! 1

""oo*' T'F{EASIANL c 9

VOL. V I I I \O. 5

I

I

OCTOBER/ \OVE\{BER 1995

Sueeess and SueeessionBv Frankw. Tsao

eg.g-

/\

,fr&

-i#+*ir4r#il

rE&frE

r Asian and Western Management. APEC Training and Development Needs. CEO Hubris

. Labor and Competitivenessr Scpna r in Rr r i ld ins

. Waste and Quality

VOL. VIII, NO. 4 Internet Address: tam@aim.edu.phA

THEASIANMANAGER

OCTOBER/NOVEMBER 1995

COVDN STOBY

Success and Succession 9by Frank TsaoWhether you're a taipan passing the reins to your children,or iust a struggling entrepreneur, Mr. Frank Tsao spurs youon with words of wisdorn towards success.

IUANAGEIUEI\TT IJPIIATDS

18Kaizenby Professor Rene T . Domingo , AtMThere's money to be found in waste.

Marketingby Professor Francisco L. Roman, AtMA humorous, but timely, parable of a marketing meeting inHades.

BUSIITIDSS NDVIDW

Across the Cultural Gap (Part II) 27by Professor Mario Antonio G. Lopez,.etuMayo Lopez concludes his article on the differences between"Asian and Westerners. "

NXSXA"trCtr

How Risky are Philippine IPOS? 31by Professor Errol B. Perez, etuand Professor Aida L. VelnscoAnd how much reward do thev vield?

22

Trends in Employer Sponsored Trainingand Develooment in the Asia PacificRegion by Professor Etsu Inaba, .uu 34What APEC corporations want most from their hainingprograms.

POI,ICY I'ORtrM

Forecasting the Futureby Professor Francisco L. Roman,.ttuand Hazel SanggalangPaint scenarios, not only sensitivities.

Traders or Entrepreneurs:

42

49

50

Or Why Labor is a CompetitivenessIssue in the Post-GATT World 46by Sindhu Khullar, Visiting FeIIowDevelop multi-skilled levels of labor, not iust white collarworkers, to be competitive.

OPINION

Thinf About Itby Professor lesus G. Gallegos,lr., uuJess recounts the Acer miracle.

Entrepreneur's Cornerby Robert V. Chandran, uaM'74Never lose touch with your key stakeholders; customers,suppliers, and employees.

&AIMTHE AshN MANAGEn-A Publicatron of the Asid Istihrte ofMana8€hdr and the F€deration of Asian ltutitute ofManagement Alumni Asiations.

CopyriSht @ 1995 by T,'e ,4Ji," MrraSd. AII rights t!€4€d.Reproduction in any manner in whole or in pari in Entlish o.oth6 langlage prchibited. Tle Asian Manager is publish€dbi-monthly by the Asian Institute of Management. Ediiorialand Advertising Offie: Asian Institute of Managemenl,EuEmio L6pez Foundation, Joseph R. McMid<ing Campue123 Pas d€ Roias, City of Makati, Philippinc. Tel: (632) 89240 1l-25; a92 (X 3543; 893 3 4r Fax (632) 817 92,t0. Photcgraphi sourced by the AIM Library.Printed by Tim6 Printers Pte. Lrd., SintaporeThe Asian MaMSq MITA (P) 245/9/91KDN PP(s) r07613/93ISSN 01167790

Puln lcr FeliF B. Al{onsoCo-I!$lrLor & Edlaor{n{hlef Ricardo A. tnAllcho Prl|bh.t

& Aave blrg lxr.3t r D€lia C. GutierczD||.cLrt Of.r.drr f ChlrLdo. Millie C. Fenertcdo I Hr.thr C.mlr.rt Flanm Patriarca

ner..rct .ra Prodrcalor Amy G. EspirituAlvcrdllnl A3.|3Lna Vanessa M. ,aballasPoblldhgf,ord ReneT.Doningo,JesusC.Callegotlr., Ricardo A. Um, Victors. Limlingan, Eduardo A. Morat6,Ashok K. Nath

INIf,trNAIIONIII, MDDLIITFf,fSf,]tITATIVD OTIICDS

f,r!l.d!|tPamelaChoy,PacificAsiaMedi.,l3A,361 363Ldkhart R@d, Wan.hai, HonE Kong. Fax, (85 2) 834 5980.AlnlFFE reddy Tan, Pam Media Serices Pte. Ltd. 83AE6t Coast Rdd, Tay Buan Guan shopping Centre, Singaporel5{2. Far. {65) 440 8760. rrdoFiLt Raoa Slamer, Manaser,r irle Cotmuru(.tioB.. ll.Bdn8|.i \l A/5. ldlirtd 12t20.lndon*ia, Fa\ ro2 2l ' 7w20o0,7471784 ltt l.yrl,ConnENg, AdvertisinS Repre*nlative, Mediaplus (M) Sn Bhd.,34A, Jalan SS20/10 Danansara Kin, 47400 Petaling Jaya,S€lanEo. Malaysia hdh SrHorrLdo Media SouthA3ja (P) Ltd., Apartmdt lA, Abhi-Anil Awas, Kanhpath-Jamal, Kathmandu, Nepal. Telex 2606 MEDREP NP, Fax, (97/

1) 227 3-%36. P.ldlatn S,l. 9lahudd in, chiel Exfturiv€, INsCommunicario6 Lrd., 6/ F, Panoratu Centre, Fatim JinnahRd.- Kararhi, Pakistan. Fax. (92 2l) 568 2271 x.rer Y.K.Chun, ri6t Media S€ri.€s Corpontio[ Ct! Bo\ 79] 9, Seool,Korea, Teld FMSCORP K 29132 Far. (02) 738 7970 J.p!nHid@ Natayama, Nakayama Media IntematioMl Inc., FonteAoyama 705,2-22-14 MinamiAoyam,Minateku,Tokyo 102Japan. Fa!. (03) 3479'6130. lli.lldd: Dr. Anthony Sham,MaMgintDire.ior,IlhiRep.Mtatjve Ltd.,867/58PomtaveSukhumlit Soi l01, Prakahont Ban8kok 10260, Thailand. FAx,(66 2) 33r 9303. Unliea Ll.gloir Bnan Taplin Assiates,32 Fishqy Rcd, Bo\m@r, Hemel Hempsl€ad, Hens HPlI ND, U.K. Fax (0142) 2,16 034 fn|ra Stephane de Ramust,MaMSing Di€tor, REM Inr€marioml., 24 bis ru€ Calli{i,95160 Montmorenca France. Far. (33 1 ) 39 89 63 41

?THE AsrAN MANAGER . OcroBER-NovEMBER 1995

n

In the world of communicotiol systems, we're here to help.ln 125 counlr ies worldwide, we ore

helping to provide odvonced communicotionssolut ions. These solut ions, developed in closeportnership with our customers, combineglobol expert ise with locol understonding.

Bosed on the lotest inlernotionolcom mun icol ions technologies, these rongefrom ATM broodbond switching, Intel l igent

Networks ond entire business systems lothe smol les t mob i le phones. And fu r thereff iciencies ore ochieved through theinfegrotion of voice, doto ond video networks.

The end-user is our f irst considerol ion.Every solut ion must be user-fr iendly, f lexibleond evolve with individuol needs.

Exomples of our involvement include the

INTELSAT Vll sotel l i te progrom ond lheIAI 12 /13 t ronsot lon l i c f iber op t ic cob le . Todote , more thon 100 mi l l ion d ig i to l phonelines ore operotionol worldwide.

As port of Alcotel Alsthom, we're hereto he lp you. P leose te lephone 2 .815.O2.27,fox 2 .815.02 .25 . o r wr i te to us o l thefollowing oddress. Alcofel. We help you grow. Ahotel oh,Lpp nes 2, /c Mo vn Plozo Bu, ld i rg 2 l 53 Posong Toho,

Mokol , Metro Mon lo Mol io l l ler lo l onol A, por l 3120 Phi l 'pp nes

IM has received iht'1995 Ramon Magsav-sav A\rard tbr Intem-

ational Understanding. ThcIlNl Arvard Foundation citcclA IM's innovat ivc cont r ibu-tions over thc past 27 Yearsltht original trvo-vear MBM

Program/ a Proneer 1n caseeelucatiorr in Asia; the ont'-

vear M lvl program; CD\l(once knorvn as ihe RDMI') forrural and gencral dcvelopn len t managers ; the shor icourse ExecutiVe DeVeloPmentPrograms; and o f o therach icvcmenis : our case re -scarch, our netl'ork of Alumnjancl Rep office-s in the PaciiicBas in , T / rc ,4s in t t Mr t r ta tc t ' ,AIMLINK, and others.

The c i ta t ion a lso reads :" . . . thc impact o f A IM t ran-scends national bordcrs. Tcrdate, sornlv t\r'cntv thousandinc l i r , idua ls have rece ivc 'c1AIM rraining... more than halffrom dozens of neighboring count r ies . . . " Thesetlrentv thousand are fam-i l v l i ke vourse lves , ouralumni. The AIM Familvextends to our parent in-stitutions, Ateneo and LaSalle; our staff; our Board ofCor,ernors, Trustees, andsocial investors; our part-ner academic and corpo-rate institutions; our guestlecturers from around thewor ld ; the med ia j ourAsian ManagementAwardn'inners; the l ist goes onand on. We thank vou allfo r con t r ibu t ing to th isprestigious award, dubbedbv the "Nobel prize" forAsia. We could not havecome this far u,ithout vourhelp; vou are winners asmuch as the Institute itself.

Other au 'a rc lees th isyear include Co\'. Mori-hiko Hiramatsu of Oita I're-fecture, Kvushu, Japan, forGovernment Sen'ices; Ms.Asma Jahangir, a lan'r 'erfrom Pakistan, for I 'ublic

6

I

Pnorrsson RICaRDQ A. LIMt t j ' * .

t

. . - . j ] \

, - i , - : ' . 1 . ' . . , '

Tm Ddlron

Service; Ho Ming Teh, IJead. ofChiavi I 'hi lanthropv Croup

. - o f Ta iu 'an , fo r Contmun i tvLeaclership; I 'ramoedy.r An-

;.e' anta Toer, a $'riter frot'n Incltl-nesia, for Journalism, Literaturt ', a ncl Creativc Comnruni-

., cation Arts.'

The Ranon MagsavsavAwarcl lvas established bv theRockefeller Foundation, sottna f ie r the Ph i l ipp ine Pr t ' s i -

- c len t ' s r lea th f rom a p lanecrash in March 1917, k) "per-

peluate IMagsavsa\"'s] exam-plc of integritv anrl praEinatic

':- idealisn rvit lr in a denocratic.- rr societv" The a!\ ard is given to

t " in r l i r , idua ls and organ iza-: '

tlugraysay,

t

AwardI

Thg&gou from tlie battomof our hearts.

I

- *

AIM: 1995/{rirttort MrigsrttTsntT Aintd t '

Itrtr t1tot ioml Uttdcrst' ntld.iug

tions n ho have addresscd theproblt'ms of povcrtv, malnu-trition, dise.rse, ancl violenct',as rvell as \\'ith ne\\'er prob-I tms tha t come i { i th p ro-gress . . . recogn iz ing I those lrvho har,c acldressed ihese is-sucs l!ith exiraordinarv !igot

in tegr i t v and se l f l cssness . . . S ince 1957 th ishonor has becn bestou'edupon fifteen institutjonsand 176 individuals. lVeare hulored to be invitecl asa membcr o f th is se lec t

8r0up.

Surfin'.{IDICatch the wavc!Join the

rvorld's .10 mill ion-anc1still growirlg Internet us-ers. AIM and Tht AsitnMnrrrrgcr are norv onJine,specificallv in the \\brldWide Web (WWW), themultimedia, user-friendlvportion of the Internet. Itvou are now hooked intothe net, load up vour \'Vin-web or Netscape programand get AIM nerls and fea-tureAsian Managerarticlesonhttp://netserve.aim.edu,ph/. In tirne u'e rvill havestuclelt r6sum€s, job opporiunities, joint Yenturesancl job offers fron aJumni,and lnanv other rL'sourcesonline. You can aiso t'mail

1995 . TI{E Asr,\\ MA\ACFROC I(]BER-NOYF\IBER

I

DECT. The new wave in oersona l communica t ions ." l""lji*.. .l;,"H;:*:::;" """, l,:T:the new wireless radio interface that provides access."

;:"::: ;:, -[ H,'::T,::T ::;presents the perfect solut ion for cordless

That's -'**ll'frii##:

D€<t at work. at home .nd in the city.

hat

lwant:2,.t<-

+ ipr commuflouon Sr5rfli PO Bo' 31020 Burdi8EeC)|| 56001H aidhos TheN.rhdrdi,Ie +l ,L753303hx+l ,io7537 15

S e r v i n g t h e

G e n e r a t i o n

PHITIPS

us your comments and justabout any news to aimnet@aim.edu. ph, or tam@aim.edu.ph.

If that's not enough youcan also retrieve the magazineby subscribing to the Asianlntelligence Wire (AIW) serv-ice. AIW has more than 200Asian business periodicalsand factbooks. For a minimalfee you can download themagazine in electronic format.This serv ice is avai lab lethrough most local EuropeanChambers of Commerce.

If you haven't done it bynow we urge you to join thenet. It is so easy, it seems silly.We recommend you get a 486PC and a modem. Desktoppackages these days will costno more than $ 2,000, and alaptop package (with color)will cost slightly more. Thencall any one of the numbersbelow in your home city. Thecost to register should be lessthan $100, with reasonablemonthly fees. In return youcan get immediate profit: Youcan cut down your fax costsdramatically by simply usingthe e-mai l network; theamount of free informationalone on the WWW portioncan generate tremendous op-potunities for your business;last but not least, think aboutthe manyhours of satisfactionin "surfin" the web: Bangkok:Internet Knowledge Center,719-1583; Bombay: GEIS, 202-3075; Hong Kong: HK lnter-net, 527-7777; Hong KongSupernet, 358-7924; InternetOnline HK, 768-8008; Jakarta:Indo Internet, 470-2889; KualaLumpur: Jaring, 254-9601;Mani la : Phi lnet , 633-1956;Seoul: Databank, 751-5034;Singapore: SingNet, 838-2723 ;Taipei: Seednet, 733-6454.

All these net providers cangive you technical assistanceas part of their service. Mostof the software available todayare user-friendly and usable

8

within the first day. Try it, youwill love it. You wil l in factwhine to us later: "Why didn'tyou tell us about this before?"

AIM's Annual Manage-ment Confe|.,ence

AIM rvil l be holding itsannual management confer-ence on "Asian Crowth I'�oly-gons" on 12 to 13 March 1996,at the Shangri-La Hotel inManila. Our scheduled guestis Dr. Kenichi Ohmae, cur-rently managing Director ofthe Heisei Ilesearch Institutein Tokyo, Japan. A nuclear en-gineer bv training (he was asen ior des ign eng ineer fo rMonju, Japan's prototype nu-clear reactor), he made theswitch into thebusiness worldwith great impact. A formermanaging partner of McKin-sey & Company, Dr. Ohmaemade his mark as a world-renowed consultant and au-thor on creative strategies. Hisfamous books inc lude l l cMinri oi tha Sfrnfcgist, TrindPoruer, Beyond Nntionsl Borders,The Borritrlrs World, and ThcEnd of th( NatiotlStof., and hewrote frequentlv for the Har-vard Business Review. Oh-mae's strategic frameworkswere unusual in the eighties:he cerebrally blended the or-derly, svstematic frameworksof the West with eclecticism ofthe East. In Thc Mird of theSt ra te& is t (1982) h is char tswere a marvel for economy,with well-defined dimensionstha t any bus inesspersonwould understand; his vi-gnettes on soda pop and mi-crowave ovens and super-tankers wereequally robust; atthe same time, some of hisstrategies-"Win the World"-actually exhorted the readerto make bold, quantum leapsinto the unknown. Ohmaewas able to bridge the east andthe west nicely.

To my mind his mostinter-esting story on the creative

uses of strategy was outlinedin a Harvard Business Reviewarticle. It was the experienceof Yamaha, particularly withtheir piano division. Yamahawas facing declining sales infor its pricey, elegant grandpianos. It was a product thatlasted more than h\.enty years,

and buyers were not apt to re-place their machines, muchless buy another grand piano.What to do? Yamaha c.ngi-neers experimented with anew device in the eighties: theCD-ROM. Much like the oldHo l lywood cowboy f i lmswhere upright pianos playedthemselves-rvith the help ofpunched rollecl music-Ya-maha engineers adopted CD-ROM technologv b "play" thepiano for their owners, bv sup-plying an attachment to thepiano. Ilesult? For the priceof attachment, which costs afew thousand do l la rs , you

There aremany waysto squeezemore out ofa matureproduct ora servrce.

cou ld have V ladmi r Horo-witz, or Van Cliburn playingthe piano ght in your livingroom. This was much morepleasing than turning on vourstereo, and much cheaper thanhiring the real Horowitz. Ya-maha effectively extended theproduct life cycle (PLC) of thegrand piano, bv offering Ya-maha p iano owners thechance to continue using theirmachine, long after their kidshave graduated from their les-sons. Yamaha also found a

way to extend profitabil ity,long affer the sales and mar-ke t ing peop le thought theproduct as waning.

Ohmae's lessons are clear:there are many ways tosqueeze more out ot a matureproduct or service. Acer, forexample, as outl ined by Dean

JessCallegos, has squeezed de-livery time and churned outmore inventory turns on its PCproducts as if thcy wereiastfoocl hamburgers. It seems,according to Jess, to be a sim-ple matter of how you viewyour business. Merrill Lynchviewed itselfnot just as a stockbrokerage, but as a completefinancial services provider ofdebit cards, checking accounts,and consumer credit, with itsfamed Cash Management Ac-count (CMA) product.

Ohmae's later books alsopresage our conference: gowthpolygons. The sub-bading "tri-

angles" and "squares" partner-sh ips are sprou t ing up a l lover-in China (Hong Kong,Cuandong, Tain'an, and Fuji-an), in lndochina (Vietnam,

Northern Malaysia, and Thai-land), around Singapore (Johor

and ldau)and in EAGA, for thesouthern part of ASEAN (Bru-

nei, Indonesia, Malaysia, andthc Philippincs). Will these sub-trading regions prosper at thesame time as AFIAand APECand WTO? We hope to find an-swels to this question. Pleasecomc in March!

Price lnei'easeThe Asinn Managtr will be

changing its ncwstand pricebeginning in December-Janu-ary. This change wil l helpcover the increasing costs inprinting and distribution, aswell as help expand our re-search and pro-bono capabili-t ies . Your cont r ibu t ion isgreatly appreciated.Pnt Rtcku A. LDtr trad]tsllT a,td Mntlalrnr.]tlCo,nnu iralbfi iJr tll. EDPnt l

OcroBER-NovEMBER 1995 . THE AsrAN MANACER

!1'

BY FRANK W.K. TSAO

)ilRin Edl;'

Educatron. Knowledge. Understand-ing. That is Ren. Educate yourself. Beknowledgeable about the technical andprofessional expertise vou need to man-age vour business. Understand your en-\ i ronmcn l and d i rec t ion . Th is i s espe-ciallv important when you conduct an

enterprise located away from vour homebase. "On entering a country, a'l vr hat isnot allowed; on entering a home, ask forthe names of familymembers." In the late1940s a number of leading businessmenfrom Shanghai with ample capital andknow-how came to Hong Kong to launchnew ventures. They failed precisely be-cause they ignored this lesson.

Be realistic in vour assessment of thehidden valleys and sharp as you pursueyour goal. "lf you don't know the obsta-clt : and dang,crs preenled bv mounlain:and fo res ts . sharp cJ i f f ' and gorg ,es .swamps and marshes along vour chosenroute, vou cannot advance your troops."

Understand the needs of your custom-ers. Understand your employees-theircharactet needs and aspirations. And,most importantly, r derstnnd yourself. Re-member Sun Tzu's farnous dictum, "Un-

derstand yourself. Understand the otherparty. Then you will succeed every time."

a,Rdn \ \J l

Patience. Commitment. That is the es-sence ofRdn. There are many Chinese say-ings to illushate the practical applicationof Ildn. "Lack of patience will disrupt thebest-made plans." "Where perseveranceand commitment are resolutely applied,

Success and SuccessionLessons from the Chinese Cultural Tradition

l'ounding rlnd Maragingan Enlerpris€

The vear rvas 1950. The place r'r.asHong Kong. I rvas ncn ar r i va l f romShanghai in search of a future in an unfa-miliar land. Walking with a fanilv elderdllnts thr pier' that dt'ttrrl Honp, Kong,harbout I spotted a ship about 3,000 bns$'aiting its turn to load. "Wouldn't it begreat if I wcrc thc owner of this magnificent ship!" I said rvith envv and resigna-tion. My elder, Iooking intently at m€., re-plied in challenge, "Remember the pror-erb,'One's aspirarions should ertend tothe four .eas : ten thou.and mr lc . , rwav i .just l ike next door.'You must have a arstrttr of lvhere vou want to lead vour en-terprise. Then, 'Where there is a will, thereis a wav' If you have the (,i// to fulf i l lthat goal, one dav vou z{'il/ ou,n such aship." That conversation has remainedvividly in mv mind to this dav

Acccpting thc challc'nge from mvelder, I sought guidance from a success-ful family friend on hot'to work torvardmv goal. Hc advised me, "Whatever voudo, be guided by these eight charactcrs-R c n { e & , r R e n r 3 . I \ r n r . l k ,j . (cn r ̂ - ) sh in r , l i ) (hcngr l l ! - lQin ( 4/ ) and Jidn ( ,(&.) These arethe most mcmorablc cight characters Ihave ever learned.

TIIE AslA\ MANACtTR . OcrolrER'No!EMBFR 1995

even metal and rock can be brokenI followed the good advice of my fam-

ily friend. I searched for experienced pro-fessionals in shipping.I studied shippingiournals and reporti on shippinS orgdni-zations. I familiarized myself with freightmarkets and visited prospective shippers.I boarded ships, going from engine roomto deck and talked to anyone on boardwilling to share their knowledge and ex-perience with me. After manv monthsof leg work and brain work,l bought myfirst ship that was within mv financialresources. It was a ship built in 1918, nota pretb/ sight in the eves of the impatientinspector. He was obviously displeasedwith the task he was to perform. He wasaffogant.l decided tobe patientwith him.But I was determined to speak up whenhis demands were outrageous-not inanger but with reason. The ship was ret-rofitted within budget and placed in serv-ice on schedule. That was the first shiptha t launched my sh ipp ing en terpr i .e .later to be knorvn as lnternational Mari-time Carriers.

Another lesson of Rdn ( *{, ) andRen ( .{. ). In the late 1960s Mr RobertKuok Hock Nien and I undertook thetask of setting up the first nationalMaJaysia n :hipping l ine-the MalavsianIn te rna t iona l Sh ipp ing Corpora t ion(MISC). Mr. Kuok and I called on thechairman of a Bristish shipping companywhich, at that time, monopolized all theshipping lanes in Malaysia. We explainedto him whv MISC had to place at leasttwo ships to serue the market in order tomake our enterprise viable and asked forhis cooperation. {fter two hour: of dir-cussion, he told us that he would a//ulMISC to run orre nlld 0 i1i dr. ship in themarket. lf we insisted on placing twoships in service, he would run MISC tothe ground. He stood up, pointed to thedoor, and ordered us to leave. We left hisoffice. determined that we would per-severe. We would compete head onagainst this monopoly. We tighteneci ourbus iness p lans and opera t ions . Westrengthened our resourccs. We mar-keted more intensively. In 1992, MISCcelebrated its twentieth year of successuloperation and won the honour of beingone of the most profitable shipping com-panies in the Asian region. That mo-nopoly? It had long gone out of exist-ence.

