,ramifies, complicates. We of-ten get lost in the ever enlarg-ing forest. But there is greaterurge to use our faculties tothink out arrangements thatachieve better, more enlight-ened ways of living and actappropriately so as not towaste the world that has beenentrusted to our stewardship

_ for future generations. LJ

,t .rt Ptot'. Ma o Antonio G. Lopez is the

,' ,t Pilipixos Shell Corporation Prclessor ot'.

,t Public Adftinistration. His.urrcnt in-

., lercsts are m|ftagelial deoelopme t,deoeloprnenL fiarlagemefil, cross-cul-tural nanagement, and project dmel-opfief i l ond management. I ternel:< ma gI o p e z@ain. e d u. p h>,

I I

-l<-

-r l

AucusT-SEpTEMBER 1996 . THE AsrAN MANAGER

MmIcnm[NT UPDATI:Dsvnropmnnr

BY PROFESSOR EMMANUEL A. LEYCo

MobilizingPrivate Resourcesfor Public ProjectsLGUs meet the demand for socieconomic infrastructure.

Almost four years after implementingthe Code, much of the political rheto c rsgone. Public attention is now focused onhow some local governmentunits (LGUs)were able to cope with the demands oftheir constituent:, particularly [inancingsocial and economic infrastructure.

Overdependenceon Revenue Sharingwith the Natlonal Government

The new Code devolved services tolocal governments which required tre-mendous amount of financial resources.These 'en ices included health care, agri-cultural support, and infrastructure de-velopment. Local governments needed togenerate revenues to support these serv-ices. But a study made bythe Departmentof Finance in 1995 revealed that LGUsremain highly dependent on their share

of the national tax rcvenues. In fact, lo-cally generated funds represented onlyabout 207c of their total revenues in 1996.Close to 52% of theirrevenues came fromtheir share of national tax revenues.

Limited Besournc€s Lead toLlmlted Capltal ErTendltures

In fiscal year 1996, LCUs spent 40%of their budget on general public servicesand 43% on combined social and eco-nomic services. ln the same year, LGUsspent ;bout PhP36 B for personal serv-ices, PhP26 B for maintenance and otheroperating seruices, and only about PhPl8B for capital outlays. Although funds gen-erated both locally and nationally werenot enough to cover needed services,LGUs did little borowing.ln 1994, LGUsdevoted only 1.07% of their total expen-ditures for debt service.

Balaneing neonomlel)evelopmenl throughPolltical Deeentralization

When the Local Covernment Codewas implemented almost four years ago,some of its advocates pointed out that theuneven development of the Philippineswas a greater problem than the overallbackwardness of the national economy.The wide income disparity among thepopulation was considered a more sen-ous problem when viewed in the contextof the countrv's uneven economic devel-opment. Over 507' of the population arepoorand majoritv ofthem live in far-flungbarrios in the countryside. The new Codewas vierved as an opportunity to let thepeople take the future into their ownhands by decentralizing political author-ity and distributing the country's eco-nomic resources.

THE ASIAN MANAGER . AUGUST-SEPTEMBER 1996 47

To address the needs of the displacedmarket vendors and the community atlarge, local officials provided a temporaryspace for the market. One of the streetswas closed for this purpose. But not everydisplaced vendor was accommodated bythis temporary arangement. Some hadto rent from pdvate lot owners near theold market where theyconstructed make-

The llandaluyongBulld-Operate-TFansf erProreet

Mandaluyong is a newly-chartered city just outside thecountry's capital. Its impressiveinvestment growth rates of over1070 characterized its robusteconomic activities in the lastfew years.

But on August 25, 1990,Mandaluyong's public marketwas completely gutted downby fire. Although new privatemarkets and shopping centersemerged, the city govemmentfelt the need to reconstruct thepublic market. Before the fire,the public market served some300,000 residents ofthecity andits adiacent communities.

The Need Tb RebuildThe Publie Market

shi f t market s ta l ls whichcaused problems for the cityand the community.

The closure of the streetcaused traffic congestion inthe neighborhood. Lack of asystematic waste collectionsystem caused serious sanita-tion problems in the area. Fur-thermore, vendors who re-sorted to renting from pdvatelot owners had to pay muchhigher rent compared withwhat the city charged. Resi-dents ofthe community airednumerous complaints aboutthis temporary market. Thus,thecity government felt com-pelled to rebuild the market.But the city also realized thatthey did not have enough re-sources to finance the projectdespite increasing revenuesgenerated from collection oftaxes and fees.

42

1990 1992 1994

f-'1",**" f "'o lt,n'",'",'osoude Depanment or F na^ce

Mayor Abalosand His Finaneing Options

The city considered a number ofcredit financing options. Under the Lo-cal Government Code of 1991, LGUswere allowed to transact loans on therrbehalf to finance their projects. Thesecredit financing instruments included di-rect loans from banks. debt notes, com-

1988 1989 1990 1991 1992 1S93 1994 1995 1995

mercial paper, and municipalbonds. Another option that thecity considered was the build-operate-transfer mechanism.