1 0

Yin baCapital. Careful husbanding of re-

sources. That is Yin ( JL ). There is theChinese proverb, "Without careful man-agement of resources, a surplus will beexhausted. With careful management,even modest resources will yield a sur-plus. "

Mv years in the shipping businesshave taught me how invaluable Yin hasproven tobe. There was a longestablishedNorwegian shipping empirewhich, at theheight of the freight market in the 1970s,embarked on a vast fleet expansion fi-nanced by highly leveraged debt. Whenthe freight market collapsed a few years

later, so did the company. We find simi-lar examples in the reail estate industry.The decline of the famed Olympia andYork empire is another reminder of thelesson of Yin-that capital and resourcesmust be carefully budgeted and pru-dently managed.

R6nPeople. Human resources. How to

work rvith people. How to manage hu-man resources. That is R€n ( A ). R6nis based on the principle of respecf: "You

must have high regard for yourself thenothers will regard you highlv You mustrespect vourself, then others respectyou."If you do not respect others, it is tanta-

mount to having no respect for yourself."When you have high regard for yourself,you will not hesitate to accept honest ad-vice and crit icism even though as theChinese saying goes, "Honest crit icismgrates on the ear Cood medicine is brtterto the mouth." When you respect youremployees, you make them feel valued.You canexpect and theywilldeliver qual-ity performance. When you respect yourcustomers, you will deliverquali$ goodsand service.

On managing human resources,l findthe proverb, "Apply talent where it canbe best utilized" most instructive. Youplace an employee where his or herstrengths can be most appropdately uti-lized and you supplement what is lack-ing in that person. Moreover, talent,which is indispensible to the growth ofan enterpdse, must be nurtured and cul-tivated. That demands patience and com-mitment for the long term. There is theChinese saving, "lt takes ten years to cul-tivate a tree, a hundred yeals to grow aperson." On nurturing and cultivatinghuman tesources, I recall that in the late1950s, the Malaysian Government offered"pioneer" status for industries that werenew to the country. At that time therewere very few trained professionals anderperienced mill worler. in te\ti les inMalays ia . The inves tor g roup whofounded the first major textile mill had tobegin from the beginning they recruitedseasoned professionals, technicians, andold mill hands from Hong Kong to workin their Malaysian plant. To cultivate andnurture local talent, they organized tran-ing programs for newcomers. Today,many of the leading professionals andtechnical e\pert\ in the te\ti le sector inMa)avsia are proud alumnr of thote train-lng programs.

t iIA ELShin f{ \

Prudence. Critical thinking. Carefuland realiltic planning. This is Shen. Thereare numerou5 quotations from classicalChinese literature on the importance ofShen, both in the conduct ofbusiness andpersonal life:

"Broaden vour Inowledge. Examinethoroughly. Thinl crit ically. Analyze logi-cally. Execute prudently and with perse-verance.

"Remind yourself ofdanget then you

OCIOB!R-NO\ !MB!R I995 . THE A5hN MANACLR

/A/ TRODU CII,{ GC TT IB AI,{ K /ru V ES r T/IENr Sr RV I CEsrRUST OUR PEOPLE, PRODUCTS AND OAR S''RYICTS TO HELP YOU ACHIEVE YOUR INVESTMENT GOALS,

OUR WELL - TMINED PERSONAL BANKERS BEGIN BY UNDERSTANDING YOUR INVESTMENT NEEDS. Each Personal Bankeis first priority is

finding out what your investment objectives are: whether it's for your retirement. your child's education. for capital preservation or wealth accumulation. Through

Citibank's customer profiling process, you md your Personal Banker can determine how long you are willing to invest your money and the risks you are willing to

take. Only then will your Personal Bmker provide you with suitable products you cm choose from.

yOA CAN CHOOSE FROM CITIBANK'S RANGE OF PRODaCTS TO BEST MEETYOUR INVESTMENT GOALS. Depending on your objectives, you can

sehct from money market instruments, bonds, stocks, or investment funds from the Philippines. Asia, Europe or America. AII these are made available through

Citrbank's intemational network which sDms across almost 100 countries.

FAX ro . 8 r s -7 06 s I mu r ro .'r#fil;Ii; nll!,{tlfr1l', ifi',.a

4WE WILL KEEP YOU INFORMED OF YOUR INVESTMENTS' PER-

FORMANCE AS WELL AS NEW INVESTMENT OPPORTUNITIES,

Your Personal Banker will update you with regular reports and provide

you market information that may be relevant to the performance of your

investmenls. Our 24-hour telephone information seruice also gives you

quick access to available investment options and allows you to anange a

meeting with one of our Personal Bankers On top of these, customer

briefings are also held to keep you abreast of new investment

opportunities.

Find out how Citibonk Investment Semices can help you achieve your

iTestment goals. IJ you vould like to gel more informtion or sr4nge a

me*ing with one of our Personal Bankers, coll our 24hour number: 813'9300.

YES/ I believe citibank Investment SeRices can help me achieve my investment goals

I would l ike to know more about your Peso and/or Dol lar investment products.

U Money Market Inslruments

U Bonds

lJ Srmks

Please have your Personal Banker cal l or v is i t

provrded belos to discuss ho* these investmenl

object ives.

D Inu..r*ent Funds

E ,q.lt of th. "bou"

me at the number and addressproducts wil l help me meet my

NAME

ADDRESS

TEL. NO. (llome)

f cit ibank Investor

Signature

E Non - Citibmk Investor

ctflBAw(o{MEMB€FOFIH€ PHILIPPINE OEPOSII INSUAArcE CGPoMIONTDETgTSINSUnEO uPTOPlm,m.m)

AM 10/01/95

N O f J U S f B A N K I N G . C I T I B A N K I N C .

will secure safety. Be prepared for retreat,then you will be ready to advance. Bewary of chaos, then you will secure or-der. Be vigilant against failure, then youwill survive."

"Plan first, then take action, and youwill succeed. Act first, thenplan, and youwill fail."

Think critically three times before youact."

"Be consistently as prudent towardthe end as you were at the beginning, andyou will not encounter disaster"

"Forsake prudence and planning atthe beginning, and all the regrets later onwill not rehieve your failure."

"Do not pay attention to words thatare unsubstantiated. Do not undertakeplans that are undeliberated."

"Prudence is the charrn that will pro-tect you."

The turbulent waters of the shippingbusiness have been littered with trasicbusiness disaters. A number of these d]s-asters can be traced to one simple fact-management's reckless disregard forShen. In the last twenty-five years, we sawmany instances where fle€toperators, fo-cusing on the immediate booming tankermarket, gambled on acquiring VLCCs(very large crude carriers) at US$25 M apiece. Barely three years later, demandfor WCCs collapsed. These vessels, builtonly to serve a very specific segment ofthe oil market, did not have the flexibil-ity to carry other commodities. Many hadto be sold for mere scrap value of $ 5 to$6 M . But other operators survived pro-Ionged depression in freight markets andlived to enjoy another profitable cycle.They managed their operations in accordancewith Shin. They structured their fleet forflexibility and functionality and addedcapacity at a steady and sustainable pace.Their debt load was limited to what couldbe easily financed with conservativelyprojected cash flow. Above all, by prac-ticing Shdn over a long business horizon,they managed to minimize risk, optimizegain, and build a solid future for their en-terprises.

For the younger generation-espe-cially those who want to distinguishthemselves not as mere custodians of theirinhe tance but as builders like their fore-fathers-it is important that they pay spe-cial attention to Shdn. The annals ofbusi-ness are full of failure stories of rich heirs

1.2

who took over from their builder-fathers.More likely born into wealth and comfortand never been bruised by the hard-knocks experiences the founder had toendure, the second generation is particu-larly rrrlnerable to flattery impatience,and hasty, undeliberated action. As theChinese saying goes, "Prosper throughhardship but wither in comfort andluxury. " Thomas Watson, the founder ofIBM, used to post the word "THINK" inevery office and by every desk through-out his organization. I would propose tothe new generation of heirs that they postthe character "SHEN" on their desks andby their bedside to serve as a constant re-minder ofthe importance of Sh€n in theirendeavor to build their own empires.

)-.+)7tsY

l,heng 7'- \In the €thos of the Chinese cultural

tradition, individuals and their commu-nity are bound together by a web of mu-tual obligaiions and responsibilities. Thetradition stresses ihe responsibilities ofthe individual to his or her community-family, clan, profession, business associ-ates or other broad-based entities-ratherthan the nglls of the individual. Ch6ngis an extension of thi s humanistic tradihon.Ch6ng is cenhal to our cherished moralvalues: interpersonal responsibiliry loy-alry sinceriry personal integrity and com-mitment. Our credibility and reputationare measured by how faithfully we liveup to these values.

In practice, living up to Ch€ng de-mands that we, as employers, must con-

cern ourselves with providing opporhr-nities as well as safety nets for our em-ployees. That means duringrecession wemust do our utmost not to abandon them.Rehain and educate them to meet newskill demands. With our clients and cus-tomers, we must "Promise what we cllrperform. Perform what we do promise."If we don't , we will be delinquent inmeeting our communal responsibilities.To our profession and our enterprise, wemust serue with loyalty and commitmentbecause the credibility of our professionand our enterpdse is at stake.

The practice of Ch6ng is well illus-trated in Chinese proverbs. A few quotedhere:

"lntegrity demands that you don'tharm others in order to benefit yourself."

"Don't do to others what you don'twant others do to you."

"You only cheat yourself when youcheat others."

"Treat your employees the way youwant yourself to be heated. Never be re-luctantto conect your own shortcomings.But always be magnanimous and com-passionate toward others."

qlDiligence. Perseverance. That is Qin.

There is a Chinese fable-Y( Gdng YiShan I b ir,L, ) that il lustrateithevery spirit of Qin:

Once upon a time, there was a ninety-year old man who lived in a house sur-rounded by two hills. He had to travelmany rugged paths and winding ways toreach the village beyond. One day he be-gan work to level the hill. His neighborslaughed at him. They said, "Stop whatyou are doing, old man!" The old man re-plied, " After I die, my son will continue.His grandson will continue after his sonand so generation after generation theywill persevere at leveling the hills. Oneday, the hills ruillbe leveled."

I like to cite a real-world example ofhow the practice of Qin helped to turnaround an enterprise suffering from de-clining sales and mounting inventories.

Thirty years ago, a newly establishedMalaysian textile mill found its sales fall-ing far short of projections. Finished prod-ucts were pilling up in warehouses. It waslosins market share. The livelihood ofhundreds of workers depended on the

OCTOBER-NOVEMEER 1995 . THEASIAN MANAGER

Qin

company's succest which appeared tobe further and further remote. Also atstake were millions of dolla$ of invesiors'capiial and the credibility of management.

Management was determined thatways zasl be found to turn around thebusiness. Executives personally led salesrepresentatives deep into field marketingthroughout Malaysia. For days andweeks, ladened with heavy loads of sam-ple fabric, they called on every outlet, notjust in cities and urban centers, but alsoin outlying towns and villages. They didnot stop at selling fabric. They invitedstorekeepers and sales clerk to critiquetheir products and offer suggestions fornew colors and designs. The field mar-keting efforts were difficult and challeng-ing. But, as the saying goes, "One cannotimagine the expanse of space withoutclimbing high mountains nor be able tofathom the depth of earth without goingto the deepest gorges," Management'sdiligent efforts did yield (1) reasons whytheir existing line of fabric was not sell-ing (2) what innovative ideas wereneeded to correct what did not work and(3) suggestions for new colors and designsthat offered good potential for consumeracceptance. Based on these hard-earnedlessons, management created new de-signs, overhauled production line and im-plemented a more focused marketingshategy. With the help of a motivated staffand steadfast pursuit of "fuality and per-fection through diligence," managementnot only hrrned around the company butalso laid a solid foundation for profitablegrowth in later years.

nin /aIian is thrift-a celebrated virhre in the

Chinese cultural tradition. In the annalsof ethnic Chinese pioneers who madegood in their adoptive lands, most if notall of them left their home villages withnothing but their skills and a will to suc-ceed. True to their upbringing, they faith-fully practiced Jian. They lived by themotto, "Save and measure your daily ex-penses against your eamings. " Many intheir lifetime amassed personal forhrneswhile their savings and investments con-tributed significantly to the wealth oftheir communities and their adoptivelands.

In business, thrift demands tight con-

trol over expenses. Thrift mandates effi-cient operations. Thrift requires carefulhusbanding of resources. Responsiblemanagement has to be prepared for un-expected twisis and turns in the marketplace. In a recession, it is the ability tocome uo with the lasf hundred thousandor the lnsl million dollars to clear up billsand debt that separates thesurvivorfromihe bankrupt. The key to prospe ty is thecapacity to survive the next downturn.The management that implements thriftwith vigor will always have that key intheir hands.

l,eadershlpThe success of an enterprise is attrib-

utable largely to the calibre of leadership.Volumes have been written on how to bethe very best and most effective leader.To rne, five simple characters rooted inChinese cultural hadition have taught mewhat I need to know most about leader-ship. They are: Zhi -trf (wisdom),Xin;$ (credibility), R6n ,(e. (com-passion, interpersonal responsibility),Vong Q (courage), ana fr Yan(discipline).

zhi 'q

The wisdom to take an honest meas-ure of one's own abilities and limits ofone's knowledge and expertise is Zhi. AsConfucius said, "When I am walking ina companv of three, one of them will cer-

tainly have something to ieach me." Byconstantly subjecting oneself to this kindof reality-check instead of isolating him-self [herself] in penthouse office suites, aleader will never lose touch with real people---employees, customers, and the pub-lic. The good learner "amends his [her]own shortcomings with the shengths ofothers." Zhi demands that a leadershould understand that, "As the worldaround us changes everyday, we mustrenew ourselves everyday." To lead, he[she] must be open to new ideas, newtechnology, and new hends. This is par-ticularly irnportant for us ethnic Chineseentrepreneurs. Our enterprise are, moreoften than not, borderles s and trnnsnational.W e have to compete locally and globally.Hard- won markets for our goods andservices can disappear in a matter ofmonths or even weeks. But, new oppor-hrnities can be within our grasp if we areever vigilant in spotting new trends andin being open to innovative ideas.

In managing our organizations, Zhidemands that we recruit and delegate re-sponsibility to those who are capable azdof sound monl character. Otherwise, wewill be surrounded by unproductive "yes

men." A special word of caution to ourheirs and young empire-builders-bewary of "yes men!" Challenge your asso-ciates to criticize your policies and offerconstructive alternatives. These construc-tive criticisms may hurt your ego but iheywill save you from many heartaches andregrets down the road.

We must have the wisdom to act onlyafter deliberate thought. It has been myexperience that achon taken in haste with-out deliberate thought is doomed to fail.In the following paragraphs, I would liketo share with readers other quotationsfrorn classical Chinese that have been es-pecially helpful to me as I moved up theleadership ladder over the years:

'The challenge is not in iaking goodmeasure of others but in taking honestmeasure of yourself."

" When you understand the other per-son, you are wise. When you honestlyunderstand yourself, you are truly en-lightened."

"Be aware of your own weaknessesbut never belittle the shength of others."

"See more, you broaden your perspec-tive. Listen more, you deepen yourknowledge."

THE AsrAN MANAGER . OcroBER-NovEMBER 1995

"What joy it must be to pe$evere inlearning and in practicing what youlearn."

IZX i n A t

Xin is credibility. Credibility is price-less. In the ethnic Chinese communify,one s reputation does not rest on the sizeof his lherl bank account. Reputation ismeasured by one's credibility. A leadermust first "establish his [her] credibilityunder the heaven." To establish credibil-ity, one must eam the trust of others bydeed. "Promise and performance must beone and the same," decrees one Chineseproverb.

Xin demands erezplary conductoftheleader As a general must earfl the trust ofhis troops before he can lead them effec-tively to battle, one must eam the trust ofhis [her] associates and employees to leadthem effectively in his Jherl enterprise."When on top, guard against arogance,"for an unpretentious leader will reap thebenefit of genuine respect and coopera-tion from his [her] people. "One mustprepare for adversity but wait to partakein prosperity only after the world hastasted prosperity. A lead.er thus engagedwillbuild a shongand loyal organization.I must add that the spectacle of top man-agement indulging themselves in luxun-ous surroundings and multi-million dol-lar paychecks and bonuses while closingplants and laying off workers is a grossviolation of Xin.

On credibility, a word of caution to ourheirs and empire-buildersto-be. It hasbeen my observation over the years thatwe must guard ourselves against bank-ers who do not share our traditional re-spect for Xin. They are only interested inthe short term and in whatever transac-tion fees they can collect from a deal. Theywill lavish you with easy credit when youhave little need for it. But they will ex-ploit every loophole to legitimize unilat-eral termination of credit just when youneed it. Don't ba,k on their "commit-

ment" or you will live to regret it!

l -t r6n A?

The heart and soul of the humanisticcharacter of the Chinese cultural trddi-tion is best represented by the word R6n.R6n is composed of two ( : )human be-ings ( /r. ). R6n stresses compassionateconcern for one's fellow beings. This com-

14

mitment to inferpelsonal responsibility iswell appreciated among the enlightenedin the western world. The famed econr>mist and president of the University ofChicago Dr. Hugo F Sonnenschein saidrecently, ',As a society, we carnot be guidedby what is economically efficient. To do sowould be to deny our humanity."

Guided by R6n, a genuine leader leadswith sincerity of intent and exemplaryperformance. His [her] interpersonal re-sponsibilities extend to associates, em-ployees, customers, and his [her] profes-sion as well as the community at large.Rdn demands that "one must not considerwhat benefits oneself as benefit; one muststdve for benefits that will benefit ah un-der the heaven." Then the leader will in-spire the loyalty andtrust of others whichis indispensable to effective leadership.

Y6ngY6ngis courage. To think theunthink-

able and to act on such thinking is )6ng."Break down outdated thinking in orderto bring in new thought," represents thespirit of Ydng. To begin a new beginningafter suffering adversity is \6ng. The criti-

cal element underlying all these defini-tions of \bng is this Take t' l measure ofdanger ond risk. Take decisioe nction t0 meetthe chnllenge. Without this element, alldegenerates to recklessness.

We find a good example of )tng insuccessful leadership in Chester Carlsonand Joseph C, Wilson of what is nowknown the Xerox Corporation, manufac-turer of the Xerox copier This piece of

office equipment-made by Xerox andothers-has revolutionized communica-tion. We cannot imagine an office run-ning its operations any'lvhere in the worldwithout this machine. In fact, Xerox hasevolved into a new word in the Englishvocabulary-to "xerox" is "to copy."Along the way, Xerox Corporation grewfrom an obscure photographic supplycompany in Rochestet New York, to amulti-bill ion dollar and multinationalgiant corporation.

In 1938 Chester Carlson applied thetechnology of xerography to transfer animage on to a piece of paper H e offeredhis invention to several leading corpora-tions. Everywhere he wenthe was tumeddown. One major reason that Carlson'sinvention failed to gain support was thegenerally accepted wisdom that it was tir-thinkable companies would spend thou-sands of dollars for a piece of equipmentjust to replace the penny-a-piece carbonpaperl

Undaunted by his failure to gain sup-port, Carlson persisted in his search.Evenhrally Carlson's invention came tothe attention of Wilson, who had inher-ited from his father a photographic sup-ply of company in Rochestel New York.Wilson hired the best legal minds to ad-vise him on the perfection of Carlson'spatent. He consulted the best scientificexperts on irnaging. Wilson took fullmeasure of marketingrisk by seeking themost innovative sales ideas and strategieshe could uncover That led to a market-ing strategy that was unheard of at thetime-leasing the machine based on us-age. Just a few pennies a copy. No differ-ent from paying for carbon paper! In 1960the first Xerox machine was brought tomarket. The rest is history

Chester Carlson began a new begin-ning every time he met adversity. JosephC. Wilson dared to think the unthink-able-a massive machine to replace thelowly carbon paper. He took full meas-ure of thb danger-the modest resourcesof the company he had inherited couldbe exhausted before the machine came romarket -and the risk of potential chdl-Ienges to Carlson's patent. As a Chinesesaying goes, "Every a thousand consid-erations of a sage may yet miss a point."He faced competition from long estab-lished companiesbacked by strong finan-cial and marketing resources. In the end,

OcroBER-NovEMBER 1995 . THE ASIAN MANAGER

0nlcttT woRKGRoup tEtvER'": nEAtlv, ntAtly tilptE yEr vERy, vERy powtRtul.

OracleT Workgroup Server replaces SQL database complexity with point and click simplicity.

Pretuned andpreconfigured forresults rightoutofthe box, OracleT WorkgrouprM Server is the ideal

database for workgroups frorn two to twenty-five. Best ofall. it's 100% compatible with all leading

-Iutllitliln Windows@ applications and tools. Add a powerlul anay of graphicaloar-

-;--'- .' rE-l

.-'- := administration tools plus OracleT's blistering speed and infinite scalability

,i]ir|

r r - . * l rsq

.$d.-re!!&-

€=::- -, 5 (pc MAG. Editors' choice). and you have an

,.=,-"*_g! *l4b,* *...�!+ -'-

.-. .. competition may promise, but can't deliver.: " o : :Sinnle checkhoxes & nick listsnoke odnuislrolu eosl

f ri enllt gru phic s i ru1ic at eJtJ/ga.t s/dlr.r.

oRACrr SYSTEMS (PHIUPPIMS) INC.l8/F. Pacific Star Building. Sen. Gil J. Puyat Ave, corner Makati A!enue. Makati. Metro Manila. 1200 Philippines

Tel . No.8 l2-1551 r Fa.r No. 815-2155

z$"o ORACL€Enabling the Infornation Age

he took well-calculated risks and decisiveaction. Two short Chinese proverbs sumup very well the Ybng in Carlson andWilson:

"Fully cognizant of the danger yetundaunted-that is l5ng."

"lf you don't venhrre into a tigress'den, how can you get her cub?"

YdnYi{n is discipline. "lf there is no ruler

nor compass, you cannot form squaresor circles." In the Chinese cultural hadi-tion, discipline starts at the top.There rs noroom for the leader to eat rice while ask-ing others to subsist on chaff. Here areseveral reminders on Yin from classicalChinese literature.

"Lead by your own example.""Correct your faults if any; reduce

your efforts if there are none.""Discipline and cultivate yourself,

then you can keep order in your house;discipline and secure your nation, thenyou can bring peace to all under theheaven."

We may recall that durhg a period inthe late 1960s. Hong Kong experiencedgreat tumoil punctuated by daily acts ofviolence in the strcets. As the head of myfamily, I had responsibility for the safetyof my aging parents, my wife, and myyoung children. As the head of my com-pary, I had the obligation to offer my staffand their immediate families some waysto cope uhth the crisis. Some advised meto take refuge elsewhere, some advised meto stay and wait for the storm blow over.

To luae or to stay? Before I made mydecision, I sought out the best informedminds on Hong Kong and neighboring re-gion for their objective assessment of thedisturbances that were so threatenins toHong Kong residents. With careful delib-eration, I came to the conclusion thatthose acts of violence were randorn andlocal. I decided to stay.

But what if rny analysis and conclu-sion were wrong? I must prepare for a fallback position should violence in HongKong persist.

Iirsl I persuaded my parents to leaveHong Kong. Then I explained my deci-sion to my key staff rnembers. Those whoplanned to take refuge elsewhere wouldbe offered some means to do so.