In 1990, the Philippine leg-islature passed the Build-Oper-ate-Transfer (BOT)/Bui ld-Transfer(BT) Law intended "to

mobilize the pdvate sector inthe financing, construction,operation, and maintenance ofpublic inf rastructure projects."This law provided the policyframework and implementa-tion guidelines for BOT/BTprojects.

Mayor Benjamin Abalosplayed a key role in addressingthe problems of financing theproject. When asked why hefavored the BOT financing ofthe publ ic market , MayorAbalos said, "There was no

choice. Bond flotation was not possible be-cause of the urgency of the project. Youneed an agency to structure it for you andsell bonds to investors."

According to Mayor Abalos, munici-pal "bonds will never sell in the Philip-pines unless you pay high interest rates."He estimated that, given the current mar-ket conditions, they have to pay at least24% a year He surmised that, being a gov-

25000

20000

15000

10000

5000

0

f lo"n",alpuotic serl""" I e*nori" s.ri"."

! "o",", ,"rv,"." ffi "*,," o"o, """,""

emment entity, they would haveto payabout 18cl. interest. The ap-proximate cost of the public mar-ket was around PhP50 M. At 1870,he estimated that they wouldhave to raise PhP 9 M a year Hisestimate of the annual collectionfrom the market was only PhP 2M. Based on the current 50-centavo rental rateper square me-tet he doubted that they can evermake that kind of annual debtpayments. He even doubtedwhether or not the estimated PhP2 M revenues could cover oper-atFg expenses.

Mayor Abalos, a lawyer byprofession and a former judge,learned ofthe BOTconcepts fromnewspaper coverage of the lawHe studied it and became con-vinced that BOT was the answerto his problems. He thought thatthebiggest asset of the city for thisproject was land ownership. He

Source: Oeparfnenl of Financ€

AUGUST.SEPTEMBER 1996 . THE ASIAN MANACER

PNO EONO PUBLICO.The pub l ic marke t con t inues toserve some 300,000 residents ofthe city and its adjacent commu-n r t |es .

also thought ihat the long standing col-laborative relationship of the city govern-ment n'ith ihe pdvate sector could pro-vide the clincher to initiate private sectorinvolvemenl in financing this project.

REASON TO SMILE.Formerlv disolaced market vendors have Ioundnew hope in new business opportunities.

THREE.IN-ONE.To attract more private investors and custom-ers, a multi- level shopping complex and a recreation center became added features to theor ig ina l pub l i c marke t .

fl!

1988 1989 1990

- opear.g slrp us

Sotrrce Oepadm€nr or F na^ce

1991 1992 1993

' . - . . ' - To la lS l rp lus

Although convinced that the privatesector would definitely benefit ftom fi-nancing the construction of the publicmarket, Mayor Abalos was not sure howto sell this idea to his intended partnerc.

He decided that hewi l l have a muchbetter chance withthose who were con-sidering long terminves tment . Hesought those inves-tors who could seethe oppor tun i t ieswith the changingbusiness climate inManda luyong. Heconc luded tha tmerelv re-buildingthe public marketwou ld no t a t t rac tp vate investors. Hedecided that a multi-level shopping com-plex was required to

stimulate interest in the project. Con-vinced that hc had the right package toattract investors, he set out to invite bid-ders for the BOT project.

Macro Funders and DevelopmentCorporation won the bidding for theproject. The organization was formed toundertake the project. Incorporators ofthe organization came from a distin-g u i s h e d c o m m u n i t v o f i n v e s t o r r i nMandaluyong. The company then had anauthorized capital stockofPhP 170 M andaround PhP100 M paid up capital stock.

Macro Funder. thou8ht that compe-tition for market share ra'as stiffand there-fore thev needed to establish their owncompetitive advantage. They decided thatthe project should provide an accessibleone-stop shopping and entertainmentcenter for all consumers.

The Proreeaand The Tlnaneing Plan Used

The project consisted of a seven-sto-rey building on a 7,000 square meter lot

: l ; ' n' . a '

\ T

A PHOENIX REBORN. The l\.4andaluyong public market andcommercial center rises anew from ashes and soars to greater heights.

THE ASIA\ MA\AGER . AUCUST-SEPTEMBER 1996

owned by the city ofMandaluyong where theburned down public marketwas strategically located, atthe back of commercial estab-lishments. According to theplan, the first and secondfloors will contain commer-cial shops and departmentstores. There will also be atwo-level parking area to ac-commodate customers on thethird and fourth floors. Bowl-ing lanes were planned forthe fifth floor while the sixthfloor was reserved formoviehouses.

Under the proposed fi-nancing scheme, the ciiy gov-emment provided the Iandwhile the winning bidderprovided the funds to financethe conshuction of the shopping complex.The financing scheme involved two ma-jor features of the BOT law: The first fea-ture involved the use of the BT arrange-ment. Upon completion of the groundfloor which housed the public market,Macro Funders was supposed to transferownership and operations to the citygov-

a Total Expenditure

Source: Departmenl of Finance

1992 1993 1994

--+--- Debt Service Oullay

winning bidders the right todevelop and use $'ithoutcharge the space above themarke t s t ruc tu re . MacroFunders was given the rightto operate tl.re place for 40years. Under this arrange-ment, the city govemmentdid not have anv right toshare in the revenues gener-ated bv the businesses in thccompler, except for the al-lowable local taxes and feesto operate the business.