Those who decided to stay would be

16

provided with the same escap€ route thatmy farnily and I would take in case mybest judgment tumed oui to be mistaken.We put in place our escape route: Twosmall boats anchored in Hong Kong har-bour and a larger vessel waited in theopen sea near Hong Kong. The ships werefully staffed and well-stocked with pro-visions. I remifted abroad sufficient fundsas a rainy-day reserve for ny family, staff,and ihefu immediate families. Thus pre-pared, we carried on our daily lives in asnormal a fashion as possible under therather chaotic circumstances.

Gradually, stability and calm rehrrnedto Hong Kong. The calculated risk I tookin deciding to stay proved to be conect.But reaching that decision and having thediscipline to stay the course were notwithout fear or pain. l{hat gave me theshength to manage the crisis were the fivesimple characters rooted in the Chinesecultural tradition-Zhi (wisdom), Xin(credibility) R6n (compassior! interper-sonal responsibility), )6ng (courage), andYrin (discipline).

0n Suceecelul SuacesslonSuccession is difficult. According to a

recent suwev "Farnilv conholled enrer-

prises account for one-third of all compa-nies in the Fortune 500, anything between75 percent and 99 percent of all compa-nies in the EC...a mere 17 percent of start-ups survive into the third generation." Inanother report "Only 3 out of 10 such[family] businesses survive into the sec-ond generation and only one oui of 10 into

the third."Still, it is a universal desire of found-

ers to pass control of their businessesalong family lines. How do we prepareourselves and our heirs for a successfulsuccesion? That is a complex question forwhich we do not have easy answers.However, we can draw on the Chmesecultural tradition for lessons to guide usfoalard successful succession.

First, preparing for succession is aIong- term commitment. The founder hasto commit time and enengy to prepareand to nurhrre his [her] heir for succes-sion. The preparation should begin withcultivating the heir apparent's interest inthe business at an early age and to pro-vide opportunities for him [her] to observe both the successful and the unsuc-cessful endeavors of the founder In thisway, the heir apparent will leam to un-derstand and appreciate what the Chinesesaying describes as, 'The pain and hard-ship of founding an enterprise."

Second, the heir apparent will benefitfrom working for other firms for a fewyears before joining the family enterprise.In the outside world, he [she] will be sub-jected to "ruler and compass" and somehard knocks along the way. As the sayinggoes, "One must experience the hardestof hardships in order to climb higher thanthe high." In the process, the prospechveheir will leam the perils of anogance andlhe value of pntience, persmuance, and mod-esty about his [her] uun knmoledge and ex-w$e.

Third, after the heir apparent joinsthe family firm, he [she] should begin ata low level and gradually work his [her]way up the ladder in the organization.That will afford him [her] the opportu-nity to learn ihe business from the groundup and to be acquainted with staff at alllevels. He [she] must work to gain therespect and loyalty of the other employeeso that he [she] can lead them effectivelyin the fuhrre.

The founder has to make sure that theheir apparent eanrs his [her] promotionsto greater responsibility in the firrn. Toprepare the heir apparent for the role ofthe chief executive officer, the founderwill be wise to delegaie responsibility tohim [her] gradually and only one sectionor one division at a time. Allow him [her]roorn to make mistakes but make sure thathe [she] Ieans from his [her] mistakes

OCIoBER-NoVn,BER ,1995 . THE ASIAN MANAGER

"Failureis the mother of success." It is farless damaging to the enterpdse that theheir apparent makes mistakes and learnsfrom them bqfore he [she] takes over a topmanagement position.

The founder must make it very clearto the heir apparent that unless he [she]has a proven rccord oI exemplary pet-

formance over a long period of time , he[she] cannot look forward to taking overthe enterpdse. This will be difficult andoainful for the founder to do butit is nec-essary in order to protect and preserve aviable enterprise. We understand that thesuccess of the enterprise is crucial to thefounding family. But we must not forgetthat success of the enterprise is also criti-cal to hundreds and thousands of em-ployees, providers, and their familieswhose economic well being depends onthe enterprise.

Fourth, the founder and the youngergeneration have tosharea romnor vision.If the former wants to focus on shippingwhile the latter insists that telecommuni-cation is ffte future, the disagreementcould cause such tension in their relation-ship as to work against a successful suc-cession down the road. The prospectiveheir should have the wisdom to learnfrom the invaluable experiences of thefounder in planning for new initiatives forthe enterpdse. In managing the enter-prise, he [she] will be well advised to fol-low the Chinese saflng, "lt is sufficientto eat the way a silkworm feeds itself, notthe way a whale swallows its prey; proceed steadily bui ever forward, then pros-pedty for Benerations to come will be as-sured."

Fifth, where there is conJlict, resolu-tion has to be based. on mfiual rcspect,The founder has to allow open and ensydialogue with his [her] prospective heirThe latter has to have lhe patierce andthe wisdom to take an honest measure ofthe limits of his [her] expertise. In thisway, compromises can be rnore easilyreached.

Sixth, when the heir apprent hasproven his [her] abiliry to lead the fam-ily enterprise, then it is time for thefounder to follow the sage advice, "The

courageous man knows when to stepback." He [she] will then assume the roleof a senior advisor. The founder mavchoose to continueas chai'rman or to takethe oosition as chairman ofthe execuhve

comrnittee of the board of directors of theenterpfise. His [her'l invaluable experi-enc€ will serve the new management wellboth as a sounding board for new ideasand strategies and as a check-and-balancemechanism. Such a timehonored role ofthe founder has been long practiced bymaior co{porations in the United Staiesand Europe.

To assure a smooth and successfulhansition, the heir apparent will be wiseto follow a well-known Chinese prov-erb,"When you drink the water, think ofthe source." Acknowledge in words andby deeds the contributions of the founderand his [her] senior manaqement team in

the making of the enterprise. Respect theircounsel. Value their experience. They arepriceless assets for the younger genera-tion to have and to hold on to as he [she]endeavors to lead the enterprise to newheighis of accompishment.

Seventh, the heir apprent needs toguard against the siren call that a newtrend always represents advancementand that a fle?, team is necessarily moreeffective.ln the annuals ofbusiness thereare many examples of harm and damagedone to enterprise when incoming man-agementindiscriminatelyreplaced semorstaff with new people iust because it washis [her] righi io begin with a new can so-called "clean" slate.

In the Chinese cultural tradition, it isnot the incoming management's rightsbut his [her] responsibility to the founder,to the long-time associates and employ-ees, customers, suppliers, and to the com-munity at large that must take precedence

over any other priority. Building on thestrength of this mutual bond, the heirapprent can and will eam their loyal sup-port. He lshel will reap rich rewards fromthe wisdom and the steady guidance offounder and the hard-eamed experiencesof old-time staff and employees. Both willgo a long way to guide the heil apparenttoward the grand prize: a successful suc-cession and a legacy he [she] can pass onto his [her] heirs with well deserved prideand joy.

ConeluslonIt has been well-understood among

informed men and women both East andWest that the humanistic character of theChinese cultural tradition has been a ma-jor driving force behind the "East AsianMiracle."

I have attempted to present the lessonsfrom this rich cultural hadition that haveguided me and my peers over the last fi$years. We are eager to pass our legacy onto our heirs and their children. They havethe benefit of a Westem education withsolid background in science, technology,and disciolines in social sciences and hu-manities. By opening their minds andhearts to the timeless values rooted in theChinese cultural hadition, they will bewell prepared to accept our legacy andbuild on what we have built.

The "Easi Asian Miracle" has yetgreater frontiers to conquer. Our heirsmust be at the vanguard of our commoneffort to bring ever growing prosperityand advancement to the lands we ethnicChinese now call home. This is the chal-lenge that confronts our next generation.They have our firm support and ourwarmest blessings as they go forth to meetit. It is our fervent hope that we have pro-vided them with the foundation and rc-sources to take up the challenge. But ofall the things we can bequeath to them,that which we hold most precious, andwhich will be most valuable to them, isthe rich fund of principles, values, andlessons built up by generations upon gen-erations of Chinese before thern.

Fnnk Tsao is the lounder and Croup Chaitman ofthe IMC Group of comrynies. He u,es auariled theIitle "Tan Sri' in 1973 W the Ktng of Mnlaysiauoon the recofifiefialdtiotl of the Fecleral GoLvm-fient in recognitiofi of his contriblttions to the eco-nomic deoelopment of that co ntry.

17THE AS]AN MANAGER . OCToBER-NoVEMBER 1995

B\' [ 'ROFLssolt RE\E T. Do\]r \co

Howto FindHidden Waste

,r rcsuii of hicht'r costs ,irrr1 l irt l cr ntarket:harcs .

lh t o thcr t i i t c t o i n , r : te n i l l b t on. l ( . . r l r l \ . , r ' ( i , l ' l r \ , r \ \ \ . . 1 , r . r 1 , ' f , r . i , ' r ' -hivr ,r ir 'nclcnc\ to hirle anrl ,rggra\',rtequ,rl itv problcms tlt ' ftcts, scr,tp, antlre\\ 'ork.\\ irstclul procc!tes,trlcl io lt acl

l inrcr l ikc nr,r 'rut,lcturirlg c\,clr t i l l l f 5,rndord(,r lroctssjng i inrcs. Thc rcsult \\ ' i l l b(., 1 , l r r , . l . l ' l r r ' - r , - r ' , i l , ' r r ' ; r r ' , r i t i r r ' 1tinres. l)oor tlu,rl i tr ' ,rn11 puor dclir erv tlueio \\ ' ,rstL. !\ ' i i l L.ad k) Lru cr nrarkets shart',lrsi cuslonrer:, anel loilcr proiits. Tht bot-Irn l inc ol al] rlaste is that ihtrc rvil l Lrc

LOW PROFTTS I

LOST ET SHABE I

/I\4ARK

MANAGEMENT UPDATE:, ,l(AgEN,

nfri

T ) r ' , l r l . r l ' i l i l \ L h r . r ' ' , 1 1 1 1 1 ' 1 1 . , 1 . - , ' , , ,

l - , ' t , r - 1 . . . \ , r l l . . ' n t l \ . r n \ L , ' l t l . l r \I n r . r ^ t ; t ' r ' r ' \ . ' t . i l , , . r r r - n ' , r , r. r f r l r r ' . . r n r r ' l i r n , l l t , . l , t r ' 1 r r - l r . , r \ , r lcoulcl be m.rking more than lru lost, thushiclins the problc'rr anrl opportunit\ tol i l r r l I n l r . l r r r ' t r L l r l l t ( l r . l l t U L r . r r , l r r r r r ' ', ' r r \ L r \ \ j l l l ; \ ' ' r I l I ' r , ' l l l t . r r ' - , t - r l l - , , ' t ' -

gra tu l , r t ion and con ' rp l , rccncr sc t rn .Cl't.tncts are, noborlv i lr nr,rn,rgcrrlcnt r\ ' i l lsuspect or in\'estigatc ,rnr rr,rstciul op-eratior ,rnd clccisjon marle in the |rror\'t'ar.

flffocls 0f llasle\ \ , t - 1 , t l i l , ' l . r r l l t , ' . r - ) r , , , t - - t . I t t -

ablc in tht' Iont run. I l ig)r s.rlcs, nr,rrktlshart, ,rrrcl intlustn le,rrlership i l i l l bt\ r r \ l c ( l ( \ ! r l U . r l \ L ' t t r ' t : t r L l t r L r . t r r . l l t rL u r . i r , ' 1 , , 1 . I l ' r ' n r , . - r l | I n r \ i l i . l ( L l l L . t \ ' lrVaste $'i l l be on co:t. Hithcr \\,rstt ' meauI t t t l t , r r t t r i l ' r , \ l r t , 1 r , " r , ' . - l - ' , r - , r \ ' r . r 'costs. !Mstc bccorrc intr{r. lk'd inlo Dlattri,r l anrl l.rLror costs Olerhcad iri l lsimil,rrlv r. ise. Ino itablr', products u hrcnclo not halt t lastcfir] pl[esscq i| i l l gctthtir shart ol overht'arl u,rstc,tI Ioc,tte,.1fronr u,rsteiul prorluct hncs. Br' ,rppli inrihe cost plus formula, hightr costs mcarrshighcr priccs. \ larket slrare uil l shrink,-rs,t result oi the troclus of lour pnrc-sensiti |e clrstomcrs. I 'rotits u i l l shrink as

I 8

WASIE

POOR QUALITY

SLOW DELIVERY

O! r ' t , , r r \ . , \ \ t , . 1 , 1 " . , r . I I t L - \ : \ \ N l r t t t . t i

no bottom, just a line.Waste or, nrrrdrl inJapanese, canbe de-

lined as anvthing unnccessarv used ordone ir.r the process of coming out rvithanv output. This output can be a prod-uc l , re r \ i (e , o r in l i r rmat ion th r t i . retiuired or ordered by a user or custonerWaste can be a non-value adding input,process, or product feature. Value analv-sis and value engineering (VA/VE) ad-dress thefirst and third items. \A/VE aimto eliminate unnecessarv product or de,sign features, and inputs or ran' mated-als. Process wasies or unnecessarv activi,ties or steps are examined and removedbv the industrial engineer's rvork simpli-f i ca t ion techn ique anL l bv the bu . ine . .process reengineering (BPR) approach.

Obvious and hidden $ aslesThere are tu'o major categorics of

waste thai arc useful in \,vaste nanage-ment:

l. obvious $.aste2 .

Japanese companies, knou'n for lealrand mean manuiacturing svstems, havediscovered that the second tvpe, hidden\ \ l r . le r ' r \ \ , i - te $ t don( ' i \ee . i5mrrCI tb igger than the obviolrs wastes. Most obvi-ous waste is tdvial and easilv climinated.The problem is thc hidden waste that ishard to spot and thereforc hard to stop.The lesson is that companies should dc-yote their effbrts and resources in uncor-er ing and ident i f v ing h ic lden las tc ,r . r lhc r than r \ d r te the i r t rmc l l r ( ' i i th l ingobvious wastes. Hidden waste is not nec-essarilv unseen. Thev are visiblc, but notnormallv rccognized as rvaste. Therc arefour tvpes of hiddcn waste:

1. r,vaste from overproduction2. waste hom unnecessarv processes3. \'\'astc from unnecessary transport4. tvaste lrom unneccssarv \,\'aiting

llhste from ovcrprodletionWhen defecdve products pile up, r.r,e

eas i l t reco8n iz r ' l l te .e . t . , ' b r iou ' r r . rs t r .and raise hell. When good protlucts pileup . t \ ( ( . r l l t l l e .e in \ i n to rv . rnd ( , ' t inu(\r'ith oru work routine as if nothing unu-sual has happened. lronically, unnecessary invcntorv is one of the biggest hid-den $'astes in anv conpanv and probablvmorewasteful than defects. We set. inven-tory, but we are incliffcrcnt to it and recognize it as curent assets, something of

value. Unless inycntorv can be sold orused right a\'\'at waste is incurred con-t inu , ' r r rh in ie rn r . o f ho ld ing c , ' : r : : inierest, space, insurance, manp,lr,r'er- andobsolescenct or spoilage cost. These }rugccosts are carried in the books as "normal"

operating expenses as if thev are neces-sarv in running the business. Just-in-timemanufacturing svstt'ms and the fastfooclbusiness havc debunked this assumption.Custolners can be sen,ed and satisfieclrth i lc c,rrrr ing, a nrinirnunr rl n, ' t zer, ' inventorv. Do not be deceiyecl bv ncatlv ar-ranged stocks in shelves, and warehouses.These mav be l'astes h.rrking for vearsand eating your profits a\\'av Invcrltorvrvastes can be in thc'fonr ofexcessive pur-chascs of rarv materials and office sup-pJ ie . . rn t l o \ ( rp roduc t io l t o I r r , ' rL - in -process ancl finishcd goods. Thereare also$'astes in issuing vour cmplovees toomanv pencils, paper, punchers, and othersupplies that thcv do not need or cannotuse right a\\'a\'.

ll:rslr. fronr [nnccossar] proe-csses

When an enrploycc comes to lvorkand sits clou'n thc whule dav behind his

clesk cloing nothing, l'e easilv recognizelh i . . i tu . r t i r 'n , r . \ \ , t . t r , anJ . lu ick lv rcpr i -mand him. But the next rlari he comes tou'ork, picks up a pen and slarts $'ritingsomething, anvthing, the rvhole dav Wecall this t 'r 'cnt "work." Weleavetheerrrplovee akrne and rnav e\.en tap him at thcback saying, "Keep up thc good work."We don't bother t0 ask what he is wdt-ing, rvhv and for n hom. We confusc mo-tion with work. If there are no users orreaders of his $'ritten output, then all hisefforts are wasted. There are more wastein peoplc cloing somcthing, then in peo-plc'rvho are not doing anvthing. ln thefirst example, the davdreaming emploveeis just wasting tirne; in the second, thebusy empkrvcc n'astcs both time and pa-per RareJy clo emplovees davdrcam thewhole dav; most enlplovees do some-thing, or "nrove" thc rvhoic dav. Under-neath this busvncss lies a vast potentialof hidden u'aste to Lrncover. Unneces-sary processes, opcrations, steps, activi-t ics abound in the hustle and bustle of atvpical working dav in both the office andfactorv We teel goocl if we see peoplebusy doing somtlhinS, whether or not itadds value to the product or service. We

llJlStE trEJtSEJgIEtrtgLlrgIEIEtriE

Tr rE AsrA\ MAN,\cIR . OcrotsER-NovFNTBER 1995 19

confuse efficiency and hard work withef-fectiveness. We see employees and man-agers afflicted with AIDS or As lf DoingSomething, and this is infectious.

Itaste fi'om unnecossarytransporl

When an employee walks back andforth thecorridor or takes the elevator upand down the wholeday, we call this situ-ation loitering, and reprimand him rightaway. Of course, rarely do we see thrsobvious waste. When the same employeewalks back and forth, this time carryingan envelope (possibly empty), we call thisactivity "work" or "transport" of docu-ment. We don't bother to ask why he'stransporting it. After analysis and workflow simplification, maybe there is noneed to transport the document at all, ortransport to a closer location would besufficient. In much the same way, if wesee an empty company truck or vehicleplying its route back and forth, we rightaway call the transport waste. Ifthe vehi-cle does the same thing, this time loadedwith goods or people, we are easily de-ceived and call the process "necessary

transport." We transport people, goods,materials, supply, documents, checksback and forth everyday. We see this ac-tivity as productive work because, again.people look busy. We do not see the hid-den waste in unnecessary transport ofsomething. In most cases, we could notfault the carriers - empJoyees, drivers,haulers, messengers. They are just com-plying with the wasteful systemsand pro-cedures designed by management.

WASTE

WASTE

WASTEWasle from unneeessarywelllng

The most subtle or most hidden wasteis unnecessary waiting. We waste tlmeeverydaywaiting for something or some-one before we could start an activitv. Wewait fordelayed raw materials orsuppliesto start production. We wait for latecom-ers to starta meeting. We wait for delayedtransport (cars, elevators, carts) before wecan move things orourselves. We wait formaintenance to fix broken equipmentbe-fore we could resume our work. ln thesitualion. above. we obr iously wa.te timeand our time is wasted by somebody else.Whatisdifficult to spot is the hidden typeof unnecessary waiting.

If an employee comes to work andstands up in the middle of the office orfactory the whole day staring into the dis-tance, we immediately call his attentionand ask him why the hell he is doing whathe doing. This obvious waste of coursevery rarely happens. But when the same

WASIE

WASTE

employee stands up the whole day, do-ing nothing, in front of an equipment(machinerv, fax, printet copiers, etc.) weconsider this "stadng" and "waiting" ac-tivity "work." Weare deceived into think-ing that he is needed there to watch theequipment, when in fact the equipmentcan run by itself without his presence. Inmany factories, lve see workers "man-

ning" equipment when in fact they arejust watching and staring at them. Unnec-essary waiting can be minimized by rnak-ing the equipment faster and more reli-able, or assigning employees severalequipment to handle.

Spotting lvasleWaste comes in manv sizes - big and

small, and magnitudes - trivial and dra-matic. They come in many shapes andcolors. Not all waste is black, ugly, anddirty.lt is not always in the wastebasket.Waste can be bright and pretty. Do notbe de.eived bv appearance,' and "izes.Let us look for the waste that we do notsee - the hidden waste. Before we canstop wastes, we have to spot them first.ln fact, recognizing waste is more diffi-cult and important than eliminatingthem. Many managers find it most diffi-cult to admit that there are waste in theirrcspective departments. Finding waste is80% of the solution. Failure to eliminateuncovered waste, or tolerating it is tan-tamount to dereliction of managerial re-sponsibil i t) ' . Remember that in waste,there is wealth.

Pk)f. R.]t( T. Dot,ti g. is i frll-t\tp professor al

lht As| l t lns l i l I / l t : of Mdtny ' , ] ( 'n f ( AIM)dnLl lhthol,l, r af lh. Sirt DnrL,v Chnir fot MinLtltt.ttLli,S. i iz' li'd./r.s olrr,?l ir, ts n nngc?t(fi t , totnl Llunl -

iIv k'/tttttllcn:r,nt , scIt,iIt Ll(Iii,tru , ntd IitotnRc lenI

t ltlot ,tlat t1)' t svsl(',15.

WASTE-**WASTE

WASTE \7ASTE WASTEufnsrc WASTE

WASTE WASTE

20

WASTE WASTE

OcroBER-NovEMBER 1995 . THE AsrAN MANACER

Your essentinl guides to doing business in

CHINA

China and Hong KongA reader service of The Asian Manager's Bookshelf

Accounting and Finance in ChinaAn essential overview of accountancy systems andpractices in different types of enterprises in China.This fully revised and updated edition examinesrecent radical changes in the regulatory fiameworkof accounting in China. Special attention is givento accounting forjoint ventures. the business con-tract system and also government accounting.

us$64

Foreign Exchange Controls in ChinaA new book of tried and trusted strategies fbr bal-ancing fbreign exchange and repatriating profitsfiom China including financial transaction-basedstrategies, utilising joint venture/FIE leverage, trans-actions involving SWAP centre and the PBCD.

US$64

Intellectual Property andTechnology Transfer in ChinaThis book provides comprehensive informationconcerning legistion and practical solutions fbr pro-tecting the intellectual property rights of fbreigninvestors, as well as providing details concemingthe system of technology transf'er and licensingwhich regulates the transferoftechnology to China.and the systems for protection in this regard. US$77

PRC Listing Manual (looseleaf work)PRC Listing Manual is the most comprehensivework of its kind. providing an in-depth analysis ofall the issues that need to be considered when list-ing a PRC company overseas. US$592

China Investment Guide (4th edition)This well-known publication includes coverage ofjoint ventures, the investment environment, and lawsand regulations of all aspects of businesses. lt alsodiscusses the developing legal andjudicial systemsand provides statistical information on provinces,munic ipal i t ies. autonomous regions and coastaleconomic zones. This fourth edition includes prom-ulgated laws and regulations on all aspects of for-e ign investment in China.