The CitationIn 1994, Mandaluyong's

financing scheme of the pub-lic market project won aprestigious citation from theGcirrad Ccling Pook adminis-tered by the Asian lnstitute

of Management and funded by the FordFoundat ion. Cal ing Pook c i ted theproject's positive impact on the economyand the environment.

Prof. Emnnntrcl A. L.vco spr..talizes in prbli(ltoliclt tnalysis, public litnnc, heallh cn fit1ot1ae, d d inlerni l ion0! dci 'claptlrcnt iss ts.l]1 | ertp | : <enl t vco@n i tn.t:d .ph>.

1988 199r

emment. In May 1993, the box-type struc-ture was turned over to the ciry The gov-ernmenl then undertook the construction.The govemment and the stall ownersequally divided the cost of the construc-tion of 520 concrete stalls.

The second feature of the financingscheme involved the BOT which gave

A Development Philosophy

PeoPle are the focus and center ofdevelopment. The Asian Institute of Management believes that it is man's needs andaspirations that should generate economic and social activities. And the common good dictates that we must pu$ue suchactivities within the context of preserving the finite resources ofthe earth. AIM believes that development must go beyondthe mere production of goods and services. The promotion of business, as well as technological, agricultural, and indus-trial growth are merely some of the means towards development.

Development considers the totality of the human potential and harnesses this for the good of the people. It examinessocial values and stmctures. It assesses political situations as well as ideologies. It evaluates economic policies and pro-gtams, lt pursues health, education, nutrition, and goals. It respects people's culture and religion as well as nature and theenvtronment.

True development is holistic. It discards the myopic lenses of a single discipline, uses tools from vadous disciplines tohelp create for themselves sustainable communities of healtht productive, happy families and individuals.

Development looks at Mother Earth as the nurturer, the life source of the global village. Slnce the earth's resources arefinite, development sees to it that these are well managed and used for the benefit, not just of a few, but of all humanity.

The Institute realizes that Asia shelters the greatest number of the earth's poor It has therefore placed the alleviation ofpoverty at the center of its development philosophy. AIM recognizes that if it is to succeed in improving the lives of thepeople of Asia, it must elicit from the poor their fult participation in the task of development.

AIM is dedicated to the education of professional development managers who are skilled and knowledgeable in theirfields, and endowed with a deep sense of social lesponsibility.

Prof. Eduardo A. Morato Jr

(ln [,'lillion Pesos)

4 Aucusr-SEpTEMBER 1996 . THE AsrAN MANAGER

Poucr Fonum"

BY PROFESSOR FRANCISCo L. ROMAN, JR.AND MATI L. MARTIN

n earlier article discussed the com-petitiveness process and the grow-ing concern over productivitywhich affectboth developing and

developed counhies. This article revisitsthe issues of competitiveness and produc-tivity.

The concept of "competitiveness" or"competitive advantage" in its latest andmost popular form was developed byMichael Porter, management guru andauthor of three best sellers published be-tween 1980 and 1990. In that decade, bothbusiness leaders and public sector policymakers advocated competitive advantageas fhe way lor theindustry and the coun-try to advance in the global marketplace.

PaIt of this article focuses on argu-ments presented by a respected economistfrom MIT and now at Stanford Univer-sity, Paul Krugman, who noted a "dan-

gerous obsession" among decision mak-eIS.

CompetitivenessRevisited:

Back to ProductiYityIirugman concludes that productivity is the key underlying concept

behind continuing economic gro${h of nations.

Competition and Compe'litivenessKrugman looks into The Competitfue

Afuantage of Nations (Porter, 1 990). He firstnoted that competitiveness has its sup-porters, even among economic policymakers, "The image ofcountries compet-ing with one another il world markets rnthe same way that corporations do de-rives much of its attractiveness ftom itsseeming comprehensibility,' l.e., that USand Japan are competitors in the samesense that Coca-Cola competes withPepsi."'�

According to Krugman, that "com-

mon sense" argument is flawed. Considerthe conflict between international tradeand domestic job creation. These two eco-nomic variables appear to have a simplerelationship: (1) Free trade is desirablebecause it provides more jobs around theworld. (2) The more individual natronsexport, the richer they become and themore people will be employed. |apan, in

essence, holds to this mercantilist view ofexport. (3) Another ramification whichsupports a "protectional" view is that themore imports, the fewer jobs will be avail-able.

Howevet the real world is not thatsimple. The thoughtfu I economist realizesthat real wages, which affect the level ofemployment, depend largely on the over-all productivity ofthe economy. Changesin wages or profits that are not reflectedin import or export pdces cannot changeoverall national income, as it can only re-distdbute profits to one group within aneconomy at the expense of another.Moreover, Krugman makes a simple com-parison: For a corporation to exist andgrow, it must make profits and outdo itscompetitors. However, countries, regard-less of their economic performance, donot go out of business.

Krugman further suggests that theconcept of trade balance as a nation's

THE ASIAN MANAGER . AUGUST-SEPTEMBER 1996 45

"bottom line" is flawed. Tiadebalance, asa competitiveness measure, means that acountry has to sell more than it buysabroad. However, Mexico showed thattrade surplus may even be a sign of na-tional weakness. This was apparent whenMexico was forced to run huge trade sur-pluses in the 1980s to pay interest on itsforeign debt as international investors re-fused to lend it any more money.3 Thissituation did not indicate that Mexico wasa competitive nation, given its debt cnsrssrtuatron.

Looking at Europe, Krugman notesthat competitiveness advocates are alsoincorrect in saying that European unem-ployment was due to lack of competitive-ness in the US and Japan; that the solu-tion was a program of investment, say ininfrastructure and in high technology re-search and development. Other causes aremore relevant: Taxes and regulations im-posed by elaborate welfare states in Eu-rope made employers reluctant to createnew jobs while a relatively generous levelof unemployment benefits discouragedworkers from accepting low-wage jobs, ameasure that likewise helped keep unem-ployment comparatively high (in theUS).

Likewise, Krugman asserts that inter-national competitiveness was neither thecentral issue nor the only cause for thesuccess ofAsian economies. Although theAsian tigers, like Singapore, South Korea,and Taiwan, rapidly transformed them-selves from peasant societies into indus-trial powerhouses and continuouslyachieved growth rates several timeshigher than the advanced nations, theydid not share the same faith in free mar-kets as their Western counterparts. PaulKrugman, in his articleThe Myth of Asia'sMiracle. emphasized that these economiesdid not adhere to Porter's free marketcompetitiveness but instead insisted ontaking charge, sometimes limiting strate-gic choices in the interest of economicgrowth.

Krugman concludes that productivityis the key underlying concept that ac-counts for the cont inu ing economicgrowth of nations (Porter also creditsproductivity and innovation as key ele-ments in competitiveness.) A country'slivingstandards should be determined al-most entirely by domestic growth andrate of its productivity growth. Even theUS, an open economy, exports only 10%

46

of its GNP; almost 90% of its economyproduces goods and services for its ownuse. Krugman uses statistics from 1973to i990 which he classifies as a periodof long-run stagnating living standardsfor the US. The data demonstrated a 91%decline in economic activity attdbuted tothe fall in domestic productivity growth.r

Krugman noted that the growth rateof living standards does not depend onsuccess relative to any foreign competi-tor

Krugmanconcludes thatproductivityis the keyunderlyingconcept thataccounts forthe continuingeconomicgrowthof nations.

ProdtrellvltyOther economists use the concept of

productivity to account for apparent ecGnomic growth in excess of the increasesin labor and capital inputs.s Lagging Pro-ductioity Growth, (1990) concluded that"capital accumulation and improvementin total factor efficiency were the twoimportant sources of aggregate economicgrowth."6This may be interpreted as ad-dition of capital resources and efficientusage of these capital factors of produc-tion, from factories to computers.

Another recent shrdy (1990) madebyMIT economist Alwyn Young suggestedthat Singapore's economic growth waslargely the result of "brute-force capitalaccumulation."T

An observation also shared byKrugman in his article Clmpetitioeness: A

Dangerous Obsession stated that a countrylike Singapore grew not because of anyinherent hi-tech expertise but because ofheavy doses of capital spending and anexpanding and educated workforce.sYoung added that both capital and (hu-man capital adjusted) labor inputs grewconsiderably faster in Singaporeduring itsperiod of rapid growth. He pointed outthat, "Capital accumulation explains 101%ofthe increase in output per worker in theSingaporean economy between 1970 and1990." Productivity in Singapore de-pended on a rising capital-tolabor ratio:Each worker had more and more expen-sive equipment and assets to use: fromelectric hammers for construction work-els to computer-assisted machines for fac-tory workerc.

Likewise, citing an entirely differenteconomy, the immense growth in the 1950softheold Soviet Union was largely causedby efforts of Stalinist planners to movemillions of workers ftom farms to cities,pushing the labor force to work longerhours, pursuing rnassive programs of edu-cation, and plowing an ever-growing pro-portion of the country's industrial outputback into the construction of new facto-ries despite a virtually non-existent rateof efficiency growth.s On the other hand,Hong Kong achieved its "miracle" on thestrength of increased efficiency, mainly inits expandin8 service industries.

Technology adaptation seems anotherpath to pushing productivity. Based on theFar Eastem Economic Reaiew article byBruce Gilley, Howard Davies, a businessprofessor at Hong Kong Polytechnic University, suggested that the Hong Konggovemment shou)d focuson helping firmsadopt existing technologies to make theiroperations inChina become more efficientand not on trying to invent new ones."Support for development which is 'new

to the world' isunnecessary and unlikelyto be successful," he said.

Pr.oducllvlly: The JapaneseExperlence

When theJapanese talk about produc-tiviry they do not refer to a single meas-ure which, in the Westem economies, isusually the inverse of a unit cost, e.9., 100output units per $1 labor cost. The Japa-nese concept of productivity recognizesthe output/input relationship but focuseson the elements within output and input.