The PRC Employment Manual(looseleaf work)The PRC Employ-ment ManLnl provides you withall you need to know about employing and dealingwith PRC staff in one user-friendly guide. Thereare also translations of the most imDortant PRC la-bour regulations. us$478

HONGKONGEstablishing a Company in Hong KongThis book explains in detail the legal and practical

requirements for the fbrmation and operation of aprivate limited liability company in Hong Kong. Itcovers what a company is, the various types ofcom-pany available, incorporation procedures and a sum-mary of the standard provisions to be expected inthe Anicles of Incorporation. It also provides a sum-mary of Hong Kong company law and the HongKong tax system which are invaluable for both new-

comers to the territory as well as business peoplealready established in Hong Kong. US$35

A Guide to Public Flotation in Hong KongThe new rules covering listings in Hong Kong wereintroduced in December 1989. Aclear understand-ing of these rules and how they affect flotation isfundamental to the proper development of HongKong's securities industry. US$229

The Hong Kong Takeovers andShare Repurchase CodesThe first book to provide a detailed analysis of therecently revised Hong Kong Takeovers and Merg-ers Code and the Hong Kong Share RepurchaseCode. The authors not only highlight the signifi-cant changes to the codes and the complete back-ground to them, but also emphasise the subtle butimportant differences between the Hong Kong andLondon Codes. US$79

TO ORDER. FILL OUT THE RESERVATION FORM BELOW OR SEND US YOUR NAME. TITLE.COMPANY. ADDRESS. PHONE AND FAX TO OUR E,MAIL/INTERNET ADDRESS : tam@aim.edu.Dh

Title of the bookAccounting and Finance in ChinaForeign Exchange Controls in ChinaIntellectual Property and Technology Transfer in ChinaPRC Listing Manual (looseleaf work)China Investment Guide (4th edition)The PRC Employment Manual (looseleaf work)Establishing a Company in Hong KongA Guide to Public Flotation in Hong KongThe Hong Kong Takeovers and Share Repurchase Codes

T O T A I ,

US$@Book Qty Total Price in US$

YES I I WANT THE BOOKS I TICKED ABOVE. I ORDERED A TOTAL OF - BOOKS AI THE TOTALPRICI1 OF US$_. I UNDERSTAND THAr I WILL BE CHARGED 20Ea OF TOTALCOST BOOKSTO COVER COURIER AND SERVICE FET1S.

Enclosed is rny check fbr US$- (Checks in Phil ippine peso and otherASEAN cunencies acceptable).

PIease charge my international credit card:

Visa Amex Mastercard Diners Others tpr"n." 'p""'ry1

Card# Exp. Date:

Si gnature

Delivery address:

Name Company Position:

Address

Country Telephone: Faxno:

Faxyourorderto(632)893-3341 or 817-9240orcal l892-4011 Attn:Ms.VanessaM.Jabal lassend your check or credit card details to The Asian Manager Bookshell G/F AIM Building,Paseo de Roxas, Makati City. Philippines.

| *PI.EASE {LLO\\ 4-6 WEEKS FOR DEL|VERY OF BOOKTS,. bb.t,ps I| _ _

us$220

Or123

z lTHE AsrAN MANAGER . OcroBER-NovEMBER 1995

Milton and Marketing

Editor's nole: Marketing managersdoing battle in Hades? Frankie Ro-man paints a aiztid, humorous anal-ogy of a marketing meeting in HelL

his issue's marketing updatepromises to be quite differentfrom the previous ones, for three

reasons: (1) The typical "update" reviewsmarketing issues in a current context, usu-allv through magazine articles written bypractitioners, and in recent book by acad-emicians, in order to derive useful lessons.This particular update tries to extract les-sons by exploring the past, ratherthan thepresent. (2) The usual update offers anexistential,"flavor-of -the-month" ap-proach, by studying what is current, andperhaps provides little erudition. On theother hand, this update sug-gests timeless lessons derivedfrom literature. (3) Finally, thisupdate, instead of evaluatingissues, seeks to illustrate (a)thebasic options for a market-ing shategy under a crisis situ-ation, and (b) the techniquesfor making a good marketingpresentation. The exampleused in this update is a clas-sic, rather than a contempo-rary illustration.

One other minor distinc-tion: This update quotes ftom

22

By PRoFESSoR FRANCrsco L. RoMAN, IR.

How manyrnarket'ingnTanagersact out ofspite ahmfaced with

only two sources, rather than the usualmenu of several authors: (1) Book II ofParadise Lost, by John Milton, 300 yearsago, and arguably England's greatestpoet, if one splits the honors, by regard-ing William Shakespeare as England'sgreatest playwright (and poet). (2) An-thony Jay, a former BBC (British Broad-casting Corporation) executive producer,consultant, and the aulhor of Managementawl Machiaaelli, wdtten almost 30 yearsago. The discerning readershould be ableto distinguish between the two authors.The Jay quotations obviously mean tocomplement the Milton quotations.

One can not do justiceto Parndise Lostin one paragraph. The focus of this up-date is on Book ll, in which the epic poemdescribes, the battle between the forces ofgood and evil, between the ArchangelMichael and his coho s against Satan and

his demonic legions, andthe latter's expulsion fromHeaven into Hades (which,without grace and God, isnow a Hell-hole). Satanemerges from Paradise Lostas the much more fascinat-ing personaliry and the up-date describes the after-math of losing the battle,from the losing side's per-spective.

A council of demonsmeets in to discuss theirfate. Consider the situa-

tion:the audience ofthe defeated and dis-pirited represents a daunting task for anymarketing man making a presentatlon.The main task is to translate Milton intomarketing terms. The situation is akin tothat...

-..of a corporation trying to formu-late a new policv after taking a ter-rific beating from its chief compett-tor and being driven of the market ithad previously depended on.

In this context, a number of market-ing presentations are made, by differenthigh-ranking demons, each one offeringa different approach or solution to theproblem. The first person (or demon) toaddress the audience is Moloch:

...Moloch, sceptered king, stoodup, the strongest and the fiercestspirit that fought in heaven, madefiercer by despair.

"...of God, or Hell, or worse, hecared not, and these words thereaf-ter spoke: (43-50)

My sentence is for open war: ofwiles, more inexpeft,l boast not. (51-52)

...Let us rather choose, armedwith Hell's flames, and fury all atonce over Heaven's high towers toforce irresistible way. (60-62)

...What fear we then? What careweto incense His utmost ire? Which

a, setback?

OCToBER-NoVEMBER 1995 . THE ASIAN MANAGER

An audienceusually runsON A LIFOmental modn,that is, the lastthought thatthe preuiousspeaka saysbecoma thefirst orfinalthought intheir mind,s.

...goes on to talk in emotional lan-guage about fighting back: he is thecl assic i nsta nce of th e u n i nte I I i g e nLu n i mag i n at ive, bu I l-at-the-g ate ex-ecutive with masses of drive but nobrain; he is contemptuous of thosewho want to think and plan. ln otherwords: "Don't letb stop and analyzewhat went wrong or reconsider ourgeneral policy; let's just raise morecapital, re-equip the factories, boostour advertising, train more salesstaff, and try again." Most firmshave a Moloch, and he is usuallv aninvaluable asset so long as he istoldexactly what to do. He uses energyand emotion as a substitute forthought, and instead of thrashingout policy, picks out the simplestsolution because it is all he under-stands.

Belial is the second speaker. He has his ...highly intelligent, and althoughown, particular skills: his critics would call him a pessi-

mist or a defeatist, he would prob-...On the other side up rose Belial, ably call himself a realist. He pro-

in act more graceful and humane; poses an alternative plan, which in...But all was false and hollow; fact is not a plan at all: to acceDt the

though his tongue dropped manna, inevitable. ln other words: ',Letb ac-he could make the worse appearthe cept our defeat, accept that we're abetter reason, to perplex and dash small firm now and not a big

THE AsrAN MANAGER . OcroBER-NovEMBER 1995

to the height enraged,will either quite con-sume us, and reduceto noth ing our es-sence, far happierthan miserable tohave eternal being.(94-98)

...Which if not vic-tory is yet revenge."(105)

The presentation isthe go-for-broke type,and it can be inspiring.However, Milton, masterof motivation, has cap-tured Moloch's primarydriver: "Which ifnot vic-tory is yet revenge." Howmany CEOs or marketingsenior vice-presidentshave seen their market-ing managerc act out ofspite when faced with asetback? Moloch,...

m aturest counsels: For histhoughts were low

To vice industrious,but to nobler deeds tim-orous and slothful.

Yet he pleased the eaLand with persuasive ac-cent th us began: ( 1 08- 1 1 8)

Whatever his personal-ity profile, Belial is no ama-teur orator. He knows thepros and cons of being the"next" speaker Moloch hasawakened h is audiencefrom the stupor of their loss,and he realizes that an au-dience usually runs on aLIFO mental mode, that is,the lastthoughtthat the pre-vious speaker says becomesthe first or final thought intheir minds, So he must firstdemolish Mol-och's plan:

one...circumstances may one daychange and we may have a chance toget back again, whereas if we takeMolochb advise and fail we will notexist at all."

Moloch and Belial represent two op-posites of the stereotypical marketingmanagers- a lineoriented individual ver-susa stafforiented individual. The formersees only the marketing arena, and canonly think of going out to do the samething over and over again. The latter per-haps is overwhelmed by defeat and data,and lacks the former's fighting spirit. TheCEO/Marketing SVP must often weighthe recommendations frorn these types ofindividuals. But all is not lost. Ifany mar-keting unit has any competence, it willhave a Mammon- the third speaker, andan astute gauge of human (or demonic)nature:

"Suppose He should relent, andpublish pardon to all, on promisemade of new subjection?

With what eyes could we standin His presence humble, and recetvestrict laws imposed, to celebrate Histhrone with warbled hymns, and toHis Godhead sing forced hallelujahs;while He lordly sits our envied sov-ereign, and His altar breathes... ourservile offerings.

This must be our task in Heaven,this our delight.

Howwearisome eternity so spentin worship paid to whom we hate.:(236-248)

Mammon thus takes a different tackinhis presentation. Unlike Belial, whostarted by destroying Moloch's argument,Mammon completely ignores the previousspeaker, because he intuitively realizesthat no audience is ready to acceptdefeat,least of all marketing men (and women),who are people of action, accustomed toliving on the edge, and who are alwaysready to try anything which might havethe least chance of success.

Mammon instead grasps and buildsup the essence of an unstated idea in theminds oftheaudience, namely, tobe takenover by the victorious company, and im-mediately demolishes it:

Not for him the specious cant about

"First, what revenge?The towers of Heaven are filled

with armed watch, that render allaccess impregnable... " ( 1 29-1 3 1 )

Belial then proceeds to develop histheme:

"Heed my advise: since fate in-evitable subdues us, and.omnipo-tent decree the victor's will:

To suffer, which to do ourstrength is equal, nor the law un-just that so ordains... (197-201)

This is now our doom;...which ifwe can sustain and bear, our su-preme foe in time mey much remitHis anger, and perhaps thus far re-moved, not mind us not offending."(208-212)

Belialis the exactopposite of Moloch,brains without guts, Belial is...

23

"not being in the long term interestsof shareholders"; he goes straighttothe heaft ofthe matter, and voicesthe emotion which (whatever theofficecircular may say) is uppermostin the breast of every director (andmarketing manager) th reatenedwith a takeover by a victorious rival:the complete and utter humiliationof it. Many taken-over directors andexecutives i n defeated co rporati onshave learned what it isto sing forcedhallelujahs, and most would shareMammonb views about it.

Mammon's opening remarks thusspeak to all managers. More than that, heis the first to propose any kind of a well-thought out marketing strategy:

"This deseft soil wants not herhidden luster gems and gold.

Nor want we skill or aft, fromwhence to raise magnif icence...(270-273)

To found this nether empirewhich might rise by policy and longprocess of time in emulation oppo-site to Heaven." (296-298)

Mammon thus offers another option,in contemporary terms, to reengineer thecorporation by:

...developing the possibilities of Hell:" Let's staft developing the few prod-ucts we have left, and perhaps de-velop some more products alongthe same line, and drop the prod-ucts that we're being beaten on.then if we put our heads into it wecan be a big firm again, in differentlines."

The audience reaction is positive andinstantaneous:

As Mammon ended, and his sen-tence pleased, advising peace.-.(291-292)

...Whbh when Beelzebub per-ceived, than whom Satan except,non higher sat, with grave aspect herose, and in his rising seemed a pil-lar of state;... (299-302)

Thus far, Milton and Jay offer threemarketing responses to the problem of a

24

serious marketing setback- to fightback,to give in, to reassess. At this point, theissue moves from formulating strategy toimplementing it. And the tum comes toBeelzebub, apparently the Vice-Charr-man, and a demon of stature among hispee6.

Beelzebub goes straight to the point,and suggests:

...What if wefind some easier en-terprise? There is a place ...anotherworld, the happy seat of some newrace called Man, about this time tobe created like to us, though less inpower and excellence... Thither letus bend our thoughts, to learn whatcreatures there inhabit, of what

Rebuilding thecorporationfromthe ground upaftu a rnajorsetback might betbe unimaginatiuebut ultimately thernore successfalapproach.

mold or substance, how imbued,andwhat their power, and where theirweakness, how attempted best byforce or subtlety.

Though Heaven be shut. and Heav-en's high arbitrator sit secure in Hisown strength, this place may lie ex-posed..." (344-360)

Thus Beelzebub oleaded his devil-ish counsel, first devised bv Satan.(37&380)

Beelzebub is apparently in leagle withSatan, because he puts forward the chair-man's policy as if it were his own, so asto preserve the chairmdn's apparent im-partiality- a worthy tactic for anyonetrying to get a marketing plan through.There are pros and cons to being last tospeak, but the tactic of exhausting the

opponents' options and then offering thefinal option (based on LIFO, as noted)appears to work, at least in this situahon.So Beelzebub:

...proposes the fourth possibility:Notfighting back blindly, not accept-ing passively, not developing newproducts, but seeking out new mar-kets, and he suggests a preliminarysurveY.

Satan finally steps in as Chairman ofthe corporation, and as the final arbiterof the firm's marketing strategy:

Satan with now transcendentglory raised above his fellows, withmon-archic pride, conscious of high-est worth, unmoved thus spoke:(427-429)

" But I should ill become thisthrone, o peers,

. . . i f anyth ing proposed andjudged of public moment,

in the shape of difficulty or dan-ger could deter me from attempt-in9... (445-450)

While here shall be our home,...do what best may ease our presentmisery, and render Hell more toler-able; (458-460)

...while I abroad through all thecoasts of dark destruction seek de-liverance of us all. this enterprisenone shall partake with me." (463-466)

Thus saying rose the monarch,and prevented all reply; Prudent, lestfrom his resoluteness raised, othersamong the chiefs might offer now(certain to be refused what beforethey feared.

...and so refused might in opin-ion stand his rivals, winning cheapthe high repute which he throughhazard huge must earn. (466473)

And sb, the final solution, in a man-ner of speaking, is to go into the exportbusiness, by developing a new marketcalled Earth (and Man). The final sectionofverses is illuminating, and offers manylessons: Note that Satan himself, as anexample to all chairmen, personally fliesout to investigate and report on the newmarket, while others stdy behind to im-plement Mammon's scheme, which be-

OcroBER-NovEMBER 1995 . THE AsrAN MANAGER

" Are u)omen better in business than menT ""HouD did the top women executiaes

get to uthere they are? "

fldited by Dro{. Victoria Licuanan

\rO]VIENtNTplppiNf,Up6IN 6OUTtIfll\6Tl\6ll\

his book is a must have for anyone who wants insightful, in-spiring and informative case studies of highly successful womenentrepreneurs in Southeast Asia. Discover important researchthat unlocks the success secrets behind these notable women in

business:

Philippines: Socorro Cnncio Ranos, National Bookstore o Fe EspersnzaRodriguez,Burger Machine . Salud Santos Tesolo, Tesoro's r /ulie Gamboa,Milky Way Restaurant o Cora Jacob, Cojac International, Inc. * E/enaLim, Solid Corporation o Carmencita N ortnlez Esteban, Philippine Sur-vey and Research Center (PSRC)

Mafaysia: lenny Qua, Tip-Top Life Insurance o Annie Won.q, Interna-tional Fashion Training Centre c Let Lsn Lar, Federal Academy of Bal-1p1 o lennll Tan, Analabs Sdn Bhd . Farah Din, Executive DevelopmentCorporatioir, Sdn Bhd

Singapore: Dora Chan, Craft Print Pte Ltd o Cstherine Lan, FabristeelPte Ltd . lannah Lertinge. Jannah Levinge Personal Development Sys-tem School o lay Tan, Noel Group of Companies

Thaifand: Suppalak Ampuch, The Mall Shopping Center Co. Ltd. .Khunying Somsri Charoenrnjapark, Meridien President Hotel o KhunyingLersak Sombatsiri, Nai Lert Park Hotel Co. Ltd o Niramon Suriuasat.Thai Toshiba Electrical Industries, Inc.

fndonesia: Tuti Sundari Azmi,P.T. Aries Lima c Mutiara Djokosutono,Blue Bird Group o Gunarijah Mocftdle, PT Sunthi Sepuri o Netty B Rianto,Retna's Pharmacy and 24-Hour Specialist Clinic ' Marthi Tobing, PTAndhika Group

And many, many more!

"More and more women have gained a foothold in managerial posi-tions over the last few years. ...Nonetheless, Southeasi Asian womenmanagers are still a new breed. The road to success, especially in theAsian milieu, is fraught with difficulties imposed by traditional valuesystems. The average Southeast Asian woman manager must copewith conflicting demands arising from her role as a career executive

+THE AsrAN MANAGER . OcroBER-NovEMBER 1995

who must operate and compete in a male-dominated world, and as awife and mother fulfilling social roles determined by strong orientalvaiues and expectations.

"Thus, the pressures of becoming a competent and effective managerare often rivalled by the pressure to succeed in her role as the prover-bial nurturer." - fron the introduction by Victoria Licuanan, editor

To find out how these successful women entrepreneurs faced and over-come these pressures, buy the book!

To order, fill out the reservation form below or send us your name. title,company, address, phone and fax to our e-mail / internet address:tam@aim.edu.ph or cal l (632) 893-3341 or fax to 1632l, 917-9240

Yes, please send me _ copies of Prof. Victoria Licuanan's book,Women Entrepreneurs in Southeast Asia at USg20 per copy.(Please add US$10.00 for handling and courier delivery outside

, Metro Manila, Philippines)

Enclosed is my check for US$ _ (checks in Philippine pesos and otherASEAN currencies acceptable)

Please charge my international credit card:

Visa Amex Mastercard Diners Others

Please specify

Exp. da te

Signature

Delivery address

Name:

Company

Country: Tel: _ Fax:

Fax your order to 632-893-3341 Attn: Vanessa Jaballas or send your check Ior credit card details to The Asian Manager Bookshelf, G/F AIM Build- |

I ing , l2 . t Paseo de Roxas , Ma ld t i C i ty , fh i l ipp ines It - - -

25

comes a "fall-back" strategv Satan takeson the task but imn.rediately cuts off alldiscussion. Finallv, his forcefulness pre-vents the othet lesser chiefs, from belat-

edly playing the usual game of "one-

upmanship", once the direction is clear.This update from an unlikelv source

sti l l offers timely lessons: Consider thecomplexity of the marketing task in thisbrave neu'world ofopen markets, globalin te rd epenJ ence, p roduc t inno t . t t ion .and ease of entrv by competitors. Thisupdate warns the un$'arv manager thatmarkets are no Ionger secure, and a com-pany'. sh,rre of marlet can drop precipi-tously in a short period of timc. Further-more, globalization creates a trend to-wards buying market share rather thancompeting in the marketplace for it. So

the notion ofsinging "forced hallelujahs"to d ner! ma5ter i. nol loo,rl icn d porci-bilitv.

Finalll', this update does not endorsea strategy ofentering into the export mar-ket as the automatic solution to the prob-lem of a loss of one's market. lndeed, thebulk of Pnrndlse losf (after Book ll) goeson to describe the successful temptationbv Satan of Adam and Eve, and the clireconsequences of that act on Satan and hisminions; even the "fall-back strategy"fails before divine n'rath as Hades is lev-elled and the demons transformed toncar-animals. One of Milton's kev sub-themes in the epic poem is the consc-quence of pride, which Satan trcice-dem-onstrated: in believing thai he couldoverwhelm Heaven, and in being blind-

ed by pride and failing to do a PPA (po-

tential problem analysis)- what couldgo wrong. bv causing the dor'r'nfall ofAdam and Eve. Indecd. bv h inds igh t .after reading the entire epic, Mammon'soption might have been the most viable.A nervly defeated corporation might nothave th r i inanc ia l and techno log ica l ca .pdbil ity or even the appropriate organi-za l iona l cu l tu re to immedia te lv sh i f t re -sources to a new market. And rebuild-ing the corporation from the ground upafter a major setback might be the un-imaginativebut ult imately the more suc-cessful approach.

Pnt. Fmtnlljjjjs.o L. Rontl!|,lr., i\ tht Dirxtor nftll( AIM

Irrti.r/ hrlrD drd lis SVslirr Cdr+rdilird,r.ss Dfsli.

JAXUATY

29 Management Development Program (8w)

?EBRUANV

5 Basic Management Prograrn (4w)

TARGH

' BOT/BOG Annual Meeting (2d)Golf Tournament (1 d)The Orchard (Dasmarif,as, Cavite)Asian Managernent Conference"Asian Growth Polygons" (2d)Shangri-La Hotel, ManilaAIM Homecoming-Shangri-La, Manila

Apnn

2il Basic Management Program (4w)

nAv

JUilE

5 MM, MDM Classes begin

JULY

MBM Registration startsBasic Management Program (4w)Program and ProjectDevelopment Management (4w)

| | MBM Classes begin29 Marketing Strategy Course (2w)

AUGUST

| 2 Advanced Manu{acturing Management Course (3w)26 Advanced Bank Managernent Program (6w)

SEPTETBER

2 Basic Management Program (4w)

OGTOBEN

7 Management Development Program (8w)

TOUETBEN

4 Basic Management Program (4w)4 Program for Development Managers (4w)

4Ia '

al l

l 2

l 4

ol 2m30

Top Management Program (4w)Bali , IndonesiaProgram for Development Managers (4w)MBM, MM and MDM 1996 Graduation CeremonyManagement Development Program (8w)MM, MDM Regishation starts

26 OcroBER-NovEMBER 1995 . THE AsiAN MANACER

Editor's Note: In the lastissue Prof. Mayo Lopezzttrote sbottt Asian Stere-otypes perpetuated from theWest. Here he zurites aboutthe roots of Asian culturalualues, ultich could explairtthe d ifferences betuleenEnst and West.

llhy tho appar.entdiffer.ences

Much o f the observedbehavior differences amongdifferent peoples are stronglyinfluenced by several kev vafues. These values include howpeople value the individualcompared to the group; howthev handle time and space;social openness or ethnocen-tdsm;respect for tradition andelders versus a high valueplaced on new knowledge andthose $.ho possess it; conform-itv versus uniqueness; risktak ing or avo id ing ; thestrength of ourdesire to main-tain social harmony versus"frankness," "objectivity," andeconomic efficiency; and be-tween being "idea-or-issue-

oriented" \'ersus being "peo-

p le -and re la t ionsh ips-or i -ented."

In discussions with col-leagues and from rny own ex-periences the perceived differ-ences are not "either/or" ab-so lu tes ( f rank versus no tfrank, risk averse versus dar-ing). Tl.rey involve differencesin terms ofdegrees, rvhich areaffected bv socioeconomicconditions, Ievel of education,position in society, the percep-tions ofthe costs offailure, andeven physical health.

Caucasiansand "Western-

ized" Asians seem driven byihe twin needs to performyery rvell to show personalachievement and acquire ma-terial wealth as symbols of"having arrived," that is, be-ing recognized as excellentper fo rmers and ach ievers .

Helping their corporationsmake a bigger profit and be-ing rewarded for the effort arethe socially accepted means ofdoing this. To achieve organi-zational efficiencv and profitabil ity, manv of them givetheir best efforts and much oftheir "p me time" to the com-panv rn tne Process.