AUGUST.SETTEMBER I996 O 196 AsIAN MANAGER

The great strength of such productivitythinking is probably its standardizationfor economic purposes,' both at the macroand micro levels. For instance, theJapanProductivity Center has produced, annu-ally, for the last two decades, a widelyused P ractical Handbook of Productiaity andLabour Stetistics. This publication (alsoavailable in English) is an essential refer-ence material for economists, academi-cians, and corporate executives interestedin business perlormance becau"e it givestrends and levels of labor productivity,wag,es and prices, and internal compari-sons. Its value lies in the simplified andeasy-to-understand format so that man-agers mav readilv see the meanings of fig-ures and indices, as a basis for labor ne-gotiations.

There is a myth that high Japaneseproductivity results from unique culturalfactors which are, therefore, nontransfer-able. This claim is perhaps exaggerated.Many Japanese product iv i ty pract iceswere derived out ofnecessity rather thanbeing pa of their culhrre.

Historically, the Japanese, had onefundamental goal since 1945:full employ-ment through industdalization. Accord-ing toAlan Stainet Japanese success maybe attributed to: (1) output factors, suchas investment for high technology, mod-ern factories and facilities, and investmentfor new product development; and (2)input factors, such as skilled labor andphysical resources.

Long before total quality management(TQM) became buzzwords, Japanese pnn-ciples guiding labor as input focused onmotivation and stability; in tum, physicalresources attain optimal use through wastereductiory and utilization of modem, clean,and environmentally acceptable technol-ogy.")Grayson and ODell list five produc-tivity strengths of theJapanese ind usiry in-cluding an emphasis on leaming and rapidadjustment to changing conditions. Cul-tural aspects include natural "drive" anda less adversarial society than the West.Japan, invests morc in both productivity

PastYear CurrentYearVolume 100,000 120,000VALUE 100,000,000 140,000,000

and qualiry

Product ProduetlviiyProductivity may be used to measure

the value-added performance of a prod-uct. Industrial survival in a hyper-com-petitive global marketplace increasinglydepends on the degree to which increas-ing value may be added to a product,given its resource inputs. Counhies mustensure that itse\port products havehighcustomer value. Product productivitymay be classified as follows: On one endis the so called high-value-product (HVP).One indication that customers attach highvalue to the product is continued patron-age despite price inflation. The product'srate of deceleration is slower than that ofthe low-value product (LVP). LVPs are thebulk processed commodities, such asgrains, because there is no distinct featurein LVPs to differentiate one ftom the other

Consider the following illustration(see Table 1). Assuming a 10% inflationrate, the net valuechange in price is 30%.The increase in value (407o) is greaterthanthe increase in volume (207o) and the pnceincrease exceeds the inflation rate; thischaracterizes the HVP On the oiher hand,the market share of LVI commodities,like rice and corn, grows through in-creases in volume not in value, as infla-tion-adjusted "real" prices actually fallover time.

Factor Productlvlty: l,aborFactors of production refer to the level

of input resources utilized in productionsuch as: (1) labor, output derived from oneunit of labor or output produced from oneunit of labor-hour; (2) capital, output de-rived from one unit of capital expendi-iure-R&D, among others. All these fac-

%Chanoe %lnflation NET20yo40% (10y"1 30%

toIS must be measwed over time. Corsider,for lack of space, only labor as the factor.

Labor productivity is defined as theoutput per unit of labor input. The usualunit is in number of working hours.Sometimes other units are used, such asthe number of employed people or con-stant wage cost of labor. On the otherhand, output is measured according toconventional GDP yardsticks.

Using thePhilippine economy data asan example (see Table 2), labor produc-tivity rose by an average annual rate of1.3% between 1993 and 1994. If wagesand productivity in a country rise at th€same rate, then labor cost of producing agiven amount of output remains constant.Note that productivity may rise at differ-ent levels fordifferent firms or industneswithin an economy.

Industrial economies have expert-enced a slowdown in productivity growthsince the early I970s but Europe's gainsremained larger than those of the USrrhence the US perception of "losing

ground." Europe's real wages, includingthose of lower-income groups, continuedto climb while US real wages slowed andachrally fell sharply at the lower end ofthe scale. On the other hand, unemploy-ment skyrocketed in Europe in the pastdecade while it remained relatively lowin the US. Europe exhibited stagnant jobgrowth compared with substantial USemployment gains. Europeans were farIess concerned with productivity thanwith reducing unemployment, evidencedperhaps by the reluctance to adaPt to thegreater flexibility of US labor markets, Incontrast, the Americans focused on theneed to boost productivity to foster realwage growth and reverse the trend to-ward income inequality.

A study made by Northwestern Uni-versity professor, Robert Gordon, re-vealed that Europe's productivity waspartly a by-product of its rising unem-ployment while a source ofAmerica's lag-ging productivity may actually have beenthe sluggish wage growth it purportedlycaused. He cited that, in recent decades

Real GDP {1985 prices, M pesos)Employed Population (thousands)GDP per worker (labor produclivity)

734,'t5624,44330.03

1994 %Chengo765,691 4.3%25, |66 2.9y"30.42 1.3yo

THE ASIAN MANAGER . AUGUST-SET.TEMBER 1996 47

in Europe, union militancy and rninimumwage hikes periodically boosted laborcosts which initially raised both unem-ployment and productiviry as reducedhiring meant existing plant and equip-ment were spread over fewer workers. lnAmerica, the waning unionization and aplugging real minimum wage depressedwages and the falling cost of labor rela-tive to capital encouraged hiring and less-ened the appeal of labor-saving invest-ment, placing downward pressure onproductivity growth.

Hence, output per capita may rise onlyif (1) labor force participation increases, (2)the number of hours per worker increases,or (3) labor productivity inoeases. Neitherof the first two ways of inoeasing GDP percapita may be sustained at significant ratesover long periods.

Ibtal tractors ProduetlvltyAfter decomposing GDP growth into

a portion attributable to growth in thelabor force and to capital accumulation,the "residual" portion, not due to the in-creases in these factors of production, iscalled the increase in total factor produc-rivity (TFP). The increase in TFl, is ameasure of the increase in efficienry inwhich both labor and capital are used. Toget a measure of a nation's TFP it is nec-essary to estimate the ratio of labor tocapital in its economic processes. TFP isjust output divided by the amount of "to-

tal factor" used to produce it. This "total

factor" is. measured as a weighted aver-age of the capital and the labor used. Orsinply, TFP is derived by deducting allfactor costs. This residual represents TFPwhich might be applied at the companyand industry level, as suggested in thishypoihetical example (see Table 3). Thepositive variance indicates productivitycontribution. While a crude measure/ acompany or industry can collect data overtime' to create and assess productivitytrends and patterns.

OoneluslonThis article revisits the relevance of

productivity as an €conomic measure forgrowth. Productivity as a concept andtool preceeded competitiveness, andseems to be enjoying a revival. This artr-cle is unlikely to be the last word of theongoing debate.

48

Past YearSales Value 100,000,000Labor Costs 80,000Net Olher Costs 100,000

Hes idua l , r= 20Y"- l1OYo+5o/o l =

REFERENCES:' Paul Krugman. "Competitivenessr A

Dangerous Obsession ." Foreign Affairs.Yol.73No.2 March/April 1994, p.39.

'� tbid ., p. 29 .3 tbid., p.31.' Ibid.,p.33.s Elliot S. Grossman, "How To Measure

Productivity," Handbo1k t'1t Ptoductioitll Meas-urcmetlt nnd ltnpru)ement ,1993, pp. 6-13.

"Charles R. Hulten and Meilo Nishrmizu,"The Importance of Productivity Change inThe Economic Growth ofNine IndustrializedCountries," Il�ggittg Prcductioit! Grouth, "1980,

pp.97-98.TAlwyn Young, "ATale of Two Cities: Fac-

tor Accumulahon and Technical Change jn

CurrentYear I%I120,000,000 20"/.

88,000 100/0105,000 50/o

50/o

Hong Kong and Singapore," NBERMacroeconomics Annual1992, April 1992, pp. 13-54.

3 Bruce Gilley, "New Model," Far EaslerrEcofiofiic Reaiew, December 21, 1995, p.5'1.

'Alan Stainer "Prcductivity Management:The Japanese Experierrce," M0 agemetlt Deci-sion, Vol.33.

ta tbid., p.9.I'Gene Koretz, "A Productivitv Paradox,"

Business lNeek, July 10, 1995, p. 10.

Prcf. F rakcisco L. Rofiat1, lr. ts the Executk'e Di/.ctot oflhe AIM Policy Folum. Intonet:<fnnkidAaim.edu.ph> .

Matl L. Martin is a Researcfur nl lhe Asia lhstitule olManagemenl railh srycial ihlercst in inforfiatiafi technology and a Facull! at IIE College of Business Admin'islnitioh ofthe U il.prsilltalthe Philipri es.

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United KingdomFax: +44 (0) 17 | 267 l94l

FREE INFONA,TTION AVAILABLE ONLYIQ MBAGUIDE SUBSCRIAERS A}nA/1

Aucusr-SEpTEMBER 1996 . THE AsrAN MANAGEIT

{ f, ne of mv closest friends

lf; [ a. a buiiness under-" f graduate rn California

rvas a Colombian namedGuillermo. Cuil lermo cameio America to study andlearn English. When I f irstmet him, he barelv spokeanv English so we conversedsucccssfullv in his nativetongue, Spanish. In time, henot or.rlv picked up thelanguage but also the manl'euphemisms popular inCalifornia. From then on, hepreferrecl to acldress me inEngtish.

I realized rve rverestarhng to have a commu-nication problem u,henhp r i o : r ino c , ,no l :c<e<

and u'ith a beach towel inhancl, dropped bv onesunny afternoorr andinformed me that he n'asgoing to "catch Ray." Irvondered who Rav rvasand rvhat on carth'hc hadclone to make Cr.rillermolv,rnt to catch him. I laterrealized he was using thepopular Califomia termfor sunbathing, "catch

some ravs."Irostgracluate rvork in

Nerv \brk rvith mv friendL ealle [rom france leo tomanv passionate cliscus-sions on media andcommunications. Oned,rv, rve l'ere debating then-Icrits of multimediaconglomeraies, l ike thcDisnev Compan\i rvhenCecile blurted out, "The

Donald is a capitalist pig."Bervildered, I rvonderedhorv Donald Trump hadcrept into our conversa-tion, but amicablvprcparecl to pursue hertrain of thought. I foundout Iaier on ihat ourc.iebate on the moral r,alueof Disnev empirercpresenied bv DonaldDuck, in Cecile's transla-hon-was an area npe\\' i th cultural and languagetime bombs.