The work group or team isa vehicle within which one canmaximize chances of increas-ing individual distinctiveness.

ism. But there is enough in thepopular media to justify theperception thatAmerican cul-ture is highly individualistic.This can be a problem to thoseof us who have been raisedwith more communal valuesin the way we are often forcedto conduct ourselves in themanaging of enterprises sincemany of the prevailing man-agement models are reallyAmerican in origin.

Clearly, Asian communal-

family, including affinal rela-tions.

Whatever the focus of ourcommunality, we have diffi-culties dealing with Cauca-sians because they seem tomisundentand the efforts wetake to harmonize our livesalong lines that focus on thesegroups of reference which of-ten conflict with the strivingfor work efficiency

Japanese loyalty to theircompanies and dedication totheir work is culturally dic-tated. It is equally a source ofproblems in their dealingswith the other Asians. TheJapanese concept of social har-mony is premised on every-one doing their duty as dic-tated bv their position in soci-ety.

Familv and clan are impor-tant to the Japanese. Workhou'ever, seems the mainmeans ofcontdbuting to soci-ety. This high concetn forwork is shared by other socie-ties we have often termed"Confucian" Taiwan,HongKong, South Korea, and Sin-gapore. In these societies fam-ily and clan are equally impor-tant, buteven more importantseems to be productive workwhich brings wealth, which inturn makes for great "face."

Contrast these with thegreater emphasis many, otherAsians place on family andaffinal group obligations. Inour societies, our duties asworkers in a company do notrank as high as our obligationsto extended family and affinalsystems. This has to do with along history of interfamily,interclan, and intertribal rival-des within what were ill-un-derstood and threatening geo-physical environments. Onecould trust only the family,clan, and tribe. This causedmajor conflicts between usand those for whom weworked for

ln parts of traditional Asia,

It is common for Westerners,therefore to talk of companyloyalties since companies arethe venue within which oneseeks personal acclaim. Butwhile there is aln'ays muchta lk about "be ing par t o fteam" and "maximizing effi-ciencv and effectivity throughthe team," there is greater at-tention to "looking out fornumber one" and "getting

ahead" of the "the wolf pack"in the "rat race" while "swim-

ming with the sharks!"The imagery of predatory

selfishness exaggerates thelevel of Western individual-

ism has different foci. The

Japanese are seen as the mostnationalistic (being Japanese),then as corporate men, then asfamily men. TheChinese seemmore focused on clan and fam-ilv, then on their specific eth-nolinguistic group: Hok-kien,Cantonese, or Hakka. The In-donesians seem conscious oftheir extended family, town,region, ethnolinguistic group,and nation, in that order,though company affiliation iscoming in to p rominence.Other groups, Filipinos for ex-ample, seem more concemedwith loyalties to the extended

THE AsrAN MANACER . OcroBER-NoVEMBER 1995 27

work and some income will besacrificed to fulfill social obli-gations to the family, clan, ortdbe. In fact, productive usesof wealth will be sacrificed tomeet social expectations. Peo-ple will sell prized, or pro-ductive possessions-a pieceof land, a water buffalo, farmor fishing implements-so asnot to suffer social shame innot having celebrated a wed-ding, a marriage, or a burialproperly. Caucasians and Jap-anese expatriates can onlyshake their heads when theyare requested to excuse work-ers from work as they needtime io fulfill familial obliga-tions neither the Caucasiansnor theJapanese consider im-portant.

Traditional Asians have tounderstand that the Cauca-sians and the Japanese areproducts of a differeni life phi-losophy and of cultures thathave given work one of thehighest values in life. To beproductive is to show one'sworth. To be producive is toearn a lot. To earn a lot is to beable to provide oneself andone's family the kind of lifethat these cultures believeworth living. Even when theyare supposedly relaxing andenioying themselves like play-ing golf or drinking cocktails,the conversations in these ac-tivities often reflect that pre-occupation with work.

Caucasians and japanese,and now increasingly the in-dustrialized Taiwanese, Sing-aporeans, and Koreans, alsofind it difficult to deal with"haditionalAsians" becausewe have what has been calleda nonscientific approach to liv-ing. We accept that we cannotcontrol the world. We acceptthat the world has a rythm oflife not subject to human in-tervention. We supposedly re-flect this in our lack of sufi-ciently detailed planning andin the way we handle time.

28

This acceptance ofa prede-termined "rhythm" to life ispart of a more basic value offatalism which results fromnot knowing enough aboutour world to believe we can,to a great extent, control theway of our lives flow. Scien-tific/industrialized societieshave advanced enough inknowledge and technology tofeel more substantially in con-hol of theft lives, even desti-nies, than have a great manyof traditional peoples in Asia.

MistakesrnaJ) shoustupidity anduould ruinwhataer'face"ue need t0put on before)ur supili)rs.

Our irdtating lateness inarriving for appointments orstarting activities as indicatedin formal programs; our in-ability to plan out our activi-ties so that we can fit our ac-tivities into prearranged timeslots (aided by filofaxes, andtime managers) have beengiven many names-"Filipinotime," "jam karet" in Indone-sia, "Malaysian time," and soon. We summarily dismiss asdifficult to understand cul-tures that find tardiness orde-lays of fifteen or more minutesoffensive.

When Caucasians, Japa-nese, Koreans, or Taiwaneseinsist on being hard and fastwith schedules, it is not thatthey are automatons; they aremerely reflecting the impor-tance systems give to preci-

sion and the meeting of com- thing made by man that is es-mrtments. sentially replaceable, you are

Time proves important to called a vandal. When youthose who are in mass indus- destroy something made bytrial production or in twenty- God that is essentially irre-four-hour indushies and serv- placeable, you are called a de-ices. Material wealth results veloper"from producing large num- Most ol us in subordinatebers of desired goods or serv- positions do not seem to ap-ices sold at prices that allow preciate being allowed tothe producers to make hefty make decisions for ourselvesprofits even as they satisfy or as Caucasians do. We believedelight their buyers. This thatbosses are bosses becauseproactive stance results only they are supposed to do thefrom people who are not fatal- thinking then tell us preciselyistic about life. what they want. Our reluc-

It is no accident that the tance to take on resDonsibilitvpeoples who have progressed is not only partly Jue to thisthe most materially are also but also partly due to our de-those whose ideology looks at sire not to be embarrassedwealth as a reward for their when we commit mistakes.hard workin the form of tech- Mistakes mav show stuDiditvnologies. Technology a lso and would ru in *hateveifavors measurement and pre- "face" we need to put on be-cision. fore our superiors.

For us Asians, the high re- [n countdeswhere to dem-gard and love our families and onstrate the acquisition andfriends have for us are God's the mastery of new knowl-blessings. Thus, we risk even edge is a sign ofbeing a quickthe loss of work as long as we and good learner, and there-are seen as fulfilling familial fore an able person, subordi-obligations. Our Western col- nates seek to be given morc re-leagues fear more not being sponsibility and the chance toable to give their children a be allowed to experiment.decent material life in the fu- Many of us prefer the "slow

ture than we do. In contrast but sure" path of being toldwe fear tnore being seen as and shown step-by-step whatunloving ogres by our chil- to do.dren. We as traditional DeoDle

It has also been pointed take comfort in the familiar,out by many speculative because the tried and truethinkers and students of his- ways spare us the risks of ex-toryand the social and human perimentation and failure.sciences that the West moored Thev are also the products ofin Judeo-Chrisiian-lslamic tra- our elders' individual and col-ditions, can easily handle the lective experience and wis-nonhuman resources of the dom, and have carried our so-world as things for their dis- cieties through the worst ofposal rather than things they times.are stewards of or even other Our Western Friends,sentient forms that also have however, delight in question-souls, and must therefore be ing anything that is there al-respected. ready. That is why they can

Curious, however, that it is say, "lf it's not broke, fix it any-a Westerner (Joseph Wood way," whilewe stillmostly goCrutch) who should reflect by the statement that says,this realization when he said, "Leave well enouqh alone.""When you destroy some- Soingra inedaieour t radi -

OCIOBER-NO\ LMBIR Iqq5 . THE A5IAN MANAGER

SAIM A'IANJoin tLa GROWTH7th NM ManagementPOTYGON'Conference on Asia

The As ian lns t i tu te o f Management 's Conference on As ia(AMCA) brings together, as i t has in the past six years, the CEOSfrom lead ing compan ies , bus inessmen, government po l i cy mak-ers, and academicians, to share insights and explore the chal lengesof a global ly competit ive environment. This year's conference fea-tures plenary topics and simultaneous sessions on three growthpolygons and the EAGA experience.

The opening of world markets and intra-Asian trade tr iggeredreg iona l in tegra t ion and l ibera l i za t ion movements as d isp layedby GATT, APEC, AFTA and the Asian growth polygons. The con-ference wil l define what growth polygons are, their location andhow they developed, bottomline expectat ions, essential successfactors, investment potentials and prospects, cr i t ical issues andcommon pit fal ls. Specif ical ly, i t wi l l focus on current si tuations ofSlJORl, the Baht Economy, and South China-the nature of comp-lementari ty and i ts infrastructure and business support systems.

tsF thg conc lud ing sess ion o f the conference fea turesDr. Kenichi Ohmae, author of cr i t ical ly acclaimed TriadPower (Free Press), The Borderless World (Harper Busi-ness), and The Mind of The Strategist (McGraw-Hil l) wi l lmake a presenta t ion on how reg iona l economies harnessthe prosper i ty o f the g loba l economy.

Make your reserva t ions now!

Yes, I want to know more about the7th AMCA Asian Growth Polygons.

P lease send me fu r ther de ta i l s .Name

Company

Address

Te lephone Fax

CONTACTMs, EDYTHE BAUTISTAPublic Affairs Off iceAsian Inst i tute of ManagementJoseph R. McMicking Campus'23 Paseo de Boxas. Legaspi Vi l iage1260 Makari City, Phi l ippinesFax Nos (632) 811 9240 I 811 2128Telephone Nos (632) 89314101892401 1T loc 209&1M

DR. KENICHI OHN,4AE

TETTAITVE GOIUFEREIUGEPROGRAMMEMARCH 11 (Monl

7:00AlVl C0NFERENCEG0TFTOUBNAMENTTEE-0FF6:30 PM EARTY REGISTRATION7:00 PN.4 WELCOME C0CKIAILS AND G0tt T0URNAMENT

AWABDI'{G CEREMONIES

MARCH 12 lTue)730 830 SEG|STRAT|oNB:30 900 NATI0NALANTHEM

lnvocattonWelcom€ RemarksSpeaker:Washington SyCipCo-Chairman, Asian Inst tute 0f Manaqement

9:00- 9:30 KEYN0TEADOBESS9:30 9:50 PLENARYl: AN OVERVIEW0t{ ASIAN GB0WIH

P0tYG0t{sThe Asia/As€an regional integrati0n andliberal sati0n movemert asdis0lavedby GATT. APEC. AFTA and the growth polygons.Presentation hones in on what growth p0lygons are,the r Ocati00 and h0w they developed Essentiai successf€ctors and comm0n lssues wil l als0 be tackled.

9:50- 10:20 G0FFEE BREAK1 0:20 I 1:20 PLENARY ll: SU0Rl. THE BAHT ECON0MY AND

SOUTH CHINAPresentations on how each growth p0lygondeveloped, its curent situation, nature 0fc0mplementarity and rts state 0f infra-structure andbusiness suDDort svstems FOcuses 0n issues and

pr0spects and b0tt0m Ine mplrcatr0nsl1:20' 12:00 0PEl{ F0RUM12:00 1 30 LUNCHE0Nr 30 3 00 srMutTANE0us sEsstoNs

Business pracr i t olers sldre hp erper erces

n each groMh polygon by expounding

0n the curent 0pp0rtunitres, busrness/

investmert p0tent als and pi t fal ls.

1. S tJ08 l2 The Baht Economy3 South Ch na

3:30 C0FFEE BBEAK5:00 SIMUtTANE0US SESSI0NS

Cont nuat 0n 0f business practit i0rers'Presentati0ns 0fexperiences n eachgrowthpolygon.1 SIJORi2 The Baht Economy3 South China

MARCH 13 {Wedl9OO, 930 SUMMARY OFOAYONE PROCEEDINGS9:30- 9:50 P.LENARYIII; oVERVIEW 0NTHE EASTASEAN

GBOWTH AREAPresentation w ll focus on the evO utiOn 0f Eaga , lscutrent status ard the busrness/ nvestment 0000ftunrtlesavailable

9:50- 10:20 COFFEE BREAK10:20 I I :20 PLEI{ABY lV: EAGA MlNlSTEElAl" FORUM

Key Official representatives from Brune l,Indonesia, Malaysra and the Ph I pp n€spresent c0!ntry expectatiOns of EAGA andhiql^riqi- thp pffons and (ommitmprFmadetoensure the success o f thea l l iance. Cf i t i ca l

issue afd c0ncefns of the pr ivate sect0rwi I a so be

addressed

l l : 2 0 1 2 0 0 0 P E N F 0 R U M

12:00 1 30 |-UNCHEoN

1:30- 3:00 SIMULTANIOUS SESSI0NS

C0mpanies repres€f l ng key industr ies share

the r exper ences 0perat lng ufder Eagapart icr lar y 0n the pr0gress 0f each ind!st iy and therr

v sion of the future.

i serv ce sector ( t0! i lsrn, genefal l radrfg, elc. l

2 i f t rastructure deve opment

3 manufact!r i rq

4 reso!rces

3:00 3:30 CoFFEE BREAK

3 : 3 0 4 0 0 P L E N A R Y V : T H E E N D 0 t T H E N A T I 0 N S T A T E(Corc udlng Sessrof)

0ne 01 the widely fecOgnized t0p busiress g!rus 0f t0day

and author 0f the h gh y acclatmed Trtad Powerand The

Bordetless W7rld shates his thoughts 0n h0w reg 0na

ecoromies hafness the pr0sper ty 0f the global ecOnomy

Speaker Ken chr 0hmaeAfihat. fhe Eild af the Natton State

4 :00- 4 :30 OPEN F0BUM4:30 5 00 CtoSlt{G REMAR(S AND PRESENTATIoN 0f

PTAOUES OF APPRECIATIONProf Fe ipe B AlfonsoPresident, Asiar Institute 0f l\,4afaqement

3 0 03 3 0

THg Aslerv MANAGER . OCTOBER-NOVEMBER 1995 29

tions in our souls that they of-ten prevent new ideas frombeing considered, especially ifthese ideas contravene the old.This may explain the slownessin the generat ion of newknowledge or in the acquisi-tion of existing but alien ones,unless these have the blessingsof the elders and our cultural"gatekeepers." And very of-ten, gaining the thrust of thegatekeepers is much less theresult of the demonstrated ef-ficacy of new technologies andmore the result of the pur-veyor haaving gained the lik-ing of our elders. I have oftenheard Asian supervisors andmanagers dismiss a new ideaby saying. "What gadfangledth ing are we going to t ryagain?"

Our risk aversion is alsoreflected in our desire to con-form to the majority. Clingingto the group gives us thestrength and majority's iden-tity and support, and the com-fort of being hidden in thesameness. People who havenew thoughts and new waysof doing things will and dostick out and more often thannot draw the attention of thosewho may hammer them backinto the grain of sameness.

Perhaps the result of longdecades of being small tribeswhose members had to relyvery much on one another forsurvival, we are, in this mod-ern day and age, sti l l con-cerned with maintaining highlevels of harmony-whichmany of us define as the ab-sence of strife-even at thecost of honesty and our rightsand priviledges.

Many of us find it difficultto call a spade especially if westand the chance of hurtingfeelings. We go through greatlengths to say things in waysthat will not offend, even atthe risk of not being able toconvey the right message. Ihave seen enough cases where

30

calling a spade a digging im-plement resulted in greaterproblems which were re-solved only with great painmuch later.

Our Western colleaguesmay be r ight in th is caseWhile we are group oriented,we unwittingly sacrifice thebenefit of the group to avoidhurting an indvidual to ben-efit the group by telling theindiv idual painfu l t ruths.Funny, but true.

I remember a case wherea company run in the tradi-tional manner finally decidedto use a per formance ap-praisal system. Practicallyeveryone got average and ex-cellent ratings. The sad partwas that many people wereclearly not meeting stand-ards. But not wanting to of-fend the ratees, many ofwhom were older than theirsupervisors, the raters opted,without consultation, to giveaverage as the lowest grade.

In still another company acertain amount was set asidefor performance bonuses withexpectations that the best per-formers would get as much as15%. What actually happenedwas that the highest bonuseswere 5% and the worst pro-ducers received 3%. Why? Be-cause their senior managersfelt embarrased at having todeny many of the older work-ers who were slower at learn-ing new systems bonuses. Af-ter all, they had shown loyaltyand obedience in accepting anew and untried system.

Most Western systems arebased on Max Weber's classicbureaucracy which stressedobject ive decis ion makingwith a minimum of emotionalconsiderations which cloudjudgment. Traditional workteams are seen more as fami-lies and in fact claim to be so,with titles reflecting the "fa-

mi l iar i ty" of the arrange-ments. Asians seem'more lib-

eral in using forms of addresslike "son" and "daughter" toaddress their employees thanare Caucasians. Filipinos calltheir peers "padre" (fromcompadre or fellow godpar-ent) or "tol" (short for utol orbrother). The ]apanese alsocall their peers a similar title.

The social space betweenpeople in corporations seemslarger and further in Cauca-sian companies than in Asiansones. To get very close to an-other in the West means ex-treme closeness, even con-spiratorial closeness. In Asia itis merely good form to getclose and even place one'shand on a subordinate 'sshoulder or siddle up to a bossto indicate intent listening andattention.

Given these seeming widedisparities, what can we reallyexpect?

ConvergeneeDespite the many differ-

ences, separate forces actingon the different societies areforcing a universal desire towork more smoothly with oneanother.

Just as we t radi t ionalAsians are realizing that wewi l l have to change ourbehaviors and attitudes to bemore competitive in this mod-ern world, the more industri-alized and scientific peoplefr'om America, Europe, andAsia are feeling the need to bemore human, humane, andcommunal. As we discovernew knowledge, science/ andtechnology, Japan is findingout that ethnocentricism hasserious drawbacks and they

-

are adapting to and adoptingdifferent Asia ways. The Westis rediscovering the joys of amore communal and caringsociety less hung up on theaccumulat ion of mater ia lwealth.

ln 7987 I was helping anIndonesia bank determine its

human resource development(HRD) requirements relativeto their strategic thrusts, I wasconstantly reminded by *yconsultors in the bank that"Insonesians are different. Wedon't like criticism, unlike the"orang putih" (white men)."Fortuitously the Herald Trib-une had printed a short essaywhich was titled, "Americans

Don't Like Criticism, SurveySays."

I hastily clipped this arti-cle, made multiple copies, andcirculated it to all senior man-agers. The look of surprise ontheir faces could be seen clearacross the halls. "Ado! SamaIndonesia!" (Ado! The same asIndonesial)

I have also heard manyWesterners and Japanesefriends speak longingly ofwhat they consider verywarm and appealing atmos-pheres in Southeast Asiancompanies. They l ike thefriendliness, even the "No

problem!" attitudes they of-ten see us take, in the face ofgreat inconveniences. Theyare impressed by the caringand concern for others we of-ten show. They apparentlywish to see more of these intheir own compalies.

Incidents l ike these areshowing people all over theglobe that with enough sincerediscussion over common in-terests, together we can breakdown many cultural barriers.The desire to work produc-tively with people from othercultures makes each of usmore willing to make all thosesmall one. And the bridge isbuilt faster when both sidesmove towards each other.

Prof . Mario Anton4o G. Looez is thePitipinas Shell Corporation Professor ofP ubl ic Administrat ion and AssistantDean for the Executiae Dnelopment Pro-gram. His current interests are mana&e-r ial deuelopment, deuelopment manage -

ment, cross-cultural management, andproject deaelopment and management.

OCTOSTn-NovEMBER 1995 O THE ASIAN MANAGER

,:!'

J nitial Public Offering.. more com-

I monly Lown as TlO5, areun5e,ti\ 'nedI common stocks offered to the publicfor subrcription. Companies go public inorder to raisecapital forexpansion or debtretirement. For several years the Philip-pine capital markets have been activelyoffering lPOs. It has generated substan-tial interest from the investing public be-cause of the perceived high return it hasearned. In finance literaturc numerousstudies have been done to verify the ab-normally high return lPOs generate.Theories have also been proposed to ex-plain the IPO underpricing puzzle. IPOsare believed to be underpriced in orderto compensate the investors for the riskthey have to bear. Investment bankersalso underprice the issue to minimize therisk and cost in selling the issue. Thus, un-derpricing is used as compensation forthe risk one has to bear.

The llataA study of sixtv-eight IPOs offered k)

the public from 1986 was done. Monthlyreturns were computed based on the pre-vious months closing price.

Ilata AnallsisPhilippine IPOs showed initial return

of 30.71% on the day of listing, which di-minishes to 0.144% one year after the of-fering period. Figure 1 shows the move-ment of the return versus the market in-

BY PROFESSOR ERROL B. PEREZ ANDPRoFESSOR AIDA L. VELASCo

HowRis ArePhilippine OS?

der performance. IIO return has outper-formed the market eight out the thirteenmonths being studied. A test of differ-ence between means, shows that there isa significant difference between the mar-ket index return and the IPO return forthe first year IPOs are traded on the floor.

Ilte rish'is tln rault oftlrc isu.eb urcunonedpduvnrrceintbe

narket.

A 5% level ofsignificance analysis showsa t-statistic of 0.1627, which concludesthat IPO returns are higher than marketreturn 95clr of the time.

Standard deviations of IPO returns arealso higher compared to the standarddeviation of the market index return. Fig-ure 2 reveals that difference between therisk on IPO and the market as a whole,measured by the standard deviation. Ta-ble I reveal: that the risk borne by the in-vestors on lPOs is significantlv higherthan that of the market 95% of the time,rvith a t-statistic of.0026.

As seen in Figure 2, The standard de-ria tion oI thc marLet inde\ return is poii.tively correlated with time with a coeffi-

cient ofcorrelation equal to 66.66%. Com-putation5 are pre5ented in Table 4. How-ever, Table 5 shows that IPO risk dimrn-ishes throughout the one-year period ofstudy with a correlation coefficient of19.37%. Although the correlation is nega-tive, the relationship offisk to time is notstatisticallv conclusive at a 5% signifi-cant level.

ConclusionThe returns on investment in Philip-

pine lPOs are significantly higher thanthat of the return one r.vill get in invest-ing in different stocks comprising thePhilippine Stock Exchange market index.This abnormally high return is a paymentto the investor for the high risk of IPOs .The risk is the result of the issue's unsea-soned perforrnance in the market. How-ever, as the risk diminishes because themarket begins to reflect all relevant infor-mation on the price of the stock, the re-turns also decrease. Thus, the investorswho subscribe to the offcring price, whenrisk is highest, are the ones compensatedin the form o[ return ,rreraging approri-mately 3l% per month.

Plof. EfioI B. Petez is n rw'lb(r of NdJr'' fuctlltt of lhtMiskr l| M logct dt Pn)lra .