I nas not lr, ithout blameeither. N{\. accent oftencausecl confusion. Once,when I jokinglv called anItalian classnate a malechauvinist, he looked

MemcnnmutCommunrcnmon' Bv PnorEsson

Manre Mrncnos T. Gencre

Richard D. Le\,!is, in his book l{lrrrr Crrltuns Collide: Manngitrg Success-irl1ld.,?ss Cr/lirrr.s, aitempts to assist the globalmanager on thecomplexi-t ies of inter-culturai exchange bv defining various business culturesthroughout the world. ln his book, he recommends some points globalmanagerscan look upon iheiroi{n before venturin8 out in the global play-ing field.

History and Climate. Lewis suggests that behavior of the members ofanv cultural group is dependent almost entirelv on the history of the peo-ple in that societ)r. "While most people forget to learn lessons from thepastand mistakes are often repeated-in the long run, people adhere collec-tivelv to the set of norms, reaction, and activities which their experienceand development have shown tobe most beneficial to them. This includesthings like: migrations, invasions, conquesis, religious disputes, crusades,tempest, droughts, subzero temperatures, disease, pestilence. They mayalso have experienced bruialit\,, oppression, or near-genocide. " But the factthat they have survived means they have been successful.

Language. Lewis also suggests that the mental process of a.ulturalgroup is ofien dictated bv the nature and characteristias of the language ofthat group. "The restrictions and liberties of a language will have a pro-found influence on the person's cuitural vision, personal charisma, emo-tion, poetic feelin€i, discipline, and hierarchy."

Cultural Classification. Lewis also tries to make situational, culturalforecasting a liitle easier bv classifving the worla's cultures into three roughcaiegoriesi

li,rcdl n.lii'rs. Those r{ho plan, schedule, organize, pursue action chains,do one thing at a time. Cermans and Sn'iss are in this group.

Mr/iinclri,r,s. Those livelt loquacious people who do many things atonce, planning iheirpriorities noiaccording to a time schedule butaccord-ing to ihe relative thrill or impofiance that each appointment brings withit. Italians, Latin Amerjcans, and Arabs are members of this 8roup.

Rm.ti.rs. Those cultures that priorifize cou esy and respect, listeningquietlv and calmlv, and reaciing carefully to the other side's proposals.Chinese, Iapanese, aid Finns are in this group.

lvhile it mav be difficult io place nn individual into any one group,Ler^isattemptstoprovidearoadmapforrvhatcouldpotential lybeamine-field of emotion and misunderstanding. And while these categories mayrun the danger of drawing cultural caricatures, they may serve as sta ingpoints in analvzing the environment managers may suddenly find them-selves tn.

disturbed. Later on after made translation easietclass, he came up to me and cultural timing in conversa-asked me rvhy I had called tion was crucial. ln Newhim a male "shopping list." Yorkitwasokay to jumpin

Eventually entering a and cut someone off. Inglobal work environment,l Canada, an "Excuse me" orfound that, while the "l'm sorry" before I jumpedcommon business jargon in was necessary. In Hong

my mother is a typenriter.*Mv father is a docton

Kong, I could jump in anytime. But I had to be pre-pared to have two otherpeople speak at the sametime or interrupting, evenbefore I had the chance tofinish my thoughts.

These personal experi-ences have been humorousbut an innocent misunder-standing in the globalbusiness arena may result indisaster and send shockwaves through the corpora-tion. While my cross-culturaltraining was largely spent onmy feet in the corporatebattlefield, I would have

appreciated comprehen-sive cross-culturaltraining before gettingsent out into the fray.Though many companiesrecognize the merits ofcross-cultural training foroverseas and expatriatemanagers, the learninghas been left largely toindividuals.

When all else fails, themost useful tools in th€global business setting areempathy and humorThese allow you to crosscultural barriers lessgingerly and apply a littlemore patience andunderstanding in thecommumcatlon Process.In this way, offense is nottaken when a Germancolleague asks you whenyour "death line" (dead-iirre) is. This means askingfor a clarification whenyour Japanese client tellsyou to take "a fast watch"(4rick loo/r) at the market.This also means thatwhen your Finnish bosssuggests you are looking alittle il l and you shouldtake two "trucks"(drugs=prlls), you canalways smile and say"thank you for yourkidneys" (kirdness).

. (tvpist)

Ptofr.;or Dee De? Cnrcin is lhcEtec tir)e DircctL)r of tfu Managc-,nenf Altnrds of Asia. She is nlso nfacullv nrcnlbct for mannget enLcot tnunicnlions in lhe Mastel it1BLtsitress Manngefienl P ro|ra'nlntcrnet : <tfign rcia@a im.edu.ph>.

TrrE AsrA\ MA\A(;ER . Aucusr-SEpTEMBEII 1996 49

Need, ettthusiasnr, nnd crcntit-itrl are proytellnnts ftn'fhe deal.Ego , selfishttess , nttd grcedkillers of tht flnnr.

ring a lawver to thedeal and he n'ill sinp;lehandedlv kil l i t.

Sooner or later, problems aredug up from the grave...have become worse andseemingly without solutions.How do you guaranteesomeone for something thatis not definecl. hr the name ofconservatism, manv clcalshave been killed. Most of thetime, simple oversight willbe classified as someonetrving to pull the wool overthe other. It onlv takes aphone call and ask them whvthey have inciuded certainclauses. Most of the time,they have picked up theseclauses fron some standardforms without much thoughtgiven to its impact or it is thejob of an over eager lawverwho is trying to justify hisfat bill.

Horv do you keep the dealalive and get her to comple-tion? Before any deal, makesure vou have the rightmotives. Mosl deals getkilled when egos get entan-gled. It starts simplv withone party asking for theimpossible and rationalizingthat it is a reasonablerequest. When the otherpartv refuses it because it isimpossible, both becomeintransigent, unwilling tomeet halfway. What shouldbe a position negotiationends up with mangled egosand dead deals.

The next one is selfishnessor greed. I am not sure rvhichis the root cause. Thev bothrear their uglv heads at thesame time. When vou try tocut a pie with the largerportion to younelf thinkingthat you have more power(monev or position), it leaves

50

Deal Killers

again? This is rvhere vou canhavc opinions on both sidesdepending rvht'ther vou area cvnic or a believer inhuman values of fainress.

Let mc tell you rvhat I do.I used kr push the deals k) itsbitter end and squeeze thelast nickel and nore rvhen In'orked for others. I thoughtI u'as paid b do so. I was thehired gun. I did this forseven vears: I knerv how tobreak anv deal from 1974 ti l l1981 and did not think aboutsqueezing more deals for thenr' t ime. Whc.n I left mv joband dccidecl to start acompanv the chemicalindustry that dealt r'r'ith meheaved a sigh of relitf. I hadleft an unpalatable taste formanv of them. I changed mvviewpoint and started a newleaf. I started looking fordeals in the nriddleground. Itry to do a deal that does notmake one, not even mvopponent, look like a fool.We tliscuss the risks and lrorvoil price changes could nakeus look cither as a genius oran idiot. We do a iair dealtodav and let the market takelts course.

In the oil industry wheredcals are done at a hecticpace, more and more ptoplefollow this strategv. We har.eto liye rvith one another.How often have I sccn that'h'hat the major oil companvrvas trving to sell me wasbetrveen thc ds'il and thecleep blue sea. I lstead oftakins the flesh closest to th€'heart I d0 a deal as if i t is anormal evervdav deal. Theothcr partv rloes not have torecognize it immediatelv butas he finds out I had thc gunbut did not drarv biood, theycould sav "There is honestv.rmong thitvtsl"

M,: R,t'r}t l,l Clrdr/,ir",r is lrrI \rsil! t t t.f Cl tL\ t )il anryt)mt h,n.t/ S.A.r,h11,itr<RL/C(rlCl lt'D tiil I nt t t>.

such a bad taste in themouth. Even if the otherpartv agrees, he looks forways and means to take therest of lhe pie back later Thishappens when a professionalmanager negotiates with anentrepreneur. The profes-sional managersqueezesmore out of a deal feelingthat he has to do this to flexhis "muscles." Anv cleverentrepreneur can see throughthis and may be forced totake in more from profes-sional managers who puttheir creative thoughtprocesses to work. Once thishappens the seed of discon-tent and mistrust is planted.The entrepreneur feelsjustified to avenge theinsults.

I have learned this lessonthe hard wav I refused toplav when someone tried todo this to me. I decided Ididn't have to spend all rnvtime being creative and evenout thc dcal later. I want tolo()k in the mirror in themorning and be proud that Ihave plaved an honest gamewlth mv pafiners.

The rrext kil ler is vourover jealous need to bag thedeal. The end justif ies themeans. Problerns are ration-alized; what thev do not

understand, they c1o nothave to know. This is astrategy manv entrepreneurstake because they don't dealu'ith the guys rvho make thedecision and are afraid howthev will be perceir.ed. Thesethings have a lvay of surfac-ing in the most inopportunemoment. The other party allof a sudclen rvonders: howmany more are hidden?Once lhe trust is gone, thereis not much vou can do toredeem vourself. A commoncase is vour negotiation rvithbanks. As entrepreneurs donot meet thc crcdit commit-tee, thet sometimes tend tooverlook issues. With dealstaking months to }rappen,problems take time tosurface. Once the problemsare out, thev are stuck n'ithno options but to find a newbank ancl start all over again.Overstatement of profits orunderstatement of costs 0rvital issues in a long-termcontract are all areas wherevou see t|Is.

Horv l.rard should vouneg0tiate is a question vouask voursclf t inc and again.Does anyone ever noticelvhen vou leaye monev onthe table? Do people lorgetall the issues after a deal isdone and vou start all over

Enrnnpnnununts0onnnn

ROBERT V CHANDRANMBM,74

ALLL5T-SE I ILMBLR I99b . T ] , I A : I \ \ \ , I \ \ \ L I ' I (

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