Ptof. Aidi L, Velasco is d,i . sso.inlf Profi,ssor", Cr)/legc af En gnnrn ng, Dtpnr t]It t1l ol Itd Ltsl rinl Eltg],tttr, , . . i D , L , 5 , t ' , L r ' . r ' r " r ' ! ) ' . 1 . D B A C t t i l n I . r t

THE ASIAN MANAGER . OCTOBER-NOVEMBFR 1995

Table 1

NUI\4BER OF CASES: 13 NUtri lBER OF VARIABLES:4

DIFFERENCE BETWEEN MEANS: PAIRED OBSERVATIONS

HYPOIHESIZED DIFF. =MEAN =

STD. DEV =STD. ERROR =

Table 3

NUMBER OF CASES: 13 NUMBER OF VARIABLES:3

DIFFERENCE BETWEEN MEANS: PAIRED OBSERVATIONS

0.00000,02230.0783o.0217

N = 13 {CASES = l TO 13)T = 1.0254 (D.E = 12) GROUP 1: iporet

GROUP 2: indxretPROB. = 0 .1627

T= -3.4064 (D.F. = 12) GROUPl:stdmktGROUP 2: stdprice

PROB. = 2.604E-03

HYPOTHESIZED DIFF, =MEAN =

STD, DEV =STD. ERROR =

N =

0.0000-0.1250

0.13230.036713 (CASES = 1 TO 13)

Table 5

DEP VAB,

NUMBER OF CASES: l3 NUMBER OF VARIABLES:3

INDEX NAME I\4EAN1 month 6.00002 stdmkt 0.1147

stdprice 0.2398

STD.DEV3.89440.04520 . 1 1 4 1

DEPENDENT VARIABLE: stdprice

VAR REGRESSION COEFF, STD. ERROR T(DF=I1)month -0.0056 0.0087 -0.650CoNSTANT 0.2136

sTD. ERROR OF ESr= 0.1169

r SOUARED = 0.0370r = -0.1923

ANALYSIS OF VAAIANCE TABLE

SOURCE SUMOFSOUARES D.F. MEAN SOUARE F RATIOREGRESSTON 0.0058 1 0.0058 0.423RESTDUAL 0 .1504 11 0 .00137TOTAL 0.1562 12

Figur€ |lPrO Monthly neturn andllarket lnder Perlormance

PROB.0.52900

PROB0.5290

0 . 1 5

0.5

o t

Figu?e 2

! 0.25

6 1 8

Month1 0 1 1 1 2

Standard Douiation ot IPOnetrln and Mar*et lndex

Average Price Performance

Average Market Index

32 OcroBER-NovEMBER 1995 . THE AsrAN MANAGER

Table 2

NUMBER OF CASES: 13 NUMBER OF VARIABLES: 4

Regression analysis for IPO roturn

INDEX12

NAME MEANmonth 6.0000

STD.DEV3.8944

3 abnretDEP. VAR. iporet

DEPENDENT VARIABLE; iporet

VAR. REGRESSION COEFFICIENTmonth -0.0087CONSTANT 0.0813

0.0070 0.02540.0248 0.07940.0293 0.0926

indx ret

SOURCE SUM OF SOUARESREGRESSION .0137RESIDUAL .0891TOTAL .1028

Table 4

STD. ERBOR T(DF=11)0.0067 -1.299

D,F. MEAN SOUARE1 .01371 1 .00811 2

F RATIO PROB.1.688 .2205

PROB.o.22045

STD. ERROR OF ESI = O.O9OO

r SOUARED = 0.1330r = -0.3645

ANALYSIS OF VABIANCE TABLE

NUMBER OF CASES; 13 NUMBER OF VARIABLES: 3

INDEX NAME MEAN1 month 6.00002 stdprice 0.2398

DEP VAR.: stdmkt 0.' l '147

DEPENDENT VARIABLE: stdmkt

STD.DEV.3.89440 . 1 1 4 10.0452

VAR. REGRESSION COEFFICIENT STD. ERRORmonth 0.0077 0.0026CONSTANT 0.0684

T{DF=1 1)2.966

PROB.0.01284

STD. ERROR OF EST. = .0352

r SOUARED = .4443r =.6666

ANALYSIS OF VARIANCE TABLE

SOURCE SUM OF SOUARESREGRESSION O,O109RESIDUAL 0.0136TOTAL 0.0245

THE ASIAN MANAGER . OCTOBER-NoVEMBER 1995

D.F,l

' 11't2

MEAN SOUARE0.01090.0012

F RATIO8.796

PROB.0.0r28

33

BY PRoFESSoIt ETSU INABA

Trends in Employer-SponsoredTlaining and Dwelopmentin thefuia Pacific Regron

InlroduclionWith the l iberalization of economic

ac t iv i t ies in the As ia -Pac i f i c reg ion , in -cre,l5ing interactiun dmong enterprises inthe region is expected. Enterprises aretherefore preparing tomeet this challengein variour wa) s, one of r,, hich i: trainingand development of managers and em-pJoyes. Hor,' ever approaches and priori-ties of enterp se training and develop-ment may be different, depending on thesituations in each economy.

The Asia Pacific Economic Coopera-tion (APEC) Human Resources Develop-ment Business Management Netn'ork(HRD-BMN) has conducted a joint re-search entit led "Emplover -Sponsored

Tra in ing anL l Deve lopment in the As i rlar if ic Rr:gion" in sir member economic,.Included in the studv are Australia,Canada. Ch inese I a ipe i , lapan, Ma l . rvs ia .and the Philippines. The objective of theresearch is to identifv current trainin€i anddeve lopment p r , i c t i ce : in the td rge teconomies and use these as possiblebenchmarks for organizations in theAPEC economies.

34

Quality: A Corporair. Prioritt

Qualitv improvement currently topsthe corporate prioity lists ofmost econo-mies in the studv Cost reduction is alsoseen as an immcdiate concern, pariicu-larly in large enterprises APEC. For the

Phil ippines, the dcvelopment of neu.products follorvs clualitv improvement interms ol lmportance.

Japan is the onlv cconomv that doesnot considerquaiitv improvement as oneof its nost pressing concems. lnstead, Ja-

PRESENTAUSTMLIACANADAJAPANMALAYSIAPHILIPPINESTAIPEI

FUTUREAUSTMLIACANADAJAPANMALAYSIAPHILIPPINES

TAIPEI

First Priority

Quality ImprovementDecreasing Cost SbuctureDecreasing Cost StructureQuality ImprovementQuality ImprovementQuality Improvement

Quality ImprovementQuality ImprovementDevelopment of new productsQuality ImprovementQuality Improvement

Quality Improvement

Second Priority

Decreasing CostQuality ImprovementStreamlining of businessReducing CostDevelopment of new productsRationalization of Production

Development of new productsStrategic AlliancesQuality ImprovementReducing CostForming Strategic BusinessAlliancesSheamlining of business

OCTOBEIT-NOVEMBER 1995 . THE AslAN MANAcFR

pan is more bothered by the need to re-duce cost and by the pressure to stream-line business. Both concerns are probablydue to the rapid appreciation of its cur-rencv

In the medium term, qualitv still re-mains the top prioritv for nearlv all cor-porations, except those ftomJapan. Japa-nese enterprises view the development ofnew products as their utmost pdoritvNextin the list are the following concerns:strategic alliances for Can-ada and thePhilippines; streamlining of business forChinese Taipei and reduction of costs forMalaysia, and developing new productsfor Australian enterprises. (See Table 1a)

Personnel Management PriorllyOn issues concerning personnel man-

aSement, developed economies regardpersonnel reshuffling brought about bvrestructudng/down-sizing as their cur-rent top prio ty, while Malavsia, the Phil-ippines, and Chine:e Taipei perceiveshortage ofskilled labor and cost oflaboras their major concerns. An interestingdifference is that Japan's second pdoritvlies in reducing the number of workhours. This mav be reflection of the pres-sure on Japanese corporations to shortenworking hours. (See Table 1b)

In five vears, the respondents expectthat pdorities will shift to the manage-ment of a culturally diver\e work force,particularly among the developed econo-mies of Australia, Canada, and Japan.This may be attributed to migration intoAustralia and Canada and the erpansionof their operations offshore. In Japan,labor mobilitv and internationalizationare also maior concerns, reflecting theaccelerated pace of Japanese companies'international operdtion\ and lhe chang-ing patterns of the enterprise employmentsystem, allowing higher mobilitv of workforce.

For less developed economies such asthe Philippines and Malaysia, compensa-tion and cost of labor and shortage ofsLil led labor remain the most pressing is-sues, while Chinese Taipei will becomemore concerned about the cost of laborand personnel structuring.

Supporllvo Top ManagemenaThe survev results lrom top manag,e-

ment re.pondents have a positives atti-tude towards personnel training and de-

First Priority

PeBonnel RestructuringPersonnel reshuffling due torestructuring/downsizingPersonnel r€shuIfling due toreshucturing/downsizingShortage of skilled laborCompensation/Cost of laborShortage of skilled labcr

Management of diverseworKorceManagemmt of diverreworkforceManagement of diverseworKorceShortage of skilled laborCompensation/Cost of LaborCompensation/Cost of labor

Second Prioriry

CompensationCompensation/Coet of Labor

Hours of workDevelopm€nt of new productsCompensation/Coet oI LaborShortage of skilled laborCortpenmtion/Coot oi tabor

Compensation

Shortage of sklled labor

labor mobdity/irtarntiouliz*ln

Compensation /Coot of LaborShortage of skilled laborPetsorud lEshu$iE /ns[ldnn€

PRESENTAUSTRALL{CANADA

]APAN

MALAYS1APH1LIPPINESTAIPEI

FUTUREAUSTRALiA

CANADA

JAPAN

MALAYSIAPHILIPPINESTAIPEI

Figure 1Management's Attitude Towards

Personnel Training and Development

0 20 40 60 30 100 120

0 20 40 60 30 100 r20 0 20 40 60 30 r00 120

Ie@,,yorss@ n De,re. I ,d,irs.sr

I &* | s@sry&@

THE AsrAN MANAGER . OcroBER-NovEMBER 1995 35

Figure 2

Staffing(Percent)

Malaysia

Philippines

Taipei

ls the Stalf Devoted toTraining and HRD Adequate

!""" !"o l"o on"*".

Austraiia

Japan

Malaysia

Philippines

Taipei

Expected Rate of Training StatfFor Nexl Year

0 30 60 90 120

! Increase I same

I oecrease I No Answer

velopment. Management view employ-ees as the most important asset of thecompany and the root of competitive ad-vantage. Although top management rsnot directly involved in making decisionson training matters, it nevertheless sup-ports these activities through resource al-location. This attitude is particularly evt-dent in lvfalaysia and the Philippines. InCanada and Chinese Taipei, however, re-spondents perceive top managementsupport to be slightly weaker than thatobserved in the other economies. (SeeFigure I )

lfodlcated lhalnlng PreseneeThe survey reveals the presence of

dedicated iraining and development de-partment in most enterprises. A maior-ity of the respondents have a formal,wdtten training policy. Japanese enter-prises are again an exception. Only halfreport havingformal, wdtten policiesontraining and development, despite thefact that the ma,odty are large corpora-tions.

Centrallzatlon vs l)ecentrallza-tlon: a l)llemma

While dedicated training depart-ments do exist in most of the enter-

prises surveyed, the number of staff isperceived to be inadequate. This prob-lem is identified in Chinese Taipei andJapan. In ChineseTaipei , Malays ia,and the Philippines,nearly half of the re-spondents expectthe number of staffto increase in thenear fu ture. How-ever, developed eco-nomies such as Aus-tralia, Canada, andJapan do not expectany s igni f icant in-crease.

(See Figure 2).

In terms of deci-sion-making, Japanand Chinese Taipeiexpect training anddevelopment to be-come a more decen-tralized structure inthe future, while Can-ada and the Philip-pines are split be-tween the two struc-tures. (See Figure 3.)

tends In lhalning l&l)evelopmeni

Since the service providedby the Training and Develop-ment (T&D) department in ef-fect creates value to the otherdepartments within the or-ganization, some have startedto use a transfer-pricingmechanism to measure thecorresponding costs. Re-spondents from Australia(50%) and Canada (427o) usethis mechanism more exten-sively. In all other economies,this practice is not wide-spread. But in Malaysia, theuse of transfer-pricing is ex-pected to be more popular inthe fuhrre. (See Figure 4.)

A T& D department en-gages the services of consult-ants or contractual staff anduses external institutions asaltemative ways to tap exper-tise. While these seruices areused extensively in Australiaand Canada, Asian compa-

nies are observed to have varied prefer-ences. Chinese Taipei, Malaysia, and the

Figure 3Future Structure and Control

Australia

Canada

Japan

Malaysia

Phil ippines

Taipei

0 2 0 4 0

lMore centralized

lMore Decentralize

60 80

INot ctrange

llto ln"*",

OcroBER-NovEMBER l995 . THE AsrAN MANAcER

Figure 2

Training and Development Trends

Use transfsr pricing/chargebacks

Uso consultanls orcontracl staft in TD

Use erlemaltraining institute

Use train groupsclasgiligd as teams

Train-lhe-trainerapproacn

100

Japan

lu"ay"i" lenitppines lru,*,

years. One-third of Australian, 17% ofJapanese, and 55% of Canada's corpora-tions are not optimistic about future ex-pansion in training expenditures andpredict a reduction in the T&D budget.This may be attributed to the recessionor restruchling in these economies. InCanada, corporations expect that any rn-

crease in nominal amounts to be earenup by inflation. (See Figure 5.)

One to Tlvo Weeks of Thalnlngl)ays Are a Norm

Aside from financial resources, timeis another important resource whichneeds to be allocated for the continurnetraining and education ofemployees. Al-though not all respondents keep recordsofthe number ofdays of haining for theiremployees and managers, the survey re-sults are revealing. Mostcompanies areshown to conduct training for about aweek on the average. Chinese Taipei pro-vides the longest training period for pro-duction (29 days) and service groups (20days).Australia and Canada reflect fairlyeven distdbution of training days acrossall categories. In Japan, executives re-ceive little time off (2 days) for haining,Philippine executives receive the longesttime off, over 10 days, in training. (SeeTable 2)

Leadershlp & Strateg;lc Plannlngas Top lhalnlng Needs

The survey identifies the curentcriti-cal training and development needs ofeach occupational group. For the execu-tive level, leadership training followed byshategic planning are cited as most cdti-cal inAustralia, Canada, Japan, and Ma-laysia. The managerial level also showeda similar set of needs. In the Philippines,

Philippines prefer to use extemal instihr-tions for training. Emphasis is the inho-duction of group haining as a team andthe train+he-trainer approaches. Theseapproaches are used extensively in Aus-tralia, Canada, Malaysia, and the Philip-pines. Approximately half of the corpo-rations in Japan and Chinese Taipei alsouse these. It is expected that these ap-proaches will become more popularamong the six economies in the future.

Growlng Tlalnlng BudgeiMost of the respondents have a budget

for haining and development. The trendsin the size of T&D budget vary byeconomy. A majority of respondents inMalaysia, Philippines, and Australia in-creased their per capita T&D budget in thepast and expect the trend to continue. InMalaysia and in Aushalia (from 1989 to1994), the government implemented alevy to encourage training by ihe enter-prises. Half of the respondents in Canadaand Chinese Taipei had increased theirbudget. The sarne proportion expect thehend to continue.

Only Japan had one-third of the cor-porations which had increased their train-ing budget, with a quarter of them hav-ing decreased their budget in the past two

Figure 5Training and Development Budget

lPar.ahrlCh6nO. h rhe I'an'ng Budg.l

" - -- " Exp*r€d Trs'r'ng Budoer

Mr lh. pa.l 2 y6ts aor lh€ ndr yer

!r.** f "o,"n*n" l*.,",*

THE AsrAN MANAGER . OcroBER-NovEMBER 1995 37

strategic planningis cited as the toPpriority needs of the middle level.For non-managerial members, theidentified training needs are cus-tomer service, team work, qualitvimprovement, and multi-skilling,in addition to their own profes-sional skill development. For thesame groups in thePhilippines, cre-ating a corporate culture of continu-ous learning and total quality man-agement were included in the topthree training needs. (See Table 3.)

For the future, the same needsare identified as important. How-evet senior local executives wouldput greater emphasis on strategicplanning. Other employees will re-quire higher levels of professionalskills and computer knowledge.One unique need identified by the

Japanese respondents for profes-sional and technical people is "crea-

tivity and ideas." This may be related toan earlier response which showed newproduct development as a future businessthrust in Japan.

Dffeetiveness of Trainlng 1o beMe.asured Mor"e Closely

Au!ilr!llr

Excecutive 8.4Management 10Professional 123Salm

"17.8

Clerical m.6Production 12.8Services 9.5Trade 8.3Technical/Supervisory

General WorkereSkilledSemi-skilledUnskilled

C!n.da

3.94.44.54.4

Jrp.n2.7b.3

8.9, |o

5.94.32.2

M!l.v.i. Philiooin.. Trhol

10.1 7."115.9

8.1 1't.65.1 4.94.5 10.25.3 29.'l2 20.9

11.1J.J

3.83.8

Figure 6Methods Used for Evaluating

Training Activities

Phllippines

Measuring effectiveness of training isdifficult, but it is nevertheless importantin order to enhance the learning process.There are typically four tyPes of evalua-tion methods: reaction, learning, beha-viot and result. The reaction method isto undertaken to determines the5atis[ac-tion level oI the participants on the train-

ing program. The learningmethod tries to measureany improvement of thelevel of knowledge andskills ofthe participants af-ter training. The behaviorrnethod is more compli-cated in the sense that ittypically takes a longer pe-riod to assess the effect ofthe training on behavioralchange. The result methodtdes to measure effects onthe actual results in corpo-rate performance whichcan be attributed to thetraining.

Although a large num-ber of companies surveyedclaim to use any of theabove methods , on ly asmall proportion of theirtraining activities are actu-ally evaluated. Only about24% of training programsin the Ph i l ipp ines areevaluated. Japan and Chi-nese Taipei are exceptions.

27./

Evaluating training programs is hardlypracticed by companies in these compa-nies. lt cannot be determined, however,if this is due to the fact that evaluation tsindeed not undertaken or the survey in-

strument did not cover other forms ofevaluation which these economies use.(See Figure 6.) ln any case, the reactionmethod is the most widelv used amongeconomies in measudng training effec-tiveness. Other methods are not exten-sively used. In fact, only Malaysia usesthe result method of measurement.

{Dn.the-Job and In-House Semi.nars are Preferrcd Mode

The pre fer red mode o f de l i ver inghaining among the economies is on-the-job. The emphasis given to on-the-jobtraining versus off-the-job is strongest in

Japan (87%). In Chinese Taipei and Aus-tralia, one-third of respondents stress off-the-job. (See Figure 7.)

In-houre seminarr are the most pre-

ferred modes of training for most of therespondents. Other modes included in-

house ceitification system and outsideseminars.

A l ign lng T&l l w i lh Bus inessGoals as a Critieal Chellenge

In lable 4. the participating economieshave ranked their three most critical chal-lenges to improving their organizations.Most of the respondents indicated aliSn-ing haining with business goals as most

19.1't2;l1 1 t

lil:",'."H"I;:rsr I Behaviorl\,4ethod

38

I r"*o:Mehoo

OcroBER-NovEMBER 1995 . THE ASIAN MANACER

EmployeeGroup Australia Canada Jaoan

EXECUTIVE 1. Leadership2. Stntegic

Thinking

L Strategy/Bus. Planning

2. HumanReowce De/t

Malavsia

ManageriaVProfessional1. Leadership/Motivational

2. Mgt. and Supervisory Skills3. Strategic/Bus. Planning

Technical/Supervisory1. Mgt. and Supervisory Skills

MANACEMENT

SALES/MKTG,

PRODUCTION/OPERATIONS

SERVICES

1. Leadership2. Strategic

Planning3. Gen. Mgt.

Bus. Trends

1. Leadership

2. Cen. MgtBus. Trends

3.Interper-sonal Skills

l.Leadership2. Strategic

Planning3. Managing

Changer

1. Leadership

2. Mg. Change

3. Mgt. Super-visory Skills

1. CustomerService

2. Sales,/ne8otiation

3. Tohl QualityCont.Impmve.

1. TechnicalSkills

2. CustomerService

3. TeamBuilding

1. Sales,NeSotiationSkills

2. Quality/Customer

3. TechnicalKnow. & Skills

1. TechnicalSkills

2. Quality/Customer Service

3. Teamwork,Teambuilding

1. StrategicMgt.

2. Planning/Proposition

1. EffectiveProgress

2. TechnicalSkills

1. SkllAdvancement

1. CustomerSatisfaction

2. Technical Skills (includingcomputer)

3. L€ademhip/Motivational'Ikhniques

ClericaVSales Personnel1. Technical Skills (including

computer upgrade)2. Trades Upgrading/Multi-

skilling3. Total Quality/Continuous

Improvement

Genenl Workers1. Technical Skills (including

computer upgrade)2. Trades Upgrading,/

Multi-Skilling3. Teambuilding/Tearnwork

1. Prof. Salesmanshipmarketing skills, acct.accr. mgr.

2. Culture of leaming

3, TQM

1. Self-directed workteams

2. Computer training

3. Culture of Learning

1. Teambuilding

2. Multi-Skilling

3. TechnicalSkills

l. TechnicalSKills

2. Quality/Cont. Improve.

3. Teamwork,Teambuilding

l. Quality/Customer

2. TechnicalSkills

3. Quality/Continuouslmprov

'l . Technical Skills

2. TQM

3. Culture of Leaming

1. Customer seNice

2. TQM

1. Customerse ice

2. TechnicalSkills

3. TotalQualit]'Cont. Improve.

1. Multi-Skilling

2. TechnicalSkills

3. TeamBuilding

1. TechnicalSkills

2. TradesUpgrade

3. quttyiCont. Irnprov

1. Strategic mgt./plan2. Exec. career dev't

3. Team building

1. StrateSic mgt./plan2. Exec. career dev't3. Tean building

PROFESSIONAL/ 1. Technical l.Technical 1. ProfessionalTECHNICAL Skills Know & Skills Skills & Tech.

2. hterpe$onal 2.Interpe$onal 2. Dev CostSkils Skils Reduction

3. Customer 3. Quality/Service Cust. Service

3. Culture of leaming

THE AsrAN MANACER . OcroBER-NovEMBER 1995 39

critical challenge. Other important chal-lenges listed include senior managementcommitment and the development of aculture of continuous/life-long learning.Distanee L€arning in the Not TooDlstant futule?

Distance learning referc to teachingand Iearning situations in which the in-structor and the students are geographi-cally separated. The instructional deliv-ery can take the form of electronic devicessuch as video cassettes or audio/videoconferencing, and pdnted mate als.

Currently, more traditional distancelearning media such as pdnt-based withvideo or audio cassettes are most popu-lar with all the respondents. The propor-tion of usage ranges from a low of 36% inCdnada to a high of cl % in Malaysia.Another medium. computer based train-ing, is making some in-roads, particularlyin Malaysia and the Philippines. (See Ta-ble 5.)

More high-tech training using multi-media and two way tele-conferencing arestill considered premature in the trainingscene in all economies at this stage. Manyenterpdses, howevet are interested to seehow these can be incorporated to theirtraining activities. Cost and availabilityof these trainine tools will determine ac-

are difficult to obtainand, for all intents andpurposes, are quesnon-able. Instruments usedto capture data varysignificantly-in termsof definition, measure-ment and interpreta-tion-that there is littlevalue in comparing re-sults obtained.

By using a commonapproach in methodol-ogy, this researchproject attempted toovercome these short-comings, thus enhanc-ing the comparabilityof data. The project,howevet was not with-out its challenges.Given cultural differ-ences as well as differ-ences in economicstructure and enter-pdse management, itwas difficult, if not im-

Certainly one of the key findings ofthe project was that the importance ofhaining and economic development areundeniably correlated. In some of themore "developed" economies like Japanand Canada experiencing slow economicgrowth, training thrusts are related to re-deployrnent, personnel reshuffling andcost containment. ln some "developing"

APEC economies like Malaysia, rapideconomic growth is driving focus on skillformation, development, and entrench-ment. In short, in economies enjoyingrapid economic growth, pdorities are intraininS and management development.

This study also confirms that busr-nesses and economies from all APEC re-gions share many of the samechallenges.In the training context, all participatingeconomies in this proiect indicated thatthe number one challenge to improvingtheir training activities wasdligning train-ing with overall colporate goals and shat-egy

Quality improvement is a key corpo-rate priority of all counhies excePtJapan.It is an issue that is likely to be a signifi-

hral usage. It would be interesting to see possible, to come to an agreement on ahow these will change in the fuhrre. set ofidentical questions that would form

the common survey instrument. Instead,Ooncluslon study team members agreed to focus on

Curent intemational comparisons of capturing comparable answers (not iden-corporate training policies and practices tical questions).

CountriesAUSTRALIA

CANADA

]ATAN

MALAYSIA

PHILIPPINES

TAIPEI

Critical Challenges1. Senior management commitment2. Culture of continuous life-long learning3. Culture of continuous life-long learningi. Aligning haining with business goals2. Senior management commitment3. Develop a culture of continuous lifelong learning1. Aligning haining with business goals2. Senior management commitrnent3. Increase resources-timg human and financial1. Aligning haining with business goals2. Senior management commitment3. Develop a culture of continuous/life long learning1 . Aligning haining with business goals2. Develop a culture of continuous/life-long leaming3. Senior management commitment1. Aligning haining with business goals2. Effective Evaluation3. Senior manasement commitment

Figure 7Emphasis on Modes of Training

Australia

Malaysia

Taipei

Ifl,lH,'�* I?:Jlil* | 83'�J",o0."",

40 OcroBER-NovEVBER l9c5 . THE ASIAN MANACER

cant driver of the needfor haining in the future.Personnel restructuringis a major personnelmanagement rssue atpresent in Australia,Canada, and Japan.Skilled labor shortagesare pressing and futureconcerns in Malaysia.Chinese Taipei is alsoconcerned about skillshortages at present, andthe cost of labor in the fu-ture. Restructuring insome countlres maypresent opportunities fora transfer of skilledworkers to meet the skillneeds of other countdes.

Management of a di-verse work force is iden-tified as a future pdoriiyin Australia, Canada,and Japan. As the APECregion liberalizes itstrade and investment,the need to effectivelymanage diverse workforces will be evenmore keenly felt.

The number of days spent in hainingappears high in Australia, Malaysia, andChinese Taipei among the other APECeconomies suweyed. The data, however,are not reliable due to the different waysthe question was interpreted. AIso, modesof hainin& either on-the-job or off-the-job,may be related to the outcome of thenumber of training days. It is, of course,more diffifult to measure on-the-iob train-ing in this form. Developing a compara-ble measure may be one of the areaswhich will contribute to the bench-mark-ing and standardizing of hu-man resource development.

Although the results didnot show the trends clearlyat this stage, new develop-ments in T&D areas may de-velop. Forexample, modes oftraining delivery, evaluationof effectiveness of trainings aswell as the contents of thetraining are expected to be themajor challenges for the train-ing and development sectionof the enterprise. The fast paceof economic development

will force training towards the most ef-fective ways, within the shortest times.Transfer pricing mechanisms may be oneof the ways to force the enterprise and hu-man resource department to carry outtheir task most effectively, including out-sourcing training and investing in elec-honic media.

The results of this study suggest thatinternational comparisons, while diffi-cult to make with accuracy, offer a valu-able benchmark for assessing perform-ance. Year by year enterp se of nation-ally specific data highlight only some as-pects of performance. International com-

parisons offer more demanding points ofcompanson.

Clearly, opportunities exist for moreresearch to be done focusing on these andother areas in an attempt to share our re-spective best practices in training as eco-nomic integration among APEC econo-mies moves closer to a reality.

Ptof. Etsu I obs holds lhe Fuii Xercr Fou d1tion Prc-lessorial Chnir ofToLal Qualil! Mtnagemerlt. Her arcasol specialty include Ispa ese ma agefienl practices,cross-cult nl, joitll I)enturc and lechnologV tnnsfer

Research Background:

Title of Research:Employer-Sponsored Training and Development in the Asia Pacific Region.When Conducted:"194,4Parfnersr Conference Board of Canada, Sanwa Research Institute 0apan), Research Institute forAsia and the Pacfic {RIAP), Universig of Sydney (Aushalia ), Nationa I Prcductivity Center (Iaipei),and Asian Institute of Management (Philippines),Bief Methodology: Atotal 6243 questionnaires were sent and 1, 285 !€spons€s were sent obtainedwithin the six economies. The response rates for the survey in each economy varied frorn 12.6 to32.4%. The samples were drawn on a random basis from a population of each economy's largestenterpdses.

For a complete research papet contact the author.

AUSTMUA CANADA JAPAI{ MALAYSIA PHILIPPINES TAIPEIIN USE IN USE IN USE INUSE NUAE N USE

Print-based media 40 28.5 74.7 9't.3 50.8 U.4video/audio cassettes

Business television 2 4.4 13.6 8.7 10.3 29.6Computer-based 11 18.6 20.4 47.8 n.5 14.8

hainingComputer networking 1,6 9.9 10.9 26.-1 13.5 11.1Interactive CD 15 8 3.2 4.3 6.4 0

ROM/laser diskVideo conferencing 8 5.8 8.1 - 1.6 1.2

two-way interachvevideo

Video conferencing, 2 4.7 3.2 4.3 3.2 2.sone-way video,twoway audio

Audio conferencing 74 8.0 6.3 4.3 1.8 43.2(graphics), telephoneteaching

THE AsrAN MANAGER . OcroBER-NovEMBER 1995 41

BY PROFESSoR FRANCISCO L. ROMAN, JR.AND HAZEL SANGALANG

Forecasting the Future(Part I of III)

he System Competitiveness Deskuses scenario planning as a tool togenerate altemate futures on is-

sues or to provide different policy propos-als, rather than to specify one possibleoutcome from an analysis.

Scenario planning is essentially quali-tative in its approach and structure. Forpurposes of the Desk, howevet it is nec-essary to undertake quantilative scenarioplanning: to evaluate the economic con-sequences of a policy decision, and tostimulate the impact of several policydecisions, or combinations thermf, on theeconomy or on affected stakeholders.

The desk uses a pmgram cdled Stella @,which is highly amenable to generatingquantitative scenarios. The software isessentially a model-building tool whichprovides nonlinear simulations. It hasuser-friendly menus, is visually-orientedwith an abundance of graphs and charts,and requires only basic algebra,

We suggest to corporate executivesand government po)icy makers that amuch more informed discussion of shat-egies and policies can take place by us-ing a tool like Stella. The quotations andcharts in this article are extracted, withthe company's written consent, fromStella's operating manual and softwarepackage. The desk uses the program, butit is neither promoting the sofh.^r'are onbehalf of the company, nor is it compar-ing Stella with other programs in themarket.

Sensltivity ls. ScenarioThe quantitative approach to scenario

planning is intended as a counterpoint tothe prevailing and popular practice ofmanagers who use spreadsheets for tore-casts especially to generate sensitivityanalysis. Sensitivity analysis often mas-querades as a scenario because it asks asimilar question-"What if...(this or thatoccurs)?" However, this mode of sensi-tivity analyses focuses on numerical

Numbu aunchingis lihepumpingiron;You bulk up on databut da nothingforyour concfutual

fltubt@.

measures, such as, "What if raw materialcosts go up by five percent" or "what if acunency depreciates or appreciates by 15percent?"and so on.

If properly used, numbers give thedecision-maker the data crucial to evalu-ating the consequences of different ac-tions. But numbers can also create the fol-lowing intellectual trap that managers alltoo often fall into:

Every day, millions of managers boot

up their spreadsheets, twiddlea few num-bers, and diligently sucker themselvesinto thinking that they're forecasting thefuture...ln truth, number crunching[spreadsheets] is like computationallypumping iron: You bulk up on data butdo virtually nothing for your conceptualquickness or flexibility.lt's an intellectualexercise that stretches the fingers morethan the mind. You can't understandrisk-let alone manage or reduce it-bycramming it into a spreadsheet. You needtechniques that let you creatively explorerisk and vivisect it . One of the best tech-niques for doing so is generating sce-narios:lnstead of twiddling the numbers,twiddle the fundamental assumptions.

The quantitative approach of scenarioplanning allows for the almost unre-stricted manipulation of variables, as-sumptions. and inputs, to make projec-tions about the future. A key concem forany policy maker is to assess the imPactof a policy decision. ln other words, thepolicy maker must peer into the future.In essence, managers and bureaucratsmust "twiddle the fundamental assump-tions" to simuld te the resu lts of decisionsand thus arrive at altemate futures basedon the decisions.

Vignette: Prey and PredatorThe Stella program contains simula-

tions on inventory cycles, stress behaviorby sfudents in a semestet and even aninsulin management model for diabetics.

OCToBER-NOVEMBER 1995 . THE ASIAN MANAGER

The following case vignette is based on afile entitled Population Dynamics.

Consider the following scenario: Anecosystem is in a steady state. The preda-tor (mountain lions) eat the prey (deer)which in turn eat vegetation. Both spe-cies ultimately serve to fertil ize the veg-etation. All in all, we have a stable envr-ronment not too far removed from themovie "The Lion King." Now assumeenroachment, by man into this environ-ment perhaps as a result of the mountarnlion making off with farm animals, oreven mauling a human being.

Evidence of the above scenario is cap-tured in Newsweek's account of the fol-lowing event (Andrew Murr, "Lions

Ioose in the Backyard ," Naosweek,2T Mar1995,p.33.):

Late one night at Chul Yoon's LaCrescenta home northeast of Los Ange-les, a mountain lion materialized besidehis swimming pool and mauled Yoon's 80-pound Akita. Yoon sprayed the cougarwilha graden hose; unfazed, the powerful lionclenched the dog in its jaws and leapt overa four-toot wall. lt was the lion's secondsuburban snack in a week. Six days ear-lier, the cougar had killed a Germanshepherd...lncreased competition for toodhas driven some into long-held humancountry. Young lions especially, tend toroam toward suburbia-dogs are easier

prey than deer...Last year, rangers shotand killed a cougar thal had invaded ashopping center in Montclair, east of LosAngeles. In San Diego County, lions havebeen trapped near a retirement complexand spotted atan elementary school. An-other crashed though one house's win-dow while chasing a rabbit in Ramona.

One response is to place a bounty onthe predator Figure 1 simulates the ef-fects of an annual US$50 bounty from1900 to 1940 on a land area of 1,000 hec-tares containing a population of 5,000head of deer and 3,000 mountain lions.Note to the reader: As you observe thegraph, do not be concerned about thescales, since each is different. Simplyshrdy the pattem of the elements.

Using this special simulation, thegraphic simulation of the scenario offersinteresting lessons:

. The behavior is nonlinear and dy-namic. There is no "straight-line trend."The predators, although subject to the an-nual bounty, struggle to survive, beforein effect being wiped out (of the graph atIeast), after approximately 15 years.

. Presumablt well meaning bureau-crats or policy makers did not intend toendanger or eliminate a species; their op-erating assumption probably was thatthere were "too many" predators and abountv was needed to reduce their num-

bers to some undetermined and undeter-minable "safe" number. Presumablv itwas too late to sdve the cunent predatorpopulation by the time that the well-mean-ing officials realized that the impact oftheannual bounty was the near-extinction ofthe predator.

. The predator graph also demon-strates the unintended consequences ofthe poliry which often becomes an over-riding or "blanket" approach to a prob-lem. For instance, it is possible that theattacks on livestock (or people) were theresult of one or only a few predators roam-ing near the affected areas. There is alsothe possibility that media attention ex-panded the issue disproportionately. Inany event, a bounty offers a "policy" tothe pmple, and a "policy" is always clearerand more visible to the voting public than,for instance, instructions to professionalhunters to track down a specific "man-

eating lion." In this scenario, the entirepredator population paid the price of ac-tions from presumably a few "deviants."

. The graph of the remaining twopopulations-prey and vegetation--dis-play a classic pattem of "overshoot andcollapse." This case includes corollary os-cillations: "paired" (two populations),lagged (non-simultaneous), and altemat-ing (between deer and vegetation).

. Once the predators are effectively

1: Deer Populataon 2: Veg€tation 3: Pr€dator Pooulation

tl

2l

a Graph Output 9:00 PM 4/25195

THE AsrA\ MANAcER . OcroBER-NoVEVBER 1995

Figure I

43

1: De€r Population 2. V€g€talion 3 Predalor Population

1:l3:

)l3:

ll3l

a G€ph Output 8:23 PM 4125t95

eliminated from the ecosystem, the pre-vious prey are now free to grow at will,and they consume the vegetation and pas-ture land to thepoint that, in a given area,the land can not sustain the deer; vegeta-tion drops precipitously, followed by thedeer, which die from starvation. Vegeta-tion then regenerates, the deer populationexpands, and the (nonlinear) cycle repeatsitself.

The overshoot and collapse cyc le pre-vails in both biological and economic sys-tems. The classic example in economicsis the hog-corn cycle: an increased de-mand for hogs produces an increase in thedemand for corn to feed the hogs. Thisincrease in demand for both goods en-courages hog producers and corn farm-ers to expand supply to Bet greater salesand thus profits. lncreased supply, how-ever, also drives down prices becausedemand would be less than the new levelof supply. This "overshoot" period of sup-ply goes down as farmers opt to reducetheir respective supplies or "populations"

to drive the prices back up. This "col-

lapse" eventually becomes less than cur-rent demand, and thus allows pdces togo back to pre-"overshoot" levels. Thecycle occurs not only in agribusinessproducts; theconstruction and airline in-dustries, for different reasons and withdifferent time lags, go through similarcycles.

Note that the government incurs two

44

Figure 2

sets of costs: it paid off the bounty hunt-ers to eliminate the predators, and it, orthe ranchers and farmers, must periodi-cally spend to revitalize at least that padof the land that is the open grazing area.Moreover, there are presumably otherlosses in terms of decreased bio-diversiry

The value of the scenario lies in un-derstanding the interconnections of dif-ferent elements of the system.In thiscase,only three variables wereconsidered. Butthe interaction is clear. Thus, a specificpolicy directed at predators has unin-tended effects on prey and pasture.

Other "system relationships," in hind-sight, readily come to mind. Changes inthe price of steel will affect automobiles;a devaluation will change the competi-tiveness ofboth exporfand import indus-tries; a labor strike will raise materialcosts in other companies and industries;and so on.

Policy ls Nol "Dllher Or"The core lesson of Figure 1 is that is

difficult to imagine the impact or out-comes of a decision on the affectedpopulations. As human beings, policyrnakers tend to think in static, linear, ei-ther-or-terms; that is, consequences willeither be good or bad, results will eitherbe up or down, but probably not a com-bination of both.

There is a second, more important, les-son: policy makers often have more than

one option, and therefore more variablesto simulate, and more alternate futures toconsider. Even in this simple, three-vari-able model, the policy maker has fourother va ables to manipulate, aside fromsetting a bounty:

r Reintroduce predator: Ifthe produc-tion dropsbelow desirable levels, you canrepopulate the area. (Based on the data,one can physically transpose up to 3,000mountain lions.)

. Deer tags: Deer tags are a euphe-mism for bounties; apparently, deer donot merit a "bounty." Instead, hunting li-censes are issued "tagging" the numberof deer that can be shot in a year.

o Reintroduce deer: If the deer popu-Iation falls below desirable levels, eitherbecause of the deer tags or because of thecollapse ofvegetation, one can repopulatethe area with deer (The ecosystem cansupport up to 5,000 deer.)

. Clear land: One can see the impactofchanging land use in the ecosystem. [nthis situation, assorted legislation onlyallows the clearance of up to 100 hectaresof land per year

Note that each policy variable can beadjusted quantitatively, upwards ordownwards as well as through time-every year, once in three or four years, orpolicies can be kept unchanged over a100-yr period.

The above policy variables presumeenvironmentally conscious policy mak-

OcroBER-NovEMBER 1995 . THE AsrAN MANACER

ers. That is, if the predator and the preyweredeemed irrelevant, then the simplestsolution would be to eliminate both spe-cies, and then to managetheland for "hu-

man" needs-livestock pasture, tounsmforest preserue, urban development, etc.

The final lesson in forecasting the fu-ture is that it is difficult to return to an

way of dealing with uncertainty. There isno single outcome for the fuhrre, becausethe future has not yet happened, andlherefore the future is always uncertain.The quantitative scenario tries to reduceuncertainty for managers and policy mak-ers by offering glimpses of alternate fu-tures based on fundamental assump-

tions,which the decision maker can alterin the present.

P\t. Fnncisco L. Ro'7,atr is Efic titt Dircchtr of lhe

Hazel Sanldlant is Pjlirv Atnlus! ol the NM P'liyForum antl Associate Editor of SCOPE (Systent Coml1(lil i1)ol,ss O.casionaL PflFrs tr Editorirls).

odginal steady state once it hasbeendishlrbed. This lesson is im-portant in both ecology andeconomies. All too often, a policyis deemed a failure, and attemptsto rectify the effects imply a de-sire to return to original condi-tions, the "good old days." Thisis easier said than done.

In the scenario under consid-eration, annual intervention is re-quired over a period of time toachieve anything near the origi-nal steady state. Figure 2 beginswith $50 bounty in 1900, andshows a similar outcome withFigure 1 until 1910, when envi-ronmentalists attempt to attainthe steady state equilibrium. Be-ginning 1910 therefore, a series ofone-to two-year variable changesare made. Reinhoducing deerby5,000 head every year eliminatesthe natural overshoot and col-lapse behavior of this population.Howevet it suryives at a muchreduced rate. Meanwhile the veg-etation coveris also stabilized bythe relatively' stable deer popula-non.

Reintroducin8 the maximumnumber of allowable predators aswell as withdrawing the bountyentirely in 1920allows the preda-tor population to shoot up be-yond the limits ofthegraph. Onlyby reintroducing the bounty tothe maximum $100 in 1932 willthe predator population drop.The predator population's be-havior is greatly dependent onthe presence or absence of thebounty. Between 1932to 1940, thepredator population rises when-ever the boun$ is removed, anddrops whenever the bounty isreintroduced.

. neduclng UncertalntyTo conclude, scenados are a

Counaq SERVERS SpeN THe DrsrANceBnrwEnN ToD.qY's Reetrtrns

ANo TouoRno$v's OpponruNrrrEs.

NetVvbni M5E/A

c o M P A aAOCREDITED SYSTEMS EI{GII{EER

Compaqservers aren\ designed iusl (o serve neGworks. They're designed to serve business - andto help you tum rechnology in your favour.

Ar ComPaq, we undetstand how nerworking im-pacls your business. lt a|feds your abiliry ro s€rveyour customers. To keep your workers p.oducrive.To conlrol your cost.s. To be compet(ive.

So, in every Compaq Server, weve buih in ad-vanced capabilrriesnor only ro eifedively meer you.cu nent objecrives and budger requiremenrsbur alsoIo open rhe way to achieving your lonfi rennbusiness goals and needs.

Here's why you can trusr your data to Compaq

Compaq Autborized lb.2b/

COMPAQSERVERS ARE BUILT IYITH:FLEKIBTUTY TO HELP YOU STAY COMPSIITTVEMANAGEABIUTY TO STAY TJP AND RT]IININGINTELIJGENT SUBSYSTEMS FOR ACCT]RACY AND AVAII]I"BIUTYSTJPFORT TIIAT VON'T I.ET YOU DOWN

Over the years, as ever-more capable proccs-sors have come into exisrence, we've inre-

SBted their data-handling capabil iries wirh thesafety and proteciion rechniques of the mini/mainf .ame wor ld. Wit l r so much pbneef lnSeffon behind us in migr.rrinS informxrion struc'tures to open, induslry-strndard openringsystems, your network becomes grearer thindre sum of ils rndividual pans.

Ve're cu.rently providinS whar we belteve |5rhe mosr comp.elrensive suppon system forserve.s buih on dre indusrry $andard platform.Never, has ihis class of machine been backedby proSrams that are so numerous or innova-

4/F Equitable BIdg. I I , OniSas AvenueG.eenhil ls, San Juan, Metro Mini la'f el : 7 2 | -0658; 1 22-4560F^x:7A42-6a

nigitsJ-P^T-q

THE AsrAN MANACER . OcroBER-NovEMBER 1995 4ll

Traders or Entrepreneurs:Why Labor is a CompetitivenessIssue in the Post-GAfTWorld

ountry competitiveness is usuallyviewed from an industry per-spective with industrial struc-

ture, deregulation and anti-trust meas-ures as the dominantthemes. Labor in thisperspective becomes a desideratum-an"input" rather than a resource. The onlytime labor forces it.elf on the agenda inthis paradigm is when it unionizes andbecomes a nuisance. Then, of course, itneeds to be placated with appropdatesoothing noises containing Human Re-source Development (HRD) and lndus-trialRelations (lR) platitudes. The Philip-pines is an example of one such labor-abundant economy where a conjunctionof high unemployment, a segmentedlabor market, and a small (though vocal)organized sector have pushed labor as acompetitiveness issue to the backburner

But this situation is likely to changedramatically in the coming years. Thenew multilateral trade regime and theentry into force of the World Trading Or-ganization (WTO) will set in motion a se-ries ofadjustment measures to harmonizenational policies and laws with WTOcommitments. Coincidentally, in the Phil-ippine context, thesemeasures mesh wellwith the policy reform program designedfor macroeconomic stability and long

Br S rnouu KuuLLen

term industrial restructuring being imple- greater exposure of the country to inter-mented by the government since the 80s. national trade through fewer controls onThese policy reforms aim to promote glo- imports and exports and tariffs, foreignbal competitiveness and a greater degree direct investment, and foreign exchange.of openness in trade and investment. In conjunction with the new world trad-Among other things, they involve a ing regime, this poliry reform package is

Chart 1 Share in World Market for Manufactures of thePhil ippines, Thailand, lndonesia, Malaysia

(total manufactured exports as a percentage of total world manulactured expons)

0.9

0.8

o.1

Ph i l i pp ines

Thailand

Indonesia

Malaysia

0 . 3 -

0.2

0 . 110 11 72 73 14 75 76 77 78 79 80 81 82 83 84 85 86 87 8A 89 90 91

Source:Trade analysis and Feporling Systam (TAFS)darabase, Uniled Naiions Statislical Office, Geneva

0.6-

OcloBtR-NovfvErR lqq5. THI A5lA\ MANAGER

expected to result in faster growth ofmanufacfu red expods. Govenment esti-mates put this figure at an additional P2.2to2.7B every year, while employmentop-portunities have a potential to reach700,000-800,000 annually by 2000 A.D.

There are two aspects to the presentsituation. The positive one involves tak-ing advantage of the opportunities beingopened up and the negative one involvesmitigating its threats. In government-speak, the latter is called "adjustment ofindustries which grew under protectivebariers to their more efficient levels." Inother words, downsizing, resulting in re-trenchment, layoffs, and closures. On theother hand, taking advantage of oppor-tunities involves a more complex task ofident i fy ing compet i t ive advantage instatic and dynamic terms. It meansproactive initiatives for positioning thecountry favorably in the world market.In the language of business,it means de-ciding to become entrepreneurs, and nottraden, in the next century

What is the level of country prepar-edness to take on this challenge? What rsthe perspective of government agenciesvested with the responsibility of formu-lating policy for the adjustment periodand beyond? What should be the con-cerns of management and labor even asthe adjustment results in the inevitableshakeout?

The basic features underlying com-petitiveness are quality, cost, and deliv-ery Studies.have noted that the Philip-pines appears to do best in situatronswhere quantity demanded of the prod-uct is rising but quality is not undergo-ing significant changes: for erample, gar-ments of particular types. However, inproducts where quantity demanded is in-creasing slowly, but gains are to be madeby improving quality and price (e.g. shoesand bags) and in cases where increase inquantity demanded changes are accom-panied by quality changes (e.9. Microelec-honics), it has not been possible for thePhilippines to improve market share. Oneofthe reasons for this situation is that thePhilippines lacks a diversified exportportfolio. The experience of other coun-tries in the region indicates that sustainedexport Browth requires periods of spe-cialization, alternating with periods ofdi-vercification. Moreovet to increase coun-try share in world markets, exports must

Chart 2A Real Daily Wages and Productivity for Agricultureand Industry

Agricultural Productivi ty

'11 12 73 J.a 75 76 17 7A 79 80 81 82 83 84 85 86 87 8a 89 90 9l

Not€: The wage figures are daiiy w6ges in 1978 pesos. Productiviry is detined as sectoratvalue added in 1978constant pesos peremployee peryear These meas!res arerhen divided by 4 tor scating purpopes.

Source: Nalional IncomeAccounts; 1991 PhitipoineStaristicatyearbook.

grow faster than overall domestic output.For this to happen, a series ofdirect learn-ing processes have to take place, whichare different from those that occurthrough domestic sales. Some of these arestrict adherence to delivery schedules,stringent specification requirements, andmarketing channels with high fixed costsfor entry. On date the Philippines lagsbehind Thailand in its share of world mar-kets in manufactures. (Chart 1)

The labor market has contdbuted tothe loss of country competitivene5s. Tra-ditionally associated with a well- edu-cated, English-speaking labor force, Fili-pino labor's great demand overseas tes-

tifies to its inherent quality. However,policy intenentions directly in the formof minimum wage legislation and indi-rectly in the form of credit and exchangerate policies have driven up real wages.Wage differentials between skilled andunskilled labor are compressed. Produc-tivity levels have declined and unit laborco5ts dre one of the highest in the region.(Chart 2A & B). Labor ratings in selectedAsian countdes indicate that unskilledlabor costs exceed prevailing costs inChina, Indonesia, Thailand and Vietnam.(Chart 3).

In terms ofstrategy this seems to sug-gest that the economy has a comparative

(ratio of average Philippine manufacturing wages to that of competitors)

Country 1970 1975 1980 1985 1986 1987 1988 '1989

ThailandKoreaMalaysialndonesia

0.32 0.33 n.a n.a n.a0.36 0.35 0.35 0.32 0.320.41 0.4:, 0.53 0.69 0.771.37 n.a. 2.12 2.37 n.a.

0.77 0.42 0.301.09 0.80 0.390.84 0.65 0.54

5 -

0 -70

THE AS]AN MANAGER . OCToBER-NOVEMBER 1995

t ".,*11""

n.a, n.a.

Chart 28

47

cost advantage in industries which em-ploy high-quality professional, andmanagerial personnel. However, thisjump from the existing export profile oflow-wage, labor-intensive exports to ex-port-oriented indushies requiring skillintensity does not have many precedentsin the recent past. Added to this, govern-ment policy which seeks to export theselabor skills to shore up its balance andpayments means that domestic availabil-ity of such resources is depleted.

The structural changes underwaywill change the pattern of industrialmanufacture and, in the process, thepattern of labor demand. It is well-documdnted that countries which fol-lowed aggressive, export-led growth inthe 80s stimulated a demand for skill-

based, labor-intensive manufactures.Their outward orientation imposedcost discipline. In order to remain com-petitive, they had to be open to tech-no logy upgrad ing . In the Eas t As ian"miracle" countries this was accompa-n ied by a h igh degree o f human cap i -ta l accumula t ion wh ich prov ided asupply of skil led, educated labor. Infact, these countries are responsible forredefining the "vicious circle" of pov-erty into the "virtuous cycle" of humancapital accumulation as a growth strat-egy. The "virtuous circle" concept goessometh ing l j ke th is : human cap i ta l ac -cumulation frees resources to invest inimproving quality of skil l and educa-tion; better educated workers performbetter, (and in the East Asian case, ac-

cept market determined wages)and, inturn, enhanced savings and investmentout of retained earnings leads to sus-tained labor demand. In the Philippinecase, the h is tor ica l conjunct ion oI im-por t subst i tu t ing manufacture andpolicy interventions in the labor mar-ket have led to a capi ta l - in tensivemanufacturing sector on one hand, andthe e\por l o f human endowments inthe form of Overseas Contract Work-ers (OCWs), on the other.

The government perspective on someof these issues is reflected in the lnter-Agency report "The Philippines in WTO:Making the Filipino to Win" which com-prises the Action Plan of seven depart-ments of Bovemment who are affected bythe CATT-UR Agreements. They consistof three sets ofmeasures: legislative meas-ures to harmonize laws with Philippinecommitments, executive issuances andactions, and other support measures toenhance productivity and global competi-tiveness across the economy.

These measures are estimated to costa total of P127.90 B for the pe od 1995-1998. (Chart 4)

A national endeavor of this magni-tude requires discussion. So far, this hasfocused on the costs of the adjustmentprocess. The public outcry has rightlybeen in the nature of howls of hurt andpain on behalf of vulnerable groups andsectors. Much less attention has beenpaid to assessing opportunities and thesteps required to join the ranks of theNICs by the year 2000 which needs fo-cus from business and labor groups.They must pay attention to labor issuesof a mediumand long term nature, ratherthan the short term palliatives like col-lective bargaining with Unions. Some ofthese issues are skill development formeeting the demands of newly competi-tive industries, new participatory mecha-nisms to enhance productivity ftom theshop floor upwards, and evolving waysto sharb the gains from increased profitsbetween labor and management. Creat-ing export winners involves a sharedm iss ion dmong government , manage-ment, and labor to compete and win tnthe coming decade.

Sitdh Khullat is 0 Viriting Fellot, at the All,,4'Policy|,irun nl l'1, hrtl t " t h, Su.l, n. C,{,rl Iiii. c Dp.t

Production Labor lvlanaoerial Labor

O A C Total3 1 1 1 0

10 10 r 2a1 10 ' �10 40

1 0 1 0 2 2 91 '�t 10 335 5 5 2 41 1 0 8 3 85 1 0 9 4 01 8 9 3 8

Phil ippinesCh inaHong KonglndonesiaJapanMalaysiaSingaporeSouth KoreaTaiwan(Ch ina )Tha i l andVietnam

o A c3 1 25 ' � 1 11 1 0 85 1 1't 10 'r0

1 1 0 81 8 71 9 8

4 2 13 1 ' � ]

' 10 10 4 311 0 5 1 2 1

Nole : O= Oua l i t l t ;A=Ava i lab i l i l y ;C=Cosr1 = the hiqhest grade possibie; 5 = thq average grade; 10 = the lowesl {grade possible),Source: Political & Econom cFisk Consultano,/ Ltd.

( i n m i l l i ons pesos )

1995 1996-1998A L L O C A T I O N

AGENCY

AgricultureEducationLabor & EmploymentHealthlrade & IndustryScience & TechnologyEnvironment & NaturalReso!rces

GRAND TOTAL

18,660.001,939.64

500.00178.90

3,057.84

2,821.00

34,262.0032,396.611, 859.00

152.00479.05

9,938.87

970.70

TOTAL

72,922.0034,336.252,359.00

330.901,161.57

12.996.11

3,191.10

27 ,839 .90 100,058.23 127,898.13

FUNDING SOURCES:GAA, GRANTS, MINIMUM ACCESS REVENUES, APT PAOCEEDS, SAVINGS ANO BESEFVES,PRIVATE SECTOF FUNDINGSOURCE:THE PHILIPPINES lN WTO: MOVING-rHE FILIPINO TO WlN, THE GATT-UR INTEF AGENCY COMMITTEE,

48 OCTOBER-NOVEMBER 1995 . THE ASIAN MANACER

J n 1087, AIM conducted a

I coup le o f ma nagemen tI deve lopment p rogra msfor Acer ( then known asMultitech) in Taipei. As one ofthe professors teaching inthose programs,I learned thatAcer salcs then did not evenreach $200 M, yet they weretargeting for a billion dollarsin sales by 1991.

It was difficult not to beskeptical at that time since thehigh sales target meant thatAcer had to compete head onwi th the PC g ian ts o f thewor ld . Fur thermore , noamount of trend analysis willresult in a billion dollar salesforecast from the low base fig-ure given.

hr 1991, Acer sales reached$986 M. Before vou say "l toldyou so," let rne remind youthat $986 M is much, muchbigger than $14 M. So what'sa safe enough but ambitioustarget for 1994? Two billiondollars? Wrong again, becauseAcer sales last year hit $3.22B. For the current year, howabout $4 B? Chances are ,you're "Out!" on Strike Threebecause the Acer forecast salesrevenue for 1995 is $5 B.

What is Acer's magic for-mula? Clearl,v, the measurablelong-term objective helpedprovide a clearcut target. Also,the company had a properread of the ever-changing ITenvironment. More impor-tantl, howevet the strategiestha t Acer imp lementedmeshed perfectly with currentand emerging IT scenarios.

In a recent talk at AIM byMr Stan Shih, Chairman andCEO of the Acer Croup, hep inpo in ted th ree w inn ingstrategies, namely, the Fast-food Business Model, Client-Servcr Organization Structure,and C loba l Brand, Loca lTouch.

Noting that the IT indus-try is curently in the midst ofa major transition where the

move is from an integrated,single-vendor packaged com-puting solutions to an openstandard-based, more com-petit ive and disintegratedmode of business, Mr. Shihbelieved that it is at the begin-ning (designing and manufac-turing)and the end (distribut-ing) of the process where thereal value-added activities oc-cur. Speed and cost, therefore,become crucial for competi-t i veness , so the Fas t foodModel becomes appropdate.One key feature of this strat-egv is the shifting of assem-bly from Taiwan to the mar-ketplace, where inventorycos ts a re reduced and ashorter t ime to market theproducts is achieved.

On the Client-Server Or-ganization Structure, there isa focused management in eachbusiness unit (client), while anetwork relationship betweenAcer branches world-wide isestablished for speed and costeffectiveness.

The most interesting strat-egv is the Clobal Brand, LocalTouch. To Mr. Shih, localizedproducts, local assembly, localmanagement, local owner-ship, and local shareholdermajorit ies mean long-termleadership in the market. Un-like the stereotype concept ofdecentralization where theparentcompany still owns thevarious business units, decen-tralization in this case meansownership. In my previous

article, The C Alphabef, thisrepresents a quantum leap inthe leadership continuum,which usua l ly resu l ts inhigher effectiveness and effi-ciency.

Common knowledge tellsus that traditional Chinesemanagement means a highly-cent ra l i zed o tgan iza t ion .What Acer has done is a para-digm shift in management. Tohighlight this point, the AcerCEO emphasized "l'm willingto lose cont ro l than losemoney." In a conversationwith Mrs. Shih, she mentionedan old Chinese saving whereone has to first givebefore onecan lecelve.

As a longterm objective,Acer has a "21 in 21" goal, thatis, it is targetting for 21 pub-IiclyJisted companies by thestart of the 21st century Thisis "walk the talk" in action.

Acer has recently put upthe only other motherboardplant outside of Taiwan inSubic, Phil ippines. It is re-markable that it took Aceronly 57days to convert an oldAmerican warehouse into awork ing p lan t . F rom apresent output of30,000 unitsover the past two months, theplant expects an output of200,000 units per month earlynext year, and ultimately along-term goal of 10 M unitsa year Production output fornext year is estimated to beworth $200 M, while for theyear 2000 the Subic target is$1 B.

By the way, the AcerCroup aims to be a $ 10 Bcompany by the year 2000.Don't doubt. You just gottabelieve.

Pntf.ltsusG Galkgos,lr is Dean dtheAstntt lttslilute of Man|g.me l . He i.tfu Sfit Miguel CorpontiLln Plofessor ilInl(nl|irta| E |trpriy D(t'clt)lm0t| at

Tht Asian Managtr uill ptittt ML SlmShih s altil. on hii Fnstfood Brc)ness

'.tdlose control i

It n in designing,manufacturing anddistributing whae

the real ualue-added

THE AslAN MANACER . OcroBER-NovEMBER 1995

actiaities occur.49

oneliness at the top is acommon problem forCEOs. They lose their

skills, make distorted businessdecisions,and estrange theirown personal lives. Let's ex-plore how this happens andif there are ways out of thistrap.

A normal part of CEOs'routines is to disengage them-selves from dav{o-day opera-tions. They hand over theirresponsibilities to Vice Presi-dents, because "Presidents

don't mingle with commonfolks." This is a dnagerous as-sumption, and the firststep inlosing touch with the realworld.ln the guise of "succes-

sion planning" the company'sbankers and board ofdirectorsendorse this move. Secretadesbegin censoring, cutting outany new person trying toreach the CEO. "Keep busy"schedules of ceremonial andPR tasks are prepared, to giveCEOS the impression that theyare busy. Because of their de-tachment the CEOs' day-to-day skills begin to atrophy.Thedecisions the CEO partici-pates in arebased on long-agoexperiences without bearingto today's environment. CEOscould Very wellbe set up withbad information, for whichthey no longer have the"touch" to make good deci-sions with.

By now the CEOs are thor-oughlv bored. From beingbusiness people the CEOs be-come socialites. They join thesocial circuit of the ballet, thesymphonv and charitable in-stitutions. Golf becomes adominant part of their sched-ules. (Golf buddies, not com-pany persons, have much bet-ter access to the CEO.) Theireyes start to wander and findthat their spouses lack thelooks and the skills to play therole of socialite. Next is an af-fairwith "a young thing", andthe CEOs are in the middle of

50

a divorce. Now the CEOs' de-struction is complete, percon-ally and professionally. Howyou manage success is asmuch a challenge as how youget there.

How can CEOs avoid thisdestruct ion? Present day"right sizing" reduces thenumber of management lay-ers, and forces CEOs to keepin touch. E-mail makes it easyfor far-flung operations to ac-cess CEOs as if they were nextdoor AnyGE employee can e-mail Jack Welch, for example.

Fax technology hasyielded some interesting ac-cess benefits. I got so frus-trated in dealingwith a traderofa large oil company. He hadan agenda that did not do me,or his company, much good.To break the impasse I faxedour proposal up the trader'scorporate ladder \4/hen thefax,with the advantages of our

proposal-a good one for bothcompanies, we believed gotto the right decsision-maker, Igot a prompt call and the dealwas done.

Right sizing, e-mail, andfax machines are managementtools and arc instantly avail-able from consultants andcomputer stores. The moreimportant lesson is muchcheaper, and more critical,than.software or consultants:force yourself once more to be ac-cessible. Harvard professorMartyMarshall used to exhorthis OPM (Owners PresidentsManagement) classr "lf I hadmy way I would not give anyof you an office in vour HQ.There is noflring you can do inyour office. Go out and seeyour customers, suppliers,partners, and financiers. Theymake your business. Find outwhat is happening and act onit." lt is so true. CEOs have the

power to commit theircompa-n ies . Combine tha t powerwith day-to-da), access to theirstakeholders. Result? You canbecome the darling of vourcustomers. You can get greatideas from your suppliers andpartners, to save monev andimprove operations. You willget more opportunities fromvour financiers.

In my 14 vears in the oilbusiness, I have not gotten asingle phone call from anyCEO. By contrast I may be oneof thc very few oil companyCEOs that anyone in the in-dustry can access with onephone ca l l . I myse l f makethirtv to forty calls a day tovarious people in and outsidethe industry. This has come inhandy in spot t ing smal lchanges in mv competitors'moves, and adjusting to thosechanges. It is not easv this ac-cessibil i ty thing: vou some-times wander up the wrongpaths, and you seem to wastea lot of tine sitting throughendless lunches. In time youwill learn to manage these in-teractions. Keep in mind thatany one of these interactionsmight result in great ideas,and breater opportunities.And unless you interact,youwill not generate new ideas.Ideas are never born out ofvacuums, much less inacces-sible CEOs.

Communi ty work i s aboon to societv; it's just thatmany CEOs, because of theno-access trap, ioin them toosoon, perhaps at a greater lossto the society. Don't retire be-fore your time; if you must,then quit vour CEO positioncompletelv Only then canyoudo your communi tv workwell, and with the greatestgusto and passion.

Mr Rof.rl y Cird,rdrnt is n gmdunt. ofl',48M dnss batth 19i.1 H. is currc tluthc Prcsiddtt af Chttt.oil C]rl'nrali(rt,u.s.A.

-

Don't retire before your time;if you must, then quit your CE}

position completel!.

OcroBER-NovEMBER 1995 . THE AstAN MANACER

ONrv Two CoruparqtEs CAN GIvEYou A Toral NerwoRK SoLUTtoN

,ilNetlrorks That (;o the Distance.

fUIKRO D3Com Special Achievement Awarde€

for Southcast Asis

ttlErt[*o l[ Plr.lol lrsldng'" ld|ploFBrings unmatched Ethernet perfofmance t0mosl lSA. EISA [,4 cro Channel PC 0r PCI\, ' ICIAnotebook c0m0ute' wrth connectors tor codtand/or twisted pair wrr ng Sirpporls al l mal0rnetwork ope.alrn0 systems Features aulomalrcse I contrgurat on and SNMP manageabrlrty wrthTra0scend'M SmartAgent'M s0ltware Lrletrmewarfantv

1i*1frr6 ff{t''l tlrclL tdr[l ll|bAr the I errb,lt sse or mamqem6nl and econony orslackablo hubs plus malof enh.ncemenls ocarbd0inqh0h speed swirchiiq redunda powef and bu h 'nres ' l -anr nk \ l2 and 24 TP lber (S I )and Ieko hubsadapreb eroyour chore ol medra pon densty backboneand lnleqmled manaoene opnons !plo eLq unts canbe nacked tor ncreased porl densly Iranscend '

Wdlqroup M6mqer l0 rWndows or UNrX provdesLnroqralsd hdband adaDrer menagem6nl L m(ed netmewara i ty L rnkBur der " FMS e l r s pan o l3coms

lltSrlro tll'l0r$abl|lirHl$trfYtsrtTh s mullr servrces mu I m-odra hub sLrppons Ethernel. TokenR n! F0D and swtchln0 connectvt \ supports emer0rn0h 0h-speed servrcos such as ATM and lasl Elherndl Feeturost€chno oqy. ndependenl h i !h speed backplane 0rstrbuledRepeater Archr lecture RrnqBur lder ' r A.chr leclure. hot 'swaOpab e modLr es and adundanl coohno Elrmlnales s nglepo nts oilarlu.e and max m res neblork uplime D|slfibulsdMana!€.nenl Archrlecture shares lunctrona rty between srnqleMana0emenl iiodu e aad 'sman connectvty modLr ts dsallor ar le m xedlechnolooy LANs

lccr$BuHIF'"A triull prolocol R SC based retrrole access server l0r Elhefnel andToken q 0g erv r00rrents L nls nobre comDuirn0 cltnlstelec0rnmuleB and branch olice LANs lo eolerprse networkfesources usng da uoWANserv ,ces Expandabe modu la fchasss acconrnroda lesany m x o l lour o r eqht por l asynchronousn odu les 0r a r O e pod T1/ t1 syochronous nr0du le Suppor ls uplo 16 d a up nes lor cof cutrdnl dra uD connect ons to lhede lwork suop0115 b0r1 i 0 rer l to LAN a id LAN lo LAN remorene lwork fo Inc udes nand i rd SNMPnaMoemenl advafcec\ c i \ r p d i i 4 d d b d d ^ d r ' � . . d o c ' p ' i ' , p i o , o ' 1 r I

h0h speed baodwdlh a oca l roousaOe

I$rBrlrf.o Ramt! oit! z ,zn,fr427 l'/'�aaraA llhree r0ulen operare with hubs and swirches in 3CoolSuperSucl nre0oted srackrbe sysrems oras srandalone! n s A l r n c o d e D u a m a g e F r s h m e m o r y d a o ndomand bandwdth.otrdemand nleqmted 108ASE Tlmnscsver and rack Toun l k Aho suppon SNMPmanaoemeil ?nd PPP lrame relay and t ?5 WAN rnlGFemore ollice 221 (1 LAN r I WAN a 1 backup WAN pon)loi 80undary R0ulrN e sdpD0rls, neiwork orolocos Theup0odeab e I LAN r 3 WAN NEIEu,der Renor0 Of i ce 222access rou le f suppons iP PX and INS wh l le rha 22 l lu lrou le r addss0ppon lo fApp leTa l l 0ECne l and VINES

ffIE|f$ |o8 $ n.noModuLar Mulr'proiocol Manao4bl. ThE a\4:rd-Mnnno brdodroulcr suDoons up to 16 LAll x uD io 24 WANs l0r h1!hpeaornance ap0rcarons

Srnq e chasss provde Inks i0r Flhern6l Tokcn Rmq, FDDand ATM ac.epls hol'swrppabl! moduLs lor "0n-lhc.lt

nser l ro0 suppor ls a lmaror p ro loco s rnc lud nq lP lPX,AppreTalk 0Ecnel osl vINES and xNS uD l0 /5.000 ppsFeal!resallWAN dledace supporl dala compressoo plrssupporl l0r swtched seryrces slch as I 25 SMOS lrame rehyPPPand d |a uO conn€c lons Cen l ra lsne dcvEe lo r 30om sBouf idary Routno 'vsys tem archcc l (e PCMCIA ba$d lhshmemory dtuve enables sold stale booimo hr ma{mum re[abrty

uluhr'T004/001 2A md 1, O Orb I 12 or 4 s 0r nrer !en1swfch,no hub des'gnedl0r conp e, enrerpr qe wde c ent/server LANs ParloinsI rherner sq(ch 0q E lhernet ro F0DlbdO n0 F00concent.arron and otefnerwork r0urrng 3 5 Gbps backpane roacc0nrm0date rui!fe hLqh speed rechnol0!res such as FDD .nd

3COM NETwoRK PRoDUCTS ARE

C.fhx hnltFted or nodu ar ATM ATM ro trherner sw ches D,taCommunlc2r oi Nor P'oducrsAwardee Pfllo'ms Ethernerlo ATM swlch n0 ,nd lu l l ATM 0ny backbone sw ch no

Ce P ler Fam ly rc ldes lhe2 i00wo. lg fo !pswlchand 7000/1200 CeiPb! aepanment. and backbonesysrems Modula' and exp3ndab -. rhe CellPer FamrtInfrasas LAN perlormance al an allordable pr ce

INSTALLED IN MoRE SITES THAN

MICRO.DINTERNATIONAL, INC.

Jannov (innple\. Unrl I. Building Il. I'ason8'Iamo

Lxtensron. Malatr. Metro ManrlaI

Te l . Nos . 812 -2124 . 8 l 7 -3687 . 812 -5124 . 817 -333? .811 -1323 . E I E -9370

I

l'a)( No 816-0845I

Eas]'( all l4l PagerNo 250170

ANY oTHER CoMPETTNG BRAND.

ds

FEEII]{O A LTTTTE IOST IN TI{E PHITIPPINES ?

FOTLOW THE SIhART TIONil